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 Compensation Committee

 

In 2007, the members of the Compensation Committee of the Board were John A. Cosentino, Jr., Stephen Merkel and James E. Service.  Mr. Cosentino served as Compensation Committee Chairman.  Each of Messrs. Cosentino, Merkel and Service are considered "independent" for purposes of service on the Compensation Committee under the rules of the NYSE, including Rule 303A thereof.

 

The purposes of the Compensation Committee are:  (i) discharging the responsibilities of the Board with respect to the compensation of the Chief Executive Officer of the Company, the other executive officers of the Company and members of the Board; (ii) establishing and administering the Company's cash-based and equity-based incentive plans; and (iii) producing an annual report on executive compensation to be included in the Company's annual proxy statement, in accordance with the rules and regulations of the NYSE and the SEC, and any other applicable rules or regulations. The Compensation Committee has the authority to form and delegate authority to one or more subcommittees, made up of one or more of its members, as it deems appropriate from time to time.

 

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

 

The Compensation Committee held four meetings during 2007.  All members of the Compensation Committee attended all meetings of the committee during their 2007 tenure.  The annual Compensation Committee Report on Executive Compensation is included in this Proxy Statement.

 

Compensation Committee Interlocks and Insider Participation

During the 2007 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.

 

 

 

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Nominating and Corporate Governance Committee

 

In 2007, the members of the Nominating and Corporate Governance Committee were James E. Service, John A. Cosentino, Jr., C. Michael Jacobi and Richard T. Cunniff, until his retirement from the Board on April 24, 2007.  Admiral Service served as Nominating and Corporate Governance Committee Chairman.  Each of Messrs. Cosentino, Jacobi and Service are, and Mr. Cunniff 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 for identifying, vetting and nominating potential Directors and establishing, maintaining and supervising the corporate governance program.  Some of these responsibilities are discussed in more detail below.

 

The Nominating and Corporate Governance Committee is governed by a written charter that has been adopted by the Board.  The Nominating and Corporate Governance Committee charter is posted on the Company's website at www.ruger.com, and is available in print to any stockholder who requests it by contacting the Corporate Secretary as set forth in "STOCKHOLDER COMMUNICATIONS" below.

 

The Nominating and Corporate Governance Committee held four meetings during 2007.  All members of the committee attended all meetings of that committee during their 2007 tenure.

 

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

 

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 previously retained the firm of Korn/Ferry International to assist in the search for qualified Directors.

 

 

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The Nominating and Corporate Governance Committee has a written policy which states that it will consider Director candidates recommended by stockholders.  There is no difference in the manner in which the Nominating and Corporate Governance Committee will evaluate nominees recommended by stockholders and the manner in which it evaluates candidates recommended by other sources.  Shareholder recommendations for the nomination of directors should set forth (a) as to each proposed nominee, (i) their name, age, business address and, if known, residence address, (ii) their principal occupation or employment, (iii) the number of shares of stock of the Company which are beneficially owned by each such nominee and  (iv) any other information concerning the nominee that must be disclosed as to nominees in proxy solicitations pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including such person’s written consent to be named as a nominee and to serve as a director of the  Company if elected); (b) as to the shareholder giving the notice, (i) their name and address, as they appear on the Company’s books, (ii) the number of shares of the corporation which are beneficially owned by such shareholder and (iii) a representation that such shareholder is a holder of record of stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such nomination; and  (c) as to the beneficial owner, if any, on whose behalf the nomination is made, (i) the name and address of such person and (ii) the class and number of shares of the Company which are beneficially owned by such person. The Company may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of a proposed nominee to serve as a director of the Company, including a statement of the qualifications of the candidate and at least three business references.  All recommendations for nomination of directors should be sent  to the Corporate Secretary, Sturm, Ruger & Company, Inc., 1 Lacey Place, Southport, CT 06890.  The Corporate Secretary will accept such recommendations and forward them to the Chairman of the Nominating and Corporate Governance Committee.  In order to be considered for inclusion by the Nominating and Corporate Governance Committee as a candidate at the Company's next Annual Meeting of Stockholders, stockholder recommendations for director candidates must be received by the Company in writing delivered or mailed by first class United States mail, postage prepaid, no earlier than December 24, 2008 (120 days prior to the first anniversary of this year’s Annual Meeting of Stockholders,) and no later than January 23, 2009 ( 90 days prior to the first anniversary of this year’s Annual Meeting of Stockholders.)

 

The Company has not rejected any Director candidates put forward by a stockholder or group of stockholders who beneficially owned more than 5 % of the Company's Common Stock for at least one year prior to the date of the recommendation.

 

 

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 Executive Operations Committee

 

Effective August 1, 2006, the Board 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, Jr. and C. Michael Jacobi as Co-Chairs and James E. Service as a member of the Executive Operations Committee.  The need to continue the Executive Operations Committee is evaluated by the Board annually, and as a result of such evaluation and upon the recommendation of the Chief Executive Officer, the committee’s continuance has been extended by the Board through 2008.  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 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 ten meetings during 2007.  All members of the committee attended at least 75% of the meetings of the committee during their 2007 tenure.

 

 

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MEMBERSHIP AND MEETINGS OF THE BOARD AND ITS COMMITTEES

 

 

In 2007, each Director attended at least 75% of the total number of 2007 meetings of the Board and its Committees on which he served during his 2007 tenure, with the exception of C. Michael Jacobi, who was unable to attend two telephonic meetings of the Board due to prior commitments, but who was separately apprised in advance of the business of those meetings.

 

 

In addition, all then-current members of the Company's Board attended the 2007 Annual Meeting of Stockholders.  It is the policy of the Company that attendance at all meetings of the Board, all committee meetings, and the Annual Meeting of Stockholders is expected, unless the Director has previously been excused by the Chairman of the Board for good cause.  Committee memberships and the number of meetings of the full Board and its committees held during the fiscal year 2007 are set forth in the table below.  All committee memberships were effective as of January 1, 2007. When feasible and appropriate, it is the practice of the Board to hold its regular committee meetings in conjunction with the regular meetings of the Board of Directors.

