SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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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)
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(X) No fee required.
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1) Title of each class of securities to which transaction
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computed pursuant to Exchange Act Rule 0-11 (set forth the
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registration statement number, or the Form or Schedule and the date
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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 18,
2003. The purposes of the meeting are:
1. Election of Directors. To elect eight directors for one year terms;
2. 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 2004; and
3. Other Business. To transact any other business properly presented
for action 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.
This notice and the enclosed Proxy Statement and form of appointment
of proxy are being mailed to our shareholders on or about October 17,
2003.
By Order of the Board of Directors
/s/ Carol J. Price
Carol J. Price
Secretary
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 dated October 17, 2003, and 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 and at any adjournments of the meeting. The Annual
Meeting will be held at 10:00 a.m. on Tuesday, November 18, 2003, at our
headquarters located at 1653 Whichard's Beach Road, Washington, North
Carolina.
In this Proxy Statement, the terms "you," "your" and 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 Irving L. Smith to act as your
"Proxies" and 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 enclosed
envelope.
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. 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 eight nominees for director named in Proposal 1 below, and "FOR"
Proposal 2. If, before 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 brought before the Annual Meeting but, if any other
matter is properly presented for action by our shareholders, the Proxies
will be authorized to vote your shares according to their best judgment.
The Proxies also will be authorized to vote your shares according to their
best judgment on matters incident to the conduct of the Annual Meeting,
including adjournments.
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 either by
filing with our Secretary 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 soliciting appointments of proxy for the
Annual Meeting, including costs of preparing and mailing this Proxy
Statement. In addition to solicitation by mail, our directors, officers
and employees may solicit appointments of proxy, personally or by
telephone, without additional compensation.
Record Date
The close of business on October 10, 2003, is 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 in order to vote at the Annual Meeting.
Voting Securities
Our common stock is our only class of voting securities. A total of
4,757,608 shares of our common stock were outstanding on the Record Date.
Fountain holds 15,000 of those shares which are treated as treasury shares
and may not be voted at the Annual Meeting. You may cast one vote for
each share of our common stock you held of record on the Record Date on
each director to be elected and on each other matter voted on by
shareholders at the Annual Meeting.
Voting Procedures; Votes Required for Approval
In the election of directors, the eight nominees receiving the
highest numbers of votes will be elected. You may not vote cumulatively
in the election of directors. For Proposal 2 to be approved, the votes
cast in favor of the proposal must exceed the votes cast against it.
Abstentions and broker non-votes will have no effect in the election of
directors or in the voting on Proposal 2.
Beneficial Ownership of Securities
Principal Shareholders. The following table describes the beneficial
ownership of our voting securities on the Record Date by persons believed
by us to own, beneficially or of record, 5% or more of any class 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 2,700,472 (2) 52.01%
Triglova Finanz, A.G.
Edificio Torre Swiss Bank
Piso 16, Apartado Postal 1824
Panama 1, Republica de Panama 314,250 (3) 6.63%
_____________________
(1) Percentages are calculated based on 4,757,608 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 considered 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 describes the beneficial
ownership of our common stock on the Record Date 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 beneficial ownership (1) of class (2)
- ------------------ ------------------------ ------------
Reginald M. Fountain, Jr. 2,700,472 (3) 52.01%
A. Myles Cartrette 16,800 *
George L. Deichmann III 24,100 *
Guy L. Hecker, Jr. -0- -
David C. Miller 1,000 *
Mark L. Spencer 33,525 *
Robert L. Stallings III -0- -
David L. Woods. 52,500 1.11%
All current directors and
executive officers as a
group (8 persons) 2,838,997 54.26%
_____________________
(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 - 1,600 shares. The listed shares include the
following numbers of shares that could be acquired by the individuals
named and included in the group (or, in the case of one person
included in the group, by a relative whose shares the person may be
considered to beneficially own) pursuant to currently exercisable
stock options and with respect to which shares those persons may be
considered to have sole (or shared) investment power only: Mr.
Fountain - 450,000 shares; Mr. Spencer - 30,000 shares; all persons
included in the group - 490,000 shares.
