This Transition Agreement involves
Title: TRANSITION SERVICES AND CONSULTING AGREEMENT
Governing Law: Connecticut Date: 8/2/2016
Industry: Recreational Products Sector: Consumer Cyclical
TRANSITION SERVICES AND CONSULTING AGREEMENT
This TRANSITION SERVICES AND CONSULTING AGREEMENT (this “ Agreement ”) is made and entered into on August 1, 2016 by and between Sturm, Ruger & Company, Inc., a Delaware corporation with its principal place of business at One Lacey Place, Southport, Connecticut 06890 (the “ Company ”), and Michael O. Fifer (“ Fifer ”), (together with the Company, each a “ Party ,” and, collectively, the “ Parties ”).
WHEREAS, the Parties wish to ensure that, upon the conclusion of Fifer’s employment as the Chief Executive Officer of the Company, which the Parties anticipate will occur in connection with the 2017 annual meeting of the Company’s stockholders, there will be a smooth transition of Fifer’s responsibilities to his successor, and that the Company will continue to build on the successes achieved during Fifer’s tenure as the Chief Executive Officer of the Company;
WHEREAS, the Parties recognize that Fifer has gained extensive knowledge and formed many valuable relationships in his career, and that such knowledge and relationships have significant value to the Company; and
WHEREAS, the Company and Fifer desire that Fifer provide certain consulting services for the benefit of the Company following the conclusion of his employment as the Chief Executive Officer of the Company, subject to the provisions set forth herein;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises, terms, provisions and conditions set forth in this Agreement, the Parties hereby agree as follows:
(a) The Parties presently anticipate that Fifer shall continue to serve as the Chief Executive Officer until May 9, 2017 (the “ Transition Date ”). During the period beginning on the date of this Agreement and ending on the Transition Date, Fifer shall work with the Company’s executive team and the Board of Directors of the Company (the “ Board of Directors ”) to facilitate the transition process. Fifer hereby agrees that he shall resign from his position as the Chief Executive Officer on the Transition Date.
(b) Upon Fifer’s resignation as the Chief Executive Officer of the Company, the Parties anticipate that Fifer shall continue to serve as a member of the Board of Directors, subject to the approval of the Company’s shareholders and applicable law and the regulations of the New York Stock Exchange. The Parties further anticipate that, from and after the Transition Date, Fifer shall serve as the Vice Chairman of the Board of Directors.
(c) Nothing in this Section 1 confers upon Fifer the right to continue in the employment of the Company through the Transition Date or the right to hold any particular
office or position with the Company or interferes with or restricts in any way the right of the Company to terminate Fifer’s employment as the Chief Executive Officer of the Company at any time, for any reason.
2. Consulting Period . Fifer shall perform the Services (as defined below) during the period beginning on the Transition Date and ending on the six (6) year anniversary of the Transition Date (such period, the “ Consulting Period ”).
3. Services .
(a) Fifer shall provide consulting, advisory and other services (collectively, the “ Services ”) to the Company at the request of the Company, including making recommendations on strategy and helping to ensure a smooth transition of the Company’s leadership. The Services shall include, without limitation, the following:
i. Fifer shall make himself available to the Company’s Chief Executive Officer and the other members of the Company’s executive team upon the request thereof to advise on strategic and other executive matters.
ii. Fifer shall work with the Board of Directors and the Company’s Chief Executive Officer to formulate plans which will help to facilitate the transitional requirements of the Company’s new Chief Executive Officer.
iii. Fifer shall establish and chair the Company’s Product Strategy and Technology Advisory Board.
iv. Fifer shall work with the Company’s executive team to maintain the Company’s relationships with its shareholders and customers, including distributors and retailers of the Company’s products, firearms industry groups and media organizations and participate in meetings and outreach events with such Persons (as defined below).
(b) Fifer’s level of service during the Consulting Period shall be as mutually agreed by the Parties, but shall not exceed thirty (30) business days in any twelve (12) month period during the Consulting Period. For the avoidance of doubt, Fifer’s service on the Board of Directors and any committees thereof, and his participation in any activities related there, shall not reduce his time commitment under this Agreement.
(c) Fifer agrees to perform the Services contemplated during the Consulting Period in a good and competent manner and to exercise his professional skill and judgment in accordance with good business practices.
(d) Subject to the provisions of Section 8 below, during the Consulting Period Fifer shall be entitled to pursue other business activities in addition to his Services hereunder and his services as a member of the Board of Directors, including, but not limited to, serving on corporate and charitable boards for other Entities (as defined below).
4. Consulting Fees . As consideration for the performance of the Services during the Consulting Period, the Company shall pay to Fifer Three Hundred Fifty Thousand Dollars ($350,000) per annum, payable monthly.
