SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential,
for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2)
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
Fountain Powerboat Industries, Inc.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fees (Check the appropriate box):
(X) No fee required.
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
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( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
FOUNTAIN POWERBOAT INDUSTRIES, INC.
Post Office Drawer 457
1653 Whichard's Beach Road
Washington, North Carolina 27889
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of Fountain Powerboat Industries,
Inc. will be held at our headquarters located at 1653 Whichard's Beach
Road, Washington, North Carolina, at 10:00 a.m. on Tuesday, November 19,
2002. The purposes of the meeting are:
1. Election of Directors. To elect seven directors for terms of one
year or until their respective successors are duly elected and
qualified;
2. Amendment of Employee Stock Option Plan. To consider a proposal to
approve an amendment to our Employee Stock Option Plan;
3. Ratification of Appointment of Independent Accountants To consider a
proposal to ratify the appointment of Pritchett, Siler & Hardy, P.A.
as our independent public accountants for Fiscal 2003; and
4. Other Business. To transact any other business properly presented
for action by shareholders at the Annual Meeting.
You are invited to attend the Annual Meeting in person. However,
even if you plan to attend, we ask that you complete, sign and date the
enclosed appointment of proxy and return it to us as soon as you can in
the accompanying envelope. Doing that will help us ensure that your
shares are represented and that a quorum is present at the Annual Meeting.
Even if you sign an appointment of proxy, you may still revoke it later or
attend the Annual Meeting and vote in person.
By Order of the Board of Directors
/s/ Carol J. Price
Carol J. Price
Secretary
October 25, 2002
FOUNTAIN POWERBOAT INDUSTRIES, INC.
Post Office Drawer 457
1653 Whichard's Beach Road
Washington, North Carolina 27889
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
General
This Proxy Statement is being furnished to our shareholders in
connection with our solicitation of appointments of proxy in the enclosed
form for use at the Annual Meeting of our shareholders (the "Annual
Meeting") and at any adjournments of the meeting. The Annual Meeting will
be held at 10:00 a.m. on Tuesday, November 19, 2002, at our headquarters
located at 1653 Whichard's Beach Road, Washington, North Carolina. This
Proxy Statement is being mailed to our shareholders on or about October
25, 2002.
In this Proxy Statement, the term "you" or similar terms refer to the
shareholder receiving it. The terms "we," "us," "our" and similar terms
refer to Fountain Powerboat Industries, Inc. The term "Fountain" refers
to our wholly-owned operating subsidiary, Fountain Powerboats, Inc.
Solicitation and Voting of Proxies
A form of "appointment of proxy" is included with this Proxy
Statement which names Carol J. Price and Hannah Hale (the "Proxies") as
proxies to vote your shares at the Annual Meeting. We ask that you sign
and date an appointment of proxy and return it to us in the envelope we
have enclosed for that purpose.
If you sign an appointment of proxy and return it to us before the
Annual Meeting, then shares of our common stock you hold of record will be
voted by the Proxies according to your instructions in the appointment of
proxy. If you sign and return an appointment of proxy but do not give any
voting instructions, then your shares will be voted by the Proxies "FOR"
the election of each of the seven nominees for director named in Proposal
1 below, and "FOR" Proposals 2 and 3. If, at or before the time of the
Annual Meeting, any nominee named in Proposal 1 has become unavailable or
unwilling to serve as a director for any reason, the Proxies will have the
discretion to vote for a substitute nominee named by our Board of
Directors. We are not aware of any other business that will be presented
for action by shareholders at the Annual Meeting, but if any other matter
is properly presented the Proxies will be authorized to vote your shares
according to their best judgment.
Revocation of Appointment of Proxy
If you sign and return an appointment of proxy you can revoke it at
any time before the voting takes place at the Annual Meeting by filing
with our Secretary either a written instrument revoking it or an executed
appointment of proxy dated as of a later date, or by attending the Annual
Meeting and announcing your intention to vote in person.
Expenses and Method of Solicitation
We will pay all costs of the solicitation of appointments of proxy
for the Annual Meeting, including costs of preparing and mailing this
Proxy Statement. In addition to solicitation by mail, our and Fountain's
directors, officers, and employees may solicit appointments of proxy, in
person or by telephone, without additional compensation.
Record Date
Our Board of Directors has set the close of business on October 18,
2002, as the record date (the "Record Date") for determining which
shareholders are entitled to receive notice of and to vote at the Annual
Meeting. You must have been a record holder of our common stock on the
Record Date to be eligible to vote at the Annual Meeting.
Voting Securities
Our voting securities are the outstanding shares of our common stock.
There were 4,745,108 outstanding shares of our common stock on the Record
Date. Fountain holds 15,000 shares of our common stock which are treated
as treasury shares and may not be voted at the Annual Meeting. You may
cast one vote for each share you held of record on the Record Date on each
director to be elected and on each other matter voted on by shareholders.
Voting Procedures; Votes Required for Approval
In the election of directors, the seven nominees receiving the
highest numbers of votes will be elected. You may not vote cumulatively
in the election of directors. For Proposals 2 and 3 to be approved, the
votes cast in favor of the proposals must exceed the votes cast against
them. Abstentions and broker non-votes will have no effect in the
election of directors or in the voting on Proposals 2 and 3.
Beneficial Ownership of Securities
Principal Shareholders. The following table reflects, to the best of
our knowledge, the beneficial ownership of our common stock as of October
15, 2002 by persons known to us to own, beneficially or of record, more
than 5% of our common stock.
