UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
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| | Definitive Additional Materials
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STURM, RUGER & COMPANY, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 4, 2004
NOTICE IS HEREBY GIVEN THAT the Annual Meeting of Stockholders of STURM,
RUGER & COMPANY, INC. (the "Company") will be held at the Lake Sunapee Country
Club, 100 Country Club Lane, New London, New Hampshire 03257 on the 4th day of
May, 2004 at 10:30 a.m. to consider and act upon the following:
1. A proposal to elect seven (7) Directors to serve for the ensuing year;
2. A proposal to approve the appointment of KPMG LLP as the Company's
independent auditors for the 2004 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
5, 2004 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 411 Sunapee Street, Newport, New Hampshire 03773.
The Company's Proxy Statement is attached hereto.
By Order of the Board of Directors
-----------------------------
Leslie M. Gasper
Corporate Secretary
Southport, Connecticut
March 15, 2004
All Stockholders are cordially invited to attend the Annual Meeting. If
you do not expect to be present, please date, mark and sign the enclosed form of
Proxy and return it to Computershare Investor Services LLC, P.O. Box 2000,
Bedford Park, Illinois 60499-9910. A postage-paid envelope is enclosed for your
convenience.
TABLE OF CONTENTS
PAGE
----
Proxy Solicitation and Voting Information 1
Proposal No. 1: Election of Directors 2
The Board of Directors and Its Committees 5
Compensation Committee Report on Executive Compensation 11
Compensation Committee Interlocks and Insider Participation 12
Executive Compensation Summary Compensation Table 13
Option/SAR Grants in Last Fiscal Year 15
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values 16
Pension Plan Table 17
Supplemental Executive Retirement Plan Table 18
Comparison of Five-Year Cumulative Total Return 20
Principal Stockholders 21
Security Ownership of Management 23
Section 16(a) Beneficial Ownership Reporting Compliance 24
Certain Relationships and Related Transactions 24
Report of the Audit Committee 25
Proposal No. 2: Approval of Independent Auditors 26
Shareholder Proposals and Nominations for 2005 27
Other Matters 27
Exhibit A - Corporate Board Governance Guidelines A-1
Exhibit B - Audit Committee Charter B-1
Exhibit C - Compensation Committee Charter C-1
Exhibit D - Nominating and Corporate Governance Committee Charter D-1
Exhibit E - Code of Business Conduct and Ethics E-1
March 15, 2004
STURM, RUGER & COMPANY, INC.
LACEY PLACE, SOUTHPORT, CONNECTICUT 06890
PROXY STATEMENT
2004 ANNUAL MEETING OF THE STOCKHOLDERS
PROXY SOLICITATION AND VOTING INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Sturm, Ruger & Company, Inc. (the
"Company") for use at the 2004 Annual Meeting of Stockholders (the "Meeting") of
the Company to be held at 10:30 a.m. on May 4, 2004 at the Lake Sunapee Country
Club, 100 Country Club Lane, New London, New Hampshire 03257 or at any
adjournment or postponement thereof for the purposes set forth in the
accompanying Notice of Annual Meeting of Stockholders. This Proxy Statement and
enclosed proxy are first being sent to stockholders on or about March 15, 2004.
The mailing address of the principal executive office of the Company is
Lacey Place, Southport, Connecticut 06890.
If the enclosed 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). All expenses in connection with the
solicitation of these proxies, which are estimated to be $75,000, will be borne
by the Company.
The Annual Report of the Company for the year ended December 31, 2003,
including financial statements, is enclosed herewith.
Only holders of Common Stock, $1.00 par value, of the Company (the "Common
Stock") of record at the close of business on March 5, 2004 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 5, 2004,
26,910,720 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
the same effect as votes against the election of Directors. The affirmative vote
of shares representing a majority
1
of the shares present and entitled to vote is required to approve the other
proposal to be voted on 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.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
On May 6, 2003, the Board amended the Company's By-Laws to reduce the
number of Directors to seven. All of the seven Directors will be elected at the
Meeting, each to hold office until the next Annual Meeting of Stockholders and
until his successor is elected and has qualified.
All of the seven nominees for Director listed below were elected at the
last Annual Meeting. If no contrary instructions are indicated, proxies will be
voted for the election of the nominees for Director. 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. Directors shall be elected by a plurality of the votes of the shares
present in person or represented by proxy at the Meeting and entitled to vote on
the election of Directors.
The following table sets forth certain information concerning each
nominee's age, business experience, other directorships in publicly-held
corporations and the number and percentage of shares of Common Stock of the
Company beneficially owned by such nominee as of January 15, 2004.
BUSINESS EXPERIENCE FIRST SHARES PERCENT
DURING THE PAST FIVE YEARS AND BECAME A BENEFICIALLY OF
NAME AGE OTHER DIRECTORSHIPS DIRECTOR OWNED CLASS
---- --- ------------------- -------- ----- -----
William B. Ruger, Jr. 64 Chairman of the Board of Directors and March, 5,322,000 (1) 19.59%
Chief Executive Officer as of October 24, 1970
2000. Prior thereto, Vice Chairman, Senior
Executive Officer from July 18, 1995, and
President and Chief Operating Officer from
March 1, 1998. Governor, Sporting Arms &
Ammunition Manufacturers' Institute,
Trustee, St. Paul's School, the Salisbury
School, the Wildlife Management Institute,
and the Cody Firearms Museum of the
Buffalo Bill Memorial Association.
2
BUSINESS EXPERIENCE FIRST SHARES PERCENT
DURING THE PAST FIVE YEARS AND BECAME A BENEFICIALLY OF
NAME AGE OTHER DIRECTORSHIPS DIRECTOR OWNED CLASS
---- --- ------------------- -------- ----- -----
Stephen L. Sanetti 54 Vice Chairman, President, Chief Operating March, 232,000 (2) *
Officer and General Counsel as of May 6, 1998
2003. Prior thereto, Senior Executive Vice
President and General Counsel from October
24, 2000. Prior thereto, Vice President
and General Counsel from March 11, 1993.
Governor, National Shooting Sports
Foundation and Hunting & Shooting Sports
Heritage Foundation. Director, Product
Liability Advisory Council from 1988 to
2002. Trustee, Friends of Boothe Park.
John M. Kingsley, Jr. 72 Director, Neurological Institute of New April, 24,160 (3) *
Jersey and former Trustee, Brundge, Story 1972
and Rose Investment Trust. Retired as
Executive Vice President of the Company on
December 31, 1996.
Townsend Hornor 77 Director and Audit Committee member, April, 23,200 (4) *
Nickerson Lumber Company. Chairman, The 1972
National Marine Life Center. Former Senior
Securities Analyst member of Boston and New
York Societies of Securities Analysts.
First Vice President and general partner of
White Weld & Co., (investment bankers) 1952
to 1978. Former Director and Audit
Committee member, Kollmorgen Corp. Former
Director, Simon & Schuster, Ealing Corp.,
and Endevco Corp. Trustee or director of
various charitable organizations.
Richard T. Cunniff 81 Vice Chairman and Director of the Sequoia December, 45,500 (5) *
Fund, an investment company registered 1986
under the Investment Company Act of 1940.
Vice Chairman and Principal of Ruane,
Cunniff & Co., Inc., an investment advisor
under the Investment Advisers Act of 1940.
Paul X. Kelley 75 Chairman, American Battle Monuments April, 22,000 (6) *
Commission (independent agency of the 1990
Executive Branch of the Federal
government.) Commandant of the United
States Marine Corps and member of the
Joint Chiefs of Staff from 1983 to 1987.
Partner, J.F. Lehman & Company (private
investments). Former Vice Chairman,
Cassidy & Associates, Inc. (government
relations). Director, London Life
Reinsurance Company (reinsurance), Saul
Centers, Inc. (real estate investment
trust), OAO Technology Solutions, Inc.
(software development) and former
Director, United Industrial Corporation
(manufacturing).
James E. Service 73 Consultant, Invesmart (investment July, 21,000 (7) *
management). Commander, United States 1992
Naval Air Force, Pacific Fleet, from 1985
to 1987. Director of Wood River Medical
Center, Ketchum, Idaho from 1992 to 1996.
* Beneficial owner of less than 1% of the outstanding Common Stock of
the Company.
--------------------
3
(1) Includes 4,272,000 shares of Common Stock held in the name of Ruger
Business Holdings, L.P., of which the William B. Ruger Revocable
Trust of 1988 is the sole limited partner and Ruger Management, Inc.
is the sole general partner. William B. Ruger, Jr. and Carolyn Ruger
Vogel (son and daughter of William B. Ruger) are co-trustees of the
William B. Ruger Revocable Trust of 1988. Ruger Management, Inc. is
owned by William B. Ruger, Jr. and Carolyn R. Vogel. Mr. Ruger, Jr.
and Mrs. Vogel have shared investment and voting control with
respect to such 4,272,000 shares of Common Stock. Also includes
800,000 shares of Common Stock owned directly by Mr. Ruger, Jr. Mr.
Ruger, Jr. has sole investment and voting control with respect to
such 800,000 shares. Also includes 250,000 shares of Common Stock
subject to options currently exercisable or which will become
exercisable within 60 days of January 15, 2004 under the 1998 Stock
Incentive Plan.
(2) Includes 32,000 shares of Common Stock held directly by Mr. Sanetti.
Also includes 200,000 shares of Common Stock options currently
exercisable or which will become exercisable within 60 days of
January 15, 2004 under the 1998 Stock Incentive Plan.
(3) Includes 4,160 shares of Common Stock held directly by Mr. Kingsley.
Also includes 20,000 shares of Common Stock subject to options
currently exercisable or which will become exercisable within 60
days of January 15, 2004 under the 2001 Stock Option Plan for
Non-Employee Directors.
(4) Includes 3,200 shares of Common Stock held directly by Mr. Hornor.
Also includes 20,000 shares of Common Stock subject to options
currently exercisable or which will become exercisable within 60
days of January 15, 2004 under the 2001 Stock Option Plan for
Non-Employee Directors.
(5) Includes 25,500 shares of Common Stock held directly by Mr. Cunniff.
Also includes 20,000 shares of Common Stock subject to options
currently exercisable or which will become exercisable within 60
days of January 15, 2004 under the 2001 Stock Option Plan for
Non-Employee Directors. Does not include 25,500 shares of Common
Stock owned by Mr. Cunniff's wife as to which Mr. Cunniff disclaims
beneficial ownership. Mr. Cunniff is the Vice Chairman, a director
and a principal stockholder of Ruane, Cunniff & Co., Inc., which
manages discretionary accounts and which holds 80,244 shares of
Common Stock. The firm of Ruane, Cunniff & Co., Inc. is able to
direct the sale or disposition of the 80,244 shares; however, 1,800
shares may be voted by Ruane, Cunniff & Co., Inc. and 78,444 shares
may be voted only by their beneficial owners. Mr. Cunniff disclaims
beneficial ownership of such 80,244 shares.
(6) Includes 1,200 shares of Common Stock held directly by General
Kelley and 800 shares held in joint tenancy by General Kelley and
his wife. Also includes 20,000 shares of Common Stock subject to
options currently exercisable or which will become exercisable
within 60 days of January 15, 2004 under the 2001 Stock Option Plan
for Non-Employee Directors.
(7) Includes 1,000 shares of Common Stock held directly by Admiral
Service. Also includes 20,000 shares of Common Stock subject to
options currently exercisable or which will become exercisable
within 60 days of January 15, 2004 under the 2001 Stock Option Plan
for Non-Employee Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES NAMED ABOVE.
4
THE BOARD OF DIRECTORS AND ITS COMMITTEES
GENERAL
The Board of Directors is committed to good business practice,
transparency in financial reporting and the highest level of corporate
governance. To that end, over the course of the last several months, the
Board of Directors has reviewed the Company's governance policies and
practices against the practices of other public companies, specialists in
corporate governance, the legal requirements of the Sarbanes-Oxley Act of
2002, the rules and regulations of the Securities and Exchange Commission
(the "SEC"), Delaware law (the state in which the Company is incorporated)
and the new listing standards of the New York Stock Exchange, Inc.
