[LOGO OF STURM, RUGER & COMPANY, INC.]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
April 29, 2009
NOTICE IS HEREBY GIVEN THAT the Annual Meeting of Stockholders of STURM,
RUGER & COMPANY, INC. (the "Company") will be held at the Trumbull Marriott, 180
Hawley Lane, Trumbull, Connecticut 06611 on the 29th day of April, 2009 at 10:30
a.m. to consider and act upon the following:
1. A proposal to elect seven (7) Directors to serve on the Board of
Directors for the ensuing year;
2. A proposal to ratify the appointment of McGladrey & Pullen, LLP as
the Company's independent auditors for the 2009 fiscal year; and
3. Any other business as may properly come before the Annual Meeting or
any adjournment or postponement thereof.
Only holders of record of Common Stock at the close of business on March
10, 2009 will be entitled to notice of and to vote at the Annual Meeting or any
adjournment or postponement thereof. The complete list of stockholders entitled
to vote at the Annual Meeting shall be open to the examination of any
stockholder, for any purpose germane to the Annual Meeting, during ordinary
business hours, for a period of 10 days prior to the Annual Meeting, at the
Company's offices located at 1 Lacey Place, Southport, Connecticut 06890.
The Company's Proxy Statement is attached hereto.
By Order of the Board of Directors
__________________________________
Leslie M. Gasper
Corporate Secretary
Southport, Connecticut
March 16, 2009
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. TO
ENSURE THAT YOUR VOTE IS RECORDED PROMPTLY, PLEASE VOTE YOUR PROXY AS SOON AS
POSSIBLE, EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING. MOST SHAREHOLDERS HAVE
THREE OPTIONS FOR SUBMITTING THEIR VOTES PRIOR TO THE ANNUAL MEETING: (1) VIA
THE INTERNET, (2) BY TELEPHONE OR (3) BY REQUESTING AND RETURNING A PAPER PROXY
USING THE POSTAGE-PAID ENVELOPE PROVIDED. REGISTERED STOCKHOLDERS MAY VIEW OR
REQUEST THE PROXY MATERIALS AND VOTE THEIR PROXY AT WWW.INVESTORVOTE.COM OR BY
TELEPHONE AT 1-800-652-8663. STOCKHOLDERS WHO HOLD THEIR SHARES THROUGH A
BROKERAGE ACCOUNT MAY VIEW OR REQUEST THE PROXY MATERIALS AND VOTE THEIR PROXY
AT WWW.PROXYVOTE.COM OR BY TELEPHONE AT 1-800-579-1639.
Table of Contents
Page
----
PROXY SOLICITATION AND VOTING INFORMATION................................................................1
PROPOSAL NO. 1 - ELECTION OF DIRECTORS...................................................................3
DIRECTOR NOMINEES........................................................................................4
THE BOARD OF DIRECTORS AND ITS COMMITTEES................................................................6
COMMITTEES OF THE BOARD..................................................................................8
Audit Committee.................................................................................8
Report of the Audit Committee...................................................................9
Compensation Committee.........................................................................10
Nominating and Corporate Governance Committee..................................................11
Executive Operations Committee.................................................................13
MEMBERSHIP AND MEETINGS OF THE BOARD AND ITS COMMITTEES.................................................14
Membership and Meetings of the Board and its Committees Table For Year 2008....................14
Non-Management Directors.......................................................................15
DIRECTOR AND COMMITTEE COMPENSATION.....................................................................16
Director's Fees and Other Compensation.........................................................16
Directors' Compensation Table For Year 2008....................................................17
Directors' Beneficial Equity Ownership.........................................................18
Independent Directors' Outstanding Option Awards at Fiscal Year End 2008 Table.................18
COMPENSATION DISCUSSION AND ANALYSIS....................................................................19
What is the Company's Philosophy Regarding Compensation and what are the Compensation Program
Objectives and Rewards?...............................................................19
What are the Company's Governance Practices Regarding Compensation?............................19
What are the Company's Governance Practices Regarding Stock Options?...........................19
What are the Elements of Compensation?.........................................................20
Why Does the Company Choose to Pay Each Element?...............................................21
How Does the Company Determine the Amount/Formula for Each Element?............................21
How are Salaries Determined?...................................................................21
How are Bonuses Determined?....................................................................21
How are Equity Compensation Awards Determined?.................................................22
What are the Company's Ongoing Plans for Plan-Based Equity Compensation?.......................22
How is the Chief Executive Officer's Performance Evaluated and Compensation Determined?........22
What is the Chief Executive Officer's Compensation History?....................................23
Does the Company Pay for Perquisites?..........................................................23
i
Table of Contents
(continued)
Page
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EXECUTIVE COMPENSATION..................................................................................24
Summary Compensation Table.....................................................................24
All Other Compensation Table For Year 2008.....................................................26
Grant of Plan-Based Awards Table For Year 2008.................................................27
Outstanding Equity Awards at Fiscal Year End 2008 Table........................................29
Option Exercises and Stock Vested in 2008 Table...............................................30
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL................................................31
Payments on Change in Control..................................................................31
Covered Terminations and Severance Payments Pursuant to Change in Control Agreements...........31
Change in Control Events and Severance Benefits Not Covered by the Severance Agreements........31
Change in Control Definition...................................................................31
Termination by Death or Disability.............................................................32
Termination by Retirement......................................................................32
Voluntary and Involuntary Termination..........................................................32
Retention and Transition Agreements............................................................32
Potential And Actual Payments Under Severance Agreements Table.................................33
PENSION PLANS...........................................................................................35
2008 Pension Benefits Table....................................................................36
PRINCIPAL STOCKHOLDERS AND BENEFICIAL OWNERSHIP.........................................................37
Principal Stockholder Table....................................................................37
Beneficial Ownership Table.....................................................................38
Section 16(A) Beneficial Ownership Reporting Compliance........................................39
Certain Relationships and Related Transactions.................................................39
PROPOSAL NO. 2 - RATIFICATION OF INDEPENDENT AUDITORS...................................................40
Principal Accountants' Fees and Services.......................................................40
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of
Independent Auditors..................................................................40
Code of Business Conduct and Ethics............................................................42
Stockholder Proposals and Director Nominations for 2010........................................42
Stockholder and Interested Party Communications with the Board of Directors....................42
Other Matters..................................................................................43
ii
March 16, 2009
[LOGO OF STURM, RUGER & COMPANY, INC.]
PROXY STATEMENT
Annual Meeting of Stockholders of the Company to be held on April 29, 2009
PROXY SOLICITATION AND VOTING INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Sturm, Ruger & Company, Inc.
(the "Company") for use at the 2009 Annual Meeting of Stockholders (the
"Meeting") of the Company to be held at 10:30 a.m. on April 29, 2009 at the
Trumbull Marriott, 180 Hawley Lane, Trumbull, Connecticut 06611 or at any
adjournment or postponement thereof for the purposes set forth in the
accompanying Notice of Annual Meeting of Stockholders. This Proxy Statement has
been posted and is available on the Securities and Exchange Commission (the
"SEC") website at www.sec.gov and the Company's website at www.ruger.com. In
addition, registered stockholders may view or request the proxy materials and
vote their proxy at www.investorvote.com or by telephone at 1-800-652-8663, and
stockholders who hold their shares through a brokerage account may view or
request the proxy materials and vote their proxy at www.proxyvote.com or by
telephone at 1-800-579-1639.
The mailing address of the principal executive office of the Company is 1
Lacey Place, Southport, Connecticut 06890.
In accordance with rules established by the SEC that allow companies to
furnish their proxy materials over the Internet, on March 20, 2009 we are
mailing a Notice of Internet Availability of Proxy Materials instead of a paper
copy of our Proxy Statement and Annual Report on Form 10-K to our stockholders
who have not specified that they wish to receive paper copies of our proxy
materials. The Notice of Availability of Proxy Materials also contains
instructions on how to request a paper copy of our proxy materials, including
our Proxy Statement, Annual Report on Form 10-K and a form of proxy card. We
believe this process will allow us to provide our stockholders with the
information they need in a more timely, environmentally friendly and
cost-effective manner. All expenses in connection with the solicitation of these
proxies, which are estimated to be $60,000, will be borne by the Company. We
encourage our stockholders to contact the Company's transfer agent,
Computershare Investor Services, LLC, or their stockbroker to sign up for
electronic delivery of proxy materials in order to reduce printing, mailing and
environmental costs.
If your proxy is signed and returned, it will be voted in accordance with
its terms. However, a stockholder of record may revoke his or her proxy before
it is exercised by: (i) giving written notice to the Company's Secretary at the
Company's address indicated above, (ii) duly executing a subsequent proxy
relating to the same shares and delivering it to the Company's Secretary at or
before the Meeting or (iii) attending the Meeting and voting in person (although
attendance at the Meeting will not, in and of itself, constitute revocation of a
proxy).
The Company's Annual Report on Form 10-K for the year ended December 31,
2008, including financial statements, is enclosed herewith and has been posted
and is available on the SEC website at www.sec.gov and the Company's website at
www.ruger.com.
Only holders of Common Stock, $1.00 par value, of the Company (the "Common
Stock") of record at the close of business on March 10, 2009 will be entitled to
vote at the Meeting. Each holder of record of the issued and outstanding shares
of voting Common Stock is entitled to one vote per share. As of March 1, 2009,
19,047,313 shares of Common Stock were issued and outstanding and there were no
outstanding shares of any other class of stock. The stockholders holding a
majority of the issued and outstanding Common Stock, either present in person or
represented by proxy, will constitute a quorum for the transaction of business
at the Meeting.
In accordance with the Company's By-Laws and applicable law, the election
of Directors will be determined by a plurality of the votes cast by the holders
of shares present in person or by proxy and entitled to vote. Consequently, the
seven nominees who receive the greatest number of votes cast for election as
Directors will be elected. Shares present which are properly withheld as to
voting with respect to any one or more nominees, and shares present with respect
to which a broker indicates that it does not have authority to vote ("broker
non-votes"), will be counted as being present at the Meeting. However, these
shares will not be counted as voting on the election of Directors, with the
result that such abstentions and broker non-votes will have no effect as votes
on the election of Directors.
1
The affirmative vote of shares representing a majority of the shares
present and entitled to vote is required to ratify the appointment of McGladrey
& Pullen, LLP as the Company's independent auditors for the 2009 fiscal year,
which is also to be voted on at the Meeting, and to approve any other matters
properly presented at the Meeting. Shares which are voted to abstain on these
matters and broker non-votes will be considered present at the Meeting but will
not be counted as voting for these matters, with the result that abstention and
broker non-votes will have the same effect as votes against the proposal.
2
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
Seven Directors will be elected at the Meeting, each to hold office until
the next Annual Meeting of Stockholders or until his successor is elected and
has qualified.
Background
Below is a discussion of certain events regarding the Board of Directors
and the Company's management that have taken place since January 1, 2008, at
which time the members of the Board were Michael O. Fifer, Stephen L .Sanetti,
John A. Cosentino, Jr., C. Michael Jacobi, John M. Kingsley, Jr., Stephen T.
Merkel, James E. Service and Ronald C. Whitaker:
o On February 5, 2008, the Board established a policy that the maximum
number of public boards on which a non-management Director may serve
shall be five, inclusive of the Company's Board of Directors.
o On February 5, 2008, the Board also established a policy requiring
that, upon a change in employment, a Director submit a letter of
resignation to the Board for its consideration.
o On February 15, 2008, Robert R. Stutler voluntarily retired as Vice
President of Prescott Operations.
o On February 18, 2008, Mark T. Lang was employed as Group Vice
President.
o On March 2, 2008, the Board amended the 2007 Stock Incentive Plan to
clarify that the Company does not reprice stock options awarded
under the plan.
o On April 23, 2008, Stephen L. Sanetti voluntarily resigned as
Vice-Chairman and member of the Board, and voluntarily resigned as
President and Chief Operating Officer of the Company on April 30,
2008 to become the President and Chief Executive Officer of the
National Shooting Sports Foundation.
o On April 23, 2008, following Mr. Sanetti's voluntary resignation,
the Board amended the Company's By-Laws to remove the title of
Vice-Chairman of the Board, and to clarify that the President would
be the Chief Executive Officer, unless a separate Chief Executive
Officer was named by the Board. Chief Executive Officer Michael O.
Fifer assumed the additional responsibilities of President at that
time.
o On April 23, 2008, Assistant General Counsel Kevin B. Reid, Sr. was
appointed as Vice President and General Counsel.
o On April 23, 2008, the Board authorized the repurchase of up to $10
million of the Company's Common stock, and on November 26, 2008,
authorized the repurchase of an additional $5 million of the
Company's Common Stock. Under these repurchase programs, the Company
repurchased 1.5 million shares at an average price of $6.58 during
2008. As of December 31, 2008, $4.7 million remained authorized and
available for share repurchases, 19.0 million shares remain
outstanding, and 3.7 million shares remain in the Company's treasury
account.
3
DIRECTOR NOMINEES
The following table lists each nominee for Director and sets forth certain
information concerning each nominee's age, business experience, other
directorships and committee memberships in publicly-held corporations and
current Board committee assignments. All of the seven nominees for Director
listed below were elected at last year's Annual Meeting. If no contrary
instructions are indicated, proxies will be voted for the election of the
nominees for Director listed below. Should any of the said nominees for Director
not remain a candidate at the time of the Meeting (a condition which is not now
anticipated), proxies solicited hereunder will be voted in favor of those
nominees for Director selected by management of the Company.
---------------------------------------------------------------------------------------------------------------------------------
Name, Business Experience
Age, During the Past Five Years,
First Became A Director Other Directorships and Current Committee Memberships
-------------------------------------- ------------------------------------------------------------------------------------------
James E. Service Chairman of the Board (non-executive) of the Company since 2006. Vice Admiral of the
Age 78 United States Navy (retired). Commander, United States Naval Air Force, Pacific Fleet,
Director since July, 1992 from 1985 to 1987. Former Director of Wood River Medical Center, Ketchum, Idaho. Adm.
Service currently serves as the Company's Nominating and Corporate Governance Committee
Chair, and as a member of the Compensation Committee and Executive Operations Committee.
-------------------------------------- ------------------------------------------------------------------------------------------
John M. Kingsley, Jr. Director of the Neurological Institute of New Jersey and Trustee of Brundge, Story and
Age 77 Rose Investment Trust from 1999 to 2003. Executive Vice President of the Company from
Director since April, 1972 1971 to 1996. Former Vice President of F.S. Smithers & Company. Former Vice President
of Finance, General Host Company. Former Associate of Corporate Finance of Dillon, Read
& Co., Inc. Former Senior Accountant of Price, Waterhouse & Company. Mr. Kingsley is a
Certified Public Accountant. Mr. Kingsley is currently a member of the Company's Audit
Committee and Compensation Committee.
-------------------------------------- ------------------------------------------------------------------------------------------
John A. Cosentino, Jr. Partner of Ironwood Manufacturing Fund, LP since 2002. Director of Simonds Industries,
Age 59 Inc. since 2003. Chairman of North American Specialty Glass, LLC since 2005. Vice
Director since August, 2005 Chairman of Primary Steel, LLC from 2005 to 2007. Partner of Capital Resource Partners,
LP from 2000 to 2001, and Director in the following Capital Resource Partners, LP
portfolio companies: Spirit Brands from 1998 to 2006, Pro Group, Inc. from 1999 to 2002,
WPT, Inc. from 1998 to 2001, and Todd Combustion, Inc. from 1997 to 1999. Former Vice
President-Operations of the Stanley Works. Former President of PCI Group, Inc., Rau
Fastener, LLC., and Otis Elevator-North America, division of United Technologies.
Former Group Executive of the Danaher Corporation. Former Director of Integrated
Electrical Services, Olympic Manufacturing Company, and the Wiremold Company. Mr.
Cosentino is currently the Chairman of the Compensation Committee and Co-Chair of the
Executive Operations Committee and a member of the Company's Nominating and Corporate
Governance Committee.
-------------------------------------- ------------------------------------------------------------------------------------------
C. Michael Jacobi President of Stable House 1, LLC, a private real estate development company, since
Age 67 1999. President, CEO and Board member of Katy Industries, Inc. from 2001 to 2005.
Director since June, 2006 Former President, CEO and Board member of Timex Corporation. Member of the Boards of
Directors and Audit committees chairman of the Corrections Corporation of America (since
2000) and Webster Financial Corporation (since 1993). Member of the Board of Directors
and Audit committee of Kohlberg Capital Corporation since 2006. Member of the Board of
Directors of Invisible Technologies, Inc. from 2001 to 2006. Mr. Jacobi is a Certified
Public Accountant. Mr. Jacobi is currently the Chairman of the Company's Audit Committee
and Co-Chair of the Executive Operations Committee and a member of the Nominating and
Corporate Governance Committee.
