PROXY PAPER AMERICAN OUTDOOR BRANDS CORPORATION NASDAQ: AOBC ISIN: US02874P1030 MEETING DATE: 25 SEPTEMBER 2018 RECORD DATE: 02 AUGUST 2018 PUBLISH DATE: 04 SEPTEMBER 2018 INDEX MEMBERSHIP: SECTOR: INDUSTRY: COUNTRY OF INCORPORATION: UNITED STATES VOTING IMPEDIMENT: COMPANY PROFILE VOTE RESULTS APPENDIX RECREATIONAL PRODUCTS UNITED STATES HEADQUARTERS: OWNERSHIP CONSUMER DISCRETIONARY COUNTRY OF TRADE: COMPANY DESCRIPTION American Outdoor Brands Corporation designs, manufactures, and sells firearms worldwide. RUSSELL 3000; RUSSELL 2000; NASDAQ COMPOSITE ESG PROFILE MASSACHUSETTS NONE COMPANY UPDATES COMPENSATION PEER COMPARISON 2018 ANNUAL MEETING PROPOSAL 1.00 ISSUE Election of Directors BOARD GLASS LEWIS FOR SPLIT 1.01 Elect Barry M. Monheit FOR FOR 1.02 Elect Robert L. Scott FOR FOR 1.03 Elect Anita D. Britt FOR FOR 1.04 Elect Robert H. Brust FOR FOR 1.05 Elect P. James Debney FOR FOR 1.06 Elect John B. Furman FOR FOR 1.07 Elect Gregory J. Gluchowski, Jr FOR FOR 1.08 Elect Michael F. Golden FOR FOR 1.09 Elect Mitchell A. Saltz FOR WITHHOLD 1.10 Elect I. Marie Wadecki FOR FOR 2.00 Advisory Vote on Executive Compensation FOR FOR 3.00 Ratification of Auditor FOR FOR 4.00 Shareholder Proposal Regarding Report on Gun Safety Measures AGAINST FOR DISCLOSURE NOTES CONCERNS Other unique issue A more robust discussion of the reputational risks faced by the Company on account of gun violence is warranted EXPLANATION FOR REPUBLICATION: Update: On September 6, 2018, the Company filed a supplement to its proxy statement in response to several concerns cited in our report. Specifically, the filing explains that the Company's failure to disclose director Mitchell Saltz's service on the board of VirTra Inc. was the result of an inadvertent omission on his part in reviewing his biography for inclusion in the proxy statement, and that relationship does not represent a conflict of interests. Additionally, the supplemental proxy responds to comments made in an exempt solicitation filed by Majority Action on August 27, 2018. We have revised our analysis of Proposal 1 to include this information, and based on the additional disclosure provided, we have changed our voting recommendation for the members of the nominations and governance committee (directors Gluchowski, Monheit, Scott and Wadecki) from WITHHOLD to FOR. However, we continue to recommend that shareholders withhold votes from Mr. Saltz for failing to provide complete biographical disclosure. Lastly, we have added to our analysis of Proposal 4.00 a link to the Company's DEFA14A filing which further details its opposition to that proposal. CONFLICT OF INTERESTS: American Outdoor Brands purchased a copy of this Proxy Paper from Glass Lewis on receipt after publication to institutional investor clients. AOBC September 25, 2018 Annual Meeting 2 Glass, Lewis & Co., LLC SHARE OWNERSHIP PROFILE SHARE BREAKDOWN 1 SHARE CLASS Common Stock SHARES OUTSTANDING 54.4 M VOTES PER SHARE 1 INSIDE OWNERSHIP 1.80% STRATEGIC OWNERS** 1.80% FREE FLOAT 98.20% SOURCE CAPITAL IQ AND GLASS LEWIS. AS OF 06-SEP-2018 TOP 20 SHAREHOLDERS HOLDER 1. BlackRock, Inc. 2. OWNED* COUNTRY INVESTOR TYPE 12.44% United States Traditional Investment Manager The Vanguard Group, Inc. 8.31% United States Traditional Investment Manager 3. Invesco Ltd. 4.55% United States Traditional Investment Manager 4. Dimensional Fund Advisors L.P. 4.49% United States Traditional Investment Manager 5. Millennium Management LLC 2.48% United States Hedge Fund Manager/CTA 6. Credit Suisse, Investment Banking and Securities Investments 2.18% Switzerland Bank/Investment Bank 7. State Street Global Advisors, Inc. 1.87% United States Traditional Investment Manager 8. Two Sigma Investments, LP 1.71% United States Hedge Fund Manager/CTA 9. Polar Asset Management Partners Inc. 1.63% Canada Hedge Fund Manager/CTA 10. Point72 Asset Management, L.P. 1.56% United States Family Offices/Family Trust 11. BMO Global Asset Management 1.50% United Kingdom Traditional Investment Manager 12. Northern Trust Global Investments 1.20% United Kingdom Traditional Investment Manager 13. Morgan Stanley, Investment Banking and Brokerage Investments 1.15% United States Bank/Investment Bank 14. Cooper Creek Partners Management LLC 1.13% United States Hedge Fund Manager/CTA 15. Charles Schwab Investment Management, Inc. 1.09% United States Traditional Investment Manager 16. Davidson Kempner Capital Management LLC 1.03% United States Hedge Fund Manager/CTA 17. Geode Capital Management, LLC 0.99% United States Traditional Investment Manager 18. Weiss Multi-Strategy Advisers, LLC 0.88% United States Hedge Fund Manager/CTA 19. BNP Paribas Securities Corp, Asset Management Arm 0.83% United States Bank/Investment Bank 20. Susquehanna International Group, LLP, Asset Management Arm 0.72% United States Bank/Investment Bank *COMMON STOCK EQUIVALENTS (AGGREGATE ECONOMIC INTEREST) SOURCE: CAPITAL IQ. AS OF 06-SEP-2018 **CAPITAL IQ DEFINES STRATEGIC SHAREHOLDER AS A PUBLIC OR PRIVATE CORPORATION, INDIVIDUAL/INSIDER, COMPANY CONTROLLED FOUNDATION, ESOP OR STATE OWNED SHARES OR ANY HEDGE FUND MANAGERS, VC/PE FIRMS OR SOVEREIGN WEALTH FUNDS WITH A STAKE GREATER THAN 5%. SHAREHOLDER RIGHTS MARKET THRESHOLD VOTING POWER REQUIRED TO CALL A SPECIAL MEETING VOTING POWER REQUIRED TO ADD AGENDA ITEM COMPANY THRESHOLD1 N/A N/A 1.00% 2 1.00% 2 N/A N/A VOTING POWER REQUIRED FOR WRITTEN CONSENT 1N/A INDICATES THAT THE COMPANY DOES NOT PROVIDE THE CORRESPONDING SHAREHOLDER RIGHT. 2SHAREHOLDERS MUST OWN THE CORRESPONDING PERCENTAGE OR SHARES WITH MARKET VALUE OF AT LEAST $2,000 FOR AT LEAST ONE YEAR. AOBC September 25, 2018 Annual Meeting 3 Glass, Lewis & Co., LLC COMPANY PROFILE 1 YR TSR FINANCIALS 3 YR TSR AVG. 5 YR TSR AVG. AOBC -50.3% -9.5% 4.6% S&P 500 13.3% 10.6% 13.0% PEERS* -5.1% -2.6% 0.8% MARKET CAPITALIZATION (MM USD) 595 ENTERPRISE VALUE (MM USD) 734 REVENUES (MM USD) 607 ANNUALIZED SHAREHOLDER RETURNS. *PEERS ARE BASED ON THE INDUSTRY SEGMENTATION OF THE GLOBAL INDUSTRIAL CLASSIFICATION SYSTEM (GICS). FIGURES AS OF 30-APR-2018. SOURCE: CAPITAL IQ CHANGE IN CEO PAY* EXECUTIVE COMPENSATION CORPORATE GOVERNANCE ANTI-TAKEOVER MEASURES AUDITORS 1 YR 3 YR 5 YR -58% 15% -59% *SOURCE: EQUILAR. SAY ON PAY FREQUENCY 1 Year P4P 2018 F GLASS LEWIS STRUCTURE RATING Fair GLASS LEWIS DISCLOSURE RATING Fair SINGLE TRIGGER CIC VESTING No EXCISE TAX GROSS-UPS No CLAWBACK PROVISION Yes OVERHANG OF INCENTIVE PLANS 11.99% ELECTION METHOD Majority w/ Resignation Policy CEO START DATE September 2011 CONTROLLED COMPANY No AVERAGE NED TENURE 12 years DUAL-CLASS VOTING No % OF WOMEN 20.0% ON BOARD STAGGERED BOARD No ALLOWS PROXY ACCESS COMBINED CHAIR/CEO No No POISON PILL No APPROVED BY SHAREHOLDERS/EXPIRATION DATE N/A; N/A AUDITOR: DELOITTE & TOUCHE TENURE: 4 YEARS MATERIAL WEAKNESS(ES) IDENTIFIED IN PAST 12 MONTHS No RESTATEMENT(S) IN PAST 12 MONTHS No CURRENT AS OF SEP 04, 2018 AOBC September 25, 2018 Annual Meeting 4 Glass, Lewis & Co., LLC PAY-FOR-PERFORMANCE American Outdoor Brands' executive compensation received an F grade in our proprietary pay-for-performance model. The Company paid more compensation to its named executive officers than the median compensation for a group of companies selected using Equilar's market based peer algorithm.The CEO was paid moderately more than the median CEO compensation of these peer companies. Overall, the Company paid moderately more than its peers, but performed worse than its peers. HISTORICAL COMPENSATION GRADE FY 2018: F FY 2017: D FY 2016: C FY 2018 CEO COMPENSATION SALARY: $734,039 GDFV EQUITY: $1,486,518 NEIP/OTHER: $46,039 TOTAL: $2,266,596 FY 2018 PAY-FOR-PERFORMANCE GRADE 3-YEAR WEIGHTED AVERAGE COMPENSATION EQUILAR PEERS VS PEERS DISCLOSED BY COMPANY SHAREHOLDER WEALTH AND BUSINESS PERFORMANCE EQUILAR AOBC Callaway Golf Company* Sturm, Ruger & Company, Inc.* Movado Group, Inc.* iRobot Corporation* Fox Factory Holding Corp. Steven Madden, Ltd.* La-Z-Boy Incorporated* Johnson Outdoors Inc.* Oxford Industries, Inc.* Vista Outdoor Inc.* Spin Master Corp. Standex International Corporation* Perry Ellis International, Inc. Ethan Allen Interiors Inc.* Universal Electronics Inc.* ZAGG Inc Infinera Corporation Shutterfly, Inc. RBC Bearings Incorporated Motorcar Parts of America, Inc. Flexsteel Industries, Inc. Gentherm Incorporated Hooker Furniture Corporation Stoneridge, Inc. Simpson Manufacturing Co., Inc. Plantronics, Inc. Haverty Furniture Companies, Inc. ESCO Technologies Inc. Bassett Furniture Industries, Incorporated Albany International Corp. *ALSO DISCLOSED BY AOBC Analysis for the year ended 4/30/2018. Performance measures, except ROA and ROE, are based on the weighted average of annualized 1, 2, and 3 year data. Compensation figures are weighted average 3-year data calculated by Glass Lewis based on information disclosed by the Company and its peers in their proxy filings. For Canadian peers, equity awards are normalized using the grant date exchange rate and cash compensation data is normalized using the fiscal year average exchange rate. Equilar peers are updated in January and July. Peer data is based on public information, as well as information provided to Equilar during its open submission periods. The “Peers Disclosed by Company” data is based on public information only. Glass Lewis may exclude certain peers from the Pay for Performance analysis based on factors such as trading status and/or data availability. For details of exclusion criteria, go to:www.glasslewis.com. For more information about Equilar peer groups, go to: www.equilar.com AOBC September 25, 2018 Annual Meeting 5 Glass, Lewis & Co., LLC 1.00: ELECTION OF DIRECTORS SPLIT PROPOSAL REQUEST: Election of ten directors ELECTION METHOD: Majority w/ Resignation Policy RECOMMENDATIONS & CONCERNS: WITHHOLD: M. Saltz (Other unique issue) FOR: A. Britt ; R. Brust ; P. Debney ; J. Furman ; G. Gluchowski, Jr ; M. Golden ; B. Monheit ; R. Scott ; I. Wadecki UPDATE: SEPTEMBER 6, 2018 The Company filed an amendment to its proxy statement in response to our prior analysis and recommendations. We have incorporated the additional disclosure into our analysis below and revised our recommendations accordingly. BOARD OF DIRECTORS UP NAME P. James Debney* AGE GENDER COMMITTEES TERM TERM YEARS START END ON AUDIT COMP GOV NOM BOARD 50 M Insider 1 Not Independent Yes 2011 2018 7 Anita D. Britt 55 F Independent Independent Yes 2018 2018 0 Robert H. Brust 75 M Independent Independent Yes John B. Furman 74 M Independent Independent Yes Gregory J. Gluchowski, Jr 53 M Independent Independent Yes 2015 2018 3 Michael F. Golden 64 M Independent 2 Independent Yes 2004 2018 14 Barry M. Monheit 71 M Independent 3 Independent Yes 2004 2018 14 Mitchell A. Saltz 65 M Independent 4 Independent Yes 1998 2018 20 Robert L. Scott 72 M Independent 5 Independent Yes 1999 2018 19 69 F Independent Independent Yes 2002 2018 16 ·CEO ·Chair ·Vice Chair I. Marie Wadecki C = Chair, * = Public Company Executive, 1. 