FOUNTAIN POWERBOAT
INDUSTRIES, INC.
P.O. Drawer 457, Whichard's Beach Road
Washington, North Carolina 27889
<PAGE>
NOTICE OF MEETING
To Be Held
December 11, 1996
NOTICE is hereby given that a meeting of shareholders (the "Meeting") of
Fountain Powerboat Industries, Inc. (the "Company") will be held as follows:
Place: Second Floor Conference Room of the
Company's principal executive offices
Whichard's Beach Road
Washington, North Carolina
Date: Wednesday, December 11, 1996
Time: 10:00 a.m.
The purposes of the Meeting are:
1. To elect a Board of Directors consisting of five members to
hold office until the next annual meeting of shareholders or until their
respective successors are duly elected and qualified.
2. To confirm Pritchett, Siler & Hardy, Certified Publi
Accountants, as the Company's accountants
and independent auditors.
3. To transact such other business as may properly come
before the Meeting or any adjournments
thereof.
The Board of Directors has fixed the close of business on November 12,
1996, as the record date for the determination of shareholders entitled to
notice of and to vote at the Meeting.
Shares can be voted at the Meeting only if the record holder thereof is
present at the meeting or represented by proxy. To insure the presence of a
quorum at the Meeting, you are requested to sign and date the accompanying
Appointment of Proxy and return it promptly in the enclosed return envelope. The
giving of such Appointment of Proxy will not affect your rights to vote in
person in the event you attend the Meeting.
By Order of The Board of Directors
November 13, 1996 Blanche C. Williams
Secretary
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<PAGE>
FOUNTAIN POWERBOAT
INDUSTRIES, INC.
P.O. Drawer 457, Whichard's Beach Road
Washington, North Carolina 27889
PROXY STATEMENT
Mailing Date: November 1, 1996
MEETING OF SHAREHOLDERS
To Be Held
December 11, 1996
General
This Proxy Statement is furnished to the holders of Common Stock, $.01
par value per share (the "Common Stock"), of Fountain Powerboat Industries, Inc.
(the "Company") on behalf of the Company in connection with its solicitation of
Appointments of Proxy in the form enclosed herewith for use at a meeting of
shareholders (the "Meeting") to be held on December 11, 1996, and at any
adjournments thereof. The Meeting will be held at 10:00 a.m. North Carolina time
on the above date in the Second Floor Conference Room at the Company's principal
executive offices on Whichard's Beach Road, Washington, North Carolina. The
matters to be acted upon at the Meeting are set forth in the accompanying Notice
of Meeting of Shareholders and are described herein.
The cost of this solicitation of Appointments of Proxy will be borne by
the Company. In addition to the solicitation of Appointments of Proxy by mail,
certain officers, directors and regular employees of the Company, without
additional remuneration, may solicit Appointments of Proxy personally or by
telephone, telegraph or cable. Arrangements will also be made with brokerage
firms and other nominee holders for forwarding proxy materials to the beneficial
owners of shares of the Common Stock, and the Company will reimburse such
persons for reasonable out-of-pocket expenses incurred by them in connection
therewith.
Voting of Appointments of Proxy
The persons names in the enclosed Appointment of Proxy as proxies to
represent shareholders at the Meeting are Blanche C. Williams and Reginald M.
Fountain, Jr. An Appointment of Proxy which is properly executed and returned,
and not revoked, will be voted in accordance with the directions contained
therein. If no directions are given, that Appointment of Proxy will be voted FOR
the election of the five nominees for directors named in Proposal 1 by casting
an equal number of votes for each such nominee, and FOR ratification of the
accounting firm named in Proposal 2 described herein. If, at or before the time
of the Meeting, any nominee named in Proposal 1 has become unavailable for any
reason, the proxies shall have the discretion to vote each Appointment of Proxy
for any substitute nominee named by the Board of Directors. On any other matters
that may come before the meeting, each Appointment of Proxy will be voted in
accordance with the best judgment of the proxies.
Revocability of Appointments of Proxy
An Appointment of Proxy may be revoked by the shareholder at any time
before it is exercised by filing with the Secretary of the Company a written
revocation or a duly executed Appointment of Proxy bearing a later date, or by
attending the Meeting and announcing his intention to vote in person.
1
<PAGE>
Record Date and Voting Rights
The close of business on November 12, 1996 has been fixed as the record
date for the determination of shareholders entitled to notice of and to vote at
the Meeting. Only those shareholders of record on that date will be entitled to
vote on the proposals described herein.
The voting securities of the Company are the shares of its Common
Stock, of which 3,069,072 shares were issued and outstanding as of November 12,
1996. The Company's subsidiary, Fountain Powerboats, Inc. (the "Subsidiary"),
holds 10,000 of such shares which are regarded as treasury shares and not
entitled to be voted. All other outstanding shares are entitled to one vote on
each matter submitted for voting at the Meeting.