 

 

MEMBERSHIP AND MEETINGS OF THE BOARD AND ITS COMMITTEES TABLE FOR YEAR 2007

 

Name	Board of Directors	Audit Committee	Compensation Committee	Nominating and Corporate Governance Committee	Executive Operations Committee
James E. Service	Chair		Member	Chair	Member
Stephen L. Sanetti*	Vice-Chair
Michael O. Fifer*	Member
John A. Cosentino, Jr.	Member		Chair	Member	Co-Chair
Richard T. Cunniff (1)	Member			Member
C. Michael Jacobi	Member	Member		Member	Co-Chair
John M. Kingsley, Jr.	Member	Chair
Stephen T. Merkel	Member		Member
Ronald C. Whitaker	Member	Member
Number of Meetings Held in 2007	6 includes 2 telephonic	8 includes 7 telephonic	4	4	10

Notes to Membership and Meetings of the Board and its Committees Table

 

*Non-independent Board member.

 

(1)             Richard T. Cunniff retired from the Board on April 24, 2007.

 

 

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NON-MANAGEMENT DIRECTORS

 

The non-management members of the Board meet regularly in executive sessions, and each such meeting is led by the non-executive Chairman of the Board, or in his absence, a presiding Director.  James E. Service has served as the non-executive Chairman of the Board since February 24. 2006.  Richard T. Cunniff served as presiding Director from September 11, 2005 until his retirement on April 24, 2007.  Historically, the non-management Director with the greatest length of service as a Company Director was chosen annually for a one-year term as presiding Director at the first executive session held in concurrence with the organizational meeting of the Board held after each Annual Meeting of Stockholders.  On April 24, 2007, the By-Laws were amended to define the Chairman of the Board as an independent, non-management Director who would also preside at all meetings of the Board, including meetings of the non-management Directors in executive session, which would generally occur as part of each regularly scheduled Board meeting.  The April 24, 2007 By-Law amendment also provided that an independent, non-management Lead Director would be named to preside at stockholder, Board and executive session meetings and to act as an intermediary between the non-management Directors and management of the Company when special circumstances exist or communication out of the ordinary course is necessary, such as the absence or disability of the non-executive Chairman of the Board.  John A. Cosentino, Jr. was appointed Lead Director by the Board on April 24, 2007.

 

Only non-management, independent Directors served on any committees of the Board.

 

 

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DIRECTOR AND COMMITTEE COMPENSATION

 

The Board believes that compensation for the Company’s independent Directors should be a combination of cash and equity-based compensation.  The Directors and the Compensation Committee annually review Director compensation utilizing published compensation studies.  Any recommendations for changes are made to the full Board by the Compensation Committee.  In 2006 and 2007, as a result of these reviews, the Directors fee structure was changed as described below.

 

Director's Fees and Other Compensation

 

As of June 1, 2006, the Board approved a fee schedule whereby all non-management independent Directors receive annual retainer compensation of $75,000.  The retainer compensation is paid as $50,000 in cash and $25,000 in restricted stock.  In addition to the annual retainer fees, the Board Chairman receives $20,000, the Audit Committee Chairman receives $10,000 and the Compensation Committee Chairman and the Nominating and Corporate Governance Committee Chairman each receive $7,500.  Payment for service on more than two committees was discontinued effective January 1, 2007. As of August 1, 2006, the Board established an Executive Operations Committee, as described above, and established additional committee fees of $50,000 per year for this Committee's Co-Chairs and $7,500 per year for its members.

 

The annual retainer award of $25,000 worth of restricted stock was initially deferred subject to stockholder ratification of the 2007 SIP at the 2007 Annual Meeting of Stockholders.  Pending such ratification, the independent Directors received $25,000 per year in additional cash compensation, prorated from June 1, 2006 and continuing until June 30, 2007. On May 4, 2007, the date that the shares authorized under the 2007 Stock Incentive Plan were registered with the SEC following the April 24, 2007 stockholder ratification of the plan, the Board received their first annual awards of $25,000 worth of restricted stock and therefore discontinued the payment of additional cash compensation.  The Board also approved the retroactive reduction of their cash compensation from $75,000 to $50,000 per year effective April 1, 2007, the quarter in which the 2007 Stock Incentive Plan was approved by the Company’s stockholders.

 

Under the 2007 Stock Incentive Plan, options to purchase 20,000 shares of the Company's Common Stock are granted to Directors when they are first elected at an exercise price equal to the closing price on the date of award.  These options vest and become exercisable in four equal annual installments of 25% of the total number of options awarded, beginning on the date of grant and on each of the next succeeding three anniversaries thereafter. Until the April 24, 2007 ratification of the 2007 Stock Incentive Plan, these options were previously granted under the 2001 Stock Option Plan for Non-Employee Directors.

 

Directors are covered under the Company's business travel accident insurance policy for $300,000 while traveling on Company business, and are covered under the Company's director and officer liability insurance policies for claims alleged in connection with their service as a Director.

 

All Directors were reimbursed for out-of-pocket expenses related to attendance at meetings.

 

 

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DIRECTORS' COMPENSATION TABLE FOR YEAR 2007

 

The following table reflects the cash and equity compensation received during the 2007 fiscal year by each non-management Director who served on the Company's Board and the committees of the Board.  Please see "SUMMARY COMPENSATION TABLE" for disclosure of Directors' fees paid to management Directors in the 2007 fiscal year.

