<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
COASTCAST CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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)(1)
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:
-----------------------------------------------------------------------
<PAGE>
COASTCAST CORPORATION
3025 EAST VICTORIA STREET
RANCHO DOMINGUEZ, CALIFORNIA 90221
(310) 638-0595
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 22, 1998
------------------------
To the Shareholders of
COASTCAST CORPORATION:
You are cordially invited to attend the Annual Meeting of Shareholders of
Coastcast Corporation, a California corporation (the "Company"), which will be
held at the Four Seasons Hotel, 300 South Doheny Drive, Los Angeles, California,
at 10:00 a.m., California time, on Monday, June 22, 1998, to consider and act
upon the following matters, all as more fully described in the accompanying
Proxy Statement which is incorporated herein by this reference:
1. 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 qualify;
2. To consider and take action concerning approval of amendment of the
Company's 1996 Amended and Restated Employee Stock Option Plan (a copy of
which, as amended, is included as Appendix A to the accompanying Proxy
Statement) which increases the number of shares covered by such plan by
500,000 shares;
3. To consider and take action concerning approval of amendment of the
Company's 1995 Amended and Restated Non-Employee Director Stock Option
Plan (a copy of which, as amended, is included as Appendix B to the
accompanying Proxy Statement) which increases the number of shares
covered by such plan by 200,000 shares and provides for grants of
additional options to eligible directors;
4. To ratify the selection of Deloitte & Touche LLP as the Company's
independent auditors for fiscal year 1998; and
5. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Shareholders of record of the Company's common stock at the close of
business on April 27, 1998, the record date fixed by the Board of Directors, are
entitled to notice of, and to vote at, the meeting.
THOSE WHO CANNOT ATTEND ARE URGED TO SIGN, DATE, AND OTHERWISE COMPLETE THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. ANY SHAREHOLDER
GIVING A PROXY HAS THE RIGHT TO REVOKE IT ANY TIME BEFORE IT IS VOTED.
By Order of the Board of Directors
Robert C. Bruning
SECRETARY
Rancho Dominguez, California
April 27, 1998
<PAGE>
COASTCAST CORPORATION
3025 EAST VICTORIA STREET
RANCHO DOMINGUEZ, CALIFORNIA 90221
(310) 638-0595
------------------------
PROXY STATEMENT
APPROXIMATE DATE PROXY MATERIAL FIRST SENT
TO SHAREHOLDERS: MAY 6, 1998
------------------------
The following information is given in connection with the solicitation of
proxies for the Annual Meeting of Shareholders of Coastcast Corporation, a
California corporation (the "Company"), to be held at the Four Seasons Hotel,
300 South Doheny Drive, Los Angeles, California, at 10:00 a.m., California time,
on Monday, June 22, 1998, and adjournments thereof (the "Meeting"), for the
purposes stated in the Notice of Annual Meeting of Shareholders preceding this
Proxy Statement.
SOLICITATION AND REVOCATION OF PROXIES
A form of proxy is being furnished herewith by the Company to each
shareholder, and, in each case, is solicited on behalf of the Board of Directors
of the Company for use at the Meeting. The entire cost of soliciting these
proxies will be borne by the Company. The Company may pay persons holding shares
in their names or the names of their nominees for the benefit of others, such as
brokerage firms, banks, depositaries, and other fiduciaries, for costs incurred
in forwarding soliciting materials to their principals. Members of the
Management of the Company may solicit some shareholders in person, or by
telephone, telegraph or telecopy, following solicitation by this Proxy
Statement, but will not be separately compensated for such solicitation
services.
Proxies duly executed and returned by shareholders and received by the
Company before the Meeting will be voted FOR the election of all seven of the
nominee-directors specified herein, FOR approval of amendment of the Coastcast
Corporation 1996 Amended and Restated Employee Stock Option Plan (the "Employee
Plan"), FOR approval of amendment of the Coastcast Corporation 1995 Amended and
Restated Non-Employee Director Stock Option Plan (the "Director Plan"), and FOR
the ratification of the selection of Deloitte & Touche LLP as the Company's
independent auditors for fiscal year 1998, unless a contrary choice is specified
in the proxy. If a specification is indicated as provided in the proxy, the
shares represented by the proxy will be voted and cast in accordance with the
specification made. As to other matters, if any, to be voted on, the persons
designated as proxies will take such actions as they, in their discretion, may
deem advisable. The persons named as proxies were selected by the Board of
Directors of the Company and each of them is a director of the Company.
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 which 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 approve amendment of the Employee
Plan, the proposal to approve amendment of the Director Plan, and the proposal
to ratify the selection of Deloitte & Touche LLP will have no effect on the vote
for such
1
<PAGE>
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).
Your execution of the enclosed proxy will not affect your right as a
shareholder to attend the Meeting and to vote in person. Any shareholder giving
a proxy has a right to revoke it at any time by either (i) a later-dated proxy,
(ii) a written revocation sent to and received by the Secretary of the Company
prior to the Meeting, or (iii) attendance at the Meeting and voting in person.
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
The Company has outstanding only common stock, of which 9,002,898 shares
were outstanding as of the close of business on April 27, 1998 (the "Record
Date"). Only shareholders of record on the books of the Company at the close of
business on the Record Date will be entitled to vote at the Meeting. Each share
of common stock is entitled to one vote.
Representation at the Meeting by the holders of a majority of the
outstanding shares of common stock of the Company, either by personal attendance
or by proxy, will constitute a quorum.
The following table sets forth, as of April 3, 1998, the only persons known
to the Company to be the beneficial owners of more than 5% of the Company's
common stock:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) CLASS(2)
- ---------------------------------------------------------- ---------------------- -----------
<S> <C> <C>
Hans and Vivian Buehler................................... 1,312,749 shs.(3) 14.2%
3025 East Victoria Street
Rancho Dominguez, CA
90221
Tontine Partners, L.P..................................... 817,400 shs.(4) 9.1
200 Park Avenue, Suite 3900
New York, NY 10166
Gruber & McBaine Capital Management....................... 496,500 shs.(5) 5.5
50 Osgood Place, Penthouse
San Francisco, CA 94133
</TABLE>
- ------------------------
(1) Except as otherwise indicated and subject to applicable community property
and similar laws, the Company assumes that each named person has the sole
voting and investment power with respect to such person's shares.
(2) Percent of class is based on the number of shares outstanding on the Record
Date plus, in the case of Mr. Buehler, the number of shares which Mr.
Buehler has the right to purchase pursuant to options which either are
currently exercisable or will be exercisable within 60 days after the Record
Date.
(3) Includes 304,999 shares which are subject to options held by Mr. Buehler
which either are currently exercisable or will be exercisable within 60 days
after the Record Date. Golden Band, L.P., a California limited partnership,
owns of record 1,007,750 shares of common stock of the Company. Longview
Enterprises, Inc., a California corporation, is the sole general partner of
Golden Band, L.P. and owns a 1% limited partner interest in Golden Band,
L.P. Mr. and Mrs. Buehler each owns a 50% interest in Longview Enterprises,
Inc. as Co-Trustees of the Buehler Living Trust, dated August 22, 1990 (the
"Trust"). The Trust also owns a 99.07% limited partner interest in West Main
Street, L.P., a California limited partnership, which owns a 94.16597%
limited partner interest in Golden Band, L.P. Mr. and Mrs. Buehler disclaim
the beneficial ownership of 57,540.25 shares held by Golden Band, L.P.
2
<PAGE>
Does not include 171,000 shares held by a charitable foundation of which Mr.
and Mrs. Buehler are directors and officers, beneficial ownership of which
Mr. and Mrs. Buehler disclaim.
(4) Based on a Schedule 13G filed on February 19, 1998, Jefferey L. Gendell
shares disposition power and voting power over all of such shares, Tontine
Partners, L.P. and Tontine Management, L.L.C. both share disposition and
voting power over 271,800 of such shares, and Tontine Overseas Associates,
L.L.C. shares disposition and voting power over 545,600 of such shares as
investment manager to Tontine Overseas Fund, Ltd.
(5) Based on a Schedule 13D filed on February 19, 1998, John D. Gruber and J.
Patterson McBaine share disposition and voting power over 420,000 of such
shares, Mr. Gruber has sole disposition and voting power over 61,600 of such
shares, and Mr. McBaine has sole disposition and voting power over 14,900 of
such shares. In addition, Thomas O. Lloyd-Butler and Gruber and McBaine
Capital Management, L.L.C. each share disposition and voting power over
420,000 of such shares, Lagunitas Partners, a California limited
partnership, shares disposition and voting power over 201,500 of such
shares, and GMJ Investments, L.P. shares disposition and voting power over
5,500 of such shares.
The Company knows of no contractual arrangements which may at a subsequent
date result in a change of control of the Company.
STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth certain information regarding the shares of
the Company's common stock beneficially owned as of April 3, 1998 by (i) each
director and director nominee, (ii) the executive officers identified in the
Summary Compensation Table below, and (iii) all directors, director nominees and
executive officers of the Company as a group:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT
BENEFICIAL OF
NAME OF BENEFICIAL OWNER OWNERSHIP(1) CLASS(2)
- ----------------------------------------------------------------------------------------------------- --------------- ----------
<S> <C> <C>
Hans H. Buehler...................................................................................... 1,312,749(3) 14.2%
Richard W. Mora...................................................................................... 52,933(4) *
George L. Graziadio.................................................................................. 33,334(5) *
Edwin A. Levy........................................................................................ 23,334(6) *
Vernon R. Loucks Jr.................................................................................. 20,000(7) *
Lee E. Mikles........................................................................................ 20,000(8) *
Paul A. Novelly...................................................................................... 23,334(9) *
Robert C. Bruning.................................................................................... 12,100(10) *
Ramon F. Ibarra...................................................................................... 60,686(11) *
Jon A. Knartzer...................................................................................... -0- -0-
All directors, director nominees and executive officers as a group (11 persons)...................... 1,558,470(12) 16.5%
</TABLE>
- ------------------------
(1) Except as otherwise indicated and subject to applicable community property
and similar laws, to the best of the Company's knowledge and belief, each
person listed has sole voting and investment power as to shares beneficially
owned by such person.
(2) Percent of class is based on the number of shares outstanding on the Record
Date plus, with respect to each named person or group, as applicable, the
number of shares of common stock, if any, which the listed individual or
group has the right to acquire within 60 days after the Record Date.
Ownership of less than one percent is indicated by an asterisk.
(3) Includes 304,999 shares which are subject to options held by Mr. Buehler
which either are currently exercisable or will be exercisable within the 60
days after the Record Date. Golden Band, L.P., a
3
<PAGE>
California limited partnership, owns of record 1,007,750 of such shares.
Longview Enterprises, Inc., a California corporation, is the sole general
partner of Golden Band, L.P. and owns a 1% limited partner interest in
Golden Band, L.P. Mr. and Mrs. Buehler each owns a 50% interest in Longview
Enterprises, Inc. as Co-Trustees of the Buehler Living Trust, dated August
22, 1990 (the "Trust"). The Trust also owns a 99.07% limited partner
interest in West Main Street, L.P., a California limited partnership, which
owns a 94.16597% limited partner interest in Golden Band, L.P. Mr. and Mrs.
Buehler disclaim the beneficial ownership of 57,540.25 shares held by Golden
Band, L.P. Does not include 171,000 shares held by a charitable foundation
of which Mr. and Mrs. Buehler are directors and officers, beneficial
ownership of which Mr. and Mrs. Buehler disclaim.
(4) Includes 48,333 shares which are subject to options.
(5) Includes 10,000 shares owned by a partnership controlled by Mr. Graziadio
and 23,334 shares which are subject to options.
(6) All shares are subject to options.
(7) Includes 10,000 shares which are subject to options.
(8) All shares are subject to options. Does not include 15,100 shares owned by
Kodiak Opportunity, L.P. ("Kodiak"), of which Mikles/Miller Management, Inc.
("MMI") is the general partner. Mr. Mikles is a principal shareholder of MMI
and disclaims beneficial ownership of the shares owned by Kodiak.
(9) All shares are subject to options. Does not include 48,700 shares owned by
the Novelly Exempt Trust, U/I/T dated 8/12/92. Mr. Novelly disclaims
beneficial ownership of these shares.
(10) Includes 5,000 shares which are subject to options.
(11) Includes 29,178 shares which are subject to options.
(12) Includes 487,512 shares which are subject to options.
