<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 3)*
COASTCAST CORP.
---------------------
(Name of Issuer)
SHARES OF COMMON STOCK, NO PAR VALUE
------------------------------------
(Title of Class of Securities)
19057T 10 8
(CUSIP Number)
JONATHAN VANNINI
----------------
828 Irwin Drive
---------------
Hillsborough, CA 94010
-----------------------
(650) 347-1800
--------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
- with copies to -
Bernard J. Cassidy, Esq.
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
(650) 493-9300
August 14, 1998
---------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [_].
Check the following box if a fee is being paid with the statement [_].
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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SCHEDULE 13D
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CUSIP NO. 19057T 10 8
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<TABLE>
<S> <C> <C>
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
JONATHAN VANNINI
- ---------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [_]
(b) [_]
- ---------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- ---------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
PF
- ---------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [_]
- ---------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
UNITED STATES
- ---------------------------------------------------------------------------------------------------------
7 SOLE VOTING POWER
911,000
NUMBER OF -------------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 0
OWNED BY -------------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 911,000
PERSON -------------------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
0
- ---------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
911,000
- ---------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [_]
- ---------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
10.12%
- ---------------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- ---------------------------------------------------------------------------------------------------------
</TABLE>
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
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CUSIP NO. 19057T 10 8
- ---------------------
ITEM 1. SECURITY AND ISSUER.
Securities acquired: Shares of common stock, no par value per
share ("Common Stock")
Issuer: CoastCast Corp.
3025 East Victoria Street
Rancho Dominguez, CA 90221
Tel. No. (310) 638-0595
ITEM 2. IDENTITY AND BACKGROUND.
This Schedule 13D is filed on behalf of Jonathan Vannini (the
"Purchaser").
The business address of the Purchaser is 828 Irwin Drive,
Hillsborough, California 94010. The Purchaser's principal business is
that of a private investor. The Purchaser is a citizen of the United
States.
The Purchaser has not during the past five years been convicted in a
criminal proceeding (excluding traffic violations or similar
misdemeanors) or been a party to a civil proceeding of a judicial or
an administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation
with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS.
Since the filing of the second amendment to the initial Schedule 13D
on August 3, 1998, the Purchaser has not engaged in any transactions
involving the Common Stock of CoastCast Corp. (the "Issuer") as
described below in Item 5. The source of funds for the Purchaser's
previous transactions was the Purchaser's personal funds.
ITEM 4. PURPOSE OF TRANSACTION.
The Purchaser acquired shares of the Issuer's Common Stock as an
investment in order (a) to obtain an equity position in the Issuer
whose Common Stock the Purchaser believes to be presently undervalued,
and (b) to maximize the value of that investment. The Purchaser
believes that such undervaluation of the Issuer's Common Stock is in
part a result of certain policies and practices of the Issuer's
management, including without limitation the policies and practices
related to the compensation and stock options granted to the chairman
of the Issuer's board of directors.
The Purchaser has a present intention to influence control of the
Issuer. The Purchaser has called a special meeting of the
shareholders of the Company to be held at 10:00 a.m. on September
22, 1998. The following business will be transacted at the meeting:
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 the revocation of a
proposed amendment of the Company's 1996 Amended and Restated
Employee Stock Option Plan, which amendment was proposed by
management of the Company and considered at the 1998 annual meeting
of the Company's shareholders;
3) To consider and take action concerning the revocation of a
proposed amendment of the Company's 1995 Amended and Restated Non-
Employee Director Stock Option Plan, which amendment was proposed by
management of the Company and considered at the 1998 annual meeting
of the Company's shareholders;
4) To consider and take action concerning the approval of the
reimbursement of the Purchaser for the fees and expenses incurred in
connection with the special meeting of the shareholders; and
5) To transact such other business as may properly come before
the meeting or any adjournment thereof.
The Purchaser has proposed the following four individuals, each of
whom would be committed to enhancing shareholder value and initiating
responsible corporate governance policies, as new candidates for the
Coastcast Corp. Board:
Jeffrey M. Cohen, 47, is the Chairman of the Board of Directors of
Qorvis Media Group, one of the nation's largest in-store media
companies. Prior to founding Qorvis, Mr. Cohen was the founder, Chief
Executive Officer, and Chairman of the Board of Directors of Sutton
Place Gourmet, Inc., a leading gourmet food store chain. Mr. Cohen is
a seasoned manager with considerable experience in working with
troubled companies. He holds a BS in Business from the University of
Maryland.
Dr. James Malernee, 51, is the Chief Executive Officer and Managing
Director of Cornerstone Research, a leading consulting and economic
research firm that provides expert economic and financial analyses in
complex commercial litigation and regulatory proceedings. Dr. Malernee
has served as a consultant to major corporations and has taught
finance at the University of Texas at Austin and business strategy at
the Stanford Graduate School of Business. Over the last fifteen years
he has directed research on complex business issues related to a wide
variety of cases, specializing in securities matters, and has
supervised over two hundred cases dealing with material disclosure,
insider trading, merger and acquisition activity, targeted
repurchases, minority buyouts, stock trading behavior and valuation.
He is also an avid golfer. Dr. Malernee holds a BS in Engineering and
a PhD in Finance from the University of Texas and an MBA from Southern
Methodist University.
John E. Rehfeld, 58, is President, Chief Executive Officer, and
Chairman of the Board of Directors of ProShot Golf, Inc., which
manufactures and sells golf distance determination and course
management systems. Mr. Rehfeld was President and Chief Executive
Officer of Proxima Corporation, a supplier of desktop multimedia
computer projection systems, from February 1996 to March 1997 and also
served as a director of Proxima Corporation. From April 1993 to
February 1996, Mr. Rehfeld was President and Chief Executive Officer
of Etak, Inc., a supplier of digital mapping data and a subsidiary of
the News Corporation. From February 1989 to April 1993, Mr. Rehfeld
was President of Seiko Instruments USA Inc., a manufacturer of
electronic instruments. Mr. Rehfeld was also the director of
Wonderware Corporation from April 1992 until March 1998, when the
company was sold for $400 million. Mr. Rehfeld holds a BCE from the
University of Minnesota and an MBA from Harvard University. He is the
author of the book Alchemy of a Leader (1994), which has been
translated into eight languages, and "Working With the Japanese"
Harvard Business Review (1990).
Mr. Vannini, 36, is also a nominee. Mr. Vannini is a private investor
who owns over 10% of Coastcast Corporation. He was a general partner
at HPB Associates, an investment partnership, until 1996 and was
employed by HPB Associates from August 1987 until March 1996. Since
February 1993 Mr. Vannini has served as an outside director of Copart,
Inc., which provides vehicle suppliers with a full range of services
to process and sell salvage vehicles. The Purchaser holds a BA in
Economics from the University of California, Los Angeles and an MBA
from Columbia University.