4
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Name, Business Experience
Age, During the Past Five Years,
First Became A Director Other Directorships and Current Committee Memberships
-------------------------------------- ------------------------------------------------------------------------------------------
Stephen T. Merkel Private Investor. CEO and Chairman of the Waterbury Companies from 2004 to 2007.
Age 57 Corporate Vice President, Officer and President of Loctite General Industrial Business
Director since June, 2006 from 1999 to 2003. President of Loctite Americas from 1996 to 1999. Board member of
Turtle Wax, Inc. from 1997 to 2000, and St. Francis Hospital from 2000 to 2004.
Mr. Merkel is currently a member of the Company's Audit Committee and Compensation
Committee.
-------------------------------------- ------------------------------------------------------------------------------------------
Ronald C. Whitaker President, CEO (since 2003) and Board member (since 2001) of Hyco International.
Age 61 Former President, CEO (from 2000 to 2003) and current Board and executive committee of
Director since June, 2006 Strategic Distribution, Inc. President and CEO of Johnson Outdoors from 1996 to 2000.
CEO, President and Chairman of the Board of Colt's Manufacturing Co., Inc. from 1992 to
1995. Board member of Michigan Seamless Tube (since 2004), Group Dekko (since 2006),
and Pangborn Corporation (since 2006). Board member of Precision Navigation, Inc. from
2000 to 2003, Weirton Steel Corporation from 1994 to 2003 and Code Alarm from 2000 to
2002. Trustee of College of Wooster from 1997 through 2005. Mr. Whitaker is currently a
member of the Company's Audit Committee and Nominating and Corporate Governance
Committee.
-------------------------------------- ------------------------------------------------------------------------------------------
Michael O. Fifer Chief Executive Officer of the Company as of September 25, 2006; President and Chief
Age 51 Executive Officer of the Company as of April 23, 2008. Executive Vice President and
Director since October, 2006 President of Engineered Products of Mueller Industries, Inc. from 2003 to 2006.
President of North American Operations of Watts Industries, Inc. from 1998 to 2002.
Member of the Board of Directors and Audit, Compensation and Special committees of
Conbraco Industries from 2003 to 2006. Member of the Board of Governors of the National
Shooting Sports Foundation and the Sporting Arms and Ammunition Manufacturers'
Institute.
---------------------------------------------------------------------------------------------------------------------------------
More than a majority of the current Directors are "independent" under the
rules of the New York Stock Exchange, Inc. ("NYSE"). The Board has affirmatively
determined that none of Messrs. Cosentino, Jacobi, Kingsley, Merkel, Service and
Whitaker has or had a material relationship with the Company or any affiliate of
the Company, either directly or indirectly, as a partner, shareholder or officer
of an organization (including a charitable organization) that has a relationship
with the Company, and are therefore "independent" for such purposes under the
rules of the NYSE, including Rule 303A thereof.
Board of Director Recommendation
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES NAMED ABOVE.
5
================================================================================
THE BOARD OF DIRECTORS AND ITS COMMITTEES
================================================================================
The Board of Directors is committed to good business practice,
transparency in financial reporting and the highest level of corporate
governance. To that end, the Board of Directors and its committees continually
review the Company's governance policies and practices as they relate to the
practices of other public companies, specialists in corporate governance, the
rules and regulations of the SEC, Delaware law (the state in which the Company
is incorporated) and the listing standards of the NYSE. As a result of these
reviews, the Board has, over the past several years, among other things:
o Adopted a revised charter for the Audit Committee;
o Adopted a charter for the Compensation Committee;
o Established and adopted a charter for the Nominating and Corporate
Governance Committee;
o Adopted a Code of Business Conduct and Ethics;
o Adopted Corporate Board Governance Guidelines;
o Adopted a method by which stockholders and other interested parties
can send communications to the Board;
o Adopted procedures for the succession of the Chief Executive
Officer;
o Adopted criteria for the selection of new Directors;
o Caused the non-management Directors of the Board to meet regularly
in executive sessions;
o Established a policy that stock options or stock grants for
employees: (i) will only be granted on the fourth business day
following public quarterly filings of the Company's Forms 10-K or
10-Q in order to allow the investment markets adequate time to
analyze and react to recent financial results and (ii) will be
issued with an exercise price equal to the mean of the highest and
lowest market trading price of the Company's stock on the NYSE on
the date of grant;
o Established an insider trading policy window for Directors, officers
and employees beginning on the fourth business day following public
quarterly filings of the Company's Forms 10-K or 10-Q, and ending on
the earlier of the thirtieth day thereafter, the end of the fiscal
quarter or the development of material non-public information;
o Established a policy that the maximum number of public boards on
which a non-management Director may serve is five, inclusive of the
Company's Board of Directors;
o Established a policy requiring that, upon a change in employment, a
non-management Director submit a letter of resignation to the Board
for its consideration;
o Established guidelines for minimum stock ownership by Directors and
officers;
o Established a policy that annual performance bonuses for Company
officers be partially paid in the form of deferred stock awards;
o Established a policy that Directors shall strive to remain aware of
important corporate governance issues and educated in good corporate
governance practices through participation in appropriate
conferences and seminars and membership in associations such as the
National Association of Corporate Directors; and
o Established a policy that prohibits the repricing of stock options.
6
Corporate Board Governance Guidelines
The Company's corporate governance practices are embodied in the Corporate
Board Governance Guidelines. A copy of the Corporate Board Governance Guidelines
is posted on the Company's website at www.ruger.com and is available in print to
any stockholder who requests it by contacting the Corporate Secretary as set
forth in "STOCKHOLDER COMMUNICATIONS" below.
The Company's business and affairs are under the direction of the Board of
Directors of the Company pursuant to the General Corporation Law of the State of
Delaware as in effect from time to time and the Company's By-Laws. Members of
the Board are kept informed of the Company's affairs through discussions with
the Company's executive officers, by careful review of materials provided to
them and by participating in meetings of the Board and the committees of the
Board.
7
COMMITTEES OF THE BOARD
Audit Committee
In 2008, the members of the Audit Committee of the Board were C. Michael
Jacobi, John M. Kingsley, Jr., Ronald C. Whitaker and Stephen T. Merkel, who was
appointed to the Audit Committee on April 23, 2008. Mr. Kingsley served as Audit
Committee Chairman until April 23, 2008, at which time Mr. Jacobi became the
Audit Committee Chairman. Each of Messrs., Jacobi, Kingsley, Merkel and Whitaker
are considered "independent" for purposes of service on the Audit Committee
under the rules of the NYSE, including Rule 303A thereof, and Rule 10A-3 of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"). All
members of the Audit Committee are financially literate and have a working
familiarity with basic finance and accounting practices. In addition, the
Company has determined that Mr. Jacobi is an "audit committee financial expert"
as defined by the SEC rules and regulations. The Board has also affirmed that
Mr. Jacobi's simultaneous service on more than three audit committees, as noted
in his business biography under "DIRECTOR NOMINEES," does not impair his ability
to effectively serve on the Company's Audit Committee.
The purpose of the Audit Committee is to provide assistance to the Board
in fulfilling its responsibility with respect to its oversight of: (i) the
quality and integrity of the Company's financial statements; (ii) the Company's
compliance with legal and regulatory requirements; (iii) the independent
auditor's qualifications and independence; and (iv) the performance of the
Company's internal audit function and independent auditors. In addition, the
Audit Committee prepares the report required by the SEC rules included in this
Proxy Statement.
The Audit Committee is governed by a written charter that has been adopted
by the Board. A copy of the Audit Committee Charter is posted on the Company's
website at www.ruger.com, and is available in print to any stockholder who
requests it by contacting the Corporate Secretary as set forth in "STOCKHOLDER
COMMUNICATIONS" below.
The Audit Committee held six meetings during 2008. All members of the
Audit Committee attended all meetings of the committee during their 2008 tenure.
The Annual Report of the Audit Committee is included in this Proxy Statement.
8
Report of the Audit Committee*
Management has the primary responsibility for the financial statements and
the reporting process including the systems of internal controls. In fulfilling
its oversight responsibilities, the Audit Committee reviewed and discussed the
audited financial statements in the Annual Report with management, including a
discussion of the quality, not just the acceptability, of the accounting
principles, the reasonableness of significant judgments, and the clarity of
disclosures in the financial statements.
The committee reviewed with the independent auditors, who are responsible
for expressing an opinion on the conformity of those audited financial
statements with accounting principles generally accepted in the United States,
their judgments as to the quality, not just the acceptability, of the Company's
accounting principles and such other matters as are required to be discussed
with the committee by Statement on Auditing Standards No. 61 (Codification of
Statements on Auditing Standards, AU ss. 380). In addition, the committee has
discussed with the independent auditors the auditors' independence from
management and the Company, and has received the written disclosures and the
letter from the independent auditors as required by Independence Standard Board
Standard No. 1 "Independence Discussions with Audit Committees."
The committee discussed with the independent auditors the overall scope
and plans for their audit. The committee met with the independent auditors, with
and without management present, to discuss the results of their examinations,
their evaluations of the Company's internal controls, and the overall quality of
the Company's financial reporting. The committee held six meetings during fiscal
year 2008.
In reliance on the reviews and discussions referred to above, the
committee recommended to the Board of Directors that the audited financial
statements be included in the Annual Report on Form 10-K for the year ended
December 31, 2008 for filing with the Securities and Exchange Commission.
AUDIT COMMITTEE
C. Michael Jacobi, Audit Committee Chairman
John M. Kingsley, Jr.
Stephen T. Merkel
Ronald C. Whitaker
February 20, 2009
----------
* The report of the Audit Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under either the Securities Act of 1933, as
amended, or the Exchange Act (together, the "Acts"), except to the extent
that the Company specifically incorporates such report by reference; and
further, such report shall not otherwise be deemed to be "soliciting
material" or "filed" under the Acts.
9
Compensation Committee
In 2008, the members of the Compensation Committee of the Board were John
A. Cosentino, Jr., Stephen T. Merkel, James E. Service and John M. Kingsley,
Jr., who was appointed to the Compensation Committee on April 23, 2008. Mr.
Cosentino served as Compensation Committee Chairman. Each of Messrs. Cosentino,
Kingsley, Merkel and Service are considered "independent" for purposes of
service on the Compensation Committee under the rules of the NYSE, including
Rule 303A thereof.
The purposes of the Compensation Committee are: (i) discharging the
responsibilities of the Board with respect to the compensation of the Chief
Executive Officer of the Company, the other executive officers of the Company
and members of the Board; (ii) establishing and administering the Company's
cash-based and equity-based incentive plans; and (iii) producing an annual
report on executive compensation to be included in the Company's annual proxy
statement, in accordance with the rules and regulations of the NYSE and the SEC,
and any other applicable rules or regulations. The Compensation Committee has
the authority to form and delegate authority to one or more subcommittees, made
up of one or more of its members, as it deems appropriate from time to time.
The Compensation Committee is governed by a written charter that has been
adopted by the Board. A copy of the Compensation Committee charter is posted on
the Company's website at www.ruger.com, and is available in print to any
stockholder who requests it by contacting the Corporate Secretary as set forth
in "STOCKHOLDER COMMUNICATIONS" below.
The Compensation Committee held four meetings during 2008. All members of
the Compensation Committee attended all meetings of the committee during their
2008 tenure. The annual Compensation Committee Report on Executive Compensation
is included in this Proxy Statement.
Compensation Committee Interlocks and Insider Participation
During the 2008 fiscal year, none of the Company's executive officers
served on the board of directors of any entities whose directors or officers
serve on the Company's Compensation Committee. No current or past executive
officers of the Company serve on the Compensation Committee.
Compensation Committee Report on Executive Compensation *
The committee has reviewed and discussed with management the Compensation
Discussion & Analysis. In reliance on the reviews and discussions referred to
above, the committee recommended to the Board of Directors that the Compensation
Discussion & Analysis be included in this proxy statement.
COMPENSATION COMMITTEE
John A. Cosentino, Jr., Compensation Committee Chairman
John M. Kingsley, Jr.
Stephen T. Merkel
James E. Service
March 12, 2009
----------
* The report of the Compensation Committee shall not be deemed incorporated
by reference by any general statement incorporating by reference this
Proxy Statement into any filing of the Acts, except to the extent that the
Company specifically incorporates such report by reference; and further,
such report shall not otherwise be deemed to be "soliciting material" or
"filed" under the Acts.
10
Nominating and Corporate Governance Committee
In 2008, the members of the Nominating and Corporate Governance Committee
were James E. Service, John A. Cosentino, Jr., C. Michael Jacobi, and Ronald C.
Whitaker, who was appointed to the Nominating and Corporate Governance Committee
on April 23, 2008. Admiral Service served as Nominating and Corporate Governance
Committee Chairman. Each of Messrs. Cosentino, Jacobi, Service and Whitaker are
considered "independent" for purposes of service on the Nominating and Corporate
Governance Committee under the rules of the NYSE, including Rule 303A thereof.
The Nominating and Corporate Governance Committee is responsible to the
Board for identifying, vetting and nominating potential Directors and
establishing, maintaining and supervising the corporate governance program. Some
of these responsibilities are discussed in more detail below.
The Nominating and Corporate Governance Committee is governed by a written
charter that has been adopted by the Board. The Nominating and Corporate
Governance Committee charter is posted on the Company's website at
www.ruger.com, and is available in print to any stockholder who requests it by
contacting the Corporate Secretary as set forth in "STOCKHOLDER COMMUNICATIONS"
below.
The Nominating and Corporate Governance Committee held four meetings
during 2008. All members of the committee attended all meetings of that
committee during their 2008 tenure.
As required under its charter, the Nominating and Corporate Governance
Committee has adopted criteria for the selection of new Directors, including,
among other things, career specialization, technical skills, strength of
character, independent thought, practical wisdom, mature judgment and gender and
ethnic diversity. Functional skills considered important for Directors to
possess include experience as a chief executive or financial officer or similar
position in finance, audit, manufacturing, advertising, military or government,
and knowledge and familiarity of firearms and the firearms industry. The
committee will also consider any such qualifications as required by law or
applicable rule or regulation, and will consider questions of independence and
conflicts of interest. In addition, the following characteristics and abilities,
as excerpted from the Company's Corporate Board Governance Guidelines, will be
important considerations of the Nominating and Corporate Governance Committee:
o Personal and professional ethics, strength of character, integrity
and values;
o Success in dealing with complex problems or having excelled in a
position of leadership;
o Sufficient education, experience, intelligence, independence,
fairness, ability to reason, practicality, wisdom and vision to
exercise sound and mature judgment;
o Stature and capability to represent the Company before the public
and the stockholders;
o The personality, confidence and independence to undertake full and
frank discussion of the Company's business assumptions;
o Willingness to learn the business of the Company, to understand all
Company policies and to make themselves aware of the Company's
finances; and
o Willingness at all times to execute their independent business
judgment in the conduct of all Company matters.
The charter also grants the Nominating and Corporate Governance Committee
the responsibility to identify and meet individuals believed to be qualified to
serve on the Board and recommend that the Board select candidates for
directorships. The Nominating and Corporate Governance Committee's process for
identifying and evaluating nominees for Director, as set forth in the charter,
includes inquiries into the backgrounds and qualifications of candidates. These
inquiries include studies by the Nominating and Corporate Governance Committee
and may also include the retention of a professional search firm to be used to
assist it in identifying or evaluating candidates. The Nominating and Corporate
Governance Committee has previously retained the firm of Korn/Ferry
International to assist in the search for qualified Directors.