("NYSE"). As a result of this review, the Board of Directors has, among
other things:
- Adopted a revised charter for the Audit Committee;
- Adopted a charter for the Compensation Committee;
- Established and adopted a charter for the Nominating and
Corporate Governance Committee;
- Adopted a Code of Business Conduct and Ethics; and
- Adopted Corporate Board Governance Guidelines.
CORPORATE BOARD GOVERNANCE GUIDELINES
These recent measures and the Company's corporate governance
practices are now embodied in the Corporate Board Governance Guidelines,
adopted by the Board of Directors on October 23, 2003. A copy of the
Corporate Board Governance Guidelines is attached to this annual Proxy
Statement as Exhibit A and is posted on the Company's website at
www.ruger.com.
BOARD OF DIRECTORS
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 of Directors 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 of Directors and the committees of
the Board of Directors.
The Board of Directors held four meetings during 2003. All Directors
attended all meetings of the Board of Directors as well as the Annual
Meeting of Stockholders held on May 6, 2003. It is the policy of the
Company that attendance at all meetings of the Board of Directors and the
Annual Meeting of the Stockholders of the Company is expected of all
Directors, unless the Director has been previously excused by the Chairman
of the Board for good cause.
DIRECTOR COMPENSATION
The Board of Directors believes that compensation for our
independent directors should be a combination of cash and equity-based
compensation.
5
During 2003, the Company paid each Director who was not also an
officer of the Company $20,000 in annual fees for services as a member of
the Board of Directors. Each Director who was also an officer received
$6,000 in annual fees.
During 2003, each Director who was not also an officer of the
Company received an attendance fee of $1,500 per meeting, and each
Director who was also an officer received an attendance fee of $500 per
meeting. All Directors were reimbursed for out-of-pocket expenses related
to attendance at meetings, and each Director who was not also an officer
of the Company and was a member of any of the committees of the Board
received $1,000 for each committee meeting attended.
On January 22, 2004, in recognition of their continuing time
commitments, the Board of Directors approved new attendance fees for 2004
for each Director who is not also an officer of the Company and is a
member of any of the committees of the Board. Such Directors are to
receive $1,500 for each committee meeting attended, and any chairman of
such committee is to receive $2,000 for each committee meeting attended.
On January 5, 2001, each current non-employee member of the Board
was granted a non-qualified stock option to purchase 20,000 shares of
Common Stock at an exercise price of $9.875 per share under the 2001 Stock
Option Plan for Non-Employee Directors, which was approved by the
stockholders of the Company on May 3, 2001. 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.
Stanley B. Terhune, a former Director and Vice President of the
Company who retired as a Director on May 6, 2003, served as a consultant
to the Company during 2003. For his services in this capacity, Mr. Terhune
received $100 per hour until May 6, 2003, at which time his consulting
fees were changed to $6,000 per month. During 2003, Mr. Terhune received a
total of $63,150 for his service as a consultant to the Company.
AUDIT COMMITTEE
In 2003, the members of the Audit Committee of the Board of
Directors were Townsend Hornor, Richard T. Cunniff and General Paul X.
Kelley. Mr. Hornor served as Chairman. The Board of Directors has
affirmatively determined that none of Messrs. Hornor, Cunniff and Kelley
has a material relationship with the Company, either directly or as a
partner, shareholder or officer of an organization that has a relationship
with the Company. Each of Messrs. Hornor, Cunniff and Kelley are
"independent" for such purposes under the rules of the NYSE, including
Rules 303A thereof and Rule 10A-3 under the Securities and Exchange Act of
1934, as amended (the "Exchange Act" ). All members of the Audit Committee
have a working familiarity with basic finance and accounting practices as
contemplated by NYSE listing standards. In addition, the Company has
determined that Mr. Hornor is an "audit committee financial expert" as
defined by SEC rules and regulations.
The purpose of the Audit Committee is to provide assistance to the
Board of Directors 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 Committee shall
prepare the report required by SEC rules to be included in the Company's
annual proxy statement.
6
The Audit Committee is governed by a written charter that was
adopted by the Board of Directors on October 23, 2003. A copy of the Audit
Committee charter is attached hereto as Exhibit B and is posted on the
Company's website at www.ruger.com.
The Audit Committee held seven meetings during 2003. In addition to
out-of-pocket expenses related to attendance at meetings, Mr. Hornor
received $7,000, General Kelley received $6,000, and Mr. Cunniff received
$5,000 for services rendered on the Audit Committee in 2003. Mr. Hornor
attended all meetings, General Kelley attended six meetings, and Mr.
Cunniff attended five meetings of the Audit Committee in fiscal 2003.
The annual Report of the Audit Committee is included in this Proxy
Statement.
COMPENSATION COMMITTEE
In 2003, the members of the Compensation Committee of the Board of
Directors were Admiral James E. Service, Richard T. Cunniff and General
Paul X. Kelley. Admiral Service succeeded General Kelley as Committee
Chairman on May 6, 2003. The Board of Directors has affirmatively
determined that none of Messrs. Service, Cunniff and Kelley has a material
relationship with the Company, either directly or as a partner,
shareholder or officer of an organization that has a relationship with the
Company. Each of Messrs. Service, Cunniff and Kelley are "independent" for
such purposes under the rules of the NYSE, including Rule 303A thereof.
The purposes of the Compensation Committee are (i) discharging the
responsibilities of the Board of Directors 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 of Directors,
and under the Company's incentive and equity-based plans and (ii)
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 is governed by a written charter that was
adopted by the Board of Directors on January 22, 2004. A copy of the
Compensation Committee charter is attached hereto as Exhibit C and is
posted on the Company's website at www.ruger.com.
The Compensation Committee held one meeting during 2003. In addition
to out-of-pocket expenses related to attendance at meetings, Messrs.
Service, Cunniff and Kelley each received $1,000 for services rendered on
the Compensation Committee in 2003. All Directors who served on the
Compensation Committee in fiscal 2003 attended all meetings of the
Compensation Committee in fiscal 2003.
The annual Compensation Committee Report on Executive Compensation
is included in this Proxy Statement.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
On October 23, 2003, the Board of Directors created the Nominating
and Corporate Governance Committee. The members of the Nominating and
Corporate Governance Committee appointed to the committee were General
Paul X. Kelley, Townsend Hornor and Admiral James E. Service. General
Kelley was appointed as Committee Chairman. The Board of Directors has
affirmatively determined that none of Messrs. Kelley, Hornor and Service
has a material relationship with the Company, either
7
directly or as a partner, shareholder or officer of an organization that
has a relationship with the Company. Each of Messrs. Kelley, Hornor and
Service are "independent" for such purposes under the rules of the NYSE,
including Rule 303A thereof.
The Nominating and Corporate Governance Committee is responsible to
the Board of Directors 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 was adopted by the Board of Directors on October 23,
2003. The Nominating and Corporate Governance Committee charter is
attached hereto as Exhibit D and is posted on the Company's website at
www.ruger.com.
The Nominating and Corporate Governance Committee did not formally
meet during 2003.
The Nominating and Corporate Governance Committee's responsibilities
under its charter include the establishment of the Company's criteria for
the selection of new directors. The criteria is to include, among other
things, career specialization, technical skills, strength of character,
independent thought, practical wisdom, mature judgment, gender, and ethnic
diversity. However, the Nominating and Corporate Governance Committee has
not yet adopted any specific or minimum qualifications as part of its
selection criteria for directors, although it will consider any such
qualifications as required by law or applicable rule or regulation, and it
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:
- personal and professional ethics, strength of character,
integrity, and values;
- success in dealing with complex problems or have obtained and
excelled in a position of leadership;
- sufficient education, experience, intelligence, independence,
fairness, reasoning ability, practicality, wisdom, and vision
to exercise sound and mature judgment;
- stature and capability to represent the Company before the
public and the shareholders;
- the personality, confidence, and independence to undertake
full and frank discussion of the Company's business
assumptions;
- willingness to learn the business of the Company, to
understand all Company policies, and to make themselves aware
of the Company's finances; and
- 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
8
process for identifying and evaluating nominees for director, as set forth
in the charter, includes inquiries into the backgrounds and qualifications
of candidates. These inquires 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. It has not retained any such firm to date.
The Nominating and Corporate Governance Committee has a written
policy which states that it will consider director candidates recommended
by shareholders. There is no difference in the manner in which the
Nominating and Corporate Governance Committee will evaluate nominees
recommended by shareholders and the manner in which it evaluates
candidates recommended by other sources. Any shareholder interested in
recommending a candidate for consideration should send information
relating to such shareholder's ownership of Common Stock of the Company,
the biographical information about the candidate as set forth under
Proposal No. 1 of this Proxy Statement, a statement of the qualifications
of the candidate and at least three business references, 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, shareholder recommendations for Director
candidates must be received by the Company on or before November 15, 2004.
The Company has not rejected any director candidates put forward by
a shareholder or group of shareholders who beneficially owned more than 5
percent of the Company's common stock for at least one year prior to the
date of the recommendation.
SHAREHOLDER COMMUNICATIONS
The Board of Directors has adopted a method by which shareholders
can send communications to the Board of Directors. Shareholders may
communicate in writing any questions or other communications to the Board
of Directors by contacting the Corporate Secretary at Sturm, Ruger
Headquarters, 1 Lacey Place, Southport, CT 06890; or by telephone at (203)
259-7843; or by fax at (203) 256-3367; or by use of the Company's
corporate communications "hotline" at 1-800-826-6762. The "hotline" is
monitored 24 hours a day, 7 days a week. Shareholders may also communicate
in writing any questions or other communications to the non-management
directors of the Board of Directors, in the same manner.
CODE OF BUSINESS CONDUCT AND ETHICS
On May 6, 2003, the Board of Directors of Sturm, Ruger & Company,
Inc. 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 included in this annual Proxy Statement as Exhibit E and is posted on
the Company's website at www.ruger.com.
9
NON-MANAGEMENT DIRECTORS
The non-management directors of the Board of Directors have been
meeting regularly in executive sessions since October 24, 2002, at which
time they selected Mr. Townsend Hornor to be the presiding director for
the executive session meetings until the executive session to be held in
concurrence with the organizational meeting of the Board of Directors held
after the Annual Meeting to be held on May 4, 2004. Beginning on such
date, a new presiding director will be chosen annually at the first
executive session held in concurrence with the organizational meeting of
the Board of Directors held after each Annual Meeting of the Company, and
will serve for a one year term. The director who is the most senior
director, based on the number of years of service as a director of the
Company, and who has not previously served as presiding director of the
executive sessions, will be chosen to be the presiding director. The
presiding director presides at all executive session meetings. The
presiding director will also be looked upon 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.
10
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION *
Overall Policy
The Company's executive compensation program is designed to reflect
both corporate performance and individual responsibilities and
performance. The Compensation Committee administers the Company's overall
compensation strategy in an attempt to relate executive compensation
appropriately to the Company's overall growth and success and to the
executive's duties and demonstrated abilities. The objectives of this
strategy are to attract and retain the best possible executives, to
motivate these executives to achieve the Company's business goals and to
provide a compensation package that recognizes individual contributions as
well as overall business results. The Compensation Committee and the Board
of Directors as a whole have ultimate responsibility for executive
compensation.
These reviews permit an ongoing evaluation of the relationship
between the size and scope of the Company's operations, its performance
and its executive compensation. The Compensation Committee also considers
the legal and tax effect (including, without limitation, the effects of
Section 162(m) of the Internal Revenue Code of 1986, as amended) of the
Company's executive compensation program in order to provide the most
favorable legal and tax consequences for the Company and its executive
officers.
The Compensation Committee determines the compensation of the
Company's executive officers, including the individuals whose compensation
is detailed in this proxy statement. The key elements of the Company's
executive compensation consist of base salary, annual bonus and stock
options, as discussed below.
Base Salaries
Base salaries for executive officers are determined by considering
historical salaries paid by the Company to officers having certain duties
and responsibilities and then evaluating the current responsibilities of
the position, the scope of the operations under management and the
experience of the individual. Salary adjustments are determined by
evaluating on an individual basis new responsibilities of the executive's
position, changes in the scope of the operations managed, the performance
of such operations, the performance of the executive in the position and
annual increases in the cost of living.