The Purchaser also supports the election of three incumbent directors:
Hans H. Buehler, the current Chairman of Coastcast Corporation, Vernon
R. Loucks Jr., the Chairman & CEO of Baxter International, Inc., and
Richard W. Mora, the President & CEO of Coastcast Corporation.
The Purchaser believes that the newly constituted Board should provide
shareholders the business talent and focus needed to improve the value
of the shareholders' investment while continuing the Company's strong
operating practices.
The Purchaser reserves the right to acquire, or dispose of, additional
securities of the Issuer, to the extent
<PAGE>
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CUSIP NO. 19057T 10 8
- ---------------------
deemed advisable in light of his general investment and trading
policies, market conditions, or other factors. The Purchaser plans to
exercise influence in order to change the compensation and/or
membership of the present board of directors. The Purchaser plans to
exercise influence in order to persuade the Issuer to adopt a stock
repurchase program. The Purchaser plans to contact the Issuer and/or
other shareholders regarding these and other potential strategies to
increase shareholder value.
Other than as described above, the Purchaser has no present plans or
proposals which would result in any of the following:
1) any extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Issuer or any of its
subsidiaries;
2) any sale or transfer of a material amount of assets of the
Issuer or any of its subsidiaries;
3) any material change in the dividend policy of the Issuer;
4) any other material change in the Issuer's business or
corporate structure;
5) any change in the Issuer's charter, by-laws or instruments
corresponding thereto or other actions which may impede the
acquisition of control of the Issuer by any person;
6) causing a class of securities of the Issuer to be delisted
from a national securities exchange or to cease to be authorized to be
quoted in an interdealer quotation system of a registered national
securities association;
7) causing a class of securities of the Issuer to become
eligible for termination of registration pursuant to Section 12(g)(4)
of the Act; or
8) any action similar to any of those enumerated above.
On August 13, 1998, Coastcast Corporation filed suit (COASTCAST
CORPORATION v. JONATHAN VANNINI) in the United States District Court
for the Central District of California against the Purchaser seeking
injunctive and declaratory relief for alleged violations of the
federal securities laws and the California Corporations Code. The
Summons and Complaint in that suit is attached hereto under Item 7.
On August 14, 1998 the Purchaser filed a suit (JONATHAN VANNINI v.
COASTCAST CORPORATION) in the Superior Court of the State of
California, County of San Francisco against Coastcast Corporation
for injunctive and declaratory relief seeking to obtain (i) certain
shareholder records he demanded from Coastcast Corporation under
Section 1600 of the California Corporations Code (ii) the results of
the shareholder votes held at the Company's annual meeting of
shareholders on June 22 and July 8, 1998, including the results of the
shareholder votes on Proposals 2 and 3, which the Purchaser demanded
under Section 1509 of the California Corporations Code, and (iii) the
special meeting of the shareholders he demanded under Section 600 of
the California Corporations Code. The Summons and Complaint in that
suit is attached hereto under Item 7.
On August 14, 1998, the Purchaser filed a Non-Management Preliminary
Proxy Statement with the Securities and Exchange Commission on
Schedule 14A.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) As of April 30, 1998, and according to the Issuer's most
recent Quarterly Report on Form 10-Q, there were issued and
outstanding 9,003,598 shares of Common Stock. As of the date hereof,
the Purchaser has beneficial ownership of 911,000 such shares,
representing approximately 10.12% of the Common Stock of the Issuer.
<PAGE>
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CUSIP NO. 19057T 10 8
- ---------------------
(b) The Purchaser has the sole power to vote or to direct the
vote of and the sole power to dispose or to direct the disposition of
a total of 911,000 shares of Common Stock of the Issuer.
(c) The Purchaser has not engaged in any transactions involving
the Issuer's securities since the filing of the second amendment to
the initial Schedule 13D on August 3, 1998.
(d) Not Applicable.
(e) Not Applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDING OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Not Applicable.
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS.
Attached hereto as "Exhibit 99.(A)" is the Summons and Complaint in
COASTCAST CORPORATION v. JONATHAN VANNINI, No. 98-6625 WMB (MCX),
filed on August 13, 1998 in the United States District Court for the
Central District of California.
Attached hereto as "Exhibit 99.(B)" is the Summons and Complaint in
JONATHAN VANNINI v. COASTCAST CORPORATION.
SIGNATURE
---------
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: August 14, 1998
/s/ Jonathan Vannini
By:_____________________________
Jonathan Vannini
<PAGE>
EXHIBIT 99.(A)
KEVIN S. ROSEN, State Bar # 133304
JAMES P. MANISCALCO, State Bar # 179386
GIBSON, DUNN & CRUTCHER LLP
333 South Grand Avenue
Los Angeles, California 90071-3197
Telephone: (213) 229-7000
Fax: (213) 229-7520
JULIA J. RIDER, State Bar # 067277
MICHAEL A. GOLD, State Bar # 90667
DAN P. SEDOR, State Bar # 139091
JEFFER, MANGELS, BUTLER & MARMARO LLP
2121 Avenue of the Stars, Tenth Floor
Los Angeles, California 90067-5010
Telephone: (310) 203-8080
Fax: (310) 203-0567
Attorneys for Plaintiff
COASTCAST CORPORATION
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
WESTERN DIVISION
COASTCAST CORPORATION, a ) CASE NO.: 98-6625WMB (Mcx)
California corporation )
) COMPLAINT FOR INJUNCTIVE AND
Plaintiff, ) DECLARATORY RELIEF FOR
) VIOLATIONS OF FEDERAL
v. ) SECURITIES LAWS AND
) CALIFORNIA CORPORATIONS CODE
JONATHAN VANNINI, an individual, )
)
Defendant. )
)
)
- ------------------------------------
Plaintiff Coastcast Corporation ("Coastcast"), for its complaint, alleges
as follows:
INTRODUCTION
------------
1. This lawsuit arises from an unlawful campaign by defendant Jonathan
Vannini ("Vannini") , an alleged shareholder of Coastcast, to manipulate the
market with the goal of increasing the value of his shares well beyond the
current market price. Vannini's scheme involves unlawful proxy solicitations
and market manipulations designed either to wrest control of Coastcast so that
Vannini then can institute a stock buyback program well above the current
<PAGE>
market rate for Coastcast shares, to coerce Coastcast's Board of Directors (the
"Board") to institute his stock buyback scheme, and/or to suggest falsely to the
market that he intends to seek control of Coastcast and to institute such
buyback program in order to cause the market to inflate artificially the price
of Coastcast stock.
