<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from _________ to __________
---------------------------------
Commission file number 1-12676
COASTCAST CORPORATION
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-3454926
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3025 EAST VICTORIA STREET, RANCHO DOMINGUEZ, CA 90221
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310)638-0595
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
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
--- ---
At November 1, 1996 there were outstanding 8,777,890 shares of common stock, no
par value.
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COASTCAST CORPORATION
INDEX
Page
Number
------
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
September 30, 1996 and December 31, 1995 (Unaudited) 3
Condensed Consolidated Statements of Income
Three Months Ended September 30, 1996 and 1995 (Unaudited) 4
Nine Months Ended September 30, 1996 and 1995 (Unaudited) 5
Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1996 and 1995 (Unaudited) 6
Notes to Condensed Consolidated Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION:
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
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COASTCAST CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
ASSETS September 30, December 31,
1996 1995
-------------- --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 16,639,000 $ 9,237,000
Short-term investments, at cost,
which approximates market value 2,554,000 14,718,000
Accounts receivable, net of allowance for doubtful
accounts of $400,000 and $300,000 at September 30,
1996 and December 31, 1995, respectively 12,524,000 7,198,000
Inventories (Note 2) 18,720,000 7,611,000
Prepaid expenses and other current assets 2,788,000 2,743,000
Deferred income taxes 1,240,000 1,240,000
Net current assets of discontinued operations (Note 3) 776,000 697,000
----------- -----------
Total current assets 55,241,000 43,444,000
Property, plant and equipment, net of
accumulated depreciation and amortization of
$14,296,000 and $12,676,000 at September 30, 1996
and December 31, 1995, respectively 19,651,000 15,214,000
Other assets 1,952,000 250,000
----------- -----------
Total assets $76,844,000 $58,908,000
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,048,000 $ 3,833,000
Accrued liabilities 4,744,000 4,823,000
Income taxes payable 467,000 -
----------- -----------
Total current liabilities 12,259,000 8,656,000
Deferred compensation 111,000 -
----------- -----------
Total liabilities 12,370,000 8,656,000
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value, 2,000,000 shares
authorized, none issued and outstanding - -
Common stock, no par value, 20,000,000 shares
authorized; 8,777,890 and 8,734,694 shares
issued and outstanding as of September 30, 1996
and December 31, 1995, respectively 37,869,000 37,036,000
Retained earnings 26,605 000 13,216,000
----------- -----------
Total shareholders' equity 64,474,000 50,252,000
----------- -----------
Total liabilities and shareholders' equity $76,844,000 $58,908,000
----------- -----------
----------- -----------
</TABLE>
See notes to condensed consolidated financial statements.
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COASTCAST CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
For the Three Months
Ended September 30,
--------------------------------
1996 1995
--------------------------------
Sales $ 41,495,000 $ 17,305,000
Cost of sales 31,943,000 13,974,000
-------------- --------------
Gross profit 9,552,000 3,331,000
Selling, general and administrative expenses 1,678,000 1,604,000
-------------- --------------
Income from operations 7,874,000 1,727,000
Other income 238,000 418,000
-------------- --------------
Income before settlement of class action
lawsuit and provision for income taxes 8,112,000 2,145,000
Class action lawsuit settlement expense - 2,075,000
-------------- --------------
Income before provision for income taxes 8,112,000 70,000
Provision for income taxes 3,245,000 29,000
-------------- --------------
Net income $ 4,867,000 $ 41,000
-------------- --------------
-------------- --------------
Net income per share (Note 4) $ .54 $ .00
------ ------
Weighted average shares outstanding 9,087,334 9,141,047
See notes to condensed consolidated financial statements.
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COASTCAST CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
For the Nine Months
Ended September 30,
--------------------------------
1996 1995
-------------- --------------
Sales $ 113,347,000 $ 62,024,000
Cost of sales 84,439,000 49,503,000
-------------- --------------
Gross profit 28,908,000 12,521,000
Selling, general and administrative expenses 7,052,000 5,182,000
-------------- --------------
Income from operations 21,856,000 7,339,000
Other income 846,000 1,154,000
-------------- --------------
Income before settlement of class action
lawsuit and provision for income taxes 22,702,000 8,493,000
Class action lawsuit settlement expense - 2,075,000
-------------- --------------
Income before provision for income taxes 22,702,000 6,418,000
Provision for income taxes 9,313,000 2,631,000
-------------- --------------
Net income $ 13,389,000 $ 3,787,000
-------------- --------------
-------------- --------------
Net income per share (Note 4) $1.48 $.41
----- ----
Weighted average shares outstanding 9,064,076 9,148,081
See notes to condensed consolidated financial statements.
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COASTCAST CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
----------------------------------
1996 1995
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 13,389,000 $ 3,787,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,784,000 1,362,000
Loss on disposal of machinery and equipment 60,000 66,000
Deferred compensation 111,000 -
Deferred income taxes 61,000 95,000
Changes in operating assets and liabilities:
Accounts receivable (5,326,000) (243,000)
Inventories (11,109,000) 2,054,000
Prepaid expenses and other current assets (45,000) 419,000
Income taxes payable 467,000 -
Accounts payable and accrued liabilities 3,136,000 614,000
Change in accrual for disposal of aerospace business (139,000) (233,000)
------------- -------------
Net cash provided by operating activities 2,389,000 7,921,000
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net sales of short-term investments 12,164,000 2,060,000
Purchase of property, plant and equipment (6,282,000) (2,458,000)
Proceeds from disposal of machinery and equipment - -
Other assets (1,702,000) (681,000)
------------- -------------
Net cash provided by (used in) investing
activities 4,180,000 (1,079,000)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock upon exercise of
options net of related tax benefit 834,000 -
Non-employee director stock options 202,000 -
Repurchase of common stock (203,000) -
------------- -------------
Net cash provided by financing activities 833,000 -
------------- -------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 7,402,000 6,842,000
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 9,237,000 7,188,000
------------- -------------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 16,639,000 $ 14,030,000
------------- -------------
------------- -------------
</TABLE>
See notes to condensed consolidated financial statements.
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COASTCAST CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The condensed consolidated balance sheet as of September 30, 1996, the related
condensed consolidated statements of income for the three and nine months and
cash flows for the nine months ended September 30, 1996 and 1995 have been
prepared by Coastcast Corporation (the "Company") without audit. In the opinion
of management, all adjustments (consisting only of normal recurring accruals)
have been made which are necessary to present fairly the financial position,
results of operations and cash flows of the Company at September 30, 1996 and
for the periods then ended.
Although the Company believes that the disclosure in the condensed consolidated
financial statements is adequate for a fair presentation thereof, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission. The December 31, 1995 audited statements were included in
the Company's annual report on Form 10-K under the Securities Exchange Act of
1934 for the year ended December 31, 1995. These condensed consolidated
financial statements should be read in conjunction with the audited financial
statements and notes thereto contained in that annual report.
The results of operations for the periods ended September 30, 1996 are not
necessarily indicative of the results for the full year.
2. INVENTORIES
Inventories consisted of the following:
September 30, December 31,
1996 1995
------------ ------------
Raw materials and supplies $8,079,000 $1,546,000
Tooling 224,000 178,000
Work-in-process 9,607,000 4,981,000
Finished goods 810,000 906,000
----------- -----------
$18,720,000 $7,611,000
----------- -----------
----------- -----------
3. DISCONTINUED OPERATIONS
The plan adopted in October 1993 to phase out the aerospace business was
essentially completed by June 1994. The net current assets of discontinued
operations as of September 30, 1996 were $776,000,
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principally consisting of the estimated net realizable value of the Wallingford,
Connecticut property including the related deferred tax asset.
