COASTCAST CORP, 10-Q, 1997-08-12

COASTCAST CORP
10-Q, 1997-08-12
NONFERROUS FOUNDRIES (CASTINGS)

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<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 June 30, 1997

[ ] 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 August 11, 1997 there were outstanding 8,794,334 shares of common stock, no
par value.

<PAGE>

COASTCAST CORPORATION
INDEX

Page
Number
------
<S> <C>
PART I. FINANCIAL INFORMATION:

Item 1. Financial Statements

Condensed Consolidated Balance Sheets as of June 30, 1997 (Unaudited) and
December 31, 1996 3

Condensed Consolidated Statements of Income
Three Months Ended June 30, 1997 and 1996 (Unaudited) 4
Six Months Ended June 30, 1997 and 1996 (Unaudited) 5

Condensed Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 1997 and 1996 (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 1. Legal Proceedings 11

Item 4. Submission of Matter to a Vote of Securities Holders 11

Item 5. Other Information 11

Item 6. Exhibits and Reports on Form 8-K 12

</TABLE>

<PAGE>

COASTCAST CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, DECEMBER 31,
1997 1996
------------- --------------
<S> <C> <C>
A S S E T S
Current assets:
Cash and cash equivalents $ 13,913,000 $ 14,060,000
Trade accounts receivable, net of allowance for doubtful
accounts of $400,000 at June 30, 1997
and December 31, 1996 17,921,000 11,783,000
Inventories (Note 2) 26,703,000 21,660,000
Prepaid expenses and other current assets 1,372,000 4,800,000
Deferred income taxes 864,000 864,000
Net current assets of discontinued operations (Note 3) 838,000 808,000
------------- -------------
Total current assets 61,611,000 53,975,000
Property, plant and equipment, net 19,831,000 20,171,000
Other assets 2,016,000 1,954,000
------------- -------------
$ 83,458,000 $ 76,100,000
------------- -------------
------------- -------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,690,000 $ 5,043,000
Accrued liabilities 5,860,000 4,132,000
------------- -------------
Total current liabilities 11,550,000 9,175,000
Deferred compensation 1,067,000 438,000
------------- -------------
Total liabilities 12,617,000 9,613,000
------------- -------------
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;
8,794,334 and 8,777,890 shares issued and
outstanding as of June 30, 1997 and
December 31, 1996 respectively 38,545,000 38,205,000
Retained Earnings 32,296,000 28,282,000
------------- -------------
Total shareholders' equity 70,841,000 66,487,000
------------- -------------
$ 83,458,000 $ 76,100,000
------------- -------------
------------- -------------

</TABLE>

See accompanying notes to condensed consolidated financial statements.

<PAGE>

COASTCAST CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED JUNE 30,
-----------------------------
1997 1996
------------- -------------
<S> <C> <C>

Sales $ 39,938,000 $ 42,508,000
Cost of sales 31,956,000 30,933,000
------------- -------------
Gross profit 7,982,000 11,575,000
Selling, general and administrative expenses 3,278,000 3,188,000
------------- -------------
Income from operations 4,704,000 8,387,000
Other income, net 203,000 240,000
------------- -------------
Income before income taxes 4,907,000 8,627,000
Provision for income taxes 2,091,000 3,623,000
------------- -------------
Net income $ 2,816,000 $ 5,004,000
------------- -------------
------------- -------------
NET INCOME PER SHARE
Net income (Note 4) $ 0.32 $ 0.55
------------- -------------
------------- -------------
WEIGHTED AVERAGE SHARES OUTSTANDING 8,882,380 9,174,891
------------- -------------
------------- -------------

</TABLE>
See accompanying notes to condensed consolidated financial statements.

<PAGE>

COASTCAST CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
-----------------------------
1997 1996
------------- -------------
<S> <C> <C>

Sales $ 68,939,000 $ 71,852,000
Cost of sales 56,932,000 52,496,000
------------- -------------
Gross profit 12,007,000 19,356,000
Selling, general and administrative expenses 5,462,000 5,374,000
------------- -------------
Income from operations 6,545,000 13,982,000
Other income, net 375,000 608,000
------------- -------------
Income before income taxes 6,920,000 14,590,000
Provision for income taxes 2,906,000 6,068,000
------------- -------------
Net income $ 4,014,000 $ 8,522,000
------------- -------------
------------- -------------
NET INCOME PER SHARE
Net income (Note 4) $ 0.45 $ 0.94
------------- -------------
------------- -------------
WEIGHTED AVERAGE SHARES OUTSTANDING 8,919,098 9,052,352
------------- -------------
------------- -------------

</TABLE>

See accompanying notes to condensed consolidated financial statements.

<PAGE>

COASTCAST CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
-----------------------------
1997 1996
------------- -------------
<S> <C> <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 4,014,000 $ 8,522,000
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 1,411,000 1,113,000
Loss on disposal of machinery and equipment 45,000 55,000
Change in accrual for disposal of aerospace business (52,000) (115,000)
Deferred compensation 629,000 --
Deferred income taxes 22,000 50,000
Changes in operating assets and liabilities:
Trade accounts receivable (6,138,000) (11,450,000)
Inventories (5,043,000) (8,620,000)
Prepaid expenses and other current assets 3,428,000 210,000
Income taxes payable 603,000 1,783,000
Accounts payable and accrued liabilities 1,772,000 3,557,000
------------- -------------
Net cash provided by (used in)
operating activities 691,000 (4,895,000)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net sales of short-term investments -- 10,088,000
Purchase of property, plant and equipment (1,124,000) (4,775,000)
Proceeds from disposal of machinery and equipment 8,000 --
Other assets (62,000) (55,000)
------------- -------------
Net cash (used in) provided by
investing activities (1,178,000) 5,258,000
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock upon exercise
of options, including related tax benefit 206,000 806,000
Non-employee director stock options 134,000 135,000
Repurchase of common stock -- (7,000)
------------- -------------
Net cash provided by financing activities 340,000 934,000
------------- -------------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (147,000) 1,297,000
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 14,060,000 9,237,000
------------- -------------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 13,913,000 $ 10,534,000
------------- -------------
------------- -------------

See accompanying notes to condensed consolidated financial statements.