Beneficial Ownership of Common Stock
Principal Shareholders. The following table sets forth the beneficial
ownership of the Company's Common Stock as of November 12, 1996 by each person
known to the Company to own more than five percent (5%) of the Company's Common
Stock. The table has been prepared based on information provided to the Company
by each shareholder.
Amount of
Name and Beneficial Percent of
Address Ownership Class(3)
Reginald M. Fountain, Jr.
P.O. Drawer 457
Whichard's Beach Road
Washington, NC 27889 1,712,915 (1) 51.0%
Triglova Finance, S.A.
Post Office Box 1824
52nd Street
Urbanization Obarrio
Torre Banco Sur, 10th Floor
Panama City, Republic of Panama 272,500 (2) 8.9%
(1) Mr. Fountain has sole voting and investment power with respect to all
shares shown as beneficially owned by him. Includes options to purchase
300,000 shares of common stock.
(2) The Company is informed that the shares shown as beneficially owned by
Triglova Finance, S.A. are owned directly by it, and it claims shared
voting and investment power with respect to all such shares with Mr.
Filippo Dollfus De Vockersberg, c/o Fider Service, 1 Via Degli Amadio,
6900 Lugano, Switzerland. Mr. Dollfus has been authorized to act as
attorney-in-fact for Triglova Finance, S.A., and therefore, claims
shared voting and investment power with respect to such shares.
(3) The percentage for each person is calculated on the basis of the
Company's total outstanding shares less the 10,000
shares owned by the Company's Subsidiary.
Directors and Officers. The following table sets forth the beneficial ownership
of the Company's Common Stock as of November 12, 1996, by each of the Company's
current directors and nominees for election as director, and by all directors
and officers of the Company as a group.
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<PAGE>
Amount of
Name and Beneficial Percent of
Address Ownership Class
Reginald M. Fountain, Jr.(1) 1,712,915(2) 51.0%
Gary D. Garbrecht(1) 20,000(2) (3)
Mark L. Spencer(1) 20,000(2) (3)
Federico Pignatelli(1) 20,000(2) (3)
Gary E. Mazza, III(1) 20,000(2) (3)
Allan L. Krehbiel(1) 20,000(2) (3)
Blanche C. Williams(1) 100 (3)
All directors and officers
as a group (7 persons) 1,813,015(2) 52.7%
(1) The address of each person is P.O. Drawer 457, Whichard's Beach Road,
Washington, North Carolina 27889. Except as otherwise indicated, to the
best knowledge of management of the Company each of the persons listed
or included in the group has sole voting and investment power over all
shares shown as beneficially owned. Percentages for each person listed
and for the group are calculated on the basis of the Company's total
outstanding shares less the 10,000 shares owned by the Company's
Subsidiary.
(2) Includes options to purchase 20,000 shares of Common Stock held by each
of Messrs. Garbrecht, Spencer, Pignatelli
and Mazza, and options to purchase 300,000 shares held by Mr. Fountain.
(3) Less than 1%
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<PAGE>
PROPOSAL NO. 1: ELECTION OF DIRECTORS
Pursuant to the Bylaws, the Board of Directors has set the number of
directors of the Company at five. Set forth below are the names of the five
nominees for election as directors of the Company, together with certain
information concerning each such nominee. Each of the nominees currently serves
as a director of the Company. Each director elected at the Meeting will serve
until the Company's next annual meeting of shareholders or until his successor
shall be duly elected and shall qualify.
REGINALD M. FOUNTAIN, JR., age 56, founded the Company's Subsidiary during 1979
and has served as its Chief Executive Officer from its organization. He became a
director and President of the Company upon its acquisition of the Subsidiary in
August 1986. Mr. Fountain presently serves as Chairman, President and Chief
Executive Officer of the Company and its Subsidiary. From 1971 to 1979, Mr.
Fountain was a world class race boat driver and was the Unlimited Class World
Champion in 1976 and 1978.
GARY D. GARBRECHT, age 53, became a director of the Company on February 26,
1992. Mr. Garbrecht is the President
and sole shareholder of Mach Performance, Inc., a propeller and high performance
boating accessories manufacturer. From
June, 1988 to July, 1991, he was President of Aronow Powerboats, a former
manufacturer of high performance sport boats.
Prior to that time, and until its sale to OMC in 1989, Mr. Garbrecht owned
Second Effort, a manufacturer of high
performance boats. Mr. Garbrecht has over thirty years experience in racing and
recreational boating.
