FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
For Quarter Ended Commission File Number
0-14712
Fountain Powerboat Industries, Inc.
(Exact name of registrant as specified in its charter)
Nevada 56-1774895
(State or other jurisdiction (I.R.S. Identification No.)
of incorporation or
organization)
1653 Whichard's Beach Road
P.O. Drawer 457
Washington, NC 27889
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (252) 975-2000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issurer's classes of
common stock as of the latest practicable date.
Class Outstanding at April 30, 1999
Common stock, $.01 par value 4,732,608 shares
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FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
INDEX
PART I. Financial Information. Page No.
Review Report of Independent Certified
Public Accountants........................... 3
Consolidated Balance Sheets - Assets,
March 31, 1999 and June 30, 1998............ 4
Consolidated Balance Sheets - Liabilities &
Shareholders' Equity, March 31, 1999
and June 30, 1998............................ 5
Consolidated Statements of Operations -
Three and Nine Months Ended March 31, 1999
and March 31, 1998......................... 6-7
Consolidated Statements of Cash Flows -
Nine Months Ended March 31, 1999
and March 31, 1998........................ 8-9
Notes to Consolidated Financial Statements ... 10-15
Management's Discussion and Analysis of
Results of Operations and
Financial Condition.......................... 15-17
PART II. Other Information.
Item 2. Changes in Securities............................. 18
Item 6. Exhibits and Reports on Form 8 and Form 8-K....... 18
Signature........................................ 18
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<PAGE>
PRITCHETT, SILER & HARDY, P.C.
430 EAST 400 SOUTH
SALT LAKE CITY, UTAH 84111
To the Board of Directors
FOUNTAIN POWERBOAT INDUSTRIES, INC.
Washington, North Carolina
We have reviewed the accompanying consolidated balance sheet of Fountain
Powerboat Industries, Inc. as of March 31, 1999, and the related consolidated
statements of income and cash flows for the three and nine months then ended.
All information included in these financial statements is the representation of
the management of Fountain Powerboat Industries, Inc.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of Company personnel responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
/s/ PRITCHETT, SILER & HARDY, P.C.
May 10, 1999
Salt Lake City, Utah
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FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited - See Accountant's Review Report)
March 31, June 30,
1999 1998
____________ ____________
CURRENT ASSETS:
Cash and cash equivalents $ 3,210,514 $ 1,376,984
Accounts receivable, net 924,701 2,715,754
Inventories 5,951,658 7,077,540
Prepaid expenses 898,239 489,290
Deferred tax assets 1,698,726 1,058,967
____________ ____________
Total Current Assets 12,683,838 12,718,535
____________ ____________
PROPERTY, PLANT AND EQUIPMENT 34,271,399 33,411,011
Less: Accumulated depreciation (15,610,403) (14,254,156)
____________ ____________
18,660,996 19,156,855
____________ ____________
OTHER ASSETS 724,972 622,003
____________ ____________
TOTAL ASSETS $ 32,069,806 $ 32,497,393
____________ ____________
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[Continued]
FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(Unaudited - See Accountants' Review Report)
[Continued]
March 31, June 30,
1999 1998
___________ ___________
CURRENT LIABILITIES:
Current portion/long-term debt $ 2,173,487 $ 981,365
Notes payable - related party 157,910 415,821
Accounts payable 2,196,417 3,591,489
Accrued expenses 2,175,425 1,939,791
Dealer territory service accrual 2,392,557 2,046,939
Customer deposits 413,996 510,967
Allowance for boat repurchases 200,000 200,000
Reserve for warranty expense 500,000 500,000
Net liabilities of discontinued operations 10,000 103,612
___________ ___________
Total Current Liabilities 10,219,792 10,289,984
___________ ___________
LONG-TERM DEBT, LESS CURRENT PORTION 10,915,956 9,499,895
DEFERRED TAX LIABILITY 88,978 926,807
COMMITMENTS AND CONTINGENCIES [NOTE 6] - -
___________ ___________
Total Liabilities 21,224,726 20,716,686
___________ ___________
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value,
200,000,000 shares authorized,
4,732,608 and 4,702,608 shares
issued and outstanding, respectively 47,326 47,026
Capital in excess of par value 10,303,640 10,196,540
Retained earnings - accumulated 604,862 1,647,889
___________ ___________
10,955,828 11,891,454
Less: Treasury stock (110,748) (110,748)
___________ ___________
Total Stockholders' Equity 10,845,080 11,780,707
___________ ___________
$32,069,806 $32,497,393
___________ ___________
The accompanying notes are an integral part of these financial statements.
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FOUNTAIN POWERBOAT INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - See Accountants' Review Report)
For the Three Months Ended For the Nine Months Ended
March 31, March 31,
__________________________ _________________________
1999 1998 1999 1998
____________ _____________ ____________ ____________
NET SALES $ 14,041,832 $ 12,699,853 $ 39,718,327 $ 37,313,090
____________ _____________ ____________ ____________
COST OF SALES 11,094,281 8,744,319 31,172,114 26,456,149
____________ _____________ ____________ ____________
Gross Profit 2,947,551 3,955,534 8,546,213 10,856,941
EXPENSES:
Selling expense 1,761,294 1,952,340 5,855,679 3,869,103
General and administrative 734,898 592,272 2,053,514 2,089,473
General and administrative
Related parties 4,325 - 8,758 73,853
____________ _____________ ____________ ____________
Total Expenses 2,500,517 2,544,612 7,917,951 6,032,429
____________ _____________ ____________ ____________
OPERATING INCOME BEFORE
STRATEGIC CHARGE 447,034 1,410,922 628,262 4,824,512
STRATEGIC CHARGE - - (2,440,000) -
____________ _____________ ____________ ____________
OPERATING INCOME (LOSS) 447,034 1,410,922 (1,811,738) 4,824,512
NON-OPERATING INCOME
(EXPENSE):
Other income 25,937 21,934 80,933 62,099
Interest expense (249,732) (199,734) (769,363) (480,867)
Interest expense-
related party (6,514) - (20,447) -
____________ _____________ ____________ ____________
INCOME (LOSS) BEFORE TAXES 216,725 1,233,122 (2,520,615) 4,405,744
CURRENT TAX EXPENSE - 312,618 - 1,267,066
DEFERRED TAX (BENEFIT) (120,960) - (1,477,588) -
DEFERRED TAX EXPENSE - 147,574 - 75,756
____________ _____________ ____________ ____________
INCOME (LOSS) FROM
CONTINUING OPERATIONS 337,685 772,930 (1,043,027) 3,062,922
DISCONTINUED OPERATIONS:
Loss on disposal of operations
of Fountain Power, Inc. and
Mach Performance, Inc. - 60,310 - 33,710
____________ _____________ ____________ ____________
LOSS FROM DISCONTINUED
OPERATIONS - (60,310) - (33,710)
____________ _____________ ____________ ____________
NET INCOME (LOSS) $ 337,685 $ 712,620 $(1,043,027) $ 3,029,212
____________ _____________ ____________ ____________
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[Continued]
FOUNTAIN POWERBOAT INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - See Accountants' Review Report)
[Continued]
For the Three Months Ended For the Nine Months Ended
March 31, March 31,
__________________________ _________________________
1999 1998 1999 1998
____________ _____________ ____________ ____________
EARNINGS (LOSS) PER SHARE:
Continuing Operations $ .07 $ .16 $ (.22) $ .65
Income from Operations of
Discontinued Segments - - - -
Estimated Loss on Disposal
of Discontinued Segments - (.01) - (.01)
____________ _____________ ____________ ____________
EARNINGS (LOSS) PER SHARE $ .07 $ .15 $ (.22) $ .64
____________ _____________ ____________ ____________
WEIGHTED AVERAGE SHARES
OUTSTANDING 4,702,608 4,740,108 4,705,017 4,738,356
____________ _____________ ____________ ____________
DILUTED EARNINGS PER SHARE:
Continuing Operations $ .07 $ .15 $ N/A $ .61
Loss from Operations of
Discontinued Segments - - N/A -
Estimated Loss on Disposal
of Discontinued Segments - (.01) N/A (.01)
____________ _____________ ____________ ____________
DILUTED EARNINGS PER SHARE $ .07 $ .14 $ N/A $ .60
____________ _____________ ____________ ____________
DILUTED WEIGHTED AVERAGE
SHARES OUTSTANDING 4,794,363 5,068,713 N/A 5,088,913
____________ _____________ ____________ ____________
The accompanying notes are an integral part of these financial statements.
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FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - See Accountant's Review Report)
Increase (Decrease) in Cash and Cash Equivalents
For the Nine Months Ended
March 31,
_________________________________
1999 1998
________________ ________________
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (1,043,027) $ 3,029,212
________________ ________________
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation expense 1,741,646 1,418,965
Strategic Charge 2,440,000 -
Change in assets and liabilities:
(Increase) decrease in accounts receivable 1,791,053 (2,436,774)
(Increase) decrease in inventories 197,060 (3,606,629)
(Increase) decrease in prepaid expenses (408,949) 446,220
Increase (decrease) in accounts payable (1,395,072) 716,133
Increase (decrease) in accrued expenses 235,632 229,995
Increase (decrease) in dealer territory
service accrual 345,618 337,497
Increase (decrease) in customer deposits (96,971) 154,028
Net deferred taxes (1,477,588) 623,417
Net liabilities of discontinued operations (93,612) (134,441)
________________ ________________
Net Cash Provided (Used) by
Operating Activities $ 2,235,790 $ 777,623
________________ ________________
CASH FLOWS FROM INVESTING ACTIVITIES:
(Purchase) sale of certificates of
deposit, net $ - $ 696,155
Investment in molds, plugs, and other tooling (635,272) (1,060,026)
Purchase of property, plant, and equipment (2,121,691) (5,452,598)
(Increase) in other assets (102,969) (112,712)
________________ ________________
Net Cash Provided (Used) by Investing
Activities $ (2,859,932) $ (5,929,181)
________________ ________________
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt $ 4,000,000 $ 2,875,000
Repayment of long-term debt (1,391,817) (524,680)
Repayment of long-term debt - related party (257,911) -
Proceeds from issuance of common stock 107,400 107,500
________________ ________________
Net Cash Provided (Used) by Financing
Activities $ 2,457,672 $ 2,457,820
________________ ________________
Net increase (decrease) in cash and cash
equivalents $ 1,833,530 $ (2,693,738)
Cash and cash equivalents at beginning of period 1,376,984 2,994,503
________________ ________________
Cash and cash equivalents at end of period $ 3,210,514 $ 300,765
________________ ________________
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[Continued]
FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - See Accountant's Review Report)
Increase (Decrease) in Cash and Cash Equivalents
[Continued]
For the Nine Months Ended
March 31,
_________________________________
1999 1998
________________ ________________
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest:
Unrelated parties $ 502,752 $ 570,688
Related parties 16,879 17,672
________________ ________________
$ 519,631 $ 588,360
________________ ________________
Income taxes $ 263,345 $ 8,836
________________ ________________
Supplemental Disclosures of Noncash Investing and Financing Activities:
For the nine month period ended March 31, 1999:
There were no non-cash investing and financing activities.
For the nine month period ended March 31, 1998:
On September 30, 1997 the Company purchased an airplane for $1,375,000
from a related party through the issuance of a $415,821 note payable to
the related party and assuming $959,179 underlying indebtedness on the
plane.
The accompanying notes are an integral part of these financial statements.
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FOUNTAIN POWERBOAT INDUSTRIES, INC.
Notes to Consolidated Financial Statements
(Unaudited - See Accountants' Review Report)
NOTE 1. Basis of Presentation.
Although these statements have been reviewed by our independent auditors,
they are unaudited. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reporting amounts of assets and liabilities,
the disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimated by management. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly
the financial position, results of operations and cash flows at March 31,
1999 and for all periods presented have been made.
Certain information and footnote disclosures normally included in the
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted for purposes of filing interim
financial statements with the Securities and Exchange Commission. It is
suggested that these condensed financial statements be read in conjunction with
the financial statements and notes thereto included in the Company's June 30,
1998 audited financial statements. The results of operations for the period
ended March 31, 1999 are not necessarily indicative of the operating results for
the full year.
NOTE 2. Accounts Receivable.
As of March 31, 1999, accounts receivable were $924,701 net of the allowance
for bad debts of $30,000. This represents a decrease of $1,791,053 from the
$2,715,754 in net accounts receivable recorded at June 30, 1998. Of the
$924,701 balance at March 31, 1999, $612,996 has subsequently been collected as
of April 30, 1999, and the remaining $311,705 is believed to be fully
collectible.
NOTE 3. Inventories.
Inventories at March 31, 1999 and June 30, 1998 consisted of the following:
March 31, March 31,
1999 1998
________________ ________________
Parts and Supplies.............................$ 3,163,596 $ 4,510,373
Work-in-process................................ 2,175,290 2,235,394
Finished goods................................. 536,102 302,587
Sportswear..................................... 196,670 149,186
Obsolete inventory reserve..................... (120,000) (120,000)
Total..........................................$ 5,951,658 $ 7,077,540
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FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited - See Accountants' Review Report)
NOTE 4. Revenue Recognition.
The Company sells boats only to authorized dealers and to the U.S.
Government. A sale is recorded when a boat is shipped to a dealer or to the
Government, legal title and all other incidents of ownership have passed from
the Company to the dealer or to the Government, and an account receivable is
recorded or payment is received from the dealer, from the Government, or from
the dealer's third-party commercial lender. This is the method of sales
recognition in use by most boat manufacturers.
The Company has developed criteria for determining whether a shipment
should be recorded as a sale or as a deferred sale (a balance sheet liability).
The criteria for recording a sale are that the boat has been completed and
shipped to a dealer or to the Government, that title and all other incidents of
ownership have passed to the dealer or to the Government, and that there is no
direct or indirect commitment to the dealer or to the Government to repurchase
the boat or to pay floor plan interest for the dealer beyond the normal,
published sales program terms.
The sales incentive floor plan interest expense for each individual boat
sale is accrued for the maximum six month (180 days) interest payment period in
the same fiscal accounting period that the related boat sale is recorded. The
entire six months' interest expense is accrued at the time of the sale because
the Company considers it a selling expense. The amount of interest accrued is
subsequently adjusted to reflect the actual number of days of remaining
liability for floor plan interest for each individual boat remaining in the
dealer's inventory and on floor plan.