(2) Percentages are calculated based on 4,757,608 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 federal law 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, our Proxy Statements are
required to disclose failures to report shares beneficially owned or
changes in beneficial ownership, and failures to timely file required
reports, during previous years. During Fiscal 2003, the initial report
required to be filed by Irving L. Smith following his appointment as our
Chief Financial Officer inadvertently was not filed until after its due
date and did not list shares of our common stock that are beneficially
owned by a relative and that should be included in his reports. Also, the
initial report filed by A. Myles Cartrette following his election as our
director did not list shares of our common stock that are held in a trust
created by a family member and that should be included in his reports.
Each of those oversights was corrected promptly after it was discovered.
3
PROPOSAL 1: ELECTION OF DIRECTORS
Our Bylaws provide that our Board of Directors will consist of not
less than three nor more than 25 members and authorize the Board to set
and change the number of directors from time to time within those limits.
Our 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. The Board has set the number of our directors at eight and has
nominated the individuals named below for election as directors at the
Annual Meeting. Seven of the nominees currently serve as directors and
will be standing for reelection.
Name and age Position(s) with First Principal occupation and
us and Fountain elected (1) business experience for
past five years
- --------------- --------------- ---------- ----------------------
Reginald M. Chairman, 1979 Our chief executive officer
Fountain, Jr. President and
(63) Chief Executive
Officer
A. Myles Director 2002 Owner of Cartrette, LLC
Cartrette (land development and
(47) residential construction),
Greenville, NC
George L. Director 1998 Owner and President of
Deichmann III Trent
(59) Olds-Cadillac-Buick-Pontiac
-GMC Trucks, Inc. (auto
dealership), New Bern, NC
Guy L. Hecker, Director 2000 President, Stafford, Burke
Jr. (2) & Hecker, Inc. (high
(71) technology consultants),
Alexandria, VA
David C. Miller Director 2002 Owner of David C. Miller,
(52) CPA/ABV (certified public
accountant and business
valuation practice),
Greenville, NC
Mark L. Spencer Director 1992 Owner of Spencer
(47) Communications (advertising
and public relations firm),
Montrose, CA
Robert L. None New Owner and President of
Stallings III nominee Eastern Aviation Fuels,
(56) Inc. (aviation fuel sales),
New Bern, NC
David L. Woods Director 2001 Co-owner and manager, Woods
(45) & 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 calendar 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.
(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.
Our Board of Directors recommends that you vote "FOR" the eight
nominees named above. In the election of directors, the eight 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 four times during Fiscal 2003. 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, Chairman, Guy L. Hecker,
Jr., and Mark L. Spencer. We believe that each member of the Committee is
"independent" as that term is defined by the current listing standards of
The Nasdaq Stock Market. A copy of the Audit Committee charter is
included as Appendix A to this Proxy Statement. The Committee met one
time during Fiscal 2003.
Our Board of Directors currently does not have a standing nominating
or compensation committee.
Audit Committee Report
Our management is responsible for our financial reporting process,
including our systems of internal control over financial reporting and
disclosure controls and procedures, and for the preparation of
consolidated financial statements in accordance with accounting principles
generally accepted in the United States. Our independent accountants are
responsible for auditing those financial statements. The Audit Committee
oversees and reviews those processes. In connection with the preparation
and audit of our consolidated financial statements for Fiscal 2003, the
Audit Committee has:
- - reviewed our audited consolidated financial statements and discussed
them with management;
- - discussed with our independent accountants the matters required to be
discussed by Statement on Auditing Standards No. 61, as amended;
- - received written disclosures and a letter from our independent
accountants required by Independence Standards Board Standard No. 1;
and
- - discussed the independence of our accountants with the accountants.
Based on that review and discussion, the Audit Committee recommended
to our Board of Directors that our audited consolidated financial
statements be included in our Annual Report on Form 10-K as filed with the
Securities and Exchange Commission for Fiscal 2003.
The Audit Committee:
George L. Deichmann III Guy L. Hecker, Jr. Mark L. Spencer
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. Reginald M.
Fountain, Jr., who serves as Chairman, President, and Chief Executive
Officer of both companies, participates in deliberations of Fountain's
Board of Directors pertaining to executive compensation, but he does not
participate in deliberations regarding his own compensation.
5
Certain Transactions and Relationships with Insiders
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 2003, Mr. Woods' dealership purchased 28 boats from Fountain for an
aggregate wholesale price of $4,188,426 (approximately 8% of Fountain's
aggregate sales for that fiscal year), received payments of approximately
$5,000 from Fountain under dealer sales award and promotion programs that
are available to all dealers, and paid Fountain approximately $111,898 for
parts and non-warranty service work.