11
The Nominating and Corporate Governance Committee has a written policy
which states that it will consider Director candidates recommended by
stockholders. There is no difference in the manner in which the Nominating and
Corporate Governance Committee will evaluate nominees recommended by
stockholders and the manner in which it evaluates candidates recommended by
other sources. Shareholder recommendations for the nomination of directors
should set forth (a) as to each proposed nominee, (i) their name, age, business
address and, if known, residence address, (ii) their principal occupation or
employment, (iii) the number of shares of stock of the Company which are
beneficially owned by each such nominee and (iv) any other information
concerning the nominee that must be disclosed as to nominees in proxy
solicitations pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (including such person's written consent to be named as a
nominee and to serve as a director of the Company if elected); (b) as to the
shareholder giving the notice, (i) their name and address, as they appear on the
Company's books, (ii) the number of shares of the corporation which are
beneficially owned by such shareholder and (iii) a representation that such
shareholder is a holder of record of stock of the Company entitled to vote at
such meeting and intends to appear in person or by proxy at the meeting to
propose such nomination; and (c) as to the beneficial owner, if any, on whose
behalf the nomination is made, (i) the name and address of such person and (ii)
the class and number of shares of the Company which are beneficially owned by
such person. The Company may require any proposed nominee to furnish such other
information as it may reasonably require to determine the eligibility of a
proposed nominee to serve as a director of the Company, including a statement of
the qualifications of the candidate and at least three business references. All
recommendations for nomination of directors should be sent to the Corporate
Secretary, Sturm, Ruger & Company, Inc., 1 Lacey Place, Southport, CT 06890. The
Corporate Secretary will accept such recommendations and forward them to the
Chairman of the Nominating and Corporate Governance Committee. In order to be
considered for inclusion by the Nominating and Corporate Governance Committee as
a candidate at the Company's next Annual Meeting of Stockholders, stockholder
recommendations for director candidates must be received by the Company in
writing delivered or mailed by first class United States mail, postage prepaid,
no earlier than December 30, 2009 (120 days prior to the first anniversary of
this year's Annual Meeting of Stockholders,) and no later than January 29, 2010
(90 days prior to the first anniversary of this year's Annual Meeting of
Stockholders.)
The Company has not rejected any Director candidates put forward by a
stockholder or group of stockholders who beneficially owned more than 5% of the
Company's Common Stock for at least one year prior to the date of the
recommendation.
12
Executive Operations Committee
Effective August 1, 2006, the Board established the Executive Operations
Committee to collaborate with the Company's executive team during the transition
in the management of the Company, and appointed John A. Cosentino, Jr. and C.
Michael Jacobi as Co-Chairs and James E. Service as a member of the Executive
Operations Committee. The need to continue the Executive Operations Committee is
evaluated by the Board annually and as a result of such evaluation and upon the
recommendation of the Chief Executive Officer, the committee's continuance has
been extended by the Board through 2009. The Board established the Executive
Operations Committee's responsibilities and roles as follows:
o To act as the Board's representatives in providing advisory
leadership to management as needed and to ensure that all the expert
resources, experiences and skill sets of the Board are
constructively deployed in improving the business performance of the
Company;
o To establish and implement a strategic business plan that enables
the delivery of the growth and profitability objectives of the
Company's stockholders;
o To develop and implement the Ruger Business System, a robust,
Company-wide business system based on "lean" principles and
practices, designed to become indelibly rooted and capable of
sustaining itself beyond the tenure of the current management team;
o To identify, recruit and develop key executive and management level
personnel needed to execute the Company's strategic and operational
plans and to ensure a viable succession plan;
o To conduct ongoing oversight of Company operations and business
performance, including operations and strategy deployment reviews
with executive management;
o To identify and explore major initiatives, such as acquisition
analyses, major new program proposals and business opportunities;
and
o To ensure overall executive team effectiveness, collaboration and
communication within management and with the Board.
The Executive Operations Committee held 15 meetings during 2008. All
members of the committee attended at least 75% of the meetings of the committee
during their 2008 tenure.
13
MEMBERSHIP AND MEETINGS OF THE BOARD AND ITS COMMITTEES
In 2008, each Director attended all 2008 meetings of the Board and at
least 75% of the meetings of its Committees on which he served during his 2008
tenure. In addition, all then-current members of the Company's Board attended
the 2008 Annual Meeting of Stockholders. It is the policy of the Company that
attendance at all meetings of the Board, all committee meetings, and the Annual
Meeting of Stockholders is expected, unless the Director has previously been
excused by the Chairman of the Board for good cause. Committee memberships and
the number of meetings of the full Board and its committees held during the
fiscal year 2008 are set forth in the table below. All committee memberships
were effective as of April 23, 2008. When feasible and appropriate, it is the
practice of the Board to hold its regular committee meetings in conjunction with
the regular meetings of the Board of Directors.
MEMBERSHIP AND MEETINGS OF THE BOARD AND ITS COMMITTEES TABLE FOR YEAR 2008
-----------------------------------------------------------------------------------------------------------------------
Nominating and
Corporate
Board of Audit Compensation Governance Executive Operations
Name Directors Committee Committee Committee Committee
--------------------------- ------------------ -------------- ----------------- ----------------- ---------------------
James E. Service Chair Member Chair Member
--------------------------- ------------------ -------------- ----------------- ----------------- ---------------------
Stephen L. Sanetti (1) Vice-Chair
--------------------------- ------------------ -------------- ----------------- ----------------- ---------------------
Michael O. Fifer* Member
--------------------------- ------------------ -------------- ----------------- ----------------- ---------------------
John A. Cosentino, Jr. Member Chair Member Co-Chair
--------------------------- ------------------ -------------- ----------------- ----------------- ---------------------
C. Michael Jacobi Member Chair** Member Co-Chair
--------------------------- ------------------ -------------- ----------------- ----------------- ---------------------
John M. Kingsley, Jr. Member Member** Member**
--------------------------- ------------------ -------------- ----------------- ----------------- ---------------------
Stephen T. Merkel Member Member** Member
--------------------------- ------------------ -------------- ----------------- ----------------- ---------------------
Ronald C. Whitaker Member Member Member**
--------------------------- ------------------ -------------- ----------------- ----------------- ---------------------
Total Number of Meetings 5 6 4 4 15
-----------------------------------------------------------------------------------------------------------------------
Notes to Membership and Meetings of the Board and its Committees Table
* Non-independent Board member.
** As of April 23, 2008.
(1) Stephen L. Sanetti voluntarily resigned from the Board on April 23, 2008.
14
NON-MANAGEMENT DIRECTORS
The non-management members of the Board meet regularly in executive
sessions and each such meeting is led by the non-executive Chairman of the
Board, or in his absence, a presiding Director. James E. Service has served as
the non-executive Chairman of the Board since February 24, 2006. Historically,
the non-management Director with the greatest length of service as a Company
Director was chosen annually for a one-year term as presiding Director at the
first executive session held in concurrence with the organizational meeting of
the Board held after each Annual Meeting of Stockholders. On April 24, 2007, the
By-Laws were amended to define the Chairman of the Board as an independent,
non-management Director who would also preside at all meetings of the Board,
including meetings of the non-management Directors in executive session, which
would generally occur as part of each regularly scheduled Board meeting. The
April 24, 2007 By-Law amendment also provided that an independent,
non-management Lead Director would be named to preside at stockholder, Board and
executive session meetings and to act as an intermediary between the
non-management Directors and management of the Company when special
circumstances exist or communication out of the ordinary course is necessary,
such as the absence or disability of the non-executive Chairman of the Board.
John A. Cosentino, Jr. has served as Lead Director since April 24, 2007.
Only non-management, independent Directors served on any committees of the
Board.
15
================================================================================
DIRECTOR AND COMMITTEE COMPENSATION
================================================================================
The Board believes that compensation for the Company's independent
Directors should be a combination of cash and equity-based compensation. The
Directors and the Compensation Committee annually review Director compensation
utilizing published compensation studies. Any recommendations for changes are
made to the full Board by the Compensation Committee. In 2006 and 2007, as a
result of these reviews, the Directors' fee structure was changed as described
below. The Directors' fee structure has not changed since April 1, 2007.
Directors' Fees and Other Compensation
As of June 1, 2006, the Board approved a fee schedule whereby all
non-management independent Directors receive annual retainer compensation of
$75,000. The retainer compensation is paid as $50,000 in cash and $25,000 in
restricted stock. In addition to the annual retainer fees, the Board Chairman
receives $20,000, the Audit Committee Chairman receives $10,000 and the
Compensation Committee Chairman and the Nominating and Corporate Governance
Committee Chairman each receive $7,500. Payment for service on more than two
committees was discontinued effective January 1, 2007. As of August 1, 2006, the
Board established an Executive Operations Committee, as described above, and
established additional committee fees of $50,000 per year for this Committee's
Co-Chairs and $7,500 per year for its members.
The annual retainer award of $25,000 worth of restricted stock was
initially deferred subject to stockholder ratification of the 2007 Stock
Incentive Plan at the 2007 Annual Meeting of Stockholders. Pending such
ratification, the independent Directors received $25,000 per year in additional
cash compensation, prorated from June 1, 2006 and continuing until June 30,
2007. On May 4, 2007, the date that the shares authorized under the 2007 Stock
Incentive Plan were registered with the SEC following the April 24, 2007
stockholder ratification of the plan, the Board received their first annual
awards of $25,000 worth of restricted stock and therefore discontinued the
payment of additional cash compensation. The Board also approved the retroactive
reduction of their cash compensation from $75,000 to $50,000 per year effective
April 1, 2007, the quarter in which the 2007 Stock Incentive Plan was approved
by the Company's stockholders. On April 23, 2008, the date of the 2008 Annual
Meeting, the independent Directors received their annual awards of $25,000 of
restricted stock, and the vesting period for the restricted shares awarded in
2007 was satisfied.
Under the 2007 Stock Incentive Plan, options to purchase 20,000 shares of
the Company's Common Stock are granted to Directors when they are first elected
at an exercise price equal to the closing price on the date of award. These
options vest and become exercisable in four equal annual installments of 25% of
the total number of options awarded, beginning on the date of grant and on each
of the next succeeding three anniversaries thereafter. Until the April 24, 2007
ratification of the 2007 Stock Incentive Plan, these options were previously
granted under the 2001 Stock Option Plan for Non-Employee Directors.
Directors are covered under the Company's business travel accident
insurance policy for $300,000 while traveling on Company business, and are
covered under the Company's director and officer liability insurance policies
for claims alleged in connection with their service as a Director.
All Directors were reimbursed for out-of-pocket expenses related to
attendance at meetings.
16
DIRECTORS' COMPENSATION TABLE FOR YEAR 2008
The following table reflects the cash and equity compensation received
during the 2008 fiscal year by each non-management Director who served on the
Company's Board and the committees of the Board. Please see "SUMMARY
COMPENSATION TABLE" for disclosure of Directors' fees paid to management
Directors in the 2008 fiscal year.
----------------------------------------------------------------------------------------------------------------------------
Change in
Pension Value
Fees and Nonqualified
Earned or Option Deferred All
Paid in Stock Awards Compensation Other Total Director
Cash (1) Awards (2) (3)(4) Earnings (5) Compensation Compensation (6)
Name ($) ($) ($) ($) ($) ($)
--------------------------- ------------ ------------ -------------- ------------------ ------------------ -----------------
James E. Service $85,000 $25,000 $110,000
--------------------------- ------------ ------------ -------------- ------------------ ------------------ -----------------
John A. Cosentino, Jr. $107,500 $25,000 $ 3,270 $135,770
--------------------------- ------------ ------------ -------------- ------------------ ------------------ -----------------
C. Michael Jacobi $108,800 $25,000 $11,360 $145,160
--------------------------- ------------ ------------ -------------- ------------------ ------------------ -----------------
John M. Kingsley, Jr. $51,200 $25,000 $0 $76,200
--------------------------- ------------ ------------ -------------- ------------------ ------------------ -----------------
Stephen T. Merkel 50,000 $25,000 $11,360 $86,360
--------------------------- ------------ ------------ -------------- ------------------ ------------------ -----------------
Ronald C. Whitaker 50,000 $25,000 $11,360 $86,360
--------------------------- ------------ ------------ -------------- ------------------ ------------------ -----------------
Total $452,500 $150,000 $37,350 $0 $0 $639,850
----------------------------------------------------------------------------------------------------------------------------
Notes to Directors' Compensation Table
(1) See "DIRECTOR'S FEES AND OTHER COMPENSATION" above.
(2) Represents grant date dollar value of one-year-deferred restricted
stock awards worth $25,000 each that were awarded to each
non-management independent director on April 23, 2008 under the 2007
Stock Incentive Plan in accordance with the Director fee schedule
approved June 1, 2006.
(3) Non-qualified stock option awards were granted as of date of
election to Board under the Company's 2001 Stock Option Plan for
Non-Employee Directors at an exercise price equal to the closing
price of the Common Stock on the date of grant. These options vest
and become exercisable in four equal annual installments of 25% of
the total options awarded, beginning on the date of grant and on
each of the next three anniversaries thereafter. See "INDEPENDENT
DIRECTORS' OUTSTANDING OPTION AWARDS AT FISCAL YEAR-END 2008 TABLE"
below for further information.
(4) This column represents the grant date fair value amount recognized
for financial reporting purposes calculated in accordance with the
provisions of Financial Accounting Standards Board Statement of
Financial Accounting Standards (SFAS) No. 123R "Share-based
Payments"("FAS 123R"). See Note 5 of the consolidated financial
statements in the Company's Annual Report on Form 10-K for the year
ended December 31, 2008 regarding assumptions underlying valuation
of equity awards.
(5) This column represents the sum of the increased change in pension
value in 2008 for each Director, and applies only to Directors who
were former employees of the Company. Mr. Kingsley is the only
Director who is a former employee of the Company. Mr. Kingsley's
total change in pension value is related to his service as Executive
Vice President of the Company from 1971 to 1996. Mr. Kingsley's
negative change in pension value, ($65,170), is not reportable in
the table above. No Director received preferential or above-market
earnings on deferred compensation (also see Note 6 below). The
change in pension value is calculated based on a 6.25% discount
rate, the 2000 Group Mortality Table, participant ages as of
December 31, 2008, accrued benefits as of December 31, 2007, the
date the Company's pension plans were "frozen", and in the case of
the SERP, a COLA assumption of 1.5% per year. See "PENSION PLANS"
and the "PENSION BENEFITS TABLE" below for additional information,
including the present value assumptions used in the calculation.
(6) The Company's non-management Directors do not receive non-equity
incentive plan compensation, pension or medical plan benefits or
non-qualified deferred compensation.
17
Directors' Beneficial Equity Ownership
In 2006 the Board set a minimum equity ownership requirement for
Non-Management Directors of five times their annual base cash retainer of
$50,000, to be achieved within five years of the later of the date of adoption
or the date of a Director's election. As Directors are expected to hold a
meaningful ownership position in the Company, a significant portion of overall
Director compensation is intended to be in the form of Company equity. This has
been partially achieved through options granted to each independent Director
under the 2001 Stock Option Plan for Non-Employee Directors and through option
grants and restricted stock awards under the 2007 Stock Incentive Plan, which
was approved at the 2007 Annual Shareholders Meeting. The current amounts of
Common Stock beneficially owned by each Director may be found in the "BENEFICIAL
OWNERSHIP TABLE" below.
INDEPENDENT DIRECTORS' OUTSTANDING OPTION AWARDS AT FISCAL YEAR END 2008 TABLE
The following table sets forth outstanding option awards issued to the
Company's Independent Directors under the 2001 Stock Option Plan for
Non-Employee Directors and 2007 Stock Incentive Plan. See "BENEFICIAL OWNERSHIP
TABLE" below for information regarding each Company Director's total beneficial
ownership.
------------------------------------------------------------------------------------------------------------------------------------
Number of Securities
Underlying Unexercised
Options (1)
Option
Exercisable Unexercisable Exercise
Name of (2) (2) Price (3) Option Vesting Option
Independent Director (#) (#) Grant Date ($) Date Expiration Date
---------------------------------- --------------- --------------- ----------------- --------------- --------------- ---------------
James E. Service 20,000 0 1/5/2001 $9.875 1/5/2004 1/5/2011
---------------------------------- --------------- --------------- ----------------- ------------- --------------- -----------------
John A. Cosentino, Jr. 20,000 0 8/1/2005 $10.88 8/1/2008 8/1/2015
---------------------------------- --------------- --------------- ----------------- ------------- --------------- -----------------
C. Michael Jacobi 15,000 5,000 6/1/2006 $6.15 6/1/2009 6/1/2016
---------------------------------- --------------- --------------- ----------------- ------------- --------------- -----------------
John M. Kingsley, Jr. 20,000 0 1/5/2001 $9.875 1/5/2004 1/5/2011
---------------------------------- --------------- --------------- ----------------- ------------- --------------- -----------------
Stephen T. Merkel 15,000 5,000 6/1/2006 $6.15 6/1/2009 6/1/2016
---------------------------------- --------------- --------------- ----------------- ------------- --------------- -----------------
Ronald C. Whitaker 15,000 5,000 6/1/2006 $6.15 6/1/2009 6/1/2016
---------------------------------- --------------- --------------- ----------------- ------------- --------------- -----------------
Total 105,000 15,000
------------------------------------------------------------------------------------------------------------------------------------
Notes to Independent Directors' Outstanding Option Awards at Fiscal Year End
Table
(1) Awards of options to purchase the Company's Common Stock represented
in this table were granted pursuant to the Company's 1998 Stock
Incentive Plan.