Presently, the Company's normal sales program provides for the payment of
floor plan interest on behalf of its dealers for a maximum of six months. The
Company believes that this program is currently competitive with the interest
payment programs offered by other boat manufacturers, but may from time to time
adopt and publish different programs as necessary in order to meet competition.
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FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited - See Accountants' Review Report)
NOTE 5. Allowance and Qualifying Accounts.
For the nine months ended March 31, 1999, the Company adjusted its
allowance and qualifying accounts as follows:
Balance at Charged to Balance
Beginning Cost and Additions at End
of Period Expense (Deductions) of Period
Allowance for
boat repurchases $ 200,000 $ -0- $ -0- $ 200,000
Allowance for
doubtful accounts 30,000 12,710 12,710 30,000
Allowance for
warranty claims 500,000 612,279 612,279 500,000
Allowance for
inventory values 120,000 -0- -0- 120,000
---------- ---------- ------------ ----------
Total $ 850,000 $ 624,989 $ 624,989 $ 850,000
========== ========== ============ ==========
In management's opinion, the balances of the allowance and qualifying
accounts are adequate to provide for all reasonably anticipated future losses.
NOTE 6. Notes Payable and Line of Credit.
During September 1998 the Company concluded negotiations for a new $4,000,000
promissory note with Transamerica Business Credit Corporation which included
restatement and amendment of certain existing promissory notes with General
Electric Capital Corporation ("GECC"). An Omnibus Agreement was entered into
which provides that all the underlying collateral and encumbered property would
apply ratably to all of the Notes Payable. The $4,000,000 promissory note
provides for thirty-nine monthly principal payments in the amount of $100,000
beginning October 1, 1998 with a final payment of the entire outstanding payment
due on January 2, 2002. Accrued interest will be paid monthly in addition to
the principal payment. Interest will be calculated at 2.7% per annum above the
published LIBOR Rate (London Interbank Offered Rates) and is calculated monthly.
The Company executed a restated and amended Note to GECC in the amount of
$9,007,797, which replaces a previous
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FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited - See Accountants' Review Report)
note with the same outstanding balance. The note provides for 39 monthly
payments of $123,103, which includes principal and interest. A final payment of
the outstanding balance will be due on January 2, 2002. Interest is calculated
at 2.7% per annum above the published LIBOR Rate. The Company also executed a
restated and amended Note to GECC in the amount of $855,050, which replaces a
previous note with the same outstanding balance. The note provides for seventy
monthly payments of $15,181, which includes principal and interest. A final
payment of the outstanding balance will be due on April 1, 2004. Interest is
calculated at 2.7% per annum above the published LIBOR Rate. All of the notes
provide for prepayment penalties according to a predefined timetable. On
December 1, 1998, the two GECC loans were converted to fixed rates of 7.02% on
the $9,007,797 loan and 7.26% on the $855,050 loan.
NOTE 7. Commitments and Contingencies.
Manufacturer Repurchase Agreements - The Company makes available through third-
party finance companies floor plan financing for many of its dealers. Sales to
participating dealers are approved by the respective finance companies. If a
participating dealer does not satisfy its obligations under the floor plan
financing agreement in effect with its commercial lender(s) and boats are
subsequently repossessed by the lender(s), then under certain circumstances the
Company may be required to repurchase the repossessed boats if it has executed a
repurchase agreement with the lender(s). At March 31, 1999, the Company had a
total contingent liability to repurchase boats in the event of dealer defaults
and if repossessed by the commercial lenders amounting to approximately
$32,100,000. The Company has reserved for future losses it might incur upon the
repossession and repurchase of boats from commercial lenders. The amount of the
allowance is based upon probable future events, which can be reasonably
estimated. At March 31, 1999, the allowance for boat repurchases was $200,000.
Dealer Interest - The Company regularly pays a portion of dealers' interest
charges for floor plan financing for up to six months. These interest charges
amounted to approximately $1,213,400 for the first nine months of Fiscal 1999
and are included in the accompanying consolidated statements of operations as
part of selling expense. At March 31, 1999, the estimated unpaid dealer
incentive interest included in accrued expenses amounted to $404,900.
NOTE 8. Transactions with Related Parties.
The Company paid or accrued the following amounts for services rendered or for
interest on indebtedness to related parties:
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FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited - See Accountants' Review Report)
March 31, March 31,
1999 1998
___________ ___________
Apartments - Rentals $ 7,808 $ 3,862
R.M. Fountain, Jr. - Interest 20,447 -0-
- Aircraft
Rental -0- 137,219
----------- -----------
$ 28,255 $ 141,081
=========== ===========
At March 31, 1999 the Company had travel advances and other receivables
from employees in the amount of $71,328, of which $58,304 was due from an
officer of the Company. For the nine months ended March 31, 1999 the Company
paid interest expense of $20,447 to an Officer/Director of the Company.
NOTE 9. Income Taxes.
For the nine-month period ended March 31, 1999, the Company provided $-0-
for current income taxes and a benefit of $1,477,588 for deferred income taxes.
NOTE 10. Stock Options.
On January 12, 1999, the board of directors adopted a 1999 Employee Stock
Option Plan for the purpose of encouraging officers and employees of the Company
to expand and improve the profits and prosperity of the Company. Concurrent
with the adoption of this plan, the Company issued an incentive stock option for
30,000 shares of stock to an officer of the Company, at an exercise price of
$5.00 per option share. The 1999 employee stock option plan and the employee
stock option agreement with an officer of the Company were approved by a
majority of the shareholders at the 1998 annual meeting held on March 2, 1999.
At March 31, 1999 there were 546,000 unexercised stock options, of which
540,000 were held by officers and directors of the Company at prices ranging
from $3.58 to $8.167 per share. During this period, a former director of the
Company exercised 30,000 stock option shares at an option price of $3.58 per
share.
NOTE 11. Earnings Per Share.
The computation of earnings (loss) per share and diluted earnings (loss)
per share amounts are based upon the weighted average number of outstanding
common shares during the periods, plus, when their effect is dilutive,
additional shares assuming the exercise of certain vested stock options, reduced
by the number of shares which could be purchased from the proceeds from the
exercise of the stock options assuming they were exercised. Diluted earnings
(loss) per share for the nine-month period ended March 31, 1999, was not
presented, as its effect was anti-dilutive.
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FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited - See Accountants' Review Report)
For the Three Months Ended For the Nine Months Ended
March 31, March 31,
__________________________ _________________________
1999 1998 1999 1998
Weighted average common
shares outstanding for basic____________ _____________ ____________ ____________
earnings per share 4,702,608 4,740,108 4,705,017 4,738,356
Effect of dilutive securities:
Stock options 92,322 328,605 N/A 350,557
____________ _____________ ____________ ____________
Weighted average common shares
and potential dilutive shares
outstanding for dilutive
earnings per share 4,794,930 5,068,713 N/A 5,088,913
____________ _____________ ____________ ____________
Stock options to purchase
common stock not included
in the computation of diluted
earnings per share as their
effect is anti-dilutive - - 546,000 -
____________ _____________ ____________ ____________
NOTE 12. Strategic Charge.
During December 1998, the Company designed and implemented a restructuring
plan to aggressively improve the Company's cost structure, refocus sales and
marketing expenditures and divest the Company of certain non-realizable assets.
In connection with the restructuring plan the Company reviewed components of its
business for possible improvement of future profitability through reengineering
or restructuring. As part of this plan the Company decided to eliminate its
racing program and write off the balance of excess yacht
tooling cost along with other discontinued unused tooling. The Company expects
to complete the majority of these actions during the third and fourth quarters
of Fiscal 1999. The carrying value of the assets held was reduced to fair value
based on estimated realizable value based on future cash flows from use of the
asset or sale of the related assets. The resulting pretax adjustment of
$2,440,000 was recorded as a strategic charge in the second quarter statement of
operations of the Company.
Management's Discussion and Analysis of Results of Operations
and Financial Condition
Results of Operations.
The operating income for the third quarter ended March 31, 1999 was
$447,034 or $.09 per share versus operating income of $1,410,922 or $.30 per
share for the corresponding period of the previous year. Operating income as a
percent of sales for the third quarter of Fiscal 1999 was 3.2% versus 11.1% for
the same period the previous Fiscal year. Net income for the third quarter of
Fiscal 1999 was $337,685 or $.07 per share. This compares to net income
amounting to $712,620 or $.15 per share for the third quarter of Fiscal 1998.
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<PAGE>
Net sales were $14,041,832 for the third quarter of Fiscal 1999 as compared
to $12,699,853 for the third quarter of the prior Fiscal year. Unit sales
volume for the third quarter of Fiscal 1999 was 111 boats as compared to 109
boats for the third quarter of Fiscal 1998. The increase in units this quarter
over the prior Fiscal year is primarily due to an increase in the number of
fishing boats sold.
For the third quarter of Fiscal 1999, the gross margin on sales was
$2,947,551 (21.0%) as compared to $3,955,534 (31.1%) for the third quarter of
Fiscal 1998.
Selling expenses were $1,761,294 for the third quarter of Fiscal 1999 as
compared to $1,952,340 for the third quarter of last Fiscal year. Most of the
decrease was in promotional racing and advertising expense.
General and administrative expenses were $739,223 for the third
quarter of Fiscal 1999 as compared to $592,272 for the same quarter of last
Fiscal year. Most of the increase was due to a one time insurance credit
occurring in the third quarter of last Fiscal year.
Interest expense for the third quarter of Fiscal 1999 was $256,246 as
compared to $199,734 for the third quarter of last Fiscal year. Interest
expense is up due to an overall increase in long-term debt.
Other non-operating income/(expense) for the third quarter of Fiscal 1999
was $25,937 as compared to $21,934 for the third quarter of last Fiscal year.
Financial Condition.
The Company's cash flows for the first nine months of Fiscal 1999 are
summarized as follows:
Net cash provided by operating activities........ $ 2,235,790
" " used by investing activities.............. (2,859,932)
" " provided by financing activities.......... 2,457,672
Net increase in cash..................... $ 1,833,530
===========
This net increase compared to a $(2,693,738) net decrease for the first nine
months of the prior fiscal year.
Cash used in the first nine months of Fiscal 1999 to acquire additional
property, plant, and equipment (investing activity) amounted to $2,756,963 of
which $635,272 was for plugs, molds, and other product tooling.
During the first quarter of Fiscal 1999, the Company borrowed $4,000,000
to supplement and offset the cash used during Fiscal 1998 to increase
property, plant and equipment by $6,937,699 and inventory by $3,139,783.
Refer to Note 6 to the
-16-
<PAGE>
Consolidated Financial Statements for complete notes payable details. Both the
General Electric Capital Corporation loan and the Transamerica Business Credit
Corporation loans are secured by all of the Company's real and personal
property and by the Company's assignment of a $1,000,000 key man life
insurance policy.
For the remainder of 1999 and beyond, the Company expects to generate
sufficient cash through operations to meet its needs and obligations.
Management believes that the Company's sales and production volume will
continue to grow with a return to net earnings and positive cash flow. Most
of the Company's cash resources will be used to maintain its plant and
equipment, for new product tooling and for work in process inventory increases
for new product line additions.
The Year 2000.
A current concern, known as the "Year 2000" or "Y2K" Bug is expected to effect
a large number of computer systems and software during or after the year 1999.
The concern is that any computer function that requires a date calculation may
produce errors. The Year 2000 issue affects virtually all companies and
organizations, including the Company. The
Company is taking the steps necessary to prevent these errors from occurring.
With respect to third party providers whose services are critical to the
Company, the Company intends to monitor the efforts of such vendors, as they
become Year 2000 compliant. Management is not presently aware of any Year
2000 issues that have been encountered by any such third party, which could
materially affect the Company's operations. At present, the Company has spent
$312,000 and anticipates $100,000 in additional costs in upgrading some of its
software and hardware in order to avoid any problems resulting from the
Millennium bug. There is no assurance that the Company will not experience
operational difficulties as a result of Year 2000 issues.
Cautionary Statement for Purposes of "Safe Harbor" Under the
Private Securities Reform Act of 1995.
The Company may from time to time make forward-looking statements, including
statements projecting, forecasting, or estimating the Company's performance
and industry trends. The achievement of the projections, forecasts, or
estimates contained in these statements is subject to certain risks and
uncertainties, and actual results and events may differ materially from those
projected, forecasted, or estimated.
The applicable risks and uncertainties include general economic and
industry conditions that affect all businesses, as well as, matters that are
specific to the Company and the markets it serves. For example, the
achievement of projections, forecasts, or estimates contained in the Company's
forward-looking statements may be impacted by national and international
economic conditions; compliance with governmental laws and regulations;
accidents and acts of God; and all of the general risks associated with doing
business.
Risks that are specific to the Company and its markets include but are
not limited to compliance with increasingly stringent environmental laws and
regulations; the cyclical nature of the industry; competition in pricing and
new product development from larger companies with substantial resources; the
concentration of a substantial percentage of the
-17-
<PAGE>
Company's sales with a few major customers, the loss of, or change in demand
from, any of which could have a material impact upon the Company; labor
relations at the Company and at its customers and suppliers; and the Company's
single-source supply and just-in-time inventory strategies for some critical
boat components, including high performance engines, which could adversely
affect production if a single-source supplier is unable for any reason to meet
the Company's requirements on a timely basis.
PART II. Other Information.
ITEM 2: Change in Securities.
During third quarter of Fiscal 1999, 30,000 stock option shares were exercised
by a former director of the Company at an option price of $3.58 per share.
ITEM 6: Exhibits and Reports on Form 8 and Form 8-K.
(a) No Amendments on Form 8 were filed by the Registrant during the first nine
months of Fiscal 1999.
(b) No Current Reports on Form 8-K were filed by the Registrant
during the first nine months of Fiscal 1999.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FOUNTAIN POWERBOAT INDUSTRIES, INC.
(Registrant)
/s/ Joseph F. Schemenauer
By: Joseph F. Schemenauer Date: May 14, 1999
Joseph F. Schemenauer
Vice President, Chief Financial
Officer, and Designated Principal
Accounting Officer
-18-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
financial statements for the three months ended March 31, 1999, and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,210,514
<SECURITIES> 0
<RECEIVABLES> 954,701
<ALLOWANCES> 30,000
<INVENTORY> 5,951,658
<CURRENT-ASSETS> 12,683,838
<PP&E> 34,271,399
<DEPRECIATION> 15,610,403
<TOTAL-ASSETS> 32,069,806
<CURRENT-LIABILITIES> 10,219,792
<BONDS> 0
0
0
<COMMON> 47,326
<OTHER-SE> 10,797,754
<TOTAL-LIABILITY-AND-EQUITY> 32,069,806
<SALES> 14,041,832
<TOTAL-REVENUES> 14,041,832
<CGS> 11,094,281
<TOTAL-COSTS> 11,094,281
<OTHER-EXPENSES> 2,947,551
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 256,246
<INCOME-PRETAX> 216,725
<INCOME-TAX> (120,960)
<INCOME-CONTINUING> 337,685
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 337,685
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
FOUNTAIN POWERBOAT INDUSTRIES, INC.