2. 3. 4. 5. GLASS LEWIS COMPANY OWNERSHIP** CLASSIFICATION CLASSIFICATION C C C C 2011 2018 7 2004 2018 14 = Withhold or Against Recommendation President and CEO. Former president and CEO (until September 2011). Chair. Former CEO (until December 2003). Vice chair. Former president (until September 2002). Former consultant to the Company (until February 2006). **Percentages displayed for ownership above 5%, when available AOBC September 25, 2018 Annual Meeting 6 Glass, Lewis & Co., LLC NAME ATTENDED AT LEAST 75% OF MEETINGS PUBLIC COMPANY EXECUTIVE ADDITIONAL PUBLIC COMPANY DIRECTORSHIPS P. James Debney Yes Yes None Anita D. Britt N/A No None Robert H. Brust Yes No None John B. Furman Yes No None Gregory J. Gluchowski, Jr Yes No (1) Milacron Holdings Corp. Michael F. Golden Yes No (2) Trex Company, Inc.; Quest Resource Holding Corporation Barry M. Monheit Yes No (1) Quest Resource Holding Corporation Mitchell A. Saltz Yes No (2) Quest Resource Holding Corporation; VirTra Inc. Robert L. Scott Yes No None I. Marie Wadecki Yes No (1) Quest Resource Holding Corporation MARKET PRACTICE INDEPENDENCE AND COMPOSITION AOBC* REQUIREMENT BEST PRACTICE Independent Chair Yes No1 Yes7 Board Independence 90% Majority2 66.7% 7 100% ; Independent Chair 100%3 100%7 Compensation Committee Independence 100% ; Independent Chair 100%4 100%7 Nominating Committee Independence 100% ; Independent Chair 100%5 100%7 Percentage of women on board 20% N/A6 N/A6 Directors' biographies Proxy Statement Audit Committee Independence * Based on Glass Lewis Classification 1. Nasdaq Corporate Governance Requirements 2. Independence as defined by Nasdaq listing rules 3. Securities Exchange Act Rule 10A-3 and Nasdaq listing rules 4. Non-independent member allowed under certain circumstances in Nasdaq listing rules 5. Non-independent member allowed under certain circumstances in Nasdaq listing rules 6. No current marketplace listing requirement 7. CII Glass Lewis believes that boards should: (i) be at least two-thirds independent; (ii) have standing audit, compensation and nomination committees comprised solely of independent directors; and (iii) designate an independent chair, or failing that, a lead independent director. GLASS LEWIS ANALYSIS We believe it is important for shareholders to be mindful of the following: EXEMPT SOLICITATIONS Sisters of the Holy Names of Jesus and Mary On August 22, 2018, the Sisters of the Holy Names of Jesus and Mary, U.S.-Ontario Province, among others (together "the Proponent"), filed an exempt solicitation with the SEC in response to the Company's opposition to the Proponent's shareholder proposal included in the proxy statement (Proposal 4) to provide additional rationale for voting in favor of Proposal 4 which asks the Company to issue a report on the Company’s activities related to gun safety measures and the mitigation of harm associated with gun products, including the following: Evidence of monitoring of violent events associated with products produced by the company. Efforts underway to research and produce safer guns and gun products. Assessment of the corporate reputational and financial risks related to gun violence in the U.S. Please refer to Proposal 4 for a complete analysis of the Proponent's shareholder proposal as well as the Company's response to the proposal. AOBC September 25, 2018 Annual Meeting 7 Glass, Lewis & Co., LLC Majority Action On August 27, 2018, Majority Action filed an exempt solicitation with the SEC expressing concerns that the Company's disclosures are incomplete and potentially misleading to investors. Majority Action cites public backlash against the gun industry following recent shooting tragedies and a high level of public concern and investor scrutiny about gun manufacturer behavior while calling on gun makers to speak forthrightly and take concrete action to mitigate the risks and harm associated with their products and business practices. Among the primary concerns with the Company's disclosures as expressed by Majority Action are: Incomplete disclosure regarding the Company's politically related spending activities; Failure to disclose an additional directorship of board member Michael Saltz, a required disclosure by the SEC; and Substantial concerns about the board's composition and ability to provide truly independent oversight of management given that three of the Company's former executives serve on the board and five of the Company's board members also serve as directors or are former executives of Quest Resource Holding Company. Majority Action further outlined concerns about the board's actual independence and its ability to respond effectively to a changing market while asking shareholders to consider whether replacing some members of the nominations and corporate governance committee, which is charged with recruiting directors and overseeing political spending disclosure, could improve the Company's oversight of political and policy expenditures, as well as whether more general board refreshment is warranted. Regarding the completeness of disclosures pertaining to the Company's donations activities, it is noted specifically that at least $1.5 million in donations to the political programs of the NRA (which is organized as a 501(c)(4) organization) and the National Shooting Sports Foundation was not reported. The Company previously responded to a majority-supported shareholder proposal at its 2014 annual meeting, which sought enhanced disclosure of political contributions, by detailing its policy on corporate contributions and expenditures, which explicitly states that it will disclose "dues, contributions, or other payments made to tax exempt 'social welfare' organizations and 'political committees' operating under sections 501(c)(4) and 527 of the Code, respectively, and to tax exempt entities that write model legislation and operate under Section 501(c)(3) of the Code to the extent that such amounts are non-deductible." As discussed below, the Company states that such donations were not required to be disclosed under the adopted policy and we, therefore, do not believe shareholders should hold directors accountable solely on this issue. However, given the Company's historical relationship with the NRA, which has, at times, been extremely rocky, we believe shareholders should take note of this allegation. Regarding the disclosure of Michael Saltz's outside directorships, it is noted that Mr. Saltz has served on the board of publicly-traded VirTra Inc. since 2016. Because VirTra is an SEC-reporting issuer, such information is required to be disclosed in the Company's proxy statement under SEC reporting rules. Furthermore, the solicitation notes that the Company had for many years promoted Smith & Wesson Academy ("SWA") as a provider of police and security personnel training services, although SWA shut its doors less than two years after Mr. Saltz joined the VirTra board. The solicitation identifies this omission as a concern, given that VirTra previously competed with the Company for the provision of police and security training services, in apparent contradiction of the Company's code of conduct, which prohibits such conflicts of interest. As discussed further below, we have additional concerns regarding the disclosure of directors Saltz' outside commitments. Company Response to Exempt Solicitations On September 6, 2018, the Company filed an amendment to its proxy statement which provides additional background relating to the concerns identified in Majority Action's exempt solicitation. The supplemental filing primarily asserts that the concerns relating to disclosure of outside directorships are based on an inadvertent omission by Mr. Saltz in reviewing his biography for inclusion in the proxy statement and that his service on the board of VirTra is in fact not a conflict of interest and therefore not a violation of the Company's code of conduct. The filing goes on to note that Smith & Wesson Academy is in fact still operated by the Company to this day and that SWA provides services substantially different from those offered by VirTra. Because there is very little, if any, overlap in the services provided by SWA and VirTra, the Company believes that this inadvertent omission is immaterial, and of no consequence. The supplemental filing also asserts that Majority Action has substantially mischaracterized the Company's treatment of the aforementioned $1.5 million in donations to the NRA and the National Shooting Sports Foundation as a reporting failure, when, in fact, such donations were not required to be disclosed under the Company's policy on corporate contributions and expenditures. The policy, which was adopted in response to a majority-support shareholder proposal, was vetted with and approved by the proponent of that proposal. Furthermore, the policy specifically requires disclosure of contributions to tax-exempt organizations used for political purposes when such contributions are not deductible under AOBC September 25, 2018 Annual Meeting 8 Glass, Lewis & Co., LLC Section 162(e) of the Internal Revenue Code. The contributions cited by Majority Action were deductible under Section 162(e) and not used for political purposes. Accordingly, no disclosure was required under the policy. VIRTUAL MEETING The Company is part of a small but growing contingent of companies which has elected to hold shareholder meetings by