</TABLE>

<PAGE>

COASTCAST CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. BASIS OF PRESENTATION

The condensed consolidated balance sheet as of June 30, 1997, the
related condensed consolidated statements of income for the three and
six months and cash flows for the six months ended June 30, 1997 and
1996 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 June 30, 1997 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, 1996 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, 1996. 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 June 30, 1997 are not
necessarily indicative of the results for the full year.

2. INVENTORIES

Inventories consisted of the following:

<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- -----------
<S> <C> <C>
Raw materials and supplies $13,048,000 $10,448,000
Tooling 298,000 294,000
Work-in-process 12,797,000 9,792,000
Finished goods 560,000 1,126,000
----------- -----------
$26,703,000 $21,660,000
----------- -----------
----------- -----------

</TABLE>

3. DISCONTINUED OPERATIONS

<PAGE>

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.

In February, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128, EARNINGS
PER SHARE, which the Company will adopt in its annual financial
statements for the year ended December 31, 1997. The Statement
replaces the presentation of primary EPS with a presentation of basic
EPS, which excludes dilution and is computed by dividing income
available to common stockholders by the weighted average number of
common shares outstanding for the period. The Statement also requires
the dual presentation of basic and diluted EPS on the face of the
income statement for all entities with complex capital structures and
requires a reconciliation of the numerator and denominator of the
basic EPS computation to the numerator and denominator of the diluted
EPS computation. Diluted EPS is computed similarly to fully diluted
EPS pursuant to Accounting Principles Board Opinion No. 15.

The Company has determined that the effect of adopting SFAS No. 128
would not have a material effect on the Company's financial statements
for the three months and six months ended June 30, 1997.

<PAGE>

COASTCAST CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Sales decreased 6.1% and 4.2% to $39.9 million and $68.9 million for
the three months and six months ended June 30, 1997, respectively,
from $42.5 million and $71.9 million for the three months and six
months ended June 30, 1996, respectively. The decrease was primarily
due to a change in the revenue mix from a preponderance of metal woods
to irons and putters, which have lower unit sales prices than metal
wood clubheads.

Gross profit decreased 31.0% and 38.0% to $8.0 million and $12.0
million for the three months and six months ended June 30, 1997,
respectively, from $11.6 million and $19.4 million for the three
months and six months ended June 30, 1996. Gross profit margins
decreased to 20.0% and 17.4% for the three months and six months
ended June 30, 1997 respectively, from 27.2% and 26.9% for the
comparable prior year periods, due principally to the shift in
production to irons and putters.

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 June 30, 1997 were $838,000, principally
consisting of the estimated net realizable value of the Wallingford,
Connecticut property including the related deferred tax asset.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash and cash equivalents position at June 30, 1997 was
$13.9 million compared to $14.1 million on December 31, 1996, a
decrease of $0.2 million. Net cash provided by operating activities
was $0.7 million for the six months ended June 30, 1997. The net cash
provided by operating activities consisted of net income of $4.0
million, a decrease in prepaid expenses and other current assets of
$3.4 million, an increase in accounts payable and accrued liabilities
of $1.8 million, depreciation and amortization of $1.4 million, and an
increase in deferred compensation of $0.6 million, partially offset by
an increase in trade accounts receivable of $6.1 million and an
increase in inventories of $5.0 million. Net cash used in investing
activities consisted mainly of $1.1 million of net capital
expenditures for the six

<PAGE>

months ended June 30, 1997. Net cash provided by financing activities of
$0.3 million consisted mainly of proceeds from exercise of stock options.

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 should be adequate to meet its
financing requirements for the foreseeable future.

<PAGE>

COASTCAST CORPORATION

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Certain government agencies have asserted claims that for a period of
time the Company did not comply with all applicable regulations
regarding certain materials they regard as hazardous waste. The
Company does not admit to any wrongdoing, but has agreed in principle
to a settlement. Management believes that the settlement will not
have a material adverse impact on the Company's financial condition or
results of operations.

Item 4. Submission of Matter to a Vote of Securities Holders

The Company held its annual meeting of shareholders on June 11, 1997.
The following matters were voted and approved by the shareholders.

1. Election of Directors to hold office until the 1997 Annual Meeting:

<TABLE>
<CAPTION>
Votes For Votes Withheld
--------- --------------
<S> <C> <C>
Hans H. Buehler 7,734,891 68,776
George L. Graziadio 7,725,713 77,854
Edwin A. Levy 7,731,241 72,426
Vernon R. Loucks, Jr. 7,730,841 72,826
Lee E. Mikles 7,725,337 78,330
Richard W. Mora 7,727,491 76,176
Paul A. Novelly 7,731,241 72,426

</TABLE>

2. Ratification of Deloitte & Touche LLP as the Company's
independent auditors: holders of 7,759,617 shares voted for such
ratification, holders of 32,460 shares voted against such ratification
and holders of 11,540 shares abstained from voting on such
ratification.

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, 1996, are hereby
incorporated by reference as though set forth fully herein:

Customer concentration
Competition
New products
New materials and processes
Manufacturing cost variations
Dependence on polishing and finishing plant in Mexico

<PAGE>

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) Exhibits:

3.1.1 Articles of Incorporation of the Company, as
amended (1)
3.1.2 Certificate of Amendment of Articles of
Incorporation filed with the California Secretary
of State on December 6, 1993 (1)
3.2 Bylaws of the Company (1)

(1) Incorporated by reference to the exhibits to
the Registration Statement on Form S-1
(Registration No. 33-71294) filed on
November 17, 1993, Amendment No. 2 filed on
December 1, 1993, and Amendment No. 3 filed on
December 9, 1993

10.1 Amended and Restated Coastcast Corporation 401(k)
Retirement Plan, effective January 1, 1997

11.1 Statement re: computation of per share earnings

99.1 Pages 10-12 of Registrant's Annual Report on Form
10-K for the year ended December 31, 1996
(incorporated by reference to such Form 10-K filed
with the Commission)

(b) Reports on Form 8-K:

None

<PAGE>

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

August 11, 1997 By /s/ Robert C. Bruning
- -------------------- ------------------------
Dated Robert C. Bruning
Chief Financial Officer (Duly Authorized
and Principal Financial Officer)

<PAGE>

ADOPTION AGREEMENT FOR

REGIS RETIREMENT PLAN SERVICES, INC.
NON-STANDARDIZED 401(k) PROFIT SHARING
PLAN AND TRUST

The undersigned Employer adopts the Regis Retirement Plan Services, Inc.
Non-Standardized 401(k) Profit Sharing Plan for those Employees who shall
qualify as Participants hereunder, to be known as the

A1 COASTCAST CORPORATION 401(k) RETIREMENT PLAN

It shall be effective as of the date specified below. The Employer hereby
selects the following Plan specifications:

CAUTION: The failure to properly fill out this Adoption Agreement may result in
disqualification of the Plan.