2. Vannini has improperly demanded a special shareholders' meeting and is
carrying out his scheme through the public dissemination of materially
misleading statements under Sections 10(b) , 13(d) , and 14(a) of the Securities
Exchange Act of 1934 (the "Exchange Act") (15 U.S.C. (S)(S) 78j, 78m, and 78n),
and the rules and regulations of the SEC promulgated thereunder. Vannini's
Section 13(d) filings and public statements are a blatant attempt to mislead
Coastcast shareholders and contain numerous material misrepresentations,
including the following:
a. Vannini has failed to disclose that his purported notice of a
special shareholders' meeting is defective. Vannini has no right to demand a
special meeting of Coastcast shareholders under Coastcast's bylaws (the
"Bylaws") or California law because he is not a shareholder of record of ten
percent or more of Coastcast's shares.
b. Vannini has failed to inform Coastcast's shareholders that the
vote he is calling for at a special shareholders' meeting is intended not to
elect additional Board members, but to eliminate the entire Board in favor of
Vannini's own slate of nominees. That goal can only be accomplished, pursuant
to the Bylaws & and California law, at a regular annual meeting of the
shareholders or by a two-step removal and replacement process that requires a
far higher percentage of shareholder approval than the election of new directors
at an annual meeting.
c. Vannini has failed to reveal the identities or background of his
nominees to the Board, in direct violation of the Bylaws and applicable law.
d. Likewise, Vannini has failed to notify the shareholders of the
relevant facts relating to himself, including his background, whether he is
acting on behalf of himself or a group, and what resources he proposes to
utilize to achieve other sweeping goals described in his Section 13(d) filings
and public statements, including the adoption of a stock repurchase plan and
unspecified changes to the compensation of Board members.
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<PAGE>
e. Vannini has also failed to disclose what his purpose is as to the
various changes he proposes for resolution at the special shareholders' meeting
he has demanded, whether it be merger, divestiture of assets or simply
leveraging a favorable stock repurchase for his own benefit.
f. Vannini has, on information and belief, misstated the source of
his funds for his purported purchase of Coastcast stock.
JURISDICTION AND VENUE
----------------------
3. This Court has subject matter jurisdiction of this action pursuant to
Section 27 of the Exchange Act (15 U.S.C. (S) 78aa) and 28 U.S.C. (S) 1331.
4. Venue is proper in this District pursuant to 28 U.S.C. (S) 1391(b)(2)
in that a substantial part of the events giving rise to the claims herein
occurred within this District.
5. In connection with the wrongs complained of herein, Vannini used and
continues to use the instrumentalities of interstate commerce.
THE PARTIES
-----------
6. Coastcast is a corporation organized and existing under the laws of
the State of California with its principal place of business in Los Angeles
County, California.
7. Vannini is, on information and belief, an individual residing in San
Mateo County, California.
BACKGROUND FACTS:
-----------------
VANNINI'S NON-STATUS AS A
-------------------------
COASTCAST SHAREHOLDER
---------------------
8. Coastcast's records do not reflect Vannini as the owner of record,
i.e., as a "shareholder" under Section 185 of the California Corporations Code,
of any shares of Coastcast common stock.
-3-
<PAGE>
THE REQUIREMENTS FOR SPECIAL
----------------------------
MEETINGS, ELECTION OF DIRECTORS AND
-----------------------------------
DEMANDS FOR SHAREHOLDER INFORMATION
-----------------------------------
9. Coastcast's Bylaws and the California Corporations Code provide that a
special meeting of the shareholders may be called at any time only by the Board,
the Chairman of the Board, Coastcast's president, or a shareholder "entitled to
cast not less than ten percent (10%) of the votes at that meeting."
10. The Bylaws further mandate that the number of directors on the Board
is limited to seven, and the Bylaws and the California Corporations Code provide
that "[d]irectors shall be elected at each annual meeting of the shareholders to
hold office until the next annual meeting . . . and [e]ach director . . . shall
hold office until the expiration of the term for which elected." The only
provision made in the Bylaws and the California Corporations Code for the
election of directors in special shareholders' meetings is to fill vacancies on
the Board created other than by removal of directors. Although directors may be
removed by a vote of shareholders at a special meeting, the Bylaws and the
California Corporations Code only allow for their replacement at a special
meeting by a vote of a majority of the shareholders, which is a much higher
percentage than the votes required to elect new directors at an annual
shareholders' meeting.
11. The Bylaws also contain strict requirements relating to the
information that must be disclosed by any shareholder seeking to nominate
candidates for director. Among other things, that shareholder must timely
disclose, in accordance with procedures set forth in the Bylaws, personal data
relating to each nominee, the nominee's beneficial ownership of Coastcast stock,
and all other information relating to the nominee and his or her sponsoring
shareholder as would be required under SEC rules in proxy solicitation
materials.
12. In addition, the Bylaws and the California Corporations Code only
allow Coastcast shareholders holding five percent or more of Coastcast's
outstanding stock to demand and receive access to lists of Coastcast
shareholders and their shareholdings.
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<PAGE>
VANNINI'S MATERIALLY MISLEADING SEC FILINGS,
--------------------------------------------
PUBLIC STATEMENTS, AND UNLAWFUL DEMANDS FOR A SPECIAL
-----------------------------------------------------
MEETING AND COASTCAST SHAREHOLDER INFORMATION
---------------------------------------------
13. On or about July 17, 1998, Vannini filed a Schedule 13D (the "Schedule
13D") with the SEC, in which he disclosed a purported investment of
approximately $9.9 million in shares of Coastcast common stock, allegedly
representing beneficial ownership of 600,000 shares, or approximately 6.6% of
the outstanding shares. Vannini did not affirmatively indicate in the Schedule
13D, or in any amendment thereto, whether he was acting on behalf of a group of
investors, despite the fact that the SEC's Form 13D requires such information.
In the Schedule 13D, Vannini also stated his intention to orchestrate a wide
array of changes relating to Coastcast stock, Coastcast's Board of Directors,
and other shareholders, including the use of that influence to "persuade
[Coastcast] to adopt a stock repurchase program." However, Vannini failed to
disclose in the Schedule 13D, or in any subsequently filed document, what
resource he plans to utilize to effect these drastic changes.
14. Vannini subsequently filed with the SEC an amendment to the Schedule
13D ("Amendment No. 1"), dated July 24, 1998, in which he disclosed a further
purported investment of approximately 3,534,060 in shares of Coastcast common
stock. Together with the previous investment, this allegedly constituted
beneficial ownership of 891,000 shares, or approximately 9.9% of the outstanding
shares.
