EXHIBIT 10.1

 

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(STURM, RUGER & CO. LOGO) [y28171ky2817100.gif]
December 15, 2006
Mr. Michael O. Fifer
3254 Pointe Hill Cove
Memphis, TN 38125
Dear Mr. Fifer:
     As you are aware, it is the practice of Sturm, Ruger & Co., Inc. (the
“Company”) to provide severance benefits, subject to certain conditions, to
certain officers whose employment is terminated by the Company.
     The purpose of this letter is to set forth the terms of the severance
benefits that you would be entitled to receive under the circumstances outlined
below.
     1. (a) Subject to the limitations set forth in Section 3, if, during the
Term (as defined below) the Company terminates your employment without Cause (as
defined below) then the Company shall pay to you, within 30 days after the date
that you execute and deliver to the Company a release in favor of the Company
and its affiliates in form and content acceptable to the Company (the “Release
Delivery Date”) or, to the extent required by Section 409A (as defined below),
on the first day of the seventh month following the Release Delivery Date, as a
severance payment for services previously rendered to the Company, a lump sum
equal to the product of (x)1.5 multiplied by (y) your Base Annual Salary (as
defined below) in effect immediately prior to the date your employment
terminates.
     (b) Subject to the limitations set forth in Section 3, if a Change in
Control (as defined below) occurs during the Term and on or after the effective
date of such Change in Control the Company reduces your annual salary or makes a
material change in the nature and scope of your duties to a level below that in
effect immediately prior to the effective date of the Change in Control and
thereafter you terminate your employment during the Term, then the Company shall
pay to you, within 30 days after the Release Delivery Date or, to the extent
required by Section 409A, on the first day of the seventh month following the
Release Delivery Date, a lump sum equal to the product of (x) 1.5 multiplied by
(y) your Annual Compensation in effect immediately prior to the date your
employment terminates (without regard to any decrease in the rate of your Annual
Compensation made after the Change in Control).
     (c) As used herein, the term “Base Annual Salary” shall mean, at any time,
an amount equal to your annual rate of salary at such time. “Annual
Compensation” shall

 

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mean, at any time, an amount equal to your Base Annual Salary, plus 100% of the
target cash bonus or other cash incentive that you are eligible to earn in such
year pursuant to each plan or program (whether or not such plan or program has
been formalized or is in written form) of the Company in effect for such year
that provides for cash bonuses or other cash incentives, or if no such plan or
program has been adopted with respect to such year, 100% of the target cash
bonus or other cash incentive that you were eligible to earn in the most recent
year in which such a plan or program was in effect. The severance benefits
specified in this Section 1 shall be in lieu of any severance pay or other
severance benefit that the Company may provide to terminated employees pursuant
to policies of the Company that may at that time be in effect (unless the only
severance benefits to which you are entitled are those severance benefits
provided under such policies).
     (d) As used herein, a “Change in Control” shall be deemed to have occurred
if the event set forth in any one of the following paragraphs shall have
occurred:
          (i) any person is or becomes the Beneficial Owner (as defined below),
directly or indirectly, of securities of the Company representing 25% or more of
the combined voting power of the Company’s then outstanding securities; or
          (ii) the following individuals cease for any reason to constitute a
majority of the number of directors then serving as directors of the Company:
individuals who, on the date hereof, constitute the Board of Directors of the
Company and any new director (other than a director whose initial assumption of
office is in connection with the settlement of an actual or threatened election
contest, including but not limited to a consent solicitation, relating to the
election of directors of the Company) whose appointment or election by the Board
of Directors of the Company or nomination for election by the Company’s
stockholders was approved or recommended by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors on the date
hereof or whose appointment, election or nomination for election was previously
so approved or recommended; or
          (iii) a merger or consolidation of the Company is consummated with any
other corporation or entity, other than (a) a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior to such merger or consolidation continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity or any Parent (as defined below) thereof), at least a majority
of the combined voting power of the securities of the Company, such surviving
entity or any Parent thereof outstanding immediately after such merger or
consolidation or (b) a merger or consolidation effected solely to implement a
recapitalization of the Company (or similar transaction) in which no person is
or becomes the Beneficial Owner, directly or indirectly, of securities of the
Company representing 25% or more of the combined voting power of the Company’s
then outstanding securities; or
          (iv) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is consummated a sale or
disposition by the Company of any assets which individually or as part of a
series of related transactions constitute all or substantially all of the
Company’s consolidated assets; or