GARY E. MAZZA, III, age 58, became a director of the Company on December 28,
1993. Mr. Mazza is a practicing
attorney in the business, tax and international areas of the law in Annapolis,
Maryland. He also practices law in New York
and Virginia. He is the Chairman of Triangle Tractor & Trailer, Inc., a
Director of the American Red Cross of Maryland,
and an Adjunct Professor at the University of Maryland. He is the founder,
Executive Vice President, and General Counsel
for Aerovias Quisqueana, C. por A., Santo Domingo, Dominican Republic. Prior to
entering private practice, Mr. Mazza was
the Director of the Legal Education Institute at the U.S Department of Justice
from 1977 to 1981. Prior to 1977, he served
as the Director of Legal Training for the U.S. Civil Service Commission and as
Senior Legal Advisor for the U.S. Indian
Claims Commission. His honors include the New York State Attorney General's
Achievement Award. Mr. Mazza is a highly
decorated retired United States Army Colonel.
FEDERICO PIGNATELLI, age 43, became a director of the Company on April 8, 1992.
Mr. Pignatelli is the U.S. representative of Eurocapital Partners, Inc., an
investment banking firm. From 1989 to April, 1992, he was a Managing Director at
Gruntal & Company, an investment banking firm. From 1988 to 1989, he was General
Manager of Euromobiliare Ltd., a subsidiary of Euromobiliare, SpA, a publicly
held investment and merchant bank in Italy and Senior Vice President of New York
and Foreign Securities Corporation, an institutional brokerage firm in New York.
From 1986 to 1988, he was Managing Director at Ladenburg, Thalmann & Co., an
investment banking firm. From 1980 to 1986, he was Assistant Vice President of
E.F. Hutton International. Prior to 1980, he was a financial journalist. Mr.
Pignatelli was elected as a director of the Company pursuant to the right of
Eurocapital Partners, Ltd. to designate one member of the Board of Directors in
connection with a private placement of the Company's Common Stock. Mr.
Pignatelli also serves as chairman of BioLase Technology, Inc. a company which
produces medical and dental lasers and endodontic products. Formerly, he served
as a director of MTC Electronic Technologies Co., Ltd., a NASDAQ/NMS company,
and of CST Entertainment Imaging, Inc., an American Stock Exchange Company
engaged in colorizing black and white film.
MARK L. SPENCER, age 41, founded Spencer Communications, an Advertising Public
Relations firm specializing exclusively in the marine industry, in 1987.
Previously, Mr. Spencer began his journalism career at Powerboat Magazine in
1976. He was named Executive Editor of Powerboat Magazine in 1981 and served in
that capacity until 1987. During the last seven years Mr. Spencer has served as
an on camera "expert" commentator for ESPN covering the boating industry.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR LISTED ABOVE. THE FIVE NOMINEES
RECEIVING THE HIGHEST NUMBER OF VOTES SHALL BE DEEMED TO HAVE BEEN ELECTED.
4
<PAGE>
Meetings and Committees of the Board of Directors
The Company's Board of Directors met one time during Fiscal 1996. All
directors attended more than 75% of the
meetings. The Board has an Audit Committee which met one time during the fiscal
year. The Audit Committee is chaired
by Mr. Garbrecht, Mr. Pignatelli and Mr. Spencer serve as Committee members.
The Board also has a Compensation
Committee which met one time during the fiscal year. The Compensation Committee
is chaired by Mr. Pignatelli, and Mr.
Garbrecht and Mr. Spencer serve as Committee Members.
Executive Officers
In addition to Mr. Fountain, who is listed above as a director, other
executive officers of the Company are as follows:
ALLAN L. KREHBIEL, C.P.A., age 53, was appointed Vice President - Finance and
Chief Financial Officer in May, 1991.
Mr. Krehbiel had been Controller since April, 1991, when he was hired by the
Company. He is a Certified Public Accountant
and has had ten years experience as the Chief Financial Officer/Controller of
Revere Aluminum Building Products, Inc. (and
its successor, Noranda Building Products Company) and of Hunter Douglas Building
Products Division (and its successor,
Alumark Corporation).
BLANCHE C. WILLIAMS, age 62, has been Corporate Secretary and Treasurer of the
Company since August, 1986, and
has held the same positions with the Company's Subsidiary since it was formed
during 1979. Mrs. Williams also served as
Executive Assistant to the President from 1979 to 1988.
Certain Relationships and Related-Party Transactions
During the fourth quarter of Fiscal 1996, the Company borrowed $170,000
from Mr. Fountain to supplement its working capital. This loan was unsecured
with interest at 12%. The Company paid Mr. Fountain $2,710 in interest. The loan
was entirely repaid by June 30, 1996.