EMPLOYER INFORMATION

B1 Name of Employer COASTCAST CORPORATION

B2 Address 3025 EAST VICTORIA STREET
RANCHO DOMINGUEZ CA 90221

Telephone (310) 532-2060

B3 Employer Identification Number 95 - 345926

B4 Date Business Commenced 1/28/80

B5 TYPE OF ENTITY

a. / / S Corporation
b. / / Professional Service Corporation
c. /X/ Corporation
d. / / Sole Proprietorship
e. / / Partnership
f. / / Other _

AND, is the Employer is a member of . . .

g. a controlled group? / / Yes /X/ No
h. an affiliated service group? / / Yes /X/ No

<PAGE>

B6 NAME(S) OF TRUSTEE(S) a. FLEET NATIONAL BANK

b. _

c. _

B7 TRUSTEES' ADDRESS a. / / Use Employer Address
b. /X/ ONE FEDERAL STREET
BOSTON, MA 02211

B8 LOCATION OF EMPLOYER'S PRINCIPAL OFFICE:
a. /X/ State b. / / Commonwealth of c. CALIFORNIA and this Plan and
Trust shall be governed under the same.

B9 EMPLOYER FISCAL YEAR means the 12 consecutive month period:

Commencing on a. JANUARY 1 (e.g., January 1st) and ending on b. DECEMBER 31

<PAGE>

PLAN INFORMATION

C1 EFFECTIVE DATE

This Adoption Agreement of the Regis Retirement Plan Services, Inc.
Non-Standardized 401(k) Profit Sharing Plan and Trust shall:

a. / / establish a new Plan and Trust effective as of _ (hereinafter
called the "Effective Date").

b. /X/ constitute an amendment and restatement in its entirety of a
previously established qualified Plan and Trust of the Employer
which was effective 1/1/96 (hereinafter called the "Effective
Date"). Except as specifically provided in the Plan, the
effective date of this amendment and restatement is 4/1/97(For
TRA '86 amendments, enter the first day of the first Plan Year
beginning in 1989).

C2 PLAN YEAR means the 12 consecutive month period:

Commencing on a. JANUARY 1, and ending on b. DECEMBER 31.

IS THERE A SHORT PLAN YEAR?

c. /X/ No
d. / / Yes, beginning _

and ending .

C3 ANNIVERSARY DATE of Plan (Annual Valuation Date)

a. DECEMBER

C4 PLAN NUMBER assigned by the Employer (select one)

a. / /001 b. /X/002 c. / /003 d. / /Other_

<PAGE>

C5 NAME OF PLAN ADMINISTRATOR (Document provides for the Employer to appoint
an Administrator. If none is named, the Employer will become the
Administrator.)

a. /X/ Employer (Use Employer Address)
b. / / Name _

Address _

_, _ _

Telephone _

Administrator's I.D. Number -

C6 PLAN'S AGENT FOR SERVICE OF LEGAL PROCESS

a. /X/ Employer (Use Employer Address)

b. / / Name_

Address

_, _ _

<PAGE>

ELIGIBILITY, VESTING AND RETIREMENT AGE

Dl ELIGIBLE EMPLOYEES (Plan Section 1.15) shall mean:

a. / / all Employees who have satisfied the eligibility requirements.

b. /X/ all Employees who have satisfied the eligibility requirements
except those checked below:
1. / / Employees paid by commissions only.
2. / / Employees hourly paid.
3. / / Employees paid by salary.
4. /X/ Employees whose employment is governed by a collective
bargaining agreement between the Employer and "employee
representatives" under which retirement benefits were the
subject of good faith bargaining. For this purpose, the term
"employee representatives" does not include any organization
more than half of whose members are employees who are
owners, officers, or executives of the Employer.
5. / / Highly Compensated Employees.
6. /X/ Employees who are non-resident aliens who received no earned
income (within the meaning of Code Section 911 (d)(2)) from
the Employer which constitutes income from sources within
the United States (within the meaning of Code Section 861
(a)(3)).
7. / / Other_

NOTE: For purposes of this section, the term Employee shall
include all Employees of this Employer and any leased
employees deemed to be Employees under Code Section 414 (n)
or 414 (o).

D2 EMPLOYEES OF AFFILIATED EMPLOYERS (Plan Section 1.16)

Employees of Affiliated Employers:

a. /X/ will not or N/A
b. / / will

be treated as Employees of the Employer adopting the Plan.

NOTE: If D2b is elected, each Affiliated Employer should execute this
Adoption Agreement as a Participating Employer.

5
<PAGE>

D3 HOURS OF SERVICE (Plan Section 1.31) will be determined on the basis of the
method selected below. Only one method may be selected. The method selected
will be applied to all Employees covered under the Plan.

a. /X/ On the basis of actual hours for which an Employee is paid or
entitled to payment.

b. / / On the basis of days worked. An Employee will be credited with
ten (10) Hours of Service if under the Plan such Employee would
be credited with at least one (1) Hour of Service during the day.

c. / / On the basis of weeks worked. An Employee will be credited
forty-five (45) Hours of Service if under the Plan such Employee
would be credited with at least one (1) Hour of Service during
the week.

d. / / On the basis of semi-monthly payroll periods. An Employee will be
credited with ninety-five (95) Hours of Service if under the Plan
such Employee would be credited with at least one (1) Hour of
Service during the semi-monthly payroll period.

e. / / On the basis of months worked. An Employee will be credited with
one hundred ninety (190) Hours of Service if under the Plan such
Employee would be credited with at least one (1) Hour of Service
during the month.