Name	Fees Earned or Paid in Cash (1) ($)	Stock Awards (2) ($)	Option Awards (3)(4) ($)	Change in Pension Value and Nonqualified Deferred Compensation Earnings (5) ($)	All  Other Compensation ($)	Total Director Compensation (6) ($)
James E. Service	$91,250	$25,000				$116,250
John A. Cosentino, Jr.	$113,750	$25,000	$11,244			$149,994
Richard T. Cunniff (7)	$37,500					$37,500
C. Michael Jacobi	$106,250	$25,000	$11,360			$142,610
John M. Kingsley, Jr.	$66,250	$25,000		$16,724		$107, 974
Stephen T. Merkel	$56,250	$25,000	$11,360			$92,610
Ronald C. Whitaker	$56,250	$25,000	$11,360			$92,610

 

Notes to Directors' Compensation Table

 

(1)

See "DIRECTOR'S FEES AND OTHER COMPENSATION" above.

 

(2)

Represents grant date dollar value of one-year-deferred restricted stock awards worth $25,000 each awarded to each non-management independent director on  May 4, 2007 under the 2007 Stock Incentive Plan in accordance with the Director fee schedule approved June 1, 2006.

 

(3)

Non-qualified stock option awards were granted as of date of election to Board under the Company's 2001 Stock Option Plan for Non-Employee Directors at an exercise price equal to the closing price of the Common Stock on the date of grant.  These options vest and become exercisable in four equal annual installments of 25% of the total options awarded, beginning on the date of grant and on each of the next three anniversaries thereafter.  See “INDEPENDENT DIRECTORS’ OUTSTANDING OPTION AWARDS AT FISCAL YEAR-END 2007 TABLE” below for further information.

 

(4)

This column represents the grant date fair value amount recognized for financial reporting purposes calculated in accordance with the provisions of Financial Accounting Standards Board Statement of Financial Accounting Standards (SFAS) No. 123R "Share-based Payments."  See Note 5 of the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2007 regarding assumptions underlying valuation of equity awards.

 

(5)

This column represents the sum of the change in pension value in 2007 for each Director, and applies only to Directors who were former employees of the Company.  Mr. Kingsley is the only Director who is a former employee of the Company.  Mr. Kingley's total change in pension value is related to his service as Executive Vice President of the Company from 1971 to 1996.  No Director received preferential or above-market earnings on deferred compensation (also see Note 6 below).  The change in pension value is calculated based on a 5.75% discount rate, the 2000 Group Mortality Table, average earnings and service credits as of December 31, 2007, and in the case of the SERP, a COLA assumption of 1.5% per year.  See "PENSION PLANS" and the "PENSION BENEFITS TABLE" below for additional information, including the present value assumptions used in the calculation.

 

(6)

The Company's non-management Directors do not receive non-equity incentive plan compensation, pension or medical plan benefits or non-qualified deferred compensation.

 

(7)

Richard T. Cunniff retired from the Board on April 24, 2007.

 

 

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 Directors’ Beneficial Equity Ownership

 

 

In 2006 the Board set a minimum equity ownership requirement for Non-Management Directors of five times their annual base cash retainer of $50,000, to be achieved within five years of the later of the date of adoption or the date of a Director's election.  As Directors are expected to hold a meaningful ownership position in the Company, a significant portion of overall Director compensation is intended to be in the form of Company equity.  This has been partially achieved through options granted to each independent Director under the 2001 Stock Option Plan for Non-Employee Directors and through option grants and restricted stock awards under the 2007 Stock Incentive Plan, which was approved at the 2007 Annual Shareholders Meeting.  The current amounts of Common Stock beneficially owned by each Director may be found in the "BENEFICIAL OWNERSHIP TABLE" below.

 

 

  INDEPENDENT DIRECTORS’ OUTSTANDING OPTION AWARDS AT FISCAL YEAR END 2007 TABLE

 

The following table sets forth outstanding option awards issued to the Company’s Independent Directors under the 2001 Stock Option Plan for Non-Employee Directors and 2007 Stock Incentive Plan.  See “BENEFICIAL OWNERSHIP TABLE” below for information regarding each Company Director’s total beneficial ownership.

 

 

	Number of Securities Underlying Unexercised Options (1)
Name of Independent Director	Exer- cisable (2)  (#)	Unexer- cisable  (2) (#)	Grant Date	Option Exercise Price (4) ($)	Option Vesting  Date	Option Expiration Date
James E. Service	20,000	0	1/5/2001	$9.875	1/5/2004	1/5/2011
John A. Cosentino, Jr.	15,000	5,000	8/1/2005	$10.88	8/1/2008	8/1/2015
C. Michael Jacobi	10,000	10,000	6/1/2006	$6.15	6/1/2009	6/1/2016
John M. Kingsley, Jr.	20,000	0	1/5/2001	$9.875	1/5/2004	1/5/2011
Stephen T. Merkel	10,000	10,000	6/1/2006	$6.15	6/1/2009	6/1/2016
Ronald C. Whitaker	10,000	10,000	6/1/2006	$6.15	6/1/2009	6/1/2016
Total	85,000	35,000

Notes to Independent Directors’ Outstanding  Option Awards at Fiscal Year End Table

 

(1)

Awards of options to purchase the Company's Common Stock represented in this table were granted pursuant to the Company's 1998 Stock Incentive Plan.

 

(2)

Options awarded to Independent Directors upon their date of election vest and become exercisable in four equal annual installments of 25% of the total number of options awarded, beginning on the date of grant and on each of the next succeeding three anniversaries thereafter and have a 10 year term.  Amounts shown as exercisable or unexercisable reflect the vesting status of each Director’s options within 60 days of March 1, 2008.

 

(3)

This column represents the exercise price of awards of options to purchase the Company's Common Stock which exercise price was not less than the closing price on the grant date.

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

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

 

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

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

What are the Company's Governance Practices Regarding Compensation?