virtual means only. We note that some shareholder rights advocates, including the Comptroller of New York City and the Council of Institutional Investors, have expressed concerns that virtual-only meetings may reduce accountability to shareholders. Glass Lewis believes that virtual meeting technology can be a useful complement to a traditional, in-person shareholder meeting by expanding participation of shareholders who are unable to attend a shareholder meeting in person (i.e. a "hybrid meeting"). However, we also believe that virtual-only meetings have the potential to curb the ability of a company's shareholders to meaningfully communicate with the company's management. When analyzing the governance practices of companies that choose to hold virtual-only meetings, we look for robust disclosure from the Company which assures shareholders that they will be afforded the same rights and opportunities to participate as they would at an in-person meeting. In 2018, we will refrain from making voting recommendations solely on the basis that a company is holding a virtual-only meeting. Beginning in 2019, however, Glass Lewis will generally recommend voting against members of the governance committee where the board is planning to hold a virtual-only shareholder meeting and the company does not provide such disclosure. RECOMMENDATIONS We recommend withholding votes from the following nominee up for election this year based on the following issue: DISCLOSURE CONCERNS As noted above, we have identified concerns with the Company's proxy statement disclosures, specifically regarding the outside commitments of nominee SALTZ. As Mr. Saltz has served on the board of VirTra since 2016, it seems that this inadvertent omission has persisted for at least two annual meeting cycles. We believe shareholders should be concerned that this issue was not addressed until the Company's September 6, 2018 supplemental filing. However, because the board has ultimately addressed this concern through its recently enhanced supplemental disclosure, we do not believe action is warranted against members of the nominations and corporate governance committee at this time. Nonetheless, we believe this omission raises questions about the degree to which Mr. Saltz is protecting the interests of shareholders by being fully transparent about his outside commitments. Contrary to the Company's assertion that this omission is immaterial and of no consequence, we believe a full assessment of directors' outside commitments is integral to the role of the nominations and corporate governance committee, which is charged with oversight of the selection and composition of committees of the board, as well as oversight of director evaluations. Furthermore, given the perception that VirTra may have been a competitor to services provided by the Company, we believe it is even more concerning that the board was not provided with this information. Accordingly, we believe shareholders should hold director Saltz responsible for failing to provide a full disclosure of biographical information, as required under SEC rules. We do not believe there are substantial issues for shareholder concern as to any other nominee. We recommend that shareholders vote: FOR: Britt; Brust; Debney; Furman; Gluchowski, Jr; Golden; Monheit; Scott; Wadecki WITHHOLD: Saltz AOBC September 25, 2018 Annual Meeting 9 Glass, Lewis & Co., LLC 2.00: ADVISORY VOTE ON EXECUTIVE COMPENSATION PROPOSAL REQUEST: Approval of Executive Pay Package PAY FOR PERFORMANCE GRADES: FY 2018 F FY 2017 D FY 2016 C PRIOR YEAR VOTE RESULT (FOR): 96.4% RECOMMENDATION: FOR STRUCTURE: Fair DISCLOSURE: Fair FOR GLASS LEWIS RECOMMENDATION: FOR While the sustained disconnect between pay and performance warrants concern regarding the Company's compensation practices, we note that there were no payouts made under the short-term incentive while no PSU grants from fiscal 2015 vested at the end of their performance period in fiscal 2018. As the vesting outcomes and a substantial decline in total compensation to each NEO mitigate some of our concerns at this time, we believe shareholders can reasonably support the Company's executive pay decisions for the fiscal year under review. However, shareholders should closely monitor future granting practices and their impact on the pay-for-performance alignment as compensation remains above peers. PROGRAM FEATURES 1 POSITIVE LTIP performance-based STIP performance-based STI-LTI payout balance No single-trigger CIC benefits Anti-Hedging Policy Clawback policy for NEOs Executive stock ownership guidelines for NEOs NEGATIVE Significant disconnect between pay and performance 1 Both positive and negative compensation features are ranked according to Glass Lewis' view of their importance or severity SUMMARY COMPENSATION TABLE BASE SALARY BONUS & NEIP EQUITY AWARDS TOTAL COMP P. James Debney President and Chief Executive Officer $734,039 - $1,448,758 $2,228,836 Jeffrey D. Buchanan Executive Vice President, Chief Financial Officer, Chief Administrative Officer and Treasurer $402,831 - $519,658 $972,779 Robert J. Cicero Senior Vice President, General Counsel, Chief Compliance Officer and Secretary $339,715 - $296,752 $661,968 Mark P. Smith Senior Vice President, Manufacturing Services Division $339,709 - $296,752 $659,338 Brian D. Murphy President, Outdoor Products and Accessories Division $283,091 $160,000 $296,752 $755,081 NAMED EXECUTIVE OFFICERS CEO to Avg NEO Pay: AOBC September 25, 2018 Annual Meeting 10 2.92: 1 Glass, Lewis & Co., LLC EXECUTIVE COMPENSATION STRUCTURE - SYNOPSIS SHORT-TERM INCENTIVES AWARD GRANTED Cash TARGET PAYOUTS $735,000 for the CEO MAXIMUM PAYOUTS $2,205,000 for the CEO ACTUAL PAYOUTS No cash incentive was paid due to failure to achieve target performance metrics METRICS USED Adjusted EBITDAS and revenue PERFORMANCE/VESTING PERIOD Performance is measured over one year. Failure to reach 81.3% of the targeted adjusted EBITDAS performance level would result in no payouts, regardless of revenue performance, for the CEO and NEOs whose award is determined with Company-wide performance metrics. LONG-TERM INCENTIVES AWARDS GRANTED RSUs and PSUs TARGET PAYOUTS 70,100 shares for the CEO MAXIMUM PAYOUTS 140,200 shares for the CEO METRICS USED Stock price performance relative to the Russell 2000 Index ALLOCATION OF AWARDS At least one-third of awards are performance-based. PERFORMANCE/VESTING PERIOD Performance is measured over three years and awards subsequently time-vest over one year. Time-vesting awards vest over four years. The committee maintains stock holding requirements for the shares underlying outstanding stock-based awards granted during the year in review so that vested shares generally will not be delivered and therefore, at a minimum, cannot be sold until the first anniversary of each applicable vesting date. The maximum number of shares that can be delivered with respect to the fiscal 2018 PSU grants is limited to a dollar value, determined as of the vesting date, of 600% of the grant date value. None of the PSUs granted in fiscal 2015 vested at the end of the performance period. ONE-TIME PAYMENTS OTHER FEATURES NEO TYPE OF PAYMENT AWARD Brian D. Murphy Promotion PERF. PERIOD Cash LFY CEO TO MEDIAN EMPLOYEE PAY RATIO * 43:1 STOCK OWNERSHIP GUIDELINES Yes - all NEOs CLAWBACK POLICY Yes EXCISE TAX GROSS-UPS No CIC EQUITY TREATMENT Double-trigger acceleration HIGHEST SEVERANCE ENTITLEMENT* 2x base salary N/A VESTING PERIOD VALUE N/A $160,000 * Highest disclosed, if applicable GLASS LEWIS ANALYSIS This proposal seeks shareholder approval of a non-binding, advisory vote on the Company's executive compensation. Glass Lewis believes firms should fully disclose and explain all aspects of their executives' compensation in such a way that shareholders can comprehend and analyze the company's policies and procedures. In completing our assessment, we consider, among other factors, the appropriateness of performance targets and metrics, how such goals AOBC September 25, 2018 Annual Meeting 11 Glass, Lewis & Co., LLC assessment, we consider, among other factors, the appropriateness of performance targets and metrics, how such goals and metrics are used to improve Company performance, the peer group against which the Company believes it is competing, whether incentive schemes encourage prudent risk management and the board's adherence to market best practices. Furthermore, we also emphasize and evaluate the extent to which the Company links executive pay with performance. POTENTIAL CAUSES FOR CONCERN PAY FOR PERFORMANCE Sustained Pay-for-Performance Disconnect The Company has been deficient in linking executive pay to corporate performance, as indicated by the "F" grade received by the Company in Glass Lewis' pay-for-performance model. A properly structured pay program should motivate executives to drive corporate performance, thus aligning executive and long-term shareholder interests. In this case, the Company may not have implemented such a program. Furthermore, we note that the Company received a pay-for-performance grade of "D" in our 2017 Proxy Paper. In our view, shareholders should be concerned with the sustained nature of this misalignment. VARIABLE COMPENSATION Single Metric As indicated above, the Company uses only one performance metric under the LTI plan. We believe measuring a company's performance with multiple metrics serves to provide a more complete picture of the Company's performance than a single metric and that this compensation strategy may focus too much management attention on a single target. OTHER ISSUES One-Off Awards For the year in review, the Company granted Mr. Murphy a supplemental award outside of its normal incentive plans in connection to his promotion. We believe shareholders should generally be wary of awards granted outside of the standard incentive schemes, as such awards have the potential to undermine the integrity of a company's regular incentive plans, the link between pay and performance or both. We generally believe that if the existing incentive programs fail to provide adequate incentives to executives, companies should redesign their compensation programs