15. On or about July 31, 1998, Vannini, through his counsel, Bernard J.
Cassidy of Wilson Sonsini Goodrich & Rosati, wrote to Hans H. Buehler, Chairman
of the Board of Coastcast ("Buehler"), purporting to call a special meeting of
Coastcast shareholders to be held at 10:00 a.m. on September 22, 1998 (the
"Special Meeting"), despite the fact that Vannini was (and is) not an owner of
record of any Coastcast shares, i.e., he is not a Coastcast "shareholder." In
that letter (the "Special Meeting Demand"), Vannini proposed, among other
things, that at the Special Meeting the shareholders would "elect a board of
seven directors to serve until the next annual meeting of [Coastcast's]
shareholders and until their successors have been elected and qualify."
-5-
<PAGE>
16. Despite the Bylaws' requirements relating to the nomination of new
directors, Vannini has failed to identify in a timely manner his nominees or to
provide any of the other information required in connection with such
nominations.
17. Also on or about July 31, 1998, in a separate letter to Buehler,
Vannini demanded, among other things, that Coastcast make available for
Vannini's inspection a list of the names, addresses and shareholdings of
Coastcast's shareholders, to allow him to solicit proxies for the special
meeting.
18. In a second amendment to the schedule 13D ("Amendment No. 2"), dated
July 31, 1998, Vannini disclosed a further purported investment of $220,000 in
shares of Coastcast common stock, bringing his total alleged beneficial
ownership to 911,000 shares, or approximately 10.12% of the outstanding shares.
In Amendment No. 2, Vannini stated that he had called the Special Meeting and
set forth a description of the business to be transacted at the Special Meeting
that was virtually identical to the description contained in the Special Meeting
Demand.
19. Vannini's proposed "election" is in reality a campaign to do one of
two things, either of which is improper. First, his acts evidence an intent not
merely to "elect" directors, but instead to remove the current members of the
Board and replace them with individuals of Vannini's choosing. If not, then his
intention is to give the false impression of a fight over the control of
Coastcast, so that he can gain leverage and advance his personal agenda,
including his proposed stock repurchase plan, and to cause an artificial
increase in the price of Coastcast stock. In either event, Vannini's efforts to
remove and replace the Board, whether he intends to follow through on them or
not, are unlawful. There are no vacancies on the board at present and no
directors have previously been removed, so Vannini's plan can only be to effect
that removal and replace the entire Board with his as yet unidentified nominees.
However, instead of making his purpose clear in the Schedule 13D or filing an
amendment to the Schedule 13D which would clarify his intentions, and obviously
mindful of the far stricter voting requirement applicable to the replacement of
removed directors at special shareholders' meetings, Vannini has elected to
engage in a de facto proxy solicitation by issuing public statements about his
planned special meeting that
-6-
<PAGE>
are designed to lead to the procurement of Coastcast shareholder proxies. Those
public statements include at least the following:
a. In an interview published by Federal Filings Newswires on July
21, 1998, Vannini was quoted as saying that he "plans to contact Coastcast and
other shareholders to discuss his plans" and "to persuade Coastcast Corp. to
adopt a stock buyback program. as well as to seek changes in the company's board
of directors."
b. On the same day, July 21, 1998, the Los Angeles Times reported
that Vannini said he wants to "push for a stock buyback," change Coastcast's
executive pay practices and shake up its board.
c. In another interview published by Federal Filings Newswires on
July 27, 1998, Vannini stated that the Board should "start behaving in a pro-
shareholder-oriented-way" by spending $25.5 million of its cash "on a massive
buyback program."
d. On July 28, 1998, Federal Filings Newswires quoted Vannini as
saying that "[t]he current board of directors and [Coastcast chairman] Hans
Buehler cannot be allowed to stand" and accused them of failing to "realiz[e]
their responsibilities in running a public company."
e. In an August 3, 1998 Dow Jones News Service article, Dow Jones
reported that Vannini had called a special meeting of Coastcast shareholders for
September 22, 1998, and noted that Vannini claims that Coastcast's shares are
undervalued.
f. On the same day, August 3, 1998, Federal Filings Newswires
reported that Vannini had called the September 22, 1998 special shareholders'
meeting to elect a board of seven directors.
g. On August 4, 1998, the Wall Street Journal noted that Vannini had
called for a special meeting and that Vannini "thinks the best investment for
Coastcast's cash would be its own stock" (which is not surprising since such a
repurchase would at above-market rates and would boost the value of Mr.
Vannini's own shares by increasing the average price of Coastcast's remaining
outstanding shares).
-7-
<PAGE>
FIRST CLAIM FOR RELIEF
----------------------
(INJUNCTIVE RELIEF FOR VIOLATION OF
SECTION 13(D) OF THE EXCHANGE ACT (15 U.S.C. (S) 78M)
AND REGULATIONS PROMULGATED THEREUNDER)
20. Coastcast realleges and incorporates by reference the allegations
contained in paragraphs 1 through 19, above.
21. Vannini's conduct as alleged above violates Section 13(d) of the
Exchange Act and regulations promulgated thereunder in that among other things,
Vannini has failed to disclose that his purported notice of a special
shareholders' meeting is defective and that he has no right to demand a special
shareholders' meeting, failed to disclose that he intends to ask the
shareholders not only to elect new directors but to remove and replace the
entire Board, which requires a much higher voting percentage for shareholder
approval than an annual election of directors, failed to disclose whether he is
acting as a member of a group, and failed to disclose requisite facts relating
to his background and integrity, the identities, background and integrity of his
proposed nominees for membership on the Board, what resources he proposes to
utilize to achieve the drastic changes he intends to make at Coastcast and what
his true purpose is in seeking those changes.
22. Unless Vannini is preliminarily and permanently enjoined from
continuing to violate Section 13(d), the regulations promulgated thereunder, and
the Bylaws and is instead required to comply with the requirements set forth
therein, Coastcast's current and potential shareholders will be unlawfully
deprived of vital information affecting timely decisions pertaining to the
purchase or sale of Coastcast stock and the voting rights permitted thereunder.
In addition, Coastcast will suffer great and irreparable injury in that, among
other things, Coastcast and the Board will be forced to squander time, effort
and financial resources in responding to Vannini's improper demands for a
special shareholders' meeting and access to information regarding Coastcast's
shareholders, and in responding to Vannini's campaign to unseat the Board, all
of which fail to comply with applicable legal requirements. Furthermore,
Vannini's continued dissemination of materially misleading statements about the
Board and its management of
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<PAGE>
Coastcast will cause irreparable damage to Coastcast's relationships with its
customers by causing uncertainty as to the financial stability and direction of
Coastcast.