(2) Options awarded to Independent Directors upon their date of election
vest and become exercisable in four equal annual installments of 25%
of the total number of options awarded, beginning on the date of
grant and on each of the next succeeding three anniversaries
thereafter and have a 10 year term. Amounts shown as exercisable or
unexercisable reflect the vesting status of each Director's options
within 60 days of March 1, 2009.
(3) This column represents the exercise price of awards of options to
purchase the Company's Common Stock which exercise price was not
less than the closing price on the grant date.
18
================================================================================
COMPENSATION DISCUSSION AND ANALYSIS
================================================================================
What is the Company's Philosophy Regarding Compensation and what are the
Compensation Program Objectives and Rewards?
The Company's executive compensation program is designed to reward both
corporate and individual performance in an environment that reflects commitment,
responsibility and adherence to the highest standards of ethics and integrity.
Recognition of both individual contributions as well as overall business results
permits an ongoing evaluation of the relationship between the size and scope of
the Company's operations, its performance and its executive compensation.
The program's objectives are to attract, retain and motivate the workforce
that helps to ensure our future success, support a lean and flexible business
model culture and to help achieve overall business objectives in order to
provide our stockholders with a superior rate of return.
What are the Company's Governance Practices Regarding Compensation?
Stockholders: The 2007 Stock Incentive Plan (the "2007 SIP"),
which was approved by the stockholders at the
Company's 2007 Annual Meeting, replaced all
previous stock incentive plans. The Company does
not have any stock plans that are not
stockholder-approved.
Board and The Compensation Committee and the Board determine
Compensation the compensation of the Company's executive
Committee and Nominating officers, including the individuals whose
and Corporate Governance compensation is detailed in this Proxy Statement.
Committee: The Compensation Committee, which is composed
entirely of independent Directors, establishes and
administers compensation programs and
philosophies. The Compensation Committee ensures
that stockholder-approved plans are administered
in accordance with good governance practices and
stockholder intent. The Compensation Committee is
responsible for the recommendation of salaries,
bonuses and long-term incentive compensation paid
to executive officers, bonus pools for
non-executive employees, retirement formulas for
executive officers, deferred compensation plans,
and any employment and change-in-control
agreements. In addition, the performance of each
executive officer is evaluated by the Nominating
and Corporate Governance Committee and reported to
the full Board. The full Board reviews the
Compensation Committee and Nominating and
Corporate Governance Committee reports and acts on
recommendations of the Compensation Committee.
Management: The Chief Executive Officer's views regarding the
performance and recommended compensation levels
for the Company's executive officers are discussed
with all of the non-management Directors,
including the Compensation Committee and the
Nominating and Corporate Governance Committee.
Within management, the Chief Executive Officer and
the Corporate Secretary serve as liaisons with
these committees.
What are the Company's Governance Practices Regarding Stock Options?
The use of equity compensation is a significant component of the Company's
overall compensation philosophy and is one that the Company plans to continue.
The Company's philosophy is built on the principles that equity compensation
should seek to align participants' actions and behaviors with stockholders'
interests, be market-competitive, and be able to attract, motivate and retain
the best employees, independent contractors and Directors.
The Board has established the following practices and policies regarding
stock options and grants:
o The Company's policy for setting the timing of stock option grants
does not allow executives to have any role in choosing the price of
their options or other stock awards;
o The Company has never "back dated" or repriced options or other
stock awards, and the 2007 Stock Incentive Plan states that
repricing of options is not allowed under the plan;
19
o Stock options or stock grants for employees shall be issued only on
the fourth business day following the public quarterly filing of the
Company's Forms 10-K or 10-Q in order to allow the investment
markets adequate time to assimilate the current financial
information, and will be valued at the mean between the highest and
lowest sales prices of the Company's common stock on the NYSE on the
date of grant;
o Annual performance-based options for executive officers and certain
employees shall generally be approved at the first Board meeting of
each year and shall be issued in quarterly increments on the fourth
business day following the filing of the public quarterly filing of
the Company's Forms 10-K or 10-Q;
o The executive officers' annual performance-based option awards shall
be based on two-thirds of their assigned bonus potential divided by
the Black-Scholes value per option in accordance with FAS 123R; and
o The restricted stock unit awards to the executive officers in lieu
of the 25% equity portion of their prior year's performance-based
bonus shall be made on the date that the Board approves payment of
the prior year's performance bonus in accordance with the Company's
Incentive Compensation Program.
The Compensation Committee and the Board consider recommendations from the
Chief Executive Officer in establishing appropriate option grants to officers or
employees. All stock option awards, including the specific number of options
granted to specific individuals, have been, and will continue to be, subject to
the approval of the Compensation Committee and ratification by the full Board.
The Company's Corporate Secretary is responsible for issuing grants upon their
approval by the Compensation Committee and the full Board and maintaining
records of all grants issued, exercised or terminated in accordance with the
terms of the 1998 Stock Incentive Plan, 2001 Stock Option Plan for Non-Employee
Directors and the 2007 Stock Incentive Plan.
What are the Elements of Compensation?
The key elements of the Company's executive compensation consist of:
Cash Compensation: Base salary and bonuses.
Equity Compensation: Pursuant to the Company's 2007 Stock Incentive
Plan approved by the Company's stockholders on
April 24, 2007, which replaced all prior stock
incentive plans, the Company may make grants of
stock options, restricted stock, deferred stock
and stock appreciation rights ("SARS"), any of
which may or may not require the satisfaction of
performance objectives.
Retirement Benefits: Until December 31, 2007, the Company offered a
tax-qualified defined-benefit Salaried Employee's
Retirement Income Plan (the "Pension Plan") to all
salaried employees and a non-qualified
defined-benefit Supplemental Executive Retirement
Plan (the "SERP") to one employee and two retired
employees. In 2007, the Company's Pension Plan was
amended so that employees will no longer accrue
benefits under it effective December 31, 2007.
This action "froze" the benefits for all employees
and prevented future hires from joining the plan,
effective December 31, 2007. Starting in 2008, the
Company provided supplemental discretionary
contributions to substantially all employees'
individual 401(k) Plan accounts. In 2007, the
Company's SERP was amended effective December 31,
2007 so that lump-sum payments of the benefits
accrued were paid to the one employee and one of
the two retiree participants. There are no current
employees participating in the SERP. For further
discussion, see "PENSION PLANS" below.
Health, Welfare and Other The Company offers the same health and welfare
Insurance Benefits: benefits to all salaried employees. These benefits
include medical benefits, dental benefits, vision
benefits, life insurance, salary continuation for
short-term disability, long-term disability
insurance, accidental death and dismemberment
insurance and other similar benefits. Because
these benefits are offered to a broad class of
employees, the cost is not required by SEC rules
to be included in the "SUMMARY COMPENSATION TABLE"
below. Officers are covered under the Company's
business travel accident insurance policy for ten
times their base salary to a maximum of $5,000,000
while traveling at any time. Officers are also
covered under the Company's director and officer
liability insurance policies for claims alleged in
connection with their service as an officer, as
applicable.
Severance Agreements: The Company has a Severance Policy that covers all
employees. In addition, the officers of the
Company are offered specific severance agreements
that provide severance benefits to them when their
employment terminates as a result of a change in
control or by the Company without cause. For
further discussion, see "Potential Payments Upon
Termination or Change in Control" below.
20
Why Does the Company Choose to Pay Each Element?
The Company's compensation and benefits programs are designed to fulfill
the Company's need to attract, retain and motivate the highly talented
individuals who will engage in the behaviors necessary to enable the Company to
achieve its business objectives while upholding our values in a highly
competitive marketplace. The reasons for each of the elements of compensation
are:
o Base salaries and retirement and welfare benefits are designed to
attract and retain employees over time;
o Performance-based incentive bonuses, which are paid in cash or a
combination of cash and deferred stock, are designed to focus
executives and employees on important Company-wide performance
goals;
o Long-term equity incentives, including non-qualified or incentive
stock options, SARS and restricted stock and deferred stock awards
are designed to focus executives' efforts on their individual
contributions to the long-term success of the Company, as reflected
in increases to the Company's stock prices over a period of several
years, growth in its earnings per share and other measurements of
corporate performance; and
o Severance Agreements, which are designed to facilitate the Company's
ability to attract and retain talented executives and encourage them
to remain focused on the Company's business during times of
corporate change.
As a result of the Company's equity and non-equity incentive plan awards,
a significant portion of the Company's executive compensation is linked directly
to individual and corporate performance. The Compensation Committee intends to
continue the policy of linking executive compensation to corporate and
individual performance, recognizing that the ups and downs of the business cycle
from time to time may result in an imbalance for a particular period.
How Does the Company Determine the Amount/Formula for Each Element?
Generally, each element of compensation is evaluated independently to
determine whether it is competitive within the market as a whole, and then the
aggregate compensation is evaluated using publicly available data to determine
whether it is competitive and reasonable within the market as a whole, as
further described below. The target percentages of total annual compensation for
the Named Executive Officers range from 45% - 55 % for base salaries, 25% - 35%
for bonus opportunities, and 15%-25% for equity opportunities.
How are Salaries Determined?
Salaries for executive officers are determined by considering historical
salaries paid by the Company to officers having certain duties and
responsibilities, by comparing those salaries to required market rates for
compensation of new executives being recruited to the company, and then
evaluating the current responsibilities of the officer's position, the scope and
performance of the operations under their management and the experience and
performance of the individual.
In making its salary decisions, the Compensation Committee places its
emphasis on the particular executive's experience, responsibilities and
performance. No specific formula is applied to determine the weight of each
factor. The Compensation Committee has historically followed a policy of using
performance-based incentive bonus awards rather than base salary to reward
outstanding performance, and base salaries are not typically adjusted each year.
How are Bonuses Determined?
The Company's Named Executive Officers are eligible for quarterly
profit-sharing, an annual performance-based incentive bonus and discretionary
bonuses. All employees participate in quarterly profit sharing, and all are
eligible for consideration for discretionary bonuses, which are awarded under
special circumstances. Supervisory employees, mid-level and management-level
employees and officers additionally participate in a performance-based incentive
program. These annual performance incentive bonuses are based on operating
performance metrics and goals approved annually by both the Compensation
Committee and the full Board.
Under the performance-based incentive program, individual bonus
opportunities range from between 5% to 75% of each employee's annual base salary
or hourly wage compensation, and are based on the employee's level of
responsibility.
21
The Company has adopted a policy that executive officers of the Company
shall have 25% of any performance incentive bonus that is earned paid in
restricted stock units in lieu of cash. These restricted stock units convert to
shares of Common Stock of the Company after a three-year cliff-vesting period.
The quantity of restricted stock units is determined based upon a one-third
discount to the mean of the highest and lowest sales price of a share of Common
Stock on the date of grant.
How are Equity Compensation Awards Determined?
Equity compensation awards are given to key employees and officers of the
Company to align their long-term interests with those of the shareholders. In
2006 the Company adopted a practice whereby key new executives hired by the
Company would receive an initial, one-time award of stock options with
time-based vesting. New Vice Presidents were granted 100,000 such options and
the new Chief Executive Officer was granted 400,000 such options. In 2007, the
Company extended the practice to include more modest, annual awards of options
with performance-based vesting for officers, and senior managers based on their
performance, in quantities reflecting their level of responsibility.
Performance-based option awards were granted pursuant to this policy in 2007,
2008 and 2009. The performance-based options which were granted in 2007 vest
only upon achievement of earnings-based operating goals within three years of
grant. If the goals are not met within three years of grant, the options will
not vest and will expire. It is not anticipated that the options granted in 2007
will vest because of the aggressiveness of the performance goals set at the time
of grant. Establishment of the performance criteria for the performance-based
options granted in 2008 was deferred until February 3, 2009 in order to use the
Company's year-end 2008 financial results as a baseline measurement in
establishing the performance criteria. The 2008 and 2009 performance-based
options granted will vest only upon achievement of earnings-based operating
goals within six years of grant. If the goals are not met within six years of
grant, the options will not vest and will expire.
The Compensation Committee considers previous grants and the
responsibilities of an executive and the recommendation of the Chief Executive
Officer when determining the amount of stock awards to be granted. In 2009 the
Company based the value of performance-based stock option awards for executive
officers in an amount equal to two-thirds of the target value of their
performance-based bonus opportunity, using the Black-Scholes valuation
methodology in accordance with the provisions of FAS 123R.
What are the Company's Ongoing Plans for Plan-Based Equity Compensation?
The Company intends to consider annually the grant of performance-based
stock options for management-level employees as described above. The performance
goals will likely vary from year to year and will be based on the perceived
needs of the business at the time of the award. The Company does not currently
anticipate expansion of the equity compensation program as described above.
How is the Chief Executive Officer's Performance Evaluated and Compensation
Determined?
The Nominating and Corporate Governance Committee, the Compensation
Committees and the Board as a whole annually evaluate the performance and review
the compensation of the Chief Executive Officer utilizing a variety of criteria.
The job objectives established for the Chief Executive Officer are:
o To promote and require the highest ethical conduct by all Company
employees and demonstrate personal integrity consistent with the
Company's Corporate Governance Guidelines.
o To establish, articulate and support the vision for the Company that
will serve as a guide for expansion.
o To align physical, human, financial and organizational resources
with strategies.
o To communicate strategies and alignment in a clear manner so that
every employee understands their personal role in the Company's
success.
o To establish succession planning processes in order to select,
coordinate, evaluate and promote the best management team.
o To keep the Board informed on strategic and business issues.
Evaluation of the Chief Executive Officer's performance with regard to
these job objectives is rated on the following business skills and performance
achievement:
o Leadership: his ability to lead the Company with a sense of
direction and purpose that is well understood, widely supported,
consistently applied and effectively implemented.
22
o Strategic Planning: his development of a long-term strategy,
establishment of objectives to meet the expectations of
stockholders, customers, employees and all Company stakeholders,
consistent and timely progress toward strategic objectives and
obtainment and allocation of resources consistent with strategic
objectives.
o Financial Goals and Systems: his establishment of appropriate and
longer-term financial objectives, ability to consistently achieve
these goals and ensuring that appropriate systems are maintained to
protect assets and control operations.
o Financial Results: his ability to meet or exceed the financial
expectations of stockholders, including continuous improvement in
operating revenue, cash flow, net income, capital expenditures,
earnings per share and share price.
o Succession Planning: his development, recruitment, retention,
motivation and supervision of an effective top management team
capable of achieving objectives.
o Human Resources: his ensuring development of effective recruitment,
training, retention and personnel communication plans and programs
to provide and motivate the necessary human resources to achieve
objectives.
o Communication: his ability to serve as the Company's chief
spokesperson and communicate effectively with stockholders and all
stakeholders.
o Industry Relations: his ensuring that the Company and its operating
units contribute appropriately to the well-being of their
communities and industries, and representation of the Company in
community and industry affairs.
o Board Relations: his ability to work closely with the Board to keep
them fully informed on all important aspects of the status and
development of the Company, his implementation of Board policies,
and his recommendation of policies for Board consideration.
The Chief Executive Officer's compensation levels are determined after
performance evaluations based on published compensation studies, the Chief
Executive Officer's demonstrated abilities and contributions to the success of
the Company, and the overall results of Company operations.
What is the Chief Executive Officer's Compensation History?
Michael O. Fifer joined the Company as Chief Executive Officer on
September 25, 2006, with an annual base salary of $400,000, an option award to
purchase 400,000 shares of the Company's Common Stock under the 1998 Stock
Incentive Plan, a $75,000 guaranteed bonus for 2006, a 75% target bonus
opportunity thereafter, a one-time $250,000 restricted stock award to be issued
under the 2007 stock Incentive Plan, and reimbursement for temporary living,
commuting and relocation expenses with related tax gross-up. In both 2007 and
2008, Mr. Fifer received performance-based option awards to purchase 40,000
shares of Common Stock subject to vesting criteria as described above. Mr.
Fifer's base compensation and target bonus opportunity have not changed since he
joined the Company in 2006.
Does the Company Pay for Perquisites?
The Company believes in limited perquisites for its Directors and
executive officers. Perquisites include discounts on Company products, which are
available to all Company employees and Directors. The Company has a Relocation
Policy covering all employees based on their grade level that provides various
levels of temporary living and relocation expense reimbursements, payment of
related taxes, and the use of Company vehicles for business purposes. Temporary
living and relocation reimbursements and related tax payments for the Named
Executive Officers are disclosed in the "SUMMARY COMPENSATION TABLE" below.
23
================================================================================
EXECUTIVE COMPENSATION
================================================================================
SUMMARY COMPENSATION TABLE
The following table summarizes total compensation paid or earned by the
Company's Name Executive Officers (those officers who served as Chief Executive
Officer or Chief Financial Officer during 2008, and the three other officers who
received the highest compensation in 2008) who served in such capacities during
2008.