 

Stockholders:	The 2007 Stock Incentive Plan (the “2007 SIP”), which was approved by the stockholders at the Company's 2007 Annual Meeting, replaced all previous stock incentive plans. The Company does not have any stock plans that are not stockholder-approved.
Board and Compensation Committee and Nominating and Corporate Governance Committee:	The Compensation Committee and the Board 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 reviews the Compensation Committee and Nominating and Corporate Governance Committee reports and acts on recommendations of the Compensation Committee.
Management:	The Chief Executive Officer's views regarding the performance and recommended compensation levels for the Company's executive officers are discussed with all of the non-management Directors, including the Compensation Committee and the Nominating and Corporate Governance Committee.  Within management, the Chief Executive Officer and the Secretary serve as liaisons with these committees.

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

 

The use of equity compensation is a significant component of the Company's overall compensation philosophy and is one that the Company plans to continue.  The Company's philosophy is built on the principles that equity compensation should seek to align participants' actions and behaviors with stockholders' interests, be market-competitive, and be able to attract, motivate and retain the best employees, independent contractors and Directors.

 

The Compensation Committee and the Board 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  has never "back dated" or re-priced options or other stock awards, and on February 5, 2008, the Board clarified the 2007 Stock Incentive Plan to state that repricing of options is not allowed under the plan.  On October 23, 2007, the Company  also established a policy that stock options or stock grants for employees will be issued only on the fourth business day following public quarterly filing of the Company’s Forms 10-K or 10-Q in order to allow the investment markets adequate time to assimilate the current financial information, and will be valued at the mean between the highest and lowest sales prices of the Company’s common stock on the New York Stock Exchange on the date of grant.  Prior to October 23, 2007, employee option awards were valued at the closing price of the Company's Common Stock on the date of grant.

 

 

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The Compensation Committee approves stock option awards, including the specific number of options granted to specific individuals, which are then ratified by the full Board

All stock option awards have been, and will continue to be, subject to the approval of the Compensation Committee and the Board.  The Company's Corporate Secretary is responsible for issuing grants upon their approval by the Compensation Committee and the Board and maintaining records of all grants issued, exercised or terminated in accordance with the terms of the 1998 Stock Incentive Plan, 2001 Stock Option Plan for Non-Employee Directors and the 2007 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:	Pursuant to the Company's 2007 Stock Incentive Plan approved by the Company’s stockholders on April 24, 2007, which replaced all prior stock incentive plans, the Company may make grants of stock options, restricted stock, deferred stock and stock appreciation rights (“SARS”), any of which may or may not require the satisfaction of performance objectives.)
Retirement Benefits:	Until December 31, 2007, the Company offered a tax-qualified defined-benefit Salaried Employee's Retirement Income Plan (the “Pension Plan”) to all salaried employees and a non-qualified defined-benefit Supplemental Executive Retirement Plan (the “SERP”) to one employee and two retired employees.  In 2007, the Company’s Pension Plan was amended so that employees will no longer accrue benefits under it effective December 31, 2007.  This action “freezes” the benefits for all employees and prevents future hires from joining the plans, effective December 31, 2007.  Starting in 2008, the Company will provide supplemental discretionary contributions to substantially all employees’ individual 401(k) Plan accounts. In 2007, the Company’s SERP was amended effective December 31, 2007 so that lump-sum payments of the benefits accrued were paid to the one employee and one of the two retiree participants.  There are no current employees participating in the SERP.  For further discussion, see "PENSION PLANS" below.
Health, Welfare and Other Insurance 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.   Officers are covered under the Company's business travel accident insurance policy for $1,000,000 while traveling at any time.  Officers are also covered under the Company's director and officer liability insurance policies for claims alleged in connection with their service as an officer, as applicable.
Severance Agreements:	The Company has a Severance Policy that covers all employees.  In addition, the officers of the Company are offered specific severance agreements that provide severance benefits to them when their employment terminates as a result of a change in control or by the Company without cause.  For further discussion, see “Potential Payments Upon Termination or Change in Control” below.

 

 

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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 reasons for each of the elements of compensation are:

·	Base salaries and retirement and welfare benefits are designed to attract and retain employees over time;

·	Incentive bonuses, which are paid in cash or a combination of cash and deferred stock, are designed to focus executives and employees on important Company-wide performance goals;

·

Long-term equity incentives, including non-qualified or incentive stock options, SARS and restricted stock and deferred stock awards are designed to focus executives' efforts on their individual contributions to the long-term success of the Company, as reflected in increases to the Company's stock prices over a period of several years, growth in its earnings per share and other measurements of corporate performance; and

·	Severance Agreements, which are designed to facilitate the Company's ability to attract and retain talented executives and encourage them to remain focused on the Company's business during times of corporate change.

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

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

 

Generally, each element of compensation is evaluated independently to determine whether it is competitive within the market as a whole, and then the aggregate compensation is evaluated to determine whether it is competitive and reasonable within the market as a whole, as further described below.

 

How are Salaries Determined?

 

Salaries for executive officers are determined by considering historical salaries paid by the Company to officers having certain duties and responsibilities, by comparing those salaries to required market rates for compensation of new executives being recruited to the company, and then evaluating the current responsibilities of the officer’s position, the scope and performance of the operations under their management and the experience and performance of the individual.

 

In making its salary decisions, the Compensation Committee places its emphasis on the particular executive's experience, responsibilities and performance.  No specific formula is applied to determine the weight of each factor.  The Compensation Committee has historically followed a policy of using incentive bonus awards rather than base salary to reward outstanding performance, and base salaries are not typically adjusted each year.

How are Bonuses Determined?