Annual Bonus
The Company's executive officers are eligible for an annual cash
bonus. Annual bonuses are determined on the basis of corporate
performance. The most significant corporate performance measure for bonus
payments is earnings of the Company. In determining annual bonuses, the
Compensation Committee considers the views of the Chief Executive Officer
and discusses with him the appropriate bonuses for all officers.
-----------
* 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 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 filed under the Acts.
11
Stock Options
Under the Company's 1998 Stock Incentive Plan, stock options may be
granted to the Company's executive officers. The Compensation Committee sets
guidelines for the size of stock option awards based on factors similar to those
used to determine base salaries and annual bonuses. Stock options are designed
to align the interests of executives with those of the stockholders.
Under the 1998 Stock Incentive Plan, stock options are typically granted
with an exercise price equal to the market price of the Company's common stock
on the date of grant and vest over time. This approach is designed to encourage
the creation of stockholder value over the long term since the full benefit of
the compensation package cannot be realized unless stock price appreciation
occurs over time.
Chief Executive Officer's Compensation
Following William B. Ruger, Jr.'s appointment as Chief Executive Officer
on October 24, 2000, the Compensation Committee reviewed Mr. Ruger, Jr.'s
compensation as well as the compensation of the Company's other executive
officers who had been assigned positions of increased responsibility. Based on
the Committee's recommendations as a result of this review, the Board of
Directors approved an increase to William B. Ruger, Jr.'s base salary from
$225,000 per year to $400,000. Mr. Ruger, Jr.'s base salary has not increased
since October 24, 2000. Prior thereto, Mr. Ruger, Jr.'s base salary had not
increased since January 1, 1998.
Conclusion
Through the programs described above, 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.
COMPENSATION COMMITTEE
James E. Service, Committee Chairman
Richard T. Cunniff
Paul X. Kelley
January 19, 2004
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
The members of the Compensation Committee of the Company's Board of
Directors for the year 2003 were those named above in the Compensation Committee
Report on Executive Compensation. No member of the Committee was at any time
during the year 2003 or at any other time an officer or employee of the Company.
No executive officer of the Company has served on the board of directors or
compensation committee of any other entity that has or has had one or more
executive officers serving as a member of the Board of Directors.
12
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information with respect to the
compensation for calendar years 2003, 2002 and 2001 for the Company's Chief
Executive Officer and the other individuals who served as executive officers of
the Company during 2003.
ANNUAL COMPENSATION LONG TERM
------------------- ---------
COMPENSATION
------------
OTHER ALL
ANNUAL OTHER
COMPEN COMPEN-
NAME AND SALARY (1) BONUS -SATION (2) SATION (3), (4), (5)
PRINCIPAL POSITION YEAR $ $ $ $
------------------ ---- ---------- ------- ----------- --------------------
William B. Ruger, Jr. - 2003 $408,000 $15,000 $22,310 $ 60,792
Chairman of the Board of Directors 2002 408,500 39,500 22,310 60,792
and Chief Executive Officer 2001 408,000 52,000 25,657 60,792
Stephen L. Sanetti -
Vice Chairman of the Board of
Directors, President, Chief 2003 $283,000 $15,000 $36,801 $ 41,757
Operating Officer and General 2002 283,500 32,000 36,801 42,457
Counsel 2001 283,000 39,000 36,801 41,526
Erle G. Blanchard -
Vice Chairman of the Board of 2003 $ 95,167 $ 0 $ 0 $286,806
Directors, President, Chief 2002 283,500 32,000 30,677 42,697
Operating Officer and Treasurer.(6) 2001 283,000 32,700 30,677 81,734
2003 $ 98,083 $12,190 $13,125 $ 14,956
Leslie M. Gasper - 2002 97,500 12,000 13,048 14,805
Corporate Secretary 2001 91,250 10,800 12,212 13,868
Thomas A. Dineen - 2003 $130,750 $15,920 $17,498 $ 19,716
Treasurer and Chief Financial 2002 130,000 16,000 17,397 19,596
Officer 2001 113,333 15,750 14,221 17,786
-----------------------------
(1) Includes Director's fees.
(2) The amounts set forth in this column represent "gross-ups" for taxes
incurred on benefits received pursuant to the Company's Supplemental
Executive Profit Sharing Plan (the "Supplemental Plan").
(3) The amounts set forth in this column represent benefits received pursuant
to the Company's Salaried Employees' Profit Sharing Plan, Supplemental
Plan, and taxable premiums paid by the Company for group term life
insurance for the named individuals, respectively, as follows: William B.
Ruger, Jr., 2003 - $30,000, $30,000 and $792, 2002 - $30,000, $30,000 and
$792, 2001 - $25,500, $34,500 and $792; Stephen L Sanetti, 2003 - $0,
$41,250 and $276, 2002 - $0, $41,250 and $276, 2001 - $0, $41,250 and
$276; Erle G. Blanchard, 2003 - $0, $0 and $129, 2002 - $0, $41,250 and
$516, 2001 - $0, $41,250 and $436; Leslie M. Gasper, 2003 - $0, $14,712
and $244, 2002 - $0, $14,625 and $180, 2001 - $0, $13,688 and $180; Thomas
A. Dineen, 2003 - $0, $19,613 and $103, 2002 - $0, $19,500 and $96, 2001 -
$0, $17,690 and $96.
13
(4) The amounts set fourth in this column include the taxable value and
"gross-ups" for taxes for Company products given to the named individuals
respectively as follows: William B. Ruger, Jr., 2003 - $0 and $0, 2002 -
$0 and $0, 2001 - $0 and $0; Stephen L. Sanetti, 2003 - $231 and $0, 2002
- $931 and $0, 2001 - $0 and $0; Erle G. Blanchard, 2003 -$218 and $0,
2002 - $931 and $0, 2001 - $0 and $0; Leslie M. Gasper, 2003 - $0 and $0,
2002 - $0 and $0, 2001 - $0 and $0; Thomas A. Dineen, 2003 - $0 and $0,
2002 - $0 and $0, 2001 - $0 and $0.
(5) The amounts set forth in the this column for Erle G. Blanchard for 2003
include accrued vacation pay of $22,917 and compensation of $263,542 paid
to Mr. Blanchard upon his retirement on April 30, 2003 in recognition of
his service to the Company. The amounts set forth in this column for Erle
G. Blanchard also include the taxable value of moving expenses and
"gross-ups" for taxes related to moving expenses reimbursed to Mr.
Blanchard, respectively, as follows: 2003 - $0 and $0, 2002 - $0 and $0,
2001 - $31,005 and $9,043.
(6) Erle G. Blanchard retired as Vice-Chairman of the Board of Directors,
President, Chief Operating Officer and Treasurer on April 30, 2003.
14
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding stock options
and Stock Appreciation Rights ("SARs") granted during fiscal 2003 by the Company
to the executive officers named in the Summary Compensation Table.
POTENTIAL REALIZABLE VALUE AT
ASSUMED INTEREST RATES OF STOCK
PRICE APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM (3)
------------------------------ ---------------------------------
PERCENT OF
TOTAL
OPTIONS
NUMBER OF GRANTED
SECURITIES TO
UNDERLYING EMPLOYEES
OPTIONS IN FISCAL EXERCISE OR
GRANTED (1) YEAR BASE PRICE (2) EXPIRATION @ 5% @ 10%
NAME # % $ / SHARE DATE $ $
----------------------- ----------- ------------ -------------- ---------- ------------- ------------
William B. Ruger Jr. 0 0.0% n/a n/a n/a n/a
Stephen L. Sanetti 0 0.0% n/a n/a n/a n/a
Erle G. Blanchard (4) 0 0.0% n/a n/a n/a n/a
Leslie M. Gasper 0 0.0% n/a n/a n/a n/a
Thomas A. Dineen 0 0.0% n/a n/a n/a n/a
------------------------
(1) All options granted under the Company's 1998 Stock Incentive Plan vest in
five equal annual installments.
(2) The exercise price for options granted under the Company's 1998 Stock
Incentive Plan is the closing price of the Common Stock as of the date of
grant.
(3) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed annual rates of share price appreciation mandated by
the Securities and Exchange Commission of 5% and 10% of the fair value of
the Common Stock on the date of grant of the options, compounded annually
from the date of the grant to the option expiration date. The gains shown
are net of the option exercise price, but do not include deductions for
taxes or other expenses associated with the exercise. Actual gains, if
any, are dependent upon the performance of the Common Stock and the date
on which the option is exercised. There can be no assurance that the
values reflected will be achieved.
(4) Erle G. Blanchard retired as Vice-Chairman of the Board of Directors,
President, Chief Operating Officer and Treasurer on April 30, 2003. Mr.
Blanchard's right to exercise his vested options under the 1998 Stock
Incentive Plan expired at that time.
15
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table sets forth certain information regarding stock options
and SARs granted which were exercised during fiscal 2003 by the executive
officers of the Company named in the Summary Compensation Table.
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
ACQUIRED OPTIONS/SARS AT MONEY OPTIONS/SARS AT
ON FISCAL YEAR-END FISCAL YEAR-END
EXERCISE VALUE REALIZED EXERCISABLE/UNEXERCISABLE(1) EXERCISABLE/UNEXERCISABLE(2)
NAME # $ # $
---- -------- -------------- ---------------------------- ----------------------------
William B. Ruger Jr. 0 $0.00 250,000 / 0 $0 /$0
Stephen L. Sanetti 0 0.00 200,000 / 0 0 / 0
Erle G. Blanchard (3) 0 0.00 0 / 0 0 / 0
Leslie M. Gasper 0 0.00 50,000 / 0 0 / 0
Thomas A. Dineen 0 0.00 35,000 / 0 0 / 0
---------------------------
(1) Stock options awarded December 31, 1998 under the 1998 Stock Incentive
Plan at an exercise price of $11.9375 per share.
(2) The closing price of the Common Stock on December 31, 2003, $11.37, was
less than the exercise price on the date of grant.
(3) Erle G. Blanchard retired as Vice-Chairman of the Board of Directors,
President, Chief Operating Officer and Treasurer on April 30, 2003. Mr.
Blanchard's right to exercise his vested options under the 1998 Stock
Incentive Plan expired at that time.
16
PENSION PLAN TABLE
Estimated Amounts of Annual Pension Payable from the
Salaried Employees' Retirement Income Plan
for the Participant's Life,
Commencing During 2003 at Age 65
YEARS OF CREDITED SERVICE
-------------------------
HIGHEST 60-CONSECUTIVE-
MONTH AVERAGE
ANNUALIZED BASE PAY 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
------------------- -------- -------- -------- -------- --------
$75,000 $10,713 $14,284 $17,855 $17,855 $17,855
100,000 15,713 20,951 26,188 26,188 26,188
125,000 20,713 27,617 34,522 34,522 34,522
150,000 25,713 34,284 42,855 42,855 42,855
175,000 30,713 40,951 51,188 51,188 51,188
200,000 35,713 47,617 59,522 59,522 59,522
225,000 35,713 47,617 59,522 59,522 59,522
250,000 35,713 47,617 59,522 59,522 59,522
All of the Company's salaried employees participate in the Sturm, Ruger &
Company, Inc. Salaried Employees' Retirement Income Plan (the "Pension Plan"),
which in general provides annual pension benefits at age 65 in the form of a
straight life annuity in an amount equal to: (i) 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 (ii) the participant's years of
credited service up to a maximum of 25 years.
The pensions listed in the table above are not subject to any offset or
deduction for Social Security or any other benefits.
As of December 31, 2003, William B. Ruger, Jr. and Leslie M. Gasper each
had more than 25 years of credited service, Stephen L. Sanetti and Erle G.
Blanchard each had 23 years of credited service, and Thomas A. Dineen had 6
years of credited service.
An indication of the average annualized base pay under the Pension Plan
for these individuals can be found in the Salary column of the Summary
Compensation Table.