In November, 1992 Mr. Fountain loaned the Company $300,000 to
supplement the Company's working capital. The
loan was unsecured and bore interest at the rate of 12% per annum. Effective
January 31, 1994, the Company's Board of
Directors authorized the issuance of 86,572 additional common stock shares in
consideration for the cancellation of this
$300,000 debt to Mr. Fountain. The additional shares were issued at a price of
$3.50 per share to Mr. Fountain and to
Triangle Finance Ltd., a client of Eurocapital Partners, Ltd. Mr. Federico
Pignatelli is the U.S. representative of Eurocapital,
Ltd. and is also a director of the Company. Mr. Fountain cancelled two-thirds
of the total amount of the debt ($202,000,
including $200,000 of principal and $2,000 of accrued interest) for 57,715
common shares. Triangle Finance Ltd. repaid one-
third of the total amount of the debt ($101,000, including $100,000 of principal
and $1,000 of accrued interest) for 28,857
common shares. The Board of Directors determined that the price of $3.50 per
share was fair to the Company after
consideration of such factors as the common stock's book value, its then current
market price, and recent private placements.
In Fiscal 1994, the Company paid Mr. Fountain interest amounting to
$18,000 due on the $300,000 loan which was converted to common stock effective
January 31, 1994. The interest paid to him on the loan while it was outstanding
during Fiscal 1993 was $22,054. For Fiscal 1992, a similar loan was made by Mr.
Fountain to the Subsidiary and the interest paid was $48,624. No interest was
paid to Mr. Fountain in Fiscal 1995. The Company also paid rentals and the
aforementioned interest at what it believes to be their fair market values
during the last three fiscal years to Mr. Fountain or to entities owned by him
as follows:
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<PAGE>
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
1996 1995 1994
<S> <C> <C> <C>
Greenwood Helicopters $ -0- $ -0- $ 22,552
Eastbrook Apartments 8,705 12,540 17,368
Village Green Apartments 6,675 1,455 -0-
R.M. Fountain, Jr. - airplane rental 155,499 104,469 91,180
R.M. Fountain, Jr. - other misc. 2,000 -0- -0-
$ 172,879 $ 118,404 $ 131,100
</TABLE>
The rentals paid to Greenwood Helicopters are for the use of a
helicopter primarily for aerial photography of the Company's boats and plant
site. The rentals paid to Eastbrook Apartments and Village Green Apartments are
primarily for temporary lodging for relocating and transient Company personnel
and visitors. The rentals paid for the airplane are based upon the actual hours
that the airplane was used for Company business plus a monthly standby charge
for the exclusive use of the airplane. During Fiscal 1993, Mr. Fountain
purchased the airplane from the Company together with a parcel of real estate
located at Morehead, North Carolina. The Company recorded a profit on these
transactions with Mr. Fountain amounting to $117,126.
Mr. Gary D. Garbrecht is a director of the Company and the President
and sole shareholder of Mach Performance,
Inc. which supplies the Company's Subsidiary with some of its requirements for
propellers and other accessory items. The
Company paid Mach Performance, Inc. $191,709 in Fiscal 1996, $254,696 in Fiscal
1995 and $89,433 in Fiscal 1994. On
October 11, 1996 the Company acquired Mach Performance, Inc. by the issuance of
85,000 shares of restricted Company
Common Stock, valued at $1,041,250.
Mr. Gary E. Mazza, III, a distinguished attorney, businessman,
educator, and retired United States Army Colonel
was elected to the Board of Directors on December 28, 1993. He is Mr.
Fountain's father-in-law. The Company paid Mr.
Mazza $1,079 in Fiscal 1996 and $1,743 in Fiscal 1995. No amounts were paid to
Mr. Mazza prior to Fiscal 1995.
Mr. Federico Pignatelli was elected to the Board of Directors as the
designee of Eurocapital Partners, Ltd., the Company's investment banking firm in
connection with a private placement of the Company's Common Stock. No amount was
paid to Mr. Pignatelli or to Eurocapital Partners, Ltd., or to any of their
affiliates, in Fiscal 1996, 1995 or 1994.
Mr. Mark L. Spencer is a director of the Company and the President and
sole shareholder of Spencer
Communications, Inc. which furnishes advertising and public relations services
to the Company's Subsidiary. The Company
paid Spencer Communications, Inc. $265,985 in Fiscal 1996, $138,116 in Fiscal
1995 and $124,872 in Fiscal 1994.
The Company believes that all of the above transactions were on terms
which were not more favorable than would have been obtained from non-affiliated
parties.