rather than make additional grants. DISCLOSURE Performance Goals Not Disclosed The Company has failed to provide a clear description of the threshold, maximum and actual performance levels under the short-term incentive plan. We believe clearly defined performance targets are essential for shareholders to fully understand and evaluate the Company's procedures for quantifying performance and translating it into payouts for its executives. CONCLUSION We recommend that shareholders vote FOR this proposal. AOBC September 25, 2018 Annual Meeting 12 Glass, Lewis & Co., LLC 3.00: RATIFICATION OF AUDITOR PROPOSAL REQUEST: Ratification of Deloitte & Touche RECOMMENDATIONS & CONCERNS: PRIOR YEAR VOTE RESULT (FOR): 97.4% BINDING/ADVISORY: Advisory REQUIRED TO APPROVE: Majority of votes cast AUDITOR OPINION: Unqualified FOR FOR- No material concerns AUDITOR FEES 2018 2017 2016 $1,012,500 $1,120,500 $943,000 Audit-Related Fees: $0 $0 $0 Tax Fees: $0 $0 $0 All Other Fees: $0 $0 $0 $1,012,500 $1,120,500 $943,000 Deloitte & Touche Deloitte & Touche Deloitte & Touche Audit Fees: Total Fees: Auditor: Years Serving Company: 4 Restatement in Past 12 Months: No Alternate Dispute Resolution: No Auditor Liability Caps: No GLASS LEWIS ANALYSIS The fees paid for non-audit-related services are reasonable and the Company discloses appropriate information about these services in its filings. We recommend that shareholders vote FOR the ratification of the appointment of Deloitte & Touche as the Company's auditor for fiscal year 2019. AOBC September 25, 2018 Annual Meeting 13 Glass, Lewis & Co., LLC 4.00: SHAREHOLDER PROPOSAL REGARDING REPORT ON GUN SAFETY MEASURES PROPOSAL REQUEST: That the Company produce a report on the Company's activities related to gun safety measures BINDING/ADVISORY: Precatory PRIOR YEAR VOTE RESULT (FOR): N/A FOR SHAREHOLDER PROPONENT: The Sisters of the Holy Names of Jesus and Mary, U.S.-Ontario REQUIRED TO APPROVE: Majority of votes cast RECOMMENDATIONS, CONCERNS & SUMMARY OF REASONING: FOR A more robust discussion of the reputational risks faced by the Company on account of gun violence is warranted GLASS LEWIS REASONING As has been seen at other companies, companies that manufacture firearms could be significantly adversely impacted by reputational issues; and We believe that a more robust discussion of the efforts underway to research and produce safer guns and gun products and the reputational and financial risks faced by the Company on account of gun violence is warranted at this time. PROPOSAL SUMMARY Text of Resolution: RESOLVED: Shareholders request the Board of Directors issue a report by February 8, 2019, at reasonable expense and excluding proprietary information, on the company’s activities related to gun safety measures and mitigation of harm associated with gun products, including the following: Evidence of monitoring of violent events associated with products produced by the company. Efforts underway to research and produce safer guns and gun products. Assessment of the corporate reputational and financial risks related to gun violence in the U.S. Proponent's Perspective Gun violence is a public health crisis with extraordinary human and financial costs; Given the proponent's commitment to safety and responsibility, it is imperative that it assesses all options for decreasing the societal impact of gun violence and mitigate financial and reputational risks for the Company; The Gun Violence Archive’s recent research found gun homicides up 12% and gun injuries up 50% year-after-year from 2014-2017; A recent Harvard and Northeastern University study approximated 265 million guns in the U.S. with a population of only 242 million adults, more than one gun per adult, and that 55 million Americans own guns and 3% of the population own half the total number of guns in the country, averaging 17 per super owner; The New England Journal of Medicine published research demonstrating that living in a home with guns increased the risk of homicide by 40% to 170% and the risk of suicide by 90% to 460%; An estimated 1.69 million children live in a home with firearms according to research published in the Journal of Pediatrics; Research in the Archives of Pediatric and Adolescent Medicine found 29% of parents with children 12 years or younger, and 42% of parents with children ages 13 to 17 have unlocked firearms in the home; A recent Qunnipiac Poll shows that background checks are favored by 95% of the population likely to vote, while survey participants also supported: (i) a ban on sales of assault weapons (65%); (ii) a ban on sales of guns to people convicted of a violent crime (91%); (iii) banning gun modifications that convert weapons to fully automatic capabilities (74%); and (iv) stricter regulations on ammunition sales (62%); While efforts to bring smart guns to the U.S. have been unsuccessful to date, the technology exists and there is reason to believe they could significantly reduce accidental shootings and suicides; A recent study in the American Journal of Public Health found that almost 70% of Americans would be willing to buy a smart gun when considering a purchase; AOBC September 25, 2018 Annual Meeting Board's Perspective Adoption of this proposal would not advance gun safety, mitigate criminal gun violence, or better educate the Company's shareholders with respect thereto; As the Company discloses each year in considerable detail in its 10-K, it is subject to and in compliance with numerous federal and state regulations applicable to firearm manufacturers; The Company's publicly available SEC reports prominently disclose the corporate reputational and financial risks of being a firearm manufacturer; While the Company's products are used lawfully and safely the vast majority of the time, the Company is aware that a very small percentage of the population sometimes engages in horrible, criminal acts with firearms, including those manufactured by the Company and its competitors; The Company lawfully sells its firearm products to federally licensed distributors, large retailers, and cooperative buying groups; The Company does not transfer any firearms to consumers, rather, all firearms sold by the Company are transferred to a consumer through a federally licensed retailer that completes all requisite federal and state forms and background checks; It is no more realistic or feasible for the Company to monitor whether its legal firearms are used in criminal ways than it is for a car manufacturer to monitor how often a drunken driver causes a tragic accident with one of its vehicles or for a mobile phone company to monitor whether its mobile devices are used in terrorist activities; The Company works very closely with the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives ("ATF") and other law enforcement agencies to help trace firearms used in crimes, which is done in the context of a confidential law enforcement investigation; On average, the Company receives over 11,000 requests per year from the ATF to trace firearms allegedly used in crimes; The Company responds to each trace request from the ATF within 24 hours and it advises the ATF whether the Company 14 Glass, Lewis & Co., LLC According to the Violence Policy Center, since 1984 the Company's products have been used in five mass shootings, responsible for killing 43 people and wounding 80 more; and Evidence shows that the American public, in ever greater numbers, is demanding safer guns and responsible firearm manufacturers. The proponent has provided additional information concerning its rationale for this proposal. AOBC September 25, 2018 Annual Meeting made the firearm, when it was made, to whom in its distribution channel it sold the firearm, and when it sold it; The Company does not have in its records, and therefore it cannot provide to the ATF, any information about who may have purchased the firearm at retail or in any other subsequent transaction, and thus the proponent's request that the Company monitor the criminal misuse of its firearms is unfeasible, unrealistic, and unhelpful, and would in no way further the goal of reducing the societal misuse and criminal violence associated with the illegal use of firearms; The Company cannot and will not disclose confidential and proprietary R&D efforts, but it is a well-known fact that it has a long history of supporting and promoting the safe use of firearms; The Company was among the first firearm companies to voluntarily provide a cable-style firearm safety lock included in the box with every firearm it makes; The Company is a contributing author to a nationally known firearms safety instruction manual, a sponsor of hunter education and firearms safety programs, a trainer of firearms safety to both instructors and firearm owners, a contributor to the Scholastic Shooting Sports Foundation, and a sponsor of firearms safety and shooting clinics for women; The Company supports, through the National Shooting Sports Foundation, several highly successful initiatives that promote firearm safety and compliance with firearm laws; The proponent suggests, without any empirical data or other substantive support, that certain smart gun technology could reduce accidental shootings and suicides, but the Company disagrees strongly with this claim and its statistics regarding proposed usage; According to a recent report, smart gun technology, if available, could lull a user into a false sense of security, potentially resulting in more injuries not fewer; The smart gun concept has been discussed since the mid-1990s when it was conceived of as a technological response to law enforcement officers having been injured or killed when a criminal wrestled the officer’s firearm away and used it against the officer; According to a 2013 National Institute of Justice review, smart gun technology has not been fully developed and a safe and reliable product incorporating the technology is not available today; Despite considerable research, including at least $12.6 million in funding by the United States Department of Justice and additional research by firearms manufacturers, smart gun technology remains in the prototype stage; No federal or