23. There is no threat of irreparable harm to Vannini from such an
injunction, because Vannini can suffer no cognizable harm from having to conform
his conduct to existing legal requirements.
24. Entry of an injunction as prayed for herein is in the best interest of
the public because it will benefit Coastcast's public shareholders by requiring
Vannini to conform his conduct to comply with applicable legal requirements and
by preventing Vannini from forcing Coastcast and the Board to waste time, effort
and financial resources in responding to Vannini's improper conduct.
SECOND CLAIM FOR RELIEF
-----------------------
(INJUNCTIVE RELIEF FOR VIOLATION OF
SECTION 14 (A) OF THE EXCHANGE ACT (15 U.S.C. (S) 78N)
AND REGULATIONS PROMULGATED THEREUNDER)
25. Coastcast realleges and incorporates by reference the allegations
contained in paragraphs 1 through 24, above.
26. Vannini's actions alleged above constitute communications to security
holders within the meaning of SEC Rule 14a-1 (1), promulgated pursuant to
Section 14 (a) of the Exchange Act. Vannini has a duty under Section 14 (a) of
the Exchange Act and the regulations promulgated thereunder to disclose all
material facts in the press releases, news articles and other materials he has
caused to be publicly disseminated to Coastcast shareholders and to refrain from
making material misrepresentations and omitting to state material facts
necessary in order to make the statements made, in light of the circumstances
under which they are made, not misleading. Vannini is violating that duty.
27. The press releases, news articles, and other materials described above
contain statements that are materially false and misleading and omit material
facts in that, among other things, Vannini has failed to disclose in his Section
13 (d) filings and in his public statements in press releases, news articles and
other materials that his purported notice of a special shareholders'
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<PAGE>
meetings is defective and that he has no right to demand a special shareholders'
meeting, failed to disclose that he intends to ask the shareholders not just to
elect new directors but to remove and replace the entire Board, which requires a
much higher voting percentage for shareholder approval than an annual election
of directors, failed to disclose whether he is acting as a member of a group,
and failed to disclose requisite facts relating to his background and integrity,
the identities, background and integrity of his proposed nominees for membership
on the Board, what resource he proposes to utilize to achieve the drastic
changes he intends to make at Coastcast and what his purpose is in seeking those
changes. In addition, on information and belief, Vannini has failed to disclose
accurate and complete information regarding the source of his funding for his
purported purchases of Coastcast stock.
28. Unless Vannini is preliminarily and permanently enjoined from
continuing to violate Section 14(a), the regulations promulgated thereunder, and
the Bylaws and is instead required to comply with the requirements set forth
therein, Coastcast's current and potential shareholders will be unlawfully
deprived of vital information affecting timely decisions pertaining to the
purchase or sale of Coastcast stock and the voting rights permitted thereunder.
In addition, Coastcast will suffer great and irreparable injury in that, among
other things, Coastcast and the Board will be forced to squander time, effort
and financial resources in responding to Vannini's improper demands for a
special shareholders' meeting and access to information regarding Coastcast's
shareholders, and in responding to Vannini's campaign to unseat the Board, all
of which fail to comply with applicable legal requirements. Furthermore,
Vannini's continued dissemination of materially misleading statements about the
Board and its management of Coastcast will cause irreparable damage to
Coastcast's relationships with its customers by causing uncertainty as to the
financial stability and direction of Coastcast.
29. There is no threat of irreparable harm to Vannini from such an
injunction, because Vannini can suffer no cognizable harm from having to conform
his conduct to existing legal requirements.
30. Entry of an injunction as prayed for herein is in the best interest of
the public because it will benefit Coastcast's public shareholders by preventing
Vannini from forcing
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<PAGE>
Coastcast and the Board to waste time, effort and financial resources in
responding to Vannini's improper conduct, and instead will require Vannini to
conform his conduct to comply with applicable legal requirements.
THIRD CLAIM FOR RELIEF
----------------------
(INJUNCTIVE RELIEF FOR VIOLATION OF
SECTION 10(B) OF THE EXCHANGE ACT (15 U.S.C. (S) 78J)
AND REGULATIONS PROMULGATED THEREUNDER)
31. Coastcast realleges and incorporates by reference the allegations
contained in paragraphs 1 through 30, above.
32. Vannini was and is responsible for issuing materially false and
misleading statements to the public regarding Coastcast as alleged herein.
33. Vannini has violated Section 10(b) and the regulations promulgated
thereunder in that he employed devices, schemes, and artifices to defraud, made
untrue statements of material facts and omitted to state material facts
necessary to make statements made, in the light of the circumstances under which
they were made, not misleading, and engaged in acts, practices and a course of
conduct that operated and continues to operate as a fraud upon the public
including the present and potential shareholders of Coastcast.
34. Unless Vannini is preliminarily and permanently enjoined from
continuing to violate Section 10(b) and the regulations promulgated thereunder
and is instead required to comply with the requirements set forth therein,
Coastcast's current and potential shareholders will be unlawfully deprived of
vital information affecting timely decisions pertaining to the purchase or sale
of Coastcast stock and the voting rights permitted thereunder. In addition,
Coastcast will suffer great and irreparable injury in that, among other things,
Coastcast and the Board will be forced to squander time, effort and financial
resources in responding to Vannini's improper demands for a special shareholders
meeting and access to information regarding Coastcast's shareholders, and in
responding to Vannini's campaign to unseat the Board, all of which fail to
comply with applicable legal requirements. Furthermore, Vannini's continued
dissemination of materially misleading statements about the Board and its
management of Coastcast will cause
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<PAGE>
irreparable damage to Coastcast's relationships with its customers by causing
uncertainty as to the financial stability and direction of Coastcast.
35. There is no threat of irreparable harm to Vannini from such an
injunction, because Vannini can suffer no cognizable harm from having to conform
his conduct to existing legal requirements.
36. Entry of an injunction as prayed for herein is in the best interest of
the public because it will benefit Coastcast's public shareholders by preventing
Vannini from forcing Coastcast and the Board to waste time, effort and financial
resources in responding to Vannini's improper conduct, and instead will require
Vannini to conform his conduct to comply with applicable legal requirements.
FOURTH CLAIM FOR RELIEF
-----------------------
(DECLARATORY RELIEF)
37. Coastcast realleges and incorporates by reference the allegations
contained in paragraphs 1 through 36, above.