David C. Miller, one of our directors, is a certified public
accountant who provides us with consulting services regarding accounting
and tax issues, auditing, and related financial matters. Under our
current arrangement, we pay Mr. Miller $2,000 per month for those
services.
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: (1) base salary paid by Fountain, (2) cash bonuses paid
by Fountain to selected executive officers, (3) stock options we issue to
selected employees, and (4) contributions by Fountain to the individual
accounts of all participating employees under Fountain's Section 401(k)
plan. In addition, Fountain provides other employee benefit and welfare
plans customary for companies 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. Mr. Fountain's employment
agreement entered into with Fountain during 1989 provides for base salary
of not less than $104,000. In recent years, he has received base salary
at a rate of $350,000 per year with no salary increase. For a portion of
Fiscal 2003, Mr. Fountain voluntarily reduced the rate at which salary was
paid to him with the result that, during the year, he actually received
aggregate salary payments of only $265,385. However, since that salary
reduction was voluntary, the amount of the reduction was still treated as
taxable compensation to Mr. Fountain even though he did not receive it,
and accounting rules required that we account for the net amount of the
reduction, after required tax withholdings, as a contribution by Mr.
Fountain to our capital. For that reason, Mr. Fountain's salary for
Fiscal 2003 is listed in the Summary Compensation Table below as the full
$350,000 on which he was taxed rather than the reduced amount of salary he
actually received.
Pursuant to his employment agreement, Mr. Fountain may also receive a
cash bonus each year equal to 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. The cash bonus
earned by Mr. Fountain for Fiscal 2003 is shown in the Summary
Compensation Table below. No cash bonuses were earned for Fiscal 2001 or
Fiscal 2002.
The salaries and cash bonuses paid to Fountain's other officers are
determined by Mr. Fountain based on his 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 cash bonus, 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, are tied empirically
to his individual performance or to Fountain's financial performance.
6
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. A. Myles Cartrette
Guy L. Hecker, Jr. David C. Miller Mark L. Spencer
David L. Woods
Executive Officers
Reginald M. Fountain, Jr., age 63, 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.
Irving L. Smith, age 60, was appointed to serve as our and Fountain's
Chief Financial Officer during March 2003. Prior to that, he served as
our Director for Information Technology from March 2001 through February
2003. Previously, he was President and owner of ISA Group, Inc., a
financial, manufacturing and information technology consulting firm.
Executive Compensation
Cash Compensation. The following table contains information
regarding cash and other compensation paid to or deferred by our Chief
Executive Officer 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
------------------------------------- ------------------------
Restricted Securities
Name and Fiscal Other annual stock underlying All other
principal position year Salary Bonus compensation (2) awards options (#) compensation
- ------------------ ------ ------ ----- ---------------- ---------- ----------- ------------
Reginald M. Fountain 2003 $350,000(1) $58,315 $ -0- $ -0- -0- $ -0-
Chairman, President
and Chief Executive
Officer 2002 350,000 -0- -0- -0- -0- -0-
2001 351,500 -0- -0- -0- -0- -0-
_____________________
(1)As described above under the caption "Board Report on Executive
Compensation," for a portion of Fiscal 2003 Mr. Fountain voluntarily
reduced the rate at which salary was paid to him with the result that
he actually received aggregate salary payments of only $265,385.
However, since the salary reduction was voluntary, the amount of the
reduction was still treated as taxable compensation to Mr. Fountain
even though he did not actually receive it, and accounting rules
required that we account for the net amount of the reduction, after
required tax withholdings, as a contribution by Mr. Fountain to our
capital. For that reason, Mr. Fountain's Fiscal 2003 salary is listed
in the table above as the full $350,000 on which he was taxed rather
than the reduced amount of salary he actually received.
(2)In addition to compensation paid in cash, Fountain's executive officers
receive certain personal benefits. The value of such benefits received
each year by Mr. Fountain did not exceed 10% of his cash compensation
for that year.
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
7
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.
Stock Options. The following table contains information regarding
options to purchase shares of our common stock held on June 30, 2003, by
Mr. Fountain.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES (1)
Number of securities Value of unexercised
underlying unexercised in-the-money options
options at fiscal year-end at fiscal year-end
----------------------------- ----------------------------
Shares
acquired Value
Name on exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- --------- ----------- -------- ----------- ------------- ----------- -------------
Reginald M. Fountain, Jr. (2) (2) 450,000 (3) -0- (4) -
_____________________
(1)Information contained in the table is for Fiscal 2003 which ended on
June 30, 2003.