17
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN TABLE
Estimated Amounts of Annual Plan Benefit Payable from the
Supplemental Executive Retirement Plan
for the Participant's Life,
Commencing During 2003 at Age 65
YEARS OF CREDITED SERVICE
-------------------------
AVERAGE ANNUAL
--------------
COMPENSATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
------------ -------- -------- -------- -------- --------
$125,000 $ 3,635 $ 11,731 $ 19,826 $ 19,826 $ 19,826
150,000 7,635 17,064 26,493 26,493 26,493
175,000 11,635 22,397 33,160 33,160 33,160
200,000 15,635 27,731 39,826 39,826 39,826
225,000 19,635 33,064 46,493 46,493 46,493
250,000 23,635 38,397 53,160 53,160 53,160
300,000 33,635 51,731 69,826 69,826 69,826
400,000 63,635 91,731 119,826 119,826 119,826
The Sturm, Ruger & Company, Inc. Supplemental Executive Retirement Plan
(the "SERP") is a nonqualified supplemental retirement plan for certain senior
executives of the Company. Two of the executive officers who appear in the
Summary Compensation Table, William B. Ruger, Jr. and Stephen L. Sanetti
participate in the SERP, and Erle G. Blanchard participated in the SERP until
April 30, 2003. The SERP provides an annual benefit beginning at age 65 in an
amount equal to 2% of the participant's average annual compensation for each
complete year of service with the Company up to a maximum of 50% of such average
compensation, for those participants who retire from the Company at or after age
60 with 10 or more years of service. The annual benefits described in the table
above are already 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. Preretirement death or disability benefits are also
provided to plan participants under the SERP.
The average annual compensation shown in the above table includes the
participant's base pay, bonuses and other compensation for the participant's
highest consecutive 36 months of service (or, if the participant's service was
less than 36 months, then for the entire period of service) as reported in the
Summary Compensation Table, except that benefits received under the Pension
Plan, Salaried Employees' Profit Sharing Plan and taxable premiums paid by the
Company for group term life insurance are excluded from the SERP compensation
formula. The annual compensation upon which the SERP benefit is calculated is
limited to $400,000. As of December 31, 2003, William B. Ruger, Jr. had more
than 25 years of credited service, and Stephen L. Sanetti and Erle G. Blanchard
each had 23 years of credited service. The estimated amounts presented above
assume that the participant attained age 65 in 2003.
John M. Kingsley, Jr., a Company Director who retired as Executive Vice
President of the Company on December 31, 1996, received $141,972 in benefits
from the SERP during 2003.
18
The SERP provides that in the event of a change in control of the Company
participants in pay status shall be entitled to receive a lump-sum payment equal
to the present value of the participant's benefit. Those not in pay status shall
become fully vested and generally, if terminated within three years of a change
in control, become entitled to a lump-sum payment. The payment shall be computed
based upon the participant's average compensation and years of service with the
Company on the date of change in control (provided, however, that in the event
of a change in control, the participant's years of service with the Company for
purposes of computing the benefit amount shall not be less than ten). A change
in control is defined to mean the effective date of one of the following events:
(i) sale or exchange of substantially all of the capital stock of the Company;
(ii) sale of substantially all of the assets of the Company; (iii) sale of
substantially all of the capital stock of the Company owned of record and
beneficially held by members of the William B. Ruger family; or (iv) the merger
or consolidation of the Company with or into one or more other corporations;
and, in each of such four cases, the sale of stock or assets is to, or the
exchange of stock is with, or the merger or consolidation is with or into one or
more persons, firms or corporations which does not own at least 10% of the
capital stock of the Company.
19
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
Sturm, Ruger & Company, Inc., Standard & Poor's 500 and Value Line Recreation
Industry Index
(Performance Results Through December 31, 2003)
[SIX YEAR PERFORMANCE CHART]
Assumes $100 invested at the close of trading 12/98 in Sturm, Ruger & Company,
Inc. Common Stock, Standard & Poor's 500 and Value Line Recreation Industry
Index.
*Cumulative total return assumes reinvestment of dividends.
Factual material is obtained from sources believed to be reliable, but the
publisher is not responsible for any errors or omissions contained herein.
1998 1999 2000 2001 2002 2003
------ ------ ------ ------ ------ ------
Sturm, Ruger & Company, Inc. 100.00 80.62 93.60 128.33 109.29 140.29
Standard & Poor's 500 100.00 119.62 107.49 93.47 71.63 90.53
Value Line Recreation Industry 100.00 128.67 132.39 187.59 189.60 284.24
The peer group in the above graph is the Value Line Recreation Industry.
20
PRINCIPAL STOCKHOLDERS
The following table sets forth as of January 15, 2004 the ownership of
Common Stock by each person of record or known by the Company to beneficially
own more than 5% of such stock.
NAME AND ADDRESS AMOUNT AND NATURE OF
TITLE OF CLASS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
-------------- ------------------- -------------------- ----------------
Common Stock William B. Ruger, Jr. 5,322,000 (1) 19.59%
P.O. Box 293
Newport, NH 03773
Common Stock Carolyn R. Vogel 5,022,000 (2) 18.66%
P.O. Box 906
Harrisville, NH 03450
Common Stock Ruger Business Holdings, L.P. 4,272,000 (3) 15.87%
Lacey Place
Southport, CT 06890
Common Stock Ruger Management, Inc. 4,272,000 (4) 15.87%
Lacey Place
Southport, CT 06890
Common Stock NFJ Investment Group L.P. 1,532,200 (5) 5.69%
2121 San Jacinto Street
Suite 1840
Dallas, TX 75201
Common Stock Royce & Associates, LLC 1,481,400 (6) 5.50%
1414 Avenue of the Americas
New York, NY 10019
---------------------
(1) Includes 4,272,000 shares of Common Stock held in the name of Ruger
Business Holdings, L.P., of which the William B. Ruger Revocable Trust of
1988 is the sole limited partner and Ruger Management, Inc., is the sole
general partner. William B. Ruger, Jr. and Carolyn Ruger Vogel (son and
daughter of William B. Ruger) are co-trustees of the William B. Ruger
Revocable Trust of 1988. Ruger Management, Inc., is owned by William B.
Ruger, Jr. and Carolyn R. Vogel. Mr. Ruger, Jr. and Mrs. Vogel have shared
investment and voting control with respect to such 4,272,000 shares of
Common Stock. Also includes 800,000 shares of Common Stock owned directly
by Mr. Ruger, Jr. Mr. Ruger, Jr. has sole investment and voting control
with respect to such 800,000 shares. Also includes 250,000 shares of
Common Stock subject to options currently exercisable or which will become
exercisable within 60 days of January 15, 2004 under the 1998 Stock
Incentive Plan.
21
(2) Includes 4,272,000 shares of Common Stock as disclosed in footnote (1)
above. Also includes 750,000 shares of Common Stock owned directly by Mrs.
Vogel. Mrs. Vogel has sole investment and voting control with respect to
such 750,000 shares.
(3) Represents the 4,272,000 shares of Common Stock disclosed in footnote (1)
above.
(4) Represents the 4,272,000 shares of Common Stock disclosed in footnote (1)
above.
(5) Such information is as of December 31, 2003 derived exclusively from
Schedule 13G filed by NFJ Investment Group L.P. on February 13, 2004.
(6) Such information is as of December 31, 2003 derived exclusively from
Amendment No. 1 to Schedule 13G filed by Royce & Associates, LLC on
February 6, 2004.
22
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information as of January 15, 2004
as to the number of shares of Common Stock beneficially owned by the Chief
Executive Officer of the Company and the other individuals who served as
executive officers of the Company during 2003, and all Directors and executive
officers of the Company as a group. See ELECTION OF DIRECTORS above for such
information with respect to each Director of the Company.
AMOUNT AND NATURE OF
--------------------
TITLE OF CLASS NAME OF BENEFICIAL OWNER * BENEFICIAL OWNERSHIP PERCENT OF CLASS
-------------- -------------------------- -------------------- ----------------
Common Stock William B. Ruger, Jr. 5,322,000 (1) 19.59%
Common Stock Stephen L. Sanetti 232,000 (2) **
Common Stock Erle G. Blanchard 0 (3) **
Common Stock Leslie M. Gasper 50,049 (4) **
Common Stock Thomas A. Dineen 35,295 (5) **
Common Stock Directors and executive officers as a group (5
non-officer Directors, 3 Directors who were also
executive officers during 2003
and 2 other executive officers) 5,775,204 21.28%
--------------------------
* The address of each of the executive officers named in this Security
Ownership of Management table is c/o Sturm, Ruger & Company, Inc., Lacey
Place, Southport, Connecticut 06890.
** Beneficial owner of less than 1% of the outstanding Common Stock of the
Company.
(1) Includes 4,272,000 shares of Common Stock held in the name of Ruger
Business Holdings, L.P., of which the William B. Ruger Revocable Trust of
1988 is the sole limited partner and Ruger Management, Inc. is the sole
general partner. William B. Ruger, Jr. and Carolyn Ruger Vogel (son and
daughter of William B. Ruger) are co-trustees of the William B. Ruger
Revocable Trust of 1988. Ruger Management, Inc. is owned by William B.
Ruger, Jr. and Carolyn R. Vogel. Mr. Ruger, Jr. and Mrs. Vogel have shared
investment and voting control with respect to such 4,272,000 shares of
Common Stock. Also includes 800,000 shares of Common Stock owned directly
by Mr. Ruger, Jr. Mr. Ruger, Jr. has sole investment and voting control
with respect to such 800,000 shares. Also includes 250,000 shares of
Common Stock subject to options currently exercisable or which will become
exercisable within 60 days of January 15, 2004 under the 1998 Stock
Incentive Plan.
(2) Includes 32,000 shares of Common Stock held directly by Mr. Sanetti. Also
includes 200,000 shares of Common Stock options currently exercisable or
which will become exercisable within 60 days of January 15, 2004 under the
1998 Stock Incentive Plan.
(3) Erle G. Blanchard retired as Vice-Chairman of the Board of Directors,
President, Chief Operating Officer and Treasurer on April 30, 2003.
(4) Includes 49 shares of Common Stock held under the CT Gift to Minors Act
for the benefit of Ms. Gasper's two minor daughters. Also includes 50,000
shares of Common Stock options currently exercisable or which will become
exercisable within 60 days of January 15, 2004 under the 1998 Stock
Incentive Plan.
(5) Includes 295 shares of Common Stock held directly by Mr. Dineen. Also
includes 35,000 shares of Common Stock options currently exercisable or
which will become exercisable within 60 days of January 15, 2004 under the
1998 Stock Incentive Plan.
23
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 Securities and Exchange Commission and the New York Stock
Exchange. Officers, Directors and greater than ten percent stockholders are
required by Securities and Exchange Commission regulation 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, 2003 through December 31, 2003, all such forms were filed in a timely
manner by the Company's officers, Directors and greater than ten percent
beneficial owners.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 2003, the Company paid Newport Mills, of which William B. Ruger,
Jr. is the sole proprietor, $225,000 for storage rental. During 2003, the
Company also paid Mr. Ruger, Jr. $18,000 for the rental of office space owned by
Mr. Ruger, Jr. in Newport, New Hampshire.
Stanley B. Terhune, a former Director and Vice President of the Company
who retired as a Director on May 6, 2003, served as a consultant to the Company
during 2003. For his services in this capacity, Mr. Terhune received $100 per
hour until May 6, 2003, at which time his consulting fees were changed to $6,000
per month. During 2003, Mr. Terhune received a total of $63,150 for his service
as a consultant to the Company.
24
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 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 of 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 (Communication with
Audit Committees). 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 seven meetings during
fiscal 2003.
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, 2003 for filing with the Securities and Exchange Commission.
AUDIT COMMITTEE
Townsend Hornor, Committee Chairman
Richard T. Cunniff
Paul X. Kelley
March 11, 2004
----------------
* 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 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 filed
under the Acts.
25
PROPOSAL NO. 2
APPROVAL OF INDEPENDENT AUDITORS
KPMG LLP has served as the Company's independent auditors since August 27,
2001. Subject to the ratification of the stockholders, the Board of Directors
has reappointed KPMG LLP as the Company's independent auditors for the 2003
fiscal year.
Audit Fees
KPMG LLP's aggregate fees, including expenses reimbursed, for professional
services rendered for the audit of the Company's financial statements for 2003
and the reviews of the Company's quarterly financial statements for the year
2003 were $261,000, and KPMG LLP's aggregate fees, including expenses
reimbursed, for professional services rendered for the audit of the Company's
annual financial statements for 2002 and the reviews of the Company's quarterly
financial statements for the year 2002 were $224,000.