1999 EMPLOYEE STOCK OPTION PLAN
FOUNTAIN POWERBOAT INDUSTRIES, INC. (the "Company") hereby adopts this
1999 EMPLOYEE STOCK OPTION PLAN (the "Plan") as further described herein.
ARTICLE I
PURPOSE AND SCOPE OF PLAN
1.1 Purpose.
The purpose of the Plan is to encourage the continued service of officers and
employees of the Company or any company which is a subsidiary of the Company
(a "Subsidiary"), and to provide an additional incentive for such officers and
employees to expand and improve the profits and prosperity of the Company and
its Subsidiaries, by granting them options to purchase shares of the Company's
common stock. The Plan also will assist the Company and its subsidiaries in
recruiting and retaining persons to serve as officers and employees of the
Company and its Subsidiaries.
1.2 Stock Subject to Plan.
Pursuant to and in accordance with the terms of the Plan, options ("Options")
may be granted from time to time to purchase shares of the Company's common
stock, $.01 par value per share ("Common Stock").
The aggregate number of shares of Common Stock which may be sold upon the
exercise of Options granted under the Plan is 120,000 shares, which maximum
number is subject to adjustment as provided in Paragraph 6.1 hereof. Shares
of Common Stock sold by the Company upon the exercise of Options granted
hereunder, at the sole discretion of the Company, may be issued from the
Company's authorized but unissued shares, or be issued and outstanding shares
purchased by the Company on the open market or in private transactions. In
the event an Option granted under the Plan shall expire or terminate for any
reason without having been exercised in full, then, to the extent the Plan
shall remain in effect, the shares covered by the unexercised portion of such
Option shall again be available for the grant of Options under the Plan.
1.3 Effective Date.
The Plan shall become effective as of January 12, 1999 (the "Effective Date,"
which is the date of adoption of the Plan by the Company's Board of
Directors); provided, however, that notwithstanding anything contained herein
to the contrary, the Plan shall be subject to approval of the Company=s
shareholders by a vote of the holders of at least a majority of the shares of
the Company's Common Stock present and voted at a meeting of the Company's
shareholders held in accordance with Nevada law. Options may be granted
pursuant to the Plan prior to receipt of such approvals, but any such Options
granted shall be subject to, and may not become exercisable until, receipt of
such approvals.
1.4 Termination Date. Unless sooner terminated as provided herein, the Plan
shall terminate at 5:00 P.M. on January 11, 2009 (the "Termination Date").
Following the Termination Date, no further Options may be granted under the
Plan, but such termination shall not effect any Option granted prior to the
Termination Date.
ARTICLE II
DEFINITIONS
2.1 Company. ACompany@ refers to Fountain Powerboat Industries, Inc. and to
any successor to the Company which shall have assumed or become liable for the
Company=s obligations pursuant to any Option granted or Option Agreement
entered into pursuant to the Plan.
2.2 Board. "Board" refers to the Company's Board of Directors.
2.3 Committee. "Committee" refers to the committee of and appointed or
designated by the Board to administer the Plan as described in Article III
below.
2.4 Common Stock. "Common Stock" refers to the common stock of the Company,
par value $.01 per share.
2.5 Date of Grant. The "Date of Grant" of an Option refers to the effective
date of action by the Committee granting such Option.
2.6 Employee. "Employee" refers to any person who is a full-time employee of
the Company or of any of the Company=s Subsidiaries.
2.7 Exercise Price. "Exercise Price" refers to the price per share to be
paid by an Optionee for the purchase of Option Stock upon the exercise of an
Option.
2.8 Expiration Date. "Expiration Date" refers to the date set by the
Committee at which time any unexercised portion of an Option automatically
will terminate and be of no further force or effect.
2.9 Modification, Extension or Renewal. "Modification" refers to any change
in an Option which alters or modifies the original terms, conditions or
benefits of the Option granted to the Optionee. "Extension" refers to the
granting to the Optionee of an additional period of time within which to
exercise the Option beyond the Expiration Date originally prescribed in the
Option Agreement. "Renewal" refers to the granting of an Option to the
Optionee with the same rights and privileges and on the same terms and
conditions as contained in an original Option after expiration or termination
of the original Option.
2.10 Non-Employee Director. ANon-Employee Director@ refers to a member of the
Board who satisfies the definition of that term contained in Rule 16b-3(b)(3)
under the Securities Exchange Act of 1934, as such rule may be amended from
time to time.
2.11 Option. "Option" refers to a right granted to an Employee by the Company
pursuant to the Plan to purchase shares of Common Stock at the Exercise Price
set by the Committee for such Option and on the terms and conditions set forth
herein and in the Option Agreement relating to such Option.
2.12 Option Agreement. "Option Agreement" refers to a formal written
agreement executed between the Company and an Optionee setting forth the terms
and conditions of an Option.
2.13 Option Stock. "Option Stock" refers to the shares of Common Stock
covered by an Option and which may be purchased by the Optionee upon the
exercise, in whole or in part, of such Option.
2.14 Optionee. "Optionee" refers to an Employee to whom an Option is granted
pursuant to the Plan.
ARTICLE III
PLAN ADMINISTRATION
3.1 General.
The Plan shall be administered by the Committee which shall be composed solely
of two or more Non-Employee Directors. Members of the Committee shall serve
at the pleasure of the Board, and the Board, from time to time and at its
discretion, may remove members from (with or without cause) or add members to
the Committee or fill any vacancies on the Committee, however created.
Alternatively, the Board may, by resolution, elect that the Plan be
administered by the full Board rather than a Committee. During any such time
as the Board shall administer the Plan, all references herein to the
"Committee" shall be deemed to refer to the Board and all actions taken by the
Board in the administration of the Plan shall be taken in the form of
resolutions approved by the Board.
3.2 Duties.
In its administration of the Plan, the Committee shall have the authority,
power and duty:
(a) to make any and all determinations regarding persons who are eligible to
receive Options under the Plan;
(b) to construe and interpret the terms and provisions of the Plan and any
and all Option Agreements entered into pursuant to the Plan;
(c) to make, adopt, amend, rescind, and interpret such rules and regulations
not inconsistent with the Plan or law as it from time to time deems
reasonable and necessary for the interpretation and administration of the
Plan;
(d) to prescribe the form or forms of the Option Agreements and other
instruments evidencing or relating to any Options granted under the Plan
and of any other instruments required under the Plan and to change such
forms from time to time;
(e) to determine:
(i) the Employees to whom Options shall be granted pursuant to the
Plan and the timing of such grant or grants, and to cause Options to
be granted to Employees it selects;
(ii) the number of shares of Option Stock to be covered by each
Option granted;
(iii) the Exercise Price to be paid for Option Stock upon
exercise of the Option as set forth in the Option Agreement and as
determined in accordance with Paragraph 4.3 hereof;
(iv) the Expiration Date of each Option granted, and the period
within which any such Option may be exercised;
(v) any other term and/or condition of each Option (which need not
be identical from Option to Option) so long as not inconsistent with
the Plan; and,
(f) to make all other determinations and take all other actions provided for
herein or deemed by it, in its discretion, to be necessary or advisable
to administer the Plan in a proper and effective manner.
3.3 Meetings and Voting.
The Committee shall select one of its members as Chairman and shall hold
meetings at such times and places as it shall deem necessary or desirable. A
majority of the members of the Committee shall constitute a quorum for all
matters with respect to administration of the Plan, and acts of a majority of
the members of the Committee present at meetings at which a quorum is present,
or acts reduced to and approved in writing by all of the members of the
Committee without a meeting, shall be valid acts of the Committee.
3.4 Choice of Form of Option.
The Committee shall have the discretion to cause any Option granted pursuant
to the Plan to be granted with the intent that it qualify for treatment as an
"Incentive Stock Option" (an "ISO") as defined in '422 of the Internal Revenue
Code of 1986, as amended (the "Code"), or with the intent that it be treated
as a "Nonqualified Stock Option" (an "NSO"). ISOs and NSOs shall collectively
be referred to herein as "Options" unless reference is specifically made only
to one or the other, and, in the case of any such reference only to one, such
reference shall be deemed to be made to the exclusion of the other.
3.5 Effect of Committee Action.
All actions, decisions and determinations of the Committee in connection with
the grant of Options or the administration, interpretation or construction of,
or questions or other matters concerning, the Plan or any Option granted,
shall (i) be made consistent and in accordance with the terms of the Plan and,
with respect to an ISO, shall be designed to cause the Plan and each such ISO
to continue to comply with applicable provisions of the Code, and (ii) shall
be final, conclusive and binding on all persons, including the Company, its
shareholders, Optionees and any other person claiming any interest in any
Option; provided, however, that any action, decision, interpretation or
determination, other than those respecting the actual grant of Options, shall
be subject to review by the Board of Directors either on its own initiative,
at the request of the Committee or on application of any aggrieved party. In
such a case, the determination of the Board of Directors on such review shall
be final and binding on all affected parties.
3.6 Indemnification.
To the extent permitted by applicable law, and in addition to such other
rights of indemnification that members of the Committee may have as Directors
of the Company, the members of the Committee shall be indemnified by the
Company against the reasonable expenses, including attorneys' fees, actually
and necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal thereof, to which they or any of
them may be made a party by reason of any action taken or omitted in good
faith under or in connection with administration of the Plan or any Option
granted hereunder and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that any such Committee member is
liable for gross negligence or misconduct in the performance of his duties;
provided, however, that within thirty (30) days after institution of any such
action, suit or proceeding, such Committee member(s) shall in writing offer
the Company the opportunity, at its own expense, to handle and defend same.
ARTICLE IV
GRANT AND TERMS OF OPTIONS
4.1 Authorization to Grant Options.
Pursuant to the Plan, from time to time prior to the Termination Date the
Company may grant Options to Employees to purchase shares of Common Stock.
Options may only be granted by action of the Committee, and no person shall
have any rights under the Plan or with respect to any Option except pursuant
to such action of the Committee.
4.2 Number of Shares.
The number of shares of Option Stock covered by each Option shall be set by
the Committee at the time such Option is granted and shall be specified in the
Option Agreement evidencing such Option; provided, however, that the number of
shares of Option Stock covered by Options granted from time to time to any one
Employee under the Plan may not exceed 40% of the aggregate number of shares
of Common Stock originally available for the grant of Options under the Plan
from time to time. The number of shares of Option Stock covered by each
Option shall be subject to adjustment in the manner described in Paragraph 6.1
below.
4.3 Exercise Price.
At the time an Option is granted, the Committee shall set the Exercise Price
applicable to such Option. The Exercise Price shall be determined by the
Committee in the manner described below and shall be specified in the Option
Agreement evidencing the Option. The Exercise Price applicable to each Option
shall be subject to adjustment in the manner described in Paragraph 6.1 below.
The Exercise Price for each share of Option Stock covered by an Option shall
not be less than one hundred percent (100%) of the fair market value of one
share of the Common Stock on the Date of Grant of such Option (the "Fair
Market Value"). The Fair Market Value on any particular date shall be, (i) if
the Common Stock is not then listed on the Nasdaq Stock Market, the fair
market value of a share of the Common Stock as determined by the Committee in
its sole discretion in such manner as it shall deem to be reasonable and
appropriate, or, (ii) if the Common Stock is listed on the Nasdaq Stock
Market, the closing sale price of the Common Stock as quoted by Nasdaq on such
date.
4.4 Option Agreements.
Each Option granted under the Plan shall be evidenced by an Option Agreement
which shall be executed and delivered by the Optionee and by or on behalf of
the Company and which shall (i) specify whether such Option is intended to be
an ISO or an NSO, (ii) contain such other information as is provided or
permitted herein to be contained in the Option Agreement, and (iii) not
contain any provisions inconsistent with the Plan. Following the execution of
an Option Agreement evidencing an Option, such Option shall be effective as of
the Date of Grant of such Option.
4.5 Limits on Grant of ISOs.
Notwithstanding anything contained herein to the contrary:
(a) in the case of an ISO granted to an Employee who owns, immediately before
the ISO is granted, more than ten percent (10%) of the total combined
voting power of all classes of Common Stock of the Company, the Exercise
Price per share with respect to such ISO, as determined by the Committee
and stated in the Option Agreement, shall not be less than one hundred
ten percent (110%) of the Fair Market Value as of the Date of Grant of
the ISO; and,
(b) the aggregate Fair Market Value (determined as of the Date of Grant of
the Option) of the Option Stock for which an Optionee may be granted ISOs
exercisable for the first time in any calendar year (including ISOs
granted under all option plans of the Company or any of its Subsidiaries)
shall not exceed $100,000. This $100,000 limitation shall not apply to
the grant of NSOs.
ARTICLE V
EXERCISE OF OPTIONS
5.1 Waiting Period.
In connection with the grant of an Option, the Committee may, at its option,
specify a "Waiting Period" in connection with the exercise of such Option. In
such event, the Option may not be exercised unless and until the Optionee
shall have completed a period of continuous, full time service in the
employment of the Company or any of its Subsidiaries following the Date of
Grant of the Option equal to the Waiting Period set by the Committee and
specified in the Option Agreement evidencing that Option, but thereafter,
subject to earlier termination as described herein, may be exercised as
provided herein and in the Option Agreement evidencing such Option. No such
Waiting Period shall not operate to extend the Expiration Date or other date
of termination of an Option set forth or provided for herein or in the Option
Agreement evidencing such Option.
5.2 Term; Conditions on Exercise; Expiration or Termination.
The Expiration Date of each Option shall be set by the Committee at the time
the Option is granted and shall be specified in the Option Agreement
evidencing the Option, but in no event shall be more than ten years following
the Date of Grant of the Option. However, notwithstanding any thing contained
herein to the contrary, in the case of an ISO granted to an Employee who owns,
immediately before the ISO is granted, more than ten percent (10%) of the
total combined voting power of all classes of Common Stock of the Company, the
Expiration Date shall not be more than 5 years following the Date of Grant of
the ISO.