Name and address Amount and nature of Percentage
of beneficial owner beneficial ownership of class(1)
___________________________ ____________________ __________
Reginald M. Fountain, Jr.
Post Office Drawer 457
Washington, North Carolina 27889 2,690,472 (2) 51.94%
Triglova Finanz, A.G.
Edificio Torre Swiss Bank
Piso 16, Apartado Postal 1824
Panama 1, Republica de Panama 314,250 (3) 6.62%
________________________
(1) Percentages are calculated based on 4,745,108 total outstanding
shares, minus 15,000 shares held by Fountain, plus, in the case of
Mr. Fountain, the number of additional shares that he could purchase
upon the exercise of stock options.
(2) Includes 450,000 shares which could be purchased by Mr. Fountain from
us upon the exercise of stock options and as to which shares he may
be deemed to have sole investment power only. Also includes 10,000
shares held by a family member and as to which Mr. Fountain disclaims
beneficial ownership.
(3) Based solely on information contained in the shareholder's most
recent filing with the Securities and Exchange Commission, as
adjusted for the effect of the three-for-two split in our common
stock which we effected during 1997.
2
Management Ownership. The following table reflects the beneficial
ownership of our common stock as of October 15, 2002, by our current
directors and nominees for election as directors, individually, and by all
our current directors and executive officers as a group:
Name of Amount and nature of Percentage
beneficial owner beneficial ownership (1) of class (2)
_______________________ ________________________ ___________
Reginald M. Fountain, Jr. 2,690,472 (3) 51.94%
A. Myles Cartrette 10,000 *
George L. Deichmann III 23,100 *
Guy L. Hecker, Jr. -0- -
David C. Miller 1,000 *
Mark L. Spencer 33,525 *
David L. Woods. 52,500 *
All current directors
and executive officers
as a group (7 persons) 2,800,792 53.63%
________________________________
(1) Except as otherwise noted, and to the best of our knowledge, the
individuals named and included in the group exercise sole voting and
investment power with respect to all shares. The listed shares
include the following numbers of shares with respect to which the
individuals named and included in the group have shared voting and
investment power:
Mr. Miller - 1,000 shares; and all persons included in the group -
1,195 shares. The listed shares include the following numbers of
shares that could be acquired by the individuals named and included
in the group pursuant to currently exercisable stock options and with
respect to which shares those persons may be deemed to have sole
investment power only: Mr. Fountain - 450,000 shares; Mr. Spencer -
30,000 shares; Mr. Woods - 12,500 shares; all persons included in the
group - 492,500 shares.
(2) Percentages are calculated based on 4,745,108 total outstanding
shares, minus 15,000 shares held by Fountain, plus, in the case of
each individual and the group, the number of additional shares (if
any) that could be purchased by that individual or by persons
included in the group upon the exercise of stock options. An
asterisk indicates less than 1.0%.
(3) Includes 10,000 shares held by a family member and as to which Mr.
Fountain disclaims beneficial ownership.
Section 16(a) Beneficial Ownership Reporting Compliance
Our directors and executive officers are required by Section 16(a) of
the Securities Exchange Act of 1934, as amended, to file reports with the
Securities and Exchange Commission regarding the amount of and changes in
their beneficial ownership of our common stock. Based on our review of
copies of those reports, we are required each year to disclose failures by
our directors and executive officers to report shares they beneficially
own or changes in their beneficial ownership, or to timely file required
reports. It has come to our attention that, during Fiscal 2002, Anthony
J. Romersa, who served as Executive Vice President and Chief Operating
Officer until August 2002, received a grant of stock options for which the
required report was not filed until shortly after the due date.
PROPOSAL 1: ELECTION OF DIRECTORS
Our Bylaws provide for a Board of Directors composed of not less than
three nor more than 25 members and authorize our Board of Directors to set
and change the number of directors from time to time within those limits.
Directors are elected each year at the Annual Meeting for terms of one
year or until their respective successors have been elected and have
qualified.
3
Our Board of Directors currently consists of six members whose terms
will expire at the Annual Meeting. Our Board has set the number of our
directors at seven for the year following the Annual Meeting and has
nominated the persons named below for election at the Annual Meeting.
With the exception of Mr. Cartrette, all of the nominees currently serve
as directors and have been nominated for reelection.
Position(s) with
Name and age us and Fountain First Principal occupation and
elected(1) business experience
______________ ________________ ________ ______________________
Reginald M. Chairman, President 1979 Our chief executive officer
Fountain, Jr. and Chief Executive
(62) Officer
A. Myles None New Owner of Cartrette,LLC
Cartrette Nominee (land development and
(46) residential construction),
Greenville, NC
George L. Director 1998 Owner and President of
Deichmann III Trent Olds-Cadillac-
(58) Buick-Pontiac-GMC Trucks,Inc.
(auto dealership),
New Bern, NC
Guy L. Director 2000 President, Stafford, Burke
Hecker, Jr. (2) & Hecker, Inc.
(70) (high technology consultants),
Alexandria, VA
David C. Miller Director 2002 Owner of David C.Miller,
(51) CPA/ABV (certified public
accountant and business
valuation practice),
Greenville, NC
Mark L. Spencer Director 1992 Owner of Spencer
(46) Communications
(advertising and public
relations firm),
Montrose, CA
David L. Woods Director 2001 Co-owner and manager,
(44) Woods & McCauley, LLC,
d/b/a Pier 57 Boat Sales
and Service
(boat sales and service),
Counce, TN
(1) The term "First elected" refers to the year in which each individual
first became our director or, in Mr. Fountain's case, when he first became
a director of Fountain prior to our organization. Mr. Miller was
appointed as a director during September 2002 to fill a vacancy on the
Board of Directors.