Executive Compensation
The following table sets forth the cash compensation awarded, paid to
or earned by the Company's chief executive officer, who was the only executive
officer of the Company whose compensation exceeded $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION(3)
Name and Other Annual Awards Payouts All
Principal Position Year Salary(1) Bonus(2) Compensation Other
Restricted Options LTIP (5)
Stock ($) SARs(#)Payouts ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Reginald M. Fountain, Jr. 1996 232,154 199,984 -0- -0- 300,000 -0- -0-
Chairman of the Board of 1995 211,650 106,438 -0- -0- 20,000 -0- -0-
Director, Chief Executive Officer(4) 1994 187,200 -0- -0- -0- -0- -0- -0-
and Chief Operating Officer
</TABLE>
(1) The Board of Directors increased Mr. Fountain's annual base salary to
$285,000 for the period March 30, 1995 to March 30,
1996 and to $350,000 thereafter. Previously, effective October 6,
1992, the Board had increased his salary to $187,200 from
6
<PAGE>
$115,000. The amounts shown do not include the value of certain
personal benefits received in addition to cash compensation. The
aggregate value of such personal benefits received was less than ten
percent (10%) of the total cash compensation paid.
(2) The bonus amount payable to Mr. Fountain for Fiscal 1995 and 1996 was
authorized by the Board on May 1, 1994. The bonus represents 5% of
net income after the profit sharing distribution but before income
taxes limited to a maximum of $250,000.
No bonus was received or accrued for Fiscal 1994.
(3) Mr. Fountain does not participate in the Company's 401(k) Plan and
has no other long-term compensation, other than stock
options.
(4) Effective June 23, 1992, Mr. Fountain was also elected to the
positions of President and Chief Operating Officer of both the
Company and its Subsidiary.
The Company has no pension or other plans pursuant to which cash or non-cash
compensation was paid or distributed during the fiscal year ended June 30, 1996.
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
Value of Assumed
Number % of Total Annual Rates of
Securities Options/SARs Stock Price
Underlying Granted to Exercise Appreciation for
Options/SARs Employees or Base Price Expiration Option Plan
Name Granted (#) in Fiscal Year ($/Sh) Date 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Reginald M. Fountain, Jr.300,000 100% 7.00(1) 08/04/05 $1,320,678 $3,346,859
</TABLE>
The following table contains information concerning the exercise of stock
options and employment related options and information in unexercised stock
options held as of July 31, 1995 by the named executive officer:
7
<PAGE>
<TABLE>
<CAPTION>
Option Exercises and Year-end Value Table
Value of Unexercised
In-the-Money
Options
Number of Unexercised at
Shares Options & Warrants June 30, 1996
Acquired on Value
Exercise Realized(1) Exercisable NonExercisable Exercisable(2)
<S> <C> <C> <C> <C> <C>
Reginald M. Fountain, Jr. -0- -0- 320,000 0 $ 1,461,750
</TABLE>
(1) Market value at time of exercise less exercise price.
(2) The closing sale price of the Common Stock at Friday June 28, 1996 was
$11 1/2. Value equals the difference between
market value and exercise price.
In October 1995, the FASB issued SFAS No. 123 "Accounting for Stock Based
Compensation." SFAS No. 123 permits a company to choose either a new fair value
based method of accounting for its stock based compensation arrangements or to
comply with the current APB Opinion 25 intrinsic value based method adding pro
forma disclosure of net income and earnings per share computed as if the fair
value based method had been applied in the financial statements. SFAS No. 123 is
effective for fiscal years beginning after December 15, 1995. The Company will
adopt SFAS No. 123 in 1997 using pro forma disclosures of net income and
earnings per share. The Impact of stock options on the Company's pro forma
disclosures of net income and earnings per share calculation is not known as the
Company has not yet implemented the provision of the SFAS.
Employment Agreement
Reginald M. Fountain, Jr. serves as the Company's President, Chief
Executive Officer and Chief Operating Officer pursuant to an employment
agreement entered into during 1989. The Agreement provides for a term of one
year and for automatic renewals at the end of each year for additional one-year
periods until terminated. Pursuant to the agreement, Mr. Fountain receives a
base salary approved by the Board of Directors and an annual cash bonus based
upon the Company's net profits before taxes. On May 1, 1994, the Board of
Directors authorized an increase in the annual bonus payment to Mr. Fountain to
5% of net income after profit sharing distribution but before income taxes
limited to a maximum of $250,000. Bonuses of $199,984 for Fiscal 1996 and of
$106,438 for Fiscal 1995 were paid to Mr. Fountain. No bonus was paid to him for
Fiscal 1994. The agreement terminates upon death or permanent disability. Mr.
Fountain's above agreement replaced a similar agreement with Mr. Fountain that
had been in effect since December, 1986.
Performance Table
The following table was prepared by Standard & Poor's Compustat Services,
Inc. It compares the Company's cumulative total shareholder return with a stock
market performance indicator (S. & P. 500 Index) and an industry index (S. & P.
Leisure Time). The table assumes a base point of June 30, 1991 to be equal to
$100.00. Accumulated returns are noted through June 30, 1996. Each time period
covered by the table gives the dollar value of the investment assuming monthly
reinvestment of dividends. The Company has never paid any dividends.