------------------------------------------------------------------------------------------------------------------------------------
Change in
Pension Value
Named and Non-
Executive Non-Equity qualified All
Officer and Stock Option Incentive Plan Deferred Other
Principal Bonus Awards Awards Compensation Compensation Compen-
Position Year Salary (1) (2) (3) (4) Earnings (5) sation (6) Total
($) ($) ($) ($) ($) ($) ($) ($)
------------------ ----- -------------- ----------- ----------- ------------- -------------- ---------------- ----------- ----------
Michael O.
Fifer (7) 2008 $ 400,000 $ 0 $ 86,900 $ 162,300 $ 278,501 $ 0 $ 25,776 $ 953,477
President, Chief 2007 $ 400,000 $ 15,385 $ 290,000 $ 193,360 $ 0 $ 10,989 $ 191,860 $1,101,594
Executive Officer 2006 $ 107,692 $ 75,000 $ 0 $ 43,280 $ 0 $ 2,463 $ 11,551 $ 239,986
and Director
------------------ ----- -------------- ----------- ----------- ------------- -------------- ---------------- ----------- ----------
Stephen L.
Sanetti (8)
Vice Chairman
of the Board of 2008 $ 108,333 $ 325,000 $ 0 $ 0 $ 0 $ 989,889 (10) $ 18,558 $1,441,780
Directors, 2007 $ 325,000 $ 12,500 $ 32,500 $ 11,648 $ 0 $ 96,899 (10) $ 4,526 $ 483,073
President, Chief 2006 $ 322,917 (9) $ 113,750 $ 0 $ 0 $ 0 $ 36,149 (10) $ 516 $ 473,332
Operating
Officer and
General Counsel
------------------ ----- -------------- ----------- ----------- ------------- -------------- ---------------- ----------- ----------
Thomas A.
Dineen 2008 $ 221,875 $ 0 $ 24,073 $ 47,908 $ 82,143 $ 0 $ 16,625 $ 392,624
Vice President, 2007 $ 197,917 $ 7,692 $ 20,000 $ 44,242 $ 0 $ 9,729 $ 10,133 $ 289,713
Treasurer and 2006 $ 168,250 $ 52,500 $ 0 $ 0 $ 0 $ 4,321 $ 108 $ 225,179
Chief Financial
Officer
------------------ ----- -------------- ----------- ----------- ------------- -------------- ---------------- ----------- ----------
Christopher J.
Killoy (11) 2008 $ 230,625 $ 0 $ 25,023 $ 57,912 $ 85,400 $ 0 $ 21,472 $ 420,432
Vice President of 2007 $ 200,000 $ 7,692 $ 20,000 $ 69,560 $ 0 $ 9,923 $ 9,710 $ 316,885
Sales and 2006 $ 19,743 $ 6,667 $ 0 $ 5,470 $ 0 $ 7,155 $ 0 $ 39,035
Marketing
------------------ ----- -------------- ----------- ----------- ------------- -------------- ---------------- ----------- ----------
Thomas P.
Sullivan (12) 2008 $ 235,000 $ 0 $ 25,498 $ 37,920 $ 86,952 $ 1,762 $ 17,721 $ 404,853
Vice President of 2007 $ 235,000 $ 9,038 $ 23,500 $ 49,568 $ 0 $ 6,333 $ 40,831 $ 364,270
Newport 2006 $ 89,104 $ 50,000 $ 0 $ 14,431 $ 0 $ 683 $ 104,332 $ 258,550
Operations
------------------ ----- -------------- ----------- ----------- ------------- -------------- ---------------- ----------- ----------
Mark T.
Lang(13) 2008 $ 196,154 $ 0 $ 21,283 $ 45,882 $ 73,030 $ 0 $ 10,800 $ 347,149
Group Vice 2007
President 2006
------------------------------------------------------------------------------------------------------------------------------------
Notes to Summary Compensation Table
(1) This column represents discretionary bonuses awarded by the Board of
Directors. For Michael O. Fifer and Thomas P. Sullivan, 2006 amounts
represent guaranteed bonuses awarded upon their employment with the
Company. For Stephen L. Sanetti, 2008 amount represents a discretionary
bonus paid upon his voluntary termination in consideration of his service
to the Company.
24
(2) This column represents the dollar amounts recognized for financial
statement reporting purposes in each fiscal year with respect to the grant
date fair value of stock awards. 2007 amounts are for stock grants awarded
to the Named Executive Officers, and 2008 amounts are for Restricted Stock
Units ("RSUs") that were awarded in lieu of 25% of the 2008
performance-based cash bonus to the Named Executive Officers. These RSUs
are subject to a three-year vesting period. See "OUTSTANDING EQUITY AWARDS
AT FISCAL YEAR END 2008 TABLE" below for further information regarding
stock granted to each Named Executive Officer.
(3) This column represents the dollar amount grant date fair value recognized
for financial statement reporting purposes with respect to each fiscal
year for the fair value of stock options granted to the Named Executives
Officers in 2008, 2007 and 2006, in accordance with the provisions of FAS
123R, and may include amounts from awards granted in previous years.
Establishment of the performance criteria for the performance-based
options awarded to the named executive officers on April 23, 2008 was
deferred until February 3, 2009 in order to establish criteria based on
the stronger performance expected by year-end 2008, and therefore were not
expensed in 2008. In addition, performance-based options awarded to the
named executives on April 24, 2007 are not expected to vest because of the
uncertainty of meeting their aggressive performance criteria and therefore
were not expensed in 2008. See Note 5 of the consolidated financial
statements in the Company's Annual Report on Form 10-K for the year ended
December 31, 2008 regarding assumptions underlying valuation of equity
awards. Any estimate of forfeitures related to service-based vesting
conditions are disregarded pursuant to the SEC Rules. See "OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR END 2008 TABLE" below for further information
regarding stock options granted to each Named Executive Officer. Mr.
Sanetti forfeited his non-vested option awards upon his voluntary
termination on April 30, 2008.
(4) This column represents the non-equity portion of performance-based bonus
payments made under the Company's 2008 Incentive Compensation Program.
These amounts were calculated and paid in full in the year following the
fiscal year in which they were earned. Non-equity performance-based
bonuses were not paid in 2007 or 2006.
(5) This column represents the increased change in pension value for each
fiscal year for each of the named executives. Negative changes in pension
value, which are not reportable in the above table, for the Named
Executive Officers were: M. Fifer - ($3,533), T. Dineen - ($6,629), S.
Sanetti - ($46,749) and C. Killoy - ($3,474). No named executive officer
received preferential or above-market earnings on deferred compensation.
The Company's pension plans were frozen, and no further benefit service
was accrued, as of January 1, 2008. Mark T. Lang, who was hired after
January 1, 2008, was therefore not a participant in the pension plan and
had no change in pension value. For 2008, the change in pension value is
calculated based on a 6.25% discount rate, participant ages as of December
31, 2008, frozen accrued benefits as of December 31, 2007, the 2000 Group
Mortality Table, and in the case of the SERP, a COLA assumption of 1.5%
per year. See "PENSION PLANS" and the "PENSION BENEFITS TABLE" below for
additional information.
(6) This column represents: (i) relocation and temporary living and related
tax gross-ups, (ii) commuting allowance not subject to gross-up for taxes,
(iii) taxable value of Company products received, (iv) taxable premiums
paid by the Company for group term life insurance, and (v) Employer
safe-harbor matching and discretionary supplemental contributions made
under the Company's 401(k) Plan. See "ALL OTHER COMPENSATION TABLE" below
for additional information.
(7) Michael O. Fifer joined the Company as Chief Executive Officer effective
September 25, 2006, and was appointed to the Board of Directors on October
19, 2006. Mr. Fifer assumed the additional responsibilities of President
on April 23, 2008.
(8) Stephen L. Sanetti served as interim Chief Executive Officer from February
28, 2006 to September 25, 2006, when Mr. Fifer joined the Company as Chief
Executive Officer. Mr. Sanetti voluntarily resigned from the Board on
April 23, 2008, and from the Company on April 30, 2008 to become the
President and Chief Executive Officer of the National Shooting Sports
Foundation.
(9) For 2008, represents the actual lump sum cash settlement value of Mr.
Sanetti's accrued benefits under the Supplemental Executive Retirement
Plan (the "SERP"). For 2007 and 2006, includes a change in accumulated
pension value under the Company's Pension Plan for Mr. Sanetti as follows:
2007 - $61,809; 2006 - $29,501, and under the Company's Supplemental
Executive Retirement Income Plan as follows: 2007 - $35,090; 2006 -
$6,648. Mr. Sanetti was the only active employee participating in the SERP
in 2008, and received a lump sum settlement of his SERP benefits on
February 1, 2008.
(10) For 2006, includes $3,000 for Director's Fees and $3,250 for Meeting Fees
paid to Mr. Sanetti pursuant to the Company's policy in effect until June
1, 2006. See "DIRECTOR'S FEES AND RETAINERS" above.
(11) Christopher J. Killoy was appointed Vice President of Sales and Marketing
on November 27, 2006, having previously served in that position from
November 1, 2004 to January 25, 2005.
(12) Thomas P. Sullivan was appointed Vice President of Newport Operations on
August 14, 2006.
(13) Mark T. Lang was appointed Group Vice President on February 18, 2008.
25
ALL OTHER COMPENSATION TABLE FOR YEAR 2008
------------------------------------------------------------------------------------------------------------------------
Taxable
Premiums
Relocation and Paid by Company
Temporary Living Taxable the Matching and
and Related Tax Value of Company Discretionary
Gross-Ups and Company for Group 401(k) Plan
Commuting Products Term Life Contributions
Allowance Received Insurance (1) Total
Named Executive Officers Year ($) ($) ($) ($) ($)
------------------------------ ----------- -------------------- --------------- ---------------- -------------- --------
2008 $ 0 $276 $25,500 $ 25,776
Michael O. Fifer 2007 $175,613 (2) $260 $15,987 $191,860
2006 $ 11,506 (2) $ 45 $ 0 $ 11,551
------------------------------ ----------- -------------------- --------------- ---------------- -------------- --------
2008 $174 172 $18,212 $ 18,558
Stephen L. Sanetti 2007 $516 $ 4,010 $ 4,526
2006 $516 $ 0 $ 516
------------------------------ ----------- -------------------- --------------- ---------------- -------------- --------
2008 $117 $16,508 $ 16,625
Thomas A. Dineen 2007 $108 $10,025 $ 10,133
2006 $108 $ 0 $ 108
------------------------------ ----------- -------------------- --------------- ---------------- -------------- --------
2008 $ 4,168 (3) $180 $17,124 $ 21,472
Christopher J. Killoy 2007 $ 1,263 (3) $180 $ 8,267 $ 9,710
2006 $ 0 $ 0 $ 0 $ 0
------------------------------ ----------- -------------------- --------------- ---------------- -------------- --------
2008 $ 0 $180 $17,541 $ 17,721
Thomas P. Sullivan 2007 $ 31,251 (4) $180 $ 9,400 $ 40,831
2006 $104,287 (4) $ 45 $ 0 $104,332
------------------------------ ----------- -------------------- --------------- ---------------- -------------- --------
2008 $207 $10,593 $ 10,800
Mark T. Lang 2007
2006
------------------------------------------------------------------------------------------------------------------------
Notes to All Other Compensation Table
(1) Consists of matching contributions made under the Sturm, Ruger &
Company, Inc. 401(k) Plan (the "401(k) Plan"), to the Named
Executive Officers who participated in the 401(k) Plan, based on
their deferrals for each 401(k) Plan year. For 2008, also includes
supplemental employer discretionary contributions made to all plan
participants. Salaried employees were not eligible to participate in
the 401(k) Plan in 2006.
(2) Consists of reimbursements for Mr. Fifer's temporary living and
relocation expenses, as follows: 2007 - $65,038 for real estate
closing costs, $30,000 for incidental relocation expenses, $6,801
for commuting and $73,774 for related tax gross-ups ; 2006 - $3,202
for temporary lodging, $377 for meals, $2,937 for commuting, and
$4,990 for related tax gross-ups.
(3) Consists of the taxable value of commuting allowance for Mr. Killoy
at one-half the I.R.S. approved mileage rate and not subject to
gross-up for taxes.
(4) Consists of reimbursements for Mr. Sullivan's temporary living and
relocation expenses, as follows: 2007 - $12,500 for temporary
lodging, $10,255 for relocation costs and $8,496 for related tax
gross-ups; 2006 - $25,797 for temporary lodging, $36,000 for real
estate closing costs, $10,000 for incidental relocation expenses,
$1,172 for non-move travel, $421 for Company vehicle use and $30,897
for related tax gross-ups.
26
GRANT OF PLAN-BASED AWARDS TABLE FOR YEAR 2008
The following table reflects estimated possible payouts under equity
incentive plans to the Named Executive Officers during the fiscal year 2008 from
the 2007 Stock Incentive Plan, consisting of performance-based option awards,
time-based option awards and restricted stock unit awards. The Company's
non-equity incentive plan compensation is based on achievement of certain
financial performance goals for the fiscal year, and the cash portion is paid in
full in the year subsequent to the year in which earned. These amounts are
reported in the Summary Compensation Table, and are not included in this table
because no further payment is required or allowed pertaining to the program. The
25% portion of the non-equity incentive plan compensation that is deferred into
RSUs with three-year cliff-vesting is listed below.
------------------------------------------------------------------------------------------------------------------------------------
All Other
Estimated Future Payouts All Other Option
under Equity Incentive Stock Awards
Plan Awards Awards : (1)(2)
------------------------ ---------------- ---------------
Exercise
Price of
Number of Number of Option Grant
Securities Securities Awards or Date
Underlying Underlying Base Price Fair
Named Type of Max- Stock Options of Stock Value
Executive Grant Award Threshold Target imum Granted Granted Awards((4) (5)(6)
Officers Date (1)(2)(3) (#) (#) (#) (#) (#) ($/Share) ($)
--------------- ----------- ------------------ ---------- ------- ----- ---------------- --------------- ---------------- ----------
Performance-
Based Option 40,000 $ 8.23 $107,136
4/28/08 Award (1)
----------- ------------------ ---------- ------- ----- ---------------- --------------- ---------------- ----------
Michael O. Restricted
Fifer Stock Unit 20,335 $4.27 $86,900
2/3/09 Award (3)
====================================================================================================================================
Stephen L.
Sanetti - - - - -
====================================================================================================================================
Performance-
Based Option 15,000 $8.23 $40,176
4/28/08 Award (1)
Thomas A. ----------- ------------------ ---------- ------- ----- ---------------- --------------- ---------------- ----------
Dineen Restricted
Stock Unit 5,633 $4.27 $24,073
2/3/09 Award (3)
====================================================================================================================================
Performance-
Based Option 15,000 $8.23 $40,176
Christopher 4/28/08 Award (1)
J. Killoy ----------- ------------------ ---------- ------- ----- ---------------- --------------- ---------------- ----------
Restricted
2/3/09 Stock Unit 5,856 $4.27 $25,023
Award (3)
====================================================================================================================================
Performance-
Based Option 15,000 $8.23 $40,176
4/28/08 Award (1)
----------- ------------------ ---------- ------- ----- ---------------- --------------- ---------------- ----------
Thomas P. Restricted
Sullivan 2/3/09 Stock Unit 5,967 $4.27 $25,498
Award (3)
====================================================================================================================================
Time-Based
Option 100,000 $7.97 $277,140
3/3/08 Award (2)
----------- ------------------ ---------- ------- ----- ---------------- --------------- ---------------- ----------
Performance-
Mark T. 4/28/08 Based Option 15,000 $8.23 $40,176
Lang Award (1)
----------- ------------------ ---------- ------- ----- ---------------- --------------- ---------------- ----------
Restricted
2/3/09 Stock Unit 4,980 $4.27 $21,283
Award (3)
====================================================================================================================================
27
Notes to Grant of Plan-Based Awards Table
(1) Performance-based options awarded to the Named Executive Officers in
2008, which vest upon achievement of certain earnings-based
operating goals within six years of their grant. If these goals are
not met within six years of grant, these awards do not vest and will
expire. If vesting is achieved, these options become exercisable on
their vesting date.
(2) Time-based options awarded to Named Executive Officers which vest
and became exercisable in five equal annual installments of 20% of
the total number of options awarded, beginning on the date of first
anniversary of the date of grant and on each of the next succeeding
four anniversaries thereafter and have a 10 year term.
(3) RSUs awarded to the Named Executive Officers in lieu of 25% of their
individual year-end 2008 performance-based cash bonus. The quantity
is calculated using a one-third discount to market based on the mean
of the highest and lowest sales price of a share of Common Stock on
the date of grant. The RSUs are subject to three year cliff-vesting.