Subject to the other terms and conditions contained in the Plan, each Option
may be exercised by the Optionee at such times or intervals and on such other
terms and conditions (if any) as are determined by the Committee and specified
in the Option Agreement evidencing the Option.
Notwithstanding anything contained herein or in any Option Agreement to the
contrary, to the extent that an Option shall not previously have been
exercised in the manner required by the Plan, it shall expire and terminate at
5:00 P.M. on its Expiration Date. In addition to the termination provisions
set forth above, Options granted pursuant to the Plan shall terminate or may
be terminated as provided in Paragraphs 5.7 and 6.1 below. Upon the
expiration or termination of all or any portion of an Option, such Option or
portion thereof shall, without any further act by the Company, expire and no
longer be exercisable or confer any rights to any person to purchase shares of
Common Stock under the Plan.
5.3 Notice of Exercise.
To exercise an Option in whole or in part, the Optionee or other person then
entitled to exercise the Option or portion thereof shall notify the Company by
delivering written notice of such exercise (a "Notice of Exercise") to the
President or the Secretary of the Company. Such written notice shall be
substantially in the form attached hereto as Exhibit A and shall specify the
number of shares of Option Stock to be purchased. A Notice of Exercise shall
not be effective (and the Company shall have no obligation to sell any Option
Stock to the Optionee pursuant to such Notice) unless it satisfies the terms
and conditions set forth herein and actually is received by the Company as
provided above prior to the Expiration Date or other termination of the Option
to be exercised.
In the event an Option or portion thereof is being exercised by a person other
than the Optionee (as provided in Paragraph 5.7(c) below), the Notice of
Exercise shall be accompanied by appropriate proof of the right of such
person(s) to exercise the Option.
5.4 Payment Upon Exercise.
The Exercise Price of Option Stock being purchased upon the exercise of an
Option (in part or in whole) shall be paid by the Optionee in full at the time
of such exercise. Such payment may be made (i) in cash, (ii) by official bank
check, bank money order or other certified funds, or (iii) in the discretion
of the Committee, by a combination thereof. No Option Stock shall be issued
or delivered until full payment of the Exercise Price therefor has been made.
5.5 Restrictions.
At the time an Option is granted, the Committee shall have the authority, in
its sole discretion, to impose restrictions of any nature on the exercise of
such Option (including restrictions in the form of a schedule by which an
Option becomes exercisable in increments over a period of time) and on the
Option Stock acquired by the Optionee upon such exercise. Without limiting
the generality of the foregoing, the Committee may impose conditions
restricting absolutely the transferability of Option Stock acquired through
exercise of any Option for such periods as the Committee may determine. Any
such restrictions imposed by the Committee shall be specified in the Option
Agreement.
5.6 Nontransferability.
Options granted hereunder shall not be assignable or transferable except by
will or by the laws of descent and distribution, and, during the lifetime of
the Optionee, may be exercised only by him. More particularly, but without
limiting the generality of the foregoing, an Option may not be sold, assigned,
transferred (except as noted herein), pledged or hypothecated in any way and
shall not be subject to execution, attachment or similar process.
5.7 Termination of Employment.
(a) Voluntary and Involuntary Terminations. In the event an Optionee's
employment with the Company or any Subsidiary shall terminate or be
terminated prior to the Expiration Date of his or her Option for any
reason other than his or her death or "Disability" (as defined below),
then the status of the Optionee's Option shall be as specified below.
Authorized leaves of absence and transfers of employment by an Optionee
between the Company and a Subsidiary, or between two Subsidiaries,
without a break in service, shall not constitute terminations of
employment for purposes of the Plan. The Committee shall determine
whether any other absence for military or government service or for any
other reasons shall constitute a termination of employment for purposes
of the Plan, and the Committee's determination shall be final.
(i) If, prior to the Expiration Date of his or her Option, an
Optionee voluntarily terminates his or her employment with the
Company or any of its Subsidiaries other than as a result of
"Retirement" (as defined below), then, to the extent it shall
not previously have been exercised in the manner required by
the Plan, the Option immediately shall terminate and be of no
further force or effect on the effective date of such
termination of employment.
(ii) If, prior to the Expiration Date of his or her Option, an
Optionee voluntarily terminates his or her employment with the
Company or any of its Subsidiaries as a result of "Retirement"
(as defined below), the Option shall remain in effect and, to
the extent it shall not previously have been exercised, the
Optionee shall have the right to exercise the Option at any
time before but not later than 5:00 P.M. on the 90th day
following the effective date of such Retirement (but not later
than the Expiration Date of the Option) in accordance with the
terms of the Plan and, to the extent not so exercised, at that
time the Option shall terminate and be of no further force or
effect.
The termination of an Optionee's employment with the
Company or any of its Subsidiaries which is treated as a
"retirement" under the terms of any qualified retirement plan
maintained by the Company from time to time, or the termination
of an Optionee's employment at such earlier time or under such
other circumstances as the Committee shall agree in writing to
treat as "Retirement" for purposes of the Plan, shall be deemed
to be a "Retirement" for purposes of the Plan.
(iii) If, prior to the Expiration Date of his or her
Option, an Optionee's employment is terminated by the Company
or any of its Subsidiaries other than for "Cause" (as defined
below), the Option shall remain in effect and, to the extent it
shall not previously have been exercised, the Optionee shall
have the right to exercise the Option at any time before but
not later than 5:00 P.M. on the 90th day following the date of
such termination (but not later than the Expiration Date of the
Option) in accordance with the terms of the Plan and, to the
extent not so exercised, at that time the Option shall
terminate and be of no further force or effect.
(iv) If, prior to the Expiration Date of his or her Option, an
Optionee's employment is terminated by the Company or any of
its Subsidiaries for Cause, then, to the extent it shall not
previously have been exercised in the manner required by the
Plan, the Option immediately shall terminate and be of no
further force or effect on the earlier of the date such
termination of employment is effective or the date on which the
determination is made to terminate the Optionee's employment
for Cause.
For purposes of this Paragraph 5.7(a), the Company or its
Subsidiary shall have "Cause" to terminate an Optionee's
employment upon a determination by the Company or its
Subsidiary, in good faith, that the Optionee (1) has failed in
any material respect to perform or discharge his duties or
responsibilities of employment in a reasonably competent
manner, (2) is engaging or has engaged in willful misconduct,
insubordination, or other conduct, which is detrimental to the
business of the Company or its Subsidiary or which has had or
likely will have a material adverse effect on the Company's or
its Subsidiary's business or reputation; or (3) has violated or
failed to comply with any of the Company=s or its Subsidiary=s
policies or procedures (including any employee codes of
conduct) that are applicable to him or her.
For purposes of this Plan, the determination of whether any
termination of an Optionee's employee was for Cause shall be
within the sole discretion of the Committee.
(b) Disability of Optionee: If, prior to the Expiration Date of his or her
Option, an Optionee becomes "Disabled" (as defined below) and, as a
result, his or her employment with the Company or any of its Subsidiaries
is terminated, the Option shall remain in effect and, to the extent it
shall not previously have been exercised, the Optionee=s Option shall
remain in effect and the Optionee shall have the right to exercise the
Option at any time before but not later than the 90th day following the
effective date of such termination (but not later than the Expiration
Date of the Option) in accordance with the terms of the Plan and, to the
extent not so exercised, at that time the Option shall terminate and be
of no further force or effect. For purposes of this Paragraph 5.7(b), an
Optionee shall be considered "Disabled" at such time as he or she is
determined to be permanently disabled such as would qualify the Optionee
for benefits under the Company's long term disability insurance plan
which is applicable to the Optionee.
(c) Death of Optionee: If, prior to the Expiration Date of his or her
Option, an Optionee shall die while employed by the Company or a
Subsidiary, then, following the date of the Optionee=s death, the Option
shall remain in effect and, to the extent it shall not previously have
been exercised, the Optionee=s designated beneficiary (determined either
by will or other writing delivered to the Committee in advance), or if no
designated beneficiary, the personal representative of his estate, shall
have the right to exercise the Option at any time before but not later
than 5:00 P.M. on the Expiration Date of the Option in accordance with
the terms of the Plan and, to the extent not so exercised, at that time
the Option shall terminate and be of no further force or effect. Any
references herein to an Optionee shall be deemed to include any person
entitled to exercise an Option after the death of such Optionee under the
terms of this Plan.
5.8 Modification, Extension and Renewal of Options.
Subject to the provisions of Paragraph 6.1 below, any Option may be Modified,
Extended or Renewed (as those terms are defined in Article II) only upon the
agreement of the Committee and the Optionee. Any such agreement shall be in
the form of a written amendment to the Option Agreement evidencing the Option
being Modified, Extended or Renewed and which shall set forth the terms of any
such Modification, Extension or Renewal.
5.9 Other Provisions.
In addition to the items required to be in the Option Agreement evidencing an
Option, such Option Agreement may contain such other terms, conditions and
provisions applicable to such Option or the exercise thereof (including any
and all limitations or restrictions as shall be necessary to comply with any
applicable federal and state securities laws and regulations) as the Committee
shall, at its sole discretion, deem
necessary or desirable; provided, however, that the Committee may not impose
any such terms, conditions or provisions that are inconsistent with any
provisions of the Plan.
5.10 Issuance of Option Stock.
A stock certificate representing the number of shares of Option Stock
purchased by the Optionee upon the proper exercise of an Option shall be
issued and delivered by the Company as soon as practicable after receipt of a
valid and effective Notice of Exercise and full payment of the Exercise Price
relating to those shares. Such certificate shall be delivered to or on the
written order of the person exercising the Option.
ARTICLE VI
GENERAL PROVISIONS
6.1 Adjustment of Options.
(a) Changes in Capitalization; Stock Splits and Dividends. In the event of
(i) any dividend payable by the Company in shares of Common Stock, or
(ii) any recapitalization, reclassification, split-up, consolidation or
combination of, or other change in or offering of rights to the holders
of, Common Stock, or (iii) an exchange of the outstanding shares of
Common Stock for a different number or class of shares of stock or other
securities of the Company in connection with a merger, consolidation or
other reorganization of or involving the Company (provided the Company
shall be the surviving or resulting corporation in any such merger or
consolidation), then the Committee shall, in such a manner as it shall
determine in its sole discretion, appropriately adjust the number and
class or kind of shares which may be issued under the Plan and of the
securities which shall be subject to outstanding Options and/or the
Exercise Price applicable to any outstanding Option, all computed on a
basis prior to the event described in such event. However, in no event
shall any such adjustment change the aggregate Exercise Price for Option
Stock to be purchased upon the exercise of any Option.
Subject to review by the Board of Directors of the Company, any such
adjustments made by the Committee shall be consistent with changes in the
Company's outstanding Common Stock resulting from the above events and,
when made, shall be final, conclusive and binding on all persons,
including, without limitation, the Company, its shareholders and each
Optionee or other person having any interest in any Option so adjusted.
Any fractional shares resulting from any such adjustment shall be
eliminated. However, notwithstanding anything contained herein to the
contrary, no Option which is intended to be an ISO shall be adjusted in a
manner that causes the Option to fail to continue to qualify as an ISO.
(b) Dissolution; Merger or Consolidation; Sale of Assets. In the event of a
dissolution or liquidation of the Company, the sale of substantially all
the Company's assets, or a merger or consolidation of the Company with or
into any other corporation or entity (or any other such reorganization or
similar transaction) in which the Company is not the surviving or
resulting corporation, and if a provision is not made in such transaction
for the continuance of this Plan or the assumption of Options by any
successor to the Company or for the substitution for Options of new
options covering shares of any successor corporation or a parent or
subsidiary thereof, then, in such event, and to the extent such Options
have not previously been exercised, all rights of Optionees pursuant to
all outstanding Options shall terminate and be of no further effect
immediately prior to the effective time of such dissolution, liquidation,
sale, merger, consolidation or other reorganization (or at such other
time and pursuant to such rules and regulations as the Committee shall
determine and promulgate to the Optionees). However, to the extent such
Options shall not previously have been exercised, and notwithstanding any
provisions of the Plan or any Option Agreement to the contrary, each such
Option shall become exercisable, and may be exercised, in full
immediately prior to the effective time of any such event. The Committee
shall give each Optionee at least ninety (90) days prior written notice
of the effective time of an event which gives rise to an immediate
purchase right under this Paragraph 6.1.
(c) Miscellaneous. The grant of an Option shall not affect in any way the
right or power of the Company to (i) enter into or effect any adjustment,
recapitalization, reclassification, reorganization or any other change in
the Company's capital or business structure or its business, (ii) to
merge or consolidate, or to dissolve, liquidate, sell or transfer all or
any part of its business or assets, or (iii) to issue bonds, debentures,
preferred or other preference stock ahead of or affecting Common Stock or
the rights thereof.
6.2 Rights as a Shareholder.
Neither an Optionee nor any other person shall have any rights as a
stockholder with respect to any shares of Option Stock covered by an Option
until such Option shall have been validly exercised in the manner described
herein and in the Option Agreement relating to such Option, full payment of
the Exercise Price has been made for such shares, and a stock certificate
representing the Option Stock purchased upon such exercise shall have been
registered on the Company's stock records in the name of and delivered to such
person. Except to the extent of adjustments made pursuant to Paragraph 6.1
above, no adjustment on behalf of the Optionee shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property),
distributions or other rights for which the record date for determining the
shareholders entitled to receive the same is prior to the date of registration
and delivery of the stock certificate(s) representing the Option Stock.
6.3 No Right to Employment.
Neither the Plan nor the grant of an Option, nor any Option Agreement
evidencing any such Option, is intended or shall be deemed or interpreted to
constitute an employment agreement or to confer upon an Optionee any right of
employment with the Company or any of its Subsidiaries, including without
limitation any right to continue in the employ of the Company or any of its
Subsidiaries, or to interfere with, restrict or otherwise limit in any way the
right of the Company or any Subsidiary to discharge or terminate the
employment of any Optionee at any time for any reason whatsoever, with or
without Cause.
