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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
COASTCAST CORPORATION
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(Name of Registrant as Specified In Its Charter)
Jonathan Vannini
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
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COASTCAST CORPORATION
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 26, 1998
To the Shareholders of Coastcast Corporation:
A Special Meeting of Shareholders (the "Special Meeting") of Coastcast
Corporation, a California corporation (the "Company"), will be held on Monday,
October 26, 1998 at 10:00 a.m. local time, at the Company's offices at 3025
East Victoria Street, Rancho Domingo, California 90221 for the following
purposes:
1. To remove the current board of seven directors;
2. To elect a board of seven directors to serve until the next annual
meeting of the Company's shareholders and until their successors have
been elected and qualified;
3. To consider and take action concerning the revocation of a proposed
amendment of the Company's 1996 Amended and Restated Employee Stock
Option Plan, which amendment was proposed by management of the Company
and considered at the 1998 annual meeting of the Company's
shareholders;
4. To consider and take action concerning the revocation of a proposed
amendment of the Company's 1995 Amended and Restated Non-Employee
Director Stock Option Plan, which amendment was proposed by management
of the Company and considered at the 1998 annual meeting of the
Company's shareholders;
5. To consider and take action concerning the approval of the
reimbursement of Mr. Vannini for the fees and expenses incurred in
connection with the special meeting of the shareholders; and
6. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only holders of record of the Company's Common Stock at the close of
business on [DATE], the record date, are entitled to notice of and to vote at
the Special Meeting.
All Shareholders are cordially invited to attend the Special Meeting in
person. However, to ensure your representation at the Special Meeting, you are
urged to sign and return the enclosed WHITE proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any shareholder attending
the Special Meeting may vote in person even if he or she has returned a proxy.
JONATHAN VANNINI
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IMPORTANT: SHAREHOLDER JONATHAN VANNINI URGES YOU TO MARK, SIGN AND
RETURN THE ENCLOSED WHITE PROXY CARD TO VOTE FOR THE ELECTION OF THE
VANNINI NOMINEES.
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A VOTE FOR THE VANNINI NOMINEES WILL PROVIDE YOU - AS THE OWNERS OF
COASTCAST - WITH AT LEAST FOUR REPRESENTATIVES ON THE COASTCAST
BOARD WHO ARE COMMITTED TO MAXIMIZING SHAREHOLDER VALUE.
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MR. VANNINI URGES YOU NOT TO SIGN ANY PROXY CARD SENT TO YOU BY
COASTCAST. IF YOU HAVE ALREADY DONE SO, YOU MAY REVOKE YOUR PROXY
BY DELIVERING WRITTEN NOTICE OF REVOCATION OR A LATER DATED PROXY
FOR THE SPECIAL MEETING TO JONATHAN VANNINI AT 828 IRWIN DRIVE, HILLSBOROUGH,
CA 94010 OR THE SECRETARY OF COASTCAST OR BY VOTING IN PERSON AT THE SPECIAL
MEETING.
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---------------
PROXY STATEMENT
FOR
OCTOBER 26, 1998 SPECIAL MEETING OF SHAREHOLDERS
---------------
INTRODUCTION
This Proxy Statement and the accompanying WHITE Proxy Card is being
furnished in connection with the solicitation of proxies by Shareholder Mr.
Jonathan Vannini ("Mr. Vannini") for use at the Special Meeting of Shareholders
of Coastcast Corporation, a California corporation (the "Company"), to be held
on Monday, October 26, 1998 at 10:00 a.m. local time, and at any and all
adjournments, postponements, reschedulings or continuations, or any other
meeting of shareholders held in lieu thereof (the "Special Meeting"), for the
purposes set forth herein and in the accompanying Notice of Special Meeting of
Shareholders. The Special Meeting will be held at the Company's offices at 3025
East Victoria Street, Rancho Domingo, California 90221. The telephone number is
(310) 638-0595.
These proxy solicitation materials were mailed on or about September [__],
1998 to all shareholders entitled to vote at the Special Meeting.
THIS SOLICITATION IS BEING MADE BY MR. JONATHAN VANNINI, AND NOT ON BEHALF OF
THE CURRENT COASTCAST BOARD.
Mr. Vannini, who owns 911,000 shares of the Company's Common Stock
believes that the election of the slate of nominees proposed herein, the
complete revocation of two management-endorsed amendments to the Company's
stock option plans, and the reimbursement of his expenses related to the
Special Meeting represent the best means for Coastcast shareholders to support
a focused effort to improve the value of each shareholders' investment while
preserving continuity in the Company's operating policies and practices.
PROXY SOLICITATION COSTS
Mr. Vannini has contracted with Morrow and Co., Inc., to conduct the
proxy solicitation for a fee that Mr. Vannini estimates will be less than
$100,000. The estimated total costs related to solicitation of proxies for the
Special Meeting is $400,000. Mr. Vannini is the sole bearer of the costs of
soliciting proxies for the Special Meeting, but proposes that the Company
reimburse his fees and expenses related to his solicitation of proxies, as
further discussed in Proposal 4.
