NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

April 24, 2007

          NOTICE IS HEREBY GIVEN THAT the Annual Meeting of Stockholders of STURM, RUGER & COMPANY, INC. (the “Company”) will be held at The Trumbull Marriott, 180 Hawley Lane, Trumbull, Connecticut 06611 on the 24th day of April, 2007 at 10:30 a.m. to consider and act upon the following:

	1.		A proposal to elect eight (8) Directors to serve on the Board of Directors for the ensuing year;
	2.		A proposal to ratify the appointment of McGladrey & Pullen, LLP as the Company’s independent auditors for the 2007 fiscal year;
	3.		A proposal to approve the Sturm, Ruger & Company, Inc. 2007 Stock Incentive Plan; and
	4.		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 2, 2007 will be entitled to notice of and to vote at the Annual Meeting or any adjournment or postponement thereof. The complete list of stockholders entitled to vote at the Annual Meeting shall be open to the examination of any stockholder, for any purpose germane to the Annual Meeting, during ordinary business hours, for a period of 10 days prior to the Annual Meeting, at the Company’s offices located at 1 Lacey Place, Southport, Connecticut 06890.

          The Company’s Proxy Statement is attached hereto.

		By Order of the Board of Directors
		/s/ Leslie M. Gasper
		Leslie M. Gasper
		Corporate Secretary

Southport, Connecticut
March 31, 2007

          ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. TO ENSURE THAT YOUR VOTE IS RECORDED PROMPTLY, PLEASE VOTE YOUR PROXY AS SOON AS POSSIBLE, EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING. MOST SHAREHOLDERS HAVE THREE OPTIONS FOR SUBMITTING THEIR VOTES PRIOR TO THE ANNUAL MEETING: (1) VIA THE INTERNET, (2) BY TELEPHONE OR (3) BY MAIL USING THE POSTAGE-PAID ENVELOPE PROVIDED.

Table of Contents

		Page
PROXY SOLICITATION AND VOTING INFORMATION			1
PROPOSAL NO. 1 — ELECTION OF DIRECTORS			2
DIRECTOR NOMINEES			3
THE BOARD OF DIRECTORS AND ITS COMMITTEES			5
COMMITTEES OF THE BOARD			6
Audit Committee			6
Report of the Audit Committee			7
Compensation Committee			8
Compensation Committee Interlocks and Insider Participation			8
Compensation Committee Report on Executive Compensation			8
Nominating and Corporate Governance Committee			10
Executive Operations Committee			12
MEMBERSHIP AND MEETINGS OF THE BOARD AND ITS COMMITTEES			13
Membership and Meetings of the Board and its Committees Table For Year 2006			13
Non-Management Directors			14
DIRECTOR AND COMMITTEE COMPENSATION			15
Director’s Fees and Retainers			15
Directors’ Compensation Table For Year 2006			16
Narrative to Directors’ Compensation Table			18
COMPENSATION DISCUSSION AND ANALYSIS			19
What is the Company’s Philosophy Regarding Compensation and What are the Compensation Program Objectives and Rewards?			19
What are the Company’s Governance Practices Regarding Compensation?			19
What are the Company’s Governance Practices Regarding Stock Options?			19
What are the Elements of Compensation?			20
Why Does the Company Choose to Pay Each Element?			21
How Does the Company Determine the Amount/Formula for Each Element?			21
How are Salaries Determined?			21
How are Bonuses Determined?			22
Annualized Salary and Incentive Bonus Targets Table			22
How are Equity Compensation Awards Determined?			23
What are the Company’s Ongoing Plans for Plan Based Equity Compensation?			24

 i 

Table of Contents

(continued)

		Page
How is the Chief Executive Officer’s Performance Evaluated and Compensation Determined?			24
What is the Chief Executive Officers’ Compensation History?			25
Does the Company Pay for Perquisites?			25
EXECUTIVE COMPENSATION			26
Summary Compensation Table			26
All Other Compensation Table For Year 2006			28
Grant of Plan Based Awards Table For Year 2006			29
Outstanding Equity Awards at Fiscal Year End 2006 Table			30
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL			31
Payments on Change in Control			31
Potential and Actual Payments Under Severance Agreements Table			34
PENSION PLANS			36
2006 Pension Benefits Tables			38
PRINCIPAL STOCKHOLDERS AND BENEFICIAL OWNERSHIP			39
Principal Stockholder Table			39
Beneficial Ownership Table			39
Section 16(A) Beneficial Ownership Reporting Compliance			40
Certain Relationships and Related Transactions			40
PROPOSAL NO. 2 — RATIFICATION OF INDEPENDENT AUDITORS			41
Principal Accountants’ Fees and Services			41
PROPOSAL NO. 3 — APPROVAL OF THE STURM, RUGER & COMPANY, INC. 2007 STOCK INCENTIVE PLAN			43
Equity Compensation Plan Information Table			45
New Plan Benefits Table			49
CODE OF BUSINESS CONDUCT AND ETHICS			52
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR 2008			52
STOCKHOLDER AND INTERESTED PARTY COMMUNICATIONS WITH THE BOARD OF DIRECTORS			52
OTHER MATTERS			52
Exhibit A — Audit Committee Charter			A-1
Exhibit B — Compensation Committee Charter			B-1
Exhibit C — Nominating and Corporate Governance Committee Charter			C-1
Exhibit D — The Sturm, Ruger & Company, Inc. 2007 Stock Incentive Plan			D-1
PROXY CARD

ii

March 31, 2007

PROXY STATEMENT

Annual Meeting of Stockholders of the Company to be held on April 24, 2007

PROXY SOLICITATION AND VOTING INFORMATION

          This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors (the “Board”) of Sturm, Ruger & Company, Inc. (the “Company”) for use at the 2007 Annual Meeting of Stockholders (the “Meeting”) of the Company to be held at 10:30 a.m. on April 24, 2007 at the Trumbull Marriott, 180 Hawley Lane, Trumbull, Connecticut 06611 or at any adjournment or postponement thereof for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders. This Proxy Statement and enclosed proxy are first being sent to stockholders on or about March 31, 2007.

          The mailing address of the principal executive office of the Company is 1 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 $120,000, will be borne by the Company.

          The Company’s Annual Report on Form 10-K for the year ended December 31, 2006, 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 2, 2007 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 31, 2007, 22,638,720 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 eight nominees who receive the greatest number of votes cast for election as Directors will be elected. Shares present which are properly withheld as to voting with respect to any one or more nominees, and shares present with respect to which a broker indicates that it does not have authority to vote (“broker non-votes”), will be counted as being present at the Meeting. However, these shares will not be counted as voting on the election of Directors, with the result that such abstentions and broker non-votes will have no effect as votes on the election of Directors.

          The affirmative vote of shares representing a majority of the shares present and entitled to vote is required to ratify the appointment of McGladrey & Pullen, LLP as the Company’s independent auditors for the 2007 fiscal year and the approval of the Sturm, Ruger & Company, Inc. 2007 Stock Incentive Plan (the “2007 SIP”), which are also to be voted on at the Meeting, and to approve any other matters properly presented at the Meeting. Shares which are voted to abstain on these matters and broker non-votes will be considered present at the Meeting but will not be counted as voting for these matters, with the result that abstention and broker non-votes will have the same effect as votes against the proposal.

PROPOSAL NO. 1 – ELECTION OF DIRECTORS

          Eight Directors will be elected at the Meeting, each to hold office until the next Annual Meeting of Stockholders or until his successor is elected and has qualified.

          Background

          Below is a discussion of certain events regarding the Board of Directors that have taken place since January 1, 2006, at which time the members of the Board of Directors were William B. Ruger, Jr., Stephen L .Sanetti, John A. Cosentino, Jr., Richard T. Cunniff, John M. Kingsley, Jr., James E. Service and Joseph C. Strasser:

	Ø		On January 28, 2006, Rear Admiral Joseph Strasser resigned from the Board of Directors for health reasons, and on January 31, 2006 the Board amended the Company’s By-Laws to reduce the number of Directors to six rather than fill the vacancy created by Rear Admiral Strasser’s resignation.
	Ø		On February 13, 2006, William B. Ruger, Jr. voluntarily resigned as a Director and as Chairman of the Board, and retired as Chief Executive Officer of the Company effective as of February 28, 2006.
	Ø		On February 15, 2006, the Board voted to amend the Company’s By-Laws to reduce the number of Directors to five rather than fill the vacancy created by Mr. Ruger’s resignation, and also authorized the amendment of the Company’s By-Laws in order to appoint a non-executive Chairman of the Board, naming Vice Admiral James E. Service to this position. The Board also named Stephen L. Sanetti as interim Chief Executive Officer effective as of February 28, 2006.
	Ø		On May 24, 2006, after conducting a professional search, the Board voted to increase the number of Directors to eight, and elected C. Michael Jacobi, Stephen T. Merkel and Ronald C. Whitaker to the Board of Directors effective as of June 1, 2006.
	Ø		On September 25, 2006, following another professional search, the Board appointed Michael O. Fifer as Chief Executive Officer, and named him to the Board of Directors on October 19, 2006 after amending the By-Laws to increase the number of Directors to nine.
	Ø		On January 22, 2007, Richard T. Cunniff announced his intention to retire from the Board as of April 24, 2007, and the Board voted on that date to amend the By-Laws to reduce the number of Directors to eight as of April 24, 2007, rather than fill the vacancy to be created by Mr. Cunniff’s retirement.

DIRECTOR NOMINEES

          The following table lists each nominee for Director and sets forth certain information concerning each nominee’s age, business experience, other directorships and committee memberships in publicly-held corporations and current Board committee assignments. With the exception of Messrs. Jacobi, Merkel, Whitaker and Fifer, all of the eight nominees for Director listed below were elected at last year’s Annual Meeting. If no contrary instructions are indicated, proxies will be voted for the election of the nominees for Director listed below. Should any of the said nominees for Director not remain a candidate at the time of the Meeting (a condition which is not now anticipated), proxies solicited hereunder will be voted in favor of those nominees for Director selected by management of the Company.

Name,		Business Experience
Age,		During the Past Five Years,
First Became A Director		Other Directorships and Current Committee Memberships
James E. Service Age 76 Director since July, 1992		Chairman of the Board (non-executive) of the Company since 2006. Vice Admiral of the United States Navy (retired). Semi-Consultant with PGR Solutions (investment management). Commander, United States Naval Air Force, Pacific Fleet, from 1985 to 1987. Former Director of Wood River Medical Center, Ketchum, Idaho. Adm. Service currently serves as the Company’s Nominating and Corporate Governance Committee Chair, and as a member of the Compensation Committee and Executive Operations Committee.
Stephen L. Sanetti Age 57 Director since March, 1998		Vice Chairman of the Board, President, Chief Operating Officer and General Counsel of the Company since September 25, 2006. Interim Chief Executive Officer from February 28, 2006 to September 24, 2006, and Vice Chairman, President, Chief Operating Officer and General Counsel as of May 6, 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 of the National Shooting Sports Foundation and Hunting & Shooting Sports Heritage Foundation. Trustee of the Friends of Boothe Park.
John M. Kingsley, Jr. Age 75 Director since April, 1972		Director of the Neurological Institute of New Jersey and Trustee of Brundge, Story and Rose Investment Trust from 1999 to 2003. Executive Vice President of the Company from 1971 to 1996. Former Vice President of F.S. Smithers & Company. Former Vice President of Finance, General Host Company. Former Associate of Corporate Finance of Dillon, Read & Co., Inc. Former Senior Accountant of Price, Waterhouse & Company. Mr. Kingsley is a Certified Public Accountant. Mr. Kingsley is currently the Chairman of the Company’s Audit Committee.
John A. Cosentino, Jr. Age 57 Director since August, 2005		Partner of Ironwood Manufacturing Fund, LP since 2002. Chairman of Simonds International, Inc. since 2003. Chairman of North American Specialty Glass, LLC since 2005. Vice Chairman of Primary Steel, LLC since 2005. Partner of Capital Resource Partners, LP from 2000 to 2001, and Director and investor in the following Capital Resource Partners, LP portfolio companies: Spirit Brands since 1998, Pro Group, Inc. from 1999 to 2002, WPT, Inc. from 1998 to 2001, and Todd Combustion, Inc. from 1997 to 1999. Former Vice President-Operations of the Stanley Works. Former President of PCI Group, Inc.. Rau Fastener, LLC., and Otis Elevator-North America, division of United Technologies. Former Group Executive of the Danaher Corporation. Former Director of Integrated Electrical Services, Olympic Manufacturing Company, and the Wiremold Company. Mr. Cosentino is currently a member of the Company’s Nominating and Corporate Governance Committee, Chairman of the Compensation Committee and Co-Chair of the Executive Operations Committee.