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          (v) the execution of a binding agreement that if consummated would
result in a Change in Control of the type specified in clause (i) or (iii) of
this Section 1 (an “Acquisition Agreement”) or of a binding agreement for the
sale or disposition of assets that, if consummated, would result in a Change in
Control of the type specified in clause (iv) of this Section 1 (an “Asset Sale
Agreement”) or the adoption by the Board of Directors of the Company of a plan
of complete liquidation or dissolution of the Company that, if consummated,
would result in a Change in Control of a type specified in clause (iv) of this
Section 1 (a “Plan of Liquidation”); provided however, that a Change in Control
of the type specified in this clause (v) shall not be deemed to exist or to have
occurred as a result of the execution of such Acquisition Agreement or Asset
Sale Agreement, or the adoption of such a Plan of Liquidation, from and after
the Abandonment Date (as defined below) if your employment has not been
terminated on or prior to the Abandonment Date. The term “Abandonment Date”
shall mean the date on which (a) an Acquisition Agreement, Asset Sale Agreement
or Plan of Liquidation is terminated (pursuant to its terms or otherwise)
without having been consummated, (b) the parties to an Acquisition Agreement or
Asset Sale Agreement abandon the transactions contemplated thereby, (c) the
Company abandons a Plan of Liquidation or (d) a court or regulatory body having
competent jurisdiction enjoins or issues a cease and desist or stop order with
respect to or otherwise prevents the consummation of, or a regulatory body
notifies the Company that it will not approve, an Acquisition Agreement, Asset
Sale Agreement or Plan of Liquidation or the transactions contemplated thereby
and such injunction, order or notice has become final and not subject to appeal.
     As used in connection with the foregoing definition of Change in Control,
the term “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated
under Section 12 of the Exchange Act; the term “Beneficial Owner” shall have the
meaning set forth in Rule 13d-3 under the Exchange Act; and “Exchange Act” shall
mean the Securities Exchange Act of 1934, as amended from time to time; and the
term “Parent” shall mean any entity that becomes the Beneficial Owner of at
least a majority of the voting power of the outstanding voting securities of the
Company or of an entity that survives any merger or consolidation of the Company
or any direct or indirect subsidiary of the Company.
     Notwithstanding the foregoing or anything to the contrary contained in any
Company policy providing for severance payments and benefits to which you may
become eligible pursuant to this Section 1, to the extent required by
Section 409A, no payments shall be made to you pursuant to any such Company
policy during the first six months following your termination of employment with
the Company; you shall instead receive a lump sum payment on the first day of
the seventh month following the date your employment terminates in an amount
equal to the total amount of payments that you otherwise would have received
during the first six months following your termination of employment. Any
remaining payments shall be made to you in accordance with the terms of the
applicable Company policy.
     2. Upon the occurrence of a termination of your employment under
circumstances entitling you to receive the severance payment provided in Section
1(b) above, the Company shall also cause to be continued, for a period equal to
the greater of (i) the remaining Term in effect at the time of the Change in
Control or (ii) the period for which such coverage would be maintained if you
were fully eligible to receive severance benefits under then-applicable Company
benefit plans, programs or policies, subject to the limitations set forth in

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such plans, programs or policies, such life, medical and dental insurance
coverage as is otherwise maintained by the Company for full-time employees
(based on your annual rate of salary in effect immediately prior to the date
your employment terminates), provided (1) that you shall continue to pay all
amounts in respect of such coverage that an employee receiving the same level of
coverage is or would be required to pay, and (2) no insurance coverage shall be
continued past the last day of the second calendar year after the year your
employment with the Company terminates
     3. In the event that any amount otherwise payable hereunder would be deemed
to constitute a parachute payment (a “Parachute Payment”) within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), and
if any such Parachute Payment, when added to any other payments which are deemed
to constitute Parachute Payments, would otherwise result in the imposition of an
excise tax under Section 4999 of the Code, the amounts payable hereunder shall
be reduced by the smallest amount necessary to avoid the imposition of such
excise tax. Any such limitation shall be applied to such compensation and
benefit amounts, and in such order, as the Company shall determine in its sole
discretion.
     4. You shall have no right to receive any severance pay or severance
benefit or any other compensation or benefit for any period after the date of
the termination by the Company of your employment for Cause or, except as
otherwise provided in Section 1, following the voluntary termination by you of
your employment. As used herein, the term “Cause” shall mean: (i) a breach of
your fiduciary duty to the Company including, but not limited to, your failure
to obey any lawful directive of the Board of Directors of the Company, (ii) your
personal dishonesty or willful misconduct or (iii) your willful violation of any
law, rule or regulation (other than traffic violations or similar offenses) or
final cease-and-desist order.
     5. Nothing in this letter (a) confers upon you the right to continue in the
employment of the Company or the right to hold any particular office or position
with the Company, (b) requires the Company to pay you, or entitles you to
receive, any specified annual salary or interferes with or restricts in any way
the right of the Company to decrease your annual salary at any time or (c)
interferes with or restricts in any way the right of the Company to terminate
your employment at any time, with or without Cause.
     6. Any payments due you hereunder shall be reduced by all applicable
withholding and other taxes.
     7. The provisions set forth in this letter shall continue in effect
throughout its Term. The “Term” of this letter shall mean the period commencing
on the date hereof and ending on the first anniversary of the date hereof,
subject to automatic extension on each anniversary of the date hereof, unless
(a) you give notice of your intent to terminate your employment, or otherwise
terminate your employment, before such date or (b) the Company gives written
notice to you of the termination of such automatic extensions at least 360 days
prior to such date.
     8. This letter is intended to be binding upon the Company, its successors
in interest and assigns. On and after the date of this letter, the terms
regarding severance benefits described herein shall supercede and replace all
severance and other benefits provided under, and

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any other provisions set forth or described in any prior letters to, or
agreements with, you relating to provisions of benefits upon a termination of
your employment, and are contingent upon your acceptance by signing below.
          9. This letter shall be governed by, construed and enforced in
accordance with the laws of the State of New York, without giving effect to the
principles of conflicts of law thereof.
          10. You and the Company intend that this letter complies with the
provisions of Section 409A of the Code and the regulations and other guidance of
general applicability that are issued thereunder (“Section 409A”). You and the
Company agree to negotiate in good faith regarding amendments to this letter
that may be necessary or desirable to comply with Section 409A.
     This letter may be executed in one or more counterparts, each of which will
be deemed to be an original, but all of which will collectively constitute a
single original.

                  Very truly yours,    
 
                STURM, RUGER & CO., INC.    
 
           
 
  By:   /s/ Stephen L. Sanetti
 
Name: Stephen L. Sanetti    
 
      Title: President    

Agreed and Accepted:

         
By:
  /s/ Michael O. Fifer
 
    Date: December 15, 2006    

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