(2) Mr. Hecker also serves as a director of 8x8, Inc., a public company
headquartered in Santa Clara, CA, which develops, manufactures and
markets telecommunications equipment.
Anthony J. Romersa, age 57, served as Fountain's and our Director,
Executive Vice President and Chief Operating Officer until August 16,
2002, when he retired for health reasons. Mr. Romersa had been employed
by us since 1998. He has over 20 years of experience in the boating
industry and, prior to joining us, had served as Director of Planning -
Marine Operations with Brunswick Corp. since 1986. We appreciate his work
and dedication to Fountain during his tenure as a director and officer,
and we are pleased that he has agreed to continue to provide services to
us as a consultant.
Our Board of Directors recommends that you vote "FOR" the seven
nominees named above. In the election of directors, the seven nominees
receiving the highest numbers of votes will be elected.
Director Compensation
Our directors currently do not receive any fees or other compensation
for their services as directors, but they are reimbursed for travel and
other out-of-pocket expenses in connection with their attendance at
meetings of our and Fountain's Boards of Directors.
4
Meetings of the Board of Directors
Our Board of Directors met three times during Fiscal 2002. Each
director attended 75% or more of the aggregate number of meetings of the
Board of Directors and any committees on which he served.
Committees
Our Board of Directors has appointed an Audit Committee which
operates under a written charter approved by the Board. Current members
of the Committee are George L. Deichmann III, David L. Woods, Guy L.
Hecker, Jr. and David C. Miller (who was appointed to the Committee during
September 2002). With the exception of Mr. Woods, we believe that each of
them is "independent" as that term is defined by the listing standards of
The Nasdaq Stock Market. As further described under the caption "Certain
Transactions with Insiders" on page 6, Mr. Woods' company is a Fountain
dealer that purchases boats from and has had other business transactions
with Fountain. Mr. Woods was chosen during Fiscal 2002 to fill a vacancy
on the Committee because he is an outside director and because of his
experience in the boating industry. The Audit Committee met separately
from the full Board of Directors twice during Fiscal 2002.
Our Board of Directors does not have a standing nominating or
compensation committee.
Audit Committee Report
The Audit Committee has (i) reviewed our audited financial statements
for Fiscal 2002 and discussed them with management, (ii) discussed with
our independent accountants the matters required to be discussed by
Statement on Auditing Standards No. 61, as amended, (iii) received written
disclosures and a letter from our independent accountants required by
Independence Standards Board Standard No. 1, and (iv) discussed the
independence of our accountants with the accountants. Based on that
review and discussion, the Audit Committee approved inclusion of our
consolidated financial statements in our 2002 Annual Report on Form 10-K
as filed with the Securities and Exchange Commission.
Our management is responsible for our financial reporting process,
including our system of internal controls, and for the preparation of
consolidated financial statements in accordance with generally accepted
accounting principles. Our independent accountants are responsible for
auditing those financial statements. The Audit Committee's responsibility
is to monitor and review those processes. It is not the Audit Committee's
duty or responsibility to conduct auditing or accounting reviews or
procedures. Audit Committee members are not our employees and they do not
perform audits of our financial statements. Therefore, the Committee has
relied, without independent verification, on management's representations
that our financial statements have been prepared with integrity and
objectivity and in conformity with accounting principles generally
accepted in the United States, and on the representations of our
independent accountants included in their report on our financial
statements. The Committee's oversight does not provide it with an
independent basis to determine that management has maintained appropriate
accounting and financial reporting principles or policies, or appropriate
internal controls and procedures designed to assure compliance with
accounting standards and applicable laws and regulations. Furthermore,
the Committee's considerations and discussions with management and our
independent accountants do not guarantee that our financial statements are
presented in accordance with generally accepted accounting principles,
that the audit of our financial statements has been carried out in
accordance with generally accepted auditing standards, or that our
independent accountants are in fact "independent."
The Audit Committee:
George L. Deichmann III Guy L. Hecker, Jr. David C. Miller David L. Woods
5
Compensation Committee Interlocks and Insider Participation
We are a separate company from Fountain, but Fountain is our
wholly-owned subsidiary and the Boards of Directors of the two companies
are the same. Our executive officers are compensated by Fountain for
their services as officers of that company and, with the exception of
stock options, they receive no separate or additional compensation from
us. Fountain's full Board of Directors considers and takes action on
matters pertaining to the compensation of executive officers, and neither
we nor Fountain have a standing compensation committee. During Fiscal
2002, Reginald M. Fountain, Jr., who serves as Chairman, President, and
Chief Executive Officer of both companies, and Anthony J. Romersa, who,
until his retirement effective on August 16, 2002, served as Executive
Vice President and Chief Operating Officer of both companies, participated
in deliberations of Fountain's Board of Directors pertaining to executive
compensation, but each officer abstained from participation in
deliberations regarding his own compensation.
Certain Transactions with Insiders
Mark L. Spencer, one of our directors, is President and sole
shareholder of Spencer Communications, which is retained by Fountain to
provide it with advertising and public relations services. Pursuant to
their arrangement, during Fiscal 2002, Fountain was charged a monthly
retainer for the services of Mr. Spencer's company, together with
additional amounts for printing and production costs and other associated
services and expenses, and was billed an aggregate of $49,154 (including
the monthly retainer).