NOMINATION AND ELECTION OF DIRECTORS
The Company's directors are to be elected at each annual meeting of
shareholders. At the Meeting, seven directors are to be elected to serve until
the next annual meeting of shareholders and until their successors are elected
and qualify. The nominees for election as directors at the Meeting set forth in
the table below are all recommended by the Board of Directors of the Company and
are all incumbent directors of the Company.
In the event that any of the nominees for director should become unable to
serve if elected, it is intended that shares represented by proxies which are
executed and returned will be voted for such substitute nominee(s) as may be
recommended by the Company's existing Board of Directors.
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.
Discretionary authority to cumulate votes is hereby solicited by the Board of
Directors.
4
<PAGE>
The following table sets forth certain information concerning the nominees
for election as directors.
<TABLE>
<CAPTION>
NOMINEE(1) PRINCIPAL OCCUPATION AGE
- ------------------------------------ ------------------------------------------------- ---
<S> <C> <C>
Hans H. Buehler..................... Chairman of the Board of the Company 65
Edwin A. Levy(2)(3)................. Principal of Levy, Harkins & Co. 60
Paul A. Novelly(2)(3)............... President of Apex Oil Company, Inc. 54
George L. Graziadio................. President and Chief Executive Officer of Imperial
Bancorp 78
Vernon R. Loucks Jr.(2)(3).......... Chairman of the Board and Chief Executive Officer
of Baxter International, Inc. 63
Lee E. Mikles(2).................... Chairman of Mikles/Miller Management, Inc. 42
Richard W. Mora..................... President and Chief Executive Officer of the
Company 57
</TABLE>
- ------------------------
(1) The Company does not have a nominating committee of the Board of Directors.
The nominees for election as directors at the Meeting were selected by the
Board of Directors of the Company.
(2) Member of the compensation committee of the Board of Directors of the
Company, currently consisting of four directors, none of whom is an employee
of the Company. The compensation committee held one meeting during the last
fiscal year of the Company in addition to discussions in meetings of the
Board of Directors. See "Executive Compensation and Other
Information--Report of Compensation Committee on Executive Compensation" for
a discussion of the functions performed by the compensation committee.
(3) Member of the audit committee of the Board of Directors of the Company,
currently consisting of three directors, none of whom is an employee of the
Company. The audit committee held one meeting during the last fiscal year of
the Company in addition to discussions in meetings of the Board of
Directors. The audit committee reviews, acts on, and reports to the Board of
Directors with respect to various auditing and accounting matters, including
the selection of the Company's auditors, the scope of the annual audits, the
nature of non-audit services, fees to be paid to the auditors, the
performance of the Company's auditors, and the accounting practices of the
Company.
Mr. Buehler is one of the founders of the Company and has been the Chairman
of the Board and a Director since the Company's inception 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.
Mr. Levy has been a director of the Company since February 9, 1994. He is
one of the founders of, and since 1979 has been a principal of, Levy, Harkins &
Co., an investment advisory firm. Mr. Levy is also a director of Quintel
Entertainment Corporation.
Mr. Novelly has been a director of the Company since December 14, 1994.
Since 1975, Mr. Novelly has been the President of Apex Oil Company, Inc., a
company which together with its subsidiaries is engaged in oil and gas
exploration, transportation, trading and storage, and coal mining. He is also a
director of Imperial Bancorp, a bank holding company, Vista 2000, Inc., and
Intrawest Corporation.
Mr. Graziadio has been a director of the Company since January 16, 1995.
Since 1963 he has been the President and Chief Executive Officer of Imperial
Bancorp, a bank holding company. He also is a director of Imperial Bancorp. Mr.
Graziadio is the uncle of Mr. Mikles.
Mr. Loucks has been a director of the Company 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
5
<PAGE>
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.
Mr. Mora has been the President of the Company since May 9, 1995. He was the
Chief Operating Officer of the Company 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.
Mr. Mikles has been the Chairman of Mikles/Miller Management, Inc., a
professional money management firm, since October 1992. Mr. Mikles also serves
as a director of Imperial Bancorp and Vista 2000, Inc. Mr. Mikles is the nephew
of Mr. Graziadio.
There were five meetings of the Board of Directors of the Company during the
last fiscal year of the Company. Each of the directors of the Company attended
75% or more of the aggregate of the total number of meetings of the Board of
Directors held during the period in which he was a director and the total number
of meetings held by all committees of the Board of Directors on which he served
during such period.
DIRECTOR COMPENSATION
FEES AND BENEFITS
Each member of the Board of Directors who is not an employee of the Company
receives an annual fee of $10,000, paid in quarterly installments of $2,500, and
a fee of $2,000 for each board meeting attended. The Company also reimburses
directors for expenses related to attending board and committee meetings.
STOCK OPTIONS
Each member of the Board of Directors who is not an employee of the Company
receives automatic grants of options to purchase specified numbers of shares of
common stock of the Company under the Company's 1995 Amended and Restated
Non-Employee Director Stock Option Plan (the "Director Plan"). The Director Plan
is described below under "Amendment of Non-Employee Director Stock Option Plan."
In April 1998, the Director Plan was amended, subject to approval of the
shareholders of the Company, to increase the number of shares covered by the
plan by 200,000 shares and to provide for grants of additional options to
Eligible Directors as described below under "Amendment of Non-Employee Director
Stock Option Plan."
6
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table sets forth information concerning compensation of the
chief executive officer and the four other most highly compensated executive
officers of the Company for each of the last three completed fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION -------------
--------------------------------- OTHER ANNUAL STOCK OPTION ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) GRANTS(2) COMPENSATION
- ------------------------------------ --------- ---------- ---------- ---------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Hans H. Buehler..................... 1997 $ 500,000 $ 300,000 200,000(3)
Chairman of the Board and Chief 1996 450,000 350,000 250,000
Executive Officer 1995 350,000 -0- 72,500
Richard W. Mora(4).................. 1997 400,000 275,000 $ 45,313(5) 50,000(3) $ 1,041(6)
President and Chief Operating 1996 325,000 250,000 100,000
Officer 1995 178,750 -0- 65,000
Robert C. Bruning(7)................ 1997 195,000 75,000 15,000(3) 731(8)
Chief Financial Officer 1996 116,702 45,000 25,000
Jon A. Knartzer(9).................. 1997 175,000 75,000 10,690(3) 1,313(10)
Vice President--Operations 1996 20,194 5,000 15,690
Ramon F. Ibarra..................... 1997 160,000 75,000 8,400(11) 2,315(12)
Vice President--Manufacturing 1996 160,000 60,000 -0-
1995 147,000 -0- 27,167
</TABLE>
- ------------------------
(1) Except where indicated in this table, perquisites and other personal
benefits did not in the aggregate equal or exceed the lesser of $50,000 for
any named individual or 10 percent of the total of annual salary and bonus
reported in this table for such person.
(2) Number of shares of the Company's common stock subject to stock options
granted to the named individual under the Company's employee stock option
plan.
(3) Represents shares subject to an option which was granted in 1996 and
repriced in 1997. The shares subject to options shown in this table as
having been granted in 1996 are reduced by the options which were repriced
in 1997. See "Report of Compensation Committee on Executive Compensation--
Repricing of Stock Options" below.
(4) Mr. Mora joined the Company in May 1995. He served as Chief Operating
Officer until he succeeded Mr. Buehler as Chief Executive Officer in January
1998.
(5) Includes $33,279 in relocation expenses.
(6) Represents contributions made by the Company to the Company's 401(k)
retirement savings plan, of which $416 is vested and the remainder is
unvested.
(7) Mr. Bruning joined the Company in May 1996.
(8) Represents contributions made by the Company to the Company's 401(k)
retirement savings plan, of which $146 is vested and the remainder is
unvested.
(9) Mr. Knartzer joined the Company in November 1996.
(10) Represents contributions made by the Company to the Company's 401(k)
retirement savings plan, of which $263 is vested and the remainder is
unvested.
7
<PAGE>
(11) Represents shares subject to an option which was granted in 1993 and
repriced in 1997. See "Report of Compensation Committee on Executive
Compensation--Repricing of Stock Options" below.
(12) Represents contributions made by the Company to the Company's 401(k)
retirement savings plan, all of which is vested.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Company has established a Supplemental Executive Retirement Plan (the
"Plan"), which became effective September 1, 1996. The Plan is a nonqualified
deferred compensation arrangement that covers a select group of management and
highly compensated employees. The specific objective of the Plan is to provide a
retirement benefit at age 65 (or age 55 under certain circumstances) of 70% of
the final average salary. The final average salary is the participant's average
annual salary (excluding bonuses and other non-regular forms of compensation)
earned from the Company (before adjustments for contributions to
Company-sponsored employee benefit plans) during the three highest salary years
of the five-year period ending on the December 31 next preceding the earlier of
termination of employment or the date on which the participant qualifies for
retirement. Benefits do not vest until a participant has participated in the
Plan for five years. The retirement benefit accrues ratably over ten years of
participation at seven percent per year, with the actual retirement benefit
being dependent on years of participation in the Plan at the actual time of
retirement. At the time of adoption of the Plan, the Board of Directors credited
Hans H. Buehler with 10 years of participation such that he currently is vested
as to the maximum benefits under the Plan. The Board also has amended the Plan
to provide that, starting in 1997, Richard W. Mora shall be credited with two
years of participation for each actual year of participation for the accrual of
benefits and all other purposes under the Plan. The following table sets forth
approximate annual retirement benefits for retirement at age 65, expressed as a
single life annuity, which would be payable under the Plan:
<TABLE>
<CAPTION>
YEARS OF
PARTICIPATION
AVERAGE ANNUAL --------------------
COMPENSATION 5 10
- -------------- --------- ---------
<S> <C> <C>
$ 125,000 43,750 87,500
150,000 52,500 105,000
175,000 61,250 122,500
200,000 70,000 140,000
225,000 78,750 157,500
250,000 87,500 175,000
300,000 105,000 210,000
400,000 140,000 280,000
450,000 157,500 315,000
500,000 175,000 350,000
525,000 183,750 367,500
</TABLE>
As of December 31, 1997, all of the executive officers named in the Summary
Compensation Table were participating in the Plan. The average salary of the
named executive officers for purposes of the Plan does not differ substantially
from that set forth in the annual compensation columns of the Summary
Compensation Table, except for Hans Buehler, whose average annual salary
currently is $500,000, which is the average of his annual compensation for the
years 1993, 1996 and 1997. Credited years of participation in the Plan by the
participants are as follows: Hans Buehler, 10 years of participation; Richard
Mora, 3 years of participation; Robert Bruning, 2 years of participation; Jon
Knartzer, 1 year of participation; and Ramon Ibarra, 2 years of participation.
Amounts payable under the Plan are not reduced by Social Security benefits.
8
<PAGE>
OPTION GRANTS DURING 1997
There were no new grants of stock options to any of the executive officers
of the Company during 1997. Certain options held by executive officers of the
Company were, however, repriced in September 1997. See "Report of Compensation
Committee on Executive Compensation--Repricing of Stock Options" below. The
following table sets forth information concerning repriced options held by the
executive officers named in the Summary Compensation Table which were repriced
in September 1997:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
-------------------------------------------------------- AT ASSUMED RATES OF STOCK
% OF TOTAL APPRECIATION FOR OPTION
OPTIONS GRANTED TERM(4)
OPTIONS TO EMPLOYEES IN EXERCISE EXPIRATION --------------------------
NAME GRANTED(1) 1997(2) PRICE(3) DATE 5% 10%
- ------------------------------ ----------- ----------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Hans Buehler.................. 200,000 30.52 $ 14.125 02/20/06 $ 1,776,642 $ 4,502,485
Richard Mora.................. 50,000 7.63 14.125 08/07/06 444,161 1,125,621
Robert Bruning................ 15,000 2.29 14.125 05/06/06 133,248 337,686
Jon Knartzer.................. 10,690 1.63 14.125 11/10/06 94,962 240,658
Ramon Ibarra.................. 8,400 1.28 14.125 12/08/03 74,619 189,104
</TABLE>
- ------------------------
(1) The amount in the table represents shares of common stock covered by stock
options which were granted to the named individual under the Company's
employee stock option plan prior to 1997 and which were repriced inSeptember
1997. Options become exercisable as to one-third of the option shares two
years after the date of grant and as to an additional one-third of the
option shares each one-year interval thereafter, except that the options in
the table held by Mr. Buehler became exercisable one year after their grant
date. Certain transactions relating to a change in control of the Company
may accelerate the vesting of options outstanding at the time.
(2) Each of these options was granted prior to 1997 and repriced in September
1997.