The Company's executive officers are eligible for an annual performance incentive bonus and discretionary bonuses.  The annual performance incentive bonuses are based on operating performance metrics and goals approved by the Compensation Committee and ratified by the Board.  Discretionary bonuses are awarded under special circumstances and are approved by the Compensation Committee and ratified by the Board. All employees, including the officers, shared the same goals for 2007.  In 2008, all employees will participate in a quarterly profit sharing and supervisory employees, management-level employees and officers will additionally participate in the performance-based incentive bonus program.

Under the performance based incentive program, bonus opportunities range from between 0% to 150% of each employee's incentive bonus grade level, depending on the Company's operating performance results.  Incentive bonus grade levels for individuals vary from 5% to 75% of their annual base salary or hourly wage compensation.

 

 

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The Company has adopted a policy that officers of the Company shall have 25% of any performance incentive bonus that is earned paid in three-year-deferred stock in lieu of cash.  The quantity of deferred stock shall be determined based upon a 1/3 discount to market price, which discount shall cliff vest after the three year deferral period is completed.

How are Equity Compensation Awards Determined?

Equity compensation awards are given to key employees and officers of the Company to align their long-term interests with those of the shareholders.  In 2006 the Company adopted a practice whereby key new executives hired by the Company would receive an initial, one-time award of stock options with time-based vesting.  New Vice Presidents were granted 100,000 such options and the new Chief Executive Officer was granted 400,000 such options.  In 2007, the Company extended the practice to include more modest, annual awards of options with performance-based vesting.  The Chief Executive Officer was granted 40,000 such options and the other Named Executive Officers were granted 15,000 such options.  Other officers and senior managers rated for their superior performance were also granted such options in quantities reflecting the level of their responsibility.  It is anticipated that the Company will continue to grant annual performance-based stock options in similar quantities going forward.

 

The performance-based options vest only upon achievement of earnings-based operating goals within three years of grant.  If the goals are not met within three years of grant, the options do not vest and they expire.

 

The Compensation Committee considers previous grants, tenure and responsibilities of an executive and the recommendation of the Chief Executive Officer when determining the amount of stock awards to be granted.

 

In early 2007 the Company also awarded restricted stock grants to the officers of the Company equal to 10% of their base salary in recognition of their performance during the transition year of 2006.  These awards were intended to be a one-time grant.  In 2007 the Company also awarded a $250,000 restricted stock grant to the Chief Executive Officer of the Company in accordance with the terms of his 2006 employment offer from the Company.

 

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

 

The Company intends to consider annually the grant of performance-based stock options for management-level employees as described above.  The performance goals will likely vary from year to year and will be based on the perceived needs of the business at the time of the award.

The Company does not currently anticipate expansion of the equity compensation program as described above.

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

 

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

 

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 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.

 

 

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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  objectives.

 

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 to keep them fully informed on all important aspects of the status and development of the Company, his implementation of Board policies, and his recommendation of policies for Board consideration.

 

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

 

 What is the Chief Executive Officer’s Compensation History?

 

Michael O. Fifer joined the Company as Chief Executive Officer on September 25, 2006, with an annual base salary of $400,000, an option award to purchase 400,000 shares of the Company’s Common Stock under the 1998 Stock Incentive Plan, a $75,000 bonus for 2006, a 75% target bonus opportunity thereafter, a $250,000 restricted stock award to be issued under the 2007 SIP, and reimbursement for temporary living, commuting and relocation expenses with related tax gross-up.  Mr. Fifer’s compensation has not changed since he joined the Company in 2006.

 

Does the Company Pay for Perquisites?

 

The Company believes in limited perquisites for its Directors and executive officers.  Perquisites include discounts on Company products, which are available to all Company employees and Directors.  The Company has a Relocation Policy covering all employees based on their grade level that provides various levels of temporary living and relocation expense reimbursements, payment of related taxes, and the use of Company vehicles for business purposes.  Temporary living and relocation reimbursements and related tax payments for the Named Executive Officers are disclosed in the “SUMMARY COMPENSATION TABLE” below.

 

 

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EXECUTIVE COMPENSATION

 

SUMMARY COMPENSATION TABLE

 

The following table summarizes total compensation paid or earned by the Company's Name Executive Officers (those officers who served as Chief Executive Officer or Chief Financial Officer during 2007, and the three other officers who received the highest compensation in 2007) who served in such capacities during 2007.  (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.)

 

Named Executive Officer  and Principal Position	Year	Salary ($)		Bonus(1) ($)	Stock Awards (2) ($)		Option Awards (3) ($)		Change in Pension Value and Non-qualified Deferred Compensation Earnings (4) ($)		All Other Compen- sation (5) ($)	Total ($)
Michael O. Fifer (6) Chief Executive Officer and Director	2007 2006	$400,000 $107,692		$15,385 $75,000	$290,000 $0		$193,360   $43,280	(7)	$10,989 $2,463		$191,860 $11,551	$1,101,594    $239,986
Stephen L. Sanetti (8) Vice Chairman of the Board of Directors, President, Chief Operating Officer and General Counsel	2007 2006	$325,000 $322,917	(9)	$12,500 $113,750	$32,500 $0		$11,648 $0		$96,899 $36,149	(10) (10)	$4,526    $516	$483,073   $473,332
Thomas A. Dineen Vice President, Treasurer and Chief Financial Officer	2007 2006	$197,917 $168,250		$7,692 $52,500	$20,000 $0		$44,242 $0		$9,729 $4,321		$10,133 $108	$289,713   $225,179
Robert R. Stutler Vice President of Prescott Operations	2007 2006	$225,000 $220,000		$8,654 $67,500	$22,500 $0		$11,648 $0		$101,067 $67,950		$13,087 $792	$381,956   $356,242
Thomas P. Sullivan (11) Vice President of Newport Operations	2007 2006	$235,000  $89,104		$9,038 $50,000	$23,500 $0		$49,568 $14,431	(12)	$6,333 $683		$40,831 $104,332	$364,270   $258,550

 

Notes to Summary Compensation Table

 

(1)

Includes discretionary bonuses awarded by the Board of Directors. For Michael O. Fifer and Thomas P. Sullivan, 2006 amounts represent signing bonuses awarded upon their employment with the Company.  For a description of the Company’s bonus structure see the "COMPENSATION DISCUSSION AND ANALYSIS" above.