In connection with the offering for sale of the Wallingford, Connecticut
property, the Company had an environmental assessment performed, which
identified the presence of certain chemicals associated with chlorinated
solvents in groundwater beneath a portion of the property. The Company is
currently conducting further investigation to determine the source and extent of
the contamination. The Company has recorded the net assets associated with its
discontinued operations at the estimated net realizable value. However, since
the precise source and extent of the contamination has not been identified at
this time, no assurances can be given that the proceeds to be realized upon the
sale of this property less the cost of remediation will equal or exceed the
estimated net realizable value.
4. EARNINGS PER SHARE
Net income per share is based on the weighted average number of shares of common
stock outstanding and dilutive common equivalent shares from stock options,
using the treasury stock method.
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COASTCAST CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Sales increased 139.9% and 82.7% to $41.5 million and $113.3 million for the
three months and nine months ended September 30, 1996, respectively, from $17.3
million and $62.0 million for the three months and nine months ended September
30, 1995, respectively. The increase was primarily due to sales of titanium
clubheads, mainly metal wood clubheads, which have significantly higher unit
sales prices than steel-alloy clubheads. Sales of titanium clubheads were
partially offset by a decrease in sales of steel-alloy metal wood clubheads.
Titanium clubhead sales represented 65% and 54% of total sales for the three
months and nine months ended September 30, 1996, respectively.
Gross profit increased 187.9% and 131.2% to $9.5 million and $28.9 million for
the three months and nine months ended September 30, 1996, respectively, from
$3.3 million and $12.5 million for the three months and nine months ended
September 30, 1995. Gross profit margins increased to 23.0% and 25.5% for the
three months and nine months ended September 30, 1996 respectively, from 19.2%
and 20.2% for the comparable prior year periods, due principally to the shift in
production to titanium clubheads.
Selling, general and administrative expense increased 6.2% and 36.5% to $1.7
million and $7.1 million for the three months and nine months ended September
30, 1996, respectively, from $1.6 million and $5.2 million for the comparable
prior year periods. An increase in payroll and related expenses for the three
months ended September 30, 1996, compared to the prior year period was almost
offset by a decrease in legal fees. The increase for the nine month period over
the comparable prior year period was due primarily to increased payroll and
related expenses and increased legal fees.
DISCONTINUED OPERATIONS
The plan adopted in October 1993 to phase out the aerospace business was
essentially completed by June 1994. The net current assets of discontinued
operations as of September 30, 1996 were $776,000, principally consisting of the
estimated net realizable value of the Wallingford, Connecticut property
including the related deferred tax asset.
In connection with the offering for sale of the Wallingford, Connecticut
property, the Company had an environmental assessment performed, which
identified the presence of certain chemicals associated with chlorinated
solvents in groundwater beneath a portion of the property. The Company is
currently conducting further investigation to determine the source and extent of
the contamination. The Company has recorded the net assets associated with its
discontinued operations at the estimated net realizable value. However, since
the precise source and extent of the contamination has not been identified at
this time, no assurances can be given that the proceeds to be realized upon the
sale of this property less the cost of remediation will equal or exceed the
estimated net realizable value.
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LIQUIDITY AND CAPITAL RESOURCES
The Company's cash, cash equivalents and short-term investments position at
September 30, 1996, was $19.2 million compared to $23.9 million on December 31,
1995, a decrease of $4.7 million. Net cash provided by operating activities was
$2.4 million for the nine months ended September 30, 1996. The operating
activities net cash was primarily provided by net income of $13.4 million,
depreciation and amortization of $1.8 million and an increase in accounts
payable and accrued liabilities of $3.1 million, partially offset by an increase
in inventories of $11.1 million and an increase in accounts receivable of $5.3
million. Capital expenditures were $6.3 million for the nine months ended
September 30, 1996.
On October 25, 1995, the Board of Directors authorized the Company to purchase
up to one million shares of the Company's common stock from time to time in the
open market or negotiated transactions. For the nine months ended September 30,
1996, the Company purchased and retired 13,800 shares for $203,000. As of
September 30, 1996, there were 596,400 shares remaining to be purchased under
this authorization.
The Company has no long term debt. The Company believes that its current cash
position, working capital generated from future operations and the ability to
borrow from financial institutions should be adequate to meet its financing
requirements for the foreseeable future.
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COASTCAST CORPORATION
PART II. OTHER INFORMATION
Item 5. Other Information
The following business risks, as disclosed in Part II, Item 5 "Market for
Registrant's Common Equity and Related Stockholder Matters" on Form 10-K for the
fiscal year ended December 31, 1995, are hereby incorporated by reference as
those set forth fully herein:
Customer concentration
Competition
New products
New materials and processes
Manufacturing cost variations
Dependence on polishing and finishing plant in Mexico
Hazardous waste
Dependence on discretionary consumer spending
Seasonality; fluctuations in operating results
Reliance on key personnel
Shares eligible for future sale
Fluctuations in Callaway Golf Company shares.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit:
10.1 Coastcast Corporation Supplemental Executive
Retirement Plan, effective September 1, 1996
10.2 First Amendment to Coastcast Corporation Supplemental
Executive Retirement Plan,effective September 1, 1996
10.3 Trust Agreement by and between Coastcast Corporation
and Imperial Trust Company, dated September 1, 1996
11.1 Statement re: computation of per share earnings
(b) Reports on Form 8-K:
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COASTCAST CORPORATION
November 1, 1996 By /s/ Robert C. Bruning
- --------------------- --------------------------------------
Dated Robert C. Bruning
Chief Financial Officer (Duly Authorized and
Principal Financial Officer)
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COASTCAST CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
This Supplemental Executive Retirement Plan (the "Plan") is hereby
established by Coastcast Corporation, a California corporation (the "Company"),
effective September 1, 1996, for the purpose of attracting high quality
employees and promoting in its employees increased efficiency and an interest in
the successful operation of the Company by providing selected employees with
benefits upon retirement.
ARTICLE I
DEFINITIONS
1.1 ADMINISTRATIVE COMMITTEE shall mean the Benefits Committee appointed
by the Board of Directors of the Company to administer the Plan pursuant to
Article 5 of the Plan.
1.2 BENEFICIARY shall mean the person(s) or entity designated as such in
accordance with Article 7 of the Plan.
1.3 DISABILITY shall mean any cessation of the Participant's employment
with the Company as a result of a physical or mental condition which prevents
the Participant from performing important duties of his or her current
employment. The Administrative Committee, in its complete and sole discretion,
shall determine a Participant's Disability. At all times during the period of
Disability, the Participant must be receiving regular and personal medical care
from a competent physician unless the Participant provides the Administrative
Committee with written proof acceptable to the Administrative Committee
indicating that further medical care would be of no benefit. The Administrative
Committee may require that the Participant submit to an examination by a
competent physician or medical clinic selected by the Administrative Committee
on an annual basis to confirm Disability. On the basis of such medical
evidence, the determination of the Administrative Committee as to whether or not
a condition of Disability exists or continues shall be conclusive.
1.4 CHANGE IN CONTROL shall mean either: (a) the dissolution or
liquidation of Company; (b) a reorganization, merger or consolidation of Company
with one or more corporations as a result of which Company is not the surviving
corporation; (c) approval by the stockholders of Company of any sale, lease,
exchange or other transfer (in one or a series of transactions) of all or
substantially all of the assets of Company; or (d) approval by the stockholders
of Company of any merger or consolidation of Company in which the holders of the
voting stock of Company immediately before the merger or consolidation will not
own fifty percent (50%) or more of the voting shares of the continuing or
surviving corporation immediately after such merger or consolidation.
EXHIBIT 10.1
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1.5 EARLY RETIREMENT DATE shall mean the date on which the Participant
attains age fifty-five (55) having completed at least five (5) Years of
Participation.
1.6 ELIGIBLE EMPLOYEE shall mean a management level or highly compensated
employee of the Company designated by the Administrative Committee to be
eligible to participate in the Plan.
1.7 ERISA shall mean the Employee Retirement Income Security Act of 1974,
as amended.