(3) The exercise price of each option was decreased on September 8, 1997 to the
market price per share of common stock of the Company on that date.
(4) These columns represent hypothetical future values of the stock purchasable
upon exercise of the options net of the option's exercise price, assuming
that the market price of the Company's common stock appreciates at a five or
ten percent compounded annual rate over the remaining term of the options.
The five and ten percent rates of stockprice appreciation are presented as
examples pursuant to the Proxy Rules and do not necessarily reflect
management's assessment of the Company's future stock price performance. The
potential realizable values presented are not intended to indicate the value
of the options.
9
<PAGE>
OPTION EXERCISES IN 1997 AND YEAR-END OPTION VALUES
The following table sets forth information concerning stock options which
were exercised during, or held at the end of, 1997 by the officers named in the
Summary Compensation Table:
<TABLE>
<CAPTION>
NUMBER OF
UNEXERCISED OPTIONS AT VALUE OF UNEXERCISED
DECEMBER 31, 1997(1) IN-THE-MONEY OPTIONS(2)
SHARES ACQUIRED VALUE -------------------------- --------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------------------- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Hans H. Buehler............................. -0- -0- 87,497 235,003 $ 139,575 $ 99,175
Richard W. Mora............................. -0- -0- 31,666 133,334 116,456 129,169
Robert C. Bruning........................... -0- -0- -0- 25,000 -0- 2,500
Jon A. Knartzer............................. -0- -0- -0- 15,690 -0- 1,250
Ramon F. Ibarra............................. -0- -0- 66,128 12,781 476,980 35,982
</TABLE>
- ------------------------
(1) Shares of common stock.
(2) Value based on closing sale price of $13.875 per share on December 31, 1997.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors makes this report on
executive compensation pursuant to Item 402 of Regulation S-K. Notwithstanding
anything to the contrary set forth in any of the Company's previous filings
under the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended, that might incorporate future filings, including this Proxy
Statement, in whole or in part, this report and the graph which follows this
report shall not be incorporated by reference into any such filings, and such
information shall be entitled to the benefits provided in Item 402(a)(9).
The Compensation Committee reviews the performance of the executive officers
of the Company, makes recommendations to the Board of Directors as to their
compensation, and reviews the compensation programs for other key employees,
including salary and cash bonus levels. The Compensation Committee also
administers the Company's employee stock option plan (the "Employee Plan") and
authorizes grants of options to officers and other key employees based on
recommendations of Management.
COMPENSATION POLICIES AND PHILOSOPHY
The Company's executive compensation policies are designed to attract,
retain and reward executive officers who contribute to the Company's success, to
provide economic incentives for executive officers to achieve the Company's
business objectives by linking their compensation to the performance of the
Company, to strengthen the relationship between executive pay and shareholder
value and to reward individual performance. The Company uses a combination of
base salary, cash bonuses, and stock options to achieve these objectives.
The Compensation Committee considers a number of factors, including the
level and types of compensation paid to persons in similar positions by
comparable companies. In addition, the Compensation Committee evaluates
corporate performance by looking at factors such as performance relative to
competitors, performance relative to business conditions and the success of the
Company in meeting its financial objectives. The Compensation Committee also
reviews the performance of each executive officer, including a review of his or
her ability to meet individual performance objectives, demonstration of job
knowledge and skills and the ability to work with others toward the achievement
of the Company's goals.
10
<PAGE>
COMPONENTS OF COMPENSATION
Executive officer salaries are established in relation to a range of
salaries for comparable positions in companies of comparable size and
complexity. The Company seeks to pay salaries to executive officers that are
commensurate with the qualifications, duties and responsibilities and that are
competitive in the marketplace. In making its annual salary recommendations, the
Compensation Committee looks at the Company's financial position and
performance, the contribution of the individual executive officers during the
prior fiscal year in helping to meet the Company's financial and business
objectives as well as the executive officers' performance of their individual
responsibilities.
Cash bonuses are used to provide executive officers with financial
incentives to meet quarterly and annual performance targets of the Company.
Performance targets and bonus recommendations for executives other than the
chairman of the board and the chief executive officer are proposed by the chief
executive officer, reviewed and, when appropriate, revised by the Compensation
Committee and approved by the Board of Directors. Personal goals and bonus
recommendations for the chairman of the board and the chief executive officer
are recommended by the Compensation Committee and approved by the Board. Cash
bonuses were paid to Hans H. Buehler, Richard W. Mora, Robert C. Bruning, Jon A.
Knartzer, Ramon F. Ibarra and Kathleen H. Wainwright for 1997 based on the
performance of the Company in 1997.
The Compensation Committee believes that equity ownership by executive
officers provides incentives to build shareholder value and align the interests
of executive officers with the interests of shareholders. Upon hiring executive
officers, the Compensation Committee typically recommends stock option grants to
the officers under the Employee Plan, subject to applicable vesting periods.
Thereafter, the Compensation Committee considers awarding additional grants
under the Employee Plan. The Compensation Committee believes that these
additional grants provide incentives for executive officers to remain with the
Company. Options are granted at the current market price for the Company's
common stock and, consequently, have value only if the price of the Company's
common stock increases over the exercise price. In determining the size of the
periodic grants the Compensation Committee considers prior option grants to the
executive officer, the executive's performance during the current fiscal year
and his or her expected contributions during the succeeding fiscal year.
COMPENSATION OF THE PRINCIPAL EXECUTIVE OFFICERS
The Compensation Committee reviews the performance of the chairman of the
board and the chief executive officer of the Company, as well as other executive
officers of the Company, annually. For their services in 1997, Mr. Buehler
received a bonus of $300,000 and Mr.Mora received a bonus of $275,000, based on
the performance of the Company in fiscal year 1997. In February 1998, the
Compensation Committee, which administers the Company's employee stock option
plan, approved the grant to Mr. Mora of an option to purchase 200,000 shares of
common stock of the Company at an exercise price of $17.189 per share, the
market price per share of common stock of the Company on that date.
REPRICING OF STOCK OPTIONS
On September 8, 1997, the exercise prices of certain outstanding options
under the Company's employee stock option plan were reduced with the approval of
the Compensation Committee. Specifically, the exercise price of each outstanding
option with an exercise price higher than $14.125, including options held by
executive officers of the Company, was reduced to that price. The reduced price
was based on and equal to the market price per share of common stock of the
Company on September 8, 1997. No other changes were made in the repriced
options. No other options granted by the Company have ever been repriced.
11
<PAGE>
The following table sets forth information concerning repriced options held
by executive officers of the Company, all of which were repriced on September 8,
1997:
TEN-YEAR OPTION REPRICING
<TABLE>
<CAPTION>
LENGTH OF
MARKET PRICE ORIGINAL TERM
NUMBER OF SHARES OF STOCK AT EXERCISE REMAINING AT
UNDERLYING TIME OF PRICE AT TIME NEW EXERCISE DATE OF
NAME(1) REPRICED OPTIONS REPRICING OF REPRICING PRICE REPRICING
- ------------------------------- ---------------- -------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Hans Buehler................... 200,000 $ 14.125 $ 15.375 $ 14.125 8.4 years
Richard Mora................... 50,000 14.125 19.625 14.125 8.9
Robert Bruning................. 15,000 14.125 21.00 14.125 8.7
Jon Knartzer................... 10,690 14.125 16.375 14.125 9.2
Ramon Ibarra................... 8,400 14.125 16.00 14.125 6.3
Kathleen Wainwright............ 4,700 14.125 16.00 14.125 6.3
</TABLE>
- ------------------------
(1) Mr. Buehler is the Chairman of the Board; Mr. Mora is the President and
Chief Executive Officer; Mr. Bruning is the Chief Financial Officer; Mr.
Knartzer is the Vice President--Operations; Mr. Ibarra is the Vice
President--Manufacturing; and Ms. Wainwright is the Vice President--Sales.
The Compensation Committee approved this repricing of options out of concern
that the affected options were not providing a meaningful incentive to the their
holders since they had been granted when the prevailing market price of the
Company's stock was significantly higher.
MEMBERS OF THE COMPENSATION COMMITTEE
Edwin A. Levy Vernon R. Loucks Jr. Paul A. Novelly Lee E. Mikles
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
The graph below compares the cumulative total shareholder return on the
Company's common stock with the cumulative total return on the Russell 2000 and
a peer group index for the period commencing on December 10, 1993 (the date
trading of the Company's common stock commenced on the New York Stock Exchange)
and ending on December 31, 1997. The data set forth below assumes the value of
an investment in the Company's common stock and each index was $100 on December
10, 1993.
12
<PAGE>
COMPARISON OF TOTAL RETURN
SINCE THE INITIAL PUBLIC OFFERING OF COASTCAST CORPORATION COMMON STOCK
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TOTAL RETURN TO STOCKHOLDERS
<S> <C> <C> <C>
(Assumes $100 Investment on 12/10/93)
Dollars Coastcast Corporation Peer Group* Russell 2000
12/10/93 100.00 100.00 100.00
12/31/93 113.28 98.24 102.29
12/31/94 73.44 69.48 99.03
12/31/95 63.28 31.23 99.43
12/31/96 90.63 31.71 115.87
12/31/97 86.72 29.87 141.62
</TABLE>
* Peer Group Index consists of Aldila Inc. and Royal Grip, Inc. through
September 3, 1997, and Aldila Inc. and Royal Precision, Inc. (formerly named
FM Precision, Inc. and successor to Royal Grip, Inc.) from September 3, 1997
through December 31, 1997.
13
<PAGE>
AMENDMENT OF EMPLOYEE STOCK OPTION PLAN
The Company has an employee stock option plan (the "Employee Plan"), which
was adopted in 1983, amended and restated in 1993 and 1996, and previously
approved by the shareholders, under which common stock of the Company may be
issued pursuant to exercise of options granted to officers and other key
employees of the Company or its subsidiaries. The Employee Plan is intended to
provide additional compensation and incentives to eligible individuals whose
present and potential contributions are important to the continued success of
the Company, to afford such persons an opportunity to acquire a proprietary
interest in the Company, and to enable the Company to continue to enlist and
retain the best available talent for the successful conduct of its business.
In April 1998, the Board of Directors amended the Employee Plan, subject to
approval of the shareholders, to increase the number of shares covered by the
plan by 500,000 shares because relatively few shares were available for grants
of options under the plan. This amendment was adopted and is recommended for
approval by the Company's shareholders because the Board believes that option
grants under the Employee Plan play an important role in the Company's efforts
to attract employees of outstanding ability and to reward employees for
outstanding performance. In the event the amendment to the Employee Plan is not
approved by the shareholders, the Board believes that the Company's inability to
grant additional options under the Employee Plan may adversely impact the
Company's future hiring, promotion and operating plans.
A copy of the Employee Plan, as amended by the Board subject to shareholder
approval, is set forth in full as Appendix A to this Proxy Statement. Following
is a summary of the principal provisions of the Employee Plan, as so amended:
1. The purpose of the Employee Plan will continue to be to further the
growth and development of the Company and its subsidiaries by providing,
through an equity interest in the Company, an incentive to officers and
other key employees who are in a position to contribute materially to the
prosperity of the Company, to increase such persons' interests in the
Company's welfare, to encourage them to continue their services to the
Company or its subsidiaries, and to attract individuals of outstanding
ability to enter the employment of the Company or its subsidiaries.
2. Two types of options may be granted under the Employee Plan: options
intended to qualify as incentive stock options under Section 422 of the
Internal Revenue Code of 1986; and non-qualified stock options not
specifically authorized or qualified for favorable federal income tax
consequences.
3. Any employee of the Company or any of its subsidiaries is eligible to
receive one or more options under the Employee Plan, provided that no
employee may receive in any calendar year options to purchase more than
an aggregate of 450,000 shares of common stock of the Company.
4. The aggregate number of shares of common stock of the Company which may
be issued after April 3, 1998, the date of amendment of the Employee Plan
subject to shareholder approval, pursuant to exercise of options
theretofore or thereafter granted under the Employee Plan shall not
exceed 1,894,462 shares (subject to adjustment pursuant to the
"anti-dilution" provisions of the Employee Plan). This represents an
increase of 500,000 shares in the aggregate number of shares covered by
the Employee Plan prior to amendment. This amendment would allow the
Company to issue in the future a maximum of 1,894,462 shares upon
exercise of options which are now outstanding or which may be granted in
the future. Subject to the provisions of the Employee Plan, the Board or
the Committee may determine, in its sole discretion, the number of shares
of common stock of the Company with respect to which incentive stock
options and non-qualified stock options may be granted.