REASONS FOR THE SOLICITATION
Mr. Vannini believes that a new board majority, as well as the adoption of
the other proposals he has made in connection with the Special Meeting, would
cause the Company to better realize its obligations to its shareholders and
help prevent further deterioration in shareholder return. Mr. Vannini believes
that Coastcast's corporate governance policies and capital allocation practices
are unacceptable because they have resulted in a disappointing return to
shareholders at the same time the Company has aggressively sought to enrich its
officers and directors.
Mr. Vannini believes that multiple factors, when considered together, lead
to the conclusion that the Company would be better served by a new board
majority and adoption of the other proposals he has set forth for the Special
Meeting. Among these factors, Mr. Vannini notes the following:
(1) During the last three years the Company has paid its Chairman over
$1,900,000 in cash and granted him 500,000 options -- over 6% of the shares
outstanding.
<PAGE>
(2) Members of the Board had been granted beneficial ownership of approximately
1 million options even before the Company's management proposed granting
the directors an additional 200,000 options earlier this year.
(3) The Company's option plans allow the Board to reprice options without
shareholder approval.
(4) 288,790 options granted to the Chairman and certain Company executives were
repriced in late 1997.
(5) Management and the Board supported significant increases in compensation
granted to officers and directors, notwithstanding the Company's
disappointing return to shareholders.
BACKGROUND
THE ANNUAL MEETING AND ITS ADJOURNMENT. At the 1998 Annual Meeting of
---------------------------------------
Shareholders (the "Annual Meeting"), convened on June 22, 1998, the shareholders
elected the current members of the Board and voted on a management-endorsed
amendment to each of the Company's two stock option plans.
The management-endorsed proposal to the 1996 Amended and Restated Employee
Stock Option Plan (the "Employee Stock Option Plan") would increase the number
of shares covered by that plan by 500,000 shares. See "Proposal Two:
Revocation of a Proposed Amendment of the Company's 1996 Amended and Restated
Employee Stock Option Plan," below. The management-endorsed amendment to the
Company's 1995 Amended and Restated Non-Employee Director Stock Option Plan (the
"Director Stock Option Plan") would increase the number of shares covered by
that plan by 200,000 shares. See "Proposal Three: Revocation of a Proposed
Amendment of the Company's 1995 Amended and Restated Non-Employee Director Stock
Option Plan," below.
On June 23, 1998, the Company announced it had adjourned the Annual Meeting
after the approval of Proposal 1 (the election of directors) and Proposal 4
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(the approval of the Company's auditors) but before voting took place with
------
respect to Proposal 2 (the management-endorsed amendment of the Employee Stock
Option Plan) and Proposal 3 (the management-endorsed amendment of the Director
Stock Option Plan). According to the Company press release, the meeting was
adjourned to allow more time for shareholders to vote on the Employee Stock
Option Plan proposal and the Director Stock Option Plan proposal "because a
substantial number of shares had not been voted on these two matters."
MR. VANNINI PROTESTS AND THE COMPANY RESPONDS. On July 1, 1998, Mr.
----------------------------------------------
Vannini wrote to the Coastcast Board to vigorously protest the conduct of the
Annual Meeting. Mr. Vannini stated that it appeared improper to adjourn the
Annual Meeting without any explanation about the number of votes received for
each of the stock option proposals and how such votes were cast. He also
expressed his concern that the purported adjournment might be a pretext invented
to stifle the shareholders' rejection of the two management-endorsed stock
option proposals.
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The Company took no action in response to Mr. Vannini's concerns other than
to reconvene the Annual Meeting on July 8, 1998 at the offices of the Company's
lawyers. After the meeting, the Company made no immediate announcement of the
results of the shareholder voting at the meeting.
MR. VANNINI ANNOUNCES HIS INTENTIONS ON JULY 20, 1998. Mr. Vannini
------------------------------------------------------
continued to purchase shares of the Company's Common Stock, which he believed to
be undervalued. On July 20, 1998 he filed a Schedule 13D with the Securities
and Exchange Commission disclosing that he held approximately 6.66% of the
Company's Common Stock.
Mr. Vannini's Schedule 13D stated that he invested in Coastcast in order to
obtain an equity position in the Company, and to maximize the value of that
investment. He also stated his belief that Coastcast's Common Stock was
undervalued in part a result of certain policies and practices of Coastcast's
management, including without limitation the policies and practices related to
the compensation and stock options granted to the chairman of the Company's
board of directors. Mr. Vannini also disclosed that he (i) intended to
influence control of Coastcast, (ii) reserved the right to acquire, or dispose
of, additional Coastcast securities, (iii) planned to exercise influence in
order to change the compensation and/or membership of the board of directors,
(iv) planned to exercise influence in order to persuade the Company to adopt a
stock repurchase program, and (v) planned to contact the Company and/or other
shareholders regarding these and other potential strategies to increase
shareholder value.
THE COMPANY ANNOUNCES RESULTS OF RECONVENED MEETING ON JULY 21, 1998.
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After Mr. Vannini announced his intentions in the Schedule 13D, Coastcast
issued a press release, on July 21, 1998, reporting some of the results of the
July 8, 1998 meeting held at the offices of the Company's lawyers. The Company
reported that the shareholders had approved the management-endorsed proposals
to increase the number of shares of common stock that could be subject to
options granted under the Employee Stock Option Plan and the Director Stock
Option Plan. The Company's press release went on to state that the "board of
directors, after additional consideration including the large number of
shareholders who have voted against both proposals, has decided at this time
that it will not implement either proposal.