1.8 FINAL AVERAGE SALARY shall mean the Participant's average annual
salary (excluding bonuses and other non-regular forms of compensation) earned
from the Company (before adjustments for contributions to Company sponsored
employee benefit plans) during the three (3) highest salary years of the
five (5) year period ending on the December 31st next preceding the earlier of
Termination of Employment or the Normal Retirement Date.
1.9 FINANCIAL HARDSHIP shall mean an unexpected need for cash arising from
illness, casualty loss, sudden financial reversal, or other such unforeseeable
occurrence which is not covered by insurance and which is determined to qualify
as a Financial Hardship by the Administrative Committee. Cash needs arising
from foreseeable events such as the purchase of a residence or education
expenses for children shall not, alone, be considered a Financial Hardship.
1.10 NORMAL RETIREMENT DATE shall mean the date on which the Participant
attains age sixty-five (65).
1.11 PARTICIPANT shall mean an Eligible Employee who has become a
participant in the Plan in accordance with Article 2 of the Plan.
1.12 PLAN YEAR shall mean the calendar year except that the first Plan Year
shall begin on the effective date of the Plan and end on December 31, 1996.
1.13 TARGET RETIREMENT BENEFIT shall mean the Target Retirement Benefit as
defined in paragraph 3.1 of the Plan.
1.14 TERMINATION FOR CAUSE shall mean (a) a breach of the Participant's
fiduciary duty to the Company by reason of receipt of personal profits,
(b) conviction of a felony, or (c) any other willful and gross misconduct
committed by the Participant.
1.15 TERMINATION OF EMPLOYMENT shall mean the Participant's ceasing to
be employed by the Company for any reason whatsoever, voluntary or involuntary,
including by reason of the Participant's death or, to the extent provided in
paragraph 3.7 of the Plan, the Participant's Disability.
1.16 YEARS OF PARTICIPATION shall mean the number of complete Plan Years
that the Participant has been a Participant in the Plan while employed with the
Company, beginning with the first Plan Year in which the Participant commenced
participation in the Plan pursuant to Article 2 of
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COASTCAST SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
the Plan. Participants beginning participation in the Plan on the effective
date of the Plan shall receive a full Year of Participation for the first
short Plan Year. Notwithstanding the foregoing, in no event shall a
Participant's total Year of Participation for purpose of this Plan exceed ten
(10) years.
ARTICLE 2
PARTICIPATION AND ELIGIBILITY
All Eligible Employees are automatically enrolled in the Plan as of the
date designated by the Administrative Committee.
ARTICLE 3
BENEFITS
3.1 TARGET RETIREMENT BENEFIT. The Target Retirement Benefit shall be
an annual amount, payable over the lifetime of the Participant, equal to the
Participant's Years of Participation multiplied by seven percent (7%) multiplied
by the Participant's Final Average Salary. The Target Retirement Benefit shall
be paid in monthly installments over the lifetime of the Participant unless the
Participant elects up to thirteen (13) months prior to Termination of Employment
to receive actuarially adjusted benefits (based on reasonable actuarial
assumptions) payable over the joint lives of the Participant and his or her
spouse.
3.2 NORMAL RETIREMENT BEGINNING DATE. In the event of the Participant's
Termination of Employment on or after the Normal Retirement Date, the
Participant shall be entitled to receive the Target Retirement Benefit beginning
sixty (60) days following the Normal Retirement Date.
3.3 EARLY RETIREMENT BENEFIT. In the event of the Participant's
Termination of Employment prior to the Normal Retirement Date but on or after
completing at least five (5) Years of Participation, if the Termination of
Employment was not a Termination for Cause and if the Participant has fully
complied with the provisions of paragraph 3.4 of the Plan, the Participant
shall be entitled to receive the Target Retirement Benefit beginning sixty (60)
days after the Normal Retirement Date. Notwithstanding the foregoing, the
Participant may elect up to thirteen (13) months prior to Termination of
Employment to receive actuarially reduced benefits (based on reasonable
actuarial assumptions) beginning on or after the Early Retirement Date.
3.4 REQUIREMENT NOT TO COMPETE. Prior to the Participant's Normal
Retirement Date, the Participant shall, in exchange for the right to continued
benefits under this Plan, not engage or participate (as a partner, shareholder,
director, officer, employee, agent, representative or independent contractor,
or in any other capacity calling for the making of an investment or the
performance of services) in any business which is competitive with the business
of the Company.
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COASTCAST SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
For this purpose, a business which is competitive with the Company shall mean
any business involved in the casting of golf club heads for manufacturers of
premium price golf clubs.
3.5 PRE-RETIREMENT SURVIVOR BENEFIT. In the event of the Participant's
death prior to Termination of Employment the Participant's designated
Beneficiary shall be entitled to receive the Target Retirement Benefit
actuarially adjusted using reasonable actuarial assumptions to be paid in the
form of a single lump sum ninety (90) days after the death of the Participant.
3.6 POST-RETIREMENT SURVIVOR BENEFIT. In the event of the Participant's
death after Termination of Employment, no further benefits shall be payable
under the Plan unless the Participant has elected to have benefits payable
over the joint lives of the Participant and his or her spouse, in which case
benefit payments shall continue over the life of the Participant's spouse.
3.7 DISABILITY. For purpose of calculating benefits under the Plan,
Disability shall not be treated as a Termination of Employment and the
Participant shall continue to accrue Years of Participation during Disability,
unless such Disability continues through the Normal Retirement Date. If
Disability continues through such date, Termination of Employment shall be
deemed to occur on the Normal Retirement Date and the Participant shall be
entitled to receive the benefits provided upon normal retirement under this
Plan.
3.8 ADJUSTED BENEFIT ON CHANGE IN CONTROL. Notwithstanding the foregoing,
in the event of the Participant's Termination of Employment for any reason on or
after a Change in Control, the Participant shall be entitled to receive the
Target Retirement Benefit calculated by using ten (10) years of participation
payable beginning sixty (60) days after the Normal Retirement Date. In the
alternative, the Participant may elect up to thirteen (13) months prior to
Termination of Employment to receive actuarially reduced benefits (based on
reasonable actuarial assumptions) beginning on or after Termination of
Employment. In the event of the Participant's Termination of Employment on or
after a Change in Control, the Participant shall no longer be required to comply
with the provisions of paragraph 3.4 of the Plan.
ARTICLE 4
FINANCIAL HARDSHIP DISTRIBUTION
Upon a finding that the Participant or the Beneficiary has suffered a
Financial Hardship, the Administrative Committee may in its sole discretion,
accelerate distributions of benefits under the Plan in the amount reasonably
necessary to alleviate such Financial Hardship. For purposes of determining the
amount available for distribution to a Participant in the event of a Financial
Hardship, Final Average Salary shall be calculated as if a Termination of
Employment occurred on the date the Administrative Committee finds that the
Participant to have suffered such Financial Hardship.
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COASTCAST SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
ARTICLE 5
CONDITIONS RELATED TO BENEFITS
5.1 RIGHTS ON TERMINATION OF EMPLOYMENT. Except as expressly provided
in the Plan, the Company will not be required or be liable to make any
payments under the Plan subsequent to the Participant's (a) Termination for
Cause or (b) Termination of Employment prior to completing five (5) Years of
Participation.
5.2 AMENDMENT OR TERMINATION OF AGREEMENT. The Company may direct the
Administrative Committee to amend or terminate the Plan at any time prior to
Termination of Employment. However, if the Company terminates the Plan or
amends the Plan in any manner resulting in a reduction of accrued benefits or a
delay in vesting of accrued benefits of any Participant, the effective date of
such termination or amendment shall be treated as the Early Retirement Date for
such Participant and such Participant shall be entitled to the benefits provided
under Section 3.3 without regard to the non-competition requirement of Section
3.4 and without regard to such termination or amendment of the Plan. If, after
a Change in Control, the Company terminates the Plan or amends the Plan in any
MANNER resulting in a reduction of accrued benefits or a delay in vesting of
accrued benefits of any Participant, the effective date of such termination or
amendment shall be treated as a Termination of Employment on or after a Change
in Control and such Participant shall be entitled to the benefits provided under
Section 3.8 without regard to such termination or amendment of the Plan. Any
amendment or termination of the Plan after a Participant's Termination of
Employment shall not affect benefits payable to such Participant or his or her
Beneficiary under the Plan.