5. The Employee Plan is administered by the Board, or in the discretion of
the Board, a Committee ("Committee") of not less than two individuals,
all of whom must be members of the Board, with authority to determine
employees to whom options will be granted, the timing and manner of
14
<PAGE>
grant of options, the exercise price, the number of shares covered by and
all of the terms of options, the duration and purpose of leaves of
absence which may be granted to optionees without constituting
termination of employment for purposes of the Employee Plan, and all
other determinations necessary or advisable for administration of the
plan. The Employee Plan is currently being administered by the Committee.
6. The purchase price for the shares subject to any option granted under
the Employee Plan shall not be less than 100% of the fair market value of
the shares of common stock of the Company on the date the option is
granted.
7. The purchase price for any shares purchased pursuant to exercise of an
option granted under the Employee Plan must be paid in full upon exercise
of the option in cash; or, at the discretion of the Board or Committee,
upon such terms and conditions as it may approve, by transferring to the
Company for redemption shares of common stock at their fair market value;
or the Company may extend and maintain, or arrange for the extension and
maintenance of, credit to any optionee to finance his or her purchase of
shares pursuant to exercise of an option on such terms as may be approved
by the Board or Committee subject to applicable regulations of the
Federal Reserve Board and any other laws or regulations in effect at the
time such credit is extended. (Transfer to the Company for redemption of
shares of common stock at their fair market value as payment for the
shares acquired upon exercise of the option may enable employees to use a
technique known as "pyramiding," if the fair market value of the shares
acquired upon exercise of the option exceeds the price at which the
option may be exercised. Pyramiding of stock options, in brief, works as
follows: An optionee may exercise a limited portion of his or her option
for cash to acquire a few shares of stock. Because the value of the stock
the optionee acquires exceeds the exercise price of the option, he or she
may immediately exercise his or her option again by exchanging the shares
acquired by the first exercise to acquire a greater number of shares.
This process may be repeated until the optionee has fully exercised his
or her option. The optionee does not keep the shares he or she exchanges
upon each exercise of the option. Pyramiding may result in an optionee
fully exercising his or her option at any one time by this series of
stock exchanges with a nominal initial cash payment.) The Company has not
previously permitted any optionee to transfer shares of common stock of
the Company owned by the optionee to the Company as any part of the
purchase price of shares purchased under an option granted under the
Employee Plan.
8. No option shall be exercisable during the lifetime of an optionee by any
other person. The Board or the Committee has the power to set the time(s)
within which each option shall be exercisable and to accelerate the
time(s) of exercise. Unless otherwise provided by the Board or the
Committee, each option shall become exercisable on a cumulative basis as
to one-third of the total number of shares covered by the option at any
time after two years from the date the option is granted and as to an
additional one-third after the end of each consecutive year thereafter.
9. No option shall be exercisable after the earliest of the following: the
expiration of ten years after the date the option is granted; three
months after the date the optionee's employment with the Company and its
subsidiaries terminates if termination is for any reason other than
permanent disability or death; or one year after the date the optionee's
employment terminates if termination is a result of death or permanent
disability, or death results within not more than three months of the
date on which the optionee ceases to be an employee.
10. The aggregate fair market value (determined as of the time the option is
granted) of stock with respect to which incentive stock options are
exercisable by any employee for the first time during any calendar year
may not exceed $100,000.
15
<PAGE>
11. Within certain limitations, the Board or Committee has the power to
modify, extend, or renew outstanding options granted under the Employee
Plan, accept the surrender of outstanding options, and authorize the
granting of new options in substitution therefor.
12. The Employee Plan will expire on December 31, 2001.
FEDERAL INCOME TAX CONSEQUENCES
Both non-qualified stock options and incentive stock options may be granted
under the Employee Plan. Under current federal income tax law, the grant of a
non-qualified option under the Employee Plan will have no federal income tax
consequences to the Company or the optionee. Generally, upon exercise of a
non-qualified stock option granted under the Employee Plan, the excess of the
fair market value of the stock at the date of exercise over the option price
(the "Spread") is taxable to the optionee as ordinary income. All such amounts
taxable to an employee are deductible by the Company as compensation expense, if
appropriate income is reported on behalf of the optionee. The deduction will be
allowed for the taxable year of the Company in which the optionee includes an
amount in income.
Generally, the shares received on exercise of an option under the Employee
Plan are not subject to restrictions an transfer or risks of forfeiture and,
therefore, the optionee will recognize income on the date of exercise of a
non-qualified stock option. However, if the optionee is subject to Section 16(b)
of the Securities Exchange Act of 1934, as amended (the "Act"), the Section
16(b) restriction will be considered a substantial risk of forfeiture for tax
purposes. Under current law, employees who are either directors or officers of
the Company will be subject to restrictions under Section 16(b) of the Act
during their term of service and for up to six months after termination of such
service. SEC Rule 16b-3 provides an exemption from the restrictions of Section
16(b) for the grant of derivative securities, such as stock options, under
qualifying plans, Because the Employee Plan satisfies the requirements for
exemption under SEC Rule 16b-3, the grant of options will not be considered a
purchase and the exercise of the options to acquire the underlying shares of
Company common stock will not be considered a purchase or a sale. Thus, ordinary
income will be recognized and the Spread will be measured on the date of
exercise.
There will be no federal income tax consequences to the Company or the
employee as a result of the grant of an incentive stock option. The optionee
also will not recognize income when the incentive stock option is exercised
(subject to the alternative minimum tax rules discussed below). Generally, the
Company receives no deduction at the time of exercise.
In the event of a disposition of shares acquired upon exercise of an
incentive stock option, the tax consequences depend upon how long the employee
has held the shares. If the employee does not dispose of the shares within two
years after the incentive stock option was granted, or within one year after the
incentive stock option was exercised and shares were purchased, then the
employee must recognize only a long term capital gain or loss. The Company is
not entitled to any deduction under these circumstances.
If the optionee fails to satisfy either of the foregoing holding periods,
then he or she must recognize ordinary income in the year of disposition
(referred to as a "disqualifying disposition"). The amount of such ordinary
income generally is determined under the rules applicable to non-qualified
options (see above). However, such ordinary income will in no event exceed the
amount of the gain realized on the sale, provided that the disposition involves
an arm's-length sale or exchange with an unrelated party. Any gain in excess of
the amount taxed as ordinary income will be treated as capital gain. The
Company, in the year of the disqualifying disposition, is entitled to a
deduction equal to the amount of ordinary income recognized by the optionee.
The Spread under an incentive stock option is treated as an adjustment in
computing alternative minimum taxable income ("AMTI") for the year of exercise.
A subsequent disqualifying disposition of shares acquired upon exercise of an
incentive stock option will eliminate the AMTI adjustment if the disposition
occurs in the same taxable year as the exercise. A disqualifying disposition in
a subsequent taxable year will not affect the alternative minimum tax
computation in the earlier year.
16
<PAGE>
OPTIONS GRANTED UNDER THE EMPLOYEE PLAN
As of April 3, 1998, an aggregate of 555,538 shares had been issued pursuant
to exercise of options previously granted under the Employee Plan, options were
outstanding under the Employee Plan held by approximately 119 persons to
purchase an aggregate of 1,353,931 shares of Company common stock at an average
exercise price of $13.96 per share, and 40,531 shares were available for future
grants of options under the Employee Plan (without giving effect to amendment of
the Employee Plan, subject to shareholder approval, to increase the number of
shares covered by the plan). Total options granted to date under the Employee
Plan as of April 3, 1998 were as follows: Hans Buehler--372,500 shares; Richard
Mora--415,000 shares; Robert Bruning--35,000 shares; Jon Knartzer--25,690
shares; Ramon Ibarra-- 45,567 shares; all current executive officers as a group
(6 persons)--913,757 shares; all current employees as a group (excluding
executive officers) (approximately 113 persons)--440,174 shares. Directors or
nominees for directors who are not employees of the Company have not been
granted any options under the Employee Plan. In addition, no associate of any
current director, nominee for director or executive officer has been granted any
options under the Employee Plan.
The market value of the Company's common stock on April 3, 1998 was $20.44
per share.
REASONS FOR AMENDMENT OF THE EMPLOYEE PLAN
This amendment was adopted and is recommended for approval by the Company's
shareholders because relatively few shares were available for grants of options
under the Employee Plan and the directors believe that option grants under the
plan play an important role in the Company's efforts to attract employees of
outstanding ability and to reward employees for outstanding performance.
In the event the amendment to the Employee Plan is not approved by the
shareholders, the directors believe that the Company's inability to grant
additional options under the Employee Plan may adversely impact the Company's
future hiring, promotion and operating plans.
VOTE REQUIRED FOR APPROVAL OF AMENDMENT OF THE EMPLOYEE PLAN
Approval of the amendment of the Employee Plan requires the affirmative vote
of the holders of a majority of the shares of common stock of the Company
represented and voting at the Meeting (which affirmative vote must equal or
exceed a majority of the quorum required for the Meeting). If the amendment of
the Employee Plan is not approved by the shareholders, the Employee Plan, as
previously approved, will continue in effect. Abstentions as to the proposal to
approve amendment of the Employee Plan 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 the 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 BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF AMENDMENT OF THE
EMPLOYEE PLAN.
17
<PAGE>
AMENDMENT OF NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The Company has a non-employee director stock option plan (the "Director
Plan"), which was adopted and approved by the shareholders in 1993, amended and
restated in 1995, and approved again by the shareholders in June 1996, under
which common stock of the Company may be issued pursuant to exercise of options
granted to non-employee directors of the Company. In April 1998, the Board of
Directors further amended the Director Plan, subject to approval of the
shareholders, to increase the number of shares covered by the plan and to
provide for grants of additional options to eligible directors as discussed
below.
The Director Plan provides that an option to purchase 30,000 shares of
common stock of the Company will be granted automatically to each Eligible
Director (as defined in the Director Plan) who first becomes an Eligible
Director after December 13, 1995 on the date on which such director first
becomes an Eligible Director. Prior to the April 1998 amendment, the Director
Plan provided that an option to purchase an additional 10,000 shares of common
stock of the Company would be granted automatically to each such director on the
third anniversary of the date on which such director first became an Eligible
Director and on each subsequent anniversary of such date if such director is
still an Eligible Director on such anniversary (each of which is hereinafter
referred to as an "Annual Option"). Pursuant to the Director Plan, an option to
purchase 10,000 shares of common stock of the Company was granted to each
Eligible Director who became a director prior to December 13, 1995 on the date
he first became a director and an option to purchase an additional 20,000 shares
of common stock of the Company was granted each such director on December 13,
1995. Prior to the April 1998 amendment, the Director Plan provided that an
option to purchase an additional 10,000 shares of common stock of the Company
would be granted automatically to each such director on December 13, 1998, and
on each subsequent December 13 if such director is still an Eligible Director on
such December 13 (each of which is hereinafter also referred to as an "Annual
Option").
In April 1998, the Director Plan was amended, subject to approval of the
shareholders, to increase the number of shares covered by the plan by 200,000
shares and to increase the number of shares covered by each Annual Option from
10,000 shares to 20,000 shares.
The Director Plan is intended to increase the proprietary and vested
interests of the non-employee directors of the Company and the growth and
performance of the Company by granting to them options to purchase shares of
common stock of the Company, to encourage them to continue their services to the
Company, and to attract individuals with outstanding ability to serve on the
Board of Directors of the Company. The April 1998 amendment was adopted and is
recommended for approval by the Company's shareholders because the directors
believe that option grants under the Director Plan play an important role in the
Company's efforts to attract and retain the services of individuals of
outstanding ability as directors of the Company.
A copy of the Director Plan, as amended by the Board subject to shareholder
approval in April 1998, is set forth in full as Appendix B to this Proxy
Statement. Following is a summary of the principal provisions of the Director
Plan, as so amended:
1. The purpose of the Director Plan will continue to be to increase the
proprietary and vested interest of the non-employee directors of the
Company and the growth and performance of the Company by granting to them
options to purchase shares of common stock of the Company, to encourage
them to continue their services to the Company, and to attract
individuals of outstanding ability to serve on the Board of Directors of
the Company.
2. Options granted under the Director Plan will be non-qualified stock
options not specifically authorized or qualified for favorable federal
income tax consequences.
3. Each director of the Company shall be eligible to receive an option
under the Director Plan at any time only if such director (i) is not then
an employee of the Company or any of its
18
<PAGE>
subsidiaries, (ii) has not, within three years immediately preceding such
time, received any stock option, stock bonus, stock appreciation right,
or other similar stock award from the Company or any of its subsidiaries,
other than options granted to such director under the Director Plan, and
(iii) does not then beneficially own more than 10% of the outstanding
stock of the Company (an "Eligible Director").