state law enforcement agency in the U.S. employs smart gun technology; According to a survey conducted by McKeon & Associates in 2013, 81% of those surveyed would not likely be willing to or would not purchase a smart gun; The Company is not opposed to the development and commercialization of reliable smart gun technology, but it is opposed to laws in effect today in certain states and cities that would ban all firearms other than smart gun firearms if and when such technology becomes available; The Company does not invest in R&D for smart gun technology, and it is a manufacturing company, not a technology company; The Company is not-well situated to identify, hire, and train personnel with the requisite knowledge and expertise to invent and develop smart gun technology, and it is not in a position to compete with domestic and international technology companies who are far more knowledgeable with respect to this area and who dedicate a substantial portion of their human and financial resources to product testing, ultimately developing and seeking patent protection for such technologies; To divert significant human and financial resources to smart gun initiatives would be irresponsible when the most recent market research shows there is very little interest or desire among firearm consumers for “smart gun” products, even if they were ultimately developed and proven to be safe, reliable, and commercially available; This proposal's requirement that the Company assess the corporate reputational and financial risks related to gun violence is unnecessary and redundant as the Company has set forth in detail in its 10-K all material risks that it believes are relevant to its business; Absent from the proponent’s statement on the criminal misuse of firearms and the violence associated with such misuse are any proposed solutions addressing the real root causes of gun 15 Glass, Lewis & Co., LLC violence; The Company supports a comprehensive discussion regarding preventing violence in our communities, and it is committed to reviewing all reasonable proposals with an open mind, but production of the requested report will do nothing to make our communities safer; The most effective way to reduce violence is to vigilantly enforce existing laws, address the challenges of acute mental illness in society, and improve the FBI’s National Instant Criminal Background System, the very purpose of which is to prevent unauthorized access to firearms by irresponsible persons and those not qualified to possess them; On March 6, 2018, the Company posted on its website a comprehensive response to similar questions raised by BlackRock, one of its index fund investors, in its letter dated March 1, 2018; The proponent mischaracterizes or misstates several facts in its supporting statement; The proponent has not submitted this resolution for the Company’s benefit or for the benefit of its shareholders who purchase the Company's stock with the reasonable expectation that it will focus its efforts and resources on generating an optimal return on their investment; The proponent is seeking an alternate, and inappropriate, forum to advance its political and social narrative regarding whether certain firearms that the Company and other manufacturers make should be banned or further regulated; Among the more appropriate forums for a discussion regarding firearms regulation are the United States Congress and the legislative branches of the several states; The proponent has submitted its proposal at this time because it has been unsuccessful in achieving its legislative efforts to date to restrict or further regulate the manufacture, sale, and use of firearms; and The proponent is entitled to its view of the Second Amendment to the United States Constitution, but the Company cannot disregard the views of the many law-abiding consumers of its firearm products that want the Company to provide quality and discerning firearms that comport with the laws of their state, and the Company will not abdicate its responsibility to its shareholders seeking an optimal return on their investment. The Company has also filed a DEFA14A further detailing its opposition to this proposal. GLASS LEWIS ANALYSIS Glass Lewis recommends that shareholders take a close look at proposals such as this one to determine whether the actions requested of the Company will clearly lead to the protection or enhancement of shareholder value. Glass Lewis believes that directors who are conscientiously exercising their fiduciary duties will typically have more and better information about the Company and its situation than shareholders and can be held accountable in director elections. Those directors are also charged with making business decisions and overseeing management. Our default view, therefore, is that the board and management, absent a suspicion of illegal or unethical conduct, will make decisions that are in the best interests of shareholders. The Company is one of the largest manufacturers of handguns, modern sporting rifles, and handcuffs in the U.S. and is an active participant in the hunting rifle and suppressor markets. The Company also provides shooting, hunting, and rugged outdoor products and accessories, including knives and cutting tools, sighting lasers, shooting supplies, tree saws, and survival gear (2018 10-K, p.1). Given the nature and scope of the Company's operations, it could be exposed to a wide variety of social, reputational, and regulatory risks. BACKGROUND AR-15 Style Rifles Particularly following a school shooting in Parkland, Florida in February 2018, there has been significant public debate concerning the use of semi-automatic rifles, and, specifically, AR-15 rifles, as they have been responsible for a number of mass shootings in recent years. According to a New York Times analysis, at least 173 people have been killed by AR-15 rifles in mass shootings in the U.S. since 2007. This includes 12 killed in Aurora, Colorado, 27 in Newtown, Connecticut, 14 in San Bernardino, California, 58 in Las Vegas, Nevada, 26 in Sutherland Springs, Texas, and 17 in Parkland, Florida. The rifles are distinguished from their military counterparts by the absence of fully automatic or burst fire capabilities; however, they are otherwise functionally very similar and lethality can be further enhanced by use of a bump stock to AOBC September 25, 2018 Annual Meeting 16 Glass, Lewis & Co., LLC increase firing rate (C.J. Chivers, Larry Buchanan, Denise Lu, Karen Yourish. With " AR-15s, Mass Shooters Attack with the Rifle Firepower Typically Used by Infantry Troops." New York Times. February 28, 2018). The Company produces several AR-15 style variants through its line of M&P 15 rifles, of which the Company sold 396,710 in 2016. The Company's M&P 15 rifles were used in the following incidents: A June 20, 2012 shooting at a movie theater in Aurora, Colorado in which 12 people were killed and 58 were wounded (Tim Dickinson. " All-American Killer: How the AR-15 Became Mass Shooters’ Weapon of Choice." Rolling Stone. November 21, 2016); A December 2, 2015 shooting in San Bernardino, California in which 14 people were killed and 21 were wounded (Ashby Jones, Dan Frosch. "Rifles Used in San Bernardino Shooting Illegal Under State Law." The Wall Street Journal. December 3, 2015); The October 1, 2017 Las Vegas mass shooting, which left 59 people dead and 489 wounded ("Guns and Evidence from Las Vegas Shooter Stephen Paddock." 13 Action News. January 20, 2018); and The February 14, 2018 shooting at Marjory Stoneman Douglas High School in Parkland, Florida in which 17 people were killed and 14 were wounded (Polly Mosendz. "Smith & Wesson Made the Assault Rifle Used in Florida School Massacre." Bloomberg. February 15, 2018). Gun Violence Research In 1993, the New England Journal of Medicine published an article that presented the results of CDC-funded research on gun violence. The study found that keeping a gun in the home was strongly and independently associated with an increased risk of homicide (Christine Jamieson. "Gun Violence Research: History of the Federal Funding Freeze." American Psychological Association. February 2013). The study directly contradicted the NRA assertion that guns in the home protect families. Three years later, Congress passed the Dickey Amendment and made a cut to funding that, together, effectively ended the CDC's study of gun violence as a public health issue. As such, in the years since 1996, the federal government has largely abstained from studying gun violence in the U.S. (Sheila Kaplan. "Congress Quashed Research into Gun Violence. Since Then, 600,000 People Have Been Shot." New York Times. March 12, 2018). Most recently, in July 2018, a proposal to designate funding specifically for gun violence research was defeated by the House Appropriations Committee (Jacqueline Howard. "Gun Violence Research Funding Gets Snub from House Appropriations Committee." CNN. July 12, 2018). However, language in a 2018 spending bill has clarified the CDC's ability to conduct research on gun violence. Although the appropriations language prohibits the CDC and other agencies from using appropriated funding to advocate or promote gun control, the Secretary of Health and Human Services has stated that the CDC has the authority to conduct research on the causes of gun violence (Ashley Killough, Deirdre Walsh. "What Does the Spending Bill Do for Gun Violence Research?" CNN. March 22, 2018). Although there have been private attempts to study issues related to gun violence, this renewed focus on the causes of gun violence at the federal level has the potential to result in the production information that could present reputational risks to the Company and others in its industry. Smart Guns According to Giffords Law Center, federal law does not set any safety or design standards for domestically manufactured firearms. Most consumer products are regulated by the Consumer Product Safety Commission ("CPSC"), which the Consumer Product Safety Act established in 1972. The statutory definition of the term “consumer product,” however, specifically excludes firearms and ammunition. As such, the CPSC cannot require