<TABLE>
<CAPTION>
Annual Return Percentage
Years Ending
<S> <C> <C> <C> <C> <C>
Company/Index June 1992 June 1993 June 1994 June 1995 June 1996
Fountain Powerboat Inds. Inc. 25.00 -14.02 -55.81 142.11 100.00
S & P 500 Index 13.41 13.63 1.41 26.07 26.00
Leisure Time 7.86 2.71 31.39 -5.29 31.98
Indexed Returns
Years Ending
Company/Index June 1991 June 1992 June 1993 June 1994 June 1995 June 1996
Fountain Powerboat Inds. Inc. 100 125.00 107.48 47.50 115.00 230.00
8
<PAGE>
S & P 500 Index 100 113.41 128.87 130.68 164.75 207.59
Leisure Time 100 107.86 110.78 145.55 137.84 181.92
</TABLE>
As can be seen from the table, the total return to shareholders of the
Company's common stock over the past five years
has been greater than the S. & P. 500 stocks and the S. & P. Leisure Time
stocks.
Board Report on Executive Compensation
The Company's executive compensation program is administered by the
Company's Board of Directors and the Board's Compensation Committee.
Since its inception, the Company has maintained the philosophy that
compensation of its executive officers and other employees be directly and
materially linked to operating performance. To achieve this linkage, executive
compensation is heavily weighted toward compensation paid on the basis of
performance.
The entire Board of Directors, including its Chairman, Mr. Reginald M.
Fountain, Jr., who also serves as the President, Chief Executive Officer, and
Chief Operating Officer of both the Company and its Subsidiary, has prescribed
unanimously the compensation amounts for the Company's executive officers. These
compensation amounts are deemed adequate by the Board and the Compensation
Committee based upon their judgment as to the qualifications, experience, and
performance of the individual executive officers, as well as, the Company's
size, complexity, growth, and financial performance.
Upon the resignation of the Subsidiary's President and Chief Operating
Officer on June 23, 1992, Mr. Fountain was elected to these positions in
addition to his duties as Chairman and Chief Executive Officer. Recognizing his
increased responsibilities, the Board, acting unanimously, subsequently
increased his base salary from $115,000 per year to $187,200 effective October
6, 1992. During Fiscal 1995, recognizing the Company's much improved financial
performance under his leadership, the Board increased Mr. Fountain's salary to
$285,000 for the period beginning March 30, 1995 through March 30, 1996, and to
$350,000 thereafter.
The entire Board has also approved Mr. Fountain's employment agreement with
the Company, more fully described above under "Employment Agreement", which
provides for a minimum base salary and an annual cash bonus equal to 5% of the
Subsidiary's net profits after profit sharing distribution but before income
taxes limited to a maximum of $250,000. Bonuses were paid to Mr. Fountain for
fiscal 1995 amounting to $106,438 and for Fiscal 1996 amounting to $199,984. Mr.
Fountain received no bonus for Fiscal 1994.
Compensation of Directors
The Company's directors do not currently receive any type of compensation
in conjunction with their services as directors, except that they are reimbursed
for travel and other out-of-pocket expenses incurred in attending Board
meetings. All of the non-employee directors, being Messrs. Garbrecht, Mazza,
Pignatelli and Spencer, each received non-qualified options to purchase 20,000
shares at $5.375 per share. These options were not granted under any of the
Company's existing plans.
Compensation Committee Interlocks and Insider Participation
The Board has a Compensation Committee and all compensation decisions are
made by the Compensation Committee and the Board, including decisions
establishing the compensation of the Company's executive officers. Messrs.
Fountain, Garbrecht, Mazza, Pignatelli and Spencer are the only members of the
Board of the Directors.
9
<PAGE>
Incentive Bonus Plan
During Fiscal 1995 there were no incentive bonus plans in effect, other
than as provided for in the aforementioned employment agreement with Mr.
Fountain and the Profit Sharing Plan described below.
Stock Option Plans
During 1987 shareholders of the Company approved the 1986 Incentive
Stock Option Plan (the "Plan"). The Plan is administered by the Board of
Directors which may, in its discretion, from time to time, grant to officers and
key employees of the Company and its Subsidiary options to purchase shares of
the Company's Common Stock. Directors who are not officers or employees of the
Company or its Subsidiary are not eligible to be granted options under the Plan.