4. The aggregate number of shares of common stock of the Company which may
be issued pursuant to exercise of options granted under the Director Plan
shall not exceed 400,000 shares (subject to adjustment pursuant to the
"anti-dilution" provisions of the Director Plan). This represents an
increase of 200,000 shares in the aggregate number of shares covered by
the Director Plan prior to the April 1998 amendment.
5. The Director Plan provides that an option to purchase 30,000 shares of
common stock of the Company shall be granted automatically to each
Eligible Director who first becomes an Eligible Director after December
13, 1995 on the date on which such director first becomes an Eligible
Director. Thereafter, the Director Plan, as amended subject to
shareholder approval, provides that an option to purchase an additional
20,000 shares of common stock of the Company shall be granted
automatically to each such director on the third anniversary of the date
on which such director first became an Eligible Director and on each
subsequent anniversary of such date if such director is still an Eligible
Director on such anniversary. This amendment, if approved by the
shareholders, increases the option to purchase shares on the third
anniversary date and on each subsequent anniversary from 10,000 shares to
20,000 shares. Pursuant to the Director Plan, an option to purchase
20,000 shares of common stock of the Company was granted automatically on
December 13, 1995 to each Eligible Director who first became an Eligible
Director prior to such date. Thereafter, the Director Plan, as amended
subject to shareholder approval, provides that an option to purchase an
additional 20,000 shares of common stock of the Company shall be granted
automatically to each such director on December 13, 1998, and on each
subsequent December 13 if such director is still an Eligible Director on
such December 13. This amendment, if approved by the shareholders,
increases the option to purchase shares to be granted on December 13,
1998 and on each subsequent December 13 from 10,000 shares to 20,000
shares.
6. The purchase price for the shares subject to any option granted under
the Director Plan shall be the fair market value of the shares of common
stock of the Company on the date the option is granted.
7. The Director Plan is administered by the Board, or in the discretion of
the Board, a committee ("Committee") of not less than two individuals,
all of whom must be members of the Board.
8. The purchase price for any shares purchased pursuant to exercise of an
option granted under the Director Plan must be paid in full upon exercise
of the option in cash or, at the discretion of the Board or Committee,
upon such terms and conditions as it may approve, by transferring to the
Company for redemption shares of common stock at their fair market value.
(Transfer to the Company for redemption of shares of common stock at
their fair market value as payment for the shares required upon exercise
of the option may enable directors to use the technique known as
"pyramiding," if the fair market value of the shares acquired upon
exercise of the option exceeds the price at which the option may be
exercised. Pyramiding of stock options, in brief, works as follows: An
optionee may exercise a limited portion of his or her option for cash to
acquire a few shares of stock. Because the value of the stock the
optionee acquires exceeds the exercise price of the option, he or she may
immediately exercise his or her option again by exchanging the shares
acquired by the first exercise to acquire a greater number of shares.
This process may be repeated until the optionee has fully exercised his
or her option. The optionee does not keep the shares he or she exchanges
upon each exercise of the option. Pyramiding may result in an optionee
fully
19
<PAGE>
exercising his or her option at any one time by this series of stock
exchanges with a nominal initial cash payment.)
9. No option granted under the Director Plan is exercisable after the
expiration of the earlier of (i) 10 years following the date the option
is granted, or (ii) one year following the date the optionee ceases to be
a director of the Company for any reason.
10. No option shall be exercisable during the lifetime of an optionee by any
other person. Each option granted under the Director Plan becomes
exercisable as to one-third of the shares subject to the option on each
anniversary of the date the option is granted if the optionee is still a
director of the Company on such anniversary. Certain transactions
relating to a change in control of the Company may accelerate vesting of
options outstanding at the time.
11. The Director Plan expires on December 31, 2003.
FEDERAL INCOME TAX CONSEQUENCES
The federal income tax consequences to the Company or the optionee as the
result of the grant or exercise of an option under the Director Plan will be the
same as the federal income tax consequences with respect to non-qualified stock
options under the Employee Plan discussed above under "Amendment of Employee
Stock Option Plan--Federal Income Tax Consequences."
OPTIONS GRANTED UNDER THE DIRECTOR PLAN
As of April 3, 1998, options were outstanding under the Director Plan held
by five non-employee directors of the Company to purchase an aggregate of
150,000 shares of Company common stock (30,000 shares each) at an average
exercise price of $16.31 per share. Prior to the April 1998 amendment of the
Director Plan, which is subject to approval of the shareholders, 50,000 shares
were available for future grants of additional options under the plan. No shares
have ever been issued pursuant to exercise of an option granted under the
Director Plan.
The following table sets forth information concerning options which have
been granted or will be granted in the future to non-employee directors of the
Company under the Director Plan:
<TABLE>
<CAPTION>
EXERCISE
DIRECTOR DATE OF GRANT NO. OF SHARES PRICE EXPIRATION DATE
- ----------------------------------- ---------------------- ------------- ------------- ----------------------
<S> <C> <C> <C> <C>
Edwin Levy......................... February 9, 1994 10,000 $ 30.00 February 8, 2004
Edwin Levy(1)...................... December 13, 1995 20,000 10.00 December 12, 2005
Paul Novelly....................... December 14, 1994 10,000 15.00 December 13, 2004
Paul Novelly(1).................... December 13, 1995 20,000 10.00 December 12, 2005
George Graziadio................... January 16, 1995 10,000 12.50 January 15, 2005
George Graziadio(1)................ December 13, 1995 20,000 10.00 December 12, 2005
Lee Mikles(2)...................... June 12, 1996 30,000 27.00 June 11, 2006
Vernon Loucks(3)................... September 30, 1996 30,000 15.38 September 29, 2006
</TABLE>
- ------------------------
(1) An option to purchase 20,000 shares (or 10,000 shares if the April 1998
amendment of the Director Plan is not approved by the shareholders) will be
granted to each of these directors on December 13, 1998 and each December 13
thereafter if he is still an Eligible Director at the time.
(2) An option to purchase 20,000 shares (or 10,000 shares if the April 1998
amendment of the Director Plan is not approved by the shareholders) will be
granted to this director on June 12, 1999 and each June 12 thereafter if he
is still an Eligible Director at the time.
20
<PAGE>
(3) An option to purchase 20,000 shares (or 10,000 shares if the April 1998
amendment of the Director Plan is not approved by the shareholders) will be
granted to this director on September 30, 1999 and each September 30
thereafter if he is still an Eligible Director at the time.
REASONS FOR AMENDMENT OF THE DIRECTOR PLAN
This amendment was adopted and is recommended for approval by the Company
shareholders because the Board believes that option grants under the Director
Plan play an important role in the Company's efforts to attract and retain
individuals of outstanding ability to serve as directors of the Company.
VOTE REQUIRED FOR APPROVAL OF AMENDMENT OF THE DIRECTOR PLAN
Approval of the amendment of the Director Plan requires the affirmative vote
of the holders of a majority of the shares of common stock of the Company
represented and voting at the Meeting (which affirmative vote must equal or
exceed a majority of the quorum required for the Meeting). If the amendment of
the Director Plan is not approved by the shareholders, the Director Plan, as
previously approved, will continue in effect. Abstentions as to the proposal to
approve amendment of the Director Plan 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 the 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 BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF AMENDMENT OF THE
DIRECTOR PLAN.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The accounting firm of Deloitte & Touche LLP serves the Company as its
independent auditors at the direction of the Board of Directors of the Company.
One or more representatives of Deloitte & Touche LLP are expected to be present
at the Meeting and will have an opportunity to make a statement if they desire
to do so and to be available to respond to appropriate questions.
The Board of Directors recommends a vote FOR the ratification of the
selection of Deloitte & Touche LLP as the independent auditors for the Company
for fiscal year 1998. This matter is not required to be submitted for
shareholder approval, but the Board of Directors has elected to seek
ratification of its selection of the independent auditors by the affirmative
vote of a majority of the shares represented and voting at the Meeting (which
affirmative vote must equal or exceed a majority of the quorum required for the
Meeting).
Notwithstanding the ratification by shareholders of the appointment of
Deloitte & Touche LLP, the Board of Directors may, if the circumstances dictate,
appoint other independent accountants.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16 of the Securities Exchange Act of 1934, as amended, requires the
Company's directors and executive officers and persons who own more than 10% of
a registered class of the Company's equity securities to file various reports
with the Securities and Exchange Commission and the New York Stock Exchange
concerning their holdings of, and transactions in, securities of the Company.
Copies of these filings must be furnished to the Company.
Based on a review of the copies of such forms furnished to the Company and
written representations from the Company's executive officers and directors, the
Company notes that Mr. Mora filed a Form 5 reporting late his sales for the
month of October 1997.
21
<PAGE>
SHAREHOLDER PROPOSALS
Shareholders who wish to present proposals for action at the 1999 Annual
Meeting of Shareholders should submit their proposals in writing to the
Secretary of the Company at the address of the Company set forth on the first
page of this Proxy Statement. Proposals must be received by the Secretary no
later than January 7, 1999 for inclusion in next year's proxy statement and
proxy card.
ANNUAL REPORT TO SHAREHOLDERS
The Annual Report to Shareholders of the Company for the year ended December
31, 1997, including audited consolidated financial statements, has been mailed
to the shareholders concurrently herewith, but such report is not incorporated
in this Proxy Statement and is not deemed to be a part of the proxy solicitation
material.
OTHER MATTERS
Management of the Company does not know of any other matters which are to be
presented for action at the Meeting. Should any other matters come before the
Meeting or any adjournment thereof, the persons named in the enclosed proxy will
have the discretionary authority to vote all proxies received with respect to
such matters in accordance with their collective judgment.
ANNUAL REPORT ON FORM 10-K
A copy of the Company's Annual Report on Form 10-K, as filed with the
Securities and Exchange Commission (exclusive of Exhibits), will be furnished
without charge to any person from whom the accompanying proxy is solicited upon
written request to Corporate Secretary, Coastcast Corporation, 3025 East
Victoria Street, Rancho Dominguez, California 90221. If Exhibit copies are
requested, a copying charge of $.20 per page will be made.
By Order of the Board of Directors
Robert C. Bruning
SECRETARY
Rancho Dominguez, California
April 27, 1998
SHAREHOLDERS ARE URGED TO SPECIFY THEIR CHOICES AND TO DATE, SIGN, AND
RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. PROMPT RESPONSE IS HELPFUL
AND YOUR COOPERATION WILL BE APPRECIATED.
22
<PAGE>
APPENDIX A
COASTCAST CORPORATION
1996 AMENDED AND RESTATED
EMPLOYEE STOCK OPTION PLAN
<PAGE>
COASTCAST CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<C> <S> <C> <C>
1. Purpose.................................................................................................. 1
2. Incentive and Non-Qualified Stock Options................................................................ 1
3. Definitions.............................................................................................. 1
3.1 Board......................................................................................... 1
3.2 Code.......................................................................................... 1
3.3 Company....................................................................................... 1
3.4 Common Stock.................................................................................. 1
3.5 Disabled or Disability........................................................................ 1
3.6 Fair Market Value............................................................................. 1
3.7 Incentive Stock Option........................................................................ 1
3.8 Non-Qualified Stock Option.................................................................... 1
3.9 Optionee...................................................................................... 1
3.10 Plan.......................................................................................... 1
3.11 Plan Administrator............................................................................ 2
3.12 Stock Option or Option........................................................................ 2
4. Administration........................................................................................... 2
4.1 Administration by Board....................................................................... 2
4.2 Administration by Compensation Committee...................................................... 2
5. Eligibility.............................................................................................. 2
6. Shares Subject to Options................................................................................ 2
7. Terms and Conditions of Options.......................................................................... 3
7.1 Number of Shares Subject to Option............................................................ 3
7.2 Option Price.................................................................................. 3
7.3 Notice and Payment............................................................................ 3
7.4 Term of Option................................................................................ 3
7.5 Exercise of Option............................................................................ 4
7.6 No Transfer of Option......................................................................... 4
7.7 Annual Limit on Options....................................................................... 4
7.8 Limit on Incentive Stock Options.............................................................. 4
7.9 Restriction on Issuance of Shares............................................................. 4
7.10 Investment Representation..................................................................... 4
7.11 Rights as a Shareholder or Employee........................................................... 4
7.12 No Fractional Shares.......................................................................... 5
7.13 Exercisability in the Event of Death.......................................................... 5
7.14 Recapitalization or Reorganization of Company................................................. 5
7.15 Modification, Extension, and Renewal of Options............................................... 5
7.16 Other Provisions.............................................................................. 5
8. Termination or Amendment of the Plan..................................................................... 5
9. Indemnification.......................................................................................... 5
10. Effective Date and Term of Plan.......................................................................... 6
</TABLE>
i
<PAGE>
COASTCAST CORPORATION
1996 AMENDED AND RESTATED
EMPLOYEE STOCK OPTION PLAN
1. PURPOSE. The purpose of this Coastcast Corporation 1996 Amended and
Restated Employee Stock Option Plan ("Plan") is to further the growth and
development of Coastcast Corporation ("Company") by providing, through ownership
of stock of the Company, an incentive to officers and other key employees who
are in a position to contribute materially to the prosperity of the Company, to
increase such persons' interests in the Company's welfare, to encourage them to
continue their services to the Company or its subsidiaries, and to attract
individuals of outstanding ability to enter the employment of the Company or its
subsidiaries. This Plan amendment and restatement is effective on the Effective
Date (as provided in Section 10) and shall apply to options granted on or after
the Effective Date. The terms of options granted under the Plan prior to the
Effective Date shall be governed by the Plan terms in effect prior to the
Effective Date.