 

(2)	See "OPTIONS EXERCISED AND STOCK VESTED IN 2007 TABLE" below for further information regarding stock granted to each Named Executive Officer.

 

(3)

This column represents the dollar amount grant date value recognized for financial statement reporting purposes with respect to each fiscal year for the fair value of stock options granted to the Named Executives Officers in 2007 and 2006, in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 123R "Share-based Payments."  See Note 5 of the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2007 regarding assumptions underlying valuation of equity awards.  Any estimate of forfeitures related to service-based vesting conditions are disregarded pursuant to the SEC Rules. See "OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END 2007 TABLE" below for further information regarding stock options granted to each Named Executive Officer.

 

 

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(4)

This column represents the sum of the change in pension value in 2007 and 2006 for each of the named executives.  No named executive officer received preferential or above-market earnings on deferred compensation.  For 2007, the change in pension value is calculated based on a 5.75% discount rate, average earnings and service credits as of December 31, 2007, the 2000 Group Mortality Table, and in the case of the SERP, a COLA assumption of 1.5% per year.  See "PENSION PLANS" and the "PENSION BENEFITS TABLE" below for additional information.

 

(5)

This column represents:  (i) relocation and temporary living and related tax gross-ups; (ii) taxable value of Company products received; (iii) taxable premiums paid by the Company for group term life insurance; and (iv) Employer safe-harbor matching contributions made under the Company’s 401(k) Plan.  See "ALL OTHER COMPENSATION TABLE" below for additional information.

 

(6)	Michael O. Fifer joined the Company as Chief Executive Officer effective September 25, 2006, and was appointed to the Board of Directors on October 19, 2006.

 

(7)

The grant date value recognized for financial statement reporting purposes of Mr. Fifer's options to purchase 400,000 shares of the Company's Common Stock, awarded September 25, 2006, was $811,496, but was misstated as $1,348,000 in the 2006 Proxy Statement.  See "OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END 2007 TABLE" below for additional information.

 

(8)	Stephen L. Sanetti served as interim Chief Executive Officer from February 28, 2006 to September 25, 2006, when Mr. Fifer joined the Company as Chief Executive Officer.

 

(9)	For 2006, includes $3,000 for Director's Fees and $3,250 for Meeting Fees paid to Mr. Sanetti pursuant to the Company's policy in effect until June 1, 2006.  See "DIRECTOR'S FEES AND OTHER COMPENSATION" above.

 

(10)

This includes a change in accumulated pension value under the Company's Pension Plan for Mr. Sanetti as follows: 2006 - $29,501; 2007 - $61,809, and under the Company's Supplemental Executive Retirement Income Plan as follows: 2006 - $6,648; 2007 - $35,090.  Mr. Sanetti elected on December 20, 2007 to receive a lump sum payout of the value of his accrued benefits under that plan of $989,889, which was paid to him on February 1, 2008.

 

(11)	Thomas P. Sullivan was appointed Vice President of Newport Operations on August 14, 2006.

 

(12)

The grant date value recognized for financial statement reporting purposes of Mr. Sullivan's option to purchase 100,000 shares of the Company's Common Stock, awarded August 14, 2006, which will be recognized over the five year vesting period was $189,630, but was misstated as $315,000 in the 2006 Proxy Statement.  See "OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END 2007 TABLE" below for additional information.

 

 

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ALL OTHER COMPENSATION TABLE FOR YEAR 2007

 

Named Executive Officers	Year	Relocation and Temporary Living and Related Tax Gross-Ups ($)	Taxable Value of Company Products Received ($)	Taxable Premiums Paid by the Company for Group Term Life Insurance ($)	Company Matching 401(k) Plan Contributions  (1) ($)	Total ($)
Michael O. Fifer	2007 2006	$175,613 (2)   $11,506 (2)		$260 $45	$15,987 $0	$191,860 $11,551
Stephen L. Sanetti	2007 2006			$516 $516	$4,010 $0	$4,526 $516
Thomas A. Dineen	2007 2006			$108 $108	$10,025 $0	$10,133 $108
Robert R. Stutler	2007 2006		$824     $0	$792 $792	$11,471 $0	$13,087 $792
Thomas P. Sullivan	2007 2006	$31,251 (3) $104,287 (3)		$180 $45	$9,400 $0	$40,831 $104,332

Notes to All Other Compensation Table

 

(1)

Consists of matching contributions in 2007 made under the Sturm, Ruger & Company, Inc. 401(k) Plan, to the Named Executive Officers who participated in the Company’s 401(k) Plan, based on their deferrals for the 2007 401(k) Plan year.  Salaried employees were not eligible to participate in the Company’s 401(k) Plan in 2006.

(2)

Consists of reimbursements for Mr. Fifer’s temporary living and relocation expenses, as follows: 2007 -  $65,038 for real estate closing costs,$30,000 for incidental relocation expenses , $6,801 for commuting and $73,774 for related  tax gross-ups ; 2006 - $3,202 for temporary lodging, $377 for meals, $2,937 for commuting,  and $4,990 for related  tax gross-ups.

(3)

Consists of reimbursements for Mr. Sullivan’s temporary living and relocation expenses, as follows: 2007 -  $12,500 for temporary lodging, $10,255 for relocation costs and $8,496 for related tax gross-ups; 2006 -  $25,797 for temporary lodging, $36,000 for real estate closing costs, $10,000 for incidental relocation expenses, $1,172 for non-move travel, $421 for Company vehicle use and $30,897 for related tax gross-ups.