The Plan provides that the purchase price per share of Common Stock
provided for in options granted shall not be less than 100% of the fair market
value of such stock at the time such option is granted; provided, however, that
in the case of an optionee who possesses more than 10% of the total combined
voting power of all classes of stock of the Company, the purchase price shall
not be less than 110% of the fair market value of such stock on the date of
grant. No consideration is payable to the Company by an optionee at the time an
option is granted. Upon exercise of an option, payment of the purchase price of
Common Stock being purchased shall be made to the Company (i) in cash, (ii) at
the discretion of the Board of Directors, by surrender of a promissory note made
by such optionee to be credited against the option price, (iii) by surrender of
shares of Common Stock already held by such optionee which shall be valued at
their fair market value on the date the option is exercised, (iv) any
combination of the foregoing, and/or (v) on such date or in such installments,
and upon such terms and conditions as the Board of Directors, in its discretion,
shall provide. Under the Plan, the aggregate fair market value of shares with
respect to which options are exercisable for the first time by an employee in
any calendar year generally may not exceed $100,000.
The term of each option granted under the Plan is determined by the
Board of Directors, but may in no event be more than ten years from the date
such option is granted; provided, however, that in the case of an option granted
to a person who, at the time such option is granted, owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company, the term of such option may not be for a period or more than five years
from the date of grant. Unless the Board of Directors determines otherwise, no
options may be exercised for one year after the date of grant. Thereafter, an
option may be exercised either in whole or in installments as shall be
determined by the Board of Directors at the time of grant with respect to each
option granted. All rights to purchase stock pursuant to an option, unless
sooner terminated or expired, shall expire ten years from the date such option
was granted.
Upon the termination of an optionee's employment with the Company, his
option shall be limited to the number of shares to which such option is
exercisable by him on the date of such termination of employment, and shall
terminate as to any remaining shares; provided, however, that if the employment
of an optionee is terminated for "cause" (as defined in the Plan), such
optionee's rights under any then outstanding option immediately terminate at the
time of such termination of employment. No option shall be transferrable by an
optionee otherwise than by will or by the laws of descent and distribution.
Pursuant to the Plan, a maximum of 400,000 shares of the Company's
Common Stock have been reserved for issuance upon the exercise of options
granted under the Plan. In the event of a stock dividend paid in shares of the
Common Stock, or a recapitalization, reclassification, split-up or combination
of shares of such stock, the Board of Directors has the authority to make the
appropriate adjustments in the numbers of shares subject to outstanding options
and the option prices relating thereto and in the total number of shares
reserved for the future granting of options pursuant to the Plan.
During 1989 the Board of Directors amended the Plan to delete a
provision requiring that options granted to any one employee be exercised only
in the sequential order in which they were granted. That provision at one time
was, but is no longer, required by the Internal Revenue Code, as amended, to be
contained in incentive stock option plans.
During Fiscal 1995 options to purchase 20,000 shares were awarded to
Mr. Fountain at $5.9125 ($5.375 x 110%) per share and options to purchase 20,000
shares were awarded to the Chief Financial Officer at $5.50 per share. Of the
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options granted in previous years, all had expired by June 30, 1996. The
remaining options available for grant under the 1986 Plan are for 160,000 common
shares.
20,000 options granted under the 1986 Plan have been exercised
subsequent to Fiscal 1996. The 1986 Plan terminates on December 5, 1996, and,
accordingly, no additional options may be granted after that date.
On June 21, 1995, a Special Meeting of the shareholders was held to
vote upon the adoption of the 1995 Stock Option Plan. The new Plan as adopted by
the shareholders allowed for up to 300,000 common stock options to be granted by
the Board of Directors to employees or directors of the Company on either a
qualified or non-qualified basis. Subsequently, on August 4, 1995, the Board
unanimously voted to grant the entire 300,000 stock options authorized under the
1995 Stock Option Plan to Mr. Reginald M. Fountain, Jr. at $7.00 per share on a
non-qualified basis. None of the options granted to Mr. Fountain under the 1995
Plan have been exercised. The expiration date of the options granted to Mr.
Fountain is August 4, 2005.
During Fiscal 1995, each of the four-non-employee directors was granted
non-qualified stock options to purchase 20,000 common shares at $5.375 per
share. These non-qualified stock options awarded to the outside directors were
not under any of the Company's existing stock option plans.
401(k) Payroll Savings Plan
During Fiscal 1991, the Company initiated a 401(k) payroll savings plan
(the "401(k) Plan") for all employees. Eligible employees may elect to defer up
to fifteen percent (15%) of their salaries, which deferral amounts are fully
vested at all times. The Company matches 25% of the employee's deferred salary
amounts limited to a maximum of 5% of their salary amounts, or 1.25%. Amounts
contributed by the Company vest at a rate of 20% per year of service. Mr.
Fountain, by his own election, does not participate in the 401(k) plan. There
are no post-retirement benefit plans in effect.
Profit Sharing Plan
On May 1, 1994, the Board of Directors authorized a Profit Sharing Plan
applicable to all eligible employees for the fiscal year ended June 30, 1995. No
Profit Sharing Plan was authorized for Fiscal 1994 or 1996. The profit sharing
calculations were based upon the consolidated audited net income for the full
fiscal year before income taxes.