2. INCENTIVE AND NON-QUALIFIED STOCK OPTIONS. Two types of Stock Options
(referred to herein as "Options" without distinction between such two types) may
be granted under the Plan: Options intended to qualify as Incentive Stock
Options under Section 422 of the Code and Non-Qualified Stock Options not
specifically authorized or qualified for favorable income tax treatment by the
Code.
3. DEFINITIONS. The following definitions are applicable to the Plan:
3.1 BOARD. The Board of Directors of the Company.
3.2 CODE. The Internal Revenue Code of 1986, as amended from time to
time.
3.3 COMPANY. Coastcast Corporation, a California corporation.
3.4 COMMON STOCK. The shares of the no par value Common Stock of the
Company.
3.5 DISABLED OR DISABILITY. For the purposes of Section 7.4, a
disability of the type defined in Section 22(e)(3) of the Code. The
determination of whether an individual is Disabled or has a Disability is
determined under procedures established by the Plan Administrator for
purposes of the Plan.
3.6 FAIR MARKET VALUE. For purposes of the Plan, the "fair market
value" per share of Common Stock of the Company at any date shall be (a) if
the Common Stock is listed on an established stock exchange or exchanges,
the last reported sale price per share on the last trading day immediately
preceding such date on the principal exchange on which it is traded, or if
no sale was made on such day on such principal exchange, at the closing
reported bid price per share on such day on such exchange, or (b) if the
Common Stock is not then listed on an exchange, the last reported sale price
per share on the last trading day immediately preceding such date reported
by NASDAQ, or if sales are not reported by NASDAQ or no sale was made on
such day, the average of the closing bid and asked prices per share for the
Common Stock in the over-the-counter market as quoted on NASDAQ on last
trading day immediately preceding such date, or (c) if the Common Stock is
not then listed on an exchange or quoted on NASDAQ, an amount determined in
good faith by the Plan Administrator. Notwithstanding the foregoing, the
"fair market value" per share of common stock subject to any option that is
granted under this plan on the Effective Date of this Plan shall be the
initial public offering price per share of common stock of the Company in
the public offering of common stock of the Company which commences on the
Effective Date.
3.7 INCENTIVE STOCK OPTION. Any Stock Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422
of the Code.
3.8 NON-QUALIFIED STOCK OPTION. Any Stock Option that is not an
Incentive Stock Option.
3.9 OPTIONEE. The recipient of a Stock Option.
<PAGE>
3.10 PLAN. The Coastcast Corporation 1996 Amended and Restated
Employee Stock Option Plan, as amended from time to time.
3.11 PLAN ADMINISTRATOR. The Board or the Compensation Committee
designated pursuant to Section 4 to administer, construe and interpret the
terms of the Plan.
3.12 STOCK OPTION OR OPTION. Any option to purchase shares of Common
Stock granted pursuant to Section 7.
4. ADMINISTRATION.
4.1 ADMINISTRATION BY BOARD. Subject to Section 4.2, the Plan
Administrator shall be the Board of Directors of the Company (the "Board")
during such periods of time as all members of the Board are "disinterested
persons" as defined in Rule 16b-3(c)(2)(i) promulgated by the Securities and
Exchange Commission (a "disinterested person"). Subject to the provisions of
the Plan, the Plan Administrator shall have authority to construe and
interpret the Plan, to promulgate, amend, and rescind rules and regulations
relating to its administration, from time to time to select from among the
eligible employees (as determined pursuant to Section 5) of the Company and
its subsidiaries those employees to whom Stock Options will be granted, to
determine the timing and manner of the grant of the Options, to determine
the exercise price, the number of shares covered by and all of the terms of
the Stock Options, to determine the duration and purpose of leaves of
absence which may be granted to Stock Option holders without constituting
termination of their employment for purposes of the Plan, and to make all of
the determinations necessary or advisable for administration of the Plan.
The interpretation and construction by the Plan Administrator of any
provision of the Plan, or of any agreement issued and executed under the
Plan, shall be final and binding upon all parties. No member of the Board
shall be liable for any action or determination undertaken or made in good
faith with respect to the Plan or any agreement executed pursuant to the
Plan.
4.2 ADMINISTRATION BY COMPENSATION COMMITTEE. The Board may, in its
sole discretion, delegate any or all of its duties as Plan Administrator
and, subject to the provisions of Section 4.1 of the Plan, at any time the
Board includes any person who is not a disinterested person, the Board shall
delegate all of its duties as Plan Administrator during such period of time
to a committee (the "Compensation Committee") of not fewer than two (2)
members of the Board, all of the members of which Compensation Committee
shall be persons who, in the opinion of counsel to the Company, are
disinterested persons, to be appointed by and serve at the pleasure of the
Board. From time to time, the Board may increase or decrease (to not less
than two members) the size of the Compensation Committee, and add additional
members to, or remove members from, the Compensation Committee. The
Compensation Committee shall act pursuant to a majority vote, or the written
consent of a majority of its members, and minutes shall be kept of all of
its meetings and copies thereof shall be provided to the Board. Subject to
the provisions of the Plan and the directions of the Board, the Compensation
Committee may establish and follow such rules and regulations for the
conduct of its business as it may deem advisable. No member of the
Compensation Committee shall be liable for any action or determination
undertaken or made in good faith with respect to the Plan or any agreement
executed pursuant to the Plan.
5. ELIGIBILITY. Any employee (including any officer who is an employee) of
the Company or any of its subsidiaries shall be eligible to receive an Option
under the Plan; provided, however, that no person who owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company or any of its parent or subsidiary corporations shall be eligible to
receive an Incentive Stock Option under the Plan unless at the time such
Incentive Stock Option is granted the Option price (determined in the manner
provided in Section 7.2) is at least 110% of the fair market value of the shares
subject to the Option and such Option by its terms is not exercisable after the
expiration of five years from the date such Option is granted. An employee may
receive more than one Option under the Plan.
2
<PAGE>
6. SHARES SUBJECT TO OPTIONS. The stock available for grant of Options
under the Plan shall be shares of the Company's authorized but unissued, or
reacquired, Common Stock. The aggregate number of shares which may be issued
after April 18, 1996 pursuant to exercise of Options theretofore or thereafter
granted under the Plan shall not exceed 2,128,554 shares of Common Stock
(subject to adjustment as provided in Section 7.14). In the event that any
outstanding Option under the Plan for any reason expires or is terminated, the
shares of Common Stock allocable to the unexercised portion of the Option shall
again be available for Options under the Plan as if no Option had been granted
with respect to such shares.
7. TERMS AND CONDITIONS OF OPTIONS. Options granted under the Plan shall
be evidenced by agreements (which need not be identical) in such form and
containing such provisions which are consistent with the Plan as the Plan
Administrator shall from time to time approve. Such agreements may incorporate
all or any of the terms hereof by reference and shall comply with and be subject
to the following terms and conditions:
7.1 NUMBER OF SHARES SUBJECT TO OPTION. Each Option agreement shall
specify the number of shares subject to the Option.
7.2 OPTION PRICE. The purchase price for the shares subject to any
Option shall not be less than 100% of the fair market value per share of the
Common Stock of the Company on the date the Option is granted. In the case
of an Incentive Stock Option granted to an employee who owns stock
possessing more than 10% of the total combined voting power of all classes
of stock of the Company or any of its parent or subsidiary corporations, the
Option price shall not be less than 110% of the fair market value per share
of the Common Stock of the Company on the date the Option is granted.
7.3 NOTICE AND PAYMENT. Any exercisable portion of a Stock Option may
be exercised only by:
(a) delivery of a written notice to the Company, prior to the time
when such Stock Option becomes unexercisable under Section 7.4, stating
the number of shares being purchased and complying with all applicable
rules established by the Plan Administrator;
(b) payment in full of the exercise price of such Option by, as
applicable, (i) cash or check for an amount equal to the aggregate Stock
Option exercise price for the number of shares being purchased, (ii) in
the discretion of the Plan Administrator, upon such terms as the Plan
Administrator shall approve, a copy of instructions to a broker directing
such broker to sell the Common Stock for which such Option is exercised,
and to remit to the Company the aggregate exercise price of such Options
(a "cashless exercise"), or (iii) in the discretion of the Plan
Administrator, upon such terms as the Plan Administrator shall approve,
the Optionee may pay all or a portion of the purchase price for the
number of shares being purchased by tendering shares of the Company's
Common Stock owned by the Optionee, duly endorsed for transfer to the
Company, with a Fair Market Value on the date of delivery equal to the
aggregate purchase price of the shares with respect to which such Stock
Option or portion is thereby exercised (a "stock-for-stock exercise");
(c) payment of the amount of tax required to be withheld (if any) by
the Company or any parent or subsidiary corporation as a result of the
exercise of a Stock Option. At the discretion of the Plan Administrator,
upon such terms as the Plan Administrator shall approve, the Optionee may
pay all or a portion of the tax withholding by (i) cash or check payable
to the Company, (ii) cashless exercise, (iii) stock-for-stock exercise,
or (iv) a combination of (1), (2) and (3); and
(d) delivery of a written notice to the Company requesting that the
Company direct the transfer agent to issue to the Optionee (or to his
designee) a certificate for the number of shares of Common Stock for
which the Option was exercised or, in the case of a cashless exercise,
for any shares that were not sold in the cashless exercise.
Notwithstanding the foregoing, the Company may extend and maintain, or
arrange for the extension and maintenance of, credit to any Optionee to
finance the Optionee's purchase of shares pursuant to exercise of any
Stock
3
<PAGE>
Option, on such terms as may be approved by the Plan Administrator,
subject to applicable regulations of the Federal Reserve Board and any
other laws or regulations in effect at the time such credit is extended.
7.4 TERM OF OPTION. No Option shall be exercisable after the
expiration of the earliest of (a) ten years after the date the Option is
granted, (b) three months after the date the Optionee's employment with the
Company and its subsidiaries terminates if such termination is for any
reason other than Disability or death, (c) one year after the date the
Optionee's employment with the Company and its subsidiaries terminates if
such termination is a result of death or Disability or if such termination
is for any reason other than death or Disability and Optionee dies within
three months after the date of such termination; provided, however, that the
Option agreement for any Option may provide for shorter periods in each of
the foregoing instances. In the case of an Incentive Stock Option granted to
an employee who owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or any of its parent or
subsidiary corporations, the term set forth in (a), above, shall not be more
than five years after the date the Option is granted.
7.5 EXERCISE OF OPTION. No Option shall be exercisable during the
lifetime of an Optionee by any person other than the Optionee or at any time
prior to six months from the date the Option is granted. Subject to the
foregoing, the Plan Administrator shall have the power to set the time or
times within which each Option shall be exercisable and to accelerate the
time or times of exercise. Unless otherwise provided by the Plan
Administrator, each Option granted under the Plan shall become exercisable
on a cumulative basis as to one-third (1/3) of the total number of shares
covered thereby at any time after two years from the date the Option is
granted and an additional one-third (1/3) of such total number of shares at
any time after the end of each consecutive one-year period thereafter until
the Option has become exercisable as to all of such total number of shares.
To the extent that an Optionee has the right to exercise an Option and
purchase shares pursuant thereto, the Option may be exercised from time to
time by written notice to the Company, stating the number of shares being
purchased and accompanied by payment in full of the exercise price for such
shares.