At the end of the vesting period, the Company will issue one share
of Common Stock for each vested RSU. Cash dividends equivalent to
those paid on the Company's Common Stock, if any, will be credited
to each Named Executive Officer's account for non-vested RSUs and
shall be paid in cash to such individual when such RSUs become
vested under the terms of the applicable RSU Agreement. If the Named
Executive Officer terminates employment for any reason before the
RSUs vest, he will receive cash equal to (i) the number of RSUs
multiplied by two-thirds, and then multiplied by the lesser of (ii)
the mean sales price of a share of Common Stock on the date of grant
or (iii) the mean sales price of a share of Common Stock on the date
of termination.
(4) Represents the per share exercise price of the stock options granted
in 2008 as described in footnotes (1) and (2) above, which was the
mean of the highest and lowest sales price of the Common Stock as of
the date of grant, or the discounted base price of restricted stock
units granted in 2009 to each named executive as described in
footnote (3) above, The closing price of a share of Common Stock was
$8.03 on March 3, 2008, $7.98 on April 28, 2008 and $6.46 on
February 3, 2009. Options to purchase the Company's Common Stock
have never been repriced and are not permitted to be repriced under
the terms of the 2007 Stock Incentive Plan.
(5) Amounts shown for option awards represent the total grant date fair
value recognized for financial statement reporting purposes with
respect to stock options granted to the named executives in 2008
calculated in accordance with the provisions of FAS 123R.
Establishment of the performance criteria for the performance-based
options awarded to the Named Executive Officers on April 23, 2008
was deferred until February 3, 2009 in order to establish criteria
based on the stronger performance expected by year-end 2008, and
therefore were not expensed in 2008. See Note 5 of the consolidated
financial statements in the Company's Annual Report on Form 10-K for
the year ended December 31, 2008 regarding assumptions underlying
valuation of equity awards. Any estimate of forfeitures related to
service-based vesting conditions are disregarded pursuant to the SEC
Rules. The annual grant date fair value of the time-based options
granted to Mr. Lang expensed in 2008 in accordance with FAS 123R was
$45,882.
28
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END 2008 TABLE
The following table reflects outstanding grants whose ultimate value is
unknown and has not been realized (i.e. dependent on future results) for the
Named Executive Officers. (For information on stock options and grants made in
2008 to the Named Executive Officers, see the "GRANTS OF PLAN-BASED AWARDS
TABLE" above.)
------------------------------------------------------------------------------------------------------------------------------------
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END 2008 TABLE
------------------------------------------------------------------------------------------------------------------------------------
Named Executive OPTION AWARDS STOCK AWARDS
Officer
----------------- ------------------------------------------------------------------ -----------------------------------------------
Equity
Incentive
Equity Plan
Incentive Awards:
Plan Market or
Awards: Payout
Market Number of Value of
Equity Number of Value of Unearned Unearned
Number of Number of Incentive Shares or Shares or Shares or Shares or
Securities Securities Plan Units of Units of Units Units
Underlying Underlying Awards: Stock Stock That Have That Have
Unexercised Unexercised Unearned That That Have Not Not
Options (1) Options (12) Options Option Option Have Not Not Vested Vested
Exercisable Unexercisable (2) Exercise Expiration Vested Vested (3) (3)
(#) (#) (#) Price ($) Date (#) ($) (#) ($)
----------------- -------------- -------------- ----------- ------------ ----------- ----------- ----------- ----------- -----------
160,000 240,000 $7.32 9/25/2016
-------------- -------------- ----------- ------------ ----------- ----------- ----------- ----------- -----------
40,000 $13.39 4/24/2017
Michael O. Fifer -------------- -------------- ----------- ------------ ----------- ----------- ----------- ----------- -----------
40,000 $8.23 4/28/2018
-------------- -------------- ----------- ------------ ----------- ----------- ----------- ----------- -----------
20,335 $86,900
----------------- -------------- -------------- ----------- ------------ ----------- ----------- ----------- ----------- -----------
Stephen L.
Sanetti (4)
----------------- -------------- -------------- ----------- ------------ ----------- ----------- ----------- ----------- -----------
26,000 39,000 $13.39 4/24/2017
-------------- -------------- ----------- ------------ ----------- ----------- ----------- ----------- -----------
15,000 $13.39 4/24/2017
Thomas A. Dineen -------------- -------------- ----------- ------------ ----------- ----------- ----------- ----------- -----------
15,000 $8.23 4/28/2018
-------------- -------------- ----------- ------------ ----------- ----------- ----------- ----------- -----------
5,633 $24,073
----------------- -------------- -------------- ----------- ------------ ----------- ----------- ----------- ----------- -----------
40,000 60,000 $10.46 11/27/2016
-------------- -------------- ----------- ------------ ----------- ----------- ----------- ----------- -----------
15,000 $13.39 4/24/2017
Christopher J. -------------- -------------- ----------- ------------ ----------- ----------- ----------- ----------- -----------
Killoy 15,000 $8.23 4/28/2018
-------------- -------------- ----------- ------------ ----------- ----------- ----------- ----------- -----------
5,856 $25,023
----------------- -------------- -------------- ----------- ------------ ----------- ----------- ----------- ----------- -----------
40,000 60,000 $6.85 8/14/2016
-------------- -------------- ----------- ------------ ----------- ----------- ----------- ----------- -----------
15,000 $13.39 4/24/2017
Thomas P. -------------- -------------- ----------- ------------ ----------- ----------- ----------- ----------- -----------
Sullivan 15,000 $8.23 4/28/2018
-------------- -------------- ----------- ------------ ----------- ----------- ----------- ----------- -----------
5,967 $25,498
----------------- -------------- -------------- ----------- ------------ ----------- ----------- ----------- ----------- -----------
20,000 80,000 $7.97 3/03/2018
-------------- -------------- ----------- ------------ ----------- ----------- ----------- ----------- -----------
Mark T. Lang 15,000 $8.23 4/28/2018
-------------- -------------- ----------- ------------ ----------- ----------- ----------- ----------- -----------
4,980 $21,283
----------------- -------------- -------------- ----------- ------------ ----------- ----------- ----------- ----------- -----------
TOTAL 286,000 479,000 185,000 42,771 $182,777
----------------- -------------- -------------- ----------- ------------ ----------- ----------- ----------- ----------- -----------
Notes to Outstanding Equity Awards at Fiscal Year End Table
(1) Amounts shown as exercisable or unexercisable reflect the vesting
status of each individual's options within 60 days of March 1, 2009.
Time-based options awarded to Named Executives normally vest and
became exercisable in five equal annual installments of 20% of the
total number of options awarded, beginning on the date of first
anniversary of the date of grant and on each of the next succeeding
four anniversaries thereafter and have a 10 year term. Options shown
for Messrs. Fifer, Sullivan and Killoy were awarded on their
individual dates of hire. Time-based options fully vest in the event
of a Change in Control as defined in the applicable Stock Incentive
Plan.
(2) Performance-based options awarded to the Named Executives Officers
vest upon achievement of certain earnings-based operating goals. The
vesting period is three years for 2007 awards and six years for 2008
awards from the date of their grant. If these goals are not met
within the specified number of years since grant, these awards do
not vest and will expire. If vesting is achieved, these options
become exercisable on the first anniversary of their vesting date
for 2007 awards, and immediately upon vesting for 2008 awards.
Performance-based options vest fully in the event of a Change in
Control.
29
(3) RSUs were awarded to the Named Executive Officers in lieu of 25% of
their individual year-end 2008 performance-based cash bonus. The
quantity of RSUs was calculated using a one-third discount to the
mean of the highest and lowest sales price of a share of Common
Stock on the date of grant. The RSUs are subject to three year
cliff-vesting. At the end of the vesting period, the Company will
issue one share of Common Stock for each vested RSU. RSUs fully vest
in the event of a Change in Control, disability or retirement, as
defined in the 2007 stock Incentive Plan, or in the event of death.
If the Named Executive Officer terminates employment for any other
reason, he will receive cash equal to (i) the number of RSUs
multiplied by two-thirds, and then multiplied by the lesser of (ii)
the mean sales price of a share of Common Stock on the date of grant
or (iii) the mean sales price of a share of Common Stock on the date
of termination.
(4) Mr. Sanetti's performance-based options expired upon his voluntary
termination on April 30, 2008.
OPTION EXERCISES AND STOCK VESTED IN 2008 TABLE
The following table sets forth the value of equity realized by the Named
Executive Officers upon exercise of vested options or the vesting of deferred
stock during 2008. No Named Executive Officers exercised options in 2008, or
held any unvested deferred stock at any time during 2008. (For further
information on stock options and grants made in 2008 to the Named Executive
Officers, see the "GRANTS OF PLAN-BASED AWARDS TABLE" above.)
------------------------ ----------------------------- -------------------------
Option Awards Stock Awards
------------------------ ----------------------------- -------------------------
Named Executive Officer Number of
Number of Value Shares
Shares Realized Acquired Value
Acquired on Upon Upon Realized
Exercise Exercise Vesting on Vesting
(#) ($) (#) $
------------------------ --------------- ------------- ------------ ------------
Michael O. Fifer - - - -
------------------------ --------------- ------------- ------------ ------------
Stephen L. Sanetti - - - -
------------------------ --------------- ------------- ------------ ------------
Thomas A. Dineen - - - -
------------------------ --------------- ------------- ------------ ------------
Christopher J. Killoy - - - -
------------------------ --------------- ------------- ------------ ------------
Thomas P. Sullivan - - - -
------------------------ --------------- ------------- ------------ ------------
Mark T. Lang - - - -
------------------------ --------------- ------------- ------------ ------------
Total 0 0 0 0
------------------------ --------------- ------------- ------------ ------------
30
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Payments on Change in Control
In the event of a potential change in control of the Company, it is
vitally important that executives be able to continue working in the best
interest of our stockholders. For that reason, the Company has entered into
severance agreements with the Named Executive Officers designed to provide
salary and medical benefit continuance in the event of the termination of his
employment under certain circumstances. The Company's severance agreements are
not employment contracts and do not specify an employment term, compensation
levels or other terms or conditions of employment. There are also
change-in-control provisions in both the stock option and restricted stock
agreements.
Covered Terminations and Severance Payments Pursuant to Change in Control
Agreements
Each of the Named Executive Officers' severance agreements provide for the
following severance benefits, if during the term of the agreement: (A) he is
terminated without cause or (B) there is a Change in Control and a subsequent
reduction of his salary or a diminution of his duties and thereafter he
terminates his employment within 90 days. In the situation described in clause
(A) above, he will receive a lump sum cash payment equal to 12 months of his
annual base salary, if employed for less than five years, or 18 months of his
annual base salary if employed for five or more years, and continued insurance
benefits. Mr. Fifer's severance agreement provides for 18 months of his annual
base salary. In the situation described in clause (B) above, the Named Executive
Officer will receive an amount equal to a lump sum cash payment equal to 18
months of his annual base salary and 100% of his target cash bonus and continued
insurance benefits. In both cases, such continued insurance benefits are to be
paid to the Named Executive Officer net of employee contributions for a period
equal to the number of months of severance pay.
In all cases, payment of severance benefits will be subject to the
six-month deferral requirements of under the IRS Tax Code Section 409A. All of
the severance agreements have a one-year term, subject to automatic renewal on
each anniversary of its date unless (A) the Named Executive Officer gives notice
of his intention to terminate his employment, or (B) the Company gives notice of
its intention not to renew the agreement at least one year in advance. The
amount of severance and benefits are generally determined based on competitive
market practices for executives at this level. The Compensation Committee also
takes into consideration that executives at this level generally require a
longer timeframe to find comparable jobs because there are fewer jobs at this
level in the market and often have a large percentage of their personal wealth
dependent on the status of the Company, given the fact that a large part of
their compensation is equity-based.
Change in Control Events and Severance Benefits Not Covered by the Severance
Agreements
The 1998 Stock Incentive Plan and 2007 Stock Incentive Plan provide for
accelerated vesting of stock awards that the executive has already received, not
for additional payments. The 1998 Stock Incentive Plan has a single trigger
component, the Change in Control event. If there is a Change in Control event,
the accelerated vesting of stock-based compensation will occur whether or not
the executive's employment is terminated. This further protects the executive
because it provides him or her with an opportunity to exercise and vote the
option shares as a stockholder. The 2007 Stock Incentive Plan also has a single
trigger change in control accelerated vesting component which will apply unless,
in the case of a merger or acquisition of the Company by another business
entity, the surviving, continuing, or purchasing corporation assumes the awards
previously issued under that plan.
Change in Control Definition
Generally, under the Severance Agreements and the 1998 Stock Incentive
Plan and 2007 Stock Incentive Plan, a "Change in Control" will be deemed to have
occurred:
o When any person acquires a significant percentage of the voting
power of the Company (50% or more under the 1998 Stock Incentive
Plan, and 25% or more under the 2007 Stock Incentive Plan);
o If a majority of the Board members change, unless the new Directors
are elected or nominated for election by at least two-thirds of the
existing Board members;
o Upon the acquisition of the Company; or
o Upon the liquidation or dissolution of the Company (with approval of
the stockholders)
31
Termination by Death or Disability
In the event of death or disability, executives receive no payment other
than through life insurance or disability insurance available to salaried
employees generally. Under the 1998 Stock Incentive Plan, all options may be
exercised for 90 days after death or disability to the extent vested on the date
of such death or total disability. Under the 2007 Stock Incentive Plan, vested
options are exercisable in the case of death or disability within the greater
of: 30 days, or one-fourth of the length of time elapsed since the options first
vested to the date of termination. Under both plans, in no case can options be
exercised beyond the expiration date of the award.
In the event of termination by death or disability, the executive or his
or her estate will receive his or her bonus to the extent earned.
Termination by Retirement
Executives were eligible to participate in the Company's Pension Plan
until December 31, 2007, the effective date of the plan's "freeze." In 2008,
Stephen L. Sanetti was eligible for early retirement under the Pension Plan and
was the only executive participating in the SERP, but elected to receive a cash
settlement of his accrued SERP benefits in a lump sum payment made on February
1, 2008. None of the Named Executive Officers was eligible for normal
retirement, and none of the Named Executive Officers accrued service under the
Pension Plan beyond December 31, 2007, the effective date of that plan's
"freeze" by the Company. Since Mark T. Lang was hired after January 1, 2008, he
was not considered a participant in, and accrued no service under, the Company's
Pension Plan. Pension benefits are described under "PENSION PLANS" below. In
addition to the pension benefits described below, when a retirement-eligible
employee terminates employment, his or her options awarded under the 1998 Stock
Incentive Plan expire 90 days after termination. Under the 2007 Stock Incentive
Plan, vested options awarded to the Named Executive Officers are exercisable in
the case of retirement within the greater of: 30 days, or one-fourth of the
length of time elapsed since the options first vested to the date of retirement.
Under both plans, in no case can options be exercised beyond the expiration date
of the award.
In the event of termination by retirement, the executive will receive his
or her bonus to the extent earned.
Voluntary and Involuntary Termination
The severance benefits for the Named Executive Officers include base
salary and medical insurance continuation in cases of termination without cause
for a minimum of 12 months and a maximum of 18 months. Mr. Fifer's severance
agreement provides for 18 months of his annual base salary in the event of his
termination without cause. Under the 1998 Stock Incentive Plan, when a Named
Executive Officer terminates voluntarily before retirement, his stock options
expire 30 days after termination. Under the 2007 Stock Incentive Plan, vested
options awarded to the Named Executive Officers are exercisable in the case of
voluntary termination or involuntarily without cause within the greater of: 30
days, or one-fourth of the length of time elapsed since the options first vested
to the date of retirement. Under both plans, options cannot be exercised beyond
the expiration date of the award. Under both plans, in the case of termination
for cause, an employee's stock options terminate immediately.
If any employee voluntarily or involuntarily without cause terminates his
or her employment the employee, will receive his or her bonus to the extent
earned. If an employee is terminated for cause, any bonus is forfeited.
Retention and Transition Agreements
The Company may enter into retention or "transition" agreements from time
to time with executives who retire or voluntarily terminate their employment
with the Company in order to facilitate the management transition of the
executives' areas of responsibility. Stephen L. Sanetti entered into a
transition agreement with the Company upon his voluntary termination as
President, Chief Operating Officer and General Counsel on April 30, 2008. In
recognition of Mr. Sanetti's service and achievements, this agreement provided
for a discretionary bonus of $325,000, less applicable income tax withholdings,
and in lieu of any other compensation or benefit other than those earned under
the Company's qualified pension plans, or as required by applicable law.