(2)No options were exercised during Fiscal 2003.
(3)The options are exercisable at a price of $4.67 per share and expire on
August 4, 2005.
(4) Mr. Fountain's options had no value on June 30, 2003, or on October
14, 2003, since, on those dates, the exercise price of the options
exceeded the aggregate market value of the underlying shares (based on the
closing sale prices of our common stock).
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, 1998, 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.
(GRAPH OF STOCK PRICES)
GRAPH POINTS
06-30-98 06-30-99 06-30-00 06-30-01 06-30-02 06-30-03
-------- -------- -------- -------- -------- --------
- - Our Common Stock 100 41.57 29.21 18.02 13.93 31.01
- - S&P 500 Index 100 122.76 131.66 112.13 91.96 92.19
- - S&P Leisure Time
(Products) Index 100 80.91 43.55 57.79 63.22 61.24
8
PROPOSAL 2: 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 for Fiscal 2004, and a proposal to ratify that
appointment will be submitted for voting by our shareholders 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 2. To
be approved, the number of votes cast in person and by proxy at the Annual
Meeting in favor of the proposal must exceed the votes cast against it.
Services and Fees During Fiscal 2003 and 2002
As our independent accountants for Fiscal 2003 and 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 Pritchett, Siler & Hardy,
P.A.'s provision of non-audit services is compatible with maintaining its
independence. The Committee believes that those services do not affect
Pritchett, Siler & Hardy, P.A.'s independence.
Audit Fees. For Fiscal 2003 and 2002, Pritchett, Siler & Hardy,
P.A., audited our annual financial statements included in our Annual
Reports on Form 10-K, and it reviewed the condensed consolidated financial
statements included in our Quarterly Reports on Form 10-Q. The aggregate
amounts of fees billed to us for those services were $112,659 for Fiscal
2003 and $76,334 for Fiscal 2002.
Audit Related Fees. During Fiscal 2003 and 2002, we paid Pritchett,
Siler & Hardy, P.A. $7,350 and $5,010 respectively, for audits of our
Section 401(k) plan.
Tax Services. Fees for tax services that Pritchett, Siler & Hardy,
P.A. provided to us (consisting of the preparation and amendment of
federal and state income tax returns) amounted to $14,832 for Fiscal 2003
and $13,711 for Fiscal 2002.
All Other Fees. During Fiscal 2003 and 2002, Pritchett, Siler &
Hardy, P.A. provided no services other than those listed above.
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 19, 2004, 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.
9
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 2, 2004, 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 our fiscal year ended
June 30, 2003, 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 Irving L. Smith, Fountain Powerboat Industries, Inc., Post
Office Drawer 457, Washington, North Carolina 27889 (Telephone
252-975-2000).
10
Appendix A
FOUNTAIN POWERBOAT INDUSTRIES, INC.
AUDIT COMMITTEE CHARTER
The Audit Committee (the "Committee") of the Board of Directors (the
"Board) of Fountain Powerboat Industries, Inc. (the "Company") will have
the oversight responsibility, authority and specific duties as described
below.
COMPOSITION
The Committee will be comprised of three or more directors as
determined by the Board. The members of the Committee will meet the
independence and experience requirements of The Nasdaq Stock Market
("Nasdaq") then in effect. The members of the Committee for the following
year will be elected by the Board annually at the organizational meeting
of the full Board held following the annual meeting of shareholders. The
Committee will elect one of its members to serve as Chairman.
RESPONSIBILITY
The Committee is a part of the Board. It's primary function is to
assist the Board in fulfilling its oversight responsibilities with respect
to (i) the annual financial information to be provided to shareholders and
the Securities and Exchange Commission ("SEC"); (ii) the system of
internal controls that management has established; and (iii) the internal
and external audit process. In addition, the Committee provides an avenue
for communication between internal audit, the independent accountants,
financial management and the Board. The Committee should have a clear
understanding with the independent accountants that they must maintain an
open and transparent relationship with the Committee and that the ultimate
accountability of the independent accountants is to the Board and the
Committee. The Committee will make regular reports to the Board
concerning its activities.