David L. Woods, one of our directors, is co-owner and manager of Pier
57 Boat Sales and Service, which is a Fountain dealer. During
Fiscal 2002, Mr. Woods' dealership purchased eight boats from Fountain for
an aggregate wholesale price of $1,781,897 (approximately 4% of Fountain's
aggregate sales for that fiscal year), received payments of approximately
$169,808 from Fountain under dealer sales award and promotion programs
that are available to all dealers, and paid Fountain approximately $32,848
for parts and non-warranty service work. Additionally, during Fiscal
2002, Fountain used an airplane owned by a separate entity controlled by
Mr. Woods and paid that entity an aggregate of $51,158 in rental charges.
Board Report on Executive Compensation
Our goal is to provide an executive compensation program that will
enable us to attract and retain qualified and motivated individuals as
executive officers. Currently, Fountain's and our executive compensation
program includes: (i) base salary paid by Fountain, (ii) cash bonuses paid
by Fountain to selected executive officers, (iii) stock options we issue
to selected executive officers, and (iv) contributions by Fountain to the
individual accounts of all participating employees (including executive
officers) under Fountain's Section 401(k) plan. In addition, Fountain
provides other employee benefit and welfare plans customary for companies
of its size.
Base salary paid by Fountain to our President and Chief Executive
Officer, Reginald M. Fountain, Jr., is set by Fountain's Board of
Directors from time to time based on its evaluation of Mr. Fountain's
individual level of responsibility and performance and, in particular, his
historical importance and current leadership and direction in the
development and growth of Fountain's business. In recent years,
Mr. Fountain has received base salary at a rate of $350,000 per year with
no salary increase. The apparent differences in Mr. Fountain's salary from
year to year, as reflected in the Summary Compensation Table below, result
primarily from different numbers of weekly pay periods in those fiscal
years. Anthony J. Romersa (who served as Executive Vice President and
Chief Operating Officer until his retirement in August 2002) received
annual base salary at a rate that remained essentially unchanged from
Fiscal 2000 until his retirement. Pursuant to their employment
agreements, Mr. Fountain may, and
6
Mr. Romersa could before his retirement, also receive cash bonuses each
year based on Fountain's and our financial performance. Mr. Fountain's
agreement provides that his bonus will equal 5% of our consolidated net
income (calculated after deductions of profit sharing contributions but
before deductions for income taxes), but not more than $250,000. Mr.
Romersa's agreement provided that his bonus would equal 1% of Fountain's
net profits before taxes and before the deduction of bonuses paid to other
officers. Cash bonuses actually paid to them for Fiscal 2000 are shown in
the Summary Compensation Table below. No cash bonuses have been paid to
either of them for Fiscal 2001 or Fiscal 2002.
The salaries and cash bonuses paid to Fountain's other officers in
Fiscal 2002 were determined by Mr. Fountain and Mr. Romersa based on their
judgment of the levels of responsibility, qualifications, experience, and
performance of the individual officers, as well as the company's size,
complexity, growth, and financial performance. The amounts of
contributions to the separate accounts of officers under Fountain's 401(k)
plan are determined solely by the terms of that plan. Except as described
above with respect to Mr. Fountain's and Mr. Romersa's cash bonuses, the
performance review process and, thus, the setting of salaries and the
awarding of cash bonuses, largely are subjective and there are no specific
formulae, objective criteria, or other such mechanisms by which the salary
of, or the amount of the cash bonus paid to, any officer, including Mr.
Fountain and Mr. Romersa, are tied empirically to his individual
performance or to Fountain's financial performance.
Section 162(m) of the Internal Revenue Code of 1986, as amended,
limits the deductibility of annual compensation in excess of $1,000,000
paid to certain executive officers of public corporations. As none of the
companies' officers receive annual compensation approaching that amount,
Fountain's Board of Directors has not yet adopted a policy with respect to
Section 162(m).
The Board of Directors:
George L. Deichmann III Reginald M. Fountain, Jr. Guy L. Hecker, Jr.
David C. Miller Mark L. Spencer David L. Woods
Executive Officers
Reginald M. Fountain, Jr., age 62, currently serves as our and
Fountain's Chairman, President, and Chief Executive Officer. He founded
Fountain during 1979 and became our Chief Executive Officer upon our
acquisition of Fountain during 1986.
Hannah Hale, age 30, has served as our Chief Financial Officer since
January 2002 and as our and Fountain's Controller since 2001. She was
first employed by Fountain during 1997 as Accounting Manager and
previously served as Accounting Manager for a financial institution.
7
Executive Compensation
Cash Compensation. The following table contains information
regarding cash and certain other compensation paid to or deferred by
certain of our executive officers for the fiscal years listed. Our
executive officers serve and are compensated as officers and employees of
Fountain, and they receive no separate cash compensation from us.
SUMMARY COMPENSATION TABLE
_____________________________________________________________________________
Annual Compensation Long term compensation
_____________________ ____________________________
Other All
Name and annual Restricted Securities other
principal Fiscal compen- stock Underlying Compen-
position year Salary(1) Bonus sation(2) awards options(#) sation
____________ _____ _______ _____ ______ ________ ________ ______
Reginald M. 2002 $350,000 $ -0- $ -0- $ -0- -0- $ -0-
Fountain 2001 351,500 -0- -0- -0- -0- -0-
Chairman, 2000 361,330 81,438 -0- -0- -0- -0-
President and
Chief Executive
Officer
Anthony J. 2002 174,720 -0- -0- -0- 15,000 3,560(4)
Romersa (3) 2001 169,556 -0- -0- -0- -0- 6,849
Executive 2000 167,308 16,288 -0- -0- -0- 5,771
Vice President
and Chief
Operating Officer
____________________________
(1)Includes amounts deferred at Mr. Romersa's election pursuant to Fountain's
Section 401(k) plan. Mr. Fountain does not participate in that plan.