D4 YEARS OF SERVICE

a. / / 1,000 Hour Method
b. /X/ Elapsed Time Method

<PAGE>

D5 CONDITIONS OF ELIGIBILITY (Plan Section 3.1)
(Check either a OR b and c, and if applicable, d)
Any Eligible Employee will be eligible to participate in the Plan if such
Eligible Employee has satisfied the service and age requirements, if any,
specified below:

a. / / NO AGE OR SERVICE REQUIRED.

b. /X/ SERVICE REQUIREMENT. (may not exceed 1 year)

1. / / None
2. /X/ 1/2 Year of Service
3. / / 1 Year of Service
4. / / Other

NOTE: If the Year(s) of Service selected is or includes a fractional year,
an Employee will not be required to complete any specified number of
Hours of Service to receive credit for such fractional year. If
expressed in Months of Service, an Employee will not be required to
complete any specified number of Hours of Service in a particular
month.

c. /X/ AGE REQUIREMENT (may not exceed 21 )

1. / / N/A - No Age Requirement.
2. / / 20 1/2
3. /X/ 21
4. / / Other_

d. / / FOR NEW PLANS ONLY - Regardless of any of the above age or
service requirements, any Eligible Employee who was employed on
the Effective Date of the Plan shall be eligible to participate
hereunder and shall enter the Plan as of such date.

<PAGE>

D6 EFFECTIVE DATE OF PARTICIPATION (Plan Section 3.2)
An Eligible Employee shall become a Participant as of:

a. / / the first day of the Plan Year in which he met the requirements.

b. / / the first day of the Plan Year in which he met the requirements,
if he met the requirements in the first 6 months of the Plan
Year, or as of the first day of the next succeeding Plan Year if
he met the requirements in the last 6 months of the Plan Year.

c. / / the earlier of the first day of the seventh month or the first
day of the Plan Year coinciding with or next following the date
on which he met the requirements.

d. / / the first day of the Plan Year next following the date on which
he met the requirements. (Eligibility must be 1/2 Year of Service
or less and age 20 1/2 or less.)

e. / / the first day of the month coinciding with or next following the
date on which he met the requirements.

f. /X/ Other: THE FIRST DAY OF CALENDAR QUARTER COINCIDING WITH OR NEXT
FOLLOWING MEETING THE ELIGIBILITY REQUIREMENTS, provided that an
Employee who has satisfied the maximum age and service
requirements that are permissible in Section D5 above and who is
otherwise entitled to participate, shall commence participation
no later than the earlier of (a) 6 months after such requirements
are satisfied, or (b) the first day of the first Plan Year after
such requirements are satisfied, unless the Employee separates
from service before such participation date.

<PAGE>

D7 VESTING OF PARTICIPANT'S INTEREST (Plan Section 6.4(b))

The vesting schedule, based on number of Years of Service, shall be as
follows:

a. / / 100% upon entering Plan.
b. / / 0-2 years 0% c. / / 0-4 years 0%
3 years 100% 5 years 100%

d. / / 0-1 year 0% e. / / 1 year 25%
2 years 20% 2 years 50%
3 years 40% 3 years 75%
4 years 60% 4 years 100%
5 years 80%
6 years 100%

f. /X/ 1 year 20% g. / / 0-2 years 0%
2 years 40% 3 years 20%
3 years 60% 4 years 40%
4 years 80% 5 years 60%
5 years 100% 6 years 80%
7 years 100%

h. / / Other - Must be at least as liberal as either c or g above.

Years of Service Percentage

- -

9
<PAGE>

D8 FOR AMENDED PLANS (Plan Section 6.4(f)) If the vesting schedule has been
amended to a less favorable schedule, enter the pre-amended schedule
below:

a. /X/ Vesting schedule has not been amended or amended schedule is more
favorable in all years.

b. / / Years of Service Percentage

- -

10
<PAGE>

D9 TOP HEAVY VESTING (Plan Section 6.4(c)) If this Plan becomes a Top Heavy
Plan, the following vesting schedule, based on number of Years of Service,
for such Plan Year and each succeeding Plan Year, whether or not the Plan
is a Top Heavy Plan, shall apply and shall be treated as a Plan amendment
pursuant to this Plan. Once effective, this schedule shall also apply to
any contributions made prior to the effective date of Code Section 416
and/or before the Plan became a Top Heavy Plan.

a. /X/ N/A (D7a, b, d, e or f was selected)

b. / / 0-1 year 0% c. / / 0-2 years 0%
2 years 20% 3 years 100%
3 years 40%
4 years 60%
5 years 80%
6 years 100%

NOTE: This section does not apply to the Account balances of any
Participant who does not have an Hour of Service after the Plan
has initially become top heavy. Such Participant's Account
balance attributable to Employer contributions and Forfeitures
will be determined without regard to this section.

11
<PAGE>

D10 VESTING (Plan Section 6.4(h)) In determining Years of Service for vesting
purposes, Years of Service attributable to the following shall be EXCLUDED:

a. / / Service prior to the Effective Date of the Plan or a predecessor
plan.
b. /X/ N/A.
c. / / Service prior to the time an Employee attained age 18. d./X/ N/A.

D11 PLAN SHALL RECOGNIZE SERVICE WITH PREDECESSOR EMPLOYER

a. /X/ No.
b. / / Yes: Years of Service with
shall be recognized for the purpose of this Plan.

NOTE: If the predecessor Employer maintained this qualified Plan, then Years
of Service with such predecessor Employer shall be recognized pursuant
to Section 1.74 and b. must be marked.

D12 NORMAL RETIREMENT AGE ("NRA") (Plan Section 1.42) means:

a. /X/ the date a Participant attains his 65 birthday. (not to exceed
65th)
b. / / the later of the date a Participant attains his _ birthday (not to
exceed 65th) or the c. _ (not to exceed 5th) anniversary of the
first day of the Plan Year in which participation in the Plan
commenced.

D13 NORMAL RETIREMENT DATE (Plan Section 1.43) shall commence:

a /X/ as of the Participant's "NRA".

OR (must select b. or c. AND 1. or 2.)

b. / / as of the first day of the month...
c. / / as of the Anniversary Date...

1./ / coinciding with or next following the Participant's "NRA".