gun manufacturers to improve the safety of their products. Despite this lack of federal safety standards, in recent years, certain manufacturers have focused on designing and manufacturing "smart guns," or "personalized" firearms, which employ technology, typically biometrics and radio waves, designed to ensure that they can only be used by their owners. However, state regulations, which were designed to promote the use of smart guns, have resulted in their near-absence from the marketplace. Currently, there are three states that maintain laws related to smart guns. Maryland’s Handgun Roster Board is required to review the status of personalized handgun technology and report its findings to the Governor and the General Assembly annually. Massachusetts mentions personalized gun technology as an alternative to locking devices in its requirement that any handgun or large capacity weapon be sold with a safety device designed to prevent the discharge of such weapon by unauthorized users and approved by the state police. However, the state police have not yet approved any form of personalized technology as sufficient to comply with this requirement. New Jersey has developed the most extreme regulations, which many credit for limiting the availability of smart guns. The state has passed a law requiring its gun retailers to carry only smart guns within three years of the technology's commercial availability. However, this law has caught the ire of some proponents of firearms. For example, in 2014 a retailer who said it would stock smart guns received numerous threats and ultimately decided to not stock those weapons. In response to these perverse outcomes, the New Jersey governor has recently stated that he wants to change the law as quickly as possible, as he recognizes it AOBC September 25, 2018 Annual Meeting 17 Glass, Lewis & Co., LLC serves as an impediment to bringing smart guns to market (Joe Nocera. " Gun Companies Need This Gun-Control Measure." Bloomberg. February 16, 2018). In stark contrast to the assertion from firearms manufacturers-- including the Company-- that demand for smart guns is weak, there have been a number of surveys over the last several decades suggesting that Americans have an interest in purchasing smart guns. As cited by the Company, a 2013 survey by the National Shooting Sports Foundation (a trade association for gun makers) suggests that only 14% of respondents were willing to purchase a smart gun. However, other, more-credible and academic studies have found the contrary. For example, a 2001 survey from the National Opinion Research Center at the University of Chicago found that 73.6% of Americans favored a requirement that all new models of handguns be personalized so that they can only be fired by their legal owner. Additionally, a 2016 study by Johns Hopkins Center for Gun Policy and Research found that a clear majority of Americans in the market for a handgun were willing to buy a smart (or "personalized" or "childproof") gun. Overall, the survey found that 59% of Americans, if they were to purchase a new handgun, were willing to purchase a childproof gun, 23% were undecided at 18% were unwilling to buy a childproof gun. For gun-owning Americans, 43% were willing to purchase a childproof gun and 33% were undecided. Moreover, it does not appear that the Company is poised to capitalize on any opportunities that may present themselves with respect to smart gun technology. In the Company's most recent 10-K, it notes that possible changes to existing legislation or the enactment of new legislation that may seek to mandate the use of certain technologies in a firearm could have a material adverse effect on its business, operating results, and financial condition (p.18). INVESTOR AND COMPANY RESPONSES TO MASS SHOOTINGS Pension Fund Response to Sandy Hook and Other Mass Shootings Gun control has been an especially contentious issue in recent years. However, the 2012 Sandy Hook shootings acted as a catalyst for many investors and companies to take action on this issue. In response to this incident, many large institutional investors, particularly large public funds, either adopted Philadelphia Mayor Nutter's Sandy Hook Principles (a list of 20 measures that were designed to curb gun violence that companies making or selling guns and ammunition would need to endorse and adhere to in order to avoid "economic divestment actions") or adopted similar divestment tactics. For example, in 2013, New York City's teacher pension and the California State Teachers' Retirement System were among several funds that had announced that they would divest or would consider divesting from gun-related holdings. However, New York City's police pension stated that they would not be selling approximately $10 million in such holdings. According to the president of the Patrolmen's Benevolent Association, which represents 50,000 active and retired New York City police officers, "there is no evidence that the manufacturers of these weapons that are the tools of the trade for law enforcement have done anything improper" (Martin Z. Braun. " New York City's Police Pension Fund Won't Sell Gun Holdings." Bloomberg. March 7, 2013). However, since the Sandy Hook shootings, high-profile shootings in San Bernardino, Roseburg, Orlando, Las Vegas, Sutherland Springs, Washington D.C., and Parkland have further intensified the push to divest from firearms manufacturers. In January 2016, New York Mayor de Blasio submitted resolutions in order to push the remaining pension funds (the New York City Police Pension Fund, New York City Board of Education Retirement System, and the New York City Fire Department Pension Fund) toward divestment in weapons manufacturers (Kriston Capps. " Why Public Pension Funds are Slow to Divest From Gun Manufacturers." City Lab (The Atlantic). June 15, 2016). The following July, the New York City pension fund announced that it would sell all of its holdings in three retailers (Dicks's Sporting Goods, Cabela's, and Big 5 Sporting Goods) and that it would continue to press ahead in its efforts to get Walmart and a division of Kroger to remove guns from their store shelves. This divestment amounted to approximately $10.5 million, or 0.02% of the pension fund's portfolio (Liz Moyer. "New York City Pension Fund to Divest Itself of Gun Retailer Stock." New York Times. July 14, 2016). Lawmakers have also taken steps to rid pension funds of their firearms holdings. In June 2016, the San Francisco Board of Supervisors approved a measure that would ban the city's employee retirement system from investing in companies that manufacture ammunition and firearms. Additionally, former San Francisco Mayor Ed Lee stated that he would try to gather support for this divestment nationwide, asking the mayors of both Boston and New York to adopt similar legislation. As a part of the San Francisco legislation, the city's Retirement Board was asked to divest from three companies: Orbital ATK, Vista Outdoor, and the Company (Tara Moriarty. " San Francisco Seeks to Ban Pension Fund from Investing in Gun Industry." Fox 2 News. June 28, 2016). Additionally, New Jersey state lawmakers have introduced a bill to restrict the state's public pensions from investing in firearms and ammunition manufacturers and California Treasurer John Chiang urged California state teacher and public employee pensions to divest from companies that sell assault weapons, ammunition, and gun accessories (Liz Moyer. " State Pensions and Fund Companies Feel Heat over Their Investments in Gun Makers." CNBC Finance. February 22, 2018). Further, in March 2018 the Office of the Massachusetts State Treasurer, Deborah B. Goldberg, issued a press release announcing its support for a state-level bill that was filed by Massachusetts legislators. The bill would require the state's public pension fund to divest from companies that AOBC September 25, 2018 Annual Meeting 18 Glass, Lewis & Co., LLC manufacture guns and ammunition. Families of mass shooting victims also urged the California Public Employees' Retirement System to divest from companies that sell assault weapons and bump stocks (Kathleen Ronayne. " Victims' Families Urge California to End Gun Investments." Associated Press. March 19, 2018). However, divestment has proven challenging for a number of funds. Currently, in New York City, three out of five public pension funds have sold their gun-related investments, though the New York State Teachers Retirement System still holds shares in firearms manufacturers since its investments track indexes (Liz Moyer. " State Pensions and Fund Companies Feel Heat over Their Investments in Gun Makers." CNBC Finance. February 22, 2018). As of February 2018, the California State Teachers' Retirement System has yet to fully divest from all firearms-related companies (Neil Weinberg, Polly Mosendz. "Teacher Retirement Funds in 12 States Hold Gun Company Stocks." Bloomberg. February 22, 2018). Corporate Response to Gun Violence In recent years, activists have attempted to halt the funding for gunmakers. In 2015, New York City's public advocate, Letitia James, pressured TD Bank, which has provided $280 million in financing to the Company, to cut ties with the gun maker (Andrew Ross Sorkin. " Guns in Your 401(k)? The Push to Divest Grows." New York Times. December 7, 2015). Additionally, New York Comptroller Thomas DiNapoli has sent letters to nine financial institutions, asking them to assess risks and explore the cost of implementing systems that could reject purchases of firearms, ammunition, or accessories (Emily Chasan. "New York Pushes JPMorgan, BofA, Visa to Reconsider Gun Sales." Bloomberg. April 4, 2018). It appears that at least some of these institutions took heed. In April 2018, Bank of America announced that it would “examine what [it] can do to help end the tragedy of mass shootings” and that it would take an immediate step to “engage the limited number of clients [it has] that manufacture assault weapons for non-military use to understand what they can contribute to this shared responsibility.” It has also recently announced that it would not finance military-style firearms for civilian