AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into as of November 6, 1998
by and between Xxxxxxxx X. Xxxxxxx ("Xx. Xxxxxxx") and Coastcast Corporation,
a California corporation (the "Company"), and shall become effective subject
to and in accordance with Section 6.11 hereof.
RECITALS:
A. Xx. Xxxxxxx is the beneficial owner of 911,000 shares of common
stock, no par value, of the Company (the "Shares"). As used herein, the term
"beneficial owner" shall have the meaning set forth in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
B. Xx. Xxxxxxx has demanded a special meeting of shareholders of the
Company (the "Special Meeting") and commenced steps looking toward the
solicitation of proxies to be voted at such meeting.
C. Litigation is pending between the parties in the United States
District Court in Los Angeles, California, entitled COASTCAST CORPORATION X.
XXXXXXX (CASE NO. 98-6625-WMB (Mcx), including certain counterclaims by Xx.
Xxxxxxx against the Company and Xxxx Xxxxxxx (the "Litigation").
D. In consideration of the representations and covenants of the Company
set forth herein, Xx. Xxxxxxx has agreed to withdraw his demand for a Special
Meeting; abandon all efforts to acquire shares of stock of the Company,
solicit proxies or affect control of the Company; settle the Litigation; and
release certain claims; on the terms and conditions hereinafter set forth.
E. In consideration of the representations and covenants of Xx. Xxxxxxx
set forth herein, the Company has agreed to make certain covenants; settle
the Litigation; and release certain claims; on the terms and conditions
hereinafter set forth.
AGREEMENTS:
SECTION 1. REPRESENTATIONS AND COVENANTS OF THE COMPANY. The Company
hereby represents to Xx. Xxxxxxx and, during the term and subject to all of
the provisions hereof, hereby covenants as follows:
SECTION 1.1 STOCK OPTION REPRICING. The Company's employee stock
option plan and non-employee director stock option plan have been amended by
the board of directors of the Company to prohibit repricing of outstanding
stock options without shareholder approval. No modification or withdrawal of
such amendment will be made without shareholder approval.
SECTION 1.2 COMPENSATION OF CHAIRMAN. Xxxx Xxxxxxx, the Chairman of
the Board of the Company, has resumed the position and duties of Chief
Executive Officer of the Company. The annual salary rate of Xxxx Xxxxxxx has
been voluntarily reduced by him by 20%. No increase will be made in the
salary rate of Xx. Xxxxxxx until at least one year from the date hereof.
SECTION 1.3 RELINQUISHMENT OF SERP BENEFITS. Xxxx Xxxxxxx has
voluntarily relinquished all of his benefits under the Company's supplemental
executive retirement plan (the "SERP"). Such benefits will not be restored
without shareholder approval.
SECTION 1.4 CURTAILMENT OF SERP. Xxxx Xxxxxxx has recommended to the
board of directors of the Company curtailment or modification of the SERP to
reduce costs to the Company. A detailed proposal regarding any future SERP
or other benefits will be presented to the board of directors for evaluation
and possible implementation.
SECTION 1.5 ELECTION OF DIRECTORS. The authorized number of directors
provided by the bylaws of the Company is seven and there are currently seven
directors. In the event of a vacancy on the board of directors prior to the
1999 annual meeting of shareholders of the Company and upon the effectiveness
of this Agreement pursuant to Section 6.11 hereof, Xx. Xxxxxxx will be
elected forthwith by the board of directors to fill such vacancy and to serve
as a director of the Company until the next annual meeting of shareholders
and until his successor is elected and qualifies. Thereafter, Xx. Xxxxxxx
will be included on the slate of director-nominees of the board of directors
for election at the 1999 annual meeting of shareholders and at each
subsequent annual meeting of shareholders during the term of this Agreement
for as long as Xx. Xxxxxxx beneficially owns not less than 8% of the
outstanding common stock of the Company (as adjusted for any issuances of
shares after the date hereof). In addition to Xx. Xxxxxxx, the slate of
director-nominees of the board of directors for election at the 1999 annual
meeting of shareholders and at each subsequent annual meeting of shareholders
during the term of this Agreement for as long as Xx. Xxxxxxx beneficially
owns not less than 8% of the outstanding common stock of the Company (as
adjusted for any issuances of shares after the date hereof) shall include one
person selected by the board of directors subject to the approval of Xx.
Xxxxxxx (the "Vannini-approved director"), which approval will not
unreasonably be withheld. If the Vannini-approved director ceases to be a
director after his or her election as a director and prior to an annual
meeting of shareholders at which directors are to be elected, the person
elected to fill the resulting vacancy on the board of directors shall be
selected by the board of directors subject to the approval of Xx. Xxxxxxx,
which approval will not unreasonably be withheld.