32
POTENTIAL AND ACTUAL PAYMENTS UNDER SEVERANCE AGREEMENTS TABLE
The table below sets forth the terms and estimated potential payments and
benefits provided in each termination circumstance for the Company's Named
Executive Officers as of December 31, 2008. The potential amounts shown in the
table do not include payments and benefits to the extent that they are provided
on a non-discriminatory basis to the Company's salaried employees generally.
------------------------------- ---------------- ----------------- ----------------- -------------- -------------- ---------------
Named Executive Officers Continuation
Number of Retirement of Medical
Severance Options That Benefits Welfare Aggregate
Agreement (1) Bonus Payment (2) Vest (3)(4) (SERP) (5) Benefits (6) Payments(7)
($) ($) (#) ($) ($) ($)
------------------------------- ---------------- ----------------- ----------------- -------------- -------------- ---------------
Michael O. Fifer
Change In Control $600,000 $450,000 500,335 $0 $16,882 $1,066,882
Termination without Cause $600,000 $0 0 $0 $16,882 $616,882
Retirement n/a $300,000 20,335 $0 $0 $300,000
Death or Disability n/a $300,000 20,335 $0 $0 $300,000
------------------------------- ---------------- ----------------- ----------------- -------------- -------------- ---------------
Stephen L. Sanetti (8)
Change In Control - - - - - -
Termination without Cause - - - - - -
Retirement - - - - - -
Death or Disability - - - - - -
------------------------------- ---------------- ----------------- ----------------- -------------- -------------- ---------------
Thomas A. Dineen
Change In Control $337,500 $135,000 100,633 $0 $16,882 $489,382
Termination without Cause $337,500 $0 0 $0 $16,882 $354,382
Retirement n/a $90,000 5,633 $0 $0 $ 90,000
Death or Disability n/a $90,000 5,633 $0 $0 $90,000
------------------------------- ---------------- ----------------- ----------------- -------------- -------------- ---------------
Christopher J. Killoy
Change In Control $352,500 $141,000 135,856 $0 $16,882 $510,382
Termination without Cause $352,500 $0 0 $0 $16,882 $369,382
Retirement n/a $94,000 5,856 $0 $0 $ 94,000
Death or Disability n/a $94,000 5,856 $0 $0 $ 94,000
------------------------------- ---------------- ----------------- ----------------- -------------- -------------- ---------------
Thomas P. Sullivan
Change In Control $352,500 $141,000 135,967 $0 $16,882 $510,382
Termination without Cause $352,500 $0 0 $0 $16,882 $369,382
Retirement n/a $94,000 5,967 $0 $0 $94,000
Death or Disability n/a $94,000 5,967 $0 $0 $94,000
------------------------------- ---------------- ----------------- ----------------- -------------- -------------- ---------------
Mark. T. Lang
Change In Control $337,500 $135,000 119,980 $0 $16,882 $489,382
Termination without Cause $337,500 $0 0 $0 $16,882 $354,382
Retirement n/a $90,000 4,980 $0 $0 $90,000
Death or Disability n/a $90,000 4,980 $0 $0 $90,000
------------------------------- ---------------- ----------------- ----------------- -------------- -------------- ---------------
Notes to Potential and Actual Payments Under Severance Agreements Table
(1) Amounts shown assume that the Named Executive Officer has five or
more years of service at the time of termination.
(2) The Bonus payment under Retirement or Death or Disability shall be
prorated to the extent earned during the partial year prior to
Retirement or Death or Disability. The amount show is the nominal
bonus at 100% achievement of goals for a full 12 months.
(3) Includes total number of options awarded under the Company's 1998
and 2007 Stock Incentive Plans. Some of the options may have already
vested prior to termination under the normal terms of the awards.
Also includes restricted stock unit awards subject to vesting.
33
(4) Under the 1998 Stock Incentive Plan, vested time-based options
awarded to the Named Executive Officers are exercisable within 30
days of voluntary termination, or within 90 days of the earlier of
the optionee's retirement, death or disability. Under the 2007 Stock
Incentive Plan, vested time or performance-based options awarded to
the Named Executive Officers are exercisable in the case of
voluntary termination, involuntarily termination without cause,
retirement, death, or disability within the greater of: 30 days, or
one-fourth of the length of time elapsed since the options first
vested to the date of termination. Under both plans, in the case of
termination for cause, an employee's stock options terminate
immediately. RSUs vest immediately in the event of death, disability
or retirement. In the event of voluntary termination or involuntary
termination without cause before vesting, the Named Executive
Officer will receive cash equal to the number of RSUs multiplied by
two-thirds, and then multiplied by the lesser of: (i) the mean sales
price of a share of Common Stock on the date of grant, or (ii) the
mean sales price of a share of Common Stock on the date of
termination. In the event of a Change in Control under the 1998
Stock Incentive Plan, all options vest immediately. Under the 2007
Stock Incentive Plan, all options will vest if, in the case of a
merger or acquisition of the Company by another business entity, the
surviving, continuing, or purchasing corporation does not assume the
awards previously issued under that plan. All RSUs vest immediately
under the 2007 Stock Incentive Plan in the event of a Change in
Control.
(5) The Company's only active SERP participant in 2008, Stephen L.
Sanetti elected to receive a lump sum payout of the value of his
accrued benefits under that plan of $989,889, which was paid to Mr.
Sanetti on February 1, 2008. As of February 1, 2008, no employees
were participating in the SERP.
(6) Includes continuation of health insurance coverage assuming family
coverage for potential severance recipients, net of employee
contributions.
(7) Aggregate payments exclude number of options or RSUs that vest.
(8) Stephen L. Sanetti voluntarily terminated his employment with the
Company on April 30, 2008, and received a discretionary bonus of
$325,000 in consideration of his service to the Company.
34
PENSION PLANS
Until January 1, 2008, all of the Company's salaried employees
participated in the Sturm, Ruger & Company, Inc. Salaried Employees' Retirement
Income Plan (the "Pension Plan"), a defined benefit pension plan, which
generally provides annual pension benefits at age 65 in the form of a straight
life annuity in an amount equal to: 1-1/3% of the participant's final average
salary (highest 60-consecutive-month average annualized base pay during the last
120 months of employment) less 0.65% of the participant's Social Security
covered compensation, multiplied by the participant's years of credited service
up to a maximum of 25 years.
On October 1, 2007, the Pension Plan was "frozen" by the Board of
Directors so that participants will no longer accrue additional service under
the plan after December 31, 2007. In lieu of continued benefit accruals under
the Pension Plan, as of January 1, 2008, the Company began making supplemental
discretionary contributions for all eligible employees under its 401(k) Plan in
addition to the safe harbor employer match contributed on behalf of eligible
401(k) Plan participants.
John M. Kingsley, Jr., a Director who retired as Executive Vice President
of the Company on December 31, 1996, received $37,710 in benefits from the
Pension Plan during 2008.
The Sturm, Ruger & Company, Inc. Supplemental Executive Retirement Plan
(the "SERP") is a nonqualified supplemental retirement plan for certain senior
executives of the Company who have achieved the rank of Vice President or above
and who are selected by the Compensation Committee. Stephen L. Sanetti, an
executive officer who appears in the Summary Compensation Table, was the only
active employee who participated in the SERP in 2008.
The SERP generally provides an annual benefit beginning at age 65, the
normal retirement age under the SERP, based upon a participant's completed years
of service with the Company as of such age. The maximum benefit under the SERP
is equal to 50% of the participant's average annual compensation, including base
pay, bonuses and other incentive compensation, up to $400,000. All SERP benefits
are reduced by the amount the participant is entitled to receive under the
Pension Plan, and are further reduced by the amount of Social Security benefit
the participant is entitled to receive commencing at age 65. The SERP benefit is
payable as an annuity over the life of the participant, with 50% to continue for
the life of the participant's surviving spouse after the participant's death.
Pre-retirement death or disability benefits are also provided to plan
participants under the SERP.
On December 20, 2007, the Board of Directors amended the SERP to allow
lump sum cash settlements of their accrued benefits to be offered to the three
SERP participants, Stephen L. Sanetti, William B. Ruger, Jr., who retired as
Chief Executive Officer on February 28, 2006, and John M. Kingsley, Jr. Messrs.
Sanetti and Ruger, Jr. both elected to receive a lump-sum cash payment of
$989,889 and $1,084,526, respectively, in full settlement of their accrued SERP
benefits. These payments were made on February 1, 2008. As of February 1, 2008,
Mr. Kingsley is the only remaining participant in the SERP and is in retired
status. John M. Kingsley, Jr. received $150,036 in benefits from the SERP during
2008.
Prior to December 31, 2006, the Company's salaried employees also
participated in the Sturm, Ruger & Company, Inc. Profit Sharing Plan, a defined
contribution retirement plan, which generally provided an annual employer
contribution based on Company profits and individual base salaries to those
participants who met the plan's annual participation requirements, with
participant direction of individual account balances. Participants generally
became vested in their account balances after five years of service, but could
not receive distribution of their account balances until they attained age 65.
Those individuals named in the Summary Compensation Table who were excluded from
participating in the Profit Sharing Plan as a result of the limitations under
IRS Tax Code Sections 401(a)(4) and 410(b) were eligible to participate in the
non-qualified Supplemental Executive Profit Sharing Plan, designed to emulate
the benefits provided under the Profit Sharing Plan, with Company gross-up for
taxes related to the annual benefit. Until December 31, 2006, the Company also
maintained the Hourly Employees' 401(k) Plan, which excluded salaried employees.
As of January 1, 2007, the Board authorized the merger of the Profit Sharing
Plan with the 401(k) Plan and the discontinuance of the Supplemental Executive
Profit Sharing Plan. The merged 401(k) Plan provides immediate vesting upon
three months of service, a safe harbor match for all participants and
supplemental discretionary employer contributions for all eligible employees.
The individuals named in the Summary Compensation Table are eligible to
participate in the 401(k) Plan, subject to IRS plan limits.
35
2008 PENSION BENEFITS TABLE
The following table sets forth the present value of pension benefits
accrued by, and actual benefits paid in 2008 to the Named Executive Officers
under the Salaried Employees' Retirement Income Plan (the "Pension Plan") and
Supplemental Executive Retirement Plan (the "SERP").
---------------------------- ------------------------ ------------------------------ ---------------------------
Salaried Employees' Supplemental Executive
Retirement Income Plan (1) Retirement Plan (2)
---------------------------- ------------------------ ------------------------------ ---------------------------
Payments
Present Payments Present During
Value During Value of Last
of Accumulated Last Accumulated Fiscal
Plan Benefit Fiscal Plan Benefit Year
Credited Service (3) (4) Year (5) (5)
Named Executive Officers (Years) ($) ($) ($) ($)
---------------------------- ------------------------ ------------------ ----------- -------------- ------------
Michael O. Fifer 1.3 $9,919
---------------------------- ------------------------ ------------------ ----------- -------------- ------------
Stephen L. Sanetti 25.0 $363,422 $989,889 $989,889
---------------------------- ------------------------ ------------------ ----------- -------------- ------------
Thomas A. Dineen 10.6 $29,866
---------------------------- ------------------------ ------------------ ----------- -------------- ------------
Christopher J. Killoy 2.2 $13,604
---------------------------- ------------------------ ------------------ ----------- -------------- ------------
Thomas P. Sullivan 1.4 $8,778
---------------------------- ------------------------ ------------------ ----------- -------------- ------------
Mark T. Lang (6) 0.0 $0
---------------------------- ------------------------ ------------------ ----------- -------------- ------------
Notes to Pension Benefits Table
(1) On October 1, 2007, the Board of Directors authorized the suspension
of benefits, or "freeze," of the Pension Plan effective January 1,
2008.
(2) On December 20, 2007, the Board amended the SERP to allow lump-sum
cash settlements of their accrued benefits to be offered to the
three participants of that plan.
(3) The maximum years of credited service under each of the Pension Plan
and SERP is 25. Mr. Sanetti had 28 years of actual service as of the
date of his voluntary termination on April 30, 2008, and was
eligible for early retirement under the plan.
(4) The present value of accumulated benefits under the Pension Plan is
calculated assuming a discount rate of 6.25%, the 2000 Group Annuity
Mortality Table, the participant's age as of December 31, 2008, and
frozen accrued benefits as of December 31, 2007.
(5) The present value shown for Mr. Sanetti under the SERP represents
the actual lump sum cash settlement value of his accrued benefits
under that plan, which was paid to Mr. Sanetti on February 1, 2008
per his election.
(6) Because Mark T. Lang was hired after January 1, 2008, the date the
Pension Plan was frozen, he was not considered a participant in, nor
accrued any benefit service under, the Pension Plan.
36
================================================================================
PRINCIPAL STOCKHOLDERS AND BENEFICIAL OWNERSHIP
================================================================================
PRINCIPAL STOCKHOLDER TABLE
The following table sets forth as of March 1, 2009 the ownership of the
Company's Common Stock by each person of record or known by the Company to
beneficially own more than 5% of such stock.
----------------------------- ------------------------------------------ ------------------------ -----------------
Amount and Nature of
Title of Class Name and Address of Beneficial Owner Beneficial Ownership Percent of Class
----------------------------- ------------------------------------------ ------------------------ -----------------
Common Stock Janus Capital Management LLC and 2,333,250 (1) 12.25%
Janus Venture Fund
151 Detroit Street
Denver, CO 80206
----------------------------- ------------------------------------------ ------------------------ -----------------
Common Stock Renaissance Technologies LLC and 1,460,100 (2) 7.67 %
James H. Simons
800 Third Avenue
New York, NY 10022
----------------------------- ------------------------------------------ ------------------------ -----------------
The London Company 1,009,091 (3) 5. 30%
Common Stock 1801 Bayberry Court
Suite 301
Richmond, VA 23226
----------------------------- ------------------------------------------ ------------------------ -----------------
Common Stock The Killen Group 981,125 (4) 5.15%
1189 Lancaster Avenue
Berwyn, PA 19312
----------------------------- ------------------------------------------ ------------------------ -----------------
Notes to Principal Stockholder Table
(1) Such information is as of December 31, 2008 and is derived exclusively
from a Schedule 13G/A filed jointly by Janus Capital Management LLC and
Janus Venture Fund on February 17, 2009.
(2) Such information is as of December 31, 2008 and is derived exclusively
from a Schedule 13G/A filed jointly by Renaissance Technologies LLC and
James H. Simons on February 12, 2009.
(3) Such information is as of November 3, 2008 and is derived exclusively from
a Schedule 13G filed by The London Company on November 6, 2008.
(4) Such information is as of December 31, 2008 and is derived exclusively
from a Schedule 13G filed by The Killen Group on January 30, 2009.
37
BENEFICIAL OWNERSHIP TABLE
The following table sets forth certain information as of March 1, 2009 as
to the number of shares of the Company's Common Stock beneficially owned by each
Director, Named Executive Officer and all Directors and Named Executive Officers
of the Company as a group.
------------------------------------------- ---------------- -------------------------- ---------------- ----------
Name Beneficially Stock Options Currently Total Share Percent
Owned Shares Exercisable or to Become Investment in
of Common Exercisable within 60 Common Stock
Stock (1) days after March 1, 2009 (1) of Class
(#) (#) (#) (%)
------------------------------------------- ---------------- -------------------------- ---------------- ----------
Independent Directors:
-------------------------------------------------------------------------------------------------------------------
James E. Service 22,357 20,000 42,357 *
------------------------------------------- ---------------- -------------------------- ---------------- ----------
John A. Cosentino, Jr. 75,857 20,000 95,867 *
------------------------------------------- ---------------- -------------------------- ---------------- ----------
C. Michael Jacobi 14,857 15,000 29,857 *
------------------------------------------- ---------------- -------------------------- ---------------- ----------
John M. Kingsley, Jr. 9,017 20,000 29,017 *
------------------------------------------- ---------------- -------------------------- ---------------- ----------
Stephen T. Merkel 10,057 15,000 25,057 *
------------------------------------------- ---------------- -------------------------- ---------------- ----------
Ronald C. Whitaker 16,857 15,000 31,857 *
------------------------------------------- ---------------- -------------------------- ---------------- ----------
Named Executive Officers:
-------------------------------------------------------------------------------------------------------------------
Michael O. Fifer (also a Director) 58,857 160,000 218,857 *
------------------------------------------- ---------------- -------------------------- ---------------- ----------
Stephen L. Sanetti (also a Director)(2) n/a 0 n/a *
------------------------------------------- ---------------- -------------------------- ---------------- ----------
Thomas A. Dineen 11,199 26,000 37,199 *
------------------------------------------- ---------------- -------------------------- ---------------- ----------
Christopher J. Killoy 1,138 40,000 41,138 *
------------------------------------------- ---------------- -------------------------- ---------------- ----------
Thomas P. Sullivan 1,285 40,000 41,285 *
------------------------------------------- ---------------- -------------------------- ---------------- ----------
Mark T. Lang 0 20,000 20,000 *
------------------------------------------- ---------------- -------------------------- ---------------- ----------
Directors and executive officers as a 276,945 391,000 667,745 2.76%
group: (6 independent Directors, 2
Directors who were also executive
officers during 2008 and 8 other
executive officers)
------------------------------------------- ---------------- -------------------------- ---------------- ----------
Notes to Beneficial Ownership Table
* Beneficial owner of less than 1% of the outstanding Common Stock of the
Company.