However, the board of directors may in the future decide to implement one or
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both of such proposals." (Emphasis added.)
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MR. VANNINI CONTINUES TO URGE THE COMPANY TO IMPROVE SHAREHOLDER VALUE.
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Mr. Vannini wrote to the Coastcast Board on July 22, 1998 to urge them to
support efforts to improve shareholder value. He then telephoned each member of
the Board, except the Chairman, and received no response. Mr. Vannini then asked
to meet with the Company's senior management, who met with him on July 30, 1998.
Mr. Vannini expressed his dissatisfaction with the Company's lack of response to
the issues he had raised. The Company failed to provide any assurance that it
would change any of its policies and practices.
MR. VANNINI DECIDES TO TAKE FURTHER ACTION. Because of the Company's
-------------------------------------------
failure to respond, Mr. Vannini decided to take further action. He continued to
purchase shares of the Company's Common Stock. By July 31, 1998, Mr. Vannini
had purchased over ten percent (10%) of the Company's common stock. Under
California law, a holder of 10% of the outstanding voting shares of a
corporation is entitled to call a special shareholders meeting. On July 31,
1998, Mr. Vannini exercised this right by writing to the Company to call a
special meeting of the shareholders. The
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<PAGE>
notice identified the following items of business for the Special Meeting: (1)
the election of seven directors, (2) the revocation of the management-endorsed
amendment of the Employee Stock Option Plan, (3) the revocation of the
management-endorsed amendment of the Director Stock Option Plan, (4) the
reimbursement of Mr. Vannini for his fees and expenses incurred in connection
with the Special Meeting, and (5) such other business as may properly come
before the meeting or any adjournment thereof.
Under California law, a holder of five percent (5%) of the outstanding
voting shares of a corporation has an absolute right to inspect and copy the
record of the shareholders' names, addresses, and shareholdings as of the most
recent record date or which it has been compiled or as of a date specified by
the holder. Mr. Vannini exercised this right on July 31, 1998 by sending a
written demand to the Company.
THE COMPANY RESPONDS TO MR. VANNINI'S CALL FOR A SPECIAL MEETING. One week
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later, on August 6, 1998, Coastcast announced that the Board had decided to
"formally rescind" the management-endorsed amendments of the Employee Stock
Option Plan and the Director Stock Option Plan. According to the Company press
release of August 6, 1998, "No options have been or will be granted under the
rescinded amendments to the plans. Any future amendment of either plan by the
board of directors that would authorize grants of additional options to officers
or directors of the company will be subject to shareholder approval."
The Company also responded by filing a lawsuit against Mr. Vannini, as
described below under "Legal Proceedings."
COASTCAST BEGINS A STOCK PURCHASE PROGRAM AFTER OVER A MONTH OF PRODDING BY MR.
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VANNINI. After the market closed on August 26, 1998, Coastcast announced that
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it had authorized the purchase of 925,400 shares of its common stock from an
institutional investor. The company's press release noted that the new
authorization was for purchases in addition to a previously authorized amount of
560,000 shares of stock, and that the company was "actively pursuing" the
additional purchases on the open market. Over one million shares of Coastcast
common stock were traded on August 26, 1998 before the announcement.
Mr. Vannini issued a press release on August 27, 1998 praising Coastcast
for initiating the stock purchase program. Mr. Vannini stated "I am pleased
that the company has begun a program to enhance the value of the shareholders'
investment in this stock. I hope and expect that this step marks the beginning
of a dramatic change in the Company's attitude towards shareholders, and that
Coastcast will make the buyback available to all shareholders instead of only a
few. I urge Coastcast to complete a significant stock purchase program in short
order and immediately take other steps necessary to improve the value of the
shareholders' investment, such as eliminating excessive executive compensation
and eliminating the board's ability to reprice stock options without shareholder
approval."
LEGAL PROCEEDINGS
On August 13, 1998, Coastcast Corporation filed suit (COASTCAST CORPORATION
v. JONATHAN VANNINI) in the United States District Court for the Central
District of California against Mr. Vannini seeking injunctive and declaratory
relief for alleged violations of the federal securities laws and the California
Corporations Code.
On August 14,1998 Mr. Vannini filed a suit (JONATHAN VANNINI v. COASTCAST
CORPORATION) in the Superior Court of the State of California, County of San
Francisco against Coastcast Corporation for injunctive and declaratory relief
seeking to obtain (i) certain shareholder records he demanded from Coastcast
Corporation under Section 1600 of the California Corporations Code (ii) the
results of the shareholder votes held at the Company's annual meeting of
shareholders on June 22 and July 8, 1998, including the results of the
shareholder votes on Proposals 2 and 3, which Mr. Vannini demanded under
Section 1509 of the California Corporations Code, and (iii) the special
meeting of the shareholders he demanded under Section 600 of the California
Corporations Code. Mr. Vannini voluntarily dismissed this action but may pursue
other legal action to enforce his rights and to achieve measures he believes
will further enhance shareholder value.