5.3 NO RIGHT TO COMPANY ASSETS. The benefits paid under the Plan will be
paid from the general funds of the Company, and the Participant and any
Beneficiary will be no more than unsecured general creditors of the Company with
no special or prior right to any assets of the Company for payment of any
obligations hereunder.
5.4 TRUST. The Company shall be responsible for the payment of all
benefits under the Plan. At its discretion, the Company may establish one or
more grantor trusts for the purposes of providing for payment of benefits under
the Plan. Such trust or trusts may be irrevocable, but the assets thereof
shall be subject to the claims of the Company's creditors. Benefits paid to
the Participant from any such trust or trusts shall be considered paid by the
Company for purposes of meeting the obligations of the Company under the Plan.
5.5 PROTECTIVE PROVISIONS. The Participant shall cooperate with the
Company by furnishing any and all information requested by the Administrative
Committee, in order to facilitate the payment of benefits hereunder, taking such
physical examinations as the Administrative Committee may deem necessary and
taking such other actions as may be requested by the Administrative Committee.
If the Participant refuses to so cooperate, the Company shall have no further
obligation to the Participant under the Plan. In the event of the Participant's
suicide during the first two (2) years of participation in the Plan, or if the
Participant makes any material
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COASTCAST SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
misstatement of information or nondisclosure of medical history, then, in the
sole discretion of the Administrative Committee, benefits may be payable in a
reduced amount to account for the Company's losses under any insurance product.
5.6 TAX LIABILITY AND WITHHOLDING. The Participant or Beneficiary shall
make appropriate arrangements with the Company for the satisfaction of any
federal, state or local income tax withholding requirements and Social Security
or other employee tax requirements applicable to the provision of benefits under
this Plan, If no other arrangements are made, the Company may provide, at its
discretion, for such withholding and tax payments as may be required. In the
event that at any time a determination is made by the Internal Revenue Service
that a Participant or Beneficiary is in constructive receipt of any benefits
payable under the Plan, the Company shall accelerate such benefits payable under
the Plan to such Participant or Beneficiary.
ARTICLE 6
ADMINISTRATION/CLAIMS PROCEDURES
6.1 ADMINISTRATION. The Administrative Committee shall administer the Plan
and interpret, construe and apply its provisions in accordance with its terms.
The Administrative Committee shall further establish, adopt or revise such rules
and regulations as it may deem necessary or advisable for the administration of
the Plan. All decisions of the Administrative Committee shall be final and
binding, subject only to a determination otherwise by the Board of Directors of
the Company.
6.2 NOTICE OF RIGHT TO CLAIM BENEFITS. The Administrative Committee shall
notify the Participant and, where appropriate, the Beneficiary, of a right to
claim benefits under the Plan, shall make forms available for filing of such
claims, and shall provide the name of the person or persons with whom such claim
should be filed.
6.3 CLAIMS PROCEDURES. The Administrative Committee shall establish
procedures for action upon claims initially made and the communication of a
decision to the claimant promptly and, in any event, not later than ninety (90)
days after the date of the claim. The claim may be deemed by the claimant to
have been denied for purposes of further review described below in the event a
decision is not furnished to the claimant within such ninety (90) day period.
Every claim for benefits which is denied shall be denied by written notice
setting forth in a manner calculated to be understood by the claimant (i) the
specific reason or reasons for the denial, (ii) specific reference to any
provisions of the Plan on which the denial is based, (iii) description of any
additional material or information that is necessary to process the claim, and
(iv) an explanation of the procedure for further reviewing the denial of the
claim.
6.4 REVIEW PROCEDURES. The Administrative Committee shall establish
procedures for review of claim denials, such review to be undertaken by the
Administrative Committee. The review given after denial of any claim shall be a
full and fair review, with the claimant or his duly
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COASTCAST SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
authorized representative having one hundred eighty (180) days after receipt of
denial of his claim to request such review, having the right to review all
pertinent documents and the right to submit issues and comments in writing.
The Administrative Committee shall establish a procedure for issuance of a
decision by the Administrative Committee not later than sixty (60) days after
receipt of a request for review from a claimant unless special circumstances,
such as the need to hold a hearing, require a longer period of time, in which
case a decision shall be rendered as soon as possible but not later than one
hundred and twenty (120) days after receipt of the claimant's request for
review. The decision on review shall be in writing and shall include specific
reasons for the decision written in a manner calculated to be understood by the
claimant with specific reference to any provisions of the Plan on which the
decision is based.
ARTICLE 7
BENEFICIARY DESIGNATION
The Participant shall have the right, at any time, to designate any person
or persons as Beneficiary (both primary and contingent) to whom payment under
the Plan shall be made in the event of the Participant's death. The Beneficiary
designation shall be effective when it is submitted in writing to the
Administrative Committee during the Participant's lifetime on a form prescribed
by the Administrative Committee.
The submission of a new Beneficiary designation shall cancel all prior
Beneficiary designations. Any finalized divorce or marriage (other than a
common law marriage) of a Participant subsequent to the date of a Beneficiary
designation shall revoke such designation, unless in the case of divorce the
previous spouse was not designated as Beneficiary and unless in the case of
marriage the Participant's new spouse has previously been designated as
Beneficiary.
If a Participant fails to designate a Beneficiary as provided above, or if
the Beneficiary designation is revoked by marriage, divorce, or otherwise
without execution of a new designation, or if every person designated as
Beneficiary predeceases the Participant or dies prior to complete distribution
of the Participant's benefits, then the Administrative Committee shall
direct the distribution of such benefits to the Participant's estate.
ARTICLE 8
MISCELLANEOUS
8.1 SUCCESSORS OF THE COMPANY. The rights and obligations of the
Company under the Plan shall inure to the benefit of, and shall be binding upon,
the successors and assigns of the Company.
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COASTCAST SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
8.2 ERISA PLAN. The Plan is intended to be an unfunded plan maintained
primarily to provide deferred compensation benefits for a select group of
"management or highly compensated employees" within the meaning of Sections 201,
301 and 401 of ERISA and therefore to be exempt from Parts 2, 3 and 4 of Title I
of ERISA.
8.3 EMPLOYMENT NOT GUARANTEED. Nothing the Plan nor any action taken
hereunder shall be construed as a contract of employment or as giving any
Participant any right to be retained in employment with the Company.
8.4 GENDER, SINGULAR AND PLURAL. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, or neuter, as the identity
of the person or persons may require. As the context may require, the singular
may be read as the plural and the plural as the singular.
8.5 CAPTIONS. The captions of the articles and paragraphs of the Plan are
for convenience only and shall not control or affect the meaning or construction
of any of its provisions.
8.6 VALIDITY. In the event any provision of the Plan is held invalid,
void or unenforceable, the same shall not affect, in any respect whatsoever, the
validity of any other provisions of the Plan.
8.7 NOTICE. Any notice or filing required or permitted to be given to the
Company or the Participant under this Agreement shall be sufficient if in
writing and hand-delivered, or sent by registered or certified mail, in the case
of the Company, to the principal office of the Company, directed to the
attention of the Administrative Committee, and in the case of the Participant,
to the last known address of the Participant indicated on the employment records
of the Company. Such notice shall be deemed given as of the date of delivery or,
if delivery is made by mail, as of the dam shown on the postmark on the receipt
for registration or certification.