5. Expenses . The Company shall reimburse Fifer for all reasonable out-of-pocket travel expenses and other direct out-of-pocket expenses incurred by Fifer in performing the Services for the Company during the Consulting Period with the prior consent of the Company, subject to Fifer’s submission of appropriate documentation therefor. Reimbursements shall be payable to Fifer in accordance with the Company’s travel and expense policies, as in effect from time to time.
6. Equity Awards .
(a) The Company shall, subject to the approval of the Compensation Committee of the Board of Directors and Fifer’s continued engagement with the Company in accordance with the terms of this Agreement, make an annual grant to Fifer in the spring of 2017 of retention-based and performance-based restricted stock units (“ RSUs ”) for the Company’s common stock, par value $1.00 per share, at a level consistent with the retention-based and performance-based RSU grants made to Fifer in 2016.
(b) The terms applicable to the RSUs granted to Fifer in 2017 shall be consistent in all material respects with the terms applicable to the RSUs granted to Fifer in 2016 and shall be subject to such other standard terms and conditions as apply to executive RSU awards made by the Company pursuant to the Plan (as defined below), as determined by the Compensation Committee of the Board of Directors; provided, however, that if the Compensation Committee of the Board of Directors changes the performance criteria for all executive level performance-based RSU awards, Fifer’s 2017 performance-based RSU award shall include the same criteria. Further, during the Consulting Period, all RSU awards previously made to Fifer by the Company shall continue to vest as if Fifer remained employed as the Chief Executive Officer of the Company, and the Company and Fifer shall amend Fifer’s existing RSU award agreements (the “ Existing RSU Agreements ”) to reflect the foregoing.
7. Status; Benefits .
(a) It is understood and agreed that Fifer shall be an independent contractor in the performance of any and all Services during the Consulting Period, and that nothing in this Agreement shall in any way be construed to give rise to an employment relationship between the Company and Fifer during the Consulting Period.
(b) Fifer understands and agrees that, during the Consulting Period, as an independent contractor, any amounts remitted by the Company to Fifer for Services rendered are not subject to withholding for federal, state, or social security taxes. All such taxes and other legally required payments and any insurance required by law (other than health insurance) shall be Fifer’s sole responsibility.
(c) Fifer agrees and understands that, during the Consulting Period, as an independent contractor, Fifer shall not be eligible to participate in, and shall not be eligible for benefits under,
any of the Company’s employee benefit plans or programs, provided that during the Consulting Period Fifer shall be eligible to participate in any benefit plan arrangements offered by the Company to the Company’s directors, as in effect from time to time.
(d) During the Consulting Period, Fifer shall be solely responsible for his compliance with all economic, operational, safety, insurance and other requirements imposed by federal, state or local law with respect to the Services.
(e) Upon termination of the Consulting Period for any reason, the Company shall have no further obligation or liability to Fifer pursuant to this Agreement, other than the payment of any amounts due through the date of termination of the Consulting Period.
8. Confidentiality; Restricted Activities . Fifer agrees that some restrictions on his activities are necessary to protect the goodwill, Confidential Information (as defined below) and other legitimate interests of the Company and its Affiliates (as defined below):
(a) From and after the date of this Agreement, Fifer shall not disclose Confidential Information to, or use Confidential Information for the benefit of, any Person, except (i) to the extent required by an order of a court having jurisdiction over Fifer or under subpoena from an appropriate government agency, in which event, Fifer shall use his good faith efforts to consult with the General Counsel of the Company prior to responding to any such order or subpoena, or (ii) as required in the performance of the Services.
(b) Fifer agrees that, during the period commencing on the date of this Agreement and ending on the two (2) year anniversary of the termination or expiration of the Consulting Period (such period, the “ Restricted Period ”), Fifer shall not, directly or indirectly, individually or jointly, own any interest in, operate, join, control or participate as a partner, director, principal, officer, or agent of, enter into the employment of, act as a consultant to, or perform any services for any Person (other than the Company or its subsidiaries), that engages in any Competitive Activities (as defined below) within the United States of America or any other jurisdiction in which the Company or its subsidiaries are engaged (or have committed plans to engage) in business during the Consulting Period (the “ Restricted Area ”). Notwithstanding anything herein to the contrary, this Section 8 shall not prevent Fifer from acquiring or holding as an investment securities (x) of the Company or (y) representing not more than three percent (3%) of the outstanding voting securities of any other publicly-held corporation.
(c) During the Restricted Period, Fifer shall not, for his own account or for the account of any other Person (other than the Company or its subsidiaries), engage in Interfering Activities. For purposes of this Agreement, “ Interfering Activities ” means directly or indirectly (i) encouraging, soliciting, or inducing, or in any manner attempting to encourage, solicit, or induce, any Person employed by, or Person providing consulting services to, the Company or any of its subsidiaries to terminate such employment or consulting services; p