6.4 Legal Restrictions.
If in the opinion of legal counsel for the Company the issuance or sale of any
shares of Option Stock by the Company pursuant to the exercise of an Option
would not be lawful without registration under the Securities Act of 1933 (the
"1933 Act") or without some other action being taken, or for any other reason,
or would require the Company to obtain approval from any governmental
authority or regulatory body having jurisdiction deemed by such counsel to be
necessary to such issuance or sale, then the Company shall not be obligated to
issue or sell any Option Stock pursuant to the exercise of any Option to any
Optionee or to any other authorized person unless a registration statement
that complies with the provisions of the 1933 Act in respect of such shares is
in effect at the time thereof and all other required or appropriate action has
been taken under and pursuant to the terms and provisions of the 1933 Act or
other applicable law, or the Company receives evidence satisfactory to such
counsel that the issuance and sale of such shares, in the absence of an
effective registration statement or other action, would not constitute a
violation of the 1933 Act or other applicable law, or unless any such required
approval shall have been obtained. The Company is in no event obligated to
register any such shares, to comply with any exemption from registration
requirements or to take any other action which may be required in order to
permit, or to remedy or remove any prohibition or limitation on, the issuance
or sale of Option Stock to any Optionee or other authorized person.
The Committee, as a condition of the grant of an Option and/or the exercise
thereof, may require that the Optionee execute one or more undertakings in
such form as the Committee shall prescribe to the effect that such shares are
being acquired for investment purposes only and not with a view to the
distribution or resale thereof.
6.5 No Obligation to Purchase Shares.
The granting of an Option pursuant to the Plan shall impose no obligation on
the Optionee to purchase any shares covered by such Option.
6.6 Payment of Taxes.
Each Optionee shall be responsible for all federal, state, local or other
taxes of any nature as shall be imposed pursuant to any law or governmental
regulation or ruling on any Option or the exercise thereof or on any income
which an Optionee is deemed to recognize in connection with an Option. If the
Committee shall determine to its reasonable satisfaction that the Company or
any of its Subsidiaries is required to pay or withhold the whole or any part
of any estate, inheritance, income, or other tax with respect to or in
connection with any Option or the exercise thereof, then the Company or such
Subsidiary shall have the full power and authority to withhold and pay such
tax out of any shares of Common Stock being purchased by the Optionee or from
the Optionee's salary or any other funds otherwise payable to the Optionee,
or, prior to and as a condition of exercising such Option, the Company may
require that the Optionee pay to it in cash the amount of any such tax which
the Company, in good faith, deems itself required to withhold.
6.7 Choice of Law.
The validity, interpretation and administration of the Plan, any Option
Agreement, and of any rules, regulations, determinations or decisions made
thereunder, and the rights of any and all persons having or claiming to have
any interest therein or thereunder, shall be determined exclusively in
accordance with the laws of the State of Nevada. Without limiting the
generality of the foregoing, the period within which any action in connection
with the Plan must be commenced shall be governed by the laws of the State of
Nevada, without regard to the place where the act or omission complained of
took place, the residence of any party to such action, or the place where the
action may be brought or maintained.
6.8 Modification of Plan.
The Board, upon recommendation of the Committee, may, from time to time,
amend, modify, suspend, terminate or discontinue the Plan at any time without
notice, provided, however, that no such action by the Board shall adversely
affect any Optionee's rights under any then outstanding Options without such
Optionee's prior written consent; and, provided further that, except as shall
be required to comport with changes in the Code, any modification or amendment
of the Plan that (i) increases the aggregate number of shares of Common Stock
which may be issued upon the exercise of Options (other than as provided in
Paragraph 6.1 above), (ii) changes the formula by which the Exercise Price is
determined, (iii) changes the provisions of the Plan with respect to the
determination of Employees to whom Options may be granted or, (iv) otherwise
materially increases the benefits accruing to Optionees under the Plan, shall
be subject to the approval of the Company's shareholders. In the event the
Board shall terminate or discontinue the Plan, such action shall not operate
to deprive any Optionee of any rights theretofore acquired by him or her under
the Plan, and any Options outstanding as of the date of any such termination
shall remain in full force and effect according to their terms as though the
Plan had not been terminated.
6.9 Application of Funds.
The proceeds received by the Company from the sale of Common Stock pursuant to
Options granted under the Plan will be used for general corporate purposes.
6.10 Notices.
Except as otherwise provided herein, any notice which the Company or an
Optionee may be required or permitted to give to the other under this Plan
shall be in writing and shall be deemed duly given when delivered personally
or deposited in the United States mail, first class postage prepaid, and
properly addressed. Notice, if to the Company, shall be sent to its President
at the address of the Company=s then current corporate office. Any notice
sent by mail by the Company to an Optionee shall be sent to the most current
address of the Optionee as reflected on the records of the Company or its
Subsidiaries as of the time said notice is required. In the case of a
deceased Optionee, any notice shall be given to the Optionee's personal
representative if such representative has delivered to the Company evidence
satisfactory to the Company of such representative's status as such and has
informed the Company of the address of such representative by notice pursuant
to this Paragraph 6.10.
6.11 Conformity With Applicable Laws and Regulations.
With respect to persons who are subject to Section 16 of the 1934 Act, the
Plan and each Option granted and transaction under it are intended to, and
shall be interpreted so as to, be consistent with the requirements, and
satisfy applicable conditions, of Rule 16b-3 of the Securities and Exchange
Commission (as such Rule may be modified, amended or superseded from time to
time). To the extent any provision of the Plan or any Option Agreement, or
any action by the Committee or the Board, shall fail to so comply, then, to
the extent permitted by law and deemed advisable by the Committee, such
provision or action shall be deemed null and void.
6.12 Successors and Assigns.
Subject to Paragraph 5.6 above, this Plan shall bind and inure to the benefit
of the Company, any Optionee, and their respective successors, assigns,
personal or legal representatives and heirs.
6.13 Severability.
It is intended that each provision of this Plan shall be viewed as separate
and divisible, and in the event that any provision hereof shall be held to be
invalid or unenforceable, the remaining provisions shall continue to be in
full force and effect.
6.14 Titles.
Titles of Articles and Paragraphs are provided herein for convenience only, do
not modify or affect the meaning of any provision herein, and shall not serve
as a basis for interpretation or construction of this Plan.
6.15 Gender and Number.
As used herein, the masculine gender shall include the feminine and neuter,
the singular number the plural, and vice versa, whenever such meanings are
appropriate.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed in
its corporate name by its President, attested by its Secretary and its
corporate seal to be hereto affixed, all by authority duly given by the Board.
As of this the 12th day of January, 1999.
FOUNTAIN POWERBOAT INDUSTRIES, INC.
By:
President
ATTEST:
Secretary
88-0286-0001
NBMAIN\349367.2
_______________________________
1USE PRINTER 3 MACRO BEFORE PRINTING (MACRO NAME: 3)
STATE OF NORTH CAROLINA
COUNTY OF BEAUFORT
EMPLOYEE STOCK OPTION AGREEMENT
(Incentive Stock Option)
THIS EMPLOYEE STOCK OPTION AGREEMENT (the "Agreement") is made as of
this 12th day of January, 1999 (the "Date of Grant"), by and between
FOUNTAIN POWERBOAT INDUSTRIES, INC., a Nevada corporation (the "Company"), and
ANTHONY J. ROMERSA, a resident of Beaufort County, North Carolina (the
"Optionee").
WHEREAS, on January 12, 1999, the Company's Board of Directors
adopted the 1999 EMPLOYEE STOCK OPTION PLAN (the "Plan"), subject to the
approval of the Company=s shareholders; and
WHEREAS, the Plan provides that the Stock Option Committee (the
"Committee") of the Company's Board of Directors (the "Board"), or the Board
itself, from time to time may grant to officers and employees of the Company
and its subsidiaries the right or option to purchase shares of the Company's
$.01 par value common stock ("Common Stock") on the terms and conditions set
forth in the Plan; and
WHEREAS, the Optionee currently is a full-time employee of the
Company and its subsidiary, Fountain Powerboats, Inc., and the Board has
selected the Optionee as an employee to whom it will grant an option to
purchase Common Stock under the Plan;
NOW, THEREFORE, in consideration of the premises and the agreements
of the parties set forth herein, the Company and the Optionee hereby agree as
follow:
1. Grant of Option. Pursuant to and subject to the terms and
conditions contained in the Plan and this Agreement, the Company hereby grants
to the Optionee the right and option (the "Option") to purchase from the
Company all or any number of an aggregate of THIRTY THOUSAND (30,000) shares
of Common Stock (the "Option Stock") which may be authorized but unissued
shares or shares acquired by the Company on the open market or in private
transactions. The Option is intended to be an Incentive Stock Option (an
"ISO") as that term is defined in the Plan.
The Option is granted under and pursuant to the Plan, a copy of
which is attached hereto and the terms and conditions of which are
incorporated herein by reference. Capitalized terms used in this Agreement
which are defined in the Plan shall have the same meanings herein as are
assigned to them in the Plan. In the event any provision of this Agreement
conflicts or is inconsistent with a term or condition of the Plan, then the
Plan provision shall be controlling and shall supersede the provision of this
Agreement.
2. Approval by Shareholders. This Agreement and the Option
described herein are expressly made subject to approval of the Plan by the
Company=s shareholders at the Company=s next annual meeting of shareholders
following the date hereof. Notwithstanding anything contained herein to the
contrary, the Option may not be exercised prior to receipt of such approval,
and, in the event such approval is not obtained, then this Agreement and the
Option shall, without any action by the Company or the Optionee, become void
and unenforceable and of no further force or effect.
3. Date of Grant of Option. For purposes of the Plan and this
Agreement, the Date of Grant of the Option shall be the date of this
Agreement.
4. Exercise Price. The Exercise Price to be paid by the Optionee
for the purchase of the Option Stock upon exercise of the Option shall be FIVE
AND NO/100s DOLLARS ($5.00) per share.
5. Exercise Schedule. Subject to any further restrictions
contained in the Plan or this Agreement, the Option will become exercisable on
the following dates as to the indicated number of shares of the Option Stock:
Option Stock
Available
Date For Exercise
__________________ ______________
June 30, 1999 5,000 shares
September 30, 1999 5,000 shares
December 31, 1999 5,000 shares
March 31, 2000 5,000 shares
June 30, 2000 5,000 shares
September 30, 2000 5,000 shares
Notwithstanding anything contained herein to the contrary, the Option may
not be exercised at any time as to a fractional share.
6. Method of Exercise. To exercise the Option in whole or in
part, the Optionee must deliver written notice of such exercise (a "Notice of
Exercise") to the President or Secretary of the Company. Such written notice
shall be substantially in the form attached hereto as Exhibit A and shall
specify the number of shares of Option Stock to be purchased. A Notice of
Exercise shall not be effective (and the Company shall have no obligation to
sell any Option Stock to the Optionee pursuant to such Notice) unless it
satisfies the terms and conditions contained in the Plan and this Agreement
and actually is received by the Company prior to the Expiration Date or any
earlier termination of the Option.
Notwithstanding anything contained herein to the contrary, the
Optionee may not exercise the Option to purchase less than one hundred
(100) shares, unless the Committee otherwise approves or unless the partial
exercise is for all remaining shares of Option Stock available under the
Option. Following receipt from the Optionee of a valid and effective Notice
of Exercise and full payment of the Exercise Price relating to a number of the
shares of Option Stock being purchased, a stock certificate representing that
number of shares shall be issued and delivered by the Company to the Optionee
as soon as practicable; provided however that, the Company shall have the
right and discretion to hold any shares purchased upon exercise of the Option
in escrow for a period ending on the later of (i) two years from the Date of
Grant of the Option, or (ii) one year after issuance of the stock upon
exercise of the Option, for the sole purpose of informing the Company of a
disqualifying disposition within the meaning of Section 422 of the Internal
Revenue Code of 1986. During any such escrow period, the Optionee shall have
all rights of a shareholder with respect to the Option Stock purchased,
including but not limited to the right to vote, receive dividends on and to
sell such stock.
7. Payment. The Exercise Price of Option Stock being purchased
upon an exercise of the Option (in part or in whole) shall be paid by the
Optionee in full at the time of such exercise. Such payment shall be made in
the manner described in the Plan and shall accompany the Notice of Exercise.
The Option shall not be considered to have been properly exercised as to any
Option Stock, and no Option Stock shall be issued or delivered, until full
payment of the Exercise Price therefor has been made.
8. Expiration or Termination.
(a) Expiration Date. Notwithstanding anything contained
herein to the contrary, to the extent the Option shall not previously have
been exercised in the manner required by or otherwise terminated as provided
in the Plan or this Agreement, it shall expire and terminate at 5:00 P.M. on
the "Expiration Date" which, for purposes of this Agreement, shall be January
11, 2004.
(b) Other Termination. The Option otherwise shall terminate
prior to the Expiration Date in the events and upon the occurrences described
in the Plan.
(c) Effect of Termination or Expiration of Option. Upon the
expiration or termination of all or any portion of the Option, it shall,
without any further act by the Company or the Optionee, no longer be
exercisable or of any force or effect and shall no longer confer any rights to
any person to purchase shares of Common Stock under the Plan or this
Agreement.
9. Effect of Agreement on Employment Status of Optionee. Neither
the Plan, this Agreement nor the grant of the Option is intended or shall be
deemed or interpreted to constitute an employment agreement or to confer upon
the Optionee any right of employment with the Company, including without
limitation any right to continue in the employ of the Company, or to interfere
with, restrict or otherwise limit in any way the right of the Company to
discharge or terminate the employment of the Optionee at any time for any
reason whatsoever, with or without Cause.
10. Rights as a Shareholder. Neither the Optionee nor any other
person shall have any rights as a stockholder with respect to any shares of
Option Stock until the Option has been validly exercised in the manner
described in the Plan and this Agreement, full payment of the Exercise Price
has been made for such shares, and a stock certificate representing the Option
Stock purchased upon such exercise has been registered on the Company's stock
records in the name of and delivered to the Optionee or other person entitled
thereto. Except to the extent of adjustments made as described in the Plan,
no adjustment on behalf of the Optionee shall be made for dividends (ordinary
or extraordinary, whether in cash, securities or other property),
distributions or other rights for which the record date for determining the
shareholders entitled to receive the same is prior to the date of registration
and delivery of the stock certificate(s) representing the Option Stock.