2./ / nearest the Participant's "NRA"

<PAGE>

D14 EARLY RETIREMENT DATE (Plan Section 1.12) means the:

a./X/ No Early Retirement provision provided.

b./ / date on which a Participant...

c./ / first day of the month coinciding with or next following the date on
which Participant...

d./ / Anniversary Date coinciding with or next following the date on which
a Participant...

AND, if b, c or d was selected...
1./ /attains his _ birthday and has

2./ /completed at least _ Years of Service.

<PAGE>

CONTRIBUTIONS, ALLOCATIONS AND DISTRIBUTIONS

E1 a. COMPENSATION (Plan Section 1.9) with respect to any Participant means:

1. / / Wages, tips and other Compensation on Form W-2.
2. /X/ Code Section 3401(a) wages.
3. / / 415 safe-harbor compensation.

b. COMPENSATION shall be

1. /X/ actually paid (must be selected if Plan is integrated)
2. / / accrued

c. HOWEVER, FOR NON-INTEGRATED plans, Compensation shall exclude (select
all that apply):

1. / / N/A. No exclusions
2. / / overtime
3. /X/ bonuses
4. / / commissions
5. /X/ other MOVING, EDUCATIONAL EXPENSES, FRINGE BENEFITS,
TERMINATION SEPARATION, SEVERANCE ALLOWANCES, EMPLOYER STOCK.

d. FOR PURPOSES OF THIS SECTION E1, Compensation shall be based on:

1. /X/ the Plan Year.
2. / / the Fiscal Year coinciding with or ending within the Plan
Year.
3. / / the Calendar Year coinciding with or ending within the Plan
Year.

NOTE: The Limitation Year shall be the same as the year on which
Compensation is based.

e. HOWEVER, for an Employee's first year of Participation, Compensation
shall be recognized as of:

1. / / the first day of the Plan Year.
2. /X/ the date the Participant entered the Plan.

f. IN ADDITION, COMPENSATION 1. /X/ shall 2. / / shall not
include compensation which is not currently includible in the
Participant's gross income by reason of the application of Code
Sections 125, 402(a)(8), 402(h)(1)(B) or 403(b).

14
<PAGE>

E2 SALARY REDUCTION ARRANGEMENT - ELECTIVE CONTRIBUTION
(Plan Section 11.2) Each Employee may elect to have his Compensation
reduced by:

a. / / _%
b. / / up to _%
c. /X/ from 1% to 15%
d. / / up to the maximum percentage allowable not to exceed the limits
of Code Sections 401(k), 404 and 415.

AND . . .

e. /X/ A Participant may elect to commence salary reductions as of THE
FIRST DAY OF THE PAY PERIOD COINCIDING WITH OR NEXT FOLLOWING
MEETING ELIGIBILITY REQUIREMENTS. A Participant may modify the
amount of salary reductions as of THE FIRST DAY OF EACH CALENDAR
QUARTER.

AND . . .

Shall cash bonuses paid within 2 1/2 months after the end of the
Plan Year be subject to the salary reduction election?

f. / / Yes
g. /X/ No

15
<PAGE>

E3 FORMULA FOR DETERMINING EMPLOYER'S MATCHING CONTRIBUTION
(Plan Section ll.l (b))

a. / / N/A. There shall be no matching contributions.
b. /X/ The Employer shall make matching contributions equal to 25% (e.g.
50%) of the Participant's salary reductions and/or Voluntary
Employee Contributions (as elected in E3d of this Section).
c. / / The Employer may make matching contributions equal to a
discretionary percentage, to be determined by the Employer, of
the Participant's salary reductions and/or Voluntary Employee
Contributions (as elected in E3f of this Section).
d. / / The Employer shall make matching contributions equal to the sum
of ___% of the portion of the Participant/s salary reductions
and/or Voluntary Employee Contributions (as elected in E3f of
this Section) which do not exceed ___% of the Participant's
Compensation plus ___% of the portion of the Participant's salary
reductions and/or Voluntary Employee Contributions (as elected in
E3f of this Section) which exceed ___% of the Participant's
Compensation, but do not exceed ___% of the Participant's
Compensation.
e. / / The Employer shall make matching contributions equal to the
percentage determined under the following schedule:

Participant's Total Matching Percentage
Years of Service

- -

16
<PAGE>

FOR PLANS WITH MATCHING CONTRIBUTIONS

f. /X/ Matching contributions shall be based on:
1. /X/ Salary Deferrals
2. / / Voluntary Employee Contributions
3. / / Both of the above

g. /X/ Matching contributions h. / /shall i./X/shall not be used in
satisfying the deferral percentage tests. (If used, full vesting
and restrictions on withdrawals will apply and the match will be
deemed to be an Elective Contribution).

j. /X/ Shall a Year of Service be required in order to share in the
matching contributions?

With respect to Plan Years beginning after 1989...
1. / /Yes (Could cause Plan to violate minimum participation and
coverage requirements under Code Sections 401(a)(26) and
410)

2. /X/No

With respect to Plan Years beginning before 1990...
1. /X/N/A New Plan or same as years beginning after 1989.
2. / /Yes
3. / /No

k. /X/ In determining matching contributions, salary reductions and
Voluntary Employee Contributions (whichever are applicable) shall
only be matched to the extent they do not, in the aggregate,
exceed 6% of a Participant's Compensation.
1. / /N/A

m. /X/ The matching contribution made on behalf of a Participant for any
Plan Year shall not exceed $_ . n. /X/N/A

o. /X/ Matching contributions shall be made on behalf of
1. /X/all Participants.
2. / /only Non-Highly Compensated Employees.

<PAGE>

E4 WILL A DISCRETIONARY EMPLOYER CONTRIBUTION BE PROVIDED (OTHER THAN A
DISCRETIONARY MATCHING OR QUALIFIED NONELECTIVE CONTRIBUTION) (Plan Section
11.1(c))?

a. / / No.
b. / / Yes, the Employer may make a discretionary contribution out of
its current or accumulated Net Profit.
C. /X/ Yes, the Employer may make a discretionary contribution which is
not limited to its current or accumulated Net Profit.