8.8 WAIVER OF BREACH. The waiver by the Company of any breach of any
provision of the Plan shall not operate or be construed as a waiver of any
subsequent breach by the Participant.
8.9 ARBITRATION. Any claim, dispute of other matter in question of any
kind relating to the Plan shall be settled by arbitration in accordance with the
California Employment Dispute Resolution Rules of the American Arbitration
Association. Notice of demand for arbitration shall be made in writing to the
opposing party and to the American Arbitration Association within a reasonable
time after the claim, dispute or other matter in question has arisen. In no
event shall a demand for arbitration be made after the date when the applicable
statute of limitations would bar the institution of a legal or equitable
proceeding based on such claim, dispute or other matter in question. The
decision of the arbitrators shall be final and may be enforced in any court of
competent jurisdiction. The arbitrators may award reasonable fees and expenses
to the prevailing party in any dispute hereunder and shall award reasonable fees
and expenses in the event that the
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COASTCAST SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
arbitrators find that the losing party acted in bad faith or with intent to
harass, hinder or delay the prevailing party in the exercise of its rights in
connection with the matter under dispute.
Executed on AUGUST 16, 1996 under the authority and direction of the Board
-----------
of Directors of the Company.
COMPANY: COASTCAST CORPORATION
A California Corporation
By /s/ Richard W. Mora
--------------------------
Its President & COO
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FIRST AMENDMENT TO COASTCAST CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
WHEREAS, Coastcast Corporation, a California corporation (the
"Company") has adopted the Coastcast Corporation Supplemental Executive
Retirement Plan (the "Plan"), effective September 1, 1996; and
WHEREAS, Hans H. Buehler is the Chief Executive Officer and Chairman
of the Board of Directors of the Company and has served the Company faithfully
for sixteen (16) years; and
WHEREAS, the Company desires to credit Mr. Buehler immediately with
ten (10) Years of Participation for purposes of the vesting of benefits provided
by the Plan;
NOW, THEREFORE, for purposes of calculating the Target Retirement
Benefits under paragraph 3.1 of the Plan and for all other purposes under the
Plan, Hans H. Buehler shall be credited with ten (10) Years of Participation as
such term is defined in paragraph 1.16 of the Plan.
COASTCAST CORPORATION
By /s/ Richard W. Mora
----------------------
Its President & COO
----------------------
EXHIBIT 10.2
22
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EXHIBIT 10.3
COASTCAST CORPORATION
GRANTOR TRUST
This Trust Agreement made this 1st day of September, 1996 by and between
Coastcast Corporation, a California corporation ("Company") and Imperial
Trust Company, a California corporation ("Trustee");
WHEREAS, Company has entered into the Coastcast Corporation Supplemental
Executive Retirement Plan (the "Plan") effective September 1, 1996 pursuant
to which Company has agreed to provide participants in the Plan with certain
supplemental retirement benefits;
WHEREAS, Company has incurred or expects to incur liability under the
terms of such Plan with respect to the individuals participating in such Plan;
WHEREAS, Company wishes to establish a trust (hereinafter called
"Trust") and to contribute to the Trust assets that shall be held therein,
subject to the claims of Company's creditors in the event of Company's
Insolvency, as herein defined, until paid to Plan participants and their
beneficiaries in such manner and at such times as specified in the Plan;
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the
Plan as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of
1974;
WHEREAS, it is the intention of Company to make contributions to the
Trust to provide itself with a source of funds to assist it in the meeting of
its liabilities under the Plan.
NOW, THEREFORE, the parties do hereby establish the Trust and agree that
the Trust shall be comprised, held and disposed of as follows:
ARTICLE 1
ESTABLISHMENT OF TRUST
1.1 NORMAL CONTRIBUTIONS. Company shall make contributions to the
Trust at the times and in the amounts listed in Exhibit A to this Agreement,
which shall become the principal of the Trust to be held, administered and
disposed of by Trustee as provided in this Trust Agreement. In the event
that the Company fails to make the contributions specified in Exhibit A, the
Trustee shall promptly notify the Company of such default. If the Company
fails to correct such default within ninety (90) days after receipt of such
notice, such default Shall be treated as a Change in Control for all purposes
under this Trust Agreement. Company, in its sole discretion, may at any
time, or from time to time, make additional deposits of cash or other
property in Trust with Trustee to augment the principal to be held,
administered and deposited by Trustee as provided in this Agreement. Neither
Trustee nor any Plan participant
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or beneficiary shall have any right to compel such additional contributions
prior to a Change in Control.
1.2 CONTRIBUTIONS UPON A CHANGE IN CONTROL. Upon a Change in
Control, Company shall make an irrevocable contribution to the Trust equal to
the following:
(a) the present value of all vested and unvested accrued
benefits payable to participants or beneficiaries under the Plan on a
pre-tax basis; plus
(b) the present value of all reasonably anticipated fees and
expenses (including reasonably anticipated legal expenses) of the Trust for
the duration of the Trust, which shall be presumed to be at least one
percent (1%) of the amount in paragraph (a); less
(c) the current fair market value of all the assets held in the
Trust immediately before such contribution.
1.3 IRREVOCABILITY. The Trust hereby established shall be
irrevocable.
1.4 GRANTOR TRUST. The Trust is intended to be a grantor trust, of
which Company is the grantor, within the meaning of Subpart E, Part I,
Subchapter J, Chapter 1, Subtitle A of the Internal Revenue Code of 1986, as
amended, and shall be construed accordingly. The principal of the Trust, and
any earnings thereon shall be held separate and apart from other funds of
Company and shall be used exclusively for the uses and purposes of Plan
participants and general creditors as herein set forth. Plan participants and
their beneficiaries shall have no preferred claim on, or any beneficial
ownership interest in, any assets of the Trust. Any rights created under the
Plan and this Trust Agreement shall be mere unsecured contractual rights of Plan
participants and their beneficiaries against Company. Any assets held by the
Trust will be subject to the claims of Company's general creditors under federal
and state law in the event of Insolvency, as defined in Section 3.1 herein.
1.5 ESTABLISHMENT OF SUBTRUSTS. Upon a Change of Control, or at any
other time upon written direction of Company, Trustee shall establish a separate
subtrust for each participant in the Plan who is covered by the Trust. The
subtrusts shall reflect an undivided interest in the assets of the Trust and
shall not require any segregation of particular assets. Whenever separate
subtrusts are established, the then-existing assets of the Trust or affected
portion thereof shall be allocated in proportion to the vested accrued benefits,
and then, if any assets remain, the unvested (if any) accrued benefits of the
participants affected thereby, in both instances as of the end of the month
immediately preceding such allocation. With respect to any new contributions to
the Trust by Company after separate subtrusts have been established, Company
shall designate the subtrust for which such contributions are made. After
separate subtrusts are established, assets allocated to one subtrust may not be
utilized to provide benefits under any other subtrust until all benefits payable
under such subtrust have been paid in full. Trustee shall allocate investment
earnings and losses of the Trust among the subtrusts in proportion to their
account balances, except that changes in the value of an insurance contract
shall be allocated to the subtrust for which it is held. Payments to general
creditors in the event of Company becoming Insolvent shall be charged against
the subtrusts in
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proportion to their account balances, except that payment of benefits to a
participant as a general creditor shall be charged against the subtrust for that
participant.
ARTICLE 2
PAYMENTS TO PLAN PARTICIPANTS
AND THEIR BENEFICIARIES
2.1 PAYMENT SCHEDULE PROVIDED BY COMPANY. Company shall deliver to
Trustee a schedule (the "Payment Schedule") that indicates the amounts payable
in respect of each Plan participant (and his or her beneficiaries), that
provides a formula of other instructions acceptable to Trustee for determining
the amounts so payable, the form in which such amount is to be paid (as provided
for or available under the Plan), and the time of commencement for payment of
such amounts. Except as otherwise provided herein, Trustee shall make payments
to the Plan participants and their beneficiaries in accordance with such Payment
Schedule. Trustee shall make provisions for the reporting and withholding of
any federal, state or local taxes that may be required to be withheld with
respect to the payment of benefits pursuant to the terms of the Plan and shall
pay amounts withheld to the appropriate taxing authorities or determine that
such amounts have been reported, withheld and paid by Company.
