COASTCAST CORPORATION
GRANTOR TRUST
THIS AGREEMENT is made as of the 18th day of December, 1998, by
and between Coastcast Corporation("Company") and Imperial Trust Company
("Trustee") constitutes an amendment and restatement of the agreement entered
into between the parties as of September 1, 1996
WHEREAS, Company has adopted the Coastcast Corporation
Supplemental Executive Retirement Plan ("Plan"); and
WHEREAS, Company has incurred or expects to incur liability under
the terms of the Plan with respect to the individuals participating in such
Plan; and
WHEREAS, Company established a trust (hereinafter called "Trust")
to contribute to the Trust assets that shall be held therein, subject to the
claims of Company's creditors in the event of Company's Insolvency, as herein
defined, until paid to Plan participants and their beneficiaries in such manner
and at such times as specified in the Plan; and
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plan
as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974;
and
WHEREAS, it is the intention of Company to make contributions to
the Trust to provide itself with a source of funds to accumulate the amounts
necessary to satisfy its contractual liability to pay benefits under the Plan;
NOW, THEREFORE, the parties do hereby amend and restate the Trust
and agree that the Trust shall be comprised, held and disposed of as follows:
SECTION 1. ESTABLISHMENT OF TRUST.
(a) CONTRIBUTIONS. Company has deposited with Trustee in trust
the cash, securities and/or individual life insurance policies specified in
Appendix A, which constitute the principal of the Trust to be held, administered
and disposed of by Trustee as provided in this Trust Agreement. Except as
provided in any Plan, the Company, in its sole discretion, may at any time, or
from time to time, make additional deposits of cash or other property in trust
with the Trustee to augment the principal to be held, administered and disposed
of by the Trustee as provided in this Trust Agreement. Neither the Trustee nor
any Participant or Beneficiary shall have any right to compel such additional
deposits. Trustee shall have no duty to determine or collect contributions
under the Plan, to make premium payments on any individual life insurance policy
held by the Trust (except to the extent the Company contributes funds for such
purpose or
the cash value of such policy is available for such purpose) and shall have
no responsibility for any property until it is received and accepted by
Trustee. Such responsibility and liability shall continue only for so long
as such cash, securities, life insurance policies, or other property
constitute part of the Trust. Company shall have the sole duty and
responsibility for the determination of the accuracy or sufficiency of the
contributions to be made under the Plan and Trustee shall have no obligation
or responsibility in the event Company fails to (i) pay premiums on any
individual life insurance policy held by the Trust, or (ii) contribute funds
and direct Trustee to pay premiums on any individual life insurance policy
held by the Trust.
(b) IRREVOCABILITY. The Trust hereby established shall be
irrevocable.
(c) GRANTOR TRUST. The Trust is intended to be a grantor
trust, of which Company is the grantor, within the meaning of subpart E, part
I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986,
as amended, and shall be construed accordingly.
(d) CREDITOR CLAIMS. The principal of the Trust, and any
earnings thereon shall be held separate and apart from other funds of Company
and shall be used exclusively for the uses and purposes of Plan participants
and general creditors as herein set forth. Plan participants and their
beneficiaries shall have no preferred claim on, or any beneficial ownership
interest in, any assets of the Trust. Any rights created under the Plan and
this Trust Agreement shall be mere unsecured contractual rights of Plan
participants and their beneficiaries against Company. Any assets held by the
Trust will be subject to the claims of Company's general creditors under
federal and state law in the event of Insolvency, as defined in Section 4(a)
herein.
(e) TRUST FUND. The Company may, from time to time, deposit
in the Trust such cash, securities, life insurance policies or other property
as shall be transferred to the Trustee by the Company. All cash, securities,
life insurance policies or other property so received, together with the
income therefrom and any increment thereon or charge thereto (the "Trust
Fund"), shall be held, managed and administered by the Trustee pursuant to
the terms of this Trust Agreement without distinction between principal and
income. The Company may, from time to time, make additional deposits of
cash, securities, life insurance policies or other property to the Trust to
be held in the Trust Fund and administered and disbursed by the Trustee as
provided in this Trust Agreement.
(f) TOP HAT PLAN. Company represents and warrants to Trustee
that the Plan covers, and will cover, only a select group of management or
highly compensated employees as contemplated by Section 401(a) of ERISA and
interpretations, opinions, and rulings of the Department of Labor thereunder.