(2)In addition to compensation paid in cash, Fountain's executive officers
receive certain personal benefits. The value of such benefits received by
each executive officer each year did not exceed 10% of his cash
compensation for that year.
(3)Mr. Romersa retired effective as of August 16, 2002.
(4)Consists of Fountain's contributions to the Section 401(k) plan for Mr.
Romersa's account.
Employment Contracts and Termination of Employment and
Change-in-Control Arrangements. Mr. Fountain is employed as an officer of
Fountain pursuant to a 1989 employment agreement which provides for
automatic renewal at the end of each year for an additional one-year
period until the agreement terminated. Pursuant to the agreement, Mr.
Fountain receives base salary in an amount approved by our Board of
Directors (but not less than $104,000), an annual cash bonus in an amount
equal to 5% of our consolidated net income (calculated after deductions of
profit sharing contributions and before deductions for income taxes, but
not more than $250,000), and certain other benefits.
Until his retirement effective as of August 16, 2002, Mr. Romersa was
employed as an officer of Fountain pursuant to an employment agreement
entered into during Fiscal 1999 when he was first hired. The agreement
provided for Mr. Romersa to receive base salary of not less than $160,000,
an annual cash bonus equal to 1% of Fountain's net profits before taxes
and before the deduction of bonuses paid to other officers, and certain
other benefits. The initial term of the agreement expired during 2001 and
was extended on a month-to-month basis until Mr. Romersa's retirement.
8
Employee Stock Options. The following table contains information
regarding options to purchase shares of our common stock which were
granted during Fiscal 2002 to executive officers named in the Summary
Compensation Table above.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
_______________________________________________________________________________
Individual Grants
___________________________________________________________
Potential realizable
value at assumed
Number of % of total Exercise annual rates of
Securities options/SARs or stock price
Underlying granted to base appreciation
options/SARs employees in price Expiration for option term
Name granted (#) fiscal year ($ share) date (1) __________________
5% ($) 10% ($)
________ ___________ ___________ ________ _________ _______ _______
Anthony J.
Romersa 15,000 20% $1.45 12/18/06 $27,765 $35,100
______________________
(1) Mr. Romersa retired effective August 16, 2002. His options expire 90
days following the date of his retirement.
The following table contains information regarding options to
purchase shares of our common stock held on June 30, 2002, by our
executive officers named in the Summary Compensation Table above.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES (1)
________________________________________________________________________
Number of Value of
securities unexercised
underlying in-the-money
unexercised options
options at at
fiscal year-end fiscal year-end
___________________ ________________
Shares
Acquired
on Value Exer- Unexer- Exer- Unexer-
Name exercise Realized cisable cisable cisable cisable
____________ _______ _______ __________ _______ _______ _______
Reginald M.
Fountain,Jr. (2) (2) 450,000(3) -0- (5) -
Anthony J.
Romersa (2) (2) 45,000(4) -0- (5) -
__________________________
(1) Information contained in the table is for Fiscal 2002 which ended on
June 30, 2002.
(2) No options were exercised during Fiscal 2002.
(3) The options are exercisable at a price of $4.67 per share and expire on
August 4, 2005.
(4) Includes options for 30,000 shares which are exercisable at a price
of $5.00 per share, and 15,000 shares which are exercisable at a price of
$1.45 per share. Mr. Romersa's options expire 90 days following the date
of his retirement.
(5) Mr. Fountain's options had no value on June 30, 2002, or on October
15, 2002, since, on those dates, the exercise price of the options
exceeded the aggregate market value of the underlying shares (based on the
closing sale price of our common stock on those dates). Mr. Romersa's
options had no value on June 30, 2002, but they had an aggregate value of
$30,600 on October 15, 2002, based on the closing sale price of our common
stock on that date.
9
Securities Authorized for Issuance Under Equity Compensation Plans.
The following table summarizes all compensation plans and individual
compensation arrangements which were in effect on
June 30, 2002, and under which shares of our common stock have been
authorized for issuance.
EQUITY COMPENSATION PLAN INFORMATION
________________________________________________________________________
(a) (b) (c)
Number of Weighted- Number of shares
Shares to be average exercise remaining
issued upon price of available for
exercise of outstanding future issuance
outstanding options under equity
Plan category options compensation plans
(excluding shares
reflected in column (a))
______________ ___________ ___________ _______________________
Equity compensation
plans approved by
security holders 555,000 $ 4.27 -0- (1)
Equity compensation
plans not approved
by security holders 125,000 2.49 -0-
Total 680,000 3.94 -0-
________________________
(1) A proposal will be voted on at the Annual Meeting to amend the 1999
Employee Stock Option Plan to increase the number of shares available
for issuance under that plan from 120,000 to 175,000 shares.
Performance Graph
The following line graphs compare the cumulative total shareholder
return (the "CTSR") on our common stock during the previous five fiscal
years with the CTSR over the same measurement period of the S&P 500 Index
and the S&P Leisure Time (Products) Index. Each line graph assumes that
$100 was invested on June 30, 1997, and that any dividends were reinvested
in additional shares. Note, however, that we have not paid dividends on
our common stock during the previous five years, so no reinvestment is
included in the calculation of the CTSR on our common stock. Accumulated
returns are indicated through June 30, 2002.