PROCEDURAL MATTERS
RECORD DATE
The record date for the Special Meeting (the "Record Date") has not yet
been determined. Only shareholders of record on the books of the Company at the
close of business on the Record Date are entitled to notice of and to vote at
the meeting. As of the Record Date, [9,002,898] shares of the Company's Common
Stock were issued and outstanding. No shares of Preferred Stock were
outstanding.
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<PAGE>
VOTING AT THE SPECIAL MEETING
Under the Company's bylaws and California law, shares represented by
proxies that reflect abstentions or "broker non-votes" (i.e., shares held by a
broker or nominee that are represented at the Meeting, but with respect to
which such broker or nominee is not empowered to vote on a particular proposal)
will be counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. Any shares not voted (whether by
abstention, broker non-vote or otherwise) will have no impact on the election
of directors, except to the extent that the failure to vote for an individual
results in another individual receiving a larger proportion of votes. Any
shares represented at the Meeting but not voted (whether by abstention, broker
non-vote, or otherwise) with respect to the proposal to revoke the amendment of
the Employee Plan, the proposal to revoke the amendment of the Director Plan,
and the proposal to approve reimbursement of Mr. Vannini's fees and expenses
will have no effect on the vote for such proposal except to the extent the
number of abstentions causes the number of shares voted in favor of such
proposal not to equal or exceed a majority of the quorum required for the
Meeting (in which case the proposal would not be approved).
The seven nominee-directors receiving the highest number of votes cast at
the Meeting will be elected as the Company's directors. Subject to certain
exceptions specified below, shareholders of record on the Record Date are
entitled to cumulate their votes in the election of the Company's directors
(i.e., they are entitled to the number of votes determined by multiplying the
number of shares held by them times the number of directors to be elected) and
may cast all of their votes so determined for one person, or spread their
votes among two or more persons as they see fit. No shareholder shall be
entitled to cumulate votes for a given candidate for director unless such
candidate's name has been placed in nomination prior to the vote and the
shareholder has given notice at the Meeting, prior to the voting, of the
shareholder's intention to cumulate his or her votes. If any one shareholder
has given such notice, all shareholders may cumulate their votes for candidates
in nomination.
PROXIES
All shares entitled to vote and represented by properly executed proxies
received prior to the Special Meeting will be voted at the Special Meeting in
accordance with the instructions indicated on those proxies, if not revoked
prior thereto. If no instructions are indicated on a properly executed proxy,
the shares represented by that proxy will be voted as recommended by Mr.
Vannini. If any other matters are properly presented for consideration at the
Special Meeting, the proxy holders will have discretion to vote on those matters
in accordance with their best judgment. If a shareholder signs and returns
more than one proxy, the last dated proxy is the effective proxy and
supercedes all previously dated proxies.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. A proxy may be revoked (i) by
delivery of a written notice of revocation or a duly executed proxy to the
Secretary of the Company bearing a date later than the prior proxy relating to
the same shares, or (ii) by attending the Special Meeting and voting in person
(although attendance at the Special Meeting will not itself revoke a proxy).
Any written notice of revocation or subsequent proxy must be received by the
Secretary of the Company prior to the taking of the vote at the Special Meeting.
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<PAGE>
PROPOSAL ONE
REMOVAL OF THE ENTIRE CURRENT BOARD OF DIRECTORS
Mr. Vannini expects to propose to remove the entire current board of
directors. Under California law, any or all of the directors may be removed if
the removal is approved by the affirmative vote of the majority of the
outstanding shares entitled to vote. Unless the entire board is removed, no
director may be removed when the votes cast against removal, or not consenting
in writing to the removal, would be sufficient to elect the director if voted
cumulatively at an election at which the same total number of votes were cast
and the entire number of directors authorized at the time of the director's most
recent election were then being elected.
Mr. Vannini believes the entire board should be removed and immediately
replaced with a new board dedicated to improving shareholder value while
maintaining and improving Company operations. In Mr. Vannini's view, an
unconscionable disparity existed between the disappointing performance of the
Company's stock and the extraordinary compensation of its officers and directors
received BEFORE the current board unanimously approved the 1998 annual
shareholder meeting proposals that would further enrich the officers and
directors. Until Mr. Vannini intervened, the current board consistently
approved compensation packages that enriched management and the directors while
the return on shareholder investment was highly disappointing. During the last
three years the Company has paid the chairman of the board of directors over
$1,900,000 in cash and over 500,000 options -- over 6% of the shares
outstanding. The current board also repriced 288,790 options granted to the
chairman and other executives in late 1997 to lower the exercise price of such
options, providing an opportunity not made available to any other shareholder.
In addition, Mr. Vannini believes the Company's Supplemental Executive
Retirement Plan is far more generous than the retirement plans of comparable
companies.
In short, Mr. Vannini believes the current board has made it clear by its
actions that its true allegiance is to the enrichment of management rather than
the improvement of the return to shareholders, and that as a result, the
shareholders should vote to remove the current board.