7.6 NO TRANSFER OF OPTION. No Option shall be transferable by an
Optionee otherwise than by will or the laws of descent and distribution.
7.7 ANNUAL LIMIT ON OPTIONS. Options may not be granted in any
calendar year to any one person in respect of more than an aggregate of
450,000 shares of Common Stock (subject to adjustment as provided in Section
7.14).
7.8 LIMIT ON INCENTIVE STOCK OPTIONS. The aggregate fair market value
(determined at the time the Option is granted) of the stock with respect to
which Incentive Stock Options granted after 1986 are exercisable for the
first time by an Optionee during any calendar year (under all Incentive
Stock Option plans of the Company and its subsidiaries) shall not exceed
$100,000.
7.9 RESTRICTION ON ISSUANCE OF SHARES. The issuance of Options and
shares shall be subject to compliance with all of the applicable
requirements of law with respect to the issuance and sale of securities,
including, without limitation, any required qualification under the
California Corporate Securities Law of 1968, as amended.
7.10 INVESTMENT REPRESENTATION. Any Optionee may be required, as a
condition of issuance of shares covered by his or her Option, to represent
that the shares to be acquired pursuant to exercise of the Option will be
acquired for investment and without a view to distribution thereof; and in
such case, the Company may place a legend on the certificate evidencing the
shares reflecting the fact that they were acquired for investment and cannot
be sold or transferred unless registered under the Securities Act of 1933,
as amended, or unless counsel for the Company is satisfied that the
circumstances of the proposed transfer do not require such registration.
4
<PAGE>
7.11 RIGHTS AS A SHAREHOLDER OR EMPLOYEE. An Optionee or transferee of
an Option shall have no right as a shareholder of the Company with respect
to any shares covered by any Option until the date of the issuance of a
share certificate for such shares. No adjustment shall be made for dividends
(ordinary or extraordinary, whether cash, securities, or other property) or
distributions or other rights for which the record date is prior to the date
such share certificate is issued, except as provided in Section 7.14.
Nothing in the Plan or in any Option agreement shall confer upon any
employee any right to continue in the employ of the Company or any of its
subsidiaries or interfere in any way with any right of the Company or any
subsidiary to terminate the Optionee's employment at any time.
7.12 NO FRACTIONAL SHARES. In no event shall the Company be required
to issue fractional shares upon the exercise of an Option.
7.13 EXERCISABILITY IN THE EVENT OF DEATH. In the event of the death
of the Optionee, any Option or unexercised portion thereof granted to the
Optionee, to the extent exercisable by him or her on the date of death, may
be exercised by the Optionee's personal representatives, heirs, or legatees
subject to the provisions of Section 7.4 hereof.
7.14 RECAPITALIZATION OR REORGANIZATION OF COMPANY. Except as
otherwise provided herein, appropriate and proportionate adjustments shall
be made in the number and class of shares subject to the Plan and to the
Option rights granted under the Plan, and the exercise price of such Option
rights, in the event of a stock dividend (but only on Common Stock), stock
split, reverse stock split, recapitalization, reorganization, merger,
consolidation, separation, or like change in the corporate or capital
structure of the Company. In the event of a complete liquidation of the
Company or a merger, reorganization, or consolidation of the Company with
any other corporation in which the Company is not the surviving corporation
or the Company becomes a wholly-owned subsidiary of another corporation, any
unexercised Options theretofore granted under the Plan shall be deemed
cancelled unless the surviving corporation in any such merger,
reorganization, or consolidation elects to assume the Options under the Plan
or to issue substitute Options in place thereof; provided, however, that,
notwithstanding the foregoing, if such Options would be cancelled in
accordance with the foregoing, the Optionee shall have the right,
exercisable during a ten-day period ending on the fifth day prior to such
liquidation, merger, or consolidation, to exercise the Optionee's Option in
whole or in part without regard to any installment exercise provisions in
the Optionee's Option agreement. To the extent that the foregoing
adjustments relate to stock or securities of the Company, such adjustments
shall be made by the Plan Administrator, the determination of which in that
respect shall be final, binding, and conclusive, provided that each
Incentive Stock Option granted pursuant to the Plan shall not be adjusted in
a manner that causes it to fail to continue to qualify as an Incentive Stock
Option within the meaning of Section 422 of the Code.
7.15 MODIFICATION, EXTENSION, AND RENEWAL OF OPTIONS. Subject to the
terms and conditions and within the limitations of the Plan, the Plan
Administrator may modify, extend, or renew outstanding Options granted under
the Plan, accept the surrender of outstanding Options (to the extent not
theretofore exercised). The Plan Administrator shall not, however, modify
any outstanding Incentive Stock Option in any manner which would cause the
Option not to qualify as an Incentive Stock Option within the meaning of
Section 422 of the Code. Notwithstanding the foregoing, no modification of
an Option shall, without the consent of the Optionee, alter or impair any
rights of the Optionee under the Option.
7.16 OTHER PROVISIONS. Each Option may contain such other terms,
provisions, and conditions not inconsistent with the Plan as may be
determined by the Plan Administrator.
8. TERMINATION OR AMENDMENT OF THE PLAN. The Board may at any time
terminate or amend the Plan; provided that, without approval of the shareholders
of the Company, there shall be, except by operation of the provisions of Section
7.14, no increase in the total number of shares covered by the Plan, no change
in the class of persons eligible to receive Options granted under the Plan, no
reduction in the exercise price of
5
<PAGE>
Options granted under the Plan, and no extension of the latest date upon which
Options may be exercised; and provided further that, without the consent of the
Optionee, no amendment may adversely affect any then outstanding Option or any
unexercised portion thereof.
9. INDEMNIFICATION. In addition to such other rights of indemnification as
they may have as members of the Plan Administrator, the members of the Plan
Administrator administering the Plan shall be indemnified by the Company against
reasonable expense, including attorney's fees, actually and necessarily incurred
in connection with the defense of any action, suit, or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with the
Plan or any Option granted thereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any action, suit, or proceeding, except in relation to matters as to which it
shall be adjudged in such action, suit, or proceeding that such member is liable
for negligence or misconduct in the performance of his duties, provided that
within 60 days after institution of any such action, suit, or proceeding, the
member shall in writing offer the Company the opportunity, at its own expense,
to handle and defend the same.
10. EFFECTIVE DATE AND TERM OF PLAN. The Plan, as amended and restated on
April 18, 1996 as provided herein, shall become effective on that date, subject
to approval of such amendment and restatement by the shareholders of the
Company. If such approval does not occur by September 30, 1996, this amended and
restated Plan will not become effective and the Plan, as stated prior to such
amendment and restatement, will continue in effect. Unless sooner terminated by
the Board in its sole discretion, the Plan will expire on December 31, 2001.
6
<PAGE>
APPENDIX B
COASTCAST CORPORATION
1995 AMENDED AND RESTATED
NON-EMPLOYEE DIRECTOR
STOCK OPTION PLAN
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C> <C>
1. Purpose................................................................................................... 1
2. Non-Qualified Stock Options............................................................................... 1
3. Administration............................................................................................ 1
3.1 Administration by Board........................................................................ 1
3.2 Administration by Committee.................................................................... 1
4. Eligibility............................................................................................... 1
5. Shares Subject to Options................................................................................. 1
6. Terms and Conditions of Options........................................................................... 2
6.1 Grant of Options............................................................................... 2
6.2 Option Price................................................................................... 2
6.3 Notice and Payment............................................................................. 2
6.4 Term of Option................................................................................. 3
6.5 Exercise of Option............................................................................. 3
6.6 No Transfer of Option.......................................................................... 3
6.7 Rights as a Shareholder or Director............................................................ 3
6.8 No Fractional Shares........................................................................... 3
6.9 Exercisability in the Event of Death........................................................... 4
6.10 Recapitalization or Reorganization of Company.................................................. 4
6.11 Modification, Extension, and Renewal of Options................................................ 4
6.12 Other Provisions............................................................................... 4
7. Termination or Amendment of Plan.......................................................................... 4
8. Indemnification........................................................................................... 4
9. Effective Date of Amendment and Term of Plan.............................................................. 5
</TABLE>
i
<PAGE>
COASTCAST CORPORATION
1995 AMENDED AND RESTATED
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. PURPOSE. The purpose of this Coastcast Corporation 1995 Amended and
Restated Non-Employee Director Stock Option Plan ("Plan") is to increase the
proprietary and vested interest of the non-employee directors of Coastcast
Corporation ("Company") in the growth and performance of the Company by granting
such directors options to purchase shares of common stock of the Company, to
encourage them to continue their services to the Company, and to attract
individuals of outstanding ability to serve on the Board of Directors of the
Company.
2. NON-QUALIFIED STOCK OPTIONS. The options granted under the Plan (each
an "option") will be options not specifically authorized or qualified for
favorable tax treatment under Section 422 of the Internal Revenue Code of 1986,
as amended, and any successor statutes ("Code") ("non-qualified stock options").
3. ADMINISTRATION.
3.1 ADMINISTRATION BY BOARD. The Plan shall be administered by the
Board of Directors of the Company ("Board"). Subject to the provisions of
the Plan, the Board shall have authority to construe and interpret the Plan,
to promulgate, amend, and rescind rules and regulations relating to its
administration, and to make all of the determinations necessary or advisable
for administration of the Plan; provided, however, that the Board shall have
no discretion with respect to the selection of directors to receive options
under the Plan, the number of shares of stock subject to any such options,
or the purchase price thereof. The interpretation and construction by the
Board of any provision of the Plan, or of any agreement executed pursuant to
the Plan, shall be final and binding upon all parties. No member of the
Board shall be liable for any action or determination undertaken or made in
good faith with respect to the Plan or any agreement executed pursuant to
the Plan.
3.2 ADMINISTRATION BY COMMITTEE. The Board may, in its sole
discretion, delegate any or all of its administrative duties to a committee
(the "Committee") of not fewer than two (2) members of the Board, all of the
members of which Committee shall be persons who, in the opinion of counsel
to the Company, are "disinterested persons" within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934. If administration is delegated to
a Committee, the Committee shall have, in connection with administration of
the Plan, the powers otherwise possessed by the Board, subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may
be adopted from time to time by the Board. The Board may abolish the
Committee at any time and revest in the Board the administration of the
Plan. From time to time, the Board may increase or decrease (to not less
than two members) the size of the Committee, and add additional members to,
or remove members from, the Committee. The Committee shall act pursuant to a
majority vote, or the written consent of a majority of its members, and
minutes shall be kept of all of its meetings and copies thereof shall be
provided to the Board. Subject to the provisions of the Plan and the
directions of the Board, the Committee may establish and follow such rules
and regulations for the conduct of its business as it may deem advisable. No
member of the Committee shall be liable for any action or determination
undertaken or made in good faith with respect to the Plan or any agreement
executed pursuant to the Plan.
4. ELIGIBILITY. Each director of the Company shall be eligible to receive
an option under the Plan at any time only if such director (i) is not then an
employee of the Company or any of its subsidiaries, (ii) has not, within three
(3) years immediately preceding such time, received any stock option, stock
bonus, stock appreciation right, or other similar stock award from the Company
or any of its subsidiaries, other than options granted to such director under
this Plan, and (iii) does not then beneficially own more than ten percent (10%)
of the outstanding stock of the Company (an "Eligible Director"). Only Eligible
Directors may receive options under the Plan. A director of the Company shall
not be deemed to be an employee of the Company or any of its subsidiaries solely
by reason of the existence of an agreement between such
<PAGE>
director and the Company or any subsidiary thereof pursuant to which the
director provides services as a consultant to the Company or its subsidiaries on
a regular or occasional basis for compensation.
5. SHARES SUBJECT TO OPTIONS. The stock available for grant of options
under the Plan shall be shares of the Company's authorized but unissued, or
reacquired, common stock. The aggregate number of shares which may be issued
pursuant to exercise of options granted under the Plan shall not exceed 400,000
shares of common stock, as such common stock shall be constituted as of December
13, 1995. In the event that any outstanding option under the Plan for any reason
expires or is terminated, the shares of common stock allocable to the
unexercised portion of the option shall again be available for options under the
Plan as if no option had been granted with respect to such shares.
6. TERMS AND CONDITIONS OF OPTIONS. Options granted under the Plan shall
be evidenced by agreements in such form and containing such provisions which are
consistent with the Plan as the Board or Committee shall from time to time
approve. All grants of options to Eligible Directors shall be automatic and
non-discretionary and shall be made strictly in accordance with the following
provisions.
6.1 GRANT OF OPTIONS. Options to purchase shares of common stock of
the Company shall be granted automatically to each Eligible Director as
follows:
(a) An option to purchase 30,000 shares of common stock of the
Company shall be granted automatically to each Eligible Director who
first becomes an Eligible Director after December 13, 1995 on the date on
which such director first becomes an Eligible Director. Thereafter, an
option to purchase an additional 20,000 shares of common stock of the
Company shall be granted automatically to each such director on the third
anniversary of the date on which such director first became an Eligible
Director and on each subsequent anniversary of such date if such director
is still an Eligible Director on such anniversary.
(b) An option to purchase 20,000 shares of common stock of the
Company shall be granted automatically on December 13, 1995 to each
Eligible Director who first became an Eligible Director prior to such
date. Thereafter, an option to purchase an additional 20,000 shares of
common stock of the Company shall be granted automatically to each such
director on December 13, 1998 and on each subsequent December 13 if such
director is still an Eligible Director on such December 13.
(c) Anything set forth in the Plan to the contrary notwithstanding,
no option or options shall be granted at any time to purchase an
aggregate number of shares of common stock of the Company which exceeds
the total number of shares of such common stock which are then available
for issuance under the Plan minus the total number of shares of such
common stock subject to options which have been granted previously and
are then outstanding under the Plan; and options which are granted as of
the same date to purchase less shares than otherwise provided in
subparagraph (a) or (b) immediately preceding because of the foregoing
limitation in this subparagraph (c) shall cover equal numbers of shares.
6.2 OPTION PRICE. The purchase price per share of the shares subject
to any option shall be 100% of the fair market value per share of common
stock of the Company on the date the option is granted. For purposes of the
Plan, the "fair market value" per share of common stock of the Company at
any date shall be (a) if the common stock is listed on an established stock
exchange or exchanges, the last reported sale price per share on the last
trading day immediately preceding such date on the principal exchange on
which it is traded, or if no sale was made on such day on such principal
exchange, at the closing reported bid price per share on such day on such
exchange, (b) if the common stock is not then listed on an exchange, the
last reported sale price per share on the last trading day immediately
preceding such date reported by NASDAQ, or if sales are not reported by
NASDAQ or no sale was made on such day, the average of the closing bid and
asked prices per share for the common stock in the over-the-counter market
as quoted on NASDAQ on such day, or (c) if the
2
<PAGE>
common stock is not then listed on an exchange or quoted on NASDAQ, an
amount determined in good faith by the Board or the Committee.
6.3 NOTICE AND PAYMENT. Any exercisable portion of an option may be
exercised only by:
(a) delivery of a written notice to the Company, prior to the time
when such option becomes unexercisable under Section 6.4, stating the
number of shares being purchased and complying with all applicable rules
established by the Board or the Committee;
(b) payment in full of the exercise price of such option by, as
applicable, (i) cash or check for an amount equal to the aggregate option
exercise price for the number of shares being purchased, (ii) in the
discretion of the Plan Administrator, upon such terms as the Plan
Administrator shall approve, a copy of instructions to a broker directing
such broker to sell the common stock for which such option is exercised,
and to remit to the Company the aggregate exercise price of such options
(a "cashless exercise"), or (iii) in the discretion of the Plan
Administrator, upon such terms as the Plan Administrator shall approve,
the optionee may pay all or a portion of the purchase price for the
number of shares being purchased by tendering shares of the Company's
common stock owned by the optionee, duly endorsed for transfer to the
Company, with a fair market value (as determined pursuant to Section 6.2)
on the date of delivery equal to the aggregate purchase price of the
shares with respect to which such option or portion is thereby exercised
(a "stock-for-stock exercise");
(c) payment of the amount of tax required to be withheld (if any) by
the Company or any parent or subsidiary corporation as a result of the
exercise of an option. The Optionee may pay all or a portion of the tax
withholding by (i) cash or check payable to the Company, (ii) in the
discretion of the Plan Administrator, upon such terms as the Plan
Administrator shall approve, cashless exercise, (iii) in the discretion
of the Plan Administrator, upon such terms as the Plan Administrator
shall approve, stock-for-stock exercise, or (iv) a combination of (1),
(2) and (3); and
(d) delivery of a written notice to the Company requesting that the
Company direct the transfer agent to issue to the Optionee (or to his
designee) a certificate for the number of shares of common stock for
which the Option was exercised or, in the case of a cashless exercise,
for any shares that were not sold in the cashless exercise.
Any certificate(s) for shares of outstanding common stock of the Company
used to pay the exercise price shall be accompanied by stock power(s) duly
endorsed in blank by the registered holder of the certificate(s) (with the
signature thereon guaranteed). In the event the certificate(s) tendered by
the optionee in such payment cover more shares than are required for such
payment, the certificate(s) shall also be accompanied by instructions from
the optionee to the Company's transfer agent with respect to disposition of
the balance of the shares covered thereby.
6.4 TERM OF OPTION. No option granted under the Plan shall be
exercisable after the expiration of the earlier of (i) ten years following
the date the option is granted or (ii) one year following the date the
optionee ceases to be a director of the Company for any reason.
6.5 EXERCISE OF OPTION. No option shall be exercisable during the
lifetime of an optionee by any person other than the optionee. An option
shall become exercisable as to one-third of the shares subject to the option
on each anniversary of the date the option is granted if the director to
whom the option is granted is still a director of the Company on such
anniversary.
6.6 NO TRANSFER OF OPTION. No option shall be transferable by an
optionee otherwise than by will or the laws of descent and distribution.
6.7 RIGHTS AS A SHAREHOLDER OR DIRECTOR. An optionee or transferee of
an option shall have no rights as a shareholder of the Company with respect
to any shares covered by any option until the date
3
<PAGE>
of issuance of a share certificate for such shares. No adjustment shall be
made for dividends (ordinary or extraordinary, whether cash, securities, or
other property) or distribution or other rights for which the record date is
prior to the date such share certificate is issued, except as provided in
Section 6.10. Nothing in the Plan or in any option agreement shall confer
upon any director any right to continue as a director of the Company or any
of its subsidiaries, to be nominated to serve as a director, or to receive
any particular rate of compensation.
6.8 NO FRACTIONAL SHARES. In no event shall the Company be required to
issue fractional shares upon the exercise of an option.
6.9 EXERCISABILITY IN THE EVENT OF DEATH. In the event of the death of
an optionee, any option (or unexercised portion thereof) held by the
optionee, to the extent exercisable by him or her on the date of death, may
be exercised by the optionee's personal representatives, heirs, or legatees
subject to the provisions of Sections 6.4 and 6.5 hereof.
6.10 RECAPITALIZATION OR REORGANIZATION OF COMPANY. Except as
otherwise provided herein, appropriate and proportionate adjustments shall
be made in the number and class of shares subject to the Plan and to the
option rights granted under the Plan, and the exercise price of such option
rights, in the event of a stock dividend (but only on common stock), stock
split, reverse stock split, recapitalization, reorganization, merger,
consolidation, separation, or like change in the capital structure of the
Company. In the event of a liquidation of the Company, or a merger,
reorganization, or consolidation of the Company with any other corporation
in which the Company is not the surviving corporation or the Company becomes
a subsidiary of another corporation, any unexercised options theretofore
granted under the Plan shall be deemed cancelled unless the surviving
corporation in any such merger, reorganization, or consolidation elects to
assume the options under the Plan or to use substitute options in place
thereof; provided, however, that, notwithstanding the foregoing, if such
options would otherwise be cancelled in accordance with the foregoing, the
optionee shall have the right, exercisable during a ten-day period ending on
the fifth day prior to such liquidation, merger, or consolidation, to fully
exercise the optionee's option in whole or in part without regard to any
installment exercise provisions otherwise provided by Section 6.5.
6.11 MODIFICATION, EXTENSION, AND RENEWAL OF OPTIONS. Subject to the
terms and conditions and within the limitations of the Plan, the Board or
Committee may modify, extend, or renew outstanding options granted under the
Plan, accept the surrender of outstanding options (to the extent not
theretofore exercised), and authorize the granting of new options in
substitution therefor (to the extent not theretofore exercised).
Notwithstanding the foregoing, no modification of an option shall (i)
without the consent of the optionee, alter or impair any rights of the
optionee under the option, (ii) adversely affect the qualification of the
Plan or any other stock-related plan of the Company under Rule 16b-3 under
the Securities Exchange Act of 1934 or any successor provision, or (iii)
except as provided in Section 6.10, change the exercise price, increase the
number of shares to which the option relates, or extend the term of the
option.
6.12 OTHER PROVISIONS. Each option may contain such other terms,
provisions, and conditions not inconsistent with the Plan as may be
determined by the Board or Committee.
7. TERMINATION OR AMENDMENT OF PLAN. The Board may at any time terminate
or amend the Plan; provided that, without approval of the shareholders of the
Company, there shall be, except by operation of the provisions of Section 6.10,
no increase in the total number of shares covered by the Plan, no increase in
the total number of shares subject to any option granted under the Plan, no
change in the class of directors eligible to receive options granted under the
Plan, no material increase in the benefits accruing to participants under the
Plan, no reduction in the exercise price of options granted under the Plan, and
no extension of the latest date upon which options may be exercised; and
provided further that, without the consent of the optionee, no amendment may
adversely affect any then outstanding option or any unexercised portion thereof
held by the optionee.
4
<PAGE>
8. INDEMNIFICATION. In addition to such other rights of indemnification as
they may have as members of the Board or the Committee, the members of the Board
or the Committee administering the Plan shall be indemnified by the Company
against reasonable expenses, including attorney's fees, actually and necessarily
incurred in connection with the defense of any action, suit, or proceeding, or
in connection with any appeal therein, to which they or any of them may be a
party by reason of any action taken or failure to act under or in connection
with the Plan or any option granted thereunder, and against all amounts paid by
them in settlement thereof (provided such settlement is approved by independent
legal counsel selected by the Company) or paid by them in satisfaction of a
judgment in any action, suit, or proceeding, except in relation to matters as to
which it shall be adjudged in such action, suit, or proceeding that such member
is liable for negligence or misconduct in the performance of his duties,
provided that within 60 days after institution of any such action, suit, or
proceeding, the member shall in writing offer the Company the opportunity, at
its own expense, to handle and defend the same.
9. EFFECTIVE DATE OF AMENDMENT AND TERM OF PLAN. The Plan, as amended and
restated as of December 13, 1995 as provided herein, shall become effective on
that date, subject to approval of such amendment and restatement by the
shareholders of the Company. If such approval does not occur by September 30,
1996, this amended and restated Plan will not become effective. Unless sooner
terminated by the Board in its sole discretion, the Plan will expire on December
31, 2003.
5
<PAGE>
COASTCAST CORPORATION
3025 EAST VICTORIA STREET
RANCHO DOMINGUEZ, CALIFORNIA 90221
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Hans H. Buehler and Richard W. Mora as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them or either of them to represent and to vote as designated below, all the
shares of common stock of Coastcast Corporation held of record by the
undersigned on April 27, 1998, at the Annual Meeting of Shareholders to be
held on June 22, 1998, or any adjournment thereof.
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
Please mark your
votes as /X/
indicated in
this example
FOR all nominees below WITHHOLD AUTHORITY
(EXCEPT AS MARKED TO THE TO VOTE FOR ALL NOMINEES
CONTRARY BELOW) LISTED BELOW
1. ELECTION OF
DIRECTORS / / / /
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE MARK
THE LINES NEXT TO THE NOMINEE'S NAME BELOW:
Hans H. Buehler ______ George L. Graziadio ______ Edwin A. Levy _____
Vernon R. Loucks Jr. ______ Lee E. Mikles ______ Richard W. Mora ______
Paul A. Novelly ______
2. TO AMEND THE COMPANY'S 1996 AMENDED FOR AGAINST ABSTAIN
AND RESTATED EMPLOYEE STOCK OPTION / / / / / /
PLAN.
3. TO AMEND THE COMPANY'S 1995 AMENDED AND FOR AGAINST ABSTAIN
RESTATED NON-EMPLOYEE DIRECTOR STOCK / / / / / /
OPTION PLAN.
4. RATIFICATION OF SELECTION OF FOR AGAINST ABSTAIN
INDEPENDENT AUDITORS / / / / / /
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1, 2, 3 AND 4.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor,
administrator, trustee, or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
Signature(s) Dated 1998
------------------------------------------- ----------
PLEASE READ, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