While the Audit Committee has the responsibilities and powers set
forth in this charter, it is not the duty of the Audit Committee to plan
or conduct audits or to determine that the Company's financial statements
are complete and accurate and are in accordance with generally accepted
accounting principles. This is the responsibility of management and the
independent auditor. Nor is it the duty of the Audit Committee to conduct
investigations, to resolve disagreements, if any, between management and
the independent auditor, or to assure compliance with laws and regulations
and the Company's business conduct guidelines.
AUTHORITY
Subject to the prior approval of the Board, the Committee is granted
the authority to investigate any matter or activity involving financial
accounting and financial reporting, as well as the internal controls of
the Company. In that regard, the Committee will have the authority to
approve the retention of external professionals to render advice and
counsel in such matters. All employees will be directed to cooperate with
respect thereto as requested by members of the Committee.
MEETINGS
The Committee is to meet at least once annually and as many
additional times as the Committee deems necessary. Content of the agenda
for each meeting should be cleared by the Chairman. The Committee is to
meet in separate executive sessions with the chief financial officer,
independent accountants and internal audit at least once each year and at
other times when considered appropriate.
ATTENDANCE
Committee members will strive to be present at all meetings. As
necessary or desirable, the Chairman may request that members of
management and representatives of the independent accountants and internal
audit be present at Committee meetings.
SPECIFIC DUTIES
In carrying out its oversight responsibilities, the Committee will:
1. Review and reassess the adequacy of this charter annually and
recommend any proposed changes to the Board for approval, all of
which should be done in compliance with applicable Nasdaq
requirements pertaining to audit committees;
2. Review with the Company's management, internal audit and independent
accountants the Company's accounting and financial reporting
controls, and obtain annually in writing from the independent
accountants their letter as to the adequacy of such controls;
3. Review with the Company's management, internal audit and independent
accountants significant accounting and reporting principles,
practices and procedures applied by the Company in preparing its
financial statements, and discuss with the independent accountants
their judgements about the quality (not just the acceptability) of
the Company's accounting principles used in financial reporting;
4. Review the scope of internal audit's work plan for the year, and
receive a summary report of major findings by internal auditors and
how management is addressing the conditions reported;
5. Review the scope and general extent of the independent accountants'
annual audit, which review should include an explanation from the
independent accountants of the factors considered by the accountants
in determining the audit scope, including the major risk factors;
6. Confirm with the independent accountants each year that no
limitations have been placed on the scope or nature of their audit
procedures, and review annually with management the fee arrangement
with the independent accountants;
7. Have a predetermined arrangement with the independent accountants
that they will (i) advise the Committee, through its Chairman and
management of the Company, of any matters identified through
procedures followed for interim quarterly financial statements, and
that such notification is to be made prior to the related press
release or, if not practicable, prior to filing Forms 10-Q, and (ii)
receive a written confirmation provided by the independent
accountants at the end of each of the first three quarters of the
year that they have nothing to report to the Committee, if that is
the case, or the written enumeration of required reporting issues;
8. At the completion of the annual audit, the Committee will:
- Review and discuss with management, internal audit and the
independent accountants the annual audited financial statements
and related footnotes, and other financial information, to be
included in the Company's annual report to shareholders and Form
10-K;
- Review and discuss with management, internal audit and the
independent accountants the results of the audit of the
financial statements and the related report thereon and, if
applicable, a report on changes during the year in accounting
principles and their application;
- Review and discuss with management, internal audit and the
independent accountants any significant changes to the audit
plan, if any, and any serious disputes or difficulties with
management encountered during the audit, inquire about the
cooperation received by the independent accountants during their
audit, including access to all requested records, data and
information, and inquire of the independent accountants whether
A-2
there have been any disagreements with management, which, if not
satisfactorily resolved, would have caused them to issue a
nonstandard report on the Company's financial statements;
- Receive and review matters required to be communicated by the
independent accountants by Statement of Auditing Standards (SAS)
61, as amended by SAS 90, relating to the conduct of the audit,
and receive the written communication provided by the
independent accountants concerning their judgement about the
quality of the Company's accounting principles, as outlined in
SAS 61, as amended by SAS 90, and that they concur with
management's representation concerning audit adjustments;
- Inquire as to the independence of the independent
accountants, obtain from the independent accountants a formal
written disclosure and statement delineating all relationships
between the independent accountants and the Company as
contemplated by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, engage in a
dialogue with the independent accountants with respect to any
disclosed relationships or services that may impact their
objectivity and independence, and take, or recommend that the
full Board take, appropriate action to oversee the independence
of the independent accountants;
and, if deemed appropriate based on such inquiry, review and
discussion, recommend to the Board that the financial statements be
included in the Company's annual report on Form 10-K.