PROPOSAL TWO
ELECTION OF BOARD OF DIRECTORS
Mr. Vannini proposes that seven Directors be elected at the Special Meeting
to serve until the next annual meeting of the Company's shareholders and until
their successors have been elected and qualified. Mr. Vannini proposes to
nominate four new directors (the "New Directors"), each of whom is committed to
improving the value of each shareholder's investment, and initiating responsible
corporate governance policies for the Company. Mr. Vannini also supports the
election of three incumbent directors (the "Incumbent Directors"), to help
preserve continuity of the Company's operating policies and practices.
There is no assurance that the Incumbent Directors will be willing to serve
if elected with any of the New Directors.
The election of directors will occur in two steps. First, by means of an
affirmative vote on Proposal One, Mr. Vannini expects to remove each of the
Company's current directors, and any other person who may be a director
immediately prior to the effectiveness of the actions proposed to be taken by
the proxy solicitation. Second, Mr. Vannini proposes the election as directors
of the Company the seven nominees set forth below. Each vacancy created by the
removal of a director by the vote of the shareholders may be filled only by the
vote of a majority of the shares entitled to vote represented at a duly held
meeting at which a quorum is present (or by the written consent of holders of a
majority of the outstanding shares entitled to vote).
Unless otherwise instructed, the holder of proxies solicited by this Proxy
Statement will vote the proxies received by him for such nominees. In the event
that any of the nominees are unable or decline to serve as a Director at the
time of the Special Meeting, the proxy holder will vote for a nominee designated
by Mr. Vannini to fill the vacancy. Mr. Vannini is not aware of any reason that
any nominee will be unable or will decline to serve as a director.
INFORMATION REGARDING THE NOMINEES
The following table sets forth the name, age and certain other information
regarding the nominees for director.
NAME AGE PRINCIPAL OCCUPATION
---- --- --------------------
Jonathan Vannini 36 Private Investor
MR. JONATHAN VANNINI is a private investor who owns over 10% of Coastcast
Corporation. Mr. Vannini was a general partner at HPB Associates, an investment
partnership, until 1996 and was employed by HPB Associates from August 1987
until March 1996. Since February 1993 he has served as an outside director of
Copart, Inc., which provides vehicle suppliers with a full range of services to
process and sell salvage vehicles. Mr. Vannini holds a BA in Economics from the
University of California, Los Angeles and an MBA from Columbia University.
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<PAGE>
NAME AGE PRINCIPAL OCCUPATION
---- --- --------------------
Jeffrey M. Cohen 47 Chairman & CEO, Qorvis Media Group
MR. JEFFREY M. COHEN is the Chairman of the Board of Directors and Chief
Executive Officer of Qorvis Media Group, one of the nation's largest in-store
media companies. Prior to founding Qorvis, Mr. Cohen was the founder, Chief
Executive Officer, and Chairman of the Board of Directors of Sutton Place
Gourmet, Inc., a leading gourmet food store chain. Mr. Cohen is a seasoned
manager with considerable experience in working with troubled companies. He
holds a BS in Business from the University of Maryland and has completed courses
toward a graduate degree from the Wharton School of Business, University of
Pennsylvania.
NAME AGE PRINCIPAL OCCUPATION
---- --- --------------------
Dr. James Malernee 51 CEO & Managing Director, Cornerstone Research
DR. JAMES MALERNEE is the Chief Executive Officer and Managing Director of
Cornerstone Research, a leading consulting and economic research firm that
provides expert economic and financial analyses in complex commercial litigation
and regulatory proceedings. Dr. Malernee has served as a consultant to major
corporations and has taught Finance at the University of Texas at Austin and
Business Strategy at the Stanford Graduate School of Business. Over the last
fifteen years he has directed research on complex business issues related to a
wide variety of cases, specializing in securities matters, and has supervised
over two hundred cases dealing with material disclosure, insider trading, merger
and acquisition activity, targeted repurchases, minority buyouts, stock trading
behavior and valuation. He is also an avid golfer. Dr. Malernee holds a BS in
Engineering and a PhD in Finance from the University of Texas, and an MBA from
Southern Methodist University.
NAME AGE PRINCIPAL OCCUPATION
---- --- --------------------
John E. Rehfeld 58 President, CEO & Chairman, ProShot Golf, Inc.
JOHN E. REHFELD is the President, Chief Executive Officer, and Chairman of
the Board of Directors of ProShot Golf, Inc., which manufactures and sells golf
distance determination and course management systems. Mr. Rehfeld was President
and Chief Executive Officer of Proxima Corporation, a supplier of desktop
multimedia computer projection systems, from February 1996 to March 1997 and
also served as a director of Proxima Corporation. From April 1993 to February
1996, Mr. Rehfeld was President and Chief Executive Officer of Etak, Inc., a
supplier of digital mapping data and a subsidiary of the News Corporation. From
February 1989 to April 1993, he was President of Seiko Instruments USA Inc., a
manufacturer of electronic instruments. Mr. Rehfeld was also the director of
Wonderware Corporation from April 1992 until March 1998, when the company was
sold for $400 million. Mr. Rehfeld holds a BCE from the University of Minnesota
and an MBA from Harvard University. He is the author of the book ALCHEMY OF A
LEADER (1994), which has been translated into eight languages, and "Working With
the Japanese" in HARVARD BUSINESS REVIEW (1990).