2.2 BENEFITS DETERMINED BY PLAN. The entitlement of a Plan
participant or his or her beneficiaries to benefits under the Plan shall be
determined by Company or such party as it shall designate under the Plan prior
to a Change in Control and by the Participant Committee after a Change in
Control. Any claim for such benefits shall be considered and reviewed under the
procedures set out in the Plan. Any dispute remaining after such review
procedures shall be resolved as provided in Article 8.
2.3 DIRECT PAYMENT BY COMPANY. Company may make payment of benefits
directly to Plan participants or their beneficiaries as they become due under
the terms of the Plan. Company shall notify Trustee of its decision to make
payment of benefits directly prior to the time amounts are payable to
participants or their beneficiaries. In addition, if the principal of the
Trust, and any earnings thereon, are not sufficient to make payments of benefits
in accordance with the terms of the Plan, Company shall make the balance of each
such payment as it falls due. Trustee shall notify Company where principal and
earnings are not sufficient.
ARTICLE 3
TRUSTEE RESPONSIBILITY REGARDING PAYMENTS
TO TRUST BENEFICIARY WHEN COMPANY IS INSOLVENT
3.1 INSOLVENCY DEFINED. Trustee shall cease payment of benefits to
Plan participants and their beneficiaries if Company is Insolvent. Company
shall be considered "Insolvent" for purposes of this Trust Agreement if
(a) Company is unable to pay its debts as they become due, or (b) Company is
subject to a pending proceeding as a debtor under the United States Bankruptcy
Code.
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3.2 ASSETS SUBJECT TO CLAIMS OF CREDITORS ON INSOLVENCY. At all
times during the continuance of this Trust, the principal and income of the
Trust shall be subject to claims of general creditors of Company under
federal and state law as set forth below.
(a) The Board of Directors and the Chief Executive Officer of
Company shall have the duty to inform Trustee in writing of Company's
Insolvency. If a person claiming to be a creditor of Company alleges in
writing to Trustee that Company has become Insolvent, Trustee shall
determine whether Company is Insolvent and, pending such determination,
Trustee shall discontinue payment of benefits to Plan participants or their
beneficiaries.
(b) Unless Trustee has actual knowledge of Company's Insolvency,
or has received notice from Company or a person claiming to be a creditor
alleging that Company is Insolvent, Trustee shall have no duty to inquire
whether Company is Insolvent. Trustee may in all events rely on such
evidence concerning Company's solvency as may be furnished to Trustee and
that provides Trustee with a reasonable basis for making a determination
concerning Company's solvency.
(c) If at any time Trustee has determined that Company is
Insolvent, Trustee shall discontinue payments to Plan participants or their
beneficiaries and shall hold the assets of the Trust for the benefit of
Company's general creditors. Nothing in this Trust Agreement shall in any
way diminish any rights of Plan participants or their beneficiaries to
pursue their rights as general creditors of Company with respect to
benefits due under the Plan or otherwise.
(d) Trustee shall resume the payment of benefits to Plan
participants or their beneficiaries in accordance with Article 2 of this
Trust Agreement only after Trustee has determined that Company is not
Insolvent (or is no longer Insolvent).
3.3 MAKE UP OF SUSPENDED BENEFITS AFTER INSOLVENCY. Provided that
there are sufficient assets, if Trustee discontinues the payment of benefits
from the Trust pursuant to Section 3.2 hereof and subsequently resumes such
payments, the first payment following such discontinuance shall include the
aggregate amount of all payments due to Plan participants or their beneficiaries
under the terms of the Plan for the period of such discontinuance, less the
aggregate amount of any payments made to Plan participants or their
beneficiaries by Company in lieu of the payments provided for hereunder during
any such period of discontinuance.
ARTICLE 4
PAYMENTS TO COMPANY
4.1 NO RETURN OF ASSETS TO COMPANY PRIOR TO PAYMENT OF BENEFITS.
Except as provided in Article 3 hereof, after the Trust has become irrevocable,
Company shall have no right or power to direct Trustee to return to Company or
to divert to others any of the Trust assets before all payments of benefits have
been made to Plan participants and their beneficiaries pursuant to the terms of
the Plan.
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4.2 COMPANY MAY SUBSTITUTE OTHER PROPERTY FOR TRUST ASSETS. Company
shall have the power to reacquire part or all of the assets or collateral held
in the Trust at any time, by simultaneously substituting for it other readily
marketable property of equivalent value, net of any costs of disposition. The
property which is substituted may not be less liquid or marketable or less well
secured than the property for which it is substituted, as determined by Trustee.
Such power is exercisable in a nonfiduciary capacity and may be exercised
without the approval or consent of participants or any other person. The value
of any insurance contract for purposes of substitution shall be the present
value of future projected cash flow or benefits payable under the contract, but
not less than the cash surrender value. The projection shall include death
benefits based on reasonable mortality assumptions, including facts specifically
related to the health of the insured and the terms of the contract to be
reacquired. Values shall be reasonably determined by Trustee and may be based
on the determination of qualified independent parties or experts. Trustee shall
have the right to secure confirmation of value by a qualified independent party
or expert for all property to be substituted for other property hereunder.
ARTICLE 5
POWERS OF TRUSTEE
5.1 INVESTMENT POLICY. Company shall establish and provide to
Trustee an "Investment Policy" setting forth permitted investments for the
Trust. Prior to a Change in Control, Company may revise this Investment Policy
from time to time and Trustee shall invest the Trust assets in investments
authorized under the Investment Policy, in accordance with written directions of
Company. After a Change in Control, the Participant Committee shall approve or
revise the Investment Policy and shall direct Trustee with regard to investment
of Trust assets. Trustee shall be fully protected in acting upon or complying
with any investment objectives, guidelines, restrictions or directions provided
by Company or the Participant Committee in accordance with this paragraph.
If Trustee does not receive instructions from Company prior to a
Change in Control, or from a Participant Committee after a Change in Control,
for the investment of part or all of the Trust assets for a period of at least
sixty (60) days, Trustee shall invest and reinvest the liquid assets of the
Trust as Trustee may deem appropriate, in its sole discretion, in investments
permitted under the Investment Policy as previously furnished to Trustee.
Trustee is hereby specifically authorized to invest in any common or pooled
investment fund or mutual fund (within the types of investments permitted under
the Investment Policy), now or hereafter maintained by Trustee, or an affiliate
of Trustee, and any interest-bearing savings or deposit accounts with the
banking department of Trustee, or an affiliate of Trustee.
5.2 ADMINISTRATIVE POWERS. Subject in all respects to applicable
provisions of this Trust Agreement and the Plan, Trustee shall have the rights,
powers and privileges of an absolute owner when dealing with property of the
Trust, including, without limiting the generality of the foregoing, the powers
listed below:
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(a) To sell, convey, transfer, exchange, partition, lease, and
otherwise dispose of any of the assets of the Trust at any time held by
Trustee under this Trust Agreement.
(b) To exercise any option, conversion privilege or subscription
right given the trustee as the owner of any security held in the Trust; to
vote any corporate stock either in person or by proxy, with or without
power of substitution; to consent to or oppose any reorganization,
consolidation, merger, readjustment of financial structure, sale, lease or
other disposition of the assets of any corporation or other organization,
the securities of which may be an asset of the Trust; to take any action in
connection therewith and receive and retain any securities resulting
therefrom.
(c) To cause any property of the Trust to be issued, held or
registered in the name of Trustee as trustee, or in the name of one or more
of its nominees, or one or more nominees of any system for the central
handling of securities, or in such form that title will pass by delivery,
provided that the records of Trustee shall in all events indicate the true
ownership of such property.