use. Citigroup, however, had taken action prior to the New York letter. Citibank has stated that it would bar companies with which it does business from selling guns to people under 21 years old and ban clients from selling high-capacity magazines and accessories that make guns fire bullets more rapidly (Liz Moyer. " Bank of America to Step Away from Clients That Make Military-Style Assault Rifles for Civilians." CNBC. April 10, 2018). Demonstrating the political divisiveness of the actions taken by Bank of America and Citigroup, Louisiana's bond commission voted in August 2018 to ban the companies from working on the state's upcoming debt sale due to their "restrictive gun policies" (Amanda Albright, Jennifer Surane. "Louisiana Bans Bank of America, Citi from Bond Sale over Gun Policies." Bloomberg. August 17, 2018). Investors have also made headway on engaging with arms manufacturers. In September 2013, the City of Philadelphia announced that the Daicel Corporation, a $3.8 billion Japanese-based company that produces ammunition announced that it had become the first signatory to the Sandy Hook Principles. However, it does not appear that there have been any further signatories to these principles. A number of companies not targeted by investors have also been adopting responses to the increased attention to gun control regulations. In addition to Craigslist and eBay, which already ban gun sales, Facebook adopted rules concerning gun sales and gun safety. In March 2014, Facebook adopted rules that include prohibiting posts about guns to anyone younger than 18 years old, issuing cautions to users who mention guns that they must obey existing laws and using its monitoring programs to ban false claims by private gun dealers that no background check is required or that interstate sales can be transacted without a licensed gun dealer as required by law (" Gun Safety on Facebook." New York Times. March 7, 2014). In March 2018, YouTube (the offices of which experienced a shooting in in April 2018 at the hands of a gunman using a Smith & Wesson firearm, that that wounded 3 employees) also took action by implementing rules to take effect that would ban content that promotes gun and gun accessory sales, in addition to videos demonstrating how to build and refashion guns to make them more lethal (Daisuke Wakabayashi, Matthew Haag, Elizabeth Dias. " Sleeping in Car and Visiting Gun Range: How YouTube Attacker Spent Final Hours." New York Times. April 4, 2018; Allyson Chiu. "YouTube Bans More Firearms Videos, Days Before National Rally for Gun Control." The Washington Post. March 22, 2018). Further, after it was revealed that Dick's Sporting Goods had sold a shotgun to the shooter at Stoneman Douglas High School in Parkland, Florida, Dick's announced that it was halting sales of all assault-style weapons across its business operations as well as raising the age requirement to purchase firearms to 21. While it had removed all assault-style rifles from its stores following the Sandy Hook massacre, they had remained for sale at its Field & Stream stores (Emily Cohn, Kate Taylor. " Dick's Sporting Goods Will Stop Selling Assault-Style Rifles After Selling Gun to Suspect in Florida School Shooting." Business Insider. February 28, 2018). By March 2018, L.L. Bean, Walmart, and Kroger had also announced that they would raise the minimum age to purchase a firearm from 18 to 21 ("L.L. Bean Joins Kroger, Walmart in Raising Minimum Age for Gun Sales." Reuters. March 2, 2018). A number of investors have also faced pressure on account of their investments. For example, in December 2012, Cerberus Capital Management announced that it would sell the Freedom Group, which makes the Bushmaster rifle that was used in the Sandy Hook shootings, after concerns from its client, the California Teachers' Retirement System ("CalSTRS") (Troy Graham. "Nutter Unveils 'Sandy Hook Principles' for Investing." philly.com. January 15, 2013). AOBC September 25, 2018 Annual Meeting 19 Glass, Lewis & Co., LLC However, Cerberus stalled on this sale, despite pressure from CalSTRS. In June 2015, CalSTRS stated that it had completed its divestment of firearms, and, as a part of its divestment, had entered a consent agreement with Cerberus to monetize its exposure to Remington Outdoors (Antoine Gara. "Years After Sandy Hook Shooting, Pension Fund CalSTRS Exits Cerberus-Backed Remington." Forbes. June 8, 2015). These campaigns could present significant risks for arms manufacturers and sellers. For example, in March 2018, Remington filed for bankruptcy due to mounting debt as a result of divestments and slumping sales following Donald Trump's election (Matthew Haag. " Remington, Centuries-Old Gun Maker, Files for Bankruptcy as Sales Slow." New York Times. March 25, 2018). Investor Engagement with Firearms Manufacturers On March 2, 2018 BlackRock Inc. (the Company's largest shareholder, owning 12.45% of the Company's shares) issued a press release in response to the increasingly frequent occurrence of gun violence in America. The statement mentions that it does not hold firearms manufacturers in its actively-traded portfolios, but holds Sturm & Ruger, Vista Outdoor, and the Company in its index equity products. The statement further describes the steps it has taken to offer its clients options for eliminating their investment in firearms-related companies. It notes that BlackRock is engaging directly with several firearms-related companies, that it is "fundamentally looking to understand whether the company has the appropriate policies and controls in place and is sufficiently managing the risks associated with these issues," and that "[it] will monitor these and other companies to assess their policies and practices in light of evolving societal expectations." BlackRock further asserted that it may vote against specific directors or against management on shareholder proposals, following engagement with these companies. Approximately one month after issuing its press release, BlackRock announced the creation of a set of index-tracking products for pensions and employee retirement plans that omit shares of gun manufacturers and large retailers, as well as two new exchange-traded funds. These funds will not include holdings in the Company, Sturm & Ruger, Vista Outdoor, Walmart, Dick's Sporting Goods, or Kroger (Liz Moyer. " BlackRock to Offer New Funds that Exclude Stocks of Gun Makers and Retailers Including Walmart." CNBC Investing. April 5, 2018). However, some have pushed BlackRock to be doing more on this issue. Following its March press release, BlackRock's chair and CEO, Larry Fink, received a letter from Massachusetts Senator Elizabeth Warren in which she encouraged the firm to go beyond having conversations with gun manufacturers in order to “ensure that the gun companies in which [it] invest[s] are taking steps to reduce gun violence.” BlackRock was not alone in its response to the Parkland shooting and the issue of gun violence. Shortly before BlackRock's March 2018 press release, State Street Corporation, which owns approximately 2% of the Company's shares, stated that it would be “engaging with weapons manufacturers and distributors to seek greater transparency from them on the ways that they will support the safe and responsible use of their products.” In addition, State Street noted that it would be monitoring the companies’ lobbying activities. COMPANY RESPONSE AND DISCLOSURE In direct response to BlackRock's request for a meeting, the Company published a written reply to the questions presented by BlackRock. Specifically, the Company discussed how it manages relevant risks, monitors the illegal use of its products, and promotes the legal and safe use of its products. It also provided an overview of its efforts to work with the federal Bureau of Alcohol, Tobacco, Firearms and Explosives ("ATF") and other law enforcement agencies to trace firearms used in criminal acts, as well as support for the National Shooting Sport Foundation's ("NSSF") FixNICS program and other safety and compliance initiatives. Further, the Company stated that it believes enforcing existing laws, addressing challenges related to acute mental illness and "the pervasive depiction of violence in movies and video games," and improving the background check system are the best ways to approach rampant gun violence (p.8). Further, the Company stated that it does "not believe that manufacturing civilian firearms has any reputational or financial risks for [the] company, outside of those risks set our clearly in the Risk Factors in [its] Annual Report on Form 10-K." In the Company's most recent 10-K, it notes that it faces risks surfacing from various litigation matters, including criminal misuse of its firearms (p.20). It also recognizes that its stock price could be affected by investor reaction to news events (p.36). With respect to reputational risks, the Company identifies the following issues: (i) breaches of its information system; (ii) a failure to maintain its marketing and advertising channels; (iii) independent sales representatives or agents that act in a reputationally damaging manner; and (iv) poor product quality. Notably, the Company also appears to take issue with the actions of some of its shareholders. Specifically, the Company states that "certain stockholder inquiries and proposals could create perceived uncertainties or concerns as to [its] future operating environment, legislative environment, strategy direction, or leadership, and such uncertainties or concerns could result in the loss of potential business opportunities; could harm [its] ability to attract new investors, customers, and employees; could harm or disrupt [its] business and financial relationships; could result in consumer boycotts of [its] products; and could cause [its] stock price to experience periods of decline, volatility, or stagnation." As an example, the Company states that "certain activists AOBC September 25, 2018 Annual Meeting 20 Glass, Lewis & Co., LLC could pressure [its] financial institutions, [its] customers, [its] vendors, or other businesses and institutions with whom [it] maintain[s] relationships to adopt