Name,		Business Experience
Age,		During the Past Five Years,
First Became A Director		Other Directorships and Current Committee Memberships
C. Michael Jacobi Age 65 Director since June, 2006		President of Stable House 1, LLC, a private real estate development company, since 1999. President, CEO and Board member of Katy Industries, Inc. from 2001 to 2005. Former President, CEO and Board member of Timex Corporation. Member of the Boards of Directors and Audit committees chairman of the Corrections Corporation of America (since 2000) and Webster Financial Corporation (since 1993). Member of the Board of Directors and Audit committee of Kohlberg Capital Corporation since 2006. Member of the Board of Directors of Invisible Technologies, Inc. from 2001 to 2006. Mr. Jacobi is a Certified Public Accountant. Mr. Jacobi is currently a member of the Company’s Audit Committee and Nominating and Corporate Governance Committee and Co-Chair of the Executive Operations Committee.
Stephen T. Merkel Age 55 Director since June, 2006		CEO and Chairman of the Waterbury Companies since 2004. Corporate Vice President, Officer and President of Loctite General Industrial Business from 1999 to 2003. President of Loctite Americas from 1996 to 1999. Board member of Turtle Wax, Inc. from 1997 to 2000, and St. Francis Hospital from 2000 to 2004. Mr. Merkel is currently a member of the Company’s Compensation Committee.
Ronald C. Whitaker Age 59 Director since June, 2006		President, CEO (since 2003) and Board member (since 2001) of Hyco International. Former President, CEO (from 2000 to 2003) and current Board and executive committee of Strategic Distribution, Inc. President and CEO of Johnson Outdoors from 1996 to 2000. CEO, President and Chairman of the Board of Colt’s Manufacturing Co., Inc. from 1992 to 1995. Board member of Michigan Seamless Tube (since 2004), Group Dekko (since 2006), and Pangborn Corporation (since 2006). Board member of Precision Navigation, Inc. from 2000 to 2003, Weirton Steel Corporation from 1994 to 2003 and Code Alarm from 2000 to 2002. Trustee of College of Wooster from 1997 through 2005. Mr. Whitaker is currently a member of the Company’s Audit Committee.
Michael O. Fifer Age 49 Director since October, 2006		Chief Executive Officer of the Company as of September 25, 2006. President of Engineered Products of Mueller Industries, Inc from 2003 to 2006. President of North American Operations of Watts Industries, Inc. from 1998 to 2002. Member of the Board of Directors and Audit, Compensation and Special committees of Conbraco Industries from 2003 to 2006.

          More than a majority of the current Directors are “independent” under the rules of the New York Stock Exchange, Inc. (“NYSE”). The Board of Directors has affirmatively determined that none of Messrs. Cosentino, Jacobi, Kingsley, Merkel, Service, Whitaker and Strasser (prior to his resignation on January 28, 2006) has or had a material relationship with the Company or any affiliate of the Company, either directly or indirectly, as a partner, shareholder or officer of an organization (including a charitable organization) that has a relationship with the Company, and are therefore “independent” for such purposes under the rules of the NYSE, including Rule 303A thereof.

Board of Director Recommendation

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE NOMINEES NAMED ABOVE.

          The Board of Directors is committed to good business practice, transparency in financial reporting and the highest level of corporate governance. To that end, the Board of Directors and its committees continually review the Company’s governance policies and practices as they relate to the practices of other public companies, specialists in corporate governance, the rules and regulations of the Securities and Exchange Commission (the “SEC”), Delaware law (the state in which the Company is incorporated) and the listing standards of the NYSE. As a result of these reviews, the Board of Directors has, over the past several years, among other things:

	Ø		Adopted a revised charter for the Audit Committee;
	Ø		Adopted a charter for the Compensation Committee;
	Ø		Established and adopted a charter for the Nominating and Corporate Governance Committee;
	Ø		Adopted a Code of Business Conduct and Ethics;
	Ø		Adopted Corporate Board Governance Guidelines;
	Ø		Adopted a method by which stockholders and other interested parties can send communications to the Board of Directors;
	Ø		Adopted procedures for the succession of the Chief Executive Officer;
	Ø		Adopted criteria for the selection of new Directors; and
	Ø		Caused the non-management Directors of the Board of Directors to meet regularly in executive sessions.

Corporate Board Governance Guidelines

          The Company’s corporate governance practices are embodied in the Corporate Board Governance Guidelines. A copy of the Corporate Board Governance Guidelines is posted on the Company’s website at www.ruger.com, and is available in print to any stockholder who requests it by contacting the Corporate Secretary as set forth in “STOCKHOLDER COMMUNICATIONS” below.

          The Company’s business and affairs are under the direction of the Board of Directors of the Company pursuant to the General Corporation Law of the State of Delaware as in effect from time to time and the Company’s By-Laws. Members of the Board 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.

COMMITTEES OF THE BOARD

Audit Committee

          In 2006, the members of the Audit Committee of the Board of Directors were John A. Cosentino, Jr., Richard T. Cunniff, C. Michael Jacobi, John M. Kingsley, Jr., James E. Service, Ronald C. Whitaker and Joseph C. Strasser until his resignation on January 28, 2006. Mr. Kingsley, Jr. served as Committee Chairman. The Board appointed Messrs. Jacobi and Whitaker as members of the Audit Committee on June 1, 2006. Each of Messrs., Cosentino, Cunniff, Jacobi, Kingsley, Service and Whitaker are, and Admiral Strasser was, considered “independent” for purposes of service on the Audit Committee under the rules of the NYSE, including Rule 303A thereof, and Rule 10A-3 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). All members of the Audit Committee are financially literate and have a working familiarity with basic finance and accounting practices. In addition, the Company has determined that Mr. Kingsley is an “audit committee financial expert” as defined by the SEC rules and regulations. The Board of Directors has also affirmed that C. Michael Jacobi’s simultaneous service on more than three audit committees, as noted in his business biography under “DIRECTOR NOMINEES”, does not impair his ability to effectively serve on the Company’s Audit Committee.

          At a Board meeting on October 19, 2006, the Board revised the membership of the Audit Committee effective January 1, 2007, naming John M. Kingsley, Jr. as continuing committee Chairman, and C. Michael Jacobi and Ronald C. Whitaker as continuing committee members.

          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 Audit Committee prepares the report required by the SEC rules included in this Proxy Statement.

          The Audit Committee is governed by a written charter that has been adopted by the Board of Directors. A copy of the Audit Committee Charter is attached to this Proxy Statement as Exhibit A, is posted on the Company’s website at www.ruger.com, and is available in print to any stockholder who requests it by contacting the Corporate Secretary as set forth in “STOCKHOLDER COMMUNICATIONS” below.

          The Audit Committee held nine meetings during 2006, including six telephonic meetings. All members of the Audit Committee attended at least 75% of the meetings of the committee during their 2006 tenure. The Annual Report of the Audit Committee is included in this Proxy Statement.

Report of the Audit Committee^*

          Management has the primary responsibility for the financial statements and the reporting process including the systems of internal controls. In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed the audited financial statements in the Annual Report with management, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements.

          The committee reviewed with the independent auditors, who are responsible for expressing an opinion 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 (Codification of Statements on Auditing Standards, AU § 380). In addition, the committee has discussed with the independent auditors the auditors’ independence from management and the Company, and has received the written disclosures and the letter from the independent auditors as required by Independence Standard Board Standard No. 1 “Independence Discussions with Audit Committees”.

          The committee discussed with the independent auditors the overall scope and plans for their audit. The committee met with the independent auditors, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting. The committee held nine meetings during fiscal year 2006.

          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, 2006 for filing with the Securities and Exchange Commission.

AUDIT COMMITTEE

John M. Kingsley, Jr., Audit Committee Chairman
C. Michael Jacobi
Ronald C. Whitaker

February 28, 2007

Compensation Committee

          In 2006, the members of the Compensation Committee of the Board of Directors were John A. Cosentino, Jr., Richard T. Cunniff, C. Michael Jacobi, John M. Kingsley, Jr., Stephen Merkel, James E. Service and Joseph C. Strasser until his resignation on January 28, 2006. Mr. Cosentino, Jr. served as committee Chairman. Messrs. Jacobi and Merkel were appointed to the Compensation Committee as of June 1, 2006. Each of Messrs. Cosentino, Cunniff, Jacobi, Kingsley, Merkel and Service are, and Admiral Strasser was, considered “independent” for purposes of service on the Compensation Committee under the rules of the NYSE, including Rule 303A thereof.

          At a Board meeting on October 19, 2006, the Board revised the membership of the Compensation Committee effective January 1, 2007, naming John A. Cosentino, Jr. as continuing committee Chairman, and James E. Service and Stephen T. Merkel as continuing committee members.

          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 has the authority to form and delegate authority to one or more subcommittees, made up of one or more of its members, as it deems appropriate from time to time.

          The Compensation Committee is governed by a written charter that has been adopted by the Board of Directors. A copy of the Compensation Committee charter is attached to this Proxy Statement as Exhibit B, is posted on the Company’s website at www.ruger.com, and is available in print to any stockholder who requests it by contacting the Corporate Secretary as set forth in “STOCKHOLDER COMMUNICATIONS” below.

          The Compensation Committee held six meetings during 2006. All members of the Compensation Committee attended all meetings of the committee during their 2006 tenure. The annual Compensation Committee Report on Executive Compensation is included in this Proxy Statement.

Compensation Committee Interlocks and Insider Participation

          During the 2006 fiscal year, none of the Company’s executive officers served on the board of directors of any entities whose directors or officers serve on the Company’s Compensation Committee. No current or past executive officers of the Company serve on the Compensation Committee.

Compensation Committee Report on Executive Compensation *

          The committee has reviewed and discussed with management the Compensation Discussion & Analysis. In reliance on the reviews and discussions referred to above, the committee recommended to the Board of Directors that the Compensation Discussion & Analysis be included in this proxy statement.

COMPENSATION COMMITTEE

John A. Cosentino, Compensation Committee Chairman
James E. Service
Stephen T. Merkel

March 19, 2007

Nominating and Corporate Governance Committee

          In 2006, the members of the Nominating and Corporate Governance Committee were James E. Service, John A. Cosentino, Jr., Richard T. Cunniff, John M. Kingsley, Jr., Stephen T. Merkel, Ronald C. Whitaker and Joseph C. Strasser until his resignation on January 28, 2006. Admiral Service served as Committee Chairman. Messrs. Merkel and Whitaker were appointed to the committee as of June 1, 2006. Each of Messrs. Cosentino, Cunniff, Kingsley, Merkel, Service and Whitaker are, and Admiral Strasser was, considered “independent” for purposes of service on the Nominating and Corporate Governance Committee under the rules of the NYSE, including Rule 303A thereof.