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<PAGE>
NAME AGE PRINCIPAL OCCUPATION
---- --- --------------------
Hans H. Buehler 65 Chairman, Coastcast Corporation
Mr. Hans H. Buehler is a current director. He one of the founders of
Coastcast Corporation and has been the Chairman of the Board and a Director
since the inception of Coastcast Corporation in 1980. He also served as Chief
Executive Officer until Mr. Mora was appointed to that office on January 1,
1998. Mr. Buehler has more than 35 years of experience in the investment-casting
business, including more than 25 years of experience in the manufacture of golf
clubheads.
NAME AGE PRINCIPAL OCCUPATION
---- --- --------------------
Vernon R. Loucks Jr. 63 Chairman & CEO, Baxter International, Inc.
Mr. Vernon R. Loucks, Jr. is a current director. He has been a director
of Coastcast Corporation since September 30, 1996. Since 1987, Mr. Loucks has
served as Chairman of the Board of Baxter International, Inc., a provider of
cardiovascular, kidney dialysis and intravenous products to the health care
market, and he has served as Chief Executive Officer of Baxter since 1980. Mr.
Loucks also serves as a director of the Quaker Oats Company, Affymetrix, Inc.,
Anheuser-Busch Companies, the Dun & Bradstreet Corp., and Emerson Electric Co.
NAME AGE PRINCIPAL OCCUPATION
---- --- --------------------
Richard W. Mora 57 President & CEO, Coastcast Corporation
Mr. Richard W. Mora is a current director. He has been the President of
Coastcast Corporation since May 9, 1995. He was the Chief Operating Officer of
Coastcast Corporation until he was appointed to serve as the Chief Executive
Officer on January 1, 1998. From November 1991 to April 1995, he was chief
operating officer of Pharmavite Corporation, a manufacturer and distributor of
nutritional supplements. For many years before that, he was a senior officer of
Bergen Brunswig Corp., a large distributor of pharmaceutical and health and
beauty aid products. Mr. Mora also serves as a director of Amcor Capital
Corporation.
OTHER RELEVANT INFORMATION REGARDING THE NEW DIRECTORS' NOMINEES
Each of the four New Directors is a U.S. citizen.
With the exception of Mr. Vannini, none of the New Director nominees, or
their Immediate Families or any of their Associates currently, or during the
past two years, owns or share the power to vote or dispose of any shares of
Common Stock of the Company.
None of the New Director nominees, their Immediate Family, or any of
their Associates has had any material interest, direct or indirect, in any
transaction since January 1, 1998 to which the Company was or is to be a
party.
Since January 1, 1998, none of the New Director nominees have entered any
business venture or are now planning to enter into a business venture which
might be considered to be materially competitive with the Company.
Since January 1, 1998, none of the New Director nominees has been an
officer, director or owner of more than 10% of the equity interest of any
entity that has made or received payments or is likely to make or receive
payments to the Company for property or services during the Company's last
fiscal year in an amount exceeding 5% of the Company's consolidated gross
revenues or 5% of such other entity's consolidated gross revenues for that
period.
None of the four New Director nominees is a member of, or of counsel to,
any law firm or director partner, or executive officer of any investment banking
firm which has been retained or has performed services for the Company at any
time during the Company's last fiscal year or is likely to be so retained or to
perform such services during the Company's current fiscal year.
None of the four New Director nominees is now or has been within the
past year, party to any contracts or arrangements, understandings or
relationships (legal or otherwise) with any other person with respect to any
of the securities of the Company.
With the exception of Mr. Vannini, none of the New Director nominees have
contributed or will contribute to the cost of the solicitation directly or
indirectly.
None of the New Director nominees has been a participant in any other
proxy contest involving the Company or other registered corporations or
partnerships within the past ten years.
With the exception of Mr. Vannini, none of the New Director nominees
holds any directorships in companies whose securities are publicly traded or
in any investment company registered under the Investment Company Act of
1940.
None of the New Director nominees has filed a petition under the federal
Bankruptcy Act or any state insolvency law; been convicted in a criminal
proceeding or is named as the subject of a pending criminal proceeding (other
than traffic violations or other minor offences); or has had any order,
judgment or decree issued limiting in any way their engagement in any type of
business practice or engaging in any activity in connection with the purchase
or sale of any security.
None of the New Director nominees has been found by a court or by the
Securities and Exchange Commission or the Commodities Futures Trading
Commission, to have violated any federal or state securities or commodities
laws.
None of the New Director nominees or their Associates is a party adverse
to the Company; nor do they have a material interest adverse to the Company in
any pending legal proceeding to which the Company is a party or of which any of
its properties is the subject.
None of the New Director nominees has been indebted to the Company at any
time.
None of the New Director nominees has any "family relationship" with any
of the other nominees for directors of the Company, or with any executive
officer of the Company. "Family relationship" for this purpose means any
relationship by blood, marriage or adoption, not more remote than first
cousin.
DIRECTOR COMPENSATION
None of the New Director nominees received any compensation from the
Company during the last year.