IF YES (b. or c. is selected above), the Employer's discretionary
contribution shall be allocated as follows:

d. /X/ FOR A NON-INTEGRATED PLAN

The Employer discretionary contribution for the Plan Year shall
be allocated in the same ratio as each Participant's Compensation
bears to the total of such Compensation of all Participants.

e. / / FOR AN INTEGRATED PLAN

The Employer discretionary contribution for the Plan Year shall
be allocated in accordance with Plan Section 4.3(b)(2) based on a
Participant's Compensation in excess of:

f. / / The Taxable Wage Base.

g. / / The greater of $l0,000 or 20% of the Taxable Wage Base.

h. / / _% of the Taxable Wage Base. (See Note below)

i. / / $_. (see Note below)

NOTE: The integration percentage of 5.7% shall be reduced to:

l. 4.3% if h. or i. above is more than 20% and less than or equal to 80% of
the Taxable Wage Base.
2. 5.4% if h. or i. above is less than l00% and more than 80% of the
Taxable Wage Base.

<PAGE>

E5 QUALIFIED NON-ELECTIVE CONTRIBUTIONS (Plan Section 11.1 (d))

a. /X/ N/A. There shall be no Qualified Non-Elective Contributions
except as provided in Section 11.5 (b) and 11.7 (h).

b. / / The Employer shall make a Qualified Non-Elective Contribution
equal to / /% of the total Compensation of all Participants
eligible to share in the allocations.

c. / / The Employer may make a Qualified Non-Elective Contribution in an
amount to be determined by the Employer.

E6 FORFEITURES (Plan Section 4.3 (e))

a. Forfeitures of contributions other than matching contributions shall
be...

1. / / added to the Employer's contribution under the Plan.

2. / / allocated to all Participants eligible to share in the
allocations in the same proportion that each Participant's
Compensation for the year bears to the Compensation of all
Participants for such year.
3. / / used to reduce the Employer's contribution under the Plan.

b. Forfeitures of matching contributions shall be...

l. / / N/A. No matching contributions or match is fully vested.

2. / / used to reduce the Employer's matching contribution.

3. / / allocated to all Participants eligible to share in the
allocations in proportion to each such Participant's
Compensation for the year.

4. /X/ added to Employer's contribution under the Plan.

19
<PAGE>

E7 ALLOCATIONS TO ACTIVE PARTICIPANTS (Plan Section 4.3)
With respect to Plan Years beginning after 1989, a Participant...

a. / / shall (Plan may become discriminatory)
b. / / shall not

be required to complete a Year of Service in order to share in any
Non-Elective Contributions (other than matching contributions) or Qualified
Non-Elective Contributions. For Plan Years beginning before 1990, the Plan
provides that a Participant must complete a Year of Service to share in the
allocations.

20
<PAGE>

E8 ALLOCATIONS TO TERMINATED PARTICIPANTS (Plan Section 4:3 (k))
Any Participant who terminated employment during the Plan Year (i.e. not
actively employed on the last day of the Plan Year) for reasons other than
death, Total and Permanent Disability or retirement:

a. With respect to Employer Non-Elective Contributions (other than
matching), Qualified Non-Elective Contributions, and Forfeitures:

1. For Plan Years beginning after 1989,

i. /X/ N/A, Plan does not provide for such contributions.
ii. / / shall share in the allocations provided such
Participant completed more than 500 Hours of Service.
iii. / / shall share in such allocations provided such
Participant completed a Year of Service.
iv. / / shall not share in such allocations, regardless of
Hours of Service.

2. For Plan Years beginning before 1990,

i. /X/ N/A, new Plan, or same as for Plan Years beginning
after 1989.
ii. / / shall share in such allocations provided such
Participant completed a Year of Service.
iii. / / shall not share in such allocations, regardless of
Hours of Service.

NOTE: If a.1.iii or iv is selected, the Plan could violate minimum
participation and coverage requirements under Code Sections
401(a)(26) and 410.

<PAGE>

b. With respect to the allocation of Employer Matching contributions, a
Participant:

1. For Plan Years beginning after 1989,

i. / / N/A, Plan does not provide for matching contributions.
ii. /X/ shall share in the allocations, regardless of Hours of
Service.
iii. / / shall share in the allocations provided such
Participant completed more than 500 Hours of Service.
iv. / / shall share in such allocations provided such
Participant completed a Year of Service.
v. / / shall not share in such allocations, regardless of
Hours of Service.

2. For Plan Years beginning before 1990,

i. /X/ N/A, new Plan, or same as years beginning after 1989.
ii. / / shall share in the allocations, regardless of Hours of
Service.
iii / / shall share in such allocations provided such
Participant completed a Year of Service.
iv. / / shall not share in such allocations, regardless of
Hours of Service.

NOTE: If b.1.iv or v is selected, the Plan could violate minimum
participation and coverage requirements under Code Section 401
(a)(26) and 410.

E9 ALLOCATIONS OF EARNINGS (Plan Section 4.3 (c))

Allocations of earnings with respect to amounts contributed to the Plan
after the previous Anniversary Date or other valuation date shall be
determined...

a. / / by using a weighted average.
b. / / by treating one-half of all such contributions as being a part of
the Participant's nonsegregated account balance as of the
previous Anniversary Date or valuation date.
c. / / by using the method specified in Section 4.3 (c).
d. /X/ other UNIT VALUES.

<PAGE>

E10 LIMITATIONS ON ALLOCATIONS (Plan Section 4.4)

a. If any Participant is or was covered under another qualified defined
contribution plan maintained by the Employer, other than a Master or
Prototype Plan, or if the Employer maintains a welfare benefit fund,
as defined in Code Section 419(e), or an individual medical account,
as defined in Code Section 415(1)(2), under which amounts are treated
as Annual Additions with respect to any Participant in this Plan:

1. /X/ N/A.
2. / / The provisions of Section 4.4(b) of the Plan will apply as
if the other plan were a Master or Prototype Plan.
3. / / Provide the method under which the Plans will limit total
Annual Additions to the Maximum Permissible Amount, and will
properly reduce any Excess Amounts, in a manner that
precludes Employer discretion.

<PAGE>

b. If any Participant is or ever has been a Participant in a defined
benefit plan maintained by the Employer:

1. /X/ N/A.

2. / / In any Limitation Year, the Annual Additions credited to the
Participant under this Plan may not cause the sum of the
Defined Benefit Plan Fraction and the Defined Contribution
Fraction to exceed 1.0. If the Employer's contribution that
would otherwise be made on the Participant's behalf during
the limitation year would cause the 1.0 limitation to be
exceeded, the rate of contribution under this Plan will be
reduced so that the sum of the fractions equals 1.0. If the
1.0 limitation is exceeded because of an Excess Amount, such
Excess Amount will be reduced in accordance with Section
4.4(a)(4) of the Plan.