          The Nominating and Corporate Governance Committee is responsible to the Board 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 has been adopted by the Board of Directors. The Nominating and Corporate Governance Committee charter is attached to this Proxy Statement as Exhibit C, is posted on the Company’s website at www.ruger.com, and is available in print to any stockholder who requests it by contacting the Corporate Secretary as set forth in “STOCKHOLDER COMMUNICATIONS” below.

          The Nominating and Corporate Governance Committee held eight meetings during 2006. All members of the committee attended all meetings of that committee during their 2006 tenure, with the exception of Ronald C. Whitaker, who was unable to attend one meeting of the committee due to a prior commitment.

          At a Board meeting on October 19, 2006, the Board revised the membership of the Nominating and Corporate Governance Committee effective January 1, 2007, naming James E. Service as continuing Committee Chairman, and John A. Cosentino, Jr., Richard T. Cunniff as continuing committee members, and C. Michael Jacobi as a new committee member.

          As required under its charter, the Nominating and Corporate Governance Committee has adopted criteria for the selection of new Directors, including, among other things, career specialization, technical skills, strength of character, independent thought, practical wisdom, mature judgment, and gender and ethnic diversity. Functional skills considered important for Directors to possess include experience as a chief executive or financial officer or similar position in finance, audit, manufacturing, advertising, military, or government, and knowledge and familiarity of firearms and the firearms industry. The committee will also consider any such qualifications as required by law or applicable rule or regulation, and will consider questions of independence and conflicts of interest. In addition, the following characteristics and abilities, as excerpted from the Company’s Corporate Board Governance Guidelines, will be important considerations of the Nominating and Corporate Governance Committee:

	Ø		personal and professional ethics, strength of character, integrity, and values;
	Ø		success in dealing with complex problems or have obtained and excelled in a position of leadership;
	Ø		sufficient education, experience, intelligence, independence, fairness, reasoning ability, practicality, wisdom, and vision to exercise sound and mature judgment;
	Ø		stature and capability to represent the Company before the public and the stockholders;
	Ø		the personality, confidence, and independence to undertake full and frank discussion of the Company’s business assumptions;
	Ø		willingness to learn the business of the Company, to understand all Company policies, and to make themselves aware of the Company’s finances; and
	Ø		willingness at all times to execute their independent business judgment in the conduct of all Company matters.

          The charter also grants the Nominating and Corporate Governance Committee the responsibility to identify and meet individuals believed to be qualified to serve on the Board and recommend that the Board select candidates for directorships. The Nominating and Corporate Governance Committee’s process for identifying and evaluating nominees for Director, as set forth in the charter, includes inquiries into the backgrounds and qualifications of candidates. These inquiries include studies by

the Nominating and Corporate Governance Committee and may also include the retention of a professional search firm to be used to assist it in identifying or evaluating candidates. The Nominating and Corporate Governance Committee has to date retained the firm of Korn/Ferry International to assist in the search for qualified Directors.

          The Nominating and Corporate Governance Committee has a written policy which states that it will consider Director candidates recommended by stockholders. There is no difference in the manner in which the Nominating and Corporate Governance Committee will evaluate nominees recommended by stockholders and the manner in which it evaluates candidates recommended by other sources. Any stockholder interested in recommending a candidate for consideration should send information relating to such stockholder’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, stockholder recommendations for Director candidates must be received by the Company on or before December 1, 2007.

          The Company has not rejected any Director candidates put forward by a stockholder or group of stockholders 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.

Executive Operations Committee

     Effective August 1, 2006, the Board of Directors established the Executive Operations Committee to collaborate with the Company’s executive team during the recent transition in the management of the Company, and appointed John A. Cosentino and C. Michael Jacobi as Co-Chairs, and James E. Service as a member of the Executive Operations Committee. The need to continue the Executive Operations Committee will be evaluated by the Board annually. The Board established the Executive Operations Committee’s responsibilities and roles as follows:

	Ø		To act as the Board’s representatives in providing advisory leadership to management as needed, and to ensure that all the expert resources, experiences and skill sets of the Board are constructively deployed in improving the business performance of the Company;
	Ø		To establish and implement a strategic business plan that enables the delivery of the growth and profitability objectives of the Company’s stockholders;
	Ø		To develop and implement the Ruger Business System, a robust, Company-wide business system based on “lean” principles and practices, designed to become indelibly rooted and capable of sustaining itself beyond the tenure of the current management team;
	Ø		To identify, recruit and develop key executive and management level personnel needed to execute the Company’s strategic and operational plans and to ensure a viable succession plan;
	Ø		To conduct ongoing oversight of Company operations and business performance, including monthly operations and strategy deployment reviews with executive management;
	Ø		To identify and explore major initiatives, such as acquisition analyses, major new program proposals and business opportunities; and
	Ø		To ensure overall executive team effectiveness, collaboration and communication within management and with the Board.

     The Executive Operations Committee held five meetings during 2006. All members of the committee attended all meetings of the committee during their 2006 tenure.

MEMBERSHIP AND MEETINGS OF THE BOARD AND ITS COMMITTEES

          In 2006, each Director attended at least 75% of the total number of 2006 meetings of the Board of Directors and its Committees on which he served during his 2006 tenure, with the exception of: (i) Ronald C. Whitaker, who was unable to attend one meeting of the Nominating and Corporate Governance Committee due to a prior commitment and (ii) William B. Ruger, Jr., who attended one, and was recused from one, of the two 2006 meetings of the Board of Directors held before he resigned as Chairman of the Board and retired as Chief Executive Officer of the Company.

          In addition, all then-current members of the Company’s Board of Directors attended the 2006 Annual Meeting of Stockholders. It is the policy of the Company that attendance at all meetings of the Board of Directors, all committee meetings, and the Annual Meeting of Stockholders is expected, unless the Director has previously been excused by the Chairman of the Board for good cause. Committee memberships and the number of meetings of the full Board of Directors and its committees held during the fiscal year 2006 are set forth in the table below. When feasible and appropriate, it is the practice of the Board of Directors to hold its regular committee meetings in conjunction with the meetings of non-management Directors in an executive session.

MEMBERSHIP AND MEETINGS OF THE BOARD AND ITS COMMITTEES TABLE FOR YEAR 2006

Nominating and

Corporate

Executive

Audit

Compensation

Governance

Operations (1)

Name

Board of Directors

Committee

Committee

Committee

Committee

William B. Ruger, Jr.* (2)

Chair

James E. Service (3)

Chair

Member

Member

Chair

Member

Stephen L. Sanetti*

Vice-Chair

Michael O. Fifer* (4)

Member

John A. Cosentino, Jr.

Member

Member

Chair

Member

Co-Chair

Richard T. Cunniff

Member

Member

Member

Member

C. Michael Jacobi (5)

Member

Member

Member

Co-Chair

John M. Kingsley, Jr.

Member

Chair

Member

Member

Stephen T. Merkel (5)

Member

Member

Member

Joseph C. Strasser (6)

Member

Member

Member

Member

Ronald C. Whitaker (5)

Member

Member

Member

Number of Meetings Held in 2006

15 includes 7 telephonic

9 includes 6 telephonic

6

8 includes 1 telephonic

5

NON-MANAGEMENT DIRECTORS

          The non-management members of the Board of Directors meet regularly in executive sessions, and each such meeting is led by the non-executive Chairman of the Board, or in his absence, a presiding Director. James E. Service has served as the non-executive Chairman of the Board since February 24. 2006. Richard T. Cunniff, who became the presiding Director upon Townsend Hornor’s death on September 11, 2005, was reappointed as the presiding Director on May 24, 2006. A new presiding Director is chosen annually for a one-year term at the first executive session held in concurrence with the organizational meeting of the Board of Directors held after each Annual Meeting of Stockholders. 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 (or has not so served for the greatest period of time prior to such decision), is chosen to be the presiding Director. In the absence of the non-executive Chairman of the Board, the presiding Director will preside at executive session meetings, and will 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.

          The Board of Directors believes that compensation for the Company’s independent Directors should be a combination of cash and equity-based compensation. The Directors and the Compensation Committee annually review Director compensation utilizing published compensation studies. Any recommendations for changes are made to the full Board of Directors by the Compensation Committee. In 2006, as a result of this review, the Directors fee structure was changed as described below.

Director’s Fees and Retainers

          Until June 1, 2006, the Company paid each independent Director $20,000 in annual retainer fees for services as a member of the Board of Directors, an attendance fee of $1,500 per Board or committee meeting attended and $750 for each telephonic Board or committee meeting attended. Each Director who was not independent received $6,000 in annual retainer fees, $500 per Board meeting attended and $250 for each telephonic Board meeting attended. Each Committee chairman received $2,000 for each committee meeting chaired.

          As of June 1, 2006, the Board of Directors approved a revised fee schedule whereby all attendance fees (for board and committee meetings) were eliminated and non-independent Directors no longer received Directors’ fees. In addition, each independent Director received an annual retainer fee of $50,000 and $5,000 for service on more than two committees. In addition to the annual retainer fees, the Board Chairman received $20,000, the Audit Committee Chairman received $10,000 and the Compensation Committee Chairman and the Nominating and Corporate Governance Committee Chairman each received $7,500. Payment for service on more than two committees was discontinued effective January 1, 2007.

          As of August 1, 2006, the Board of Directors established an Executive Operations Committee, as described above, and established additional committee fees of $50,000 per year for this Committee’s Co-Chairs and $7,500 per year for its members.

          Under the 2001 Stock Option Plan for Non-Employee Directors, options to purchase 20,000 shares of the Company’s Common Stock are granted to Directors when they are first elected at an exercise price equal to the closing price on the date of award. These options vest and become exercisable in four equal annual installments of 25% of the total number of options awarded, beginning on the date of grant and on each of the next succeeding three anniversaries thereafter.

          In 2006, the Board approved awards of $25,000 worth of restricted stock to be granted annually to each independent Director, subject to stockholder ratification of the 2007 SIP at the 2007 Annual Meeting of Stockholders. Pending such ratification, the independent Directors receive $25,000 per year in additional cash compensation, prorated from June 1, 2006, and continuing until June 30, 2007.

          No Director who was not independent served on any committees of the Board of Directors. All Directors were reimbursed for out-of-pocket expenses related to attendance at meetings.

DIRECTORS’ COMPENSATION TABLE FOR YEAR 2006

          The following table reflects the cash and equity compensation received during the 2006 fiscal year by each non-management Director who served on the Company’s Board of Directors and the committees of the Board of Directors. Please see “SUMMARY COMPENSATION TABLE” for disclosure of Directors’ fees paid to management Directors in the 2006 fiscal year.

										Change in Pension
		Fees Earned								Value and Nonqualified
		or Paid in				Option Awards				Deferred Compensation				All other				Total Director
Name of Director		Cash (1)(2)				(3)(4)				Earnings (5)				Compensation				Compensation (6)
James E. Service (7)		$	91,167															$	91,167
John A. Cosentino, Jr.		$	97,208															$	97,208
Richard T. Cunniff		$	70,000															$	70,000
C. Michael Jacobi (8)		$	64,853			$	11,006	(9)										$	75,859
John M. Kingsley, Jr.		$	75,833								(10	)						$	75,833
Stephen T. Merkel (8)		$	43,750			$	11,006	(9)										$	54,756
Joseph C. Strasser (11) former Director		$	6,500															$	6,500
Ronald C. Whitaker (8)		$	43,750			$	11,006	(9)										$	54,756

Narrative to Directors’ Compensation Table

          In conjunction with the fee structure changes described above, in 2006 the Board of Directors set a minimum equity ownership requirement for Non-Management Directors of five times their annual base retainer, to be achieved within five years of the date of adoption, or of a Director’s election, if later. As Directors are expected to hold a meaningful ownership position in the Company, a significant portion of overall Director compensation is intended to be in the form of Company equity. This has been partially achieved through options granted to each independent Director under the 2001 Stock Option Plan for Non-Employee Directors, as described below, and is intended to be partially achieved, going forward, through option grants and restricted stock awards as set forth in the proposed 2007 SIP described in this Proxy Statement. The current amounts of Common Stock beneficially owned by each Director may be found in the “BENEFICIAL OWNERSHIP TABLE” below.