PROPOSAL THREE
REVOCATION AND RESCISSION OF A PROPOSED AMENDMENT OF
THE COMPANY'S 1996 AMENDED AND RESTATED
EMPLOYEE STOCK OPTION PLAN
BACKGROUND
At the 1998 Annual Meeting, the shareholders considered and voted on a
management-endorsed amendment of the Company's 1996 Amended and Restated
Employee Stock Option Plan (The "Employee Stock
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<PAGE>
Option Plan"), which would increase the number of shares covered by such plan by
500,000 shares. As described more fully above, in BACKGROUND: THE ANNUAL MEETING
& ITS ADJOURNMENT and sections following thereafter, the Company announced on
July 21, 1998 that the shareholders had approved the management-endorsed
amendment of the Employee Stock Option Plan. The Company's press release of that
date did not reveal the vote tally, however, and also stated that the board of
directors, after additional consideration including the large number of
shareholders who have voted against the proposal, has decided that it would not,
at that time, implement the proposal. The Board reserved the right to implement
the proposal in the future, however.
After Mr. Vannini called the Special Meeting of the Shareholders, Coastcast
announced that its Board had decided to "formally rescind" the management-
endorsed amendment of the Employee Stock Option Plan. According to the Company
press release of August 6, 1998, no options have been or will be granted under
the rescinded amendment of the Employee Stock Option Plan, and any future
amendment of the plan by the Board that would authorize grants of additional
options to officers or directors of the company will be subject to shareholder
approval.
Mr. Vannini expects to propose that the shareholders completely revoke
and rescind the management-endorsed amendment of the Employee Stock Plan. To
revoke and rescind this amendment, if a quorum is present, the affirmative vote
of a majority of the shares represented at the meeting and entitled to vote on
the matter is required.
The purpose of this proposal is to eliminate the ability of the Board to
re-implement the amendment of the Director Stock Option Plan, which would
remove any doubt about the rescission and revocation of the management-
endorsed amendment of the Employee Stock Option Plan. Voting "FOR" this
proposal would eliminate the possibility that the Board will reverse itself
again in the future by implementing the management-endorsed amendment of the
Employee Stock Option Plan.
MR. VANNINI RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" A REVOCATION AND
RESCISSION OF THE AMENDMENT TO THE COMPANY'S 1996 AMENDED AND RESTATED
EMPLOYEE STOCK OPTION PLAN.
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<PAGE>
PROPOSAL FOUR
REVOCATION AND RESCISSION OF A MANAGEMENT-ENDORSED
PROPOSED AMENDMENT OF THE COMPANY'S 1995 AMENDED AND
RESTATED NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
At the 1998 Annual Meeting, the shareholders considered and voted on a
management-endorsed amendment of the Company's 1995 Amended and Restated Non-
Employee Director Stock Option Plan (the "Director Stock Option Plan"). As
described more fully above, in BACKGROUND: THE ANNUAL MEETING & ITS ADJOURNMENT
and sections following thereafter, the Company announced on July 21, 1998 that
the shareholders had approved the amendment of the Director Stock Option Plan.
The Company's press release of that date did not reveal the vote tally, however,
and also stated that the board of directors, after additional consideration
including the large number of shareholders who have voted against the proposal,
decided that it would not, at that time, implement the Director Stock Option
Plan proposal. The Board reserved the right to implement the proposal in the
future, however.
After Mr. Vannini called the Special Meeting of the Shareholders, Coastcast
announced that its Board had decided to "formally rescind" the management-
endorsed amendment of the Director Stock Option Plan. According to the Company
press release of August 6, 1998, no options have been or will be granted under
the rescinded amendment of the Director Stock Option Plan, and any future
amendment of the plan by the Board that would authorize grants of additional
options to officers or directors of the company will be subject to shareholder
approval.
To revoke and rescind this amendment, if a quorum is present, the
affirmative vote of a majority of the shares represented at the meeting and
entitled to vote on the matter is required.
The purpose of this proposal is to eliminate the ability of the Board to
re-implement the amendement of the Director Stock Option Plan, which would
remove any doubt about the rescission and revocation of the management-endorsed
amendment of the Director Stock Option Plan. Voting "FOR" this proposal would
eliminate the possibility that the Board will reverse itself again in the future
by implementing the management-endorsed amendment of the Director Stock Option
Plan.
MR. VANNINI RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE REVOCATION AND
RESCISSION OF THE MANAGEMENT-ENDORSED AMENDMENT TO THE COMPANY'S 1995 AMENDED
AND RESTATED NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN.
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<PAGE>
PROPOSAL FIVE
APPROVAL OF REIMBURSEMENT OF MR. VANNINI'S FEES AND EXPENSES
PURPOSE AND SUMMARY OF THE PROPOSED REIMBURSEMENT
Mr. Vannini seeks reimbursement for the significant expenditures he has
incurred and will incur in connection with the Special Meeting. California law
recognizes that proxy expenses can be reimbursed from a corporate treasury under
the rationale that the expenditures incurred promote the shareholders'
intelligent evaluation and adoption of policy or fundamental decisions. Mr.
Vannini believes that his disputes with the Company's present management and
Board fit within this rationale because he is exposing the Company's otherwise
hidden actions to the scrutiny of the shareholders, and effecting changes in the
Company's policies and practices that improve shareholder value.
