This excerpt taken from the ROST DEF 14A filed Apr 14, 2008.
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 Committees 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:
Like the 2004 Plan, the 2008 Plan is designed to preserve the Companys 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
meaning of Section 162(m), the stockholders are asked to approve certain material terms of the 2008 Plan. By approving the adoption of the 2008 Plan, the stockholders will be approving, among other things:
While we believe that compensation provided by such awards under the 2008 Plan generally will be deductible by the Company for federal income tax purposes, under certain circumstances, such as a change in control of the Company, compensation paid in settlement of certain awards may not qualify as performance-based.
The Board of Directors believes that the Company must continue to offer a competitive equity incentive program to successfully attract and retain the best possible candidates for positions of responsibility. It believes that the 2008 Plan will enable the Company to increase the cost-efficiency of its equity incentives, reduce potential future stockholder dilution and preserve the deductibility of performance-based compensation, while assisting the Company to attract, retain and motivate the high-caliber employees, directors and other service providers essential to our success.