Comparison of Five-Year Cumulative Total Return
among our Common Stock, the S&P 500 Index,
and the S&P Leisure Time (Products) Index
[GRAPH OF STOCK PRICES]
June-97 June-98 June-99 June-00 June-01 June-02
Our Common Stock 100.00 113.14 47.03 33.05 20.39 15.76
S&P 500 Index 100.00 130.16 159.78 171.36 148.95 119.70
S&P Leisure Time 100.00 120.51 97.50 52.48 69.64 76.18
(Products) Index
10
PROPOSAL 2: AMENDMENT OF EMPLOYEE STOCK OPTION PLAN
At the 1999 Annual Meeting, our shareholders approved our 1999
Employee Stock Option Plan (the "Plan") which provides for the issuance of
options to purchase shares of our common stock ("Options") to our officers
and other full time employees, including officers and employees of our
subsidiaries, but not including any director who is not also one of our
full-time employees ("Optionees"). The purpose of the Plan generally is
to assist us in attracting and retaining officers and employees whose
interests are the same as those of our shareholders, and to provide an
additional incentive for our employees to whom Options are granted to
perform at levels that will expand and improve our profits and prosperity.
As originally approved by our shareholders, the Plan authorized us to
issue up to 120,000 shares of our common stock upon the exercise of
Options granted under the Plan, and Options have been granted and
currently are outstanding under the Plan for all those shares. Our Board
of Directors has proposed that the Plan be amended to increase the number
of shares that may be issued upon the exercise of Options to 175,000
shares, which represents an increase of 55,000 shares. A proposal will be
submitted for voting at the Annual Meeting to approve that proposed
amendment.
The Plan is administered by our Board of Directors. At the
discretion of our Board, Options granted under the Plan may be incentive
stock options ("ISOs") pursuant to Section 422A of the Internal Revenue
Code of 1986, as amended (the "Code"), or they may be nonqualified stock
options ("NSOs"). Among other things, our Board of Directors is
authorized to make all determinations regarding the persons to whom and
numbers of shares for which Options are granted, to specify certain of the
terms of Options granted, and to interpret and establish rules and to make
all determinations and take all other actions relating to and reasonable
or advisable in administering the Plan. To the extent permitted by
applicable law, members of our Board of Directors will be indemnified by
us for any legal expenses and liability incurred in connection with
administering the Plan.
The price per share (the "Exercise Price") of common stock covered by
each Option granted is set by our Board of Directors but may not be less
than 100% of the fair market value (as determined in the manner described
in the Plan) of a share of common stock at the time the Option is granted
(or 110% in the case of an ISO granted to an Optionee who owns more than
10% of the voting power of our outstanding common stock). Based on the
closing sale price of our common stock on The Nasdaq Stock Market, the
fair market value of a share of common stock on October 15, 2002, was
approximately $3.49.
Each Option granted under the Plan becomes exercisable as specified
by our Board of Directors at the time of grant and, to the extent not
previously exercised, expires and may not be exercised after the earlier
of: (i) the expiration date of the Option set at the time of grant (which
may be no more than 10 years after the date of grant, or 5 years in the
case of an ISO granted to an Optionee who owns more than 10% of the voting
power of our common stock), (ii) the date the Optionee resigns or on which
his or her employment is terminated for "cause" (as defined in the Plan),
(iii) 90 days following the termination of the Optionee's employment as a
result of his or her disability or retirement, or (iv) 90 days following
the termination of the Optionee's employment other than for cause. With
respect to ISOs, the aggregate fair market value (determined as of the
date of grant) of common stock for which all such Options granted to any
Optionee may become exercisable for the first time in any calendar year
may not exceed $100,000; and, in connection with any Option granted, our
Board of Directors may impose such other restrictions or conditions as it
considers appropriate, including a schedule by which an Option will become
exercisable as to a portion of the shares it covers over a period of time.
No payment is received by us upon the grant of an Option, but, at the
time an Option is exercised, the Optionee must make full payment to us in
cash of the aggregate Exercise Price for shares being purchased.
Optionees have no rights as stockholders with respect to any shares
covered by Options granted to them until those Options have been
exercised, the Exercise Price of the shares has been paid to us, and
certificates for those shares have been issued to the Optionees.
11
In the event of increases, decreases or changes in our outstanding
common stock resulting from a stock dividend, recapitalization,
reclassification, stock split, consolidation, combination or similar
event, or resulting from an exchange of shares or merger or other
reorganization in which we are the surviving entity, then our Board of
Directors may, in its sole discretion, make adjustments it deems to be
appropriate in the aggregate number and kind of shares which may be issued
for outstanding Options and for which Options may be granted under the
Plan, and in the Exercise Price of each unexercised Option. In the event
of our dissolution or liquidation, the sale of substantially all our
assets, or a merger or consolidation or similar reorganization or
transaction in which we are not the surviving entity, and if provision is
not made in such transaction for the continuance of the Plan or for
assumption of outstanding Options or the substitution of new options
covering shares of the successor entity, then each outstanding Option will
become fully vested and immediately exercisable prior to the effective
date of that transaction and, to the extent not exercised, will terminate
on that effective date.