Mr. Vannini believes that his actions have already influenced the Company
to change its policies, albeit in limited ways, to improve shareholder value.
For example, Mr. Vannini believes that without his intervention the Company
already would have increased the number of shares covered by the Employee Stock
Option Plan by an additional 500,000 shares, and would have increased the number
of shares covered by the Director Stock Option Plan by an additional 200,000
shares. As a result of Mr. Vannini's efforts, the stock option proposals that
were endorsed by Company management and unanimously supported by the Board only
a few months ago now have been "formally rescinded" by the Company, at least
for the time being.
In addition, Mr. Vannini believes that the Company will be less inclined to
defend the enrichment of the Company's current management by engaging in costly
litigation practices that waste the Company's resources if the shareholders have
the ability to support Mr. Vannini's efforts through reimbursement of the costs
he incurs in connection with the Special Meeting.
If a quorum is present, the affirmative vote of the majority of the shares
represented at the meeting and entitled to vote on this matter shall be the act
of the shareholders.
MR. VANNINI RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE REIMBURSEMENT
OF MR. VANNINI FOR THE FEES AND EXPENSES HE HAS INCURRED IN CONNECTION WITH THE
SPECIAL MEETING OF THE SHAREHOLDERS.
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<PAGE>
COASTCAST CORPORATION
SPECIAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF
SHAREHOLDER JONATHAN VANNINI
The undersigned shareholder of Coastcast Corporation, a California
corporation, hereby acknowledges receipt of the Notice of Special Meeting of
Shareholders and Proxy Statement, each dated _____ and hereby appoints Jonathan
Vannini proxy and attorney-in-fact, with full power of substitution, on behalf
and in the name of the undersigned, to represent the undersigned at the Special
Meeting of Shareholders of Coastcast Corporation to be held on October 26,
1998, at 10:00 a.m., local time, at the Company's offices at 3825 East Victoria
Street, Rancho Dominguez, California 90221, and at any adjournment(s) thereof,
and to vote all shares of Common Stock which the undersigned would be entitled
to vote if then and there personally present, on the matters set forth on the
reverse side, and, in his discretion, upon such other matter or matters which
may properly come before the meeting and any adjournment(s) thereof.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE REMOVAL OF THE INCUMBENT BOARD OF DIRECTORS,
---
FOR THE ELECTION OF THE SPECIFIED NOMINEES AS DIRECTOR, FOR THE REVOCATION OF
- --- ---
THE AMENDMENT TO THE 1996 AMENDED AND RESTATED EMPLOYEE STOCK OPTION PLAN, FOR
---
THE REVOCATION OF THE AMENDMENT TO THE 1995 AMENDED AND RESTATED NON-EMPLOYEE
DIRECTOR STOCK OPTION PLAN, FOR THE APPROVAL OF THE REIMBURSEMENT OF MR. VANNINI
---
FOR THE FEES AND EXPENSES INCURRED IN CONNECTION WITH THE SPECIAL MEETING OF
SHAREHOLDERS, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING.
------------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
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<PAGE>
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
FOR AGAINST ABSTAIN
1. PROPOSAL TO REMOVE ALL DIRECTORS [_] [_] [_]
FOR AGAINST ABSTAIN
2. PROPOSAL TO IMMEDIATELY ELECT JONATHAN [_] [_] [_]
VANNINI, JEFFREY COHEN, DR. JAMES MALERNEE,
JOHN E. REHFELD, HANS H. BUEHLER, VERNON R.
LOUCKS, JR., AND RICHARD W. MORA AS DIRECTORS
TO SERVE UNTIL THE NEXT ANNUAL MEETING OF
THE COMPANY'S SHAREHOLDERS AND UNTIL THEIR
SUCCESSORS ARE DULY ELECTED AND QUALIFY:
FOR AGAINST ABSTAIN
3. PROPOSAL TO REVOKE AND RESCIND THE AMENDMENT TO [_] [_] [_]
THE AMENDED AND RESTATED EMPLOYEE STOCK OPTION PLAN.
FOR AGAINST ABSTAIN
4. PROPOSAL TO REVOKE AND RESCIND THE AMENDMENT TO THE [_] [_] [_]
AMENDED AND RESTATED NON-EMPLOYEE DIRECTOR STOCK
OPTION PLAN.
FOR AGAINST ABSTAIN
5. PROPOSAL TO APPROVE THE REIMBURSEMENT OF MR. VANNINI [_] [_] [_]
FOR THE FEES AND EXPENSES INCURRED IN CONNECTION
WITH THE SPECIAL MEETING OF THE SHAREHOLDERS.
In their discretion, upon such other matter or matters which may
properly come before the meeting and any adjournment(s) thereof.
MARK HERE [_] This Proxy should be marked, dated, signed by the
FOR ADDRESS shareholder(s) exactly as his or her name appears hereon, and
CHANGE AND returned promptly in the enclosed envelope. Persons signing
NOTE BELOW in a fiduciary capacity should so indicate. If shares are held
by joint tenants or as community property, both should sign.
Signature: Date
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Signature: Date
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