actions that are not in the best interests of [the] company, inconsistent with the legal operations of [its] business, or contrary to the beliefs of [its] core consumers," which could "have a negative impact on [its] business, operating results, and financial condition" (p.20). With respect to legal matters, according to its most recent 10-K, the Company is a defendant in five product liability cases and is aware of 10 other product liability claims, primarily alleging defective product design, defective manufacturing, or failure to provide adequate warnings. It is also a co-defendant in a case filed on August 27, 1999, by the city of Gary, Indiana against numerous firearm manufacturers, distributors, and dealers seeking to recover damages allegedly arising out of the misuse of firearms by third parties. On May 23, 2018, the Company was named in an action related to the Parkland, Florida shooting, filed in the Circuit Court, Broward County, Florida, seeking a declaratory judgment that a Florida statute that provides firearm manufacturers and dealers immunity from liability when their legally manufactured and lawfully sold firearms are later used in criminal acts only applies to civil actions commenced by governmental agencies, not private litigants. For the fiscal years ended April 30, 2018, 2017, and 2016, the Company paid $473,000, $254,000, and $264,000, respectively, in defense and administrative costs relative to product liability and municipal litigation. It also spent an aggregate of $129,000, $209,000, and $55,000, respectively, in those fiscal years in settlement fees related to product liability cases (2018 10-K, p. F-32). On its website, the Company provides links to NSSF resources addressing safety initiatives and programs, such as Don't Lie for The Other Guy, Fix NICS, and Project Childsafe. On the website for its brand, Smith & Wesson, information is provided to address firearm safety and gun laws. RECOMMENDATION The issue of gun control has become increasingly divisive and controversial over the last several years. Companies' actions or inaction regarding these changing attitudes and regulations must be closely evaluated by shareholders in order to ensure that they are operating both within the bounds of the law and also in the best interests of shareholders. Moreover, companies must ensure that they are properly mitigating any potential exposure to reputational risks associated with their operations, as such risks could negatively affect a company's ability to operate or its relationships with its shareholders, customers, and other stakeholders. In this case, we recognize the sensitive nature of issues related to gun control and gun safety and we believe that the Company should act in the best long-term interests of its shareholders. We recognize that the Company has provided some information regarding gun safety. However, we believe that adoption of the requested reporting could benefit shareholders. We do have some reticence supporting this resolution. For example, we are concerned regarding the time allotted by the proponent for the Company to produce the requested report. The proponent requests that this reporting be available to shareholders by February 8, 2019, which is a relatively short time period and appears to be an arbitrary date. However, given that this proposal is precatory in nature, we believe that this issue can be overlooked in the context of our broader concerns with the Company and its disclosure. Our more significant concern is with the provision asking the Company to report on "evidence of monitoring of violent events associated with products produced by the company." Given the number of weapons sold by the Company and the prevalence of gun violence in the United States (it was reported that in 2017 there were 61,813 total gun-related incidents, including 346 mass shootings, which resulted in 15,637 deaths and 31,247 injuries), it is unreasonable to assume that the Company can monitor this issue with any level of accuracy. However, we believe that the provisions requesting that the Company disclose its efforts to research and produce safer guns and gun products and, most importantly, an assessment of the corporate reputational and financial risks related to gun violence in the U.S., would benefit shareholders. We are particularly concerned with the Company's management of reputational risks at this time. We believe that issues recently seen at Remington demonstrate that companies in this industry could be significantly adversely impacted by reputational issues, as, arguably, divestment on account of recent mass shootings was a large factor in Remington's recent bankruptcy. Particularly given these risks, we find the Company's current disclosure to be lacking. Specifically, the Company identifies the following issues as presenting reputational risks: (i) breaches of its information system; (ii) a failure to maintain its marketing and advertising channels; (iii) independent sales representatives or agents that act in a reputationally damaging manner; and (iv) poor product quality. The Company has also doubled-down on this assertion in its aforementioned letter to BlackRock, in which it states that it does not believe that "manufacturing civilian firearms has any reputational or financial risks for [the] company outside of those risks set our clearly in the Risk Factors in [its] Annual Report on Form 10-K." As such, we believe that a more robust discussion of the reputational and financial risks faced by the Company on account of gun violence is warranted at this time. We recommend that shareholders vote FOR this proposal. AOBC September 25, 2018 Annual Meeting 21 Glass, Lewis & Co., LLC COMPETITORS / PEER COMPARISON AMERICAN OUTDOOR BRANDS CORPORATION CALLAWAY GOLF COMPANY STURM, RUGER & COMPANY, INC. MOVADO GROUP, INC. Company Data (MCD) Ticker AOBC ELY RGR MOV Closing Price $9.88 $22.76 $60.60 $49.40 Shares Outstanding (mm) Market Capitalization (mm) Enterprise Value (mm) Latest Filing (Fiscal Period End Date) 54.4 94.4 17.5 23.1 $537.3 $2,149.5 $1,058.0 $1,141.0 $675.5 $2,208.2 $926.2 $964.0 04/30/18 06/30/18 06/30/18 04/30/18 Financial Strength (LTM) Current Ratio 2.7x 1.8x 3.3x 5.8x Debt-Equity Ratio 0.44x 0.14x 0.00x 0.00x Profitability & Margin Analysis (LTM) Revenue (mm) $606.9 $1,234.8 $482.6 $595.8 Gross Profit Margin 32.3% 46.8% 28.0% 53.2% Operating Income Margin 4.7% 12.0% 13.4% 10.8% Net Income Margin 3.3% 8.7% 10.2% -0.5% Return on Equity 4.9% 15.3% 20.6% -0.6% Return on Assets 2.3% 9.6% 13.6% 6.7% 26.7x 20.4x 21.7x - 1.1x 1.8x 1.9x 1.6x 23.9x 14.9x 14.3x 15.0x 0.6% 8.9% -4.1% 3.1% -21.2% - -10.0% - 1 Year Stock Performance -44.4% 66.5% 26.3% 107.1% 3 Year Stock Performance -45.2% 156.6% -1.8% 73.4% 5 Year Stock Performance -8.5% 231.8% 14.9% 15.2% Valuation Multiples (LTM) Price/Earnings Ratio Total Enterprise Value/Revenue Total Enterprise Value/EBIT Growth Rate* (LTM) 5 Year Revenue Growth Rate 5 Year EPS Growth Rate Stock Performance (MCD) Source: Capital IQ MCD (Market Close Date): Calculations are based on the period ending on the market close date, 08/28/18. LTM (Last Twelve Months): Calculations are based on the twelve-month period ending with the Latest Filing. *Growth rates are calculated based on a compound annual growth rate method. A dash ("-") indicates a datapoint is either not available or not meaningful. AOBC September 25, 2018 Annual Meeting 22 Glass, Lewis & Co., LLC VOTE RESULTS FROM LAST ANNUAL MEETING SEPTEMBER 19, 2017 Source: 8-K dated September 25, 2017 RESULTS NO. PROPOSAL FOR AGAINST/WITHHELD ABSTAIN GLC REC 1.1 Elect Barry M. Monheit 97.34% 2.66% 0.00% For 1.2 Elect Robert L. Scott 96.61% 3.39% 0.00% For 1.3 Elect Robert H. Brust 99.03% 0.97% 0.00% For 1.4 Elect P. James Debney 98.83% 1.17% 0.00% For 1.5 Elect John B. Furman 97.49% 2.51% 0.00% For 1.6 Elect Gregory J. Gluchowski, Jr 98.86% 1.14% 0.00% For 1.7 Elect Michael F. Golden 96.53% 3.47% 0.00% For 1.8 Elect Mitchell A. Saltz 97.35% 2.65% 0.00% For 1.9 Elect I. Marie Wadecki 96.68% 3.32% 0.00% For 2.0 Advisory Vote on Executive Compensation 96.37% 3.34% 0.29% For 4.0 Ratification of Auditor 97.35% 2.09% 0.55% For FREQUENCY OF ADVISORY VOTE ON EXECUTIVE COMPENSATION NO. 3.0 PROPOSAL Frequency of Advisory Vote on Executive Compensation AOBC September 25, 2018 Annual Meeting 1 YEAR 2 YEARS 3 YEARS ABSTAIN GLC REC 83.85% 0.61% 13.85% 1.69% 1 Year 23 Glass, Lewis & Co., LLC APPENDIX Questions or comments about this report, GL policies, methodologies or data? Contact your client service representative or go to www.glasslewis.com/issuer/ for information and contact directions. DISCLOSURES © 2018 Glass, Lewis & Co., and/or its affiliates. All Rights Reserved. This report is intended to provide research, data and analysis of proxy voting issues and, therefore, should not be relied upon as investment advice. 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For information on Glass Lewis’ policies and procedures including treatment of conflicts of interest, please visit: http://www.glasslewis.com/conflict-of-interest/. LEAD ANALYSTS Governance: Compensation: Shareholder Proposals: Aaron Wendt Maria Vu Courteney Keatinge AOBC September 25, 2018 Annual Meeting 24 Glass, Lewis & Co., LLC EQUILAR PEERS VS PEERS DISCLOSED BY COMPANY EQUILAR AOBC Callaway Golf Company* Sturm, Ruger & Company, Inc.* Movado Group, Inc.* iRobot Corporation* Fox Factory Holding Corp. Steven Madden, Ltd.* La-Z-Boy Incorporated* Johnson Outdoors Inc.* Oxford Industries, Inc.* Vista Outdoor Inc.* Spin Master Corp. Standex International Corporation* Perry Ellis International, Inc. Ethan Allen Interiors Inc.* Universal Electronics Inc.* Nautilus, Inc. Albany International Corp. Bassett Furniture Industries, Incorporated ESCO Technologies Inc. Haverty Furniture Companies, Inc. Plantronics, Inc. Simpson Manufacturing Co., Inc. Stoneridge, Inc. Hooker Furniture Corporation Gentherm Incorporated Flexsteel Industries, Inc. Motorcar Parts of America, Inc. RBC Bearings Incorporated Shutterfly, Inc. Infinera Corporation ZAGG Inc Acushnet Holdings Corp. *ALSO DISCLOSED BY AOBC AOBC September 25, 2018 Annual Meeting 25 Glass, Lewis & Co., LLC