          On January 5, 2001, each independent Director then serving as a Director of the Company (Messrs. Service, Kingsley and Cunniff) 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 vested and became exercisable in four equal annual installments of 25% of the total number of options awarded, beginning on the date of grant and on each of the next succeeding three anniversaries thereafter, and all such options are therefore currently vested and exercisable. On August 1, 2005, John A. Cosentino, Jr. and Joseph C. Strasser were each granted a non-qualified stock option to purchase 20,000 shares of Common Stock at an exercise price of $10.88 per share, and on June 1, 2006, C. Michael Jacobi, Stephen T. Merkel and Ronald C. Whitaker were each granted a non-qualified stock option to purchase 20,000 shares of Common Stock at an exercise price of $6.15 per share, under the 2001 Stock Option Plan for Non-Employee Directors. These options vest and became 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. Rear Admiral Strasser’s non-vested options under this plan expired upon his resignation on January 28, 2006.

          Non- officer employees and Directors are covered under the Company’s business travel accident insurance policy for $300,000 while traveling on Company business. Officers are covered under the Company’s business travel accident insurance policy for $1,000,000 while traveling at any time. Directors and officers are also covered under the Company’s director and officer liability insurance policies for claims alleged in connection with their service as a Director or officer, as applicable.

What is the Company’s Philosophy Regarding Compensation and what are the Compensation Program Objectives and Rewards?

          The Company’s executive compensation program is designed to reflect both corporate and individual performance in an environment that rewards commitment, responsibility and adherence to the highest standards of ethics and integrity. Recognition of both individual contributions as well as overall business results permits an ongoing evaluation of the relationship between the size and scope of the Company’s operations, its performance and its executive compensation.

          The program’s objectives are to attract, retain and motivate the workforce that helps to ensure our future success, support a lean and flexible business model culture, and to help achieve overall business objectives in order to provide our stockholders with a superior rate of return.

What are the Company’s Governance Practices Regarding Compensation?

Stockholders:		All of the Company’s current stock incentive plans were approved by the Company’s stockholders. The Company does not have any stock plans that are not stockholder-approved. If approved by the stockholders at the Company’s 2007 Annual Meeting, the 2007 SIP will replace the current stockholder-approved incentive plans.
Board and Compensation Committee and Nominating and Corporate Governance Committee:		The Compensation Committee and the Board of Directors determine the compensation of the Company’s executive officers, including the individuals whose compensation is detailed in this Proxy Statement. The Compensation Committee, which is composed entirely of independent Directors, establishes and administers compensation programs and philosophies. The Compensation Committee ensures that stockholder approved plans are administered in accordance with good governance practices and stockholder intent. The Compensation Committee is responsible for approval of salaries, bonuses and long-term incentive compensation paid to executive officers, bonus pools for non-executive employees, retirement formulas for executive officers, deferred compensation plans, and any employment and change-in-control agreements. In addition, the performance of each executive officer is evaluated by the Nominating and Corporate Governance Committee and reported to the full Board. The full Board of Directors reviews the Compensation Committee and Nominating and Corporate Governance Committee reports and acts on recommendations of the Compensation Committee. 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 (the “Tax Code”)) 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.
Management:		The Chief Executive Officer’s views regarding the performance and recommended compensation levels for the Company’s executive officers are discussed with the Compensation Committee and the Nominating and Corporate Governance Committee. Within management, the Chief Executive Officer and the Secretary serve as liaisons with these committees.

What are the Company’s Governance Practices Regarding Stock Options?

          The Compensation Committee and the Board of Directors consider recommendations from the Chief Executive Officer in establishing appropriate option grants to officers or employees. The Company’s policy for setting the timing of stock option grants does not allow executives to have any role in choosing the price of their options or other stock awards. The Company does not “back date” or re-price options or other stock awards. The Compensation Committee approves awards, including the specific number of shares granted to specific individuals which are ratified by the full Board of Directors and valued at the closing price of the Company’s Common Stock on the date of grant.

          All stock option awards have been, and will continue to be, subject to the approval of the Compensation Committee and the Board of Directors. The Company’s Corporate Secretary is responsible for issuing grants upon their approval by the Compensation Committee and the Board of Directors and maintaining records of all grants issued, exercised or terminated in accordance with the terms of the 1998 Stock Incentive Plan, 2001 Stock Option Plan for Non-Employee Directors and the 2007 SIP, if approved by the stockholders.

          The total options granted to the Company’s executive officers represented less than 50% of the total options originally granted at the inception of the 1998 Stock Incentive Plan. In the years following its inception, the 1998 Stock Incentive Plan has been used primarily as a vehicle to attract and retain executive and select management-level employees. Through attrition, the ratio of option grants for non-executive versus executive officer grants has declined. The Compensation Committee intends to review and consider further stock option grants for management-level employees pending the approval by the stockholders of the 2007 SIP.

What are the Elements of Compensation?

     The key elements of the Company’s executive compensation consist of:

Cash Compensation:		Base salary and performance bonuses.
Equity Compensation:		In the fiscal year 2006, the Company only awarded stock options to newly-employed officers pursuant to the Company’s 1998 Stock Incentive Plan (and upon approval, the 2007 SIP will allow the Company to make grants of stock options, restricted stock, deferred stock and stock appreciation rights (“SARS”), any of which may or may not require the satisfaction of performance objectives.)
Retirement Benefits:		The Company offers a tax-qualified Salaried Employee’s Retirement Income Plan (the “Pension Plan”) and a non-qualified Supplemental Executive Retirement Plan (the “SERP”). The Tax Code limits the amount of compensation that can be used in calculations under a tax-qualified defined benefit retirement plan. In 2006, this limit was $220,000. As a result, any retirement benefits that cannot be paid under the Company’s tax-qualified defined benefit plan due to these limits are paid to executives chosen by the Compensation Committee to participate under the SERP. For further discussion, see “PENSION PLANS” below.
Health and Welfare Benefits:		The Company offers the same health and welfare benefits to all salaried employees. These benefits include medical benefits, dental benefits, vision benefits, life insurance, salary continuation for short-term disability, long-term disability insurance, accidental death and dismemberment insurance, and other similar benefits. Because these benefits are offered to a broad class of employees, the cost is not required by SEC rules to be included in the “SUMMARY COMPENSATION TABLE” below.
Severance Agreements:		During a potential change in control, the Company does not want executives leaving to pursue other employment out of concern for the security of their jobs or being unable to concentrate on their work. To enable executives to focus on the best interest of the Company’s stockholders, the Company offers Severance Agreements that provide severance benefits to certain executives whose employment terminates as a result of a change in control. The Severance Agreements have both single and double trigger components. The “single trigger” arrangements require pay out immediately upon a change in control and in situations where there is a “double trigger”; a change in control must be followed by an involuntary loss of employment, a reduction in salary or duties, or other event for the named executive to be eligible to receive severance benefits. CEO Fifer’s Agreement provides that he will receive severance (without bonus and benefits) if he is terminated without cause absent a change in control.

Why Does the Company Choose to Pay Each Element?

          The Company’s compensation and benefits programs is designed to fulfill the Company’s need to attract, retain and motivate the highly talented individuals who will engage in the behaviors necessary to enable the Company to achieve its business objectives while upholding our values in a highly competitive marketplace. The elements of compensation are:

	•		Base salaries and retirement and welfare benefits, which are designed to attract and retain employees over time;
	•		Cash bonuses, which are designed to focus executives and employees on important Company-wide performance goals;
	•		Long term incentives, including non-qualified or incentive stock options, SARS, and additionally, pending approval of the 2007 SIP, restricted stock and deferred stock awards. These are designed to focus executives’ efforts on their individual contributions to the long-term success of the Company, as reflected in increases to the Company’s stock prices over a period of several years, growth in its earnings per share and other measurements of corporate performance; and
	•		Severance Agreements, which are designed to facilitate the Company’s ability to attract and retain talented executives and encourage them to remain focused on the Company’s business during times of corporate change.

How Does the Company Determine the Amount/Formula for Each Element?

          Generally, each element of compensation is evaluated independently to determine whether it is competitive within the market as a whole, and then the aggregate compensation is evaluated to determine whether it is competitive and reasonable within the market as a whole. The Compensation Committee reviews published compensation studies to evaluate the appropriate levels of salary, bonus and equity compensation. The Company’s equity awards are granted from time to time to participants pursuant to the 1998 Stock Incentive Plan based upon recommendations of the Compensation Committee (equity awards will be granted pursuant to the 207 SIP, subject to stockholder approval). The Company’s non-equity incentive awards are granted to executives pursuant to the Company’s incentive bonus program and on the recommendations of the Compensation Committee. Non-equity incentive plan awards are determined and paid as soon as practicable after the close of the fiscal year that such awards were earned.

          As a result of the Company’s equity and non-equity incentive plan awards, a significant portion of the Company’s executive compensation is linked directly to individual and corporate performance. The Compensation Committee intends to continue the policy of linking executive compensation to corporate and individual performance, recognizing that the ups and downs of the business cycle from time to time may result in an imbalance for a particular period.

How are Salaries Determined?

          Salaries are maintained at competitive levels considering the performance and longevity of the employee’s service. 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 responsibilities of the executive’s position, 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.

          To ensure that these salaries remain competitive, the Compensation Committee reviews public compensation studies. In 2006, the Compensation Committee undertook an evaluation of the compensation of the Company’s executives and officers using the metrics described above. As a result of this evaluation, the Compensation Committee recommended, and the Board of Directors approved, base salary increases effective as of March 1, 2006, as follows:

	•		Stephen L. Sanetti, Interim Chief Executive Officer and President, received a salary increase from $275,000 to $325,000;
	•		Thomas A. Dineen, Vice President (as of May 24, 2006), Chief Financial Officer and Treasurer, received a salary increase from $134,500 to $175,000;

	•		Robert R. Stutler, Vice President of Prescott Operations (as of March 17, 2006), received a salary increase from $195,000 to $225,000 and
	•		Leslie M. Gasper, Corporate Secretary, received a salary increase from $101,000 to $125,000.

          In making its salary decisions, the Compensation Committee places its emphasis on the particular executive’s experience, responsibilities and performance. No specific formula is applied to determine the weight of each factor. The Compensation Committee has historically followed a policy of using incentive bonus awards rather than base salary to reward outstanding performance

          In addition, the Compensation Committee evaluated the appropriate salary, bonus and equity compensation levels for those executive officers hired during 2006 utilizing published compensation studies. Accordingly, the following executive officers were hired during 2006 with base salary compensation as follows:

	•		Michael O. Fifer, Chief Executive Officer, was hired with a base annual salary of $400,000;
	•		Thomas P. Sullivan, Vice President of Newport Operations, was hired with a base annual salary of $235,000; and
	•		Christopher J. Killoy, Vice President of Sales and Marketing, was hired with a base annual salary of $200,000.

          In addition, the Compensation Committee increased Thomas A. Dineen’s salary from $175,000 to $200,000 as of February 1, 2007.

How are Bonuses Determined?

          The Company’s executive officers are eligible for an annual cash bonus as described below. Historically, the most significant corporate performance measure for bonus payments utilized by the Compensation Committee was the Company’s earnings, and included consideration of the Chief Executive Officer’s recommendations as to the appropriate bonuses for all officers. In 2006, the Compensation Committee developed, and the Board of Directors approved, an executive incentive bonus program based on metrics which include operating profits, operating cash flow results, and collaboration in facilitating the transition to the Ruger Business System discussed under “EXECUTIVE OPERATIONS COMMITTEE” above. Under this program, annual incentives are targeted and paid out as a percentage of base salary, and the Company’s officers are eligible to receive a variable percentage of base salary, as shown in the “ANNUALIZED SALARY AND INCENTIVE BONUS TARGETS TABLE” below. Incentive bonus opportunities will range from 0% to 150% of the officer’s stated target bonus percentage, depending on the Company’s and the officer’s performance results. The views of the Chief Executive Officer will continue to be considered by the Compensation Committee in establishing the appropriate bonus levels of all officers under the executive incentive program.