Our Board of Directors may, from time to time, amend, modify,
suspend, terminate or discontinue the Plan without notice. However, no
such action will adversely affect any Optionee's rights under any then
outstanding Option without that person's prior written consent. Except as
required to comport with changes in the Code, or in the case of
adjustments described above that the Board may make, our shareholders must
approve any modification or amendment of the Plan that (i) increases the
aggregate number of shares of common stock that may be issued upon the
exercise of Options, (ii) changes the formula by which the Exercise Price
is determined, (iii) changes the provisions of the Plan with respect to
the determination of persons to whom Options may be granted, or (iv)
otherwise materially increases the benefits accruing to Optionees under
the Plan. Consistent with the terms of the Plan, our Board of Directors
may modify, extend or renew any outstanding Option pursuant to a written
agreement with the Optionee. The Plan will expire on the date ten years
after the date of its adoption by our Board of Directors, but Options
granted prior to such expiration will continue to exist and may be
exercised in accordance with their terms until they have expired by their
own separate terms, even after the expiration date of the Plan itself.
ISOs granted under the Plan are intended to qualify for certain
favorable income tax treatment. Under the Code, an Optionee is not taxed
in the year in which an ISO is exercised. If an Optionee holds stock
purchased upon the exercise of an ISO for a period of at least two years
following the date of grant and at least one year from the date the ISO is
exercised (or dies while owning the stock) then, upon disposition of the
stock (or upon death while owning the stock), he or she will realize
capital gain equal to the excess of the sale price of the stock over the
Exercise Price. If the Optionee disposes of the stock before these
holding periods have expired, the excess of the fair market value of the
stock at the time the Option was exercised over the Exercise Price will be
treated as ordinary income. We will not be permitted to take a tax
deduction at any time in connection with ISOs unless stock purchased upon
exercise is disposed of prior to expiration of the two holding periods.
In the year in which an NSO is exercised, the Optionee will realize
ordinary income equal to the excess of the fair market value of the stock
at the time of exercise over the Exercise Price, and we will be allowed to
take a deduction for the same amount. At our discretion, we may withhold
from an Optionee's salary or any other amount due to that Optionee (or
from shares being purchased upon the exercise of an Option), or, as a
condition of exercising the Option, require the Optionee to pay to us in
cash the amount of any required tax withholdings for which we are
responsible.
Under Nevada law, the adoption and amendment of the Plan are matters
within the business judgment of our Board of Directors, but rules of The
Nasdaq Stock Market require that shareholders approve the adoption of a
stock option plan or an increase in the number of shares authorized to be
issued under such a plan. Additionally, shareholder approval is required
under the Internal Revenue Code for Options to qualify as ISOs.
Therefore, we will submit a proposal to approve the Plan for shareholder
action at the Annual Meeting.
12
The following table contains information about currently outstanding
Options under the Plan which have been granted to persons named or
included in the groups listed.
Name or Group Number of shares Exercise price
________________________ _______________ ______________
Reginald M. Fountain, Jr.
(President and
Chief Executive Officer) -0- (1) N/A
Anthony J. Romersa
(former Executive Vice
President and Chief 30,000 $5.00
Operating Officer) (2) 15,000 1.45
All our current executive
officers as a group -0- (3) N/A
All our current directors
who are not executive
officers as a group -0- (4) N/A
All nominees for election
as directors as a group -0- (4) N/A
All current employees
(other than executive officers)
as a group 80,000 (5) 2.00 (6)
____________________________
(1) No Options have been granted to Mr. Fountain under the Plan, but he
holds options to purchase 450,000 shares that were granted to him
during 1995 under a previous stock option plan.
(2) Mr. Romersa retired effective as of August 16, 2002. His Options
expire 90 days following his retirement date.
(3) As a result of Mr. Romersa's retirement, no current executive
officers hold Options granted under the Plan.
(4) Directors who are not our employees are not eligible to participate
in the Plan. However, certain of our directors hold options to
purchase shares granted to them under other arrangements.
(5) Includes options for 5,000 shares which have been granted subject to
approval of the Plan amendment.
(6) Reflects weighted average exercise price per share.
Our Board of Directors recommends that you vote "FOR" Proposal 2. To
be approved, votes cast in favor of Proposal 2 at the Annual Meeting must
exceed the votes cast against it.
PROPOSAL 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Appointment of Independent Accountants
Our current independent public accounting firm, Pritchett, Siler &
Hardy, P.A., has been appointed by our Board of Directors to serve as our
independent accountants again for Fiscal 2003, and we will submit a
proposal to ratify that appointment by shareholder action at the Annual
Meeting. Representatives of Pritchett, Siler & Hardy, P.A. are not
expected to attend the Annual Meeting.
Our Board of Directors recommends that you vote "FOR" Proposal 3. To
be approved, votes cast in favor of Proposal 3 at the Annual Meeting must
exceed the votes cast against it.
Services and Fees During Fiscal 2002
As our independent accountants for Fiscal 2002, Pritchett, Siler &
Hardy, P.A., provided various audit and non-audit services for which we
and Fountain were billed for fees as further described below. Our Audit
Committee has considered whether the accounting firm's provision of
non-audit services is compatible with maintaining its independence.
13
Audit Fees. Pritchett, Siler & Hardy, P.A., audited our annual
financial statements for Fiscal 2002 included in our 2002 Annual Report on
Form 10-K and, during Fiscal 2002, it reviewed the condensed consolidated
financial statements included in our Quarterly Reports on Form 10-Q. The
aggregate amount of fees billed to us for those services was $76,334.
Financial Information Systems Design and Implementation Fees. During
Fiscal 2002, Pritchett, Siler & Hardy, P.A., did not provide any services
to us related to financial information systems design and implementation.
All Other Fees. In addition to the services listed above, during
Fiscal 2002, Pritchett, Siler & Hardy, P.A., provided certain other
services, including tax return preparation, for which the aggregate amount
of fees billed to us and Fountain was $18,721.