Audit - Related Fees
KPMG LLP's aggregate fees, including expenses reimbursed, for
audit-related services for the year 2003 were $45,000, and KPMG LLP's aggregate
fees, including expenses reimbursed, for audit-related services for the year
2002 were $48,000. These are fees for assurance and related services performed
by KPMG LLP that are reasonably related to the performance of the audit or
review of the Company's financial statements, such as employee benefit and
compensation plan audits.
Tax Fees
KPMG LLP's aggregate fees, including expenses reimbursed, for services
rendered for tax compliance, tax advice and tax planning for the year 2003 were
$19,000 and KPMG LLP's aggregate fees, including expenses reimbursed, for
services rendered for tax compliance, tax advice and tax planning for the year
2002 were $18,000. These are fees for professional services performed by KPMG
LLP with respect to tax compliance, tax advice and tax planning. This includes
preparation of original and amended tax returns for the Company, tax audit
assistance, and tax work stemming from "Audit-Related" items.
All Other Fees
There were no aggregate fees or expenses reimbursed for services rendered
by KPMG LLP to the Company, other than for services described above, for the
year 2003 or the year 2002.
The Audit Committee has considered KPMG LLP's provision of non-audit
services in the last fiscal year and determined that it was compatible with
applicable independence standards.
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
26
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.
Representatives of KPMG 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL NO. 2.
STOCKHOLDER PROPOSALS AND NOMINATIONS FOR 2005
To be considered for inclusion in next year's Proxy Statement, stockholder
proposals must be submitted in writing by November 15, 2004. Any stockholder
proposal to be considered at next year's meeting, but not included in the proxy
statement, must be submitted in writing by January 29, 2005. Recommendations for
nominees to stand for election at the 2005 Annual Meeting of Stockholders must
be received by November 15, 2004. All written proposals or nominations should be
submitted to Leslie M. Gasper, Corporate Secretary, Sturm, Ruger & Company,
Inc., Lacey Place, Southport, Connecticut 06890.
OTHER MATTERS
Management of the Company does not intend to present any business at the
Meeting other than as set forth in Items 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, 2003,
including the financial statements and financial statement schedules. Such
requests should 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 15, 2004
27
EXHIBIT A
STURM, RUGER & COMPANY, INC.
CORPORATE BOARD GOVERNANCE GUIDELINES
The primary responsibility of the Board of Directors is to oversee
management of the Company and guide the long-term success of the Company,
consistent with its fiduciary responsibility to the shareholders.
Accordingly, we have adopted the following guidelines:
A. Board of Directors
1. The first guideline of the Board is that every Director owes a duty
of loyalty to the Company, and they are expected always to act in
the best interests of the Company and its shareholders as a whole.
2. The fundamental role of the Directors is to exercise their business
judgment to act in what they reasonably believe to be the best
interests of the Company and its shareholders. In fulfilling that
responsibility Directors should be able to rely on the honesty and
integrity of the Company's senior management and expert legal,
accounting, financial and other advisors.
3. The Company's Board, which pursuant to NYSE rules is composed of a
majority of independent, outside Directors, is selected by the Board
after recommendations of the Nominating and Corporate Governance
Committee. All Directors will stand for election every year.
4. All Directors, and all candidates for consideration by the
Nominating and Corporate Governance Committee as candidates for the
Board, must have the highest personal and professional ethics,
strength of character, integrity, and values. They must be
accustomed to successfully dealing with complex problems or have
obtained and excelled in a position of leadership. They must have
sufficient education, experience, intelligence, independence,
fairness, reasoning ability, practicality, wisdom, and vision to
exercise sound and mature judgment. They must have the stature and
capability to represent the Company before the public and the
shareholders; and possess the personality, confidence, and
independence to undertake full and frank discussion of the Company's
business assumptions. They must be willing to learn the business of
the Company, to understand all Company policies, and to make
themselves aware of the Company's finances. All Board members will
be required at all times to execute their independent business
judgment in the conduct of all Company matters. All Directors must
also be loyal to the Company, not self-deal, and preserve and
protect corporate assets, at all times in accordance with the
Company's Corporate Compliance Program, including the Code of
Business Conduct and Ethics.
5. Current standing committees of the Board are the Audit,
Compensation, and Nominating and Corporate Governance Committees.
These committees will be composed solely of
A-1
independent, outside Directors appointed by vote of the Board, and
each has adopted a charter.
6. Independent, outside Directors are generally defined by the NYSE as
not having been employed by the Company for at least 5 years and who
are personally and financially independent of the Company. No
Director will qualify as independent unless the board affirmatively
determines that the Director has no material relationship with the
Company (either directly or as a partner, shareholder or officer of
an organization that has a relationship with the Company). They or
their immediate family members receive no direct compensation from
the Company in excess of $100,000 except Director's fees or Company
stock options or deferred compensation not contingent on future
service. Non-management Directors will meet in regularly scheduled
executive sessions outside the presence of internal Directors in
accordance with NYSE rules for the purpose of full and frank
discussion of the Company's affairs. An executive session will
generally be held as part of each regularly scheduled Board meeting.
7. Committee memberships will be considered for rotation periodically
at approximately 5-year intervals; but this periodic rotation is not
mandatory, as good reasons may exist, including the continuity of
membership or leadership, for longer retention of qualified
individuals as committee members.
8. All Board members will be furnished by the Corporate Secretary with
copies of all relevant corporate policies relating to the conduct of
business, significant appropriations of funds or expenditures,
conflicts of interest, insider trading, required disclosures, and
any other Company policy over which the Board has oversight,
including the Company's Compliance Program.
9 All Directors will have complete access to Company management, who
will cooperate with the Board to the best of their ability, to
review and understand corporate policies and procedures. Certain
committees will also have the right to select independent advisors
as necessary.
10. The Board will, in executive session, annually evaluate the
performance of the CEO, based upon criteria which specifically
include the performance of the Company, its prospects for future
performance and growth, his responsiveness to Board directions,
develop plans for CEO succession and any other factors the Board
deems appropriate.
11. No mandatory retirement policy for Directors is hereby established.
There are no term limits, as over a period of time, Directors gain
increased insight into Company operations and provide increased
contributions to Board deliberations.
12. Director compensation will consist of annual Director's fees and
appropriate compensation for attendance at Director's meetings.
Reasonable travel allowances and expenses incurred as a result of
travel to and from meetings will also be allowed. Independent
outside Directors also receive appropriate compensation for all
Committee meetings which they attend as a member.
A-2
13. New Board members will receive a comprehensive orientation by the
Chief Operating Officer and the General Counsel. All Directors will
be encouraged to obtain continuing
education and will be given access to current materials of interest
to Directors on an ongoing basis.
14. Management succession and Board membership will be a topic of
discussion at the final Board meeting of each calendar year. This
will give an opportunity for due consideration of the Board and the
Nominating and Corporate Governance Committee regarding Directors to
be nominated for the ensuing year.
15. All Board members will be expected to perform periodic
self-evaluations, asking themselves the following:
a) Is the Board constructively engaged with management to
determine corporate strategy?
b) Is the Board providing necessary strategic thinking,
oversight, and advice?
c) Is the Board effectively monitoring and supporting
management's execution of Board strategy?
d) Is the Board timely responding to needed changes in strategy?
e) Does the Board possess the right skills?
f) Are the committees of the Board structured correctly?
g) Are the Board meetings being run correctly?
h) Do the Board materials prepare the Board adequately?
i) Is there sufficient time to:
1. Digest Board materials before discussion, and
2. Discuss the matters fully at Board meetings
j) Are Board members satisfied with the CEO?
k) How can each Board member improve his individual
effectiveness?
l) Are needed Board changes being implemented?
Each Board member will be expected to raise any questions or
discrepancies revealed in their annual self-evaluation to the Board.
16. On an annual basis, the Nominating and Corporate Governance
Committee will evaluate the effectiveness of the Board as a whole,
and of each Committee of the Board, and will share the results and
recommendations with the entire Board. This process should
A-3
identify, among other things, recommendations for improved Board and
Committee practices and processes.
B. Board Meetings
1. The Board of Directors will meet at least 4 times each year in
regular session. One meeting will immediately follow the Annual
Meeting of Stockholders. The Chairman has the discretion to call
additional meetings of the Board, after actual notice to each Board
member, at times and places to be specified by the Chairman.
2. All Board members will be furnished with materials to review before
the Board meeting well in advance of each meeting. Board members are
expected to rigorously prepare for all meetings, including a review
of all such materials. Agendas for each meeting will be prepared in
advance by the Corporate Secretary, and will be used to guide the
discussion at each meeting. Board members may suggest items to be
included in the agenda. Minutes will be kept by the Secretary or
other designee of the Chairman.
3. All Board members are required to attend all Board meetings unless
specifically excused by the Chairman. If circumstances make a Board
member's physical presence impossible, the member will endeavor to
be present via speaker telephone. If this cannot be done, the Board
member will contact the Chairman at his or her earliest convenience
for a briefing concerning all Board proceedings and votes taken.
C. Strategic Planning
The Board will discuss an overall strategic plan of each of the Company's
businesses at least annually.
D. Fiduciary Duties and Role of Audit Committee
1. The Board recognizes its primary duty to exercise its fiduciary duty
in the best interest of the Company and its shareholders.
2. The Board expects and encourages a corporate environment of strong
internal controls, fiscal accountability, high ethical standards,
and compliance with applicable laws and regulations.
3. The Board's Audit Committee will select an independent auditing firm
to conduct periodic audits of the Company, which will report to the
Audit Committee as required by the NYSE and SEC.
4. Shareholders can communicate questions either to management or the
Chairman of the Audit Committee.
E. Management Oversight
A-4
1. The Nominating and Corporate Governance Committee shall oversee the
evaluation, at least annually, of management.
2. The Compensation Committee will make annual determinations and
evaluations of the soundness and reasonableness of compensation
levels for officers and Board members and will not recommend
excessive compensation.
3. In determining the reasonableness of executive compensation, factors
to be considered include professional qualifications and experience,
job responsibilities and actual performance, competitive salaries in
industry peer groups, the then-current financial condition of the
Company, current shareholder dividends and employee salaries, stock
options, awards, incentive bonuses and payments, and annual
performance reviews. Total compensation should be adequate to
attract, motivate, and retain quality talent. Executive compensation
will be disclosed annually in the proxy statement.
4. The Board will have complete access to the Company's management in
accordance with Section A.9, above.
F. Corporate Responsibility
1. The Board is committed, consistent with the Company's long-standing
motto of "Arms Makers for Responsible Citizens(R)", to follow all
the many applicable federal, state and local laws and regulations
regarding the production, sales and distribution of its products.
All applicable licenses and permits for the lawful conduct of its
business will be obtained and maintained as required. Product safety
shall be a priority for the Board and management.
2. In addition to its recognized responsibilities for the conduct of
its firearms business, the Board is committed to see that the
Company is also in compliance with all federal, state, and local
laws and regulations that govern the conduct of manufacturers
generally. These include environmental, equal opportunity, labor,
intellectual property, safety and security, securities trading,
political activity, antitrust, and import and export laws and
regulations.
3. The Board has enacted a Corporate Compliance Program to help
ascertain that all members of the Board, management, and all Company
employees, continually meet their serious responsibilities under
law. The General Counsel serves as the Corporate Compliance Officer,
and all personnel are encouraged to report any suspected violations
of the law immediately to that office.
A-5
EXHIBIT B
CHARTER OF THE
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS OF
STURM, RUGER & COMPANY, INC.
I. Purpose
The Board of Directors (the "Board") of Sturm, Ruger & Company, Inc. (the
"Company") has established the Audit Committee of the Board (the "Committee")
for the purpose of providing 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 Committee shall prepare the report
required by Securities and Exchange Commission (the "SEC") rules to be included
in the Company's annual proxy statement.