          While many of the accomplishments of 2006 did not result in 2006 increased operating profit, cash flows were improved and significant progress was made in the transition to the Ruger Business System. Accordingly, in recognition of the efforts of the Company’s officers during 2006, on January 23, 2007 the Compensation Committee recommended, and the Board of Directors approved, 2006 bonus payments as shown in the table below to the Named Executive Officers.

ANNUALIZED SALARY AND INCENTIVE BONUS TARGETS TABLE

		2006				2006				2006				2006				2006
		Annualized Base				Annual Incentive				Potential				Actual				Bonus Percent of
Name		Salary (1)				Target				Target Bonus Payment				Bonus Paid				Annual Base Salary
Michael O. Fifer		$	400,000				n/a	(2)			—			$	75,000				19	%
Stephen L. Sanetti		$	325,000				50	%		$	162,500			$	113,500				35	%
Thomas A. Dineen		$	175,000				40	%		$	70,000			$	52,500				30	%
Robert R. Stutler		$	225,000				40	%		$	90,000			$	67,500				30	%
Thomas P. Sullivan		$	235,000				n/a	(3)			—			$	50,000				21	%
Leslie M. Gasper		$	125,000				25	% (4)		$	31,250			$	28,125				23	%

          The Board also approved the extension of the performance-based non-equity incentive compensation program, utilizing a graded system based on levels of responsibility, to all employees of the Company in 2007 in replacement of the Company’s traditional bonus programs, which provided for semi-annual bonuses for salaried employees based on the discretion of senior management, and various incentives for hourly employees, taking into consideration the Company’s financial results and the responsibilities and performance of the individuals. Under the new incentive program, bonus opportunities will range from between 0% to 150% of each employee’s incentive bonus grade level, depending on the Company’s performance results. Incentive bonus grade levels for individuals vary from 5% to 75% of their annual base salary or hourly wage compensation.

How are Equity Compensation Awards Determined?

          Equity compensation has historically been granted to select management and executive level employees under the Company’s 1998 Stock Incentive Plan, which provides that stock options may be granted to the Company’s executive officers. The Compensation Committee has overall responsibility for approving and administering grants made pursuant to the Company’s 1998 Stock Incentive Plan. The views of the Chief Executive Officer are considered in establishing appropriate option grants to officers or employees. As with base salaries and annual bonuses, the Compensation Committee considers previous grants, tenure and responsibilities of the executive when determining the amount of stock awards to be granted. In the case of a new key executive, or an executive assuming new responsibilities, an initial grant may be made above target levels. In all cases, stock options are designed to align the interests of executive 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. Options generally become exercisable ratably over five years, provide for accelerated or continued vesting upon a change in control, and expire in ten years. Income tax withholding may be paid with exercised shares. The Company does not have a policy, plan or practice to time option grants to its executives in coordination with the release of material, non-public information.

          During 2006, the Compensation Committee recommended, and the Board of Directors approved, stock option grants to purchase the Company’s Common Stock under the 1998 Stock Incentive Plan to the following Named Executive Officers upon their dates of employment by the Company:

          Mr. Fifer was awarded options to purchase 400,000 shares on September 25, 2006. The options are exercisable in five annual installments of 80,000 shares each. The first becomes exercisable on September 25, 2007 (one year after the date of grant) and the remaining four become exercisable on September 25, 2008, September 25, 2009, September 25, 2010 and September 27, 2011 at an exercise price of $7.32 (which was the closing price on the date of award). None of the shares of the Company’s Common Stock underlying the options were forfeited in 2006.

          Mr. Sullivan was awarded options to purchase 100,000 shares on August 14, 2006. The options are exercisable in five annual installments of 20,000 shares each. The first becomes exercisable on August 14, 2007 (one year after the date of grant) and the remaining four become exercisable on August 14, 2008, August 14, 2009, August 14, 2010 and August 14, 2011 at an exercise price of $6.85 (which was the closing price on the date of award). None of the shares of the Company’s Common Stock underlying the options were forfeited in 2006.

What are the Company’s Ongoing Plans for Plan Based Equity Compensation?

          On February 23, 2007, the Board of Directors adopted, subject to shareholder approval, the 2007 SIP which will allow the Company to make grants of stock options, restricted stock, deferred stock and SARS, to employees, directors, independent contractors, officers and advisors of the Company, any of which may or may not require the satisfaction of performance objectives. If approved by the stockholders, the 2007 SIP will replace the Company’s 1998 Stock Incentive Plan and the Company’s 2001 Stock Option Plan for Non-Employee Directors. For detailed information regarding the 2007 SIP, see Proposal 3: “APPROVAL OF THE STURM, RUGER & COMPANY, INC. 2007 STOCK INCENTIVE PLAN” below.

          On January 23, 2007, the Compensation Committee recommended, and the Board of Directors approved, restricted stock grants equal to 10% of base salary to the Company’s officers and one management-level employee pending the approval of the 2007 SIP. In addition, Michael O. Fifer’s employment offer, as approved by the Board of Directors, includes issuance of a $250,000 restricted stock award pending stockholder approval of the 2007 SIP.

          The Compensation Committee intends to consider further stock option grants for management-level employees pending the approval of the 2007 Stock Incentive Plan.

How is the Chief Executive Officer’s Performance Evaluated and Compensation Determined?

          The Nominating and Corporate Governance Committee, the Compensation Committees and the Board as a whole annually evaluate the performance and review the compensation of the Chief Executive Officer utilizing a variety of criteria. The job objectives established for the Chief Executive Officer are:

	Ø		To promote and require the highest ethical conduct by all Sturm, Ruger & Company, Inc, employees and demonstrate personal integrity consistent with the Company’s Corporate Governance Guidelines.
	Ø		To establish, articulate and support the vision for the Company that will serve as a guide for expansion.
	Ø		To align physical, human, financial and organizational resources with strategies.
	Ø		To communicate strategies and alignment in a clear manner so that every employee understands their personal role in the Company’s success.
	Ø		To establish succession planning processes in order to select, coordinate, evaluate and promote the best management team.
	Ø		To keep the Board of Directors informed on strategic and business issues.

Evaluation of the Chief Executive Officer’s performance with regard to these job objectives is rated on the following business skills and performance achievement:

	Ø		Leadership: his ability to lead the Company with a sense of direction and purpose that is well understood, widely supported, consistently applied and effectively implemented.
	Ø		Strategic Planning: his development of a long-term strategy, establishment of objectives to meet the expectations of stockholders, customers, employees and all Company stakeholders, consistent and timely progress toward strategic objectives, and obtainment and allocation of resources consistent with strategic strategies.
	Ø		Financial Goals and Systems: his establishment of appropriate and longer-term financial objectives, ability to consistently achieve these goals, and ensuring that appropriate systems are maintained to protect assets and control operations.
	Ø		Financial Results: his ability to meet or exceed the financial expectations of stockholders, including continuous improvement in operating revenue, cash flow, net income, capital expenditures, earnings per share and share price.
	Ø		Succession Planning: his development, recruitment, retention, motivation and supervision of an effective top management team capable of achieving objectives.
	Ø		Human Resources: his ensuring development of effective recruitment, training, retention and personnel communication plans and programs to provide and motivate the necessary human resources to achieve objectives.
	Ø		Communication: his ability to serve as the Company’s chief spokesperson and communicate effectively with stockholders and all stakeholders.

	Ø		Industry Relations: his ensuring that the Company and its operating units contribute appropriately to the well being of their communities and industries, and representation of the Company in community and industry affairs.
	Ø		Board Relations: his ability to work closely with the Board of Directors to keep them fully informed on all important aspects of the status and development of the Company, his implementation of Board policies, and his recommendation of policies for Board consideration.

          The Chief Executive Officer’s compensation levels are determined after performance evaluations based on published compensation studies, the Chief Executive Officer’s demonstrated abilities and contributions to the success of the Company, and the overall results of Company operations.

What is the Chief Executive Officers’ Compensation History?

          Prior to his retirement on February 28, 2006 as Chief Executive Officer, William B. Ruger, Jr.’s base salary was last increased by the Board of Directors from $225,000 per year to $400,000 on October 24, 2000. Prior thereto, Mr. Ruger, Jr.’s base salary had not increased since January 1, 1998. Upon his retirement, in consideration of his years of service with the Company, Mr. Ruger was granted certain severance benefits which are described in the “SEVERANCE AGREEMENTS AND PAYMENTS” below.

          Stephen L. Sanetti, who served as Interim Chief Executive Officer from February 28, 2006 to September 25, 2006, last received a base salary increase on March 1, 2006 from $275,000 to $325,000. Mr. Sanetti was granted a 50% target bonus opportunity under the executive target bonus program developed by the Compensation Committee in 2006. Prior thereto, Mr. Sanetti’s base salary had not increased since October 24, 2000.

          Michael O. Fifer joined the Company as Chief Executive Officer on September 25, 2006, with an annual base salary of $400,000, an option award to purchase 400,000 shares of the Company’s Common Stock under the 1998 Stock Incentive Plan, a 75% target bonus opportunity under the executive target bonus program, and a $250,000 restricted stock award to be issued under the 2007 SIP, if such plan is approved by the Company’s stockholders at the 2007 Annual Meeting of Stockholders, and reimbursement for temporary living, commuting and relocation expenses with related tax gross-up.

Does the Company Pay for Perquisites?

          The Company believes in limited perquisites for its Directors and executive officers. Perquisites include discounts on Company products, which are available to all Directors, executive officers and Company employees. Temporary living and relocation expense reimbursements, with payment of related taxes, and the use of Company vehicles for business purposes, are available to executive officers and management-level employees. Temporary living and relocation reimbursements and related tax payments for the Named Executive Officers are disclosed in the “SUMMARY COMPENSATION TABLE” below.

SUMMARY COMPENSATION TABLE

     The following table summarizes total compensation paid or earned by the Company’s Name Executive Officers (those officers who served as Chief Executive Officer or Chief Financial Officer during 2006, and the three other officers who received the highest compensation in 2006) who served in such capacities during 2006. Based on the grant date fair value of equity awards granted in 2006 and the base salary of such officers, the Named Executive Officers’ aggregate base salaries accounted for approximately 50% of their total compensation, while incentive compensation (cash and equity) accounted for approximately 22% of their total compensation, change in pension value and nonqualified deferred compensation earnings accounted for approximately 5% of their total compensation, and all other compensation accounted for approximately 23% of their total compensation for 2006. (For narrative disclosure of the philosophy and structure of the Company’s equity compensation earned by the Named Executive Officers, please refer to the “COMPENSATION DISCUSSION AND ANALYSIS” above.)