38. An actual controversy has arisen and now exists relating to the
parties' respective rights and duties in that Coastcast contends that Vannini's
conduct, as alleged above, violates the Bylaws and that Vannini is not entitled
to demand a special shareholders meeting or to gain access to Coastcast
shareholder information, whereas Coastcast is informed and believes and on that
basis alleges that Vannini will dispute those contentions and contend that he
has complied with the Bylaws in all respects and is entitled to demand a special
shareholders' meeting and to gain access to Coastcast shareholder information.
39. Coastcast desires a judicial determination of its rights and duties
under the Bylaws and California law and a declaration as to whether Vannini's
conduct as alleged above violates the Bylaws and whether Vannini is entitled to
demand a special shareholders' meeting or to gain access to Coastcast
shareholder information.
40. A judicial declaration is necessary and appropriate at this time under
the circumstances in order that Coastcast may ascertain its rights and duties
under the Bylaws and California law and determine whether it is required to
comply with Vannini's various demands for,
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<PAGE>
among other things, a special shareholders' meeting and access to Coastcast
shareholder information.
PRAYER
------
WHEREFORE, Coastcast demands as follows:
A. For a preliminary and permanent injunction that:
1. Requires Vannini to correct his filings under the Exchange Act to
conform to all applicable requirements of the law and the Bylaws;
2. Bars Vannini or anyone associated with Vannini from violating
Sections 10(b), 13(d) and 14(a) of the Exchange Act and the regulations
promulgated thereunder, including by making or disseminating any further public
statements relating to his proposed special shareholders' meeting or any of the
other matters mentioned in his previous Section 13 (d) filings or public
statements, and from purchasing any additional shares of Coastcast common stock
and from voting any Coastcast stock that he purports to own currently until
Vannini makes the required corrective disclosures;
3. Forbids Vannini or anyone associated with Vannini from soliciting
any proxies related to Coastcast until Vannini makes the required corrective
disclosures;
4. Enjoins Vannini or anyone associated with Vannini from acquiring
or attempting to acquire any further Coastcast stock until ten days after
Vannini has made the required corrective disclosures;
5. Enjoins Vannini or anyone associated with Vannini from exercising
or attempting to exercise influence or Control over the business or management
of Coastcast until Vannini has made the required corrective disclosures; and
6. Enjoins Vannini or anyone associated with Vannini from making any
false or misleading statements regarding Coastcast or Coastcast shares;
B. For a declaration that Vannini's demands violate the Bylaws and that
Coastcast is not required to comply with such demands for a special
shareholders' meeting and access to Coastcast shareholder information;
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<PAGE>
C. For an award of Coastcast's costs and disbursements, including
reasonable attorneys' fees in this action; and
D. Such other and further relief as the court may deem just and proper.
DATED: August 13, 1998
GIBSON, DUNN & CRUTCHER LLP
-and-
JEFFER, MANGELS, BUTLER
& MARMARO LLP
By: /s/ Kevin S. Rosen
------------------------
KEVIN S. ROSEN
Attorneys for Plaintiff COASTCAST CORPORATION
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<PAGE>
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
- --------------------------------------------------------------------------------
COASTCAST CORPORATION, CASE NUMBER
a California corporation,
PLAINTIFF(S) CV-98-6625 WMB (Mcx)
------------------------------------------
SUMMONS
vs.
JONATHAN VANNINI,
an individual,
DEFENDANT(S)
- --------------------------------------------------------------------------------
TO THE ABOVE-NAMED DEFENDANT(S), You are hereby summoned and required to file
with this court and serve upon
KEVIN S. ROSEN, ESQ.
Plaintiff's attorney, whose address is:
GIBSON, DUNN & CRUTCHER LLP
333 SOUTH GRAND AVENUE
LOS ANGELES, CALIFORNIA 90071
an answer to the complaint which is herewith served upon you
within 20 days after service of this summons upon you, exclusive
of the date of service. If you fail to do so, judgment by default
will be taken against you for the relief demanded in the
complaint.
DATE: AUG 13, 1998
---------------------
CLERK, U.S. DISTRICT COURT
By /s/ Angelique Dominguez
------------------------------
Deputy Clerk
- --------------------
(SEAL OF THE COURT)
- --------------------------------------------------------------------------------
SUMMONS
- --------------------------------------------------------------------------------
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<PAGE>
EXHIBIT 99.(B)
DAVID J. BERGER, State Bar # 147645
JARED L. KOPEL, State Bar # 126817
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Telephone: (650) 493-9300
Attorneys for Plaintiff
JONATHAN VANNINI
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SAN FRANCISCO
JONATHAN VANNINI , ) Case No. CV 997234
) ------
Plaintiff, ) COMPLAINT
) ---------
vs. )
)
COASTCAST CORPORATION, )
)
Defendant. )
)
)
)
- --------------------------
On information and belief, Plaintiff Jonathan Vannini ("Vannini"), by his
attorneys Wilson Sonsini Goodrich & Rosati P.C., for his complaint against
Coastcast Corporation ("Coastcast" or the "Company"), alleges as follows:
INTRODUCTION
------------
1. Mr. Vannini is an investor who presently is the beneficial owner of
more than 10% of Coastcast's common stock. This lawsuit arises from the unlawful
refusal of Coastcast to make available to Vannini the Company's list of
shareholders' names, addresses and stockholdings, in violation of California
Corporations Code (S) 1600 (a); and the results of shareholder votes at
Coastcast's last annual meeting, in violation of California Corporation Code (S)
1509.
<PAGE>
2. Coastcast also has unlawfully refused the request of Vannini that
Coastcast hold a special shareholder meeting to consider the election of a new
slate of directors to replace four of the seven current directors. Vannini, as
a beneficial holder of more than 10% of the Company's stock, has the right to
call a special shareholders meeting under California Corporations Code (S)
600(d).
FACTUAL ALLEGATIONS
-------------------
THE PARTIES
-----------
3. Plaintiff is a private investor who resides in Hillsborough,
California. Mr. Vannini is presently the beneficial owner of 911,000 shares (the
"Shares") of Coastcast common stock. The Shares are currently held in an account
maintained by Salomon Smith Barney, Inc. ("SSB").
4. Defendant Coastcast is a California corporation with its principal
executive offices at 3025 East Victoria Street, Rancho Dominguez, California.
Coastcast is a leading manufacturer of golf clubheads and also manufactures a
variety of investment-cast orthopedic implants and surgical tools. The Company
conducted an initial public offering of common stock in December 1993.
Coastcast's stock is traded publicly and is listed for trading on the New York
Stock Exchange.