SECTION 1.6 STOCK REPURCHASE PROGRAM. The Company has been authorized
by the board of directors to repurchase 457,000 shares of its outstanding
common stock in addition to shares which have already been repurchased by the
Company. The Company will continue to repurchase shares of its stock at such
times and such prices as management and the board of directors deem
advantageous and prudent.
SECTION 1.7 REIMBURSEMENT OF EXPENSES. Upon the effectiveness of this
Agreement, the Company will reimburse Xx. Xxxxxxx the sum of $400,000 for a
portion of his expenses in connection with the Litigation and the Special
Meeting.
SECTION 2. REPRESENTATIONS AND COVENANTS OF XX. XXXXXXX. Xx. Xxxxxxx
hereby represents to, and covenants with, the Company as follows:
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SECTION 2.1 OWNERSHIP OF SHARES. Xx. Xxxxxxx represents and warrants
that he beneficially owns all of the Shares free and clear of interests of
others except for a lien held by Xxxxx Xxxxxx, Inc. for margin credit
extended to Xx. Xxxxxxx.
SECTION 2.2 ABANDONMENT OF SPECIAL MEETING AND PROXY SOLICITATION.
Promptly following the effectiveness of this Agreement, Xx. Xxxxxxx shall
take all such action as may be necessary and appropriate to cause to be
canceled and withdrawn all demands made by him, or on his behalf in respect
of the Shares, pertaining to a special meeting of shareholders of the Company
and inspection or delivery of shareholder records of the Company, and
terminate or cause to be terminated all efforts to solicit proxies for such
special meeting. Xx. Xxxxxxx will not, directly or indirectly, acquire
beneficial ownership of additional shares or any other securities of the
Company (collectively "Securities") which would result in him beneficially
owning more than 20% of the outstanding shares. Any additional Securities
acquired by Xx. Xxxxxxx will constitute Shares subject to the provisions of
this Agreement.
SECTION 2.3 VOTING OF SHARES. In connection with every future meeting
of shareholders of the Company during the term of this Agreement, Xx. Xxxxxxx
shall take all such action as may be necessary and appropriate so that all
shares of the Company owned beneficially, directly or indirectly, by him are
voted for and against each proposal or nominee for director in the same
proportion as the votes cast by holders of shares other than Xx. Xxxxxxx.
During the term of this Agreement, Xx. Xxxxxxx shall not contest any proxies
received by the Company with respect to, or submit, any proposal for vote of
shareholders at any annual or other meeting of shareholders of the Company.
SECTION 2.4 NO SOLICITATION OF PROXIES. During the term of this
Agreement, Xx. Xxxxxxx shall not directly or indirectly solicit proxies or
written consents or become a "participant" in a "solicitation" with respect
to any matter or with respect to any "election contest" relating to the
election of directors of the Company (as such terms are defined in
Regulation 14A under the Exchange Act), except to the extent that Xx. Xxxxxxx
may be deemed a participant in any solicitation by the board of directors of
the Company.
SECTION 2.5 NO PARTICIPATION IN GROUP. During the term of this
Agreement, and except as otherwise provided in this Agreement, Xx. Xxxxxxx
shall not directly or indirectly join, or assist or encourage in any respect
the formation of, a partnership, syndicate or other group (within the meaning
of the Exchange Act and Rule 13d-5 thereunder), or otherwise act in concert
with any other person, to affect control of the Company or to acquire, hold,
vote or dispose of Securities.
SECTION 2.6 TRANSFERS OF SHARES. During the term of this Agreement,
and except as otherwise provided in this Agreement, Xx. Xxxxxxx shall not
directly or indirectly sell or otherwise transfer in any manner any shares of
the Company (or enter into agreements or undertakings with respect to any of
the foregoing) except for sales in the open market or in privately negotiated
transactions to persons who do not, and will not as the result of any such
sale, own more than 5% of the outstanding shares of the Company. This
provision shall not restrict the right of Xxxxx Xxxxxx, Inc. to exercise its
rights in respect of any Shares in which it may hold a security interest;
provided that any sale or transfer of any such Shares by Xxxxx Xxxxxx, Inc.
is
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made independently by it solely in the exercise of its rights as secured
party and creditor. This provision shall also not restrict the right of Xx.
Xxxxxxx to tender any or all of the Shares in response to a tender offer made
in compliance with Section 14(d)(1) of the Exchange Act.