PROPOSALS OF SHAREHOLDERS
Any proposal of a shareholder which is intended to be presented for
action at our next Annual Meeting must be received by us in writing at our
main office in Washington, North Carolina, no later than June 27, 2003, to
be considered timely received for inclusion in the proxy statement and
form of appointment of proxy that we will distribute in connection with
that meeting. In order to be included in our proxy materials related to a
particular meeting, the person submitting the proposal must own,
beneficially or of record, at least 1% or $2,000 in market value of shares
of our common stock entitled to be voted on that proposal at the meeting
and must have held those shares for a period of at least one year and
continue to hold them through the date of the meeting. Also, the proposal
and the shareholder submitting it must comply with certain other
eligibility and procedural requirements contained in rules of the
Securities and Exchange Commission.
Written notice of a shareholder proposal intended to be presented for
action at our next Annual Meeting, but which is not intended to be
included in our proxy statement and form of appointment of proxy, must be
received by us at our main office in Washington, North Carolina, no later
than September 10, 2003, in order for that proposal to be considered
timely received for purposes of the Proxies' discretionary authority to
vote on other matters presented for action by shareholders at that
meeting.
ANNUAL REPORT ON FORM 10-K
We are subject to the reporting requirements of the Securities
Exchange Act of 1934 and, in accordance with that Act, we file reports and
other information, including proxy statements, annual reports, and
quarterly reports, with the Securities and Exchange Commission.
A copy of our Annual Report on Form 10-K for Fiscal 2002, which ended
June 30, 2002, as filed with the Securities and Exchange Commission, will
be provided without charge upon the written request of any shareholder
entitled to vote at the Annual Meeting. Requests for copies should be
directed to Hannah Hale, Fountain Powerboat Industries, Inc., Post Office
Drawer 457, Washington, North Carolina 27889 (Telephone 252-975-2000).
14
FOUNTAIN POWERBOAT INDUSTRIES, INC.
Post Office Drawer 457
1653 Whichard's Beach Road
Washington, North Carolina 27889
APPOINTMENT OF PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Carol J. Price and Hannah Hale, or
any substitute appointed by them, as attorneys and proxies (the "Proxies")
and authorizes each of them, jointly and severally, to vote as directed
below all shares of the common stock of Fountain Powerboat Industries, Inc.
(the "Company") held of record by the undersigned on October 18, 2002, at
the Annual Meeting of the Company's Shareholders (the "Annual Meeting") to
be held at Fountain Powerboats located at 1653 Whichard's Beach Rd.,
Washington, North Carolina, at 10:00 a.m. on Tuesday, November 19, 2002,
and at any adjournment of the Annual Meeting.
I (we) direct that the shares represented by this appointment of
proxy be voted as instructed on the reverse side of this card. In the
absence of any instruction, those shares may be voted by the Proxies "FOR"
the election of each of the seven nominees for director named in Proposal 1
and "FOR" Proposals 2 and 3. If, at or before the time of the Annual
Meeting, any nominee named in Proposal 1 has become unable or unwilling to
serve as director for any reason, the Proxies are authorized to vote for a
substitute nominee named by the Board of Directors. On any other matters
that may properly be presented for action at the Annual Meeting, the
Proxies are authorized to vote the shares represented by this appointment
of proxy in accordance with their best judgment.
This appointment of proxy may be revoked by the undersigned at any
time before the voting takes place at the Annual Meeting by filing with the
Company's Secretary either a written instrument revoking it or an executed
appointment of proxy bearing a later date, or by attending the Annual
Meeting and announcing an intention to vote in person.
To insure that your shares are represented and that a quorum is
present at the Annual Meeting, please sign and return your Appointment of
Proxy whether or not you plan to attend.
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
FOUNTAIN POWERBOAT INDUSTRIES, INC.
c/o Corporate Trust Services
Mail Drop 10AT66-4129
38 Fountain Square Plaza
Cincinnati, OH 45202
fold and detach here
1. ELECTION OF DIRECTORS: Proposal to elect the seven nominees named
below as directors of the Company for one-year terms or until their
successors are duly elected and have qualified.
1-Reginald M. Fountain Jr. 2-A. Myles Cartrette
3-George L. Deichmann, III 4-Guy L. Hecker, Jr.
5-David C. Miller 6-Mark L. Spencer 7-David L. Woods
[ ] FOR all nominees listed above (except as specified below).
[ ] WITHHOLD AUTHORITY to vote for all nominees listed above.
(Instructions: To withhold authority to vote for any indicated
nominee, write the number(s) of the nominee(s) in the box provided to the
right). [________]
2. AMENDMENT OF EMPLOYEE STOCK OPTION PLAN. To consider a proposal to
approve an amendment to the Company's Employee Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. APPOINTMENT OF INDEPENDENT ACCOUNTANTS. To consider a proposal to
ratify the appointment of Pritchett, Siler & Hardy, P.A., as the
Company's independent accountants for Fiscal 2003.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. OTHER BUSINESS. On such other matters as may properly be presented
for action at the Annual Meeting, the Proxies are authorized to vote
the shares represented by this appointment of proxy in accordance
with their best judgment.
Check appropriate box. Indicate changes below: Address Change? [ ]
Name Change? [ ]
Date _________________________, 2002
Signature __________________________
Signature __________________________
Instruction: Please sign above
exactly as your name appears on the
appointment of proxy. Joint owners
of shares should both sign.
Fiduciaries or other persons signing
in a representative capacity should
indicate the capacity in which they
are signing.