 

 

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GRANT OF PLAN-BASED AWARDS TABLE FOR YEAR 2007

 

The following table reflects estimated possible payouts under equity incentive plans to the Named Executive Officers during the fiscal year 2007 from the 2007 Stock Incentive Plan approved by the Company’s stockholders on April 24, 2007, consisting of performance-based option awards, time-based option awards and deferred stock awards.  (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.)

 

			Estimated Future Payouts under Equity Incentive Plan Awards			All Other Stock Awards (1):	All Other Option Awards (2)(3)
Named Executive Officers	Grant Date	Type of Award (1)(2)(3)(4)	Thres- hold ($)	Target (#)	Max- imum (#)	Number of Securities Underlying Stock Granted (#)	Number of Securities Underlying Options Granted #	Exercise Price of Option Awards or Base Price of Stock Awards(5) ($/Share)	Grant Date Fair Value (6) (7) ($)
Michael O. Fifer	4/24/07	Performance-Based Option Award					40,000	$13.39	$31,060
	4/24/07	Stock Award (8)				21,657		$13.39	$290,000
Stephen L. Sanetti	4/24/07	Performance-Based Option Award					15,000	$13.39	$11,648
	4/24/07	Stock Award				2,477		$13.39	$32,500
Thomas A. Dineen	4/24/07	Performance-Based Option Award					15,000	$13.39	$11,648
	4/24/07	Time-Based Option Award					65,000	$13.39	$32,594
	4/24/07	Stock Award				1,493		$13.39	$20,000
Robert. R. Stutler	4/24/07	Performance-Based Option Award					15,000	$13.39	$11,648
	4/24/07	Stock Award				1,680		$13.39	$22,500
Thomas P. Sullivan	4/24/07	Performance-Based Option Award					15,000		$11,648
	4/24/07	Stock Award				1,755		$13.39	$1,755

Notes to Grant of Plan-Based Awards Table

 

(1)

Gross number of restricted stock awards granted on April 24, 2007 to the Named Executive Officers based on 10% of each individual’s annual base salary and the closing price of the Common Stock as of the date of grant, and having a one-month deferral term. In accordance with the terms of the 2007 Stock Incentive Plan, certain of the Named Executive Officers receiving stock grants elected to receive “cashless” grants, whereby the taxes related to the acquisition of their stock grants were deducted from the gross amount of shares to which they were entitled.  Mr. Fifer and Mr. Dineen paid the taxes related to the acquisition of their stock grants in cash and received the full amount of their stock grants.  In all cases, fractional shares were paid in cash.

 

(2)

Performance-based options awarded to the Named Executives Officers which vest upon achievement of certain earnings-based operating goals within three years of their grant.  If these goals are not met within three years of grant, these awards do not vest and will expire.  If vesting is achieved, these options become exercisable on the first anniversary of their vesting date.

 

 

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(3)

Time-based options awarded to Named Executive Officers which vest and became exercisable in five equal annual installments of 20% of the total number of options awarded, beginning on the date of first anniversary of the date of grant and on each of the next succeeding four anniversaries thereafter and have a 10 year term.

 

(4)

No SARS were granted.  All Grants to Named Executive Officers under the Company's 2007 Stock Incentive Plan include a provision for acceleration of vesting in certain change in control situations, and have a ten year term.  Options to purchase the Company's Common Stock have never been repriced, and are not permitted to be repriced per the terms of the 2007 Stock Incentive Plan.

 

(5)

Represents the per share exercise price of the options, or base price of restricted stock, granted in 2007 to each named executive, which was the closing price of the Common Stock as of the date of grant.

 

(6)

Amounts shown for Option awards represents the dollar amount (grant date value) recognized for financial statement reporting purposes with respect to the 2007 fiscal year for the fair value of stock options granted to the named executives, in 2007 as well as prior fiscal years, in accordance with the provisions of Financial Accounting Standards Board Statement of Financial Accounting Standards Statement of Financial Accounting Standards (SFAS) No. 123R "Share-based Payments."  See Note 5 of the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2007 regarding assumptions underlying valuation of equity awards.  Any estimate of forfeitures related to service-based vesting conditions are disregarded pursuant to the SEC Rules. The total grant date value of the performance-based options granted in 2007 which will be recognized over the three year vesting period for the Named Executive Officers was as follows: Mr. Fifer - $135,811, Mr. Sanetti - $50,929, Mr. Dineen - $50,929 , Mr. Stutler - $50,929 and  Mr. Sullivan - $50,929.  The total grant date value of the time-based options granted to Mr. Dineen which will be recognized over the five year vesting period is $237,519.

 

(7)

Amounts shown for stock awards represent grant date value of stock granted to the Named Executive Officers on April 24, 2007 based on 10% of each individual’s annual base salary and the closing price of the Common Stock as of the date of grant.  These amounts are included in the “SUMMARY COMPENSATION TABLE” above.

 

(8)

Mr. Fifer’s stock awards granted on April 24, 2007 also included a restricted stock award valued at $250,000 which was approved by the Board of Directors upon Mr. Fifer’s September 25, 2006 employment subject to stockholder approval of the 2007 Stock Incentive Plan. This stock award was calculated based on the closing price of the Common Stock as of the date of grant.

 

 

 

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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END 2007 TABLE

 

The following table reflects outstanding grants whose ultimate value is unknown and has not been realized (i.e. dependent on future results) for the Named Executive Officers. (For information on stock options and grants made in 2007 to the Named Executive Officers, see the “GRANTS OF PLAN-BASED AWARDS TABLE” above.)