SECTION 2.7 SALE OR CONTROL OF THE COMPANY. During the term of this
Agreement, Xx. Xxxxxxx shall not (i) propose any business combination or
similar transaction with, or a change of control of, the Company to anyone
other than the board of directors of the Company, (ii) make or propose a
tender offer for Securities, (iii) otherwise act to seek control or influence
the management, board of directors, policies or affairs of the Company (other
than in his capacity as a director of the Company), or (iv) solicit or
encourage any person (other than the board of directors of the Company) to do
any of the foregoing. Xx. Xxxxxxx will promptly disclose to the board of
directors of the Company any proposals that he receives regarding the sale or
control of the Company.
SECTION 2.8 NO DERIVATIVE SUITS. Xx. Xxxxxxx shall not directly or
indirectly initiate, join in, assist or encourage in any respect any
shareholder derivative suit against any of the officers or directors of the
Company relating to any matter, cause or thing whatsoever from the beginning
of time to the date of this Agreement.
SECTION 2.9 ACTIONS OF CONTROLLED PERSONS. Xx. Xxxxxxx will cause each
person over whom he may have control or share control to observe the
foregoing provisions of Section 2 of this Agreement as if they were bound
thereby.
SECTION 3. DISMISSAL OF LITIGATION AND RELEASES.
SECTION 3.1 DISMISSAL OF LITIGATION. Forthwith following the
effectiveness of this Agreement, Xx. Xxxxxxx and the Company will dismiss
with prejudice the Litigation and all claims subject thereto, including,
without limitation, the counterclaim and claims for costs, expenses and
attorneys' fees.
SECTION 3.2 RELEASE BY THE COMPANY. Upon the effectiveness of this
Agreement, the Company hereby forever releases and discharges Xx. Xxxxxxx and
his representatives, employees, attorneys, advisors, successors and assigns
and all persons acting in concert with any such person from all manner of
claims, actions, causes of action or suits, at law or in equity, which the
Company now has or hereafter can, shall or may have by reason of any matter,
cause or thing whatsoever from the beginning of time to the date of this
Agreement, arising out of, in connection with, or in any way related to Xx.
Xxxxxxx'x acquisition or ownership of shares of the Company, demand for a
special meeting of shareholders of the Company, solicitation of proxies in
connection therewith, or which are the subject of the Company's claims in the
Litigation, whether or not they were pleaded in the Litigation, excepting
only any action, cause of action or suit arising by virtue of an undertaking,
covenant, promise or representation contained in this Agreement.
SECTION 3.3 RELEASE BY XX. XXXXXXX. Upon the effectiveness of this
Agreement, Xx. Xxxxxxx hereby forever releases and discharges Xxxx Xxxxxxx
and his representatives, employees, attorneys, advisors, successors and
assigns and all persons acting in concert with any such person and the
Company and its present and former directors, officers, representatives,
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employees, attorneys, advisors, parents, subsidiaries, affiliated companies,
predecessors, successors and assigns and all persons acting in concert with
any such person from all manner of claims, actions, causes of action or
suits, at law or in equity, which Xx. Xxxxxxx now has or hereafter can, shall
or may have by reason of any matter, cause or thing whatsoever from the
beginning of time to the date of this Agreement, arising out of, in
connection with, or in any way related to Xx. Xxxxxxx'x acquisition or
ownership of shares of the Company, demand for a special meeting of
shareholders of the Company, solicitation of proxies in connection therewith,
or which are the subject of Xx. Xxxxxxx'x claims in the Litigation, whether
or not they were pleaded in the Litigation, excepting only any action, cause
of action or suit arising by virtue of an undertaking, covenant, promise or
representation contained in this Agreement.
SECTION 3.4 RELEASE OF UNKNOWN CLAIMS. Each of the parties hereby
waives the benefits of California Civil Code Section 1542 which provides as
follows:
Section 1542. CERTAIN CLAIMS NOT AFFECTED BY GENERAL RELEASE. A
general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor.
SECTION 4. TERM OF AGREEMENT. The term of this Agreement will end on the
earlier to occur of (i) August 31, 2000 and (ii) the date of the Company's
disclosure to its shareholders of commencement of a "going private"
transaction subject to Rule 13e-3 under the Exchange Act.
SECTION 5. PUBLICITY. Promptly following the effectiveness of this
Agreement, the parties shall issue a joint press release in the form of Annex
1 attached hereto. Thereafter, neither party shall make any public
disclosure or statement concerning the matters referred to herein (including,
but not limited to, confidential information produced in the Litigation),
except that (i) Xx. Xxxxxxx shall file a copy of this Agreement as an exhibit
to his statement on Schedule 13D, filed with the Securities and Exchange
Commission and shall make such disclosures as his counsel may advise are
required by law in his preliminary proxy statements and other documents filed
with the Securities and Exchange Commission, (ii) the Company shall file a
copy of this Agreement as an exhibit to a report on Form 8A or 10-Q with the
Securities and Exchange Commission and shall make such disclosures as its
counsel may advise are required by law in its proxy statements and reports
filed under the Securities Act of 1933, as amended, of the Exchange Act, and
(iii) nothing herein shall be construed to prevent either of the parties from
making any other disclosures as may be required by law.