11. Listing and Registration of Option Shares. If in the opinion
of legal counsel for the Company the issuance or sale of any shares of Option
Stock upon the exercise of the Option would not be lawful without registration
under the Securities Act of 1933 (the "1933 Act") or without some other action
being taken or for any other reason, or would require the Company to obtain
approval from any governmental authority or regulatory body having
jurisdiction deemed by such counsel to be necessary to such issuance or sale,
then the Company shall not be obligated to issue or sell any Option Stock to
the Optionee or any other authorized person unless a registration statement
that complies with the provisions of the 1933 Act in respect of such shares is
in effect at the time thereof, or all other required or appropriate action has
been taken under and pursuant to the terms and provisions of the 1933 Act or
other applicable law, or the Company receives evidence satisfactory to such
counsel that the issuance and sale of such shares, in the absence of an
effective registration statement or other action, would not constitute a
violation of the 1933 Act or other applicable law, or unless any such required
approval shall have been obtained. The Company is in no event obligated to
register any such shares, to comply with any exemption from registration
requirements or to take any other action which may be required in order to
permit, or to remedy or remove any prohibition or limitation on, the issuance
or sale of such shares to the Optionee or other authorized person.
As a condition of the exercise of the Option, the Company may
require that the Optionee execute one or more undertakings in such form as it
shall prescribe to the effect that such shares are being acquired for
investment purposes only and not with a view to the distribution or resale
thereof.
12. Payment of Taxes. The Optionee shall be responsible for all
federal, state, local or other taxes of any nature as shall be imposed
pursuant to any law or governmental regulation or ruling on the Option or the
exercise thereof or on any income which the Optionee is deemed to recognize in
connection with the Option. If the Company shall determine to its reasonable
satisfaction that the Company is required to pay or withhold the whole or any
part of any estate, inheritance, income, or other tax with respect to or in
connection with the Option or the exercise thereof, or on the Optionee=s
resale of any shares of Option Stock, then the Company shall have the full
power and authority to withhold and pay such tax out of any shares of Option
Stock being purchased by the Optionee or from the Optionee's salary or any
other funds otherwise payable to the Optionee, or, prior to and as a condition
of exercising such Option, the Company may require that the Optionee pay to it
in cash the amount of any such tax which it, in good faith, deems itself
required to withhold.
13. Limit on Grant of ISOs. Notwithstanding anything contained in
this Agreement to the contrary (including the number of shares of Option Stock
provided for herein), the aggregate Fair Market Value (determined as of the
Date of Grant) of the Option Stock for which the Option may be exercised for
the first time in any calendar year (including ISOs granted under all option
plans of the Company) shall not exceed $100,000; and, if this Agreement covers
a number of shares of Option Stock that would result in the Option exceeding
that limitation, then the Committee shall have the right and discretion to
reduce the number of Option Shares, and/or to modify the Exercise Schedule,
provided above such that the Option qualifies as an ISO.
14. Nontransferability. The Option shall not be assignable or
transferable except by will or by the laws of descent and distribution, and,
during the lifetime of the Optionee, may be exercised only by him or her.
More particularly, but without limiting the generality of the foregoing, the
Option may not be sold, assigned, transferred (except as noted herein),
pledged or hypothecated in any way and shall not be subject to execution,
attachment or similar process.
15. Notices. Except as otherwise provided herein, any notice which
the Company or the Optionee may be required or permitted to give to the other
under the Plan or this Agreement shall be in writing and shall be deemed duly
given when delivered personally or deposited in the United States mail, first
class postage prepaid, and properly addressed. Notice, if to the Company,
shall be sent to its President at the address of the Company=s then current
corporate office. Any notice sent by mail by the Company to the Optionee
shall be sent to the most current address of the Optionee as reflected on the
records of the Company or its Subsidiaries as of the time said notice is
required. If the Optionee has died, any such notice shall be given to the
Optionee's personal representative if such representative has delivered to the
Company evidence satisfactory to the Company of such representative's status
as such and has informed the Company of the address of such representative by
notice pursuant to this Paragraph 15.
Notwithstanding anything contained herein to the contrary, a
Notice of Exercise shall be effective only upon actual receipt thereof by the
Company as provided in Paragraph 6 above.
16. References to Committee. Optionee acknowledges that, pursuant
to its terms, the Plan may be administered from time to time by the Board or
by the Committee and that, during such time as the Plan is administered by the
Board, then all references in this Agreement to the Committee shall be deemed
to refer to the Board.
17. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be valid and enforceable
under applicable law, but, in the event that any provision hereof shall be
held to be invalid or unenforceable, the remaining provisions shall continue
to be in full force and effect and this Agreement shall continue to be binding
on the parties hereto as if such invalid or unenforceable provision or part
hereof had not been included herein.
18. Modification of Agreement; Waiver. Except as otherwise
provided herein, this Agreement may be modified, amended, suspended, or
terminated, and any terms or conditions may be waived, but only by written
instrument signed by each of the parties hereto. No waiver hereunder shall
constitute a waiver with respect to any subsequent occurrence or other
transaction hereunder or of any other provision hereof.
19. Captions and Headings; Gender and Number. Captions and
paragraph headings used herein are for convenience only, do not modify or
affect the meaning of any provision herein, are not a part hereof, and shall
not serve as a basis for interpretation or in construction of this Agreement.
As used herein, the masculine gender shall include the feminine and neuter,
the singular number the plural, and vice versa, whenever such meanings are
appropriate.
20. Governing Law; Venue and Jurisdiction. The validity,
interpretation and administration of this Agreement, and the rights of any and
all persons having or claiming to have any interest hereunder, shall be
determined exclusively in accordance with the laws of the State of Nevada.
Without limiting the generality of the foregoing, the period within which any
action in connection with this Agreement must be commenced shall be governed
by the laws of the State of Nevada, without regard to the place where the act
or omission complained of took place, the residence of any party to such
action, or the place where the action may be brought or maintained. The
parties hereto agree that any suit or action relating to this Agreement shall
be instituted and prosecuted in the courts of Beaufort County, North Carolina,
and each party hereby does waive any right or defense relating to such
jurisdiction and venue.
21. Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the Company, its successors and assigns, and shall be
binding upon and inure to the benefit of the Optionee, his heirs, legatees,
personal representatives, executors, and administrators.
22. Entire Agreement. This Agreement (which incorporates the terms
and conditions of the Plan) constitutes and embodies the entire understanding
and agreement of the parties hereto with respect to the Option and satisfies
the provisions of Paragraph 3(c) of the Employment Agreement dated August 24,
1998, between Optionee, the Company and Fountain Powerboats, Inc. Except as
otherwise provided hereunder, there are no other agreements or understandings,
written or oral, in effect between the parties hereto relating to the matters
addressed herein.
23. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed in its corporate name by its President, or one of its Vice
Presidents, and attested by its Secretary or one of its Assistant Secretaries,
and its corporate seal to be hereto affixed, all by authority of its Board of
Directors first duly given, and the Optionee has hereunto set his or her hand
and adopted as his or her seal the typewritten word "SEAL" appearing beside
his or her name, all done this the day and year first above written.
FOUNTAIN POWERBOAT INDUSTRIES, INC.
[CORPORATE SEAL]
By:
ATTEST:
President and Chief Executive Officer
Secretary
OPTIONEE:
(SEAL)
Anthony J. Romersa
98-0253(A)
NBMAIN\349669.1
EXHIBIT A
NOTICE OF EXERCISE OF
EMPLOYEE STOCK OPTION
To: The Board of Directors of Fountain Powerboat Industries, Inc.
The undersigned hereby elects to purchase shares of Common Stock of
Fountain Powerboat Industries, Inc. (the "Company") pursuant to the Option
granted to the undersigned pursuant to the Company=s 1999 Employee Stock
Option Plan (the "Plan") and that certain Stock Option Agreement between the
Company and the undersigned dated __________________________.
The undersigned elects to purchase _____________ whole shares of
Common Stock having an aggregate Exercise Price of $___________
which is tendered herewith:
[ ] in cash in the amount of $____________________ ;
[ ] by bank check or money order in the amount of $___________;
[ ]
.
This the___________day of ________________, __________.
Optionee
98-0253(A)
NBMAIN\349669.1
STATE OF NORTH CAROLINA
COUNTY OF BEAUFORT
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of August
24, 1998 (the "Effective Date"), by and among FOUNTAIN POWERBOATS, INC., a
North Carolina business corporation with its corporate headquarters in
Washington, North Carolina ("Fountain"); FOUNTAIN POWERBOAT INDUSTRIES, INC.,
a Nevada business corporation, which is the holding company of Fountain, with
its corporate headquarters in Washington, North Carolina ("FPBI"); and
ANTHONY J. ROMERSA ("Employee").
W I T N E S S E T H:
WHEREAS, Fountain is engaged worldwide in the business of designing,
developing, manufacturing, marketing and selling high performance sport and
fishing boats and high performance sport cruisers and yachts, including
specialized instrumentation and related equipment and products (some of which
may be or become patented) for and to various customers and is engaged in
various related business activities (collectively "Fountain=s Business"); and,
WHEREAS, Employee has been involved for many years in various aspects of
the maritime and boating industry, with over 20 years of senior level
management experience in global consumer and industrial manufacturing
environments and extensive experience in finance, strategic planning, business
development, marketing, and general management, having previously served as
the Corporate Director of Planning Marine Operations for Brunswick
Corporation; and,
WHEREAS, Employee's experience and knowledge of such matters and his
expertise in the boat manufacturing industry would benefit Fountain in the
operation and development of Fountain's Business; and,
WHEREAS, Fountain desires to employ Employee as Chief Operating Officer
and Executive Vice President of Fountain, effective as of the Effective Date,
and Employee desires to accept employment with Fountain; and,
WHEREAS, Fountain and Employee have agreed and desire to enter into this
Agreement to set forth the terms and conditions of Employee's employment with
Fountain.
NOW, THEREFORE, in consideration of the premises and mutual promises,
covenants and conditions hereinafter set forth, and for other good and
valuable considerations, the receipt and sufficiency of which hereby are
acknowledged, Fountain and Employee hereby agree as follows:
1. Relationship and Duties.
(a) Employment. Fountain agrees to employ Employee, and Employee
accepts employment with Fountain, upon the terms and conditions stated herein,
subject to the Condition Precedent set forth in Paragraph 18 below. As an
employee of Fountain, Employee will (i) serve as Fountain=s and FPBI=s Chief
Operating Officer and Executive Vice President and, in such position, shall
report directly to, and shall be subject to the direction of, Fountain=s
Chairman, President and Chief Executive Officer; (ii) perform such duties and
exercise such authority as is customary for persons holding such office,
including but not limited to directing, supervising, and managing the
construction, marketing, sale, and servicing of high performance sport and
fishing boats and sport cruisers and yachts; (iii) supervise the development
of Fountain=s Business, and promote Fountain and engage in Business
development activities on Fountain=s behalf in its market areas; and (iv) have
such other duties and responsibilities consistent with the position of Chief
Operating Officer as shall be assigned to him from time to time by the
Chairman, President and Chief Executive Officer. In connection with the
performance of his duties hereunder, Employee's office and principal
employment location shall be at the principal executive offices of Fountain
near Washington, North Carolina, or at such other place or places as the Board
of Directors shall designate.
(b) Standards of Performance and Conduct. During the Term of
Employment, Employee shall (i) faithfully and diligently discharge his duties
and responsibilities under this Agreement; (ii) perform in a reasonably
competent manner the duties associated with his position with Fountain or
assigned to him by the Chairman, President and Chief Executive Officer; (iii)
use his best efforts to implement the policies and procedures of Fountain
currently in effect or as established from time to time by Fountain=s Board of
Directors; and (iv) devote his full working time, attention, and efforts to
the diligent performance of his duties herein specified and not accept
employment with any other individual, corporation, or other entity, or engage
as a corporate officer or employee in any other venture for profit, which
Fountain=s Board of Directors considers to be in conflict with Fountain=s best
interests or to be in competition with Fountain=s Business, or which may
interfere in any way with Employee=s performance of his duties hereunder.
Employee, in the execution of his duties under this Agreement, at
all times and in all material respects, shall comply with any code of conduct
or other personnel policies and procedures adopted by Fountain, as the same
are in effect and as amended or supplemented from time to time, and with all
applicable federal and state statutes and all rules, regulations,
administrative orders, statements of policy and other pronouncements or
standards promulgated thereunder.
2. Term of Employment. Unless sooner terminated as provided in this
Agreement, and subject to the right of either Employee or Fountain to
terminate Employee's employment at any time as provided herein, the initial
term of Employee's employment with Fountain under this Agreement (the "Term of
Employment") shall be for a period of three (3) years commencing on the
Effective Date and ending three years following the Effective Date on August
23, 2001(the "Expiration Date"). At any time during the six (6) months period
prior to the Expiration Date, either Fountain or Employee may give notice to
the other party of a desire to negotiate an extension to the Term of
Employment or to otherwise modify the terms and conditions of this Agreement.
3. Compensation.
(a) Base Salary. For all services rendered by Employee under this
Agreement as an officer of FPBI and Fountain, and as an employee of Fountain,
Fountain shall pay to Employee a base salary ("Base Salary") at an annual rate
of One Hundred Sixty Thousand Dollars ($160,000) during the Term of
Employment. Base Salary paid under this Agreement shall be payable not less
frequently than monthly in accordance with Fountain=s payroll policies and
procedures.
(b) Bonus. Fountain shall pay to Employee an annual bonus equal to
one percent (1%) of Fountain's pre-tax profits from continuing operations
before other bonuses, and computed on the same standard as R. M. Fountain,
Jr.'s bonus, which shall be payable within thirty (30) days following the
completion of (i) the annual fiscal year-end audit of Fountain's financial
statements and (ii) Fountain's annual filing on Form 10-K with the Securities
and Exchange Commission for the applicable fiscal year. Such bonus shall be
forfeited if Employee voluntarily resigns pursuant to Paragraph 11(a) below or
is terminated with "Cause" pursuant to Paragraph 11(c) below; in the case of
termination without "Cause" as defined in Paragraph 11 below, the bonus shall
be prorated on a calendar day basis (365 days) for the portion of the then
current fiscal year during which Employee was employed by Fountain.
(c) Incentive Stock Options. Subject to approval by the
shareholders of FPBI within one (1) year of the Effective Date of this
Agreement, FPBI shall grant to Employee incentive stock options to acquire
thirty thousand (30,000) shares of FPBI=s common stock at the closing market
price for such stock as quoted on NASDAQ on the Effective Date of this
Agreement ($ ), which options shall vest and become exercisable over a five
(5) year period at the rate of six thousand (6,000) optioned shares per year,
with the first increment of options becoming vested and exercisable on
June 30, 1999, and subsequent increments of options to become vested and
exercisable on June 30 of each successive year. An appropriate adjustment
shall be made by FPBI as to the amount of such incentive stock options
simultaneously with the effectiveness of any stock split, stock dividend, or
other change affecting the number of shares of FPBI=s common stock. The
vesting of such options shall be contingent upon Employee=s continued
employment, subject to the provisions of Paragraph 11 of this Agreement.