5. As of July 1, 1998, Coastcast's stock was at $18 per share, within two
dollars of its initial public offering price in December 1993. Thus, in a
period in which stocks averaged a 20% return annually, Coastcast's stock
provided a return of less than 3% annually.
6. Members of Coastcast's Board of Directors own approximately 1 million
options and are the beneficiaries of additional monetary perks not available to
other stockholders, as well as a supplemental executive retirement plan more
generous than retirement plans of comparable companies. During the past three
years, the Company has paid Hans Buehler, the Chairman of the Board of
Directors, over $1.9 million in cash and over 500,000 options, even though Mr.
Buehler owned over 14% of Coastcast's stock and therefore should not have needed
incentives in the form of additional equity. In addition, 288,790 options
granted to Mr. Buehler and other executives were repriced in late 1997 to ensure
that they would be "in the money" and have value even though
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<PAGE>
the stock price had risen only slightly from the offering price. These lavish
financial benefits were not justified in light of the minimal return provided by
the Company's stock.
COASTCAST'S ANNUAL SHAREHOLDER MEETING
--------------------------------------
7. Coastcast's annual meeting of shareholders was scheduled to take place
on June 22, 1998. At that meeting, the Company's shareholders were supposed to
vote on four proposals. The first proposal was to elect seven directors to serve
one-year terms. The second proposal sought shareholder approval to amend the
1996 employee stock option plan to reserve 500,000 additional shares for use as
options. The third proposal sought shareholder approval to amend the 1995 non-
employee director stock option plan to reserve 200,000 additional shares and to
increase to 20,000 from 10,000 the number of shares subject to options annually
granted to each director. The fourth proposal sought approval of Deloitte &
Touche LLP as the Company's outside auditors.
8. Proposals 2 and 3 would have substantially enriched the amount of
equity granted to Coastcast's officers and directors, despite the gross
underperformance of Coastcast's stock and the concomitant lack of shareholder
return on their investment.
9. On June 23, 1998, Coastcast issued a press release announcing the
adjournment of its annual meeting of shareholders following the election of
directors and the approval of the auditors, but before voting on proposals 2 and
3. The release stated that the annual meeting was being adjourned until July 8,
1998 "to allow more time for shareholders to vote on amendments of the company's
employee stock option plan and non-employee director stock option plan because a
substantial number of shares had not been voted on these matters."
10. The press release failed to disclose any information concerning the
number of votes received or cast with respect to Proposals 2 and 3.
MR. VANNINI'S LETTERS TO COASTCAST
----------------------------------
11. On July 1, 1998, Mr. Vannini wrote a letter to Coastcast and its Board
of Directors asserting that the adjournment of the annual meeting was nothing
more than an attempt to stifle Coastcast shareholders' rejection of Proposals 2
and 3. The letter requested that Coastcast publish the results of the
shareholders vote on Proposals 2 and 3; stop paying excessive amounts of cash to
Mr. Buehler; stop issuing stock options to Mr. Buehler; and voluntarily forfeit
the options granted
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<PAGE>
to the Board members until such grants were justifiable in light of an increased
stock price. Coastcast failed to take any action in response to this request.
12. On July 21, 1998, Coastcast issued a release announcing the approval
by shareholders at the adjourned shareholder meeting held on July 8, 1998, of
Proposals 2 and 3. The release also stated that the Board of Directors, after
additional consideration including the large number of shareholders who voted
against both proposals, had decided "at this time" not to implement either
proposal. The release stated, however, that the Board may in the future decided
to implement one or both of such proposals.
13. On July 22, 1998, Mr. Vannini wrote a letter to Coastcast and its
Board of Directors stating that due to the extreme weakness in the Company's
stock price, the time had come to take concrete steps to improve the situation.
At the time of the letter, the Company's stock price had dropped to $15 per
share, which meant that the cumulative return to shareholders since the initial
public offering was negative. The letter noted that Coastcast had approximately
$35 million in cash on its balance sheet and could prudently operate with $5
million in cash. The letter recommended that the Company use the cash to
implement a stock repurchase program to increase shareholder value.
MR. VANNINI'S STOCK PURCHASES
-----------------------------
14. On July 17, 1998, Mr. Vannini filed a Schedule 13D with the Securities
and Exchange Commission ("SEC"). Section 13(d) of the Securities Exchange Act
of 1934 requires that anyone having beneficial ownership of more than 5% of a
company's stock disclose that ownership or any changes in that ownership on a
Schedule 13D. The Schedule 13D reported that Mr. Vannini had an investment of
approximately $9.9 million in shares of Coastcast stock. The Scheduled 13D
reported that Mr. Vannini had beneficial ownership of 600,000 shares of stock,
which constituted approximately 6.66% of the outstanding shares. The Schedule
13D is attached as Exhibit A.
15. The Schedule 13D publicly disclosed Mr. Vannini's intention to
exercise influence and control over Coastcast in order to "change the
compensation and/or membership of the present board of directors," "to persuade
[Coastcast] to adopt a stock repurchase program," and "to contact
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<PAGE>
[Coastcast] and/or other shareholders regarding these and other potential
strategies to increase shareholder value." (Ex. A at Item 4).
16. On July 29, 1998, Mr. Vannini filed with the SEC Amendment No. 1 to
the Schedule 13D, in which he disclosed a further investment of approximately
$3,534,000 in shares of Coastcast stock. The Schedule 13D reported that
combined with his previous investment, Mr. Vannini had beneficial ownership of
891,000 shares of Coastcast stock, which constituted approximately 9.9% of the
outstanding shares. The Amendment No. 1 is attached as Exhibit B. The
Amendment No. 1 contained the same disclosure concerning Mr. Vannini's intention
to exercise influence and control over Coastcast as did the initial Schedule
13D.
17. On August 3, 1998, Mr. Vannini filed with the SEC Amendment No. 2 to
the Schedule 13D, disclosing an additional investment of $220,000 in shares of
Coastcast stock. Together with his prior investments, the Amendment No. 2
reported that Mr. Vannini held beneficial ownership of 911,000 shares of
Coastcast common stock, which constituted approximately 10.12% of the
outstanding shares. The Amendment No. 2 is attached as Exhibit C. The Amendment
No. 2 contained the same disclosure concerning Mr. Vannini's intention to
exercise influence and control over Coastcast as the initial Schedule 13D and
Amendment No. 1. The Amendment No. 2 also disclosed that Mr. Vannini had called
for a special meeting of shareholders and described the business that would be
conducted at the special meeting.
18. Mr. Vannini presently is the beneficial holder of 911,000 shares of
Coastcast stock held at SSB, as reflected in the letter from SSB to Mr. Vannini
attached as Exhibit D.