																		Change in
																		Pension Value
																		and Nonqualified
																		Deferred
Named Executive Officer														Option				Compensation				All Other
and Principal Position		Year				Salary				Bonus (1)				Awards (2)				Earnings (3)				Compensation(4)				Total
William B. Ruger, Jr. (5)
Former Chairman of the Board of Directors and Former Chief Executive Officer			2006			$	68,667	(6)											(7	)		$	395,687			$	464,354
Michael O. Fifer (8)
Chief Executive Officer and Director			2006			$	107,692			$	75,000			$	67,400	(9)		$	2,463			$	11,551			$	264,106
Stephen L. Sanetti (10)
Vice Chairman of the Board of Directors, Interim Chief Executive Officer. President, Chief Operating Officer and General Counsel			2006			$	322,917	(11)		$	113,750							$	36,149	(12)		$	516			$	473,332
Thomas A. Dineen (13)
Vice President, Treasurer and Chief Financial Officer			2006			$	168,250			$	52,500							$	4,321			$	108			$	225,179
Robert R. Stutler (14)
Vice President of Prescott Operations			2006			$	220,000			$	67,500							$	67,950			$	792			$	356,242
Thomas P. Sullivan (15)
Vice President of Newport Operations			2006			$	89,104			$	50,000			$	21,000	(16)		$	683			$	104,332			$	265,119
Leslie M. Gasper
Corporate Secretary			2006			$	121,000			$	28,125							$	11,353			$	276			$	160,754

Notes to Summary Compensation Table

ALL OTHER COMPENSATION TABLE FOR YEAR 2006

																						Accrued
														Taxable								Vacation
						Relocation								Premiums								Pay
						and				Taxable				Paid by the								Received
						Temporary				Value of				Company								upon
						Living and				Company				for Group								Separation
Named Executive						Related Tax				Products				Term Life				Severance				of
Officers		Year				Gross-Ups				Received				Insurance				Benefits				Employment				Total
William B. Ruger, Jr.			2006															$	369,480	(1)		$	26,207	(2)		$	395,687
Michael O. Fifer			2006			$	11,506	(3)						$	45											$	11,551
Stephen L. Sanetti			2006											$	516											$	516
Thomas A. Dineen			2006											$	108											$	108
Robert R. Stutler			2006											$	792											$	792
Thomas P. Sullivan			2006			$	104,287	(4)						$	45											$	104,332
Leslie M. Gasper			2006											$	276											$	276

GRANT OF PLAN BASED AWARDS TABLE FOR YEAR 2006

     The following table reflects estimated possible payouts under equity incentive plans to the Named Executive Officers during the fiscal year 2006. (For narrative disclosure of bonuses that were not awarded pursuant to an incentive plan and the equity awards that were granted pursuant to an incentive plan as described in the table below, please see the “COMPENSATION DISCUSSION AND ANALYSIS” above.)

		Number of
		Securities				Exercise
		Underlying				Price
		Options				per				Grant Date
Named Executive		Granted				Share				Fair Value
Officers		(1)				(2)				(3)
Michael O. Fifer			400,000			$	7.32			$	67,400
Stephen L. Sanetti
Thomas A. Dineen
Robert. R. Stutler
Thomas P. Sullivan			100,000			$	6.85			$	21,000
Leslie M. Gasper

Notes to Grant of Plan Based Awards Table

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END 2006 TABLE

Option Awards (1)

Number of Securities

Option

Option

Underlying Unexercised

Exercise

Expiration

Named Executive

Options

Price (2)

Grant Date

Vest Date

Date

Officers

Exercisable

Unexercisable

Michael O. Fifer (3)

400,000

$

7.32

9/25/2006

9/25/2011

9/25/2016

Stephen L. Sanetti (4)

200,000

0

$

11.9375

12/31/1998

Vested

12/31/2008

Thomas A. Dineen (5)

35,000

0

$

11.9375

12/31/1998

Vested

12/31/2008

Robert R. Stutler (6)

100,000

0

$

11.9375

12/31/1998

Vested

12/31/2008

Thomas P. Sullivan (7)

0

100,000

$

6.85

8/14/2006

8/14/2011

8/14/2016

Leslie M. Gasper (8)

50,000

0

$

11.9375

12/31/1998

Vested

12/31/2008

Total

385,000

500,000

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

Payments on Change in Control

          In the event of a potential change in control of the Company, it is vitally important that executives be able to continue working in the best interest of our stockholders. For that reason, in 2006, the Company entered into severance agreements (the “Severance Agreements”) with certain executive officers designed to provide salary and medical benefit continuance in the event of the termination of his or her employment under certain circumstances. These agreements are not employment contracts and do not specify an employment term, compensation levels or other terms or conditions of employment.

          There are also changes in control provisions in the stock option agreements issued pursuant to the Company’s stockholder-approved 1998 Stock Incentive Plan.

          The Severance Agreements have both single and double trigger components. The “single trigger” arrangements require pay out immediately upon a change in control and in situations where there is a “double trigger”, a change in control must be followed by an involuntary loss of employment, a reduction in salary or duties, or other event for the Named Executive Officer to be eligible to receive severance benefits.

Covered Terminations and Severance Payments Pursuant to Change in Control Agreements

Each of the Named Executive Officers entered into a Severance Agreement that provides for the following:

          Michael O. Fifer

          Michael O. Fifer’s severance agreement provides for severance benefits, if during the term of the agreement: (A) he is terminated without cause or (B) there is a Change in Control and a subsequent reduction of his salary or a diminution of his duties and thereafter he terminates his employment. In the situation described in clause (A) above, he will receive a lump sum cash payment equal to 18 months of his annual base salary. In the situation described in clause (B) above, he will receive an amount equal to a lump sum cash payment equal to 18 months of his annual base salary and 100% of his target cash bonus and continued insurance benefits. Such continued insurance benefits are to be paid by Mr. Fifer, for a period equal to the greater of: (x) the remaining term in effect under his Severance Agreement at the time of the Change in Control or (y) the period that such coverage would be maintained if Mr. Fifer was fully eligible to receive severance benefits as is otherwise maintained by the Company for full time employees, for a period not to exceed two years from the date that Mr. Fifer’s employment with the Company ceases.

          Stephen L. Sanetti

          Stephen L. Sanetti’s Severance Agreement provides for severance benefits, if during the term of the agreement: (A) there is a Change in Control and he is terminated or (B) he is no longer President (this is a Change in Control event as defined in Mr. Sanetti’s Agreement) and thereafter he terminates his employment, or there is a subsequent reduction in his salary and thereafter he terminates his employment. In the either of the situations described in clauses (A) and (B), he will receive: (i) a lump sum cash payment equal to the greater of (a) 18 months of annual base salary and 100% of his target bonus or (b) ¹/2 month of salary for each year of employment service to the Company; and (ii) continued insurance benefits. Such continued insurance benefits are to be paid by Mr. Sanetti, for a period equal to the greater of: (x) the remaining term in effect under his Severance Agreement at the time of the Change in Control or (y) the period that such coverage would be maintained if Mr. Sanetti was fully eligible to receive severance benefits as is otherwise maintained by the Company for full time employees, for a period not to exceed two years from the date that Mr. Sanetti’s employment with the Company ceases.

          Thomas A. Dineen, Robert R. Stutler and Leslie M. Gasper

          Thomas A. Dineen’s, Robert R. Stutler’s, and Leslie M. Gasper’s Severance Agreements provide for severance benefits, if during the term of each agreement: (A) there is a Change in Control and thereafter the officer terminates his or her employment or (B) there is a Change in Control and a subsequent reduction in salary or diminution of duties and thereafter he or she terminates employment. In either of the situations described in clauses (A) and (B) above, the executive officer will receive: (i) a lump sum cash payment equal to the greater of (a) 18 months of annual base salary and 100% of target bonus or (b) ¹/2 month of salary for each year of employment service to the Company; and (ii) continued insurance benefits. Such continued insurance benefits are to be paid by the executive, for a period equal to the greater of: (x) the remaining term in effect under his or her Severance Agreement at the time of the Change in Control or (y) the period that such coverage would be

maintained if the executive was fully eligible to receive severance benefits as is otherwise maintained by the Company for full time employees, for a period not to exceed two years from the date that the executive’s employment with the Company ceases.

          Thomas P. Sullivan

          Thomas P. Sullivan’s Severance Agreement provides for severance benefits, if during the term of the agreement: (A) there is a Change in Control and he is terminated or (B) there is a Change in Control and he no longer reports directly to the Chief Executive Officer and thereafter he terminates his employment, or there is a Change in Control and a subsequent reduction in his salary and thereafter he terminates his employment. In either of the situations described in clauses (A) and (B) above, he will receive (i) a lump sum cash payment equal to the greater of (a) 18 months of base salary and 100% of his target bonus or (b) ¹/2 month of salary for each year of employment service to the Company; and (ii) continued insurance benefits. Such continued insurance benefits are to be paid by Mr. Sullivan, for a period equal to the greater of: (x) the remaining term in effect under his Severance Agreement at the time of the Change in Control or (y) the period that such coverage would be maintained if Mr. Sullivan was fully eligible to receive severance benefits as is otherwise maintained by the Company for full time employees, for a period not to exceed two years from the date that Mr. Sullivan’s employment with the Company ceases.

          In all cases, payment of severance benefits will be subject to the six-month deferral requirements of under the Tax Code Section 409A. All of the agreements have a one-year term, subject to automatic renewal on each anniversary of its date unless either side gives notice of intent not to renew at least one year in advance. The amount of severance and benefits are generally determined based on competitive market practices for executives at this level. The Compensation Committee also takes into consideration that executives at this level generally require a longer timeframe to find comparable jobs because there are fewer jobs at this level in the market and often have a large percentage of their personal wealth dependent on the status of the Company, given the fact that a large part of their compensation is stock option-based.

Change in Control Events Not Covered by the Severance Agreements

          The 1998 Stock Incentive Plan provides for accelerated vesting of stock awards that the executive has already received, not for additional payments. The 1998 Stock Incentive Plan has a single trigger component, the change in control event. In other words, if there is a change in control event, the accelerated vesting of stock-based compensation will occur whether or not the executive’s employment is terminated. This further protects the executive because it provides him or her with an opportunity exercise and vote the option shares as a stockholder.

          In addition, under the Company’s current practice, the Named Executive Officers are potentially eligible to receive certain severance benefits in the event that they are terminated without cause other than in a change in control circumstance. In this instance, if the officer has more than six months of service, the officer would potentially receive severance benefits equal to ¹/2 month of annual salary for each full year of service to the Company and continued insurance benefits for the same period. On December 13, 2006 the Board approved the creation of the Sturm, Ruger & Company, Inc. Employee Severance Plan, a formal severance plan for all employees, and under which officers, in the event of termination without cause, will receive one month’s salary per year of service, plus medical insurance continuation, for a minimum of six months and a maximum of 18 months.

          The Company’s SERP provides that in the event of a Change in Control, participants in pay status will receive a lump-sum payment equal to the present value of the participant’s benefit. Those not in pay status immediately prior to a change in control will: (i) become fully vested upon the change in control and (ii) if their employment with the Company is terminated under certain circumstances within three years after a Change in Control, become entitled to a lump-sum payment following such termination of employment.

Change in Control Definition

     Generally, under the Severance Agreements and the 1998 Stock Incentive Plan, a “Change in Control” will be deemed to have occurred:

	•		When any person acquires 25% or more of the voting power of the Company
	•		If a majority of the Board members change, unless the new Directors are elected or nominated for election by at least two-thirds of the existing Board members;
	•		upon the acquisition of the Company; or
	•		upon the liquidation or dissolution of the Company (with approval of the stockholders)

Termination by Death or Disability

     Executives receive no payment other than through life insurance or disability insurance available to salaried employees generally. Under the 1998 Stock Incentive Plan, all options may be exercised for 90 days after death or disability to the extent vested on the date of such death or total disability. In the event of termination by death or disability, the executive or his or her estate will receive his or her bonus to the extent earned.

Termination by Retirement

          Executives are eligible to participate in the Company’s Pension Plan and, subject to authorization of the Board of Directors, may participate the Company’s SERP. At year-end 2006, Stephen L. Sanetti and Robert Stutler were eligible for early retirement under Pension Plan, and Mr. Sanetti was the only executive participating in the SERP, although he was not yet eligible to receive benefits under the SERP. None of the Named Executive Officers was eligible for normal retirement. Pension benefits are described under “PENSION PLANS” below. In addition to the pension benefits described below, when a retirement-eligible employee terminates employment, his or her options expire 90 days after termination. In the event of termination by retirement, the executive will receive his or her bonus to the extent earned.