(1) Includes 3,037 shares of Common Stock granted to each Independent Director
pursuant to Section 11 of the 2007 Stock Incentive Plan on April 23, 2008.
These shares represent awards of restricted stock with a grant date fair
value of $25,000 issued annually as part of the compensation for
Independent Directors based on the mean of the high and low of the Common
Stock on the date of grant. These shares are considered owned with risk of
forfeiture until they vest on the date of the Company's Annual Meeting
next following the date of grant.
(2) Stephen L. Sanetti's options expired at the time of his voluntarily
termination on April 30, 2008.
38
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
Directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership with the SEC and NYSE. Officers, Directors and greater-than-10%
stockholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of the
Section 16(a) report forms furnished to the Company and written representations
that no other reports were required, that with respect to the period from
January 1, 2008 through December 31, 2008, all such forms were filed in a timely
manner by the Company's officers, Directors and greater-than-10% beneficial
owners.
CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS
The Company's Board has a policy of monitoring and reviewing issues
involving potential conflicts of interest, and reviewing and approving all
related party transactions. There were no related-party transactions in 2008.
39
PROPOSAL NO. 2 - RATIFICATION OF INDEPENDENT AUDITORS
McGladrey & Pullen, LLP has served as the Company's independent auditors
since 2005. Subject to the ratification of the stockholders, the Board of
Directors has reappointed McGladrey & Pullen, LLP as the Company's independent
auditors for the 2009 fiscal year.
PRINCIPAL ACCOUNTANTS' FEES AND SERVICES
The following table summarizes the fees incurred by the Company for
professional services rendered by McGladrey & Pullen, LLP during fiscal years
2008 and 2007.
--------------------------------------------------------------
Principal Accountants' Fees
--------------------------------------------------------------
Fiscal 2008 Fees Fiscal 2007 Fees
---------------------- ------------------- -------------------
Audit Fees $537,500 $534,800
---------------------- ------------------- -------------------
Audit-Related Fees $45,000 $45,000
---------------------- ------------------- -------------------
Tax Fees $16,650 $12,000
---------------------- ------------------- -------------------
All Other Fees $0 $0
---------------------- ------------------- -------------------
Total Fees $599,150 $591,800
---------------------- ------------------- -------------------
Audit Fees
Consist of fees billed for professional services rendered for the audit of
the Company's consolidated financial statements, the audit of internal controls
over financial reporting per Section 404 of the Sarbanes-Oxley Act, the review
of interim consolidated financial statements included in quarterly reports and
services provided in connection with statutory and regulatory filings or
engagements.
Audit - Related Fees
Consist of fees billed for assurance and related services that are
reasonably related to the performance of the audit or review of the Company's
financial statements and are not reported under "Audit Fees." These services
include audits of the Company's employee benefit and compensation plans.
Tax Fees
Consist of fees billed for professional services for tax assistance,
including pre-filing reviews of original and amended tax returns for the Company
and tax audit assistance.
All Other Fees
There were no fees or expenses reimbursed for services rendered by
McGladrey & Pullen, LLP to the Company, other than for services described above,
for the years 2008 or 2007.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit
Services of Independent Auditors
It is the policy of the Audit Committee to meet and review and approve in
advance, on a case-by-case basis, all engagements by the Company of permissible
non-audit services or audit, review or attest services for the Company to be
provided by the independent auditors, with exceptions provided for de minimus
amounts under certain circumstances as prescribed by the Exchange Act. The Audit
Committee may, at some later date, establish a more detailed pre-approval policy
pursuant to which such engagements may be pre-approved without a meeting of the
Audit Committee. Any request to perform any such services must be submitted to
the Audit Committee by the independent auditor and management of the Company and
must include their views on the consistency of such request with the SEC's rules
on auditor independence.
40
All of the services of McGladrey & Pullen, LLP described above under
"Audit-Related Fees" and "Tax Fees" were approved by the Audit Committee in
accordance with its policy on permissible non-audit services or audit, review or
attest services for the Company to be provided by its independent auditors, and
no such approval was given through a waiver of such policy for de minimus
amounts or under any of the other circumstances as prescribed by the Exchange
Act.
The Company (or someone on its behalf) has not consulted McGladrey &
Pullen, LLP during the two most recent fiscal years and the subsequent interim
period preceding their appointment regarding the application of accounting
principles to a specified transaction or the type of audit opinion that might be
rendered on the Company's financial statements.
Representatives of McGladrey & Pullen, LLP will be present at the Meeting,
will have the opportunity to make a statement if they so desire, and will be
available to respond to appropriate questions.
Board of Director Recommendation
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF MCGLADREY &
PULLEN, LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
41
CODE OF BUSINESS CONDUCT AND ETHICS
The Board has adopted a "Code of Business Conduct and Ethics" as part of
the Company's Corporate Compliance Program, which governs the obligation of all
employees, executive officers and Directors of the Company to conform their
business conduct to be in compliance with all applicable laws and regulations,
among other things. The Code of Business Conduct and Ethics is posted on the
Company's website at www.ruger.com, and is available in print to any stockholder
who requests it by contacting the Corporate Secretary as set forth in
"STOCKHOLDER COMMUNICATIONS" below.
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR 2010
To be considered for inclusion in the Proxy Statement distributed by the
Company in connection with next year's Annual Meeting of Stockholders,
stockholder proposals must be submitted in writing to the Company delivered or
mailed by first class United States mail, postage prepaid, no earlier than
December 30, 2009 (120 days prior to the first anniversary of this year's Annual
Meeting of Stockholders), and no later than January 29, 2010 (90 days prior to
the first anniversary of this year's Annual Meeting of Stockholders). Any
stockholder proposal to be considered at next year's Annual Meeting of
Stockholders, but not included in next year's Proxy Statement, must also be
submitted in writing to the Company by February 3, 2010.
Recommendations for nominees to stand for election as Directors at next
year's Annual Meeting of Stockholders must be received in writing delivered or
mailed by first class United States mail, postage prepaid, no earlier than
December 30, 2009 (120 days prior to the first anniversary of this year's Annual
Meeting of Stockholders), and no later than January 29, 2010 (90 days prior to
the first anniversary of this year's Annual Meeting of Stockholders) and include
the information as required under "THE BOARD OF DIRECTORS AND ITS COMMITTEES -
Nominating and Corporate Governance Committee" described above.
All stockholder proposals or Director nominations should be submitted to
Leslie M. Gasper, Corporate Secretary, Sturm, Ruger & Company, Inc., Lacey
Place, Southport, Connecticut 06890.
STOCKHOLDER AND INTERESTED PARTY COMMUNICATIONS WITH THE BOARD OF DIRECTORS
The Board has adopted a method by which stockholders and interested
parties can send communications to the Board. Stockholders and interested
parties may communicate in writing any questions or other communications to the
Chairman or non-management Directors of the Board through the following methods:
o by contacting the Corporate Secretary at Sturm, Ruger & Company,
Inc., 1 Lacey Place, Southport, CT 06890;
o by telephone at (203) 259-7843;
o by fax at (203) 256-3367; or
o by calling the Company's corporate communications telephone
"hotline" at 1-800-826-6762 or emailing the hotline at
sturm-ruger@hotlines.com. These hotlines are monitored 24 hours a
day, 7 days a week.
Stockholders or interested parties may also communicate in writing any
questions or other communications to the management Directors of the Board in
the same manner.
Stockholders may contact the Corporate Secretary at (203) 259-7843 or
Computershare Investor Services, LLC, which is the Company's stock transfer
agent, at (312) 360-5190 or www.computershare.com for questions regarding
routine stockholder matters.
42
OTHER MATTERS
Management of the Company does not intend to present any business at the
Meeting other than as set forth in Proposal 1 and 2 of the attached Notice of
Annual Meeting of Stockholders, and it has no information that others will
present any other business at the Meeting. If other matters requiring the vote
of the stockholders properly come before the Meeting, it is the intention of the
persons named in the proxy to vote the shares represented thereby in accordance
with their judgment on such matters.
The Company, upon written request, will provide without charge to each
person entitled to vote at the Meeting a copy of its Annual Report on Securities
and Exchange Commission Form 10-K for the year ended December 31, 2008,
including the financial statements and financial statement schedules. Such
requests may be directed to Leslie M. Gasper, Corporate Secretary, Sturm, Ruger
& Company, Inc., Lacey Place, Southport, Connecticut 06890.
BY ORDER OF THE BOARD OF DIRECTORS
________________________________
Leslie M. Gasper
Corporate Secretary
Southport, Connecticut
March 16, 2009
43
[LOGO OF STURM, RUGER & COMPANY, INC.]
[LOGO OF STURM, RUGER & COMPANY, INC.]
Electronic Voting Instructions
You can vote by Internet or telephone!
Available 24 hours a day, 7 days a week!
Instead of mailing your proxy, you may
choose one of the two voting methods
outlined below to vote your proxy.
VALIDATION DETAILS ARE LOCATED BELOW IN THE
TITLE BAR.
Proxies submitted by the Internet or
telephone must be received by 1:00 a.m.,
Central Time, on April 29, 2009.
Vote by Internet
o Log on to the Internet and go to
www.envisionreports.com/RGR
o Follow the steps outlined on the secured
website.
Vote by telephone
o Call toll free 1-800-652-VOTE (8683)
within the United States, Canada & Puerto
Rico any time on a touch tone telephone.
There is NO CHARGE to you for the call.
o Follow the instructions provided by the
recorded message.
Using a black ink pen, mark your votes with an X as shown in
this example. Please do not write outside the designated areas. |X|
================================================================================
Annual Meeting Proxy Card
================================================================================
IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION,
DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
A Proposals -- The Board of Directors unanimously recommends a Vote FOR all the
nominees listed and FOR Proposal 2.
1. Election of Directors:
For Against For Against
01 - James E. Service |_| |_| 02 - Michael O. Fifer |_| |_|
04 - C. Michael Jacobi |_| |_| 05 - John M. Kingsley, Jr. |_| |_|
07 - Ronald C. Whitaker |_| |_| 03 - John A. Cosentino, Jr. |_| |_|
For Against Abstain
2. The ratification of the appointment of McGladrey |_| |_| |_|
& Pullen, LLP as the Independent Auditors of
the Company for the 2009 fiscal year.
B Non-Voting Items
Change of Address -- Please print your new address below.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
C Authorized Signatures -- This section must be completed for your vote to be
counted. -- Date and Sign Below
When shares are held by joint tenants, both should sign. When signing as an
attorney, as executor, administrator, trustee or guardian, please give your full
title as such. If a corporation, please sign in full corporate name by President
or other authorized officer. If a partnership, please sign in partnership name
by authorized person.
Date (mm/dd/yyyy) - Please print date below.
---------------------------------------------------
Signature 1 - Please keep signature within the box.
---------------------------------------------------
Signature 2 - Please keep signature within the box.
---------------------------------------------------
IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION,
DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
[LOGO OF STURM, RUGER & COMPANY, INC.]
================================================================================
Proxy -- STURM, RUGER & COMPANY, INC.
================================================================================
LACEY PLACE, SOUTHPORT, CONNECTICUT 06890
This Proxy is Solicited on Behalf of the Board of Directors
for the Annual Meeting of Stockholders to be held on April 29, 2009
The undersigned hereby appoints Michael O. Fifer and Leslie M. Gasper as
Proxies, each with the full power to appoint his or her substitute, and hereby
authorizes them to represent and to vote, as designated below, all the shares of
Common Stock of Sturm, Ruger & Company, Inc. (the "Company"), held of record by
the undersigned on March 10, 2009 at the Annual Meeting of Stockholders to be
held on April 29, 2009 or any adjournment or postponement thereof.
The proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no direction is made, this proxy will be voted
"FOR" the election of all Directors and "FOR" Proposal 2 and at their discretion
on any other matter that may properly come before the meeting. Please sign
exactly as name appears on other side of this proxy form.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY FORM PROMPTLY USING THE ENCLOSED
ENVELOPE.
(Continued and to be signed on reverse side.)
[LOGO OF STURM, RUGER & COMPANY, INC.]
IMPORTANT ANNUAL STOCKHOLDERS' MEETING
INFORMATION -- YOUR VOTE COUNTS!
================================================================================
Stockholder Meeting Notice
================================================================================
Important Notice Regarding the Availability of Proxy Materials for the
Sturm, Ruger & Company, Inc. Stockholder Meeting to be Held on April 29, 2009
Under new Securities and Exchange Commission rules, you are receiving this
notice that the proxy materials for the annual stockholders' meeting are
available on the Internet. Follow the instructions below to view the materials
and vote online or request a copy. The items to be voted on and location of the
annual meeting are on the reverse side. Your vote is important!
This communication presents only an overview of the more complete proxy
materials that are available to you on the Internet. We encourage you to access
and review all of the important information contained in the proxy materials
before voting. The Proxy Statement and Annual Report to stockholders are
available at:
=====================================
www.envisionreports.com/RGR
=====================================
Easy Online Access -- A Convenient Way to View Proxy Materials and Vote
When you go online to view materials, you can also vote your shares.
Step 1: Go to www.envisionreports.com/RGR to view the materials.
Step 2: Click on Cast Your Vote or Request Materials.
Step 3: Follow the instructions on the screen to log in.
Step 4: Make your selection as instructed on each screen to select
delivery preferences and vote.
When you go online, you can also help the environment by consenting to receive
electronic delivery of future materials.
================================================================================
Obtaining a Copy of the Proxy Materials - If you want to receive a
paper or e-mail copy of these documents, you must request one. There
is no charge to you for requesting a copy. Please make your request
for a copy as instructed on the reverse side on or before April 19,
2009 to facilitate timely delivery.
Stockholder Meeting Notice
Sturm, Ruger & Company, Inc. Annual Meeting of Stockholders will be held on
April 29, 2009 at The Trumbull Marriott, 180 Hawley Lane,Trumbull, CT 06611, at
10:30 a.m. Eastern Time.
Proposals to be voted on at the meeting are listed below along with the Board of
Directors' recommendations.
The Board of Directors recommends that you vote FOR?the following proposals:
1. Election of Directors.
James E. Service Michael O. Fifer
John A. Cosentino, Jr. C. Michael Jacobi
John M. Kingsley, Jr. Stephen T. Merkel
Ronald C. Whitaker
2. The ratification of the appointment of McGladrey & Pullen, LLP as the
Independent Auditors of the Company for the 2009 fiscal year.
In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
PLEASE NOTE - YOU CANNOT VOTE BY RETURNING THIS NOTICE. To vote your shares you
must vote online or request a paper copy of the proxy materials to receive a
proxy card. If you wish to attend and vote at the meeting, please bring this
notice with you.
================================================================================
Here's how to order a copy of the proxy materials and select a future delivery
preference:
Paper copies: Current and future paper delivery requests can be submitted via
the telephone, Internet or email options below.
Email copies: Current and future email delivery requests must be submitted via
the Internet following the instructions below.
If you request an email copy of current materials you will receive an email with
a link to the materials.
PLEASE NOTE: You must use the numbers in the shaded bar on the reverse side when
requesting a set of proxy materials.
--> Internet - Go to www.envisionreports.com/RGR. Click Cast Your Vote or
Request Materials. Follow the instructions to log in and order a paper or
email copy of the current meeting materials and submit your preference for
email or paper delivery of future meeting materials.
--> Telephone - Call us free of charge at 1-866-641-4276 using a touch-tone
phone and follow the instructions to log in and order a paper copy of the
materials by mail for the current meeting. You can also submit a
preference to receive a paper copy for future meetings.
--> Email - Send email to investorvote@computershare.com with "Proxy Materials
Sturm, Ruger & Company, Inc." in the subject line. Include in the message
your full name and address, plus the three numbers located in the shaded
bar on the reverse, and state in the email that you want a paper copy of
current meeting materials. You can also state your preference to receive a
paper copy for future meetings. To facilitate timely delivery, all
requests for a paper copy of the proxy materials must be received by April
19, 2009.