3. / / Provide the method under which the Plans involved will
satisfy the 1.0 limitation in a manner that precludes
Employer discretion.

<PAGE>

E11 DISTRIBUTIONS UPON DEATH (Plan Section 6.6(h)) Distributions upon the
death of a Participant prior to receiving any benefits shall...

a. /X/ be made pursuant to the election of the Participant or
beneficiary.

b. / / begin within 1 year of death for a designated beneficiary and be
payable over the life (or over a period not exceeding the life
expectancy) of such beneficiary, except that if the beneficiary
is the Participant's spouse, begin within the time the
Participant would have attained age 70 1/2.

c. / / be made within 5 years of death for all beneficiaries.

d. / / other

E12 LIFE EXPECTANCIES (Plan Section 6.5 (f)) for minimum distributions
required pursuant to Code Section 401(a)(9) shall...

a. / / be recalculated at the Participant's election.

b. / / be recalculated.

c. /X/ not be recalculated.

E13 CONDITIONS FOR DISTRIBUTIONS UPON TERMINATION Distributions upon
termination of employment pursuant to Section 6.4(a) of the Plan shall not
be made unless the following conditions have been satisfied:

a. /X/ N/A. Immediate Distributions may be made at Participant's
election.

b. / / The Participant has incurred / / l-Year Break(s) in Service.

c. / / The Participant has reached his or her Early or Normal Retirement
Age.

d. / / Distributions may be made at the Participant's election on or
after the Anniversary Date following termination of employment.

e. / / Other

25
<PAGE>

E14 FORM OF DISTRIBUTIONS (Plan Sections 6.5 and 6.6)
Distributions under the Plan may be made...

a. 1. / / in lump sums.
2. /X/ in lump sums or installments.*

b. AND, pursuant to Plan Section 6.13,

1. /X/ no annuities are allowed (avoids Joint and Survivor rules).
2. / / annuities are allowed (Plan Section 6.13 shall not apply).

NOTE:b.1. above may not be elected if this is an amendment to a plan which
permitted annuities as a form of distribution or if this Plan has
accepted a plan to plan transfer of assets from a plan which permitted
annuities as a form of distribution.

c. AND may be made in...

1. /X/ cash only (except for insurance or annuity contracts).
2. / / cash or property.

*Installments will be distributed as time certain payments. The plan
participant will choose the period of years over which he/she will
receive benefit payments.

26
<PAGE>

TOP HEAVY REQUIREMENTS

Fl TOP HEAVY DUPLICATIONS (Plan Section 4.3 (i) ): When a Non-Key Employee is
a Participant in this Plan and a Defined Benefit Plan maintained by the
Employer, indicate which method shall be utilized to avoid duplication of
top heavy minimum benefits.

a. /X/ The Employer does not maintain a Defined Benefit Plan.

b. / / A minimum, non-integrated contribution of 5% of each Non-Key
Employee's total Compensation shall be provided in this Plan, as
specified in Section 4.3(i). (The Defined Benefit and Defined
Contribution Fractions will be computed using 100% if this choice
is selected.)

c. / / A minimum, non-integrated contribution of 7 1/2% of each Non-Key
Employee's total Compensation shall be provided in this Plan, as
specified in Section 4.3(i). (If this choice is selected, the
Defined Benefit and Defined Contribution Fractions will be
computed using 125% for all Plan Years in which the Plan is Top
Heavy, but not Super Top Heavy.)

d. / / Specify the method under which the Plans will provide top heavy
minimum benefits for Non-Key Employees that will preclude
Employer discretion and avoid inadvertent omissions, including
any adjustments required under Code Section 415(e).

27
<PAGE>

F2 PRESENT VALUE OF ACCRUED BENEFIT (Plan Section 2.2) for Top Heavy purposes
where the Employer maintains a Defined Benefit Plan in addition to this
Plan, shall be based on.

a. /X/ N/A. The Employer does not maintain a defined benefit plan.

b. / / Interest Rate:_

Mortality Table:_

F3 TOP HEAVY DUPLICATIONS: Employer maintaining two (2) or more Defined
Contribution Plans.

a. /X/ N/A.

b. / / A minimum, non-integrated contribution of 3% of each Non-Key
Employee's total Compensation shall be provided in the Money
Purchase Plan (or other plan subject to Code Section 412), where
the Employer maintains two (2) or more non-paired Defined
Contribution Plans.

c. / / Specify the method under which the Plans will provide top heavy
minimum benefits for Non-Key Employees that will preclude
Employer discretion and avoid inadvertent omissions, including
any adjustments required under Code Section 415(e).

<PAGE>

MISCELLANEOUS

G1 LOANS TO PARTICIPANTS (Plan Section 7.4)

a. /X/ Yes, loans may be made up to $50,000 or 1/2 Vested interest.
b. / / No, loans may not be made.

If YES, (check all that apply)...

c. /X/ loans shall be treated as a Directed Investment.
d. /X/ loans shall only be made for hardship or financial necessity.
e. /X/ the minimum loan shall be $1,000
f. / / $10,000 de minimis loans may be made regardless of Vested
interest. (If selected, plan may need security in addition to
Vested interest)

NOTE:Department of Labor Regulations require the adoption of a SEPARATE
written loan program setting forth the requirements outlined in Plan
Section 7.4.

G2 DIRECTED INVESTMENT ACCOUNTS (Plan Section 4.8) are permitted for the
interest in any one or more accounts.

a. /X/ Yes, regardless of the Participant's Vested interest in the Plan.
b. / / Yes, but only with respect to the Participant's Vested interest
in the Plan.
c. / / Yes, but only with respect to those accounts which are 100%
Vested.
d. / / No directed investments are permitted.

G3 TRANSFERS FROM QUALIFIED PLANS (Plan Section 4.6)

a. /X/ Yes, transfers from qualified plans (and rollovers) will be
allowed.
b. / / No, transfers from qualified plans (and rollovers) will not be
allowed.