 

	Option Awards (1)
	Number of Securities Underlying Unexercised Options
Named Executive Officer	Exer- cisable (2) (#)	Unexer- cisable  (2) (#)	Equity Incentive Plan  Awards: Unearned Options  (3) (#)	Grant Date	Option or Base Exercise Price (4) ($)	Option Vesting  Date	Option Expiration Date
Michael O. Fifer	80,000	320,000		9/25/2006	$7.32	9/25/2011	9/25/2016
			40,000	4/24/2007	$13.39		4/24/2017
Stephen L. Sanetti*			15,000	4/24/2007	$13.39		4/24/2017
Thomas A. Dineen *			15,000	4/24/2007	$13.39		4/24/2017
	13,000	52,000		4/24/2007	$13.39	4/24/2012	4/24/2017
Robert R. Stutler *			15,000	4/24/2007	$13.39		4/24/2017
Thomas P. Sullivan	20,000	80,000		8/14/2006	$6.85	8/14/2011	8/14/2016
			15,000	4/24/2007	$13.39		4/24/2017
Total	120,000	545,000	115,000

Notes to Outstanding Equity Awards at Fiscal Year End Table

*Exercised vested options under the 1998 Stock Incentive Plan during 2007.  See “OPTIONS EXERCISED AND STOCK VESTED TABLE” below for more information.

 

(1)

Awards of options to purchase the Company's Common Stock and restricted stock awards represented in this table were granted pursuant to the Company's 1998 Stock Incentive Plan prior to the stockholder approval of the 2007 Stock Incentive Plan.  As of April 24, 2007, all awards were granted pursuant to the 2007 Stock Incentive Plan.  See “COMPENSATION DISCUSSION AND ANALYSIS” above for more information.

 

(2)

Amounts shown as exercisable or unexercisable reflect the vesting status of each individual’s options within 60 days of March 1, 2008. Time-based options awarded to Named Executives vest and became exercisable in five equal annual installments of 20% of the total number of options awarded, beginning on the date of first anniversary of the date of grant and on each of the next succeeding four anniversaries thereafter and have a 10 year term.  Pre-2007 options shown for Messrs. Fifer, Sullivan and Killoy were awarded on their individual dates of hire. See “COMPENSATION DISCUSSION AND ANALYSIS” above for more information.

 

(3)

Performance-based options awarded to the Named Executives Officers vest upon achievement of certain earnings-based operating goals within three years of their grant.  If these goals are not met within three years of grant, these awards do not vest and will expire.  If vesting is achieved, these options become exercisable on the first anniversary of their vesting date.  See “COMPENSATION DISCUSSION AND ANALYSIS” above for more information.

 

(4)

This column represents the exercise price of awards of options to purchase the Company's Common Stock which exercise price was not less than the closing price on the grant date,

 

 

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OPTION EXERCISES AND STOCK VESTED IN 2007 TABLE

 

The following table sets forth the value of equity realized by the Named Executive Officers upon exercise of vested options or the vesting of deferred stock during 2007. (For further information on stock options and grants made in 2007 to the Named Executive Officers, see the “GRANTS OF PLAN-BASED AWARDS TABLE” above.)

	Option Awards (1)		Stock  Awards (2)
Named Executive Officer	Number of Shares Acquired on Exercise (3) (#)	Value Realized Upon Exercise (4)  ($)	Number of Shares Acquired Upon Vesting (5) (#)	Value Realized on Vesting (6) $
Michael O. Fifer			21,657	$290,000
Stephen L. Sanetti	200,000	$1,699,500	2,427	$32,500
Thomas A. Dineen	35,000	$262,763	1,493	$20,000
Robert R. Stutler	100,000	$849,750	1,680	$22,500
Thomas P. Sullivan			1,755	$23,500
Total	335,000	$2,812,013	29,012	$388,500

Notes to Options Exercised and Stock Vested Table

(1)

Reflects certain Named Executive Officers’ 2007 exercise of options to purchase Company’s Common Stock issued under the Company's 1998 Stock Incentive Plan on December 31, 1998 with an exercise price of $11.9375 per share.

 

(2)

Reflects acquisition of deferred stock awards granted on April 24, 2007 to the Named Executive Officers under the Company's 2007 Stock Incentive Plan based on the closing price of the Common Stock as of the date of grant and having a one-month deferral term.

 

(3)

Consists of gross number of shares acquired upon exercise.  In accordance with the terms of the 1998 Stock Incentive Plan, all of the Named Executive Officers exercising options elected to make “cashless” exercises, whereby the exercise price and taxes related to the exercise of options were deducted from the gross amount of shares to which they were entitled.  In all cases, fractional shares were paid in cash.

 

(4)

Consists of the taxable fair market value of shares acquired upon exercise.  In accordance with the terms of the 1998 Stock Incentive Plan, all of the Named Executive Officers exercising options elected to make “cashless” exercises, whereby the exercise price and taxes related to the exercise of options were deducted from the gross amount of shares to which they were entitled.  In all cases, fractional shares were paid in cash.

 

(5)

Consists of gross number of shares acquired upon vesting.  In accordance with the terms of the 2007 Stock Incentive Plan, certain of the Named Executive Officers receiving stock grants elected to receive “cashless” grants, whereby the taxes related to the acquisition of deferred stock were deducted from the gross amount of shares to which they were entitled.  Mr. Fifer and Mr. Dineen paid the taxes related to the acquisition of their stock grants in cash and received full amount of their stock grants.  In all cases, fractional shares were paid in cash.

 

(6)

Consists of the taxable fair market value of shares acquired upon vesting.  In accordance with the terms of the 2007 Stock Incentive Plan, certain of the Named Executive Officers receiving stock grants elected to receive “cashless” grants, whereby the taxes related to the acquisition of deferred stock were deducted from the gross amount of shares to which they were entitled.  Mr. Fifer and Mr. Dineen paid the taxes related to the acquisition of their stock grants in cash and received full amount of their stock grants.  In all cases, fractional shares were paid in cash.

 

 

 

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POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL