Exhibit 10.2

 

STATE OF NORTH CAROLINA

COUNTY OF BEAUFORT

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into as of the
1st day of September, 2004 (the “Effective Date”), by and between FOUNTAIN
POWERBOATS, INC., a North Carolina corporation with its principal place of
business in Washington, Beaufort County, North Carolina (“Fountain”); and R.
DAVID KNIGHT (“Employee”).

 

W I T N E S S E T H:

 

WHEREAS, Fountain is engaged in the manufacture of offshore racing and fishing
boats and the distribution of other marine products; and

 

WHEREAS, effective as of the 15th day of September, 2004 (the “Employment
Date”), Fountain desires to employ Employee in the capacity of Executive Vice
President of Business Development; and

 

WHEREAS, Employee, having negotiated the terms and conditions of his employment
with Fountain and understanding and accepting all of the terms and conditions of
such employment, desires to accept such employment; and

 

WHEREAS, Fountain and Employee agree that such an employment agreement is
founded and maintained upon the acceptance and observance by each of them of the
terms and conditions agreed upon, and desire to reduce the terms and conditions
of their employment agreement to writing.

 

NOW, THEREFORE, for and in consideration of the premises and the mutual
promises, covenants, agreements, 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. Employment. Fountain hereby employs Employee as its Executive Vice President
of Business Development, subject to the terms and conditions of this Agreement
and under such general rules as from time-to-time may be established by
Fountain. Employee shall report directly to the Chief Executive Officer (“CEO”)
of Fountain, and shall perform such duties and responsibilities as are
customarily associated with the position of Executive Vice President of Business
Development, including but not limited to managing the national sales
organization, enhancing dealer infrastructure, managing intra-departmental flow
of business to ensure best-in-class performance to the customer network,
developing new business strategies to increase company revenue while building a
foundation to increase sales volume, and any other duties and responsibilities
as assigned to Employee by the CEO to prepare Employee to be able to move into
the CEO position following the retirement of the current CEO.

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2. Other Duties. In addition to the duties described in Paragraph 1, Employee
may, in his own discretion, continue to represent Fountain in the offshore
racing series. Employee’s participation in these activities is done on his own
accord, will not count against vacation, and will not materially interfere with
his duties hereunder. Employee will not receive any support or compensation from
Fountain other than like or similar support to that which has been provided by
Fountain to Employee prior to this Agreement, if any.

 

3. Term. Unless sooner terminated as provided in this Agreement, the term of
this Agreement and Employee’s employment under this Agreement shall commence on
the Employment Date and shall end on the one-year anniversary of that date; and,
on the one-year anniversary of that date and on each anniversary of that date
thereafter until terminated as hereinafter provided, shall renew for an
additional term of one (1) year (each such one-year period, including the
initial one-year period, to be known as the “Term of Employment”).

 

4. Exclusive Service. Employee’s employment under this Agreement shall be
full-time employment, and Employee shall devote Employee’s entire working time
to Employee’s duties under this Agreement, and, for so long as Employee is
employed by Fountain, shall not engage in any occupation that requires any
amount of Employee’s personal attention during Fountain’s regular business hours
which directly or otherwise interferes with Employee’s attention to or
performance of Employee’s duties and responsibilities as an Employee of
Fountain, unless Employee first obtains the prior written consent of the CEO.
This Paragraph 4 shall not apply to and does not prohibit Employee’s
representation of Fountain in the offshore racing series as described in
Paragraph 2.

 

5. Compensation.

 

(a) Base Salary. For all services rendered by Employee under this Agreement,
Fountain shall pay to Employee a base salary in the annualized amount of One
Hundred Fifty-Six Thousand and No/100 Dollars ($156,000.00) (the “Base Salary”),
which Base Salary shall be paid at the rate of Three Thousand and No/100 Dollars
($3,000.00) weekly.

 

(b) Signing Bonus. Upon the execution of this Agreement by Fountain and
Employee, Fountain shall pay to Employee a one-time signing bonus in the amount
of Ten Thousand and No/100 Dollars ($10,000.00).

 

(c) Annual Bonus.

 

(i) Sales Bonus. Employee shall be eligible for an annual sales bonus upon
Fountain’s attainment of defined sales goals as set forth herein. In the first
fiscal year during this Agreement in which sales exceed Fifty-Nine Million and
No/100 Dollars ($59,000,000.00), Employee is entitled to a sales bonus payment
equal to 0.9% of the amount

 

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exceeding Fifty-Nine Million and No/100 Dollars ($59,000,000.00). For each
fiscal year thereafter, Employee is entitled to a sales bonus payment only if
sales for that year exceed the amount for which Employee previously received a
sales bonus. In that event, Employee would be entitled to a sales bonus payment
equal to 0.9% of the amount exceeding the greatest amount for which Employee
previously received a sales bonus.

 

(ii) Operating Profit Bonus. Employee shall be eligible for an annual bonus
based upon Fountain’s Operating Profit, which is defined as earnings before
interest and taxes (EBIT). For each fiscal year during this Agreement, Employee
is entitled to a bonus payment equal to 0.5% of Fountain’s EBIT.

 

(iii) Bonus payments shall be payable within sixty (60) days following the last
day of the subject fiscal year.

 

(d) Withholding. All compensation hereunder shall be subject to customary
deductions and withholding taxes and such other deductions and withholdings as
are required by law.

 

6. Insurance and Other Benefits. Employee shall be eligible for such insurance
and other benefits, including but not limited to participation in Fountain’s
401(k) plan, as from time-to-time may be established by Fountain for its
employees, subject to the terms and conditions (including eligibility
requirements) of the applicable policy or plan. Any insurance or other benefits
shall be provided only as described in applicable written policies or plans.
Employee understands that the provisions of any policies or plans may be
determined only by reading the actual policy or plan documents, under which
Fountain or the plan administrator, as applicable, may make certain
administrative interpretations with discretion. Fountain reserves the right to
modify or terminate each policy’s or plan’s provisions and any insurance or
other benefits offered under such policies and plans.

 

7. Vacation. Vacation leave is managed on a calendar year basis and will be
advanced through December 31, 2004 on beginning employment and in full on
January 1 of each calendar year, but is accrued pro rata on a monthly basis.
Employee may accrue up to a total of three weeks (fifteen (15) work days (Monday
through Friday)) of vacation leave in a calendar year, subject to such general
rules or regulations as may be adopted from time-to-time by Fountain. The
foregoing vacation leave shall be noncumulative, and any unused vacation leave
shall be forfeited at the end of each year (12/31/05 for the period from
Employment Date to 12/31/04) or upon the termination of Employee’s employment
for any reason. The time of each vacation period shall be mutually agreed upon
by Employee and the CEO. Employee is permitted to use vacation leave before it
is accrued. However, if, upon termination of this Agreement, Employee has used
vacation leave in excess of what he has accrued, then Employee will be required
to pay back the excess vacation leave used.

 

8. Performance Review. Employee shall be entitled to an annual performance
review, which shall be administered by the CEO.

 

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9. Expenses. Fountain will reimburse Employee for reasonable bona fide business
expenses incurred by Employee in the performance of his duties and
responsibilities pursuant to this Agreement. Employee shall submit appropriate
receipts, vouchers, and other evidence of charges or payment to Fountain upon
Fountain’s request. Reimbursement will be handled in accordance with Fountain’s
normal practices.

 

10. Moving Expenses. Fountain shall reimburse Employee’s reasonable bona fide
moving expenses, up to Twenty Thousand and No/100 Dollars ($20,000.00), incurred
by Employee to pack and move his household from Pittsboro, North Carolina to the
Washington, North Carolina area. Employee shall submit appropriate receipts,
vouchers, and other evidence of charges or payment to Fountain upon Fountain’s
request. Reimbursement will be handled in accordance with Fountain’s normal
practices.

 

11. Temporary Living Expenses. For a period of up to 365 calendar days beginning
with the Employment Date, Fountain shall provide Employee with an unfurnished
apartment of Employee’s choice at either Eastbrook Apartments or Village Green
Apartments, located in Greenville, North Carolina. Fountain shall be responsible
for payment of all reasonable utility expenses incurred by Employee relative to
such apartment. Provided, however, that if Employee has secured a permanent
residence in or around Washington, North Carolina, prior to the end of the
365-day period then Fountain’s obligations pursuant to this Paragraph shall then
immediately terminate.

 

12. Covenants of Nonsolicitation, Noncompetition, and Nondisclosure. During the
course of Employee’s employment with Fountain, Employee shall be given access to
non-public, confidential, and proprietary information pertaining to Fountain and
the customers of Fountain for the purpose of furthering Fountain’s business.
Fountain and Employee acknowledge that Fountain has spent and shall spend
considerable amounts of time, effort, and company resources in providing
Employee with, and that Employee shall participate in the development of,
confidential information relating to Fountain’s business. Such confidential
information includes, but is not limited to, customer lists and records;
customer preferences and requirements; pricing, rates, and discounts;
copyrights; trade secrets; inventions; patents; trademarks; proprietary
information; research; specifications; design methods; computer programs and
software; marketing investigations; plans, reports, and methods of operation;
and forms, policies, and procedures unique to Fountain (whether in oral or
written form, on tape, microfilm, microfiche, or computer, or in any other form)
(collectively, the “Information”). Fountain and Employee agree that Fountain has
a right to and does regard such Information as proprietary, and a trade secret
or confidential, and has a right to protect such Information from disclosure and
misuse.

 

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Employee, for and in consideration of the value, security and benefits of this
Agreement and the Term of Employment hereunder covenants and agrees as follows:

 

(a) Covenant of Nonsolicitation and Noncompetition. During the Term of
Employment with Fountain, and for the periods and terms specified:

 

1. Termination without cause - for period paid and/or due to be paid; except as
to any work or other relationship with the manufacturer of Donzi boats or any
entity or person related in any way with Donzi boats;

 

2. Resignation - for a period of eighteen (18) months;

 

3. Termination for permanent disability or cause - for a period of eighteen (18)
months plus any period for which Employee is paid and/or due to be paid as a
result of his termination.

 

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 be involved in any way in soliciting any business in any way
related or similar to Fountain’s business from any person or business entity who
or which is a customer of Fountain, including but not limited to those customers
with whom or which Employee has or had direct contact, within the Restricted
Territory (as defined below);

 

(ii) Divert or attempt to divert any customer of Fountain, including but not
limited to those customers with whom or which Employee has or had direct
contact, to any person or business entity competitive with, or engaged in
business in any way related or similar to, Fountain’s business, within the
Restricted Territory;

 

(iii) Employ, or seek to employ, any employee of Fountain or induce any such
person to leave his or her employment with Fountain; or

 

(iv) Engage or assist any person or entity whose services are competitive with
Fountain’s in any way, whether as an owner, shareholder, director, officer,
partner, member, manager, employee, agent, consultant, investor, financier,
supplier, vendor, or otherwise, in (1) employment or other work similar to
Employee’s employment or duties at any time during the term of Employee’s
employment with Fountain, or (2) any business related or similar to Fountain’s
business to which Employee’s knowledge of the Information may be applied, within
the Restricted Territory.

 

(b) Definition. For purposes of this Agreement, the “Restricted Territory” means
the geographic area of the United States of America including but not limited to
the geographic area within a fifty (50) mile radius of any location where
Fountain owns, operates, maintains or has, whether direct or by franchise or
other operation, a dealership, plant, office, or facility during the Term of
Employment in effect at the time of termination of employment; and any activity
by Employee or any representative of any entity with which he is connected which
relates to the marine industry within the Restricted Territory shall be deemed
to be the activity of the Employee.

 

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(c) Covenant of Nondisclosure. Employee shall not, directly or indirectly, at
any time, whether during Employee’s employment with Fountain or after the
termination of Employee’s employment with Fountain for any reason, divulge,
disclose, or communicate to any person or entity, any confidential information
of any kind, nature, or description relating to Fountain’s business, including
but not limited to the Information; provided, however, that Employee may
disclose such information as permitted by Fountain for the limited purpose of
performing Employee’s job duties, but only to the extent authorized by Fountain,
or as is required by law to be disclosed.

 

During Employee’s employment with Fountain or after the termination of
Employee’s employment with Fountain for any reason, Employee shall not use the
Information to the detriment of Fountain or its principals, shareholders,
directors, officers, or employees, in any manner competitive with Fountain, in
any unlawful manner, or to interfere with or attempt to terminate or otherwise
adversely affect any business relationship of Fountain.

 

13. Copyrights, Trademarks, Patents, Etc. Any inventions or other intellectual
property created, developed, designed, engineered, manufactured, or produced by
Employee at any time during the term of this Agreement, whether or not
copyrighted, trademarked, regarded as a trade secret or proprietary, or
patented, and any copyrights, trademarks, patents, or proprietary interests
thereon or related thereto, are and shall be the exclusive property of Fountain.
Without additional compensation, Employee shall assign promptly to Fountain all
of Employee’s right, title, and interest in and to any and all copyrights,
trademarks, trade secrets, inventions, letters patent, applications for letters
patent, and trade dress, whether or not subject to state or federal trademark,
together with all documentation and information related thereto, which are
acquired by Employee during the Term of Employment, and:

 

(a) are related to the then current products or services and activities of or
product or service development by Fountain;

 

(b) are developed or made with the use of Fountain’s facilities, equipment,
materials, personnel, trade secrets, or the Information; or

 

(c) result from any work performed by Employee for Fountain.

 

Fountain shall have all rights thereto subject only to such rights of Employee
as expressly are provided by law. Employee shall disclose promptly to Fountain
any such copyrights, trademarks, trade secrets, inventions, letters patent,
applications for letters patent, and trade dress, and, at the request and
expense of Fountain, shall assist Fountain and its agents in applying for
letters patent or registration thereon in every jurisdiction designated by
Fountain, and shall execute all documentation necessary to obtain such patents
and registrations in the name of Fountain.

 

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14. Termination.

 

(a) Termination by Employee. The Term of Employment and the Employee’s
employment under this Agreement may be terminated at any time by Employee upon
ninety (90) days’ written notice to Fountain. Upon such termination, Employee
shall be entitled to receive Base Salary compensation earned under this
Agreement through the effective date of such termination and, thereafter,
Fountain shall have no further obligations hereunder.

 

(b) Death or Permanent Disability. The Term of Employment and Employee’s
employment under this Agreement automatically shall be terminated upon his death
or permanent disability during the Term of Employment. Upon any termination for
Employee’s death, Employee’s estate shall be entitled to receive any Base Salary
compensation Employee shall have earned prior to the date of termination but
which remains unpaid. Upon any termination for the Employee’s permanent
disability, Employee shall be entitled to receive any Base Salary compensation
the Employee shall have earned prior to the date of termination but which
remains unpaid and the Employee’s normal Base Salary compensation for a period
of ninety (90) days following the date of termination. “Permanent disability”
shall mean physical or mental impairment such that Employee is rendered
incapable of performing his normal and regular employment duties for a period of
three (3) consecutive months, or for shorter periods aggregating three (3)
months during any twelve (12) month period. Employee agrees to submit to such
medical examinations as may be requested by Fountain with regard to the issue of
permanent disability hereunder, with the effective date thereof to be determined
by Fountain.

 

(c) Termination by Fountain for Cause. The Term of Employment and Employee’s
employment under this Agreement may be terminated by Fountain at any time for
cause (as provided below). For purposes of this paragraph, Fountain shall have
“cause” to terminate the Term of Employment and 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 or any
Fountain policy; (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
standing, reputation, or 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 by Employee during the Term of Employment of a felony
involving dishonesty, willful misconduct or breach of trust or any act of fraud,
embezzlement, theft, or personal dishonesty (whether or not such act or charge
results in criminal indictment, charges, prosecution, or conviction); or

 

(iii) Employee’s use of any addictive drug (except pursuant to the direction of
a physician) or 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 other federal or state laws or regulations.

 

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(d) Payment Upon Termination for Cause. In the event Employee is terminated for
cause for the reasons set forth in Paragraph 14(c)(i)(A) and/or 14(c)(i)(B)
above, Employee shall be entitled to receive (1) compensation earned under this
Agreement through the effective date of such termination, and (2) a lump sum
amount equal to three (3) months of Employee’s Base Salary (as defined above).
In the event Employee is terminated for cause for the reasons set forth in
Paragraphs 14(c)(i)(C), 14(c)(ii) or 14(c)(iii) above, Employee shall be
entitled only to Base Salary compensation earned under this Agreement through
the effective date of such termination and, thereafter, Fountain shall have no
further obligations hereunder.

 

(e) Termination by Fountain without Cause. The Term of Employment and Employee’s
employment under this Agreement may be terminated by Fountain without cause at
any time upon thirty (30) days’ written notice to Employee. Upon such
termination by Fountain of Employee, Employee shall be entitled to receive (1)
compensation earned under this Agreement through the effective date of such
termination, and (2) a lump sum amount equal to Employee’s Base Salary (as
defined above) for one year.

 

15. Change in Control.

 

(a) If at the effective time of, or any time within twelve (12) months
following, a “Change in Control” (as defined below):

 

(i) Fountain terminates Employee’s employment other than for “Cause” (as defined
in Paragraph 14(c) above), or

 

(ii) a “Termination Event” (as defined below) occurs and, thereafter, Employee
voluntarily terminates his own employment with Fountain in the manner described
below,

 

then (subject to the limitations set forth herein) Employee shall be entitled to
receive from Fountain, and Fountain shall be obligated to pay or cause to be
paid to Employee, an amount equal to 2.99 multiplied by Employee’s annual base
salary rate in effect at the time the Change in Control became effective or in
effect at the time the termination of Employee’s employment becomes effective,
whichever is greater. In the case of a termination of Employee’s employment
described in Paragraph 15(a)(i) above, the payments provided for in this
Paragraph 15 shall be in lieu of and not in addition to the payments of Base
Salary provided for in Paragraph 14 above.

 

(b) For purposes of this Agreement, a “Change in Control” shall be deemed to
have occurred if:

 

(i) after the Effective Date, any “Person” (as such term is defined in Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as amended),

 

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directly or indirectly, acquires beneficial ownership of voting stock, or
acquires irrevocable proxies or any combination of voting stock and irrevocable
proxies, representing more than 50% of any class of voting securities of
Fountain, or in any manner acquires control of the election of a majority of the
directors of Fountain; or

 

(ii) Fountain consolidates or merges with or into another corporation, or
otherwise is reorganized, where Fountain is not the resulting or surviving
corporation in such transaction; or

 

(iii) all or substantially all Fountain’s assets are sold or otherwise
transferred to or acquired by any other corporation, association or other
person, entity or group.

 

However, a transaction or event shall not be considered a Change in Control if,
prior to the consummation or occurrence of such transaction or event, Fountain
and Employee agree in writing that the same shall not be treated as a Change in
Control for purposes of this Agreement.

 

(c) For purposes of this Paragraph 15, all references to Fountain shall include
any “Successor” (as defined below) to Fountain which shall have assumed and
become liable for Fountain’s obligations hereunder (whether such assumption is
by agreement, operation of law or otherwise). “Successor” refers to any Person
or entity (corporate or otherwise) into which Fountain (or any such Successor)
shall be merged or consolidated or to which all or substantially all Fountain’s
(or any such Successor’s) assets shall be transferred in any manner.

 

(d) For purposes of this Paragraph 15, a “Termination Event” shall be deemed to
have occurred if, at the effective time of or within twelve (12) months
following a Change in Control, and without his express written consent:

 

(i) Employee’s annual Base Salary rate is reduced below the annual rate in
effect as of the effective date of the Change in Control or as the same shall
have been increased from time to time following such effective date; or

 

(ii) Employee’s life insurance, medical or hospitalization insurance, disability
insurance or similar plans or benefits (including any retirement plan) being
provided by Fountain 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 without being replaced with substantially
similar plans or benefits, unless such reduction or elimination applies
proportionately to all salaried employees of Fountain who participated in such
plans or benefits prior to such Change in Control;

 

(iii) Employee is transferred to a job location which is more than 30 miles (by
most direct highway route) from his principal work location at the effective
date of the Change in Control; or

 

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(iv) (A) if Fountain continues to exist as a separate entity following the
Change in Control, Employee’s position is changed such that he no longer serves
as Executive Vice President of Business Development or such title and
responsibility level which he has at the time of the Change in Control, or (B)
if as a result of the Change in Control, Fountain no longer exists as a separate
entity, Employee is not designated as and does not serve as an executive officer
of Fountain’s Successor; or if he does not report directly to the Successor’s
Chairman, President or Chief Executive Officer; or if his duties, pay and/or
responsibilities and/or working conditions are reduced or negatively modified.