9. After preparation by management and review by internal audit and
independent accountants, review and approve the "Audit Committee
Report" required under SEC rules to be included in the Company's
annual proxy statement, and cause this charter to be published as an
appendix to the proxy statement every three years;
10. Discuss with the independent accountants the quality of the Company's
financial and accounting personnel, and elicit the comments of
management regarding responsiveness of the independent accountants to
the Company's needs;
11. Meet with management, internal audit and the independent accountants
to discuss any relevant significant recommendations that the
independent accountants may have, particularly those characterized as
"material" or "serious," which typically are presented by the
independent accountants in the form of a Letter of Comments and
Recommendations to the Committee, and review responses of management
to the Letter of Comments and Recommendations from the independent
accountants and receive follow-up reports on action taken concerning
the aforementioned recommendations;
12. Recommend to the Board the selection, retention or termination of the
Company's independent accountants;
13. Review the appointment and replacement of the senior internal audit
executive;
14. Review with management, internal audit and the independent
accountants the methods used to establish and monitor the Company's
policies with respect to unethical or illegal activities by employees
of the Company and its subsidiaries that may have a material impact
on the financial statements;
15. Generally as part of the review of the annual financial statements,
receive an oral report(s), at least annually, from the Company's
counsel concerning legal and regulatory matters that may have a
material impact on the financial statements; and,
16. As the Committee may deem appropriate, obtain, weigh and consider
expert advice as to Audit Committee-related rules of the SEC and
Nasdaq, statements on auditing standards, and other accounting, legal
and regulatory provisions.
A-3
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 Irving L. Smith
(the "Proxies"), or any substitute appointed by them, as the undersigned's
attorneys and proxies, and authorizes either or both of them to represent
and 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 10, 2003, at the Annual Meeting of the Company's
Shareholders (the "Annual Meeting") to be held at the Company's
headquarters located at 1653 Whichard's Beach Road, Washington, North
Carolina, at 10:00 a.m. on Tuesday, November 18, 2003, and at any
adjournments of the Annual Meeting. The undersigned directs that the
shares represented by this appointment of proxy be voted as follows:
1. ELECTION OF DIRECTORS: Election of eight directors for one-year
terms.
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote
(except as indicated otherwise for all nominees listed below
on the line below)
Nominees: Reginald M. Fountain, Jr.; A. Myles Cartrette;
George L. Deichmann III; Guy L. Hecker, Jr.; David C. Miller;
Mark L. Spencer; Robert L. Stallings III; and David L. Woods
Instruction: To withhold authority to vote for any individual
nominee, write the nominee's name on the line below.
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2. RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS: Proposal to
ratify the appointment of Pritchett, Siler & Hardy, P.A. as the
Company's independent accountants for Fiscal 2004.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. OTHER BUSINESS: On any other matters properly presented for action
by shareholders at the Annual Meeting, and on matters incident to the
conduct of the meeting, including adjournments, the Proxies are
authorized to vote the shares represented by this appointment of
proxy according to their best judgment.
PLEASE DATE AND SIGN THIS APPOINTMENT OF PROXY ON THE
REVERSE SIDE AND RETURN IT TO THE COMPANY IN THE ENCLOSED ENVELOPE
I (We) direct that the shares represented by this appointment of
proxy be voted as instructed above. In the absence of any instruction,
those shares may be voted by the Proxies "FOR" the election of each
nominee named in Proposal 1 and "FOR" Proposal 2. If, before the Annual
Meeting, any nominee listed in Proposal 1 becomes unable or unwilling to
serve as a director for any reason, the Proxies are authorized to vote for
a substitute nominee named by the Board of Directors. 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 a
written instrument revoking it or a duly executed appointment of proxy
bearing a later date, or by attending the Annual Meeting and announcing an
intention to vote in person.
Dated: , 2003
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Signature
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Joint Signature (if shares are held
jointly)
Instruction: Please sign above exactly
as your name appears on this 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.
IMPORTANT: To ensure that your shares are represented and that a quorum is
present at the Annual Meeting, please send in your appointment of
proxy whether or not you plan to attend.