II. Structure and Operations
A. Composition and Qualifications
(1) The Committee shall be comprised of three or more members of the
Board, each of whom is determined by the Board to be "independent" for such
purposes under the rules of the New York Stock Exchange, Inc. (the "NYSE"),
including Rules 303A(1), 303A(2), 303A(6) and 303A(7)(a) thereof,(1) Rule 10A-3
under the Securities and Exchange Act
-----------------
(1) Under the proposed NYSE rules, "independent" means that the Board has
affirmatively determined that the director has no material relationships
with the Company (either directly or as a partner, shareholder or officer
of an organization that has a relationship with the Company). A director
cannot be "independent" if the director (or an immediate family member):
- receives compensation from the Company that exceeds $100,000 per
year (other than director and committee fees, pension or other forms
of deferred compensation not contingent on continued service) or
compensation from the Company that exceeds $100,000 per year within
the previous five-year period;
- is affiliated with or employed by a present or former auditor of the
Company until five years after the end of the affiliation or the
auditing relationship;
- is employed as an executive officer of another company where any of
the Company's present executives serves on the compensation
committee until five years after the end of such service or the
employment relationship; or
- is an executive officer or an employee of another company (i) that
accounts for the greater of $1 million or 2% of the Company's
consolidated gross revenues, or (ii) for which the Company accounts
for the greater of $1 million or 2% of such other company's
consolidated gross revenues, until five years after falling below
such threshold.
In addition, the NYSE has proposed rules that heighten the independence
standards for members of the Committee, which distinguish between
permitted compensation and payments that would taint the independence of a
Committee member - disallowed compensation includes fees paid directly or
indirectly for services as a consultant or a legal or financial advisor,
regardless of the amount.
B-1
of 1934, as amended (the "Exchange Act"),(2) and any other applicable laws,
rules or regulations in effect from time to time. No member of the Committee may
serve on the audit committee of more than three public companies, including the
Company, unless the Board (i) determines that such simultaneous service would
not impair the ability of such member to effectively serve on the Committee and
(ii) discloses such determination in the annual proxy statement.
(2) All members of the Committee must have a working familiarity
with basic finance and accounting practices as contemplated by NYSE listing
standards and SEC rules (or acquire such familiarity within a reasonable period
after his or her appointment) and at least one member must be an "audit
committee financial expert" for purposes of Item 401(h) of Regulation S-K under
the Exchange Act.(3) Committee members may enhance their familiarity with
finance and accounting by participating in educational programs conducted by the
Company or by an outside consultant.
(3) No member of the Committee shall receive compensation other than
(i) director's fees for service as a director of the Company, including
reasonable compensation for serving on the Committee as well as regular benefits
that other directors receive (including equity-based awards) and (ii) a pension
or similar compensation for past performance, provided that such compensation is
not contingent on continued or future service to the Company.
------------------
(2) Under SEC Rule 10A-3, an "independent" director for purposes of serving on
the Committee is one that, except in his or her capacity as a member of
the Committee, another Board committee or the Board: (i) does not accept
any consulting, advisory or other compensation from the Company (excluding
fixed compensation amounts under retirement plans for prior service so
long as the compensation is not contingent on continued service) and (ii)
is not an "affiliated person" of the Company.
(3) For purposes of Item 401(h), the term "audit committee financial expert"
means a Committee member with the following attributes:
- an understanding of GAAP and financial statements;
- an ability to assess the general application of GAAP in connection
with the accounting for estimates, accruals and reserves;
- experience preparing, auditing, analyzing or evaluating financial
statements that present a breadth and level of complexity of
accounting issues that are generally comparable to the breadth and
complexity of issues that can reasonably be expected to be raised by
the Company's financial statements, or experience actively
supervising one or more persons engaged in such activities;
- an understanding of internal controls and procedures for financial
reporting; and
- an understanding of audit committee functions.
An "audit committee financial expert" must have acquired these attributes
through:
- education and experience as a principal financial officer, principal
accounting officer, controller, public accountant or auditor or
experience in one or more positions that involve the performance of
similar functions;
- experience actively supervising a principal financial officer,
principal accounting officer, controller, public accountant, auditor
or person performing similar functions;
- experience overseeing or assessing the performance of companies or
public accountants with respect to the preparation, auditing or
evaluation of financial statements; or
- other relevant experience.
B-2
B. Appointment and Removal
The members of the Committee shall be appointed by the Board and
shall serve until such member's successor is duly elected and qualified or
until such member's earlier resignation or removal. The members of the
Committee may be removed, with or without cause, by a majority vote of the
Board.
C. Chairman
Unless a Chairman is elected by the full Board, the members of the
Committee shall designate a Chairman by the majority vote of the
Committee. The Chairman shall be entitled to cast a vote to resolve any
ties. The Chairman will chair all regular sessions of the Committee and
set the agendas for Committee meetings.
III. Meetings
The Committee shall meet at least quarterly, or more frequently as
circumstances dictate. The Committee shall periodically meet separately
with each of management, the director of the internal auditing department
and the independent auditors to discuss any matters that the Committee or
each of these groups believe would be appropriate to discuss privately.
The Committee should also meet with the independent auditors and
management quarterly to review the Company's financial statements in a
manner consistent with that outlined in Article IV of this Charter. When
necessary and appropriate, telephone meetings may be held. The presence of
a majority of the Committee members will constitute a quorum for the
transaction of business.
IV. Duties and Responsibilities
The following functions shall be the common recurring activities of
the Committee in carrying out its responsibilities outlined in Article I
of this Charter. These functions should serve as a guide. The Committee
may carry out additional functions and adopt additional policies and
procedures as may be appropriate in light of changing business,
legislative, regulatory, legal or other conditions. The Committee shall
also carry out any other duties and responsibilities delegated to it by
the Board.
The Committee is empowered to study or investigate any matter of
interest or concern that the Committee deems appropriate. The Committee
shall have the authority to retain outside legal, accounting or other
advisors for this purpose, including the authority to approve the fees
payable to such advisors and any other terms of retention. The Company
shall also provide funding, as determined by the Committee, for payment of
ordinary administrative expenses of the Committee.
A. Documents/Reports Review
(1) Review with management and the independent auditors prior to
public dissemination the Company's annual audited financial statements and
quarterly financial statements, including the Company's disclosures under
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" and a discussion with the independent auditors of the
matters required to be discussed by Statement of Auditing Standards No.
61.
B-3
(2) Review and discuss with management and the independent auditors
the Company's earnings press releases, as well as any other financial
information or earnings guidance provided to persons outside of the Company. The
Committee's discussion in this regard may be general in nature and need not take
place in advance of each earnings release or other dissemination of information.
B. Independent Auditors
(1) Appoint, retain, compensate, evaluate and terminate the
Company's independent auditors and approve all audit engagement fees and terms.
(2) Inform any registered public accounting firm performing work for
the Company that such firm shall report directly to the Committee.
(3) Oversee the work of any registered public accounting firm
employed by the Company, including the resolution of any disagreement between
management and the auditor regarding financial reporting, for the purpose of
preparing or issuing an audit report or related work.
(4) Approve in advance any significant audit or non-audit engagement
or relationship between the Company and the independent auditors (other than
"prohibited non-auditing services") in accordance with the Committee's
established pre-approval policies and procedures.
(5) Review, at least annually, the qualifications, performance and
independence of the independent auditors. In conducting its review and
evaluation, the Committee should:
(a) Obtain and review a report by the Company's independent auditor
describing: (i) the auditing firm's internal quality-control procedures;
(ii) any material issues raised by the most recent internal
quality-control review, or peer review, of the auditing firm, or by any
inquiry or investigation by governmental or professional authorities,
within the preceding five years, respecting one or more independent audits
carried out by the firm; and (iii) to assess the auditor's independence,
all relationships between the independent auditor and the Company;
(b) Ensure the rotation of the lead audit partner as required by law
or regulation, and consider regular rotation of the audit firm; and
(c) Take into account the opinions of management and the Company's
internal auditors (or other personnel responsible for the internal audit
function).
C. Financial Reporting Process
(1) In periodic consultation with each of the independent auditors,
management and the internal auditors, review the integrity of the Company's
financial reporting processes, both internal and external.
(2) Review periodically the effect of regulatory and accounting
initiatives, as well as off-balance sheet structures, if any, on the financial
statements of the Company.
B-4
(3) Review with the independent auditor (i) any audit problems
or other difficulties encountered by the auditor in the course of the
audit process, including any restrictions on the scope of the independent
auditor's activities or on access to requested information, and any
significant disagreements with the Company's management and (ii)
management's responses to such matters.
D. Legal Compliance/General
(1) Discuss with management and the independent auditors the
Company's guidelines and policies with respect to risk assessment and risk
management.
(2) Set clear hiring policies for employees or former
employees of the independent auditors.
(3) Establish procedures, in accordance with the procedures
outlined in the Company's Code of Business Conduct and Ethics, as amended
from time to time, for: (i) the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls, or auditing matters; and (ii) the confidential,
anonymous submission by employees of the Company of concerns regarding
questionable accounting or auditing matters.
E. Reports
(1) Prepare all reports required to be included in the
Company's proxy statement, pursuant to and in accordance with applicable
SEC rules and regulations.
(2) Report regularly to the full Board including with respect
to any issues that arise as to the quality or integrity of the Company's
financial statements, the Company's compliance with legal or regulatory
requirements, the performance and independence of the Company's
independent auditors or the performance of the internal audit function.
(3) Maintain minutes of meetings and other activities of the
Committee.
V. Reliance on Information Provided
In adopting this Charter, the Board acknowledges that the Committee
members are not employees of the Company, and are not providing any expert or
special assurance as to the Company's financial statements or any professional
certification of the independent auditors' work. Each member of the Committee
shall be entitled to rely on the integrity of those persons and organizations
within and outside the Company that provide information to the Committee by such
persons or organizations, absent actual knowledge to the contrary.
VI. Annual Performance Evaluation
The Committee shall perform a review and evaluation, at least annually, of
its performance and that of its members, including, but not limited to, a review
of the Committee's compliance with this Charter. In addition, the Committee
shall review and reassess, at least annually, the adequacy of this Charter and
recommend to the Board any improvements to this Charter.
B-5
EXHIBIT C
CHARTER OF THE
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF
STURM, RUGER & COMPANY, INC.
I. Purpose
The Board of Directors (the "Board") of Sturm, Ruger & Company, Inc. (the
"Company") has established the Compensation Committee of the Board (the
"Committee") for the purpose of (i) discharging the responsibilities of the
Board with respect to the compensation of the Chief Executive Officer of the
Company (the "CEO"), the other executive officers of the Company and members of
the Board, and under the Company's incentive and equity-based plans and (ii)
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 New York Stock Exchange, Inc. (the "NYSE"), the Securities and Exchange
Commission (the "SEC") and any other applicable rules or regulations.
II. Structure and Operations
A. Composition and Qualifications
(1) The Committee shall be comprised of three or more members of the
Board, each of whom is (i) determined by the Board to be "independent" for such
purposes under the rules of the NYSE, including Rule 303A thereof 4, (ii) a
"non-employee director" under Rule 16b-3 promulgated under Section 6 of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act") and (iii)
an "outside director" under Section 162(m) of the Internal Revenue Code of 1986,
as amended, and any other applicable laws, rules or regulations in effect from
time to time.
----------------
(1) A director cannot be "independent" for NYSE purposes if, during the
previous three years, the director was an employee of the Company or an
immediate family member of the director was an executive officer of the
Company. A director also cannot be "independent" for NYSE purposes if the
director (or an immediate family member is an executive officer position):
- has received compensation from the Company that exceeds $100,000 per
year (other than director and committee fees, pension or other forms
of deferred compensation for prior service) or compensation from the
Company that exceeds $100,000 per year within the previous three
years;
- is affiliated with or employed by a present or former auditor of the
Company until three years after the end of the affiliation or the
employment or auditing relationship;
- is employed as an executive officer of another company where any of
the Company's present executives serves on the compensation
committee until three years after the end of such service or the
employment relationship; or
- is an executive officer or, in the case of a director only (i.e.,
but not immediate family members), an employee of a company (i) that
makes payments to, or receives payments from, the Company for
property or services in an amount which, in any single fiscal year,
exceeds the greater of (x) $1 million or (y) 2% of such other
company's consolidated gross revenues, until three years after
falling below such threshold.
C-1
(2) No member of the Committee shall receive compensation other than
(i) director's fees for service as a director of the Company, including
reasonable compensation for serving on the Committee as well as regular benefits
that other directors receive (including equity-based awards) and (ii) a pension
or similar compensation for past performance, provided that such compensation is
not contingent on continued or future service to the Company.