Voluntary and Involuntary Termination by Employee

          Executives receive no payments or benefits above those that are available to salaried employees generally upon voluntary or involuntary termination (absent a Change in Control event, death, disability or retirement or in the case of Mr. Fifer, he is terminated without cause). It is the Company’s policy that when an employee terminates voluntarily before retirement, his or her stock options expire 30 days after termination. In the case of involuntary termination, an employee’s stock options terminate immediately. If the employee voluntarily terminates his or her employment or is involuntarily terminated, any bonus is forfeited.

Severance Payments Made by the Company in Fiscal Year 2006

          Upon his resignation as Chairman of the Board and retirement as Chief Executive Officer in February, 2006, William B. Ruger, Jr. was awarded severance benefits in consideration of his service to the Company of: (i) ¹/2 month of annual salary for each year of his service to the Company and (ii) continued insurance benefits until November 30, 2007. Commencement of payment of Mr. Ruger’s severance benefits was postponed until September 1, 2006 in accordance with Tax Code Section 409A, and was made retroactive to March 1, 2006 with interest of 4.75% per annum applied to the retroactive payments. Mr. Ruger’s actual severance benefits are also described in the table below.

POTENTIAL AND ACTUAL PAYMENTS UNDER SEVERANCE AGREEMENTS TABLE

     The table below sets forth the terms and estimated potential payments and benefits provided in each termination circumstance for the Company’s Named Executive Officers as of December 31, 2006. The potential amounts shown in the table do not include payments and benefits to the extent that they are provided on a non-discriminatory basis to the Company’s salaried employees generally. These include: accrued vacation pay, regular pension benefits under the Company’s Pension Plan, any severance paid under the Company’s general policy as described above, and voluntary and involuntary termination absent a change in control. Although all options granted under the 1998 Stock Incentive Plan vest the same for salaried employees as executives, these values are included, as options have traditionally been granted primarily to executives.

																		Continuation
										Number of				Retirement				of Medical
										Options				Benefits				Welfare				Aggregate
		Severance				Bonus				That Vest				(SERP)				Benefits				Payments
Named Executive Officers		Agreement				Payment				(1)				(2)				(3)				(4)
Michael O. Fifer
Change In Control (5)		$	600,000			$	450,000				400,000				0			$	23,175			$	1,073,175
Termination without Cause		$	600,000				0				0				0				0			$	600,000
Retirement			n/a			$	300,000				0				0				0			$	300,000
Death or Disability			n/a			$	300,000				0				0				0			$	300,000
Stephen L. Sanetti(6)
Change In Control		$	487,500			$	243,750				200,000			$	954,799			$	23,175			$	1,709,224
Retirement			n/a			$	162,500				200,000			$	954,799				0			$	1,117,299
Death or Disability			n/a			$	162,500				200,000			$	954,799				0			$	1,117,299
Thomas A. Dineen
Change In Control		$	262,500			$	105,000				35,000				0			$	23,175			$	390,675
Retirement			n/a			$	70,000				35,000				0				0			$	70,000
Death or Disability			n/a			$	70,000				35,000				0				0			$	70,000
Robert R. Stutler
Change In Control		$	337,500			$	135,000				100,000				0			$	23,175			$	495,675
Retirement			n/a			$	90,000				100,000				0				0			$	90,000
Death or Disability			n/a			$	90,000				100,000				0				0			$	90,000
Thomas P. Sullivan
Change In Control		$	352,500			$	141,000				100,000				0			$	23,175			$	516,675
Retirement			n/a			$	94,000				0				0				0			$	94,000
Death or Disability			n/a			$	94,000				0				0				0			$	94,000
Leslie M. Gasper
Change In Control		$	187,500			$	46,875				50,000				0			$	23,175			$	257,550
Retirement			—			$	31,250				50,000				0				0			$	31,250
Death or Disability			—			$	31,250				50,000				0				0			$	31,250
William B. Ruger, Jr.(7)
Change In Control			n/a				n/a				n/a				n/a				n/a				n/a
Retirement		$	702,813				—			Expired				$	1,123,894			$	9,199			$	1,835,906
Death or Disability			n/a				n/a				n/a				n/a				n/a				n/a

Notes to Potential and Actual Payments Under Severance Agreements Table

PENSION PLANS

          All of the Company’s salaried employees participate in the Sturm, Ruger & Company, Inc. Salaried Employees’ Retirement Income Plan (the “Pension Plan”), a defined benefit pension plan, which generally provides annual pension benefits at age 65 in the form of a straight life annuity in an amount equal to: (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.

          William B. Ruger, Jr. retired as of March 1, 2006 under the Pension Plan. Mr. Ruger’s total payments under this plan for 2006 were $55,738. John M. Kingsley, Jr., a Director who retired as Executive Vice President of the Company on December 31, 1996, received $37,710 in benefits from the Pension Plan during 2006.

          The Sturm, Ruger & Company, Inc. Supplemental Executive Retirement Plan (the “SERP”) is a nonqualified supplemental retirement plan for certain senior executives of the Company who have achieved the rank of Vice President or above and who are selected by the Compensation Committee. Two of the executive officers who appear in the Summary Compensation Table, William B. Ruger, Jr. and Stephen L. Sanetti participated in the SERP in 2006. The SERP provides an annual benefit beginning at age 65, the normal retirement age under the SERP; however, the amount of a participant’s benefit depends upon his or her completed years of service with the Company as of such age. For participants who have completed 25 or more years of service with the Company the amount of the benefit is equal to 50% of the participant’s average annual compensation. For participants who have completed 10 years of service, but less than 25 years of service with the Company, the amount of the benefit is equal to 2% of the participant’s average annual compensation for each completed year of service with the Company up to a maximum of 50% of such average annual compensation. For former participants who have at least 10 years of service with the Company, the amount of the benefit is equal to 2% of the participant’s average annual compensation for each completed year of service with the Company up to a maximum of 50% of such average annual compensation. For participants who attain age 60 and have at least ten years of service, the amount of the benefit shall be equal to 2% of the participant’s average annual compensation for each completed year of service with the Company up to a maximum of 50% of such average annual compensation. All SERP benefits are reduced by the amount the participant is entitled to receive under the Pension Plan, and are further reduced by the amount of Social Security benefit the participant is entitled to receive commencing at age 65. The SERP benefit is payable as an annuity over the life of the participant, with 50% to continue for the life of the participant’s surviving spouse after the participant’s death. Pre-retirement death or disability benefits are also provided to plan participants under the SERP.

          The average annual compensation used to calculate SERP benefits includes the participant’s base pay, bonuses and other incentive 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, 2006, Stephen L. Sanetti had more than 25 years of credited service.

          William B. Ruger, Jr. retired as Chief Executive Officer on February 28, 2006. Commencement of Mr. Ruger, Jr.’s SERP benefits was postponed until September 1, 2006, as required under the Tax Code Section 409A. Mr. Ruger, Jr. received $90,976 in benefits from the SERP during 2006. John M. Kingsley, Jr., a Director who retired as Executive Vice President of the Company on December 31, 1996, received $145,668 in benefits from the SERP during 2006.

          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 immediately prior to a change in control shall: (i) become fully vested upon the change in control and, (ii) if their employment with the Company is terminated under certain circumstances within three years after a change in control, become entitled to a lump-sum payment following such termination of employment. 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). If the lump-sum payment of the SERP benefit results in the imposition of an excise tax under the Tax Code Section 4999 on the participant, the Company will reimburse the participant an amount equal to the excise tax plus any federal, state and local income tax that is imposed on such reimbursement.

          Effective for 2005 and thereafter, the SERP was amended to reflect the provisions of the Tax Code Section 409A, which governs non-qualified deferred compensation, which included revision of the SERP change in control provisions. A change in control is defined to mean one of the following events: (i) change in ownership of the Company; (ii) the change in effective control of the Company and (iii) the change in ownership of substantial portion of the Company’s assets. A “change in ownership of the Company” occurs when the acquisition by a person, or more than one person acting a group, of Company stock which together with stock previously owned by such person or group, results in the ownership of more than 50% of the total fair market value or total voting power of the Company stock; provided however, if a person or group owns more than 50% before the acquisition of additional Company stock, the acquisition of additional stock will not be a change in control (however, if the increase in stock is a result of a transaction in which the Company acquires its stock in exchange for property, such transaction will be treated as acquisition of Company stock for purposes of determining whether a change in control occurs). A “change in effective control of Company” occurs when: (1) a person, or more than one person acting as a group, acquires (or, during the preceding 12-month period, acquired) ownership of the Company stock possessing 35% or more of the total voting power of the Company stock or (2) the election of a majority of the Company’s Directors is not endorsed by a majority of the Company’s existing Board of Directors. A “change in ownership of substantial portion of Company’s assets” occurs when any person, or more than one person acting as a group, acquires (or, during the preceding 12 months, acquired) assets from the Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions (gross fair market value means the value of the Company’s assets or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets).

          Prior to December 31, 2006, the Company’s salaried employees also participated in the Sturm, Ruger & Company, Inc. Profit Sharing Plan, a defined contribution retirement plan, which generally provided an annual employer contribution based on Company profits and individual base salaries to those participants who met the plan’s annual participation requirements, with participant direction of individual account balances. Participants generally became vested in their account balances after five years of service, but could not receive distribution of their account balances until they attained age 65. Those individuals named in the Summary Compensation Table who were excluded from participating in the Profit Sharing Plan as a result of the Tax Code Sections 401(a)(4) and 410(b) limitations were eligible to participate in the non-qualified Supplemental Executive Profit Sharing Plan, designed to emulate the benefits provided under the Profit Sharing Plan, with Company gross-up for taxes related to the annual benefit. Until December 31, 2006, the Company also maintained the Hourly Employees’ 401(k) Plan, which excluded salaried employees. However, as of January 1, 2007, the Board of Directors authorized the merger of the Profit Sharing Plan with the 401(k) Plan and the discontinuance of the Supplemental Executive Profit Sharing Plan. The new Sturm, Ruger & Company, Inc. 401(k) Plan, effective January 1, 2007, provides a safe harbor match for both hourly and salaried participants of the plan equal to 100% of the first 3% of employee contributions, plus 50% of the next 2% of employee contributions, subject to annual IRS limits, and full vesting in all account balances. The individuals named in the Summary Compensation Table are currently employed are eligible to participate in the Sturm, Ruger & Company, Inc. 401(k) Plan, subject to IRS plan limits.

2006 PENSION BENEFITS TABLES

          The following table sets forth the present value of pension benefits accrued by, and actual benefits paid in 2006 to, the Named Executive Officers under the Salaried Employees’ Retirement Income Plan and the SERP.

Salaried Employee’s Retirement Income Plan (the “Pension Plan”)

		Credited Service (1)				Present Value of Accumulated				Payments During Last
Named Executive Officers		(Years)				Plan Benefit (2)				Fiscal Year
Michael O. Fifer			0.3			$	2,463
Stephen L. Sanetti (3)(4)			25.0			$	348,362
Thomas A. Dineen			9.6			$	26,766
Robert R. Stutler (4)			19.8			$	418,686
Thomas P. Sullivan			0.4			$	683
Leslie M. Gasper			25.0			$	126,686
William B. Ruger, Jr. (Retired)(5)			25.0			$	617,012			$	55,738

Supplemental Executive Retirement Plan(The “SERP”)

		Credited Service (1)				Present Value of
Named Executive Officers		(Years)				Accumulated Plan Benefit (2)				Payments During 2006
Michael O. Fifer			0.3
Stephen L. Sanetti (3)(4)			25.0			$	954,799
Thomas A. Dineen			9.6
Robert R. Stutler (4)			19.8
Thomas P. Sullivan			0.4
Leslie M. Gasper			25.0
William B. Ruger, Jr. (Retired)(5)			25.0			$	1,123,894			$	90,976

PRINCIPAL STOCKHOLDER TABLE

          The following table sets forth as of March 1, 2007 the ownership of the Company’s Common Stock by each person of record or known by the Company to beneficially own more than 5% of such stock.