Options shall become immediately exercisable when vested and must be exercised
within 10 years from the date of grant or shall be forfeited, null and void.
Options granted shall not be assignable or transferable except by will or by
the laws of descent and distribution and, during the lifetime of Employee, may
be exercised only by him. In the event Employee=s employment is terminated
pursuant to Paragraph 11 below, such options shall vest and become exercisable
according to the provisions of Paragraph 11. The grant of stock options to
Employee pursuant to this Agreement shall be in addition to any other stock-
based compensation plans of Fountain, if any, in which Employee becomes
eligible to participate.
FPBI, by and through its Chairman and Chief Executive Officer and
the concurrence of its Directors, agrees to present for shareholder
consideration and approval an incentive stock option plan authorizing the
grant of such incentive stock options to Employee, and R. M. Fountain, Jr.,
FPBI=s Chairman, President and Chief Executive Officer, agrees to vote his
shares of FPBI in favor of said plan.
(d) Annual Performance and Financial Review. Within thirty (30)
days following the completion of (i) the annual fiscal year-end audit of
Fountain's financial statements and (ii) Fountain's annual filing on Form 10-K
with the Securities and Exchange Commission for the applicable fiscal year,
Fountain shall conduct a review of Employee=s performance during the past
fiscal year and his financial compensation and benefits, and Fountain shall
make, in its discretion, any such adjustments to such compensation and
benefits as it may deem reasonable and appropriate.
(e) Taxes; Withholdings. All cash compensation payable under this
Agreement shall be subject to applicable withholding taxes and such other
employment taxes as are required by law.
(f) Moving Expenses. Fountain shall reimburse Employee for moving
expenses involved in the relocation of Employee and his family from their
current residence to a location in or near Washington, North Carolina;
provided, however, that such reimbursement of Employee=s moving expenses shall
be limited to the actual cost to Employee of packing fees, transportation
costs, and out-of-pocket expenses, not to exceed an aggregate reimbursement of
Fifteen Thousand Dollars ($15,000); provided, however, that such amount shall
not include reimbursement of the transportation costs to relocate Employee=s
currently-owned 32' boat to the Washington, North Carolina area, and Fountain
shall provide additional reimbursement to Employee for such boat relocation
expense. Employee shall provide to Fountain reasonable documentation, in a
form acceptable to Fountain, for all such moving and relocation expenses in
order to obtain reimbursement from Fountain.
(g) Participation in Boat Testing Program. Employee shall be
entitled during the Term of Employment to the reasonable use of a Fountain
boat and to participate in Fountain=s Boat Testing Program, subject to
Fountain=s normal policies, guidelines and safety procedures for the Program.
4. Leave and Other Benefits. Employee shall be eligible for such
leave and other benefits as are generally available to and which cover
Fountain=s executive officers at Employee's job level or classification,
subject to the rules applicable to such plans or programs prevailing from time
to time. Except as otherwise specifically provided herein, Employee's
participation in such plans and programs shall be subject to and in accordance
with the terms and conditions (including eligibility requirements) of such
plans and programs, resolutions of Fountain=s Board of Directors establishing
such programs and plans, and Fountain=s normal practices and established
policies regarding such plans and programs.
5. Adjustment to Compensation or Benefits. No adjustment to
compensation, nor any addition to or modification or termination of the leave
or other benefits provided to Employee under this Agreement, shall affect the
other provisions of this Agreement.
6. Expenses. Upon presentation to Fountain of expense reports in
sufficiently detailed form to comply with standards for deductibility of
business expenses established from time to time by the Internal Revenue
Service, Fountain will reimburse Employee for all reasonable business expenses
incurred by Employee in connection with performance of his duties hereunder.
Such expenses will be submitted for reimbursement and paid in accordance with
Fountain=s standard policies and procedures for reimbursement of business
expenses.
7. Facilities and Services. Fountain shall furnish Employee with such
facilities and services as are suitable to Employee=s position and necessary
for the performance of Employee's duties hereunder. All files, records, and
documents generated, produced, or maintained by Fountain, by Employee, or by
any other employee of Fountain during Employee's employment hereunder shall be
and remain the sole and exclusive property of Fountain.
8. Ownership of Inventions, Etc. Employee promptly and fully shall
disclose and shall assign and transfer to Fountain, its successors and
assigns, the entire right, title, and interest in and to any invention,
product, process, apparatus, improvement, or design, patentable or
unpatentable, invented, discovered, conceived, developed, or originated by
Employee, individually or jointly, during the term of Employee's employment
with Fountain and (i) relating to Fountain's Business or any actual or
anticipated research or development of Fountain (including, without
limitation, the production of any product manufactured, distributed, marketed,
sold, used, or in the process of being developed by Fountain or by any parent
or affiliate of Fountain, or which may be manufactured, distributed, marketed,
sold, or used in competition with any such product) or (ii) resulting from any
work performed by Employee for Fountain (including, without limitation, any
invention, product, process, apparatus, improvement, or design invented,
discovered, conceived, developed, or originated by Employee (A) during
Employee's work time with Fountain or (B) with Fountain's equipment, supplies,
facilities, or trade secret information) (collectively, the "Inventions").
All such Inventions shall be and remain the sole property of Fountain. Such
assignment shall include the right to obtain letters patent or design patents,
in the name of Employee or otherwise, on such Inventions in the United States
or in any foreign countries. Employee agrees to execute all documents and to
make all oaths and declarations necessary for the filing and/or prosecution of
any applications for such letters patent or design patents, or any divisions,
continuations, continuations in part, renewals, or reissues thereof, and to
execute on request all documents necessary to assign such Inventions to
Fountain. The requirement of disclosure shall apply to all inventions,
products, processes, apparatuses, improvements, and designs, including those
asserted by Employee to be nonassignable hereunder, for the purpose of
determining the rights of Employee and Fountain therein. This paragraph shall
apply only to the extent not prohibited or limited by state or federal law.
9. Noncompetition; Confidentiality. Fountain and Employee acknowledge
that during the course of Employee's employment with Fountain, Employee shall
be given access to and shall develop names, contacts at, and addresses of, the
dealers, customers, and prospective customers for the purposes of furthering
Fountain's Business, and that Employee will be responsible for and will
participate in the development of Fountain's Business (whether through the
conception, invention, or development of any Inventions; through planning,
marketing, customer and prospective customer relations, construction,
distribution, sales, servicing, or management; or otherwise). Fountain and
Employee also acknowledge that Fountain will spend considerable amounts of
time, effort, and corporate resources in providing Employee with knowledge
relating to Fountain's Business, including but not limited to patents,
proposed patents, copyrights, trade secrets, inventions, proprietary
information, designs, specifications, blueprints, project notes, finances,
dealers, customers, customer lists, customer information (including, without
limitation, requirements and preferences) prospective customers, plans,
concepts, ideas, methods, analyses, marketing investigations, strategies,
proposals, surveys, and research, in whatever form, (collectively, the
"Information"), which Information Fountain has a right to regard as
confidential and to protect from disclosure.
To protect Fountain from Employee's use or exploitation of such
Information, and to provide reasonable assurance to Fountain that it safely
may provide Employee with information relating to the dealers, customers, and
prospective customers and with other information relating to Fountain's
Business, Employee covenants and agrees as follows:
(a) Covenant of Nonsolicitation and Noncompetition. During the term
of his employment with Fountain and for a period of one (1) year following the
termination of such employment for any reason ("Restriction Period"), Employee
shall not directly or indirectly, either for himself or for any other person
or entity, other than on behalf of Fountain, without the prior written consent
of Fountain (which consent may be withheld in Fountain's sole discretion):
(i) solicit or accept any business related or similar to
Fountain's Business from any person or entity who or which was or is a dealer
or customer during Employee's employment with Fountain, or, if Employee's
employment with Fountain has terminated, during the twenty-four (24) months
immediately preceding the termination of Employee's employment with Fountain
(a "Serviced Customer");
(ii) solicit or accept any business related or similar to
Fountain's Business from any person or entity who or which was or is a
prospective dealer or customer (a "Prospective Customer") and (A) in whom or
which Fountain or any of the principals, shareholders, directors, officers, or
employees of Fountain, had or has invested a reasonable amount of time or
company resources in an effort to secure such Prospective Customer's business,
and (B) with whom or which Employee had or has had contact by virtue of his
employment with Fountain, during Employee's employment with Fountain or, if
Employee's employment with Fountain has terminated, during the twenty-four
(24) months immediately preceding the termination of Employee's employment
with Fountain;
(iii) divert or attempt to divert any dealer, customer, or
prospective customer or, if Employee's employment with Fountain has
terminated, divert or attempt to divert any Serviced Customer or Prospective
Customer, to any person or entity competitive with Fountain;
(iv) engage as an owner, partner, shareholder, member,
director, manager, employee, agent, consultant, or otherwise, or assist any
person or entity in any way, in any activity performed in his capacity as an
Employee of Fountain, in any business related or similar to Fountain's
Business; or,
(v) employ, or seek to employ, any employee of Fountain or
induce any such person to leave Fountain's employment; in any of the following
areas ("Market Area"):
(A) Beaufort County, North Carolina;
(B) Any county of North Carolina contiguous to Beaufort
County in which Fountain engages in Fountain=s Business or in which Fountain
has contacted, solicited, or accepted business from a dealer, customer, or
prospective customer;
(C) Any county in North Carolina in which Fountain engages
in Fountain=s Business or in which Fountain has contacted, solicited, or
accepted business from a dealer, customer, or prospective customer;
(D) Within a fifty (50)-mile radius of a dealer of
Fountain boats in any other state in the United States or in which Fountain
engages in Fountain=s Business or in which Fountain has contacted, solicited,
or accepted business from a dealer, customer or prospective customer;
(E) Within a fifty (50)-mile radius of a dealer of
Fountain boats in any other country or territory or in which Fountain engages
in Fountain=s Business or in which Fountain has contacted, solicited, or
accepted business from a dealer, customer, or prospective customer.
By listing the specific geographic areas described above, it is the
intent of the parties to list areas in which Fountain is or is expected to be
engaging in Fountain's Business on its own behalf or through its dealers.
(b) Covenant of Nondisclosure. Employee shall not at any time,
either during the term of his employment with Fountain or at any time
following the termination of his employment with Fountain for any reason:
(i) divulge, disclose, or communicate to any person or entity
the names of, contacts at, or addresses of any Serviced Customers or
Prospective Customers; or,
(ii) divulge, disclose, or communicate to any person or entity
any confidential information of any kind, nature, or description concerning
any matters affecting or relating to Fountain's Business, including but not
limited to the Information; provided, however, that during the term of his
employment, Employee may disclose such information to dealers, customers,
prospective customers, or fellow employees, for the limited purpose of
performing his job duties, to the extent authorized by Fountain; or,
(iii) use the Information to the detriment of Fountain or
Fountain=s Business, or the principals, shareholders, officers, directors, or
employees thereof, particularly in any manner competitive with Fountain or
Fountain=s Business, in any unlawful manner, or to interfere with or attempt
to terminate or otherwise adversely affect any business relationship of
Fountain with any Serviced Customer or Prospective Customer.
Employee acknowledges that all books, records, files, forms, lists,
reports, accounts, and any other documentation relating in any manner to the
Serviced Customers and the Prospective Customers, or Fountain's Business,
whether prepared by Employee or anyone else and in whatever form, are the
exclusive property of Fountain and shall be returned immediately to Fountain
upon the termination of Employee's employment for any reason or upon
Fountain's request at any time.
(c) Reasonableness of Restrictions. If any of the restrictions set
forth in this Paragraph 9 shall be declared invalid for any reason whatsoever
by a court of competent jurisdiction, the validity and enforceability of the
remainder of such restrictions shall not thereby be adversely affected.
Employee acknowledges that Fountain has a legitimate economic interest in
those geographic areas which this Paragraph 9 specifically is intended to
protect, and that the Market Area and Restriction Period are limited in scope
to the geographic territory and period of time reasonably necessary to protect
Fountain=s economic interest and otherwise are reasonable and proper. In the
event the Restriction Period or any other such time limitation is deemed to be
unreasonable by a court of competent jurisdiction, Employee hereby agrees to
submit to such reduction of the Restriction Period as the court shall deem
reasonable. In the event the Market Area is deemed by a court of competent
jurisdiction to be unreasonable, Employee hereby agrees that the Market Area
shall be reduced by excluding any separately identifiable and geographically
severable area necessary to make the remaining geographic restriction
reasonable, but this Paragraph 9 shall be enforced as to all other areas
included in the Market Area which are not so excluded.
(d) Remedies for Breach. Employee understands and acknowledges
that a breach or violation by him of any of the covenants contained in
Paragraph 9 shall be deemed a material breach of this Agreement and will cause
substantial, immediate, and irreparable injury to Fountain, and that Fountain
will have no adequate remedy at law for such breach or violation. In the
event of Employee's actual or threatened breach or violation of the covenants
contained in Paragraph 9, Fountain shall be entitled to bring a civil action
seeking, and shall be entitled to, an injunction restraining Employee from
violating or continuing to violate such covenant or from any threatened
violation thereof, or for any other legal or equitable relief relating to the
breach or violation of such covenant. Employee agrees that, if Fountain
institutes any action or proceeding against Employee seeking to enforce any of
such covenants or to recover other relief relating to an actual or threatened
breach or violation of any of such covenants, Employee shall be deemed to have
waived the claim or defense that Fountain has an adequate remedy at law and
shall not urge in any such action or proceeding the claim or defense that such
a remedy at law exists. However, the exercise by Fountain of any such right,
remedy, power, or privilege shall not preclude Fountain or its successors or
assigns from pursuing any other remedy or exercising any other right, power,
or privilege available to it for any such breach or violation, whether at law
or in equity, including the recovery of damages, all of which shall be
cumulative and in addition to all other rights, remedies, powers, or
privileges of Fountain.
Notwithstanding anything contained herein to the contrary,
Employee agrees that the provisions of Paragraphs 9(b) and 9(c) above and the
remedies provided in this Paragraph 9(d) for a breach by Employee shall be in
addition to, and shall not be deemed to supersede or to otherwise restrict,
limit or impair the rights of Fountain under any state or federal law or
regulation dealing with or providing a remedy for the wrongful disclosure,
misuse or misappropriation of trade secrets or other proprietary or
confidential information.