SECTION 6. MISCELLANEOUS.
SECTION 6.1 INJUNCTIONS. Each of the Company and Xx. Xxxxxxx
acknowledge and agree that irreparable damage would occur in the event any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached and that such damage would not be
compensable in damages. It is accordingly agreed that each of the parties
hereto shall be entitled to an injunction or injunctions to prevent breaches
of the provisions
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of this Agreement and to enforce specifically the terms and provisions hereof
in any court of the United States or any state thereof having jurisdiction,
in addition to any other remedy to which it may be entitled at law or equity,
without furnishing an undertaking or bond and without proof of irreparable
damage, both of which are hereby waived.
SECTION 6.2 NOTICES. All notices, requests and other communications to
any person named hereunder shall be in writing (including wire, telecopier or
similar writing) and shall be given to such person at its or his address or
telecopier number set forth below or such address or telecopier numbers as
such person may hereafter specify for the purpose by notice to the other
person:
If to the Company: Coastcast Corporation
0000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxx Xxxxxxxxx, XX 00000
Telecopier No. (000) 000-0000
If to Xx. Xxxxxxx: Xxxxxxxx X. Xxxxxxx
000 Xxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
Telecopier No. (000) 000-0000
Each such notice, request or other communication shall be effective (a) if
given by telecopier, when such telecopier is transmitted to the telecopier
number specified in this subsection and the appropriate answer back is
received or (b) if given by any other means, when actually received at the
address specified in this subsection, PROVIDED a notice given other than
during normal business hours or on a business day at the place of receipt
shall not be effective until the opening of business on the next business day.
SECTION 6.3 GOVERNING LAW AND FORUM. This Agreement shall be construed
in accordance with and governed by the internal laws of the State of
California. Each of the parties hereby agrees that any litigation concerning
this Agreement shall be conducted exclusively in the Superior Court of the
State of California in Los Angeles County or the United States District Court
located in Los Angeles, and no such action shall be commenced in any other
court. The parties hereby irrevocably consent to the jurisdiction and venue
of the foregoing courts and waive any objection thereto.
SECTION 6.4 AMENDMENTS. This Agreement may be amended, modified or
supplemented only by written agreement of the parties hereto.
SECTION 6.5 WAIVER OF BREACH. Any failure of any party to comply with
any obligation, covenant, agreement or condition herein may be waived by the
party entitled to the benefit of such obligation, covenant, agreement or
condition only by a written instrument signed by such party, but such waiver
or failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any
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subsequent or other failure. Whenever this Agreement requires or permits
consent by or on behalf of any party hereto, such consent shall be effective
only if given in writing in a manner consistent with the requirements for a
waiver of compliance as set forth in this Section.
SECTION 6.6 SUCCESSORS AND ASSIGNS. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
SECTION 6.7 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
SECTION 6.8 ENTIRE AGREEMENT. This Agreement embodies the entire
agreement and understanding of the parties hereto in respect to the subject
matter contained herein. There are no restrictions, promises,
representations, warranties, covenants or undertakings, other than those
expressly set forth or referred to herein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
SECTION 6.9 INVALID PROVISIONS. If any provision of this Agreement
shall be deemed or declared to be unenforceable, invalid or void, the same
shall not impair any of the other provisions of this Agreement.
SECTION 6.10 AUTHORITY. Each of the parties represents and warrants
with respect to itself or himself that it or he is duly authorized to
execute, deliver and perform this Agreement, that this Agreement has been
duly executed by such party, and that this Agreement is a valid and binding
agreement of such party, enforceable against such party in accordance with
its terms.
SECTION 6.11 EFFECTIVENESS OF AGREEMENT. This Agreement will become
effective on the date that Xx. Xxxxxxx is elected to serve as a director of
the Company to fill a vacancy on the board of directors resulting from the
resignation of a current director. If Xx. Xxxxxxx is not elected to serve as
a director of the Company by November 9, 1998, this Agreement will not become
effective and will be of no further force or effect after that date.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
COASTCAST CORPORATION
/s/ Xxxxxxxx X. Xxxxxxx By: /s/ Xxxx X. Xxxxxxx
------------------------- ---------------------------
XXXXXXXX X. XXXXXXX Xxxx X. Xxxxxxx
Chairman and Chief Executive Officer
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