The actual profit sharing distribution for Fiscal 1995 year was
$376,614 and was paid in full to the eligible employees on August 12, 1995.
Compliance with Section 16
Mr. Fountain did not timely file one Form 4, in Fiscal 1996, with
respect to the granting of 300,000 common stock
options in August 1995.
ACCOUNTING MATTERS
The Board has selected the firm of Pritchett, Siler & Hardy,
independent certified public accountants, to serve as auditors for the fiscal
year ending June 30, 1996, subject to ratification by the shareholders. The
Board of Directors recommends a vote FOR ratification of this selection.
PROPOSALS OF SHAREHOLDERS
It is expected that the next annual meeting of the Company's
shareholders will be held during December 1996. Any proposal of a shareholder
which is intended to be presented at that Meeting must be received by the
Company at its principal executive offices in Washington, North Carolina, no
later than August 13, 1997, in order that such proposal be timely received for
inclusion in the proxy solicitation materials to be issued in connection with
the Meeting.
ANNUAL REPORT ON FORM 10-K
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Pursuant to regulations of the Securities and Exchange Commission
("SEC"), the Company has filed with the SEC an Annual Report on Form 10-K for
Fiscal 1996. Upon the written request of any person who is a shareholder of the
Company as of the record date for the Meeting, a copy of the Company's 1995
Annual Report on Form 10-K including financial statements will be forwarded to
such shareholder without charge. Such request should be made to Carol J. Price,
Director of Investor Relations, Fountain Powerboat Industries, Inc., Post Office
Drawer 457, Washington, North Carolina, 27889.
OTHER MATTERS
The Board of Directors knows of no other business which will be brought
before the Meeting. Should other matters properly come before the Meeting, the
proxies will vote all Appointments of Proxy received according to their best
judgment on such matters.
BY ORDER OF THE BOARD OF DIRECTORS
Blanche C. Williams
Secretary
November 13, 1996
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APPOINTMENT OF PROXY
FOUNTAIN POWERBOAT INDUSTRIES, INC.
Annual Meeting of Shareholders -- December 11, 1995
The undersigned hereby appoints BLANCHE C. WILLIAMS and REGINALD M.
FOUNTAIN, Jr. and each of them (with full power to act without the other), the
true and lawful proxies of the undersigned, each having full power to
substitute, to represent the undersigned and to vote all shares of stock of
FOUNTAIN POWERBOAT INDUSTRIES, INC. which the undersigned would be entitled to
vote if personally present at the Annual Meeting of Shareholders of FOUNTAIN
POWERBOAT INDUSTRIES, INC. to be held at the principal executive offices of the
Corporation on Whichard's Beach Road, Washington, North Carolina, on December
11, 1995, at the hour of 10:00 a.m., North Carolina time.
1. FOR [ ] WITHHOLD [ ] election of all of the following nominees in the
Notice of Annual Meeting and Proxy Statement as directors of the
Company:
Reginald M. Fountain, Jr. Gary D. Garbrecht, Gary E. Mazza, III,
Federico Pignatelli, and Mark L. Spencer
2. FOR [ ] WITHHOLD [ ] ratification of Pritchett, Siler & Hardy,
certified public accountants, as the Corporation's independent public
accountants for the fiscal year ended June 30, 1997.
3. Upon all such other matters that may promptly be brought before such
Annual Meeting, as to which the undersigned hereby confers
discretionary authority upon said proxies.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
CORPORATION. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR (1) THE
ELECTION OF THE BOARD'S (FIVE) NOMINEES AS DIRECTORS, AND (2) THE RATIFICATION
OF THE ABOVE ACCOUNTING FIRM OR, IF A CONTRARY INSTRUCTION IS INDICATED IN
ACCORDANCE WITH SUCH INSTRUCTIONS. THE UNDERSIGNED MAY WITHHOLD AUTHORITY TO
VOTE FOR THE ELECTION OF ANY INDIVIDUAL NOMINEE AS DIRECTOR BY LINING THROUGH
THE NOMINEE'S NAME ABOVE.
All other proxies heretofore given by the undersigned to vote shares of
stock of FOUNTAIN POWERBOAT INDUSTRIES, INC. which the undersigned would be
entitled to vote if personally present at said Annual Meeting or any adjournment
thereof are hereby expressly revoked. This proxy may be revoked at any time
prior to the voting hereof.
NOTE: Please date this proxy and sign it exactly as your name or names
appear on your shares. If signing as an attorney, executor, administrator,
guardian or trustee, please give full title as such. If a corporation, please
sign full corporate name by duly authorized officer or officers, affix corporate
seal and attach a certified copy of resolution or bylaws evidencing authority.
(Date)
(Signature)
(Signature)