Amount and Nature of

Title of Class

Name and Address of Beneficial Owner

Beneficial Ownership

Percent of Class

Common Stock

Royce & Associates, LLC 1414 Avenue of the Americas New York, NY 10019

1,402,600

(1)

6.2

%

BENEFICIAL OWNERSHIP TABLE

     The following table sets forth certain information as of March 1, 2007 as to the number of shares of the Company’s Common Stock beneficially owned by each Director, Named Executive Officer, and all Directors and Named Executive Officers of the Company as a group.

		Beneficially				Stock Options Currently
		Owned Shares				Exercisable or to Become				Total Share
		of				Exercisable within 60 days after				Investment in				Percent of
		Common Stock				March 1, 2007				Common Stock				Class
Independent Directors:
James E. Service			15,000				20,000				35,000				*
John A. Cosentino, Jr.			40,000				10,000				50,000				*
Richard T. Cunniff			45,500	(1)			20,000				65,500				*
C. Michael Jacobi			10,000				5,000				15,000				*
John M. Kingsley, Jr.			4,160				20,000				24,160				*
Stephen T. Merkel			0				5,000				5,000				*
Ronald C. Whitaker			12,000				5,000				17,000				*
Named Executive Officers:
William B. Ruger, Jr. (2)			0				0				0				*
Michael O. Fifer (also a Director)			22,200				0				22,200				*
Stephen L. Sanetti (also a Director)			32,000				200,000				232,000				1.02	%
Thomas A. Dineen			1,795				35,000				36,795				*
Robert. R. Stutler			0				100,000				100,000				*
Thomas P. Sullivan			0				0				0				*
Leslie M. Gasper			149	(3)			50,000				50,149				*
Directors and executive officers as a group: (7 independent Directors, 3 Directors who were also executive officers during 2006 and 4 other executive officers)			182,804				470,000				652,804				2.88	%

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

          Section 16(a) of the Exchange Act requires the Company’s officers and Directors, and persons who own more than ten percent of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownership with the SEC and NYSE. Officers, Directors and greater-than-ten-percent stockholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.

          To the Company’s knowledge, based solely on a review of the copies of the Section 16(a) report forms furnished to the Company and written representations that no other reports were required, that with respect to the period from January 1, 2006 through December 31, 2006, 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

          The Company’s Board of Directors has a policy of monitoring and reviewing issues involving potential conflicts of interest, and reviewing and approving all related party transactions.

          During 2006, the Company paid the amount of $9,750 to William B. Ruger, Jr. for the rental of office space owned by Mr. Ruger, Jr. in Newport, New Hampshire. The Company vacated these premises as of July 31, 2006. William B. Ruger, Jr., served as the Company’s Chairman of the Board until February 13, 2006 and Chief Executive Officer until February 28, 2006.

          On September 26, 2006, the Company purchased, and subsequently retired, 4,272,000 shares of Common Stock from Ruger Business Holdings, L.P. for $5.90 per share. The William B. Ruger Revocable Trust of 1988 is the sole limited partner and Ruger Management, Inc., is the sole general partner of Ruger Business Holdings, L.P. 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, and co-owners of Ruger Management, Inc.. Mr. Ruger, Jr. and Mrs. Vogel had shared investment and voting control with respect to such 4,272,000 shares of Common Stock sold to the Company.

PROPOSAL NO. 2 — RATIFICATION OF INDEPENDENT AUDITORS

          Effective July 29, 2005, the Audit Committee of the Company dismissed KPMG LLP and appointed McGladrey & Pullen, LLP as its independent auditors. This change was the result of an extensive search made at the request of the Audit Committee to review the services and costs associated with the external audit function. Subject to the ratification of the stockholders, the Board of Directors has reappointed McGladrey & Pullen, LLP as the Company’s independent auditors for the 2007 fiscal year.

          KPMG LLP’s report on the Company’s financial statements for the past two years did not contain an adverse opinion, disclaimer of opinion, or qualification or modification as to uncertainty, audit scope, or accounting principles.

          During the two most recent fiscal years and the interim period preceding July 29, 2005, there have been no disagreements with KPMG LLP on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which, if not resolved to the satisfaction of KPMG LLP, would have caused it to make reference to the subject matter of the disagreement in connection with its report.

          The Company (or someone on its behalf) has not consulted McGladrey & Pullen, LLP during the two most recent fiscal years and the subsequent interim period preceding July 29, 2005 regarding the application of accounting principles to a specified transaction or the type of audit opinion that might be rendered on the Company’s financial statements.

PRINCIPAL ACCOUNTANTS’ FEES AND SERVICES

          The following table summarizes the fees incurred by the Company for professional services rendered by KPMG LLP and McGladrey & Pullen, LLP during fiscal years 2006 and 2005.

		KPMG LLP								McGladrey & Pullen, LLP
		Fiscal 2006 Fees				Fiscal 2005 Fees				Fiscal 2006 Fees				Fiscal 2005 Fees
Audit Fees		$	115,000	(1)		$	121,000	(2)		$	513,000			$	460,000	(3)
Audit-Related Fees		$	0			$	0			$	42,000			$	38,000
Tax Fees		$	0			$	0			$	14,000			$	12,000
All Other Fees		$	0			$	0			$	0			$	0
Total Fees		$	115,000			$	121,000			$	569,000			$	510,000

Audit Fees

          Consist of fees billed for professional services rendered for the audit of the Company’s consolidated financial statements, the audit of internal controls over financial reporting per Section 404 of the Sarbanes-Oxley Act, the review of interim consolidated financial statements included in quarterly reports and services provided in connection with statutory and regulatory filings or engagements.

Audit — Related Fees

          Consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported under “Audit Fees”. These services include audits of the Company’s employee benefit and compensation plans.

Tax Fees

          Consist of fees billed for professional services for tax assistance, including pre-filing reviews of original and amended tax returns for the Company and tax audit assistance.

All Other Fees

          There were no fees or expenses reimbursed for services rendered by KPMG LLP or McGladrey & Pullen, LLP to the Company, other than for services described above, for the years 2006, 2005 or 2004.

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors

          It is the policy of the Audit Committee to meet and review and approve in advance, on a case-by-case basis, all engagements by the Company of permissible non-audit services or audit, review or attest services for the Company to be provided by the independent auditors, with exceptions provided for de minimus amounts under certain circumstances as prescribed by the Exchange Act. The Audit Committee may, at some later date, establish a more detailed pre-approval policy pursuant to which such engagements may be pre-approved without a meeting of the Audit Committee. Any request to perform any such services must be submitted to the Audit Committee by the independent auditor and management of the Company and must include their views on the consistency of such request with the SEC’s rules on auditor independence.

          All of the services of KPMG LLP and McGladrey & Pullen, LLP described above under “Audit-Related Fees” and “Tax Fees” were approved by the Audit Committee in accordance with its policy on permissible non-audit services or audit, review or attest services for the Company to be provided by its independent auditors, and no such approval was given through a waiver of such policy for de minimus amounts or under any of the other circumstances as prescribed by the Exchange Act.

          Representatives of McGladrey & Pullen, LLP will be present at the Meeting, will have the opportunity to make a statement if they so desire and will be available to respond to appropriate questions.

Board of Director Recommendation

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF MCGLADREY & PULLEN, LLP AS THE COMPANY’S INDEPENDENT AUDITORS .

PROPOSAL NO. 3 – APPROVAL OF THE STURM, RUGER & COMPANY, INC.
2007 STOCK INCENTIVE PLAN

          On February 23, 2007 the Board of Directors adopted the Sturm, Ruger & Company, Inc. 2007 Stock Incentive Plan (“2007 SIP”), subject to stockholder approval. If approved, the 2007 SIP will replace the Company’s 1998 Stock Incentive Plan (“1998 Plan”) and the Company’s 2001 Stock Option Plan for Non-Employee Directors (“2001 Director Plan”) in advance of their expiration and will become the sole plan for providing stock-based incentive compensation to eligible employees, independent contractors and Directors (including non-employee Directors).

          The 1998 Plan, which is administered by the Compensation Committee, provides for grants of options in the form of incentive stock options, non-qualified stock options and SARS to employees. Options and SARS granted under the 1998 Plan are exercisable subject to the terms and conditions as determined by the Compensation Committee.

          The 2001 Director Plan, which is also administered by the Compensation Committee, provides for a one-time grant of a non-qualified stock option to purchase 20,000 shares of Common Stock to all non-employee Directors upon becoming a Director. The non-qualified stock options granted pursuant to the 2001 Director Plan vests to the extent of 5,000 shares upon grant, and 5,000 shares annually for three years.

          The Board of Directors of the Company has chosen to adopt the 2007 SIP rather than extend the 1998 Plan and the 2001 Director Plan primarily to: (i) consolidate the Company’s equity compensation arrangements into one plan, (ii) broaden the scope of equity based compensation by providing for the grant of restricted stock and deferred stock in addition to the stock options and SARS provided for in the 1998 Plan and the 2001 Director Plan, (iii) provide for performance-based grants, (iv) provide for annual grants of restricted stock to non-employee Directors (the “Non-Employee Director Restricted Stock Grant”) in addition to continuing the one-time non-employee Director option grants similar to the ones provided for in the 2001 Director Plan (the “Non-Employee Director Stock Option Grant”) and (vi) to allow for equity compensation to be granted to independent contractors and additional grants to non-employee Directors.

The Board is Seeking Approval of the Following for the 2007 SIP:

          1. Approval of the 2007 SIP with an Expiration Date of April 24, 2017. The 1998 Plan and the 2001 Director Plan are currently scheduled to expire on October 28, 2008 and December 18, 2010, respectively. As of December 31, 2006, there are approximately 1,130,000 shares to be issued upon exercise of outstanding option awarded pursuant to the 1998 Plan and approximately 185,000 shares under the 2001 Director Plan. As of April 24, 2007 there will be approximately 870,000 shares available for awards under the 1998 Plan and approximately 15,000 shares available for awards under the 2001 Director Plan. If the stockholders approve the 2007 SIP, no further awards will be granted under the 1998 Plan or the 2001 Director Plan.

          2. 2,550,000 Shares to Fund the 2007 SIP. The Board of Directors is recommending the approval of 2,550,000 shares for issuance pursuant to the 2007 SIP of which: (i) a maximum of 2,350,000 shares can be awarded as stock option grants (this maximum was set to ensure that shares remain available for the annual grants of restricted stock to the Company’s non-employee Directors as provided in the 2007 SIP), (ii) no more than 500,000 shares of Common Stock can be granted in any one year to a single participant and (iii) no single participant shall be granted SARS in any one year related to more than 500,000 shares of Common Stock.

Equity Plan Share Reservation

1998 Plan
Shares authorized under the 1998 Plan			2,000,000
Shares underlying options awarded from October, 1998 through December 31, 2006 (1)			(1,130,000	)
Estimated maximum shares awarded from January 1, 2007 through April 2007			0
Estimated shares available to be granted as of April 2007			0
Estimated shares reserved but not issued under the 1998 Plan			870,000
2001 Director Plan
Shares authorized under the 2001 Director Plan			200,000
Shares underlying options awarded from May 2001 through December 31, 2006 (1)			(185,000	)
Estimated maximum shares awarded from January 1, 2007 through April 2007			0
Estimated shares available to be granted as of April 2007			0
Estimated shares reserved but not issued under the 2001 Director Plan			15,000
2007 SIP
Maximum shares authorized under the 2007 SIP			2,550,000