(d) To renew or extend the time of payment of any obligation due
or to become due.
(e) To commence or defend lawsuits or legal or administrative
proceedings; to compromise, arbitrate or settle claims, debts or damages in
favor of or against the Trust; to deliver or accept, in either total or
partial satisfaction of any indebtedness or other obligation, any property;
to continue to hold for such period of time as Trustee may deem appropriate
any property so received; and to pay all costs and reasonable attorneys'
fees in connection therewith out of the assets of the Trust.
(f) To manage any real property in the Trust in the same manner
as if Trustee were the absolute owner thereof.
(g) To borrow money from any person in such amounts upon such
terms and conditions and for such purposes as Trustee, in its discretion,
may deem appropriate; in connection therewith to pledge or mortgage any
Trust asset as security; to lend money on a secured or unsecured basis to
any person other than a party in interest.
(h) To hold such part of the assets of the Trust uninvested for
such limited periods of time as may be necessary for purposes of orderly
account administration or pending required directions, without liability
for payment of interest.
(i) To determine how all receipts and disbursements shall be
credited, charged or apportioned as between income and principal.
(j) To dispose of any property in the Trust and to enforce any
note or obligations of Company to the Trust (and foreclose on any
collateral securing such notes, subject to the terms of any pledge
agreement to Trustee) in the event Company fails to
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make required contributions to the Trust after sixty (60) days' written
notice to Company of its failure to make such required contributions.
(k) Generally to do all acts, whether or not expressly
authorized, which Trustee may deem necessary or desirable for the orderly
administration or protection of the Trust.
5.3 NO INVESTMENT IN COMPANY SECURITIES. In no event may Trustee
invest in securities (including stock or rights to acquire stock) or obligations
issued by Company, other than a de minimis amount held in common investment
vehicles in which Trustee invests. All rights associated with assets of the
Trust shall be designated by Trustee, and shall in no event be exercisable by or
rest with Plan participants.
5.4 LIMITATION WITH RESPECT TO INSURANCE POLICIES. Trustee shall
have, without exclusion, all powers conferred on Trustees by applicable law,
unless expressly provided otherwise herein; provided, however, that if an
insurance policy is held as an asset of the Trust, Trustee shall have no power
to name a beneficiary of the policy other than the Trust, to assign the policy
(as distinct from conversion of the policy to a different form) other than to a
successor Trustee, or to loan to any person the proceeds of any borrowing
against such policy.
5.5 LIMITATION WITH RESPECT TO COMPANY AS A BUSINESS.
Notwithstanding any powers granted to Trustee pursuant to this Trust Agreement
or to applicable law, Trustee shall not have any power that could give this
Trust the objective of carrying on a business and dividing the gains therefrom,
within the meaning of Section 301.7701-2 of the Procedure and Administrative
Regulations promulgated pursuant to the Internal Revenue Code.
ARTICLE 6
DISPOSITION OF INCOME
During the term of this Trust, all income received by the Trust,
net of expenses and taxes, shall be accumulated and reinvested.
ARTICLE 7
ACCOUNTING BY TRUSTEE
Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between
Company and Trustee. Such records shall be open to inspection by Company at all
reasonable times. Within sixty (60) days following the close of each calendar
year and within sixty (60) days after the removal or resignation of Trustee,
Trustee shall deliver to Company a written account of its administration of the
Trust during such year or during the period from the close of the last preceding
year to the date of such removal or resignation, setting forth all investments,
receipts, disbursements and other
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transactions effected by it, including a description of all securities and
investments purchased and sold with the cost or net proceeds of such
purchases or sales (accrued interest paid or receivable being shown
separately), and showing all cash, securities and other property held in the
Trust at the end of such year or as of the date of such removal or
resignation, as the case may be. After a Change in Control the Participant
Committee shall have the same rights of inspection of Company and Trustee
shall deliver a copy of its written account to the Participant Committee as
well as to Company.
ARTICLE 8
RESPONSIBILITY OF TRUSTEE
8.1 FIDUCIARY RESPONSIBILITY. Trustee shall act with the care,
skill, prudence and diligence under the circumstances then prevailing that a
prudent person acting in like capacity and familiar with such matters would use
in the conduct of an enterprise of a like character and with like aims;
provided, however, that Trustee shall incur no liability to any person for any
action taken pursuant to a direction, request or approval given by Company or
the Participant Committee which is contemplated by, and in conformity with, the
terms of the Plan or this Trust and is given in writing by Company.
8.2 DISPUTED CLAIMS. In the event of a dispute between Company and
any participant or beneficiary, Trustee may decide such claim and give notice to
Company and the participant or beneficiary of its decision on the claim. Either
party shall then have sixty (60) days from the receipt of such Trustee notice to
make a demand for arbitration, in writing, to Trustee, the opposing party, and
the American Arbitration Association. If no such demand is made after such
sixty (60) day period, the decision of Trustee shall become final and binding on
all parties. Trustee may decline to decide a claim and may submit such claim
directly to arbitration by providing notice of demand for arbitration in writing
to Company, the relevant participant or beneficiary and the American Arbitration
Association.
8.3 ARBITRATION. Any claim, dispute or other matter in question
arising out of or related to this Trust Agreement shall be resolved by binding
arbitration in accordance with the California Employment Dispute and Resolution
Rules of the American Arbitration Association. The decision of the arbitrators
shall be final and may be enforced in any court of competent jurisdiction. The
fees and expenses (including reasonable attorneys' fees) incurred in the
arbitration shall be paid as directed by the arbitrator. However, all of
Trustee's fees and expenses incurred in any arbitration or enforcement
proceeding to resolve a dispute between Company and a participant or
beneficiary shall be allowed as an administrative expense of the Trust.
8.4 LEGAL COUNSEL. Trustee may consult with legal counsel (who may
also be counsel for Company generally) with respect to any of its duties or
obligations hereunder.
8.5 EXPERTS. Trustee may hire agents, accountants, actuaries,
investment advisors, financial consultants or other professionals to assist it
in performing any of its duties or obligations hereunder.
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ARTICLE 9
COMPENSATION AND EXPENSES OF TRUSTEE
Trustee shall be reimbursed for all reasonable expenses and shall be
paid a reasonable fee fixed by agreement with Company from time to time. No
increase in the fee shall be effective before sixty (60) days after Trustee
gives notice to Company of the increase. Trustee shall notify Company
periodically of expenses and fees. Company shall pay trustee and other
administrative and valuation fees and expenses.
ARTICLE 10
RESIGNATION AND REMOVAL OF TRUSTEE
10.1 RESIGNATION. Trustee may resign at any time by written notice to
Company, which shall be effective sixty (60) days after receipt of such notice
unless Company and Trustee agree otherwise. If Trustee resigns, Company shall
select a successor Trustee in accordance with the provisions of Section 11.1
hereof, subject to the approval of the Participant Committee in the event of a
Change in Control prior to the effective date of Trustee's resignation or
removal.
10.2 REMOVAL. Trustee may be removed by Company at any time prior to
a Change in Control on sixty (60) days' notice or upon shorter notice accepted
by Trustee. On or after a Change in Control, Trustee may be removed by the
Participant Committee on sixty (60) days' notice or upon shorter notice accepted
by Trustee. If Trustee is removed, a successor shall be appointed, in
accordance with Section 11.2 hereof, by the effective date of removal. If no
such appointment has been made, Trustee may apply to a court of competent
jurisdiction for instructions. All expenses of Trustee in connection with the
proceeding shall be allowed as administrative expenses of the Trust.
10.3 TRANSFER OF ASSETS. Upon resignation or removal of Trustee
and appointment of a successor Trustee, all assets shall subsequently be
transferred to the successor Trustee. The transfer shall be completed within
ninety (90) days after receipt of notice of resignation, removal or transfer,
unless Company extends the time limit.