(3) The Committee may 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.
B. Appointment and Removal
The members of the Committee shall be appointed by the Board, upon
recommendation from the Nominating and Corporate Governance Committee, and shall
serve until such member's successor is duly elected and qualified or until such
member's earlier resignation or removal. The members of the Committee may be
removed, with or without cause, by a majority vote of the Board.
C. Chairman
Unless a Chairman is elected by the full Board, the members of the
Committee shall designate a Chairman by the majority vote of the Committee. The
Chairman shall be entitled to cast a vote to resolve any ties. The Chairman will
chair all regular sessions of the Committee and set the agendas for Committee
meetings.
III. Meetings
The Committee shall meet at least annually, or more frequently as
circumstances dictate. When necessary and appropriate, telephone meetings may be
held. The presence of a majority of the Committee members will constitute a
quorum for the transaction of business.
IV. Duties and Responsibilities
The following functions shall be the common recurring activities and
guiding principles of the Committee in carrying out its responsibilities
outlined in Article I of this Charter. These functions should serve as a guide.
The Committee may carry out additional functions and adopt additional policies
and procedures as may be appropriate in light of changing business, legislative,
regulatory, legal or other conditions. The Committee shall also carry out any
other duties and responsibilities delegated to it by the Board.
The Committee is empowered to evaluate or investigate any matter of
interest or concern that the Committee deems appropriate. The Committee shall
have the sole authority to retain an outside compensation consultant or other
advisors for this purpose, including the sole authority to approve the fees
payable to such advisors and any other terms of retention. The Company shall
also provide funding, as determined by the Committee, for payment of ordinary
administrative expenses of the Committee.
C-2
A. CEO Compensation
(1) Review and approve corporate goals and objectives relevant to
CEO compensation.
(2) Evaluate the performance of the CEO in light of such corporate
goals and objectives.
(3) Based on the evaluation, determine and approve the
compensation level of the CEO, including salary, benefits,
stock options and any other compensation. The Committee may do
this as the Committee or in consultation with other
"independent" directors under the rules of the NYSE (as
directed by the Board), and nothing herein shall preclude
members of the Committee from discussing these matters with
the Board.
B. Non-CEO Executive and Director Compensation
(1) Recommend to the Board for approval the compensation levels
for each non-CEO executive officer, including the salary,
benefits, stock options and any other compensation.
(2) Recommend to the Board for approval the compensation levels
for the members of the Board, including payment schedules and
stock options.
C. Principles of Compensation
(1) Ensure that all compensation paid by the Company, whether in
the form of salaries, benefits, stock options or any other
compensation, are internally equitable and externally
competitive.
(2) Ensure that all compensation packages shall include both
salary and performance components, and recommended
compensation levels have a reasonable relationship to salaries
in industry peer groups, if ascertainable.
(3) Ensure that the Committee is diligent in ascertaining that its
compensation recommendations will be adequate to attract,
motivate, and retain quality talent, linked to actual
performance and responsibilities.
D. Company Plans
(1) Exercise all rights, authority and functions of the Board
under all of the Company's incentive-compensation plans and
equity-based plans, including without limitation, the
authority to interpret the terms thereof, and to make stock
awards and grant options thereunder; provided, however, that
except as otherwise expressly authorized to do so by a plan or
resolution of the Board, the Committee shall not be authorized
to amend any such plan. To the extent permitted by applicable
law and the provisions of a given incentive-compensation or
equity-based plan, and consistent with the requirements of
applicable law and such incentive-
C-3
compensation or equity-based plan, the Committee may delegate
to one or more executive officers of the Company the power to
make stock awards and grant options pursuant to such
incentive-compensation or equity-based plan to employees of
the Company who are not directors or executive officers of the
Company.
(2) Review and recommend changes to the Company's incentive-
compensation plans and equity-based plans (or amendments
thereto), and review and recommend any other
incentive-compensation or equity-based plans (or amendments
thereto) that are not otherwise subject to the approval of the
shareholders.
E. Investigations, Studies and Reports
(1) Conduct or authorize investigations into any matters within
the scope of its responsibilities as it shall deem
appropriate, including by requesting any officer, employee or
advisor of the Company to meet with the Committee or any
advisors engaged by the Committee.
(2) Prepare any studies, as the Committee deems necessary, in
order to determine adequate and reasonable compensation for
the CEO, the other executive officers of the Company and the
members of the Board.
(3) Prepare all reports required to be included in the Company's
proxy statement, in accordance with applicable NYSE and SEC
rules and regulations, and any other reports required by
applicable rules or regulations.
(4) Report regularly to the full Board and prepare or cause to be
prepared any report requested by the Board.
(5) Maintain minutes of meetings and other activities of the
Committee.
V. Reliance on Information Provided
In adopting this Charter, the Board acknowledges that the Committee
members are not employees of the Company, and are not providing any expert or
special assurance as to the Company's compensation packages. Each member of the
Committee shall be entitled to rely on the integrity of those persons and
organizations within and outside the Company that provide information to the
Committee by such persons or organizations absent actual knowledge to the
contrary.
VI. Annual Performance Evaluation
The Committee shall perform a review and evaluation, at least annually, of
its performance and that of its members, including, but not limited to, a review
of the Committee's compliance with this Charter. In addition, the Committee
shall review and reassess, at least annually, the adequacy of this Charter and
recommend to the Board any improvements to this Charter.
C-4
EXHIBIT D
CHARTER OF THE
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
OF THE BOARD OF DIRECTORS OF
STURM, RUGER & COMPANY, INC.
I. Purpose
The Nominating and Corporate Governance (the "Committee") is responsible
to the Board of Directors (the "Board") for: identifying, vetting and nominating
potential Directors; and establishing, maintaining and supervising the corporate
governance program.
II. Composition and Qualifications
The Committee shall consist of a minimum of three Directors who meet the
standards of independence established by the Securities and Exchange Commission,
the New York Stock Exchange, and such other regulatory bodies as may be
appropriate.
The members of the Committee shall be elected by the Board annually and
shall serve until their successors are duly elected and qualified, or until
their earlier resignation or removal. The members may be removed, with or
without cause, by a majority vote of the Board. Unless a Chairman of the
committee is elected by the full Board, the members of the Committee shall
designate a Chairman by majority vote of the Committee.
III. Meetings
The Committee shall meet at least two times annually, or more frequently
when circumstances so dictate. When necessary and appropriate, telephone
meetings may be held. The presence of a majority of the Committee members will
constitute a quorum for the transaction of business.
IV. Responsibility and Processes
The responsibilities and processes of the Committee set forth below serve
as a guide, with the understanding that the Committee may alter or supplement
them with policies and procedures as may be appropriate in light of changing
business, legislative, regulatory, legal or other conditions. The Committee
shall also carry out any other responsibilities and duties delegated to it by
the Board from time to time related to the purposes of the Committee. The
Committee, in discharging its oversight role, is empowered to study or
investigate any matter of interest or concern that it deems appropriate, and
shall have the sole authority to retain outside counsel or other experts for
this purpose, including the authority to approve the fees payable to such
counsel or experts and any other terms of retention.
The following shall be the recurring responsibilities and processes of the
Committee:
A. Board Selection, Composition, and Evaluation
(1) Establish criteria for the selection of new Directors,
including, but not limited to, career specialization,
technical skills, strength of character, independent thought,
practical wisdom, mature judgment, gender, and ethnic
diversity.
D-1
(2) Identify and vet individuals believed to be qualified to serve
on the Board and recommend that the Board select the
candidates for all directorships to be filled by the Board or
by the shareholders at an annual or special meeting.
(3) Conduct inquiries into the backgrounds and qualifications of
candidates to serve on the Board. In that connection, the
Committee is authorized to do its own studies and shall also
have sole authority to retain and to terminate any search firm
to be used to assist it in identifying candidates, including
sole authority to approve the fees payable to such search firm
and any other terms of retention.
(4) Consider questions of independence and possible conflicts of
interest of members of the Board and executive officers.
(5) Consider matters relating to the retirement of members of the
Board.
(6) Review and make recommendations to the Board regarding whether
a Director should stand for re-election.
(7) Review and make recommendations to the Board regarding the
composition and size of the Board.
(8) Oversee evaluation of, at least annually, of the Chairman and
Chief Executive Officer, Officers of the Company, and the
Directors.
B. Committee Selection, Composition and Evaluation
(1) Recommend Directors to serve on committees of the Board,
giving consideration to the criteria for service on each
committee as set forth in the charter for such committee, as
well as to any other factors the Committee deems relevant, and
where appropriate, make recommendations regarding the removal
of any member of the Committee.
(2) Recommend a Director to serve as chairman of each committee of
the Board.
(3) Establish, monitor and recommend the purpose, structure and
operations of the various committees of the Board, the
qualifications and criteria for membership on each committee
of the Board and, as circumstances dictate, make any
recommendations regarding periodic rotation of Directors among
the committees and recommend any term limitations of service
on any Board committee.
(4) Periodically review the charter, composition and performance
of each committee of the Board and make recommendations to the
Board for the creation of additional committees or the
elimination of any such committees.
C. Corporate Governance
(1) Consider the adequacy of the certificate of incorporation and
by-laws of the Corporation and recommend to the Board any
amendments thereto.
D-2
(2) Develop and recommend to the Board a set of corporate
governance principles and keep abreast of developments with
regard to corporate governance to enable the Committee to make
recommendations to the Board in light of such developments.
(3) Consider policies relating to meetings of the Board.
D. Reports
(1) Report to the Board, at least annually or as otherwise
requested by the Board, concerning any of its meetings,
findings or recommendations.
(2) Maintain minutes of meetings and other activities of the
Committee.
V. Reliance on Information Provided
In adopting this Charter, the Board acknowledges that the Committee
members are not employees of the Company, and are not providing any expert or
special assurance as to the Company's nominating or corporate governance
process. Each member of the Committee shall be entitled to rely on the integrity
of those persons and organizations within and outside the Company that provide
information to the Committee by such persons or organizations, absent actual
knowledge to the contrary.
VI. Annual Performance Evaluation
The Committee shall perform a review and evaluation, at least annually, of
its performances and its members, including, but not limited to, a review of the
Committee's compliance with this Charter. The Committee shall conduct such
evaluation and reviews in such a manner as it deems appropriate.
D-3
EXHIBIT E
STURM, RUGER & COMPANY, INC.
CODE OF BUSINESS CONDUCT AND ETHICS
Sturm, Ruger & Company, Inc. (the "Company") maintains an extensive
"Corporate Compliance Program" which governs the obligation of all employees,
officers and directors to conform their business conduct to be in compliance
with all applicable laws and regulations. A copy of the Corporate Compliance
Program has been distributed to each employee, officer and director, and
additional copies can be obtained by these individuals from any personnel
manager. The Company's other policies and procedures also set forth rules with
which, although not having the effect of laws or regulations, all personnel must
comply.
This Code of Business Conduct and Ethics (this "Code") is one way in
which the Company seeks to ensure that the Corporate Compliance Program and the
Company's other policies and procedures are effectively implemented. It consists
of three parts: Business Ethics, Legal Compliance and Making It Work. This Code
is not intended to cover every applicable law, address all possible business
dealings or potential dilemmas, nor does it provide answers to all questions
that may arise in connection with the issues raised.
BUSINESS ETHICS
- General Standards. The Company is committed to operating with the
highest ethical principles guiding our business philosophy and
personal business behavior at all times. All employees, officers and
directors are expected to behave honestly and with integrity at all
times, whether in dealing with fellow employees, the general public,
the business community, civic organizations, stockholders,
customers, suppliers, or governmental and regulatory authorities.
- Books and Records and Internal Controls. The accuracy and
reliability of the Company's business records are critical to the
Company's business decisions and compliance with the Company's
financial and legal reporting requirements. Employees, officers and
directors shall be familiar with and follow the Company's policies,
accounting controls and procedures. Applicable laws and Company
policy require the Company to keep books and records that accurately
and fairly reflect its transactions and the dispositions of its
assets and to maintain a system of internal accounting controls
which ensure the reliability and adequacy of its books and records.
No employee, officer or director is authorized to depart from this
requirement or to condone a departure by anyone else.