 

(e) If Employee’s employment is terminated by Fountain without Cause prior to
the effective time of a Change in Control but following the date on which
Fountain’s Board of Directors takes action to approve an agreement (including
any definitive agreement or an agreement in principle) relating to the Change in
Control, then, for purposes of this Agreement, such termination of employment
shall be deemed to have occurred at the effective time of the Change in Control.

 

(f) Amounts payable pursuant to this Paragraph 15 shall be paid in thirty-six
(36) equal monthly payments which shall commence not later than the 45th day
following the Termination Date and be made on the same day of each consecutive
month thereafter until all such monthly payments have been paid. For purposes of
this Agreement, the “Termination Date” will be the effective date of the
termination of Employee’s employment which gives rise to Fountain’s payment
obligation under this Paragraph 15.

 

(g) In order to become entitled to any payments under Paragraph 15(a)(ii) above,
Employee must effectively terminate his employment with Fountain within ninety
(90) days from the date of occurrence of the Termination Event which gives rises
to his right to terminate. A Termination Event shall be deemed to have occurred
on the date such action or event is implemented or takes effect or, if later, on
the date on which notice of the action or event is given to Employee. The
Termination Date of Employee’s termination of employment following a Termination
Event shall be the date of delivery by Employee to Fountain (or to any
Successor) of a written notice of termination which describes the Change in
Control and Termination Event which have occurred. If Employee does not so
terminate his employment with Fountain within such ninety (90) day period
following the occurrence of a Termination Event, then he thereafter shall have
no rights hereunder with respect to that Termination Event but shall retain
rights, if any, hereunder with respect to any other Termination Event occurring
within twelve (12) months following the Change in Control and as to which such
notice period has not expired.

 

(h) 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

 

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Revenue Code of 1986, as amended (the “Code”), shall be modified or reduced to
the extent (but only to the extent) which, upon the advice of Fountain’s
independent certified public accountants, Fountain’s Board of Directors in good
faith deems to be necessary to avoid the imposition of excise taxes on Employee
under Section 4999 of the Code and the disallowance of a deduction to Fountain
under Section 280G(a) of the Code.

 

(i) Notwithstanding anything contained herein to the contrary, it is expressly
understood and agreed by Employee that Employee shall not be entitled to any
payments under this Agreement in the event (i) Fountain terminates Employee’s
employment for Cause, or (ii) Employee voluntarily terminates his employment
with Fountain other than as provided in Paragraph 15(a)(ii) above, or (iii)
Employee’s employment with Fountain terminates or is terminated due to his death
or Retirement.

 

16. Waiver. The failure of a party to insist upon the strict performance of any
of the terms and conditions of this Agreement, or the waiver by a party of any
breach or default of any of the terms and conditions of this Agreement, shall
not be construed as thereafter waiving any terms and conditions, but the same
shall continue and remain in full force and effect as if no forbearance or
waiver had occurred. No such waiver shall be enforceable unless in writing and
signed by the party to be charged therewith.

 

17. Modification and Amendment. The terms of this Agreement may not be amended
or modified except by a written agreement duly executed by both parties.

 

18. Severability. If any of the terms, covenants, conditions, and agreements of
this Agreement for any reason shall be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any of the other terms, covenants, conditions, and agreements
of this Agreement, and any terms, covenants, conditions, and agreements of this
Agreement thereafter shall be construed as if such invalid, illegal, or
unenforceable terms, covenants, conditions, and agreements never were contained
in this Agreement.

 

19. Binding Effect; Assignment. This Agreement shall be binding upon and inure
to the benefit of Fountain and Employee, their respective subsidiaries,
affiliates, members, directors, officers, successors and assigns, heirs,
legatees, executors, administrators, and personal representatives, as
applicable; provided, however, that the agreements of Employee are personal to
Employee, and Employee shall not assign Employee’s obligations,
responsibilities, and benefits hereunder. Fountain shall have the right to
assign its obligations, responsibilities, or benefits hereunder.

 

20. Paragraph Headings. The paragraph headings are for convenience of reference
only and shall not be construed as terms of this Agreement.

 

21. Governing Law. This Agreement is executed in Beaufort County, North
Carolina, and the parties hereto agree that, without regard to principles of
conflicts of laws, the

 

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internal laws of the State of North Carolina and applicable federal law shall
govern and control the validity, interpretation, performance, and enforcement of
this Agreement. Any action relating to this Agreement shall be instituted and
prosecuted only in the courts of Beaufort County, North Carolina, or the federal
district courts of the Eastern District of North Carolina, and each party
consents to the personal jurisdiction of said courts and waives any right or
defense relating to such venue and jurisdiction.

 

22. Entire Agreement. This Agreement contains the entire agreement and
understanding between Fountain and Employee with regard to the subject matter
hereof, and there are no oral understandings, terms, or conditions, and neither
party has relied upon any representation, express or implied, not contained
herein. All prior negotiations and understandings are merged in this Agreement.

 

IN WITNESS WHEREOF, Fountain has caused this Agreement to be executed in its
corporate name in such form as to be binding, and Employee has executed this
Agreement by subscribing his name and adopting as his seal the typewritten word
“SEAL” appearing beside his name, all effective as of the Effective Date.

 

    FOUNTAIN POWERBOATS, INC.     By:  

/s/ R. M. Fountain, Jr.

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    Its:  

 

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/s/ R. David Knight

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  (SEAL)     R. DAVID KNIGHT    

 

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STATE OF NORTH CAROLINA

COUNTY OF BEAUFORT

 

FIRST AMENDMENT TO EMPLOYMENT AGREEMENT

 

THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (the “First Amendment”) made and
entered into as of the 18th day of October, 2004, by and between FOUNTAIN
POWERBOATS, INC., a North Carolina corporation with its principal place of
business in Washington, Beaufort County, North Carolina (“Fountain”) and R.
DAVID KNIGHT (“Employee).

 

W I T N E S S E T H:

 

WHEREAS, Fountain and Employee previously entered into an Employment Agreement
dated September 1, 2004, (the “Agreement”); and

 

WHEREAS, Fountain and the Employee now desire to modify the terms of the
Agreement, and mutually have agreed to enter into this First Amendment to
evidence their understanding of the modified terms.

 

NOW, THEREFORE, for and in consideration of the mutual promises between the
parties hereto and other good and valuable considerations, the receipt and
sufficiency of which hereby are acknowledged, Fountain and Employee do agree as
follows:

 

  1. The Agreement is hereby amended by this First Amendment as follows:

 

A. Paragraph 14(e) of the Agreement, entitled “TERMINATION BY FOUNTAIN WITHOUT
CAUSE,” shall be amended to provide that:

 

“The Term of Employment and Employee’s employment under this Agreement may be
terminated by Fountain without cause at any time upon thirty (30) days’ written
notice to Employee. Upon such termination by Fountain of Employee, Employee
shall be entitled to receive (1) compensation earned under this Agreement
through the effective date of such termination, and (2) the amount equal to
Employee’s Base Salary (as defined above) for one year, payable over a period of
one year in weekly installments.”

 

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2. All of the remaining terms and conditions for the Agreement that are not
expressly amended by this First Amendment shall remain in full force and effect.

 

IN TESTIMONY WHEREOF, Fountain has caused this First Amendment to be executed in
its corporate name in such form as to be binding, and Employee has executed this
Agreement by subscribing his name and adopting as his seal the typewritten word
“SEAL” appearing beside his name, all effective as of the day and year first
above written.

 

FOUNTAIN POWERBOATS, INC. By:  

/s/ R. M. Fountain, Jr.

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Its:  

 

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EMPLOYEE

/s/ R. David Knight

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R. DAVID KNIGHT

 

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