Ross Stores (ROST)

PROPOSAL 2
APPROVE ADOPTION OF THE ROSS STORES, INC. 2008 EQUITY INCENTIVE PLAN

At the Annual Meeting, the stockholders will be asked to approve adoption of the Ross Stores, Inc. 2008 Equity Incentive Plan (the “2008 Plan”). The Board of Directors adopted the 2008 Plan on March 19, 2008, subject to its approval by stockholders. The 2008 Plan is intended to replace our 2004 Equity Incentive Plan (the “2004 Plan”). If the stockholders approve the 2008 Plan, it will become effective on the day of the Annual Meeting, no further awards will be granted under the 2004 Plan, and that plan will be terminated.

The Board of Directors adopted the 2008 Plan based on the Compensation Committee’s recent shift in strategy from using primarily stock options to provide equity incentives to using primarily full value awards, such as restricted stock and performance shares. The Compensation Committee believes that full value awards can provide desirable incentives for performance and retention at a comparable cost to stock options with less voting power dilution to our stockholders in relationship to the value provided.

Key differences between the 2008 Plan and the 2004 Plan are:

• A total of 6.0 million shares will be authorized for issuance under the 2008 Plan, representing a reduction of approximately 4.3 million shares from the 10.3 million shares remaining available for grant under the 2004 Plan as of March 19, 2008.
   
• Up to an additional 8,492,928 shares may be authorized for issuance under the 2008 Plan to the extent that awards outstanding as of the date of the Annual Meeting under the 2004 Plan and certain other prior plans of the Company are forfeited or otherwise terminate without shares having been issued, or to the extent that shares are withheld or reacquired by the Company in satisfaction of tax withholding obligations. Because the 2004 Plan authorizes the addition of up to 13,701,846 shares from similar sources, this provision of the 2008 Plan represents a reduction of approximately 5.2 million shares in the number of additional shares authorized.
   
• The 2004 Plan authorizes the issuance of up to 5.0 million shares pursuant to full value awards, of which 2,675,728 shares had been issued as of March 19, 2008. To facilitate the Company’s shift to the use of full value awards, the 2008 Plan authorizes the issuance of up to 6.0 million shares pursuant to full value awards.
   
• Unlike the 2004 Plan, the 2008 Plan generally imposes minimum vesting requirements on full value awards. Except for up to 5% of the aggregate number of shares authorized under the 2008 Plan, full value awards that provide for service-based vesting may not vest on a pro rata basis over a period of less than three years, while full value awards that provide for performance-based vesting must have a performance period of at least 12 months. However, full value awards may be structured to provide for accelerated vesting in the case of the participant’s death, disability, termination of employment, or a change in control of the Company.
   
• Consistent with the Company’s shift in focus to full value awards, the 2008 Plan establishes a program that will, within stockholder-approved share limits described below, permit the Committee to choose from among a range of equity awards to provide for the periodic grant of share-based compensation to non-employee directors in lieu of the automatic non-employee director grant program contained in the 2004 Plan that provides solely for the grant of stock options.

Like the 2004 Plan, the 2008 Plan is designed to preserve the Company’s ability to deduct in full for federal income tax purposes the compensation recognized by its executive officers in connection with certain awards granted under the 2008 Plan. Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), generally denies a corporate tax deduction for annual compensation exceeding $1 million paid to the chief executive officer or to any of the three other most highly compensated officers of a publicly held company other than the chief financial officer. However, certain types of compensation, including performance-based compensation, are generally excluded from this deductibility limit. To enable compensation in connection with stock options, stock appreciation rights, certain restricted stock and restricted stock unit awards, performance shares and performance units granted under the 2008 Plan to qualify as “performance-based” within the

12