- Alteration of Documents. There will be times when destruction of
documents no longer needed for business or legal purposes may be a
perfectly legitimate exercise of a proper business decision (i.e.,
for reasons of cost, logistics, space, etc.). However, the knowing
destruction, alteration, concealment, or falsification of paper or
electronic documents with the intent to impede, obstruct, or wrongly
influence official investigations or proceedings is not only
unethical, it is a crime punishable by fines and imprisonment of up
to 20 years. Employees, officers and directors must cooperate with
duly constituted official investigations that are conducted by both
sides in a legally correct fashion.
- Business Communications. At all times, the Company shall promote
full, fair, accurate, timely and understandable disclosures in every
report and public communication made by the Company, which includes,
of course, any document that it files with or submits to the
Securities and Exchange Commission (the "SEC"). Employees, officers
and directors are required to
E-1
comply with these standards in the preparation of any disclosure or
communication of the Company. Good judgment must be used when
writing about our Company and its business. Written business records
may be subject to compulsory disclosure to the government or private
parties in litigation, or may be wrongly leaked to or interpreted by
the news media.
- Conflict of Interest. Company policy promotes honest and ethical
conduct, including the ethical handling of actual or apparent
conflicts of interest between personal and professional
relationships. A "conflict of interest" occurs when an individual's
private interest interferes with the interests of the Company as a
whole. A conflict of interest might arise when an employee, officer
or director takes actions or has interests that may make it
difficult to perform Company work objectively and effectively.
Conflicts of interest might also arise when an employee, officer or
director, or a member of his or her immediate family, appears to
receive improper personal benefits as a result of such person's
position in the Company. Personal loans to, or guarantees of
obligations of, such persons are of special concern, and personal
loans to officers and directors are illegal.
- Confidential Information. Employees, officers and directors should
maintain the confidentiality of information entrusted to them by the
Company or other companies or persons, except when disclosure is
duly authorized or legally mandated. Confidential information
includes various kinds of information, including internal,
confidential, proprietary or secret information related to the
Company's business, operations and research. It includes trade
secrets (such as our technology, know-how and experience) and in
general all non-public information that might be of use to
competitors, or harmful to the Company or its customers if
disclosed. Selected human resource and personnel information must be
kept strictly confidential and used only for the purposes for which
it is intended. Personal health information will be protected as
required by law. Confidential information also includes information
entrusted to the Company by other companies or persons, such as
customers, suppliers, vendors or service-providers. The obligation
to preserve confidential information continues even after
association with the Company ends.
- Corporate Opportunities. Employees, officers and directors owe a
duty to the Company to advance its legitimate interests when the
opportunity to do so arises. Employees, officers and directors
should not: (i) take for themselves personally opportunities that
are discovered through the use of Company property, information or
position (ii) use Company property, information or position for
personal gain or (iii) compete with the Company.
- Fair Dealing. Employees, officers and directors should endeavor to
deal fairly with the Company's customers, suppliers, competitors and
employees. No employee, officer or director should take unfair
advantage of anyone through manipulation, concealment, abuse of
privileged information, misrepresentation of material facts or any
other unfair-dealing practice.
- Protection and Proper Use of Company Assets. Carelessness, misuse,
waste, destruction or theft has a direct impact on the Company's
profitability. Employees, officers and directors should safeguard
the Company's assets and ensure their efficient use. All Company
assets should be used only for legitimate business purposes.
E-2
LEGAL COMPLIANCE
- General Standard. The Company requires compliance with all laws,
rules and regulations, as set forth in the Corporate Compliance
Program, as well as compliance with this Code.
- Discrimination and Harassment. The Company's legal compliance
requirement includes all federal and state regulations prohibiting
discrimination against any employee or applicant for employment
because of race, color, religion, ethnic or national origin, gender,
sexual orientation, age, disability or veteran status. This applies
to recruitment, compensation, training, promotion and other
employment practices. The Company is also committed to providing its
employees with a work environment free of any type of harassment,
including any deliberate discrimination or harassment, in word or
action, against a fellow employee or applicant for employment on the
basis of any of the classifications above.
- Fraud. The Company's legal compliance requirement includes all laws
related to wire fraud, mail fraud, bank fraud, securities fraud, any
SEC rule or regulation, or any federal rules relating to fraud
against shareholders.
- Securities Laws and Insider Trading. The Company's stock is owned
and traded by the general public, and for this reason various laws
require the Company to make full, fair, accurate, timely and
understandable disclosure of material information. It is the
Company's goal to protect all shareholder investments in our Company
through strict enforcement of the prohibition against insider
trading set forth in federal securities laws and regulations.
Employees, officers and directors who have access to inside
information are not permitted to use or share that information for
stock trading purposes or for any other purpose except to conduct
Company business. Inside information includes any financial,
technical or other information about the Company that is not
available to the public and might influence an investor's decision
to buy, sell or hold stock of the Company. To use inside information
for personal financial benefit or to "tip" others who might make an
investment decision on the basis of this information is not only
unethical but also illegal.
- Bribes, Kickbacks, and Other Unlawful Payments. The Company's legal
compliance requirement includes the U.S. Foreign Corrupt Practices
Act, international anti-bribery conventions and any state or local
anti-corruption or bribery laws. No payment to government officials,
bribes, kickbacks or other similar unlawful payments designed to
secure favored or preferential treatment for or from the Company or
any individual associated with the Company is to be given or
received.
MAKING IT WORK
- Compliance and Reporting Required. Employees, officers and directors
are required to report or cause to be reported, on a named or
anonymous basis, any act or practice or other information which may
constitute a violation of law, rules, regulations or this Code (or
may otherwise be considered unethical) to their immediate
supervisor, personnel manager, facility director or the General
Counsel, as established by procedures set out in the Corporate
Compliance Program. However, any employee, officer or director who
suspects questionable accounting, internal
E-3
control or auditing, or has any information to report on an issue
described in this Code under the headings "Business Communications"
or "Fraud " above, must make a report directly to the Chairman of
the Audit Committee of the Board of Directors in accordance with the
procedures set forth below. Any employee, officer or director who
has any questions related to an interpretation of any part of this
Code is encouraged to contact the General Counsel. There is no right
to privacy through the use of the Company's telephone, e-mail,
Internet and computers. However, the Company will make every effort
to respect your anonymity if you choose to use the procedures for
anonymous reporting set forth below. In any event, the Company
cannot guarantee the eventual anonymity or confidentiality of a
person making a report, as more fully described below.
- Procedure for Anonymous Reports to Supervisors, Etc. or the General
Counsel. The procedure for anonymous reporting of complaints to the
applicable immediate supervisor, personnel manager, facility
director or the General Counsel of the Company is for information to
be sent by any of the following means: (i) using non-Company
telephones, by immediately faxing a letter to the applicable
individual at his or her office number, (ii) using non-Company
telephones, by calling the applicable individual at his or her
office number, (iii) using non-Company computers, by e-mailing the
applicable individual at his or her work e-mail address, or (iv)
using non-Company mail facilities, by sending a letter to the
applicable individual at his or her work address.
- Procedure for Reports to Audit Committee. The procedure for
anonymous reporting of complaints to the Audit Committee is for
information to be sent directly to the Audit Committee, which is
composed entirely of independent outside directors, by any of the
following means: (i) using non-Company telephones, by immediately
faxing information to the Chairman of the Audit Committee concerning
any such complaint at 508-428-1424, (ii) using non-Company
telephones, by calling the Chairman of the Audit Committee via a
confidential reporting service at 1-800-826-6762, (iii) using
non-Company computers, by e-mailing the Chairman of the Audit
Committee at thornor@cape.com or (iv) using non-Company mail
facilities, by sending a letter to Mr. Townsend Hornor, Chairman,
Audit Committee of the Board of Directors of Sturm, Ruger & Company,
Inc., 239 Eel River Rd., Osterville, Massachusetts 02655. The
procedure for named reporting of complaints to the Audit Committee
is the same, except that Company telephones, computers or mail
facilities may be used. Such reporting mechanisms are available 24
hours a day, 7 days a week. All reasonable and appropriate expenses
incurred by any employee, officer or director in making a report to
the Audit Committee in accordance with this Code will be reimbursed
at any time upon request.
- Full Information. It will be helpful to the Company's investigation
of any such suspected violations if your communication is as
specific as possible with regard to: (i) the nature of the suspected
conduct, (ii) the persons involved or who may have knowledge of it,
(iii) the dates upon which such suspected activity occurred, (iv)
where it allegedly took place, (v) why you believe this conduct to
be unethical, irregular or fraudulent and (vi) how such suspected
conduct has allegedly occurred or is presently occurring.
- No Guarantee of Anonymity or Confidentiality. The Company shall
always try to maintain the anonymity and confidentiality of the
reports and of those furnishing the information. The
E-4
Company cannot, however, guarantee the eventual anonymity or
confidentiality of any complaint in the event that an effective
investigation requires otherwise.
- No Retaliation. In no event will any action or retaliation be taken
against any employee, officer or director for making a report
regarding suspected violations of any law, regulation or this Code,
or against any person who testifies, participates in, or otherwise
assists in a proceeding filed or about to be filed that relates to
any such violation. Employees, officers and directors should
immediately report to the Chairman of the Audit Committee, in the
manner as set forth above, any irregular situation regarding this
issue.
- Application of this Code; Disciplinary Measures. All reports will be
investigated and appropriate actions will be taken. The Company
shall continuously enforce this Code through appropriate means of
discipline. In instances where the proper and ethical course of
action is unclear, employees, officers and directors should seek
counsel from their immediate supervisor, personnel manager, facility
director or the General Counsel. If necessary, the applicable
immediate supervisor, personnel manager, facility director, the
General Counsel or the Audit Committee, as appropriate, shall
determine whether violations of law or this Code have occurred and,
if so, shall determine the measures to be taken against the
corresponding person. The disciplinary measures shall include
counseling, oral or written reprimands, warnings, probation or
suspension without pay, demotions and termination of employment or
other association with the Company. The Company's General Counsel
and the Audit Committee, as appropriate, shall respond to questions
and issues of interpretation of this Code.
- Changes to or Waivers of this Code. Any change to or waiver of this
Code involving a director or the Company's principal executive
officer, principal financial officer, principal accounting officer
or controller, or persons performing similar functions, may be made
only by the Board of Directors or a committee of the Board of
Directors and will be promptly disclosed as required by law or the
New York Stock Exchange rules.
- Questions and Comments. If anyone has any questions concerning the
ethical propriety of any business dealings or other conduct while at
work, or any suggestions to make regarding this Code, they should
feel free to consult with their immediate supervisor, personnel
manager, facility director, the General Counsel or other officers of
the Company.
June 20, 2003
Distribution: All Directors
All Officers
All Employees
All Personnel & Human Resource Directors
All Managers & Supervisors
All Sales Representatives
All Outside Vendors & Suppliers
All Firearms Distributors
All Foundry Customers
All Providers of Professional Services
Company Website
E-5
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PROXY 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 MAY 4, 2004
The undersigned hereby appoints William B. Ruger, Jr., Stephen L. Sanetti
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 5, 2004 at the Annual
Meeting of Stockholders to be held on May 4, 2004 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. 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.)
--------------------------------------------------------------------------------
STURM, RUGER & COMPANY, INC.
PLEASE MARK VOTE IN BOX IN THE FOLLOWING MANNER USING DARK INK ONLY |X|
[ ]
A. ELECTION OF DIRECTORS
1. The Board of Directors unanimously recommends a Vote FOR the election of
seven Directors:
FOR WITHHOLD FOR WITHHOLD
William B. Ruger, Jr. | | | | Paul X. Kelley | | | |
Stephen L. Sanetti | | | | John M. Kingsley, Jr. | | | |
Richard T. Cunniff | | | | James E. Service | | | |
Townsend Hornor | | | |
B. ISSUES
The Board of Directors unanimously recommends a Vote:
FOR AGAINST ABSTAIN
2. FOR The approval of the appointment of | | | | | |
KPMG LLP as the independent auditors
of the Company for the 2004 fiscal year.
FOR AGAINST ABSTAIN
3. In their discretion, the Proxies are authorized | | | | | |
to vote upon such other business as may
properly come before the meeting.
Dated:__________________________________, 2004
Signature(s):__________________________________
__________________________________
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.
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