ARTICLE 11
APPOINTMENT OF SUCCESSOR
11.1 ON RESIGNATION OF TRUSTEE. If Trustee resigns pursuant to the
provisions of Section 10.1 hereof, Company may appoint any third party such as
a bank trust department or other party that may be granted corporate trustee
powers under state law. The appointment of a successor Trustee shall be
effective when accepted in writing by the new Trustee. The new Trustee shall
have all the rights and powers of the former Trustee, including ownership rights
in
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Trust assets. The former Trustee shall execute any instrument necessary or
reasonably requested by the successor Trustee to evidence the transfer.
11.2 ON REMOVAL OF TRUSTEE. If Trustee is removed in accordance with
Section 10.2 hereof, Company or the Participant Committee having the authority
to make such removal may appoint any third party, such as a bank trust
department or other party that may be granted corporate trustee powers under
state law, as a successor to replace Trustee upon resignation or removal. The
appointment shall be effective when accepted in writing by the new Trustee, who
shall have all of the rights and powers of the former Trustee, including
ownership rights in the Trust assets. The former Trustee shall execute any
instrument necessary or reasonably requested by Company, the Participant
Committee or the successor Trustee to evidence the transfer.
11.3 RESPONSIBILITY OF SUCCESSOR TRUSTEE. The successor Trustee need
not examine the records and acts of any prior Trustee and may retain or dispose
of existing Trust assets, subject to the terms of this Trust Agreement. The
successor Trustee shall not be responsible for and Company shall indemnify and
defend the successor Trustee from any claim or liability resulting from any
action or inaction of any prior Trustee or from any other past event, or any
condition existing at the time it becomes successor Trustee.
ARTICLE 12
AMENDMENT OR TERMINATION
12.1 AMENDMENT. Prior to a Change in Control, this Trust Agreement
may be amended by a written instrument executed by Trustee and Company. After a
Change in Control this Trust Agreement may only be amended by a written
instrument executed by Trustee, Company and the Participant Committee.
Notwithstanding the foregoing, no such amendment shall conflict with the terms
of the Plan or shall make the Trust revocable.
12.2 TERMINATION. The Trust shall not terminate until the date on
which Plan participants and their beneficiaries are no longer entitled to
benefits pursuant to the terms of the Plan. Upon termination of the Trust any
assets remaining in the Trust shall be returned to Company. Notwithstanding
the foregoing, upon written approval of all participants or beneficiaries
entitled to payment of benefits pursuant to the terms of the Plan, Company may
terminate this Trust prior to the time all benefit payments under the Plan have
been made. All assets in the Trust at termination shall be returned to Company.
ARTICLE 13
MISCELLANEOUS
13.1 SEVERABILITY. Any provision of this Trust Agreement prohibited
by law shall be ineffective to the extent of any such prohibition, without
invalidating the remaining provisions hereof.
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13.2 Benefits payable to Plan participants and their beneficiaries
under this Trust Agreement may not be anticipated, assigned (either at law or in
equity), alienated, pledged, encumbered or subjected to attachment, garnishment,
levy, execution or other legal or equitable process.
13.3 This Trust Agreement shall be governed by and construed in
accordance with the laws of California.
ARTICLE 14
DEFINITIONS
14.1 CHANGE IN CONTROL shall mean either: (a) the dissolution or
liquidation of Company; (b) a reorganization, merger or consolidation of Company
with one or more corporations as a result of which Company is not the surviving
corporation; (c) approval by the stockholders of Company of any sale, lease,
exchange or other transfer (in one or a series of transactions) of all or
substantially all of the assets of Company; or (d) approval by the stockholders
of Company of any merger or consolidation of Company in which the holders of the
voting stock of Company immediately before the merger or consolidation will not
own fifty percent (50%) or more of the voting shares of the continuing or
surviving corporation immediately after such merger or consolidation. For
purposes of this Trust Agreement, a Change in Control shall be deemed to have
occurred when Trustee makes a determination to that effect on its own
initiative, or upon receipt by Trustee of written notice to that effect from
Company. As provided in Section 1.1 of this Trust Agreement, the uncured
failure of the Company to make required contributions to the Trust shall be
considered a Change in Control for purposes of this Trust Agreement.
14.2 EFFECTIVE DATE. The effective date of this Trust Agreement
shall be September 1, 1996.
14.3 INSOLVENT/INSOLVENCY shall have the meaning given to such term
in Section 3.1 of this Agreement.
14.4 INVESTMENT POLICY shall mean the investment policy provided by
Company or the Participant Committee to Trustee pursuant to Section 5.1 of this
Trust Agreement.
14.5 PAYMENT SCHEDULE shall have the meaning given to such term in
Section 2.1 of this Trust Agreement.
14.6 PARTICIPANT COMMITTEE shall mean the committee of three (3)
participants established after a Change in Control to establish the Investment
Policy and direct Trustee pursuant to the terms of this Trust Agreement. Such
committee shall consist of participants who shall be nominated and elected upon
a Change in Control and annually thereafter by the individual participants
having an interest in the Trust assets as of the date of such election.
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14.7 PAYMENT SCHEDULE shall have the meaning given to such term in
Section 2.1 of this Trust Agreement.
IN WITNESS WHEREOF, the parties hereto have executed and entered
into this Agreement as of the effective date in Section 14.2 hereof.
COMPANY: COASTCAST CORPORATION
By /s/ Richard W. Mora
-------------------
Its President & COO
-----------------
TRUSTEE: IMPERIAL TRUST COMPANY
By /s/ David W. Stein
-------------------
Its Vice President
-----------------
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<PAGE>
EXHIBIT A
ANNUAL CONTRIBUTIONS TO BE MADE BY COMPANY TO TRUST
9/1/96 $2,026,000
- ------
1997 $2,026,000
- ----
1998 $2,026,000
- ----
1999 $2,026,000
- ----
2000 $2,026,000
- ----
2001 $2,026,000
- ----
2002 $2,026,000
- ----
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<PAGE>
COASTCAST CORPORATION
COMPUTATION OF PER SHARE EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
---------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Common stock outstanding at beginning of period 8,788,499 9,091,994 8,734,694 9,091,994
Repurchase of common stock (13,100) - (13,800) -
Exercise of options 2,491 - 56,996 -
-------------- -------------- -------------- --------------
Common stock outstanding at end of period 8,777,890 9,091,994 8,777,890 9,091,994
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Weighted average shares outstanding 8,788,476 9,091,994 8,771,111 9,091,994
Dilutive effect of stock options after
application of treasury stock method 298,858 49,053 292,965 56,087
-------------- -------------- -------------- --------------
Total 9,087,334 9,141,047 9,064,076 9,148,081
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Net income $ 4,867,000 $ 41,000 $ 13,389,000 $ 3,787,000
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Net income per common and common
equivalent share $ .54 $ .00 $ 1.48 $ .41
------- ------- -------- -------
</TABLE>
Exhibit 11.1
36
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 16,639
<SECURITIES> 2,554
<RECEIVABLES> 12,924
<ALLOWANCES> 400
<INVENTORY> 18,720
<CURRENT-ASSETS> 55,241
<PP&E> 33,947
<DEPRECIATION> 14,296
<TOTAL-ASSETS> 76,844
<CURRENT-LIABILITIES> 12,259
<BONDS> 0
0
0
<COMMON> 37,869
<OTHER-SE> 26,605
<TOTAL-LIABILITY-AND-EQUITY> 76,844
<SALES> 113,347
<TOTAL-REVENUES> 113,347
<CGS> 84,439
<TOTAL-COSTS> 84,439
<OTHER-EXPENSES> 7,052
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 22,702
<INCOME-TAX> 9,313
<INCOME-CONTINUING> 13,389
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,389
<EPS-PRIMARY> 1.48
<EPS-DILUTED> 0
</TABLE>