DEMAND LETTERS TO COASTCAST
---------------------------
19. On July 31, 1998, Mr. Vannini, by his attorney Bernard Cassidy, Esq.
of Wilson Sonsini Goodrich & Rosati P.C., sent a letter to Mr. Buehler, the
Chairman of Coastcast's Board of Directors, calling a special meeting of
Coastcast shareholders to be held on September 22, 1998. Mr. Vannini proposed,
among other things, that the special meeting elect a new Board of Directors who
would serve until the next annual meeting of shareholders. A copy of this
letter is attached as Exhibit E.
-5-
<PAGE>
20. Section 3 of Article II of the Company's Amended and Restated Bylaws
(the "Bylaws") provides that a special meeting of shareholders may be called by
one or more shareholders holding shares in the aggregate entitled to cast not
less than 10% of the votes at that meeting. Mr. Vannini satisfies this
requirement, given that he is a shareholder holding more than 10% of the
Company's voting shares.
21. In a separate letter to Mr. Buehler dated July 31, 1998, Mr. Vannini
demanded that Coastcast make available to him for inspection and copying "the
names and addresses and shareholdings of the Company's shareholders." A copy of
this letter is attached as Exhibit F. Section 1 of Article VII of the Bylaws
provides that a shareholder or shareholders holding at least 5% of outstanding
voting shares may inspect and copy the records of shareholders' names and
addresses and shareholdings five days after a written demand on the Company.
Mr. Vannini is thus entitled to inspect and copy the Company's shareholder list,
given that he is a beneficial holder of more than 5% of the Company's
outstanding shares. Section I of Article VII also provides that any shareholder
is entitled to inspect the record of shareholders upon written demand for a
purpose reasonably related to the holder's interest. The letter stated a proper
purpose reasonably related to Mr. Vannini's role as stockholder of record of
shares of Coastcast, to wit: "to solicit proxies for the special meeting of the
Company's shareholders to be held on September 22, 1998."
22. The letter further requested that Coastcast "provide the results of
all votes that occurred at the Company's 1998 annual meeting (and the
adjournment thereof), including the number of shares voting for, the number of
shares voting against, and the number of shares abstaining or withheld from
voting."
23. On August 14, 1998, Mr. Vannini filed a Non-Management Preliminary
Proxy Statement with the SEC on Schedule 14A, which proposes a new slate of
directors to replace four of the seven current directors of Coastcast at a
special meeting of the shareholders proposed for September 22, 1998. The
Schedule 14A stated Mr. Vannini's belief that the election of his proposed
nominees, and the adoption of the other proposals set forth in the Schedule 14A,
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<PAGE>
represent the best means for Coastcast shareholders to support a focused effort
by the Company to improve shareholder value. A copy of the Schedule 14A is
attached as Exhibit G.
24. To date, Coastcast has refused to make available to Mr. Vannini the
record of shareholders for inspection and copying; has refused to provide the
results of the shareholder votes at the 1998 annual meeting; and has refused to
call a special meeting of shareholders. Rather than comply with these
legitimate requests, Coastcast filed a lawsuit against Mr. Vannini in the United
States District Court for the Central District of California. The lawsuit is an
example of Coastcast's continuing effort to protect entrenched management and
thwart Mr. Vannini's attempt to improve the Company's operations and enhance
shareholder value. Meanwhile, Coastcast's stock price has fallen to
approximately $12 7/8 per share, a nearly 30% drop from the price on July 1,
1998.
FIRST CLAIM OF RELIEF
---------------------
(For Order Under California Corporation Code (S) 1600)
25. Plaintiff realleges and incorporates by reference the allegations
contained in paragraphs 1 through 24, above.
26. Plaintiffs has complied with the requirements of Coastcast's Bylaws
and California Corporations Code (S) 1600 with respect to the form and manner of
making a demand for inspection of documents and information. Consistent with
California Corporations Code (S) 1600, plaintiff has requested that Coastcast
comply and produce or make available the demanded materials within five business
days of receipt.
27. To date, Coastcast has failed to provide any of the information
requested in the Demand Letter.
28. By reason of the foregoing, plaintiff is entitled to inspect and make
copies of the demanded materials pursuant to California Corporations Code (S)
1600.
29. Plaintiff has no adequate remedy at law.
-7-
<PAGE>
SECOND CLAIM OF RELIEF
----------------------
(For Order Under California Corporations Code (S) 1509)
30. Plaintiff realleges and incorporates by reference the allegations
contained in paragraphs 1 through 29, above.
31. Plaintiff has made a valid request upon Coastcast for the results of
the shareholder votes held at the Company's annual meeting of shareholders held
on June 23 and July 8, 1998, including the results of the shareholder votes on
Proposals 2 and 3.
32. Plaintiff is entitled to obtain the requested information under
California Corporations Code (S) 1509.
33. Coastcast to date has refused to provide the requested information.
34. Plaintiff has no adequate remedy of law.
THIRD CLAIM FOR RELIEF
----------------------
(For Order Under California Corporations Code (S) 600(d))
35. Plaintiff realleges and incorporates by reference the allegations
contained in paragraphs 1 through 34, above.
36. Plaintiff has requested that Coastcast call a special meeting of
shareholders. Plaintiff satisfies the requirements under the Company's Bylaws
and California Corporations Code (S) 600(d) to make such a request, given that
plaintiff is a beneficial holder of more than 10% of the Company's outstanding
stock.
37. Coastcast to date has refused to comply with plaintiff's request.
38. Plaintiff has no adequate remedy at law.
WHEREFORE, plaintiff prays that this Court, :
(a) Summarily order Coastcast immediately to permit plaintiff and/or his
agents to inspect and copy all demanded materials, or, alternatively, order
Coastcast immediately to furnish plaintiff copies of all demanded materials;
including records of shareholder names and addresses and shares; and order
Coastcast to provide plaintiff updated demanded materials as they become
available; and
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<PAGE>
(b) Summarily order Coastcast to provide plaintiff and/or his agents with
the results of shareholder votes at the June 23, 1998 and July 8, 1998 annual
meetings, including the results of shareholder votes on Proposals 2 and 3; and
(c) Summarily order Coastcast to call a special shareholder meeting to be
held on September 22, 1998; and
(d) Grant such other and further relief, including reasonably attorneys'
fees and costs, as the Court shall deem just and proper.
Dated: August 14, 1998 WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
By /s/ Jared L. Kopel
_____________________________________
Jared L. Kopel
Attorneys for Plaintiff
JONATHAN VANNINI
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