AND, transfers shall be permitted...

c. / / from any Employee, even if not a Participant.
d. /X/ from Participants only.

<PAGE>

G4 EMPLOYEES' VOLUNTARY CONTRIBUTIONS (Plan Section 4.7)

a. / / Yes, Voluntary Contributions are allowed subject to the limits of
Section 4. 10.
b. /X/ No, Voluntary Contributions will not be allowed.

NOTE: TRA '86 subjects voluntary contributions to strict discrimination
rules.

G5 HARDSHIP DISTRIBUTIONS (Plan Section 6.11 and 11.8)

a. / / Yes, from any accounts which are 100% Vested.
b. / / Yes, from Participant's Elective Account only.
c. / / Yes, but limited to the Participant's Account only.
d. /X/ Yes, from any accounts
e. / / No

NOTE: Distributions from a Participant's Elective Account are limited
to the portion of such account attributable to such Participant's
Deferred Compensation and earnings attributable thereto up to
December 31, 1988. Also hardship distributions are not permitted
from a Participant's Qualified Non-Elective Account.

G6 PRE-RETIREMENT DISTRIBUTION (Plan Section 6.10)

a. / / If a Participant has reached the age of_, distributions may be
made, at the Participant's election without requiring the
Participant to terminate employment.

b. /X/ No pre-retirement distribution may be made.

NOTE: Distributions from a Participant's Elective Account and Qualified Non-
Elective Account are not permitted Prior to age 59 1/2.

30
<PAGE>

The adopting Employer may not rely on an opinion letter issued by the National
Office of the Internal Revenue Service as evidence that the plan is qualified
under Code Section 401. In order to obtain reliance with respect to plan
qualification, the Employer must apply to the appropriate Key District Office
for a determination letter.

This Adoption Agreement may be used only in conjunction with basic Plan document
#01. This Adoption Agreement and the basic Plan document shall together be known
as Regis Retirement Plan Services, Inc. Non-Standardized 401(k) Profit Sharing
Plan #01-005.

The adoption of this Plan, its qualification by the IRS, and the related tax
consequences are the responsibility of the Employer and its independent tax and
legal advisors.

Regis Retirement Plan Services, Inc. will notify the Employer of any amendments
made to the Plan or of the discontinuance or abandonment of the Plan provided
this Plan has been acknowledged by Regis Retirement Plan Services, Inc. or its
authorized representative. Furthermore, in order to be eligible to receive such
notification, we agree to notify Regis Retirement Plan Services, Inc. of any
change in address.

31
<PAGE>

IN WITNESS WHEREOF, the Employer and Trustee hereby cause this Plan to be
executed on this 7th day of May, 1997. Furthermore, this Plan may not be used
unless acknowledged by Regis Retirement Plan Services, Inc. or its authorized
representative.

EMPLOYER

Coastcast Corporation Fleet National Bank
- ------------------------------ ------------------------------
(enter name) TRUSTEE

By: /s/ ROBERT C. BRUNING by: /s/ [Illegible]
--------------------------- ---------------------------
TRUSTEE

PARTICIPATING EMPLOYER: PARTICIPATING EMPLOYER:

- ------------------------------ ------------------------------
(enter name) (enter name)

By: By:
--------------------------- ---------------------------

This Plan may not be used, and shall not be deemed to be a Prototype Plan,
unless an authorized representative of Regis Retirement Plan Services, Inc. has
acknowledged the use of the Plan. Such acknowledgment is for administerial
purposes only. It acknowledges that the Employer is using the Plan but does not
represent that this Plan, including the choices selected on the Adoption
Agreement, has been reviewed by a representative of the sponsor or constitutes a
qualified retirement plan.

Regis Retirement Plan Services, Inc.

By: /s/ TERRY MARTIN
-------------------------------------

With regard to any questions regarding the provisions of the Plan, adoption of
the Plan, or the effect of an opinion letter from the IRS, call or write (this
information must be completed by the sponsor of this Plan or its designated
representative):

Name Roberto Roman, Director Human Resources
-------------------------------------------------------

Address Coastcast Corporation/PO Box 9076
-------------------------------------------------------
Rancho Dominguez CA 90224
-------------------------------------------------------
Telephone (310) 638-0595
-------------------------------------------------------

<PAGE>

<TABLE>
<CAPTION>
COASTCAST CORPORATION
COMPUTATION OF PER SHARE EARNINGS
(UNAUDITED)

THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
---------------------- ----------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Common stock outstanding at beginning of period 8,794,334 8,760,960 8,777,890 8,734,694
Repurchase of common stock - - - (700)
Exercise of options - 27,539 16,444 54,505
--------- --------- --------- ---------
Common stock outstanding at end of period 8,794,334 8,788,499 8,794,334 8,788,499
--------- --------- --------- ---------
--------- --------- --------- ---------

Weighted average shares outstanding 8,794,334 8,779,108 8,789,286 8,762,333

Dilutive effect of stock options after application of
treasury stock method 88,046 395,783 129,812 290,019
--------- --------- --------- ---------
Total 8,882,380 9,174,891 8,919,098 9,052,352
--------- --------- --------- ---------
--------- --------- --------- ---------

Net income 2,816,000 5,004,000 4,014,000 8,522,000
--------- --------- --------- ---------
--------- --------- --------- ---------

Net income per share and common
equivalent per share $ .32 $ .55 $ .45 $ .94
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>

Exhibit 11.1

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY PERIOD ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 13,913
<SECURITIES> 0
<RECEIVABLES> 18,321
<ALLOWANCES> 400
<INVENTORY> 26,703
<CURRENT-ASSETS> 61,611
<PP&E> 35,362
<DEPRECIATION> 15,531
<TOTAL-ASSETS> 83,458
<CURRENT-LIABILITIES> 11,550
<BONDS> 0
0
0
<COMMON> 38,545
<OTHER-SE> 32,296
<TOTAL-LIABILITY-AND-EQUITY> 83,458
<SALES> 68,939
<TOTAL-REVENUES> 68,939
<CGS> 56,932
<TOTAL-COSTS> 56,932
<OTHER-EXPENSES> 5,462
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,920
<INCOME-TAX> 2,906
<INCOME-CONTINUING> 4,014
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,014
<EPS-PRIMARY> .45
<EPS-DILUTED> 0

</TABLE>