(e) Survival of Covenants. Employee's covenants and agreements and
Fountain=s rights and remedies as provided in this Paragraph 9 shall survive
and remain fully in effect following expiration of the Term of Employment or
any actual termination of Employee's employment with Fountain during the Term
of Employment.
10. Change in Control.
(a) In the event of a termination of Employee's employment in
connection with, or within twenty-four (24) months after, a "Change in
Control" (as defined in Subparagraph (d) below) of Fountain or FPBI, other
than for "Cause" (as defined in Paragraph 11 below), retirement, death or
disability, Employee shall be entitled to receive compensation as set forth in
Paragraph 10(c) below. Said sum shall be payable as provided in
Paragraph 10(e) below.
(b) In addition to any rights Employee might have to terminate this
Agreement as contained in Paragraph 11, Employee shall have the right to
terminate this Agreement upon the occurrence of any of the following events
(the "Termination Events") within twenty-four (24) months following a Change
in Control of Fountain or FPBI:
(i) Employee is assigned any duties and/or responsibilities
that are inconsistent with his position, duties, responsibilities or status at
the time of the Change in Control; or,
(ii) Employee is not paid an annual Base Salary rate at or
above the rate established by the terms of Paragraph 3 of this Agreement; or,
(iii) Employee's life insurance, medical or hospitalization
insurance, disability insurance, stock options, stock purchase plans, deferred
compensation plans, management retention plans, retirement plans, or similar
plans or benefits, if any, being provided by Fountain or FPBI to Employee as
of the effective date of the Change in Control are reduced in their level,
scope, or coverage, or any such insurance, plans, or benefits are eliminated,
unless such reduction or elimination applies proportionately to all salaried
employees of Fountain or FPBI who participated in such benefits prior to such
Change in Control; or,
(iv) Employee is transferred to a geographic location which is
an unreasonable distance from his current (at the time of the Change of
Control) principal work location, without Employee's express written consent.
A Termination Event shall be deemed to have occurred on the date
such action or event is implemented or takes effect.
(c) In the event that Employee terminates this Agreement pursuant
to this Paragraph 10, Fountain will be obligated to pay or cause to be paid to
Employee an amount equal to the compensation that Employee would have been
entitled to receive hereunder and which remains unpaid at the date of such
termination not to exceed two (2) years of Base Salary at the time of the
Change of Control.
(d) For the purposes of this Agreement, the term "Change in
Control" shall mean any of the following events:
(i) After the Effective Date of this Agreement, any "person"
(as such term is defined in Paragraphs 3(a)(9) and 13(d)(3) of the Securities
Exchange Act of 1934, as amended), directly or indirectly, acquires beneficial
ownership of voting stock, or acquires irrevocable proxies or any combination
of voting stock and irrevocable proxies, representing forty-five percent (45%)
or more of any class of voting securities of either Fountain or FPBI, or
acquires control in any manner of the election of a majority of the directors
of either Fountain or FPBI, provided, however, that the provisions of this
subparagraph shall not apply to R. M. Fountain, Jr., his estate, his heirs,
members of his family, his testamentary beneficiaries, or any trusts or other
entities created for the benefit of the family of R. M. Fountain, Jr.; or,
(ii) Either Fountain or FPBI consolidates or merges with or
into another corporation, association, or entity, or is otherwise reorganized,
where neither Fountain nor FPBI nor an entity controlled by R. M. Fountain,
Jr. having more than forty-five percent (45%) of the vote for directors is the
surviving corporation in such transaction; or,
(iii) All or substantially all of the assets of either Fountain
or FPBI are sold or otherwise transferred to or are acquired by any other
corporation, association, or other person, entity, or group except an entity
controlled by R. M. Fountain, Jr. having more than forty-five percent (45%) of
the vote for directors.
Notwithstanding the other provisions of this Paragraph 10, a
transaction or event shall not be considered a Change in Control if, prior to
the consummation or occurrence of such transaction or event, Employee, FPBI,
and Fountain agree in writing that the same shall not be treated as a Change
in Control for purposes of this Agreement.
(e) Such amounts payable pursuant to this Paragraph 10 shall be
paid, at the sole option of Employee, either in one lump sum, discounted at an
appropriate rate of interest, or in equal monthly payments over the remaining
term of the Agreement.
(f) Following a Termination Event which gives rise to Employee's
rights hereunder, Employee shall have one (1) month from the date of
occurrence of the Termination Event to terminate this Agreement pursuant to
this Paragraph 10. Any such termination shall be deemed to have occurred only
upon delivery to Fountain (or to any successor corporation) of written notice
of termination which describes the Change in Control and Termination Event.
If Employee does not so terminate this Agreement within such one month period,
he shall thereafter have no further rights hereunder with respect to that
Termination Event, but shall retain rights hereunder, if any, with respect to
any other Termination Event as to which such period has not expired.
(g) It is the intent of the parties hereto that all payments made
pursuant to this Agreement be deductible by Fountain for federal income tax
purposes and not result in the imposition of an excise tax on Employee.
Notwithstanding anything contained in this Agreement to the contrary, any
payments to be made to or for the benefit of Employee which are deemed to be
"parachute payments" as that term is defined in Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), shall be modified or reduced to
the extent deemed to be necessary by Fountain (or of its successor in
interest) to avoid the imposition of excise taxes on Employee under
Section 4999 of the Code and the disallowance of a deduction to Fountain (or
of its successor in interest) under Section 280G of the Code.
11. Termination and Termination Pay.
(a) By Employee. Employee's employment under this Agreement may be
terminated at any time by Employee upon sixty (60) days written notice to
Fountain. Upon such termination, Employee shall be entitled to receive his
normal Base Salary compensation through the effective date of such
termination. Any outstanding vested, unexercised options granted to Employee
pursuant to Paragraph 3 must be exercised by Employee prior to the applicable
expiration date of such options, at which time any remaining unexercised
options shall be forfeited, expired, null and void; and Employee=s right to
receive any further options that have not vested as of the termination date
shall immediately be terminated, null, void, and of no further force or
effect.
(b) Death or Retirement. Employee's employment under this
Agreement shall be terminated upon his death during the Term of Employment or
upon the effective date of Employee's retirement with Fountain=s consent or
under the terms of Fountain=s retirement plan. Upon any such termination,
Employee (or, in the case of Employee's death, his estate) shall be entitled
to receive any compensation Employee shall have earned prior to and through
the month of the date of termination and shall be entitled, through the
applicable expiration date of such options, to exercise any options granted
pursuant to Paragraph 3 that have become fully vested, plus any options
Employee would have received for that year, all as of the termination date.
(c) By Fountain for Cause. Fountain may terminate Employee's
employment at any time during the Term of Employment for "Cause" (as defined
below). Upon any such termination by Fountain under this Paragraph 11(c),
Employee shall have no further rights under this Agreement (including any
right to receive compensation or other benefits for any period after such
termination) and shall be entitled only to his Base Salary through the
effective date of termination. Any vested, unexercised stock options granted
to Employee pursuant to Paragraph 3 which remain outstanding and in effect and
all unvested stock options shall immediately terminate and be of no further
force or effect as of the effective date of such termination of employment for
Cause.
Notwithstanding anything contained herein to the contrary, before
Fountain may terminate Employee's employment for a Cause described in
Paragraph 11(c)(i) below, Fountain first shall give Employee seven (7)
calendar days written notice of the facts or circumstances constituting such
Cause for termination and if, during such period, Employee shall cure such
Cause to the reasonable satisfaction of Fountain, then Employee's employment
may continue in the discretion of Fountain; provided, however, that, in the
event of any reoccurrence or further occurrence of the same Cause, Fountain
shall have no obligation to give Employee any further or additional notice or
opportunity to cure such Cause prior to the termination of Employee's
employment. Except as specifically provided above, no such notice or
opportunity to cure shall be required in the case of termination of Employee's
employment for any Cause. For purposes of this Paragraph 11(c), Fountain
shall have "Cause" to terminate Employee's employment upon:
(i) A determination by Fountain, in good faith, that Employee
(A) has breached in any material respect any of the terms or conditions of
this Agreement, any Fountain policy, discriminated against any employee,
customer, or other person covered by any anti-discrimination laws,
regulations, or policies; (B) has failed in any material respect to perform or
discharge his duties or responsibilities of employment in the manner provided
herein; or (c) is engaging or has engaged in conduct involving moral
turpitude, willful misconduct, or conduct which is detrimental in any material
respect to the business prospects of Fountain or which has had or likely will
have a material adverse effect on Fountain=s Business or reputation;
(ii) The commission in the course of Employee's employment
with Fountain of an act of fraud, embezzlement, theft, or personal dishonesty
(whether or not such act or charge results in criminal indictment, charges,
prosecution, or conviction);
(iii) The unauthorized use of alcohol by Employee during
working hours or any use of alcohol by Employee during nonworking hours that
adversely affects his job performance, his ability to fulfill the
responsibilities of his position, or the safety of himself or others at the
workplace; or,
(iv) Employee=s use of any controlled substance, as defined at
21 U.S.C. ' 802 and listed on Schedules I through V of 21 U.S.C. ' 812, as
revised from time to time, or as defined by any other federal or state law or
regulation.
(d) By Fountain without Cause. Fountain and Employee agree that
notwithstanding anything contained herein to the contrary, Employee is an "at
will" employee, and Fountain may terminate Employee's employment at will and
without "Cause" at any time during the Term of Employment. Upon any such
termination by Fountain under this Paragraph 11(d), Employee=s rights under
this Agreement (including his right to receive compensation or other benefits
for any period after such termination) shall be limited to the right to
receive nine (9) months of Base Salary only, without any incentive
compensation (except stock options granted in Paragraph 3 above, which shall
become vested and exercisable as set forth below) and with such bonus as may
be calculated and prorated pursuant to Paragraph 3(b) above on a calendar day
basis for the portion of the then current fiscal year during which Employee
was employed by Fountain. Fountain also shall provide outplacement services
to Employee, not to exceed Five Thousand and No/100 Dollars ($5,000.00) during
the twelve (12) months immediately following such termination without Cause,
and such employee benefits, if any, as required by applicable law.
If Employee=s employment is terminated without Cause pursuant to
this Paragraph 11(d), Employee shall be entitled to exercise, through the
applicable expiration date of such options, all of his then outstanding
vested, unexercised stock options granted pursuant to Paragraph 3 above, plus
a prorated portion of the options due to vest at the end of the current fiscal
year, prorated on a calendar day basis of 365 days, for the fiscal year in
which Employee=s employment was terminated without "Cause" by Fountain, which
prorated options shall vest and become exercisable immediately and shall
remain exercisable through the applicable expiration date of such options,
after which all of such options shall be forfeited, terminated, null, void and
of no effect.
(e) Except as otherwise provided herein, upon the earlier of the
Expiration Date of the Term of Employment or the effective date of any actual
termination of Employee's employment with Fountain under this Agreement for
any reason, the provisions of this Agreement likewise shall terminate and be
of no further force or effect; provided, however, that Employee's covenants
contained in Paragraph 9 above, and Fountain=s obligations for payment of cash
compensation under Paragraphs 11(a), 11(b), 11(c) and 11(d) above, shall
survive and remain in effect in accordance with their terms following the
Expiration Date or any actual termination of Employee's employment.
12. Successors and Assigns.
(a) This Agreement shall inure to the benefit of and be binding
upon any corporate or other successor of Fountain which shall acquire,
directly or indirectly, by conversion, merger, consolidation, purchase, or
otherwise, all or substantially all of the assets of Fountain.
(b) Fountain is contracting for the unique and personal skills of
Employee. Therefore, Employee shall be precluded from assigning or delegating
his rights or duties hereunder without first obtaining the written consent of
Fountain.
13. Modification; Waiver; Amendments. No provision of this Agreement
may be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing and signed by the parties hereto. No waiver
by either party hereto, at any time, of any breach by the other party hereto
of, or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No amendments or additions to this Agreement shall be binding unless in
writing and signed by both parties, except as herein otherwise provided.
14. Applicable Law. The parties hereto agree that without regard to
principles of conflicts of laws, the internal laws of the State of North
Carolina shall govern and control the validity, interpretation, performance,
and enforcement of this Agreement and that any suit or action relating to this
Agreement shall be instituted and prosecuted in the Courts of Beaufort County,
North Carolina, and each party hereto hereby does waive any right or defense
relating to such jurisdiction and venue, except to the extent that federal law
shall be deemed to apply.
15. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
16. Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
17. Notices. Except as otherwise may be provided herein, all notices,
claims, certificates, requests, demands, and other communications hereunder
shall be in writing and shall be deemed to have been duly given when hand
delivered or sent by facsimile transmission by one party to the other, or when
deposited by one party with the United States Postal Service, postage prepaid,
and addressed to the other party as follows:
If to Fountain: If to Employee:
Fountain Powerboats, Inc. Anthony J. Romersa
Post Office Drawer 457 __________________
Washington, NC 27889 __________________
Attention: R. M. Fountain, Jr. (to be determined)
Such notice shall be deemed to be received upon receipt or refusal, if
delivered by hand, or upon receipt or refusal as evidenced by the return
receipt therefor, if delivered by registered or certified mail.
18. Condition Precedent. This Agreement is subject to the condition
precedent that Employee must obtain from his current or former employer(s) and
deliver to Fountain an appropriate written release or written consent, in a
form satisfactory to Fountain and its attorneys, as to all covenants not to
compete and/or not to solicit that are, or may be, applicable to Employee and
that will, or may be, violated by Employee=s employment with Fountain.
19. Entire Agreement. This Agreement contains the entire understanding
and agreement of the parties, and there are no agreements, promises,
warranties, covenants, or undertakings other than those expressly set forth or
referred to herein.
IN WITNESS WHEREOF, Fountain and FPBI each has caused this Agreement
to be executed by its respective duly authorized officer within the authority
duly given by its respective Board of Directors, and Employee has hereunto set
his hand and adopted as his seal the typewritten word "SEAL" appearing beside
his name, all as of the day and year first above written.
FOUNTAIN POWERBOATS, INC.
By:_______________________________
Title:____________________________
FOUNTAIN POWERBOAT INDUSTRIES, INC.
By:_______________________________
Title:____________________________
EMPLOYEE:
(SEAL)
Anthony J. Romersa
NBMAIN\330704.1