Company shall indemnify and hold harmless Trustee, its parent, subsidiaries
and affiliates and each of their respective officers, directors, employees
and agents from and against all liability, loss and expense, including
reasonable attorneys' fees and expenses suffered or incurred by any of the
foregoing indemnities as a result of a breach of the foregoing representation
and warranty. The provisions of this subsection shall survive termination of
this Trust Agreement.
2
(g) DISTRIBUTION OF EXCESS TRUST FUND TO EMPLOYERS. In the
event that the Plan Administrator, prior to a Change in Control, or the
Independent Plan Administrator in its sole and absolute discretion, after a
Change in Control, determines that the Trust Fund exceeds 120 percent of the
anticipated benefit obligations and administrative expenses that are to be
paid under the Plan, the Trustee, at the direction of the Plan Administrator
prior to a Change in Control, or the Independent Plan Administrator in its
sole and absolute discretion after a Change in Control, shall distribute to
the Company and the Subsidiaries such excess portion of the Trust Fund.
SECTION 2. DEFINITIONS.
Any capitalized terms used in this Trust Agreement that are
not defined herein are defined under the terms of the Plan (all terms defined
therein shall have the same meaning herein) and the Plan definitions are
incorporated by reference herein.
SECTION 3. PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES.
(a) PAYMENT SCHEDULE PROVIDED BY PLAN ADMINISTRATOR. The
Plan Administrator (prior to a Change in Control) or the Independent Plan
Administrator (on or after a Change in Control) shall deliver to Trustee a
schedule (the "Payment Schedule") that indicates the amounts payable in
respect of each Plan participant (and his or her beneficiaries), that
provides a formula or other instructions acceptable to Trustee for
determining the amounts so payable, the form in which such amount is to be
paid (as provided for or available under the Plan), and the time of
commencement for payment of such amounts. The Plan Administrator or the
Independent Plan Administrator, as applicable, shall provide such Payment
Schedule to the Trustee at least once each Plan Year. Except as otherwise
provided herein, Trustee shall make payments to the Plan participants and
their beneficiaries in accordance with such Payment Schedule. As directed by
the Plan Administrator or the Independent Plan Administrator, as applicable,
the Trustee shall make provision for the reporting and withholding of any
federal, state or local taxes that may be required to be withheld with
respect to the payment of benefits pursuant to the terms of the Plan and
shall pay amounts withheld to the appropriate taxing authorities.
(b) BENEFITS DETERMINED BY PLAN. The entitlement of a Plan
participant or his or her beneficiaries to benefits under the Plan shall be
determined by the Plan Administrator (prior to a Change in Control) or the
Independent Plan Administrator (on or after a Change in Control), and any
claim for such benefits shall be considered and reviewed under the procedures
set out in the Plan. The Plan Administrator (prior to a Change in Control)
or the Independent Plan Administrator (on or after a Change in Control) shall
notify Trustee of such determination and shall direct commencement of
payments of such benefits. Such directive shall identify:
(i) The participant;
(ii) The amount of the benefit;
3
(iii) The participant's address; and
(iv) The amount of tax withholdings as well as any
other information necessary for the Trustee to effectuate the withholdings
and to forward those amounts to the appropriate taxing authorities.
(c) DIRECT PAYMENT BY COMPANY. Company may make payment of
benefits directly to Plan participants or their beneficiaries as they become
due under the terms of the Plan. Company shall notify Trustee and the Plan
Administrator (prior to a Change in Control) or the Independent Plan
Administrator (on or after a Change in Control) of its decision to make
payment of benefits directly prior to the time amounts are payable to
participants or their beneficiaries. In addition, if the Trust Fund is not
sufficient to make payments of benefits in accordance with the terms of the
Plan, Company shall make the balance of each such payment as it falls due.
Trustee shall notify Company where the Trust Fund is not sufficient.
(d) TAX REPORTING AND WITHHOLDING. In the event payments are
made by Company directly to Participants, Company shall have sole
responsibility for the reporting and withholding of any federal, state, or
local taxes that may be required to be withheld with respect to the payment
of benefits pursuant to the terms of the Plan(s) and shall pay amounts
withheld to the appropriate taxing authority.
(e) LIMITATION WITH RESPECT TO TAX REPORTING AND WITHHOLDING.
Trustee shall have not duty or responsibility with respect to the above
stated reporting, withholding or payment of taxes and shall have no
responsibility to determine that Company has provided for such reporting,
withholding or payment of such taxes.
(f) INDEMNIFICATION WITH RESPECT TO TAX REPORTING AND
WITHHOLDING. Company shall indemnify and hold Trustee harmless from any and
all losses, claims, penalties or damages which may occur as a result of
Trustee following in good faith the written direction of the Company to
reimburse Company for payments made hereunder to Participants and arising
from Company's tax reporting, withholding and payment obligations hereunder.
SECTION 4. TRUSTEE RESPONSIBILITY WHEN COMPANY IS INSOLVENT.
(a) INSOLVENCY DEFINED. Trustee shall cease payment of
benefits to Plan participants and their beneficiaries if Company becomes
Insolvent. Company shall be considered "Insolvent" for purposes of this Trust
Agreement if (i) Company is unable to pay its debts as they become due, or
(ii) Company is subject to a pending proceeding as a debtor under the United
States Bankruptcy Code.
(b) ASSETS SUBJECT TO CLAIMS OF CREDITORS ON INSOLVENCY. At
all times during the continuance of this Trust, as provided in Section 1(d)
hereof, the Trust Fund shall be subject to claims of general creditors of
Company under federal and state law as set forth below.
4
(i) The Board of Directors and the Chief Executive
Officer of Company shall have the duty to inform Trustee in writing of
Company's Insolvency. If a person claiming to be a creditor of Company
alleges in writing to Trustee that Company has become Insolvent, Trustee
shall determine whether Company is Insolvent and, pending such determination,
Trustee shall discontinue payment of benefits to Plan participants or their
beneficiaries. In all cases, Trustee shall be entitled to conclusively rely
upon the written certification of the Board of Directors or the Chief
Executive Officer of Company when determining whether Company is Insolvent.
If Trustee is unable to obtain information sufficient to ascertain
Insolvency, Trustee may seek instructions of a court of law or submit the
matter for arbitration before the American Arbitration Association or
interplead the Trust Assets at the expense of the Trust.
(ii) Upon receipt of the aforesaid written notice of
the Company's insolvency from a person claiming to be a creditor of Company,
the Trustee shall notify the Company, and the Company, within thirty (30)
days of receipt of such notice, shall engage an arbitrator (the "Arbitrator")
acceptable to Trustee, from the American Arbitration Association to determine
the Company's solvency or insolvency. The Company shall cooperate fully and
assist the Arbitrator, as may be requested by the Arbitrator, in such
determination and shall pay all costs relating to such determination. The
Arbitrator shall notify the Company and Trustee separately by registered mail
of its findings. If the Arbitrator determines that the Company is solvent or
if once found insolvent the Company is no longer insolvent, the Trustee shall
resume holding the Trust assets for the benefit of the Participants and may
make any distributions called for under this Trust Agreement, including any
amounts which should have been distributed during the period when the Trustee
suspended distributions in response to a notice of the Company's insolvency,
the Trustee shall continue to retain the assets of the Trust until the
Company's status of solvency or insolvency is decided by a court of competent
jurisdiction or it distributes all or a portion of the Trust assets to any
duly appointed receiver, trustee in bankruptcy, custodian or to the Company's
general creditors, but only as such distribution is ordered by a court of
competent jurisdiction. The Trustee shall have no liability for relying upon
the determination of the Arbitrator as to the Company's solvency or
insolvency.
(iii) Unless Trustee has actual knowledge of
Company's Insolvency, or has received notice from Company or a person claiming
to be a creditor alleging that Company is Insolvent, Trustee shall have no
duty to inquire whether Company is Insolvent. Trustee may in all events rely
on such evidence concerning Company's solvency as may be furnished to Trustee
and that provides Trustee with a reasonable basis for making a determination
concerning Company's solvency.
(iv) If at any time Trustee has determined that
Company is Insolvent, Trustee shall discontinue payments to Plan participants
or their beneficiaries and shall hold the assets of the Trust for the benefit
of Company's general creditors. Nothing in this Trust Agreement shall in any
way diminish any rights of Plan participants or their beneficiaries to pursue
their rights as general creditors of Company with respect to benefits due
under the Plan or otherwise.
5
(v) Trustee shall resume the payment of benefits to
Plan participants or their beneficiaries in accordance with Section 3 of this
Trust Agreement only after Trustee has determined that Company is not
Insolvent (or is no longer Insolvent).
(c) MAKE-UP OF SUSPENDED BENEFITS AFTER INSOLVENCY. Provided
that there are sufficient assets, if Trustee discontinues the payment of
benefits from the Trust pursuant to Section 4(b) hereof and subsequently
resumes such payments, the first payment following such discontinuance shall
include the aggregate amount of all payments due to Plan participants or
their beneficiaries under the terms of the Plan for the period of such
discontinuance, less the aggregate amount of any payments made to Plan
participants or their beneficiaries by Company in lieu of the payments
provided for hereunder during any such period of discontinuance.
SECTION 5. PAYMENTS TO COMPANY.
Except as provided in Section 1(g) and Section 4 hereof,
Company shall have no right or power to direct Trustee to return to Company
or to divert to others any of the Trust assets before all payment of benefits
have been made to Plan participants and their beneficiaries pursuant to the
terms of the Plan, as certified to Trustee by the Plan Administrator (prior
to a Change in Control) or the Independent Plan Administrator (on or after a
Change in Control).
SECTION 6. INVESTMENT AUTHORITY.
Prior to a Change in Control, the assets of the Trust shall be
invested by Trustee pursuant to the direction of the Plan Administrator. On
or after a Change in Control, the assets of the Trust shall be invested by
Trustee pursuant to the direction of the Independent Plan Administrator.
Unless the Plan Administrator, or Independent Plan Administrator, as
applicable, and the Trustee have mutually agreed in a separate writing that
the Trustee shall have and exercise investment discretion with respect to all
or a portion of the assets of the Trust, the Plan Administrator (prior to a
Change in Control) or the Independent Plan Administrator (on or after a
Change in Control) shall have complete discretion with respect to the
investment of such assets at all times and shall direct the Trustee
accordingly. From time to time, the Trustee shall be notified in a writing
signed by an officer of the Company of the person or persons authorized to
act on behalf of the Plan Administrator (prior to a Change in Control) or the
Independent Plan Administrator (on or after a Change in Control) for purposes
of this Section and the Trust. In each such notice, the Company shall
warrant that all directions given by the Plan Administrator (prior to a
Change in Control) are proper. The Trustee shall have no responsibility to
review or to consider the propriety of holding or selling investments
directed by the Plan Administrator or the Independent Plan Administrator,
including, without limitation, any life insurance, retirement income or
annuity policies or contracts. The Company shall have the responsibility for
establishing and carrying out a funding policy and method, consistent with
the objectives of the Plan, taking into considerations the Plan's short-term
and long-term financial needs. The Trustee's responsibility for investment
and diversification of the assets in the portion of the Trust for which the
Trustee has investment discretion shall be subject to, and is limited by, the
investment guidelines issued to it by the Company. It is understood that,
unless otherwise agreed in writing, the Company, rather than the Trustee,
shall be responsible for the overall
6
diversification of Trust assets. In the exercise of its investment
authority, Trustee shall have the powers described below.
(a) To invest and reinvest the principal and income of the
Trust and keep it invested, without distinction between principal and income,
in any security, property or obligation, secured or unsecured, or in any
combination of these; provided, however, that in no event mat Trustee invest
in securities (including stock or rights to acquire stock) or obligations
issued by the Company, other than a de minimis amount held in common
investment vehicles in which Trustee invests; and provided, further, that in
no event shall the assets of the Trust be invested in real estate. For this
purpose, "real estate" includes, but is not limited to, real property,
leaseholds, mineral interests and any form of asset which is secured by any
of the foregoing. All rights associated with assets of the Trust shall be
exercised by the Trustee or the person designated by the Trustee;
(b) To acquire, sell and exercise options to buy securities
("call" options) and to acquire, sell and exercise options to sell securities
("put" options);
(c) To buy, sell, assign, transfer, acquire, loan, lease (for
any purpose, including beyond the life of this Trust), exchange and in any
other manner to acquire, manage, deal with and dispose of all or any part of
the Trust property, for cash or credit;
(d) Subject to the Trustee's exercise of prudence and
fulfilment of Trustee's fiduciary obligations, to retain all or any portion
of the Trust in cash temporarily awaiting investment or for the purpose of
making distributions or other payments, without liability for interest
thereon, notwithstanding trustee's receipt of float;
(e) To take all of the following actions: to vote proxies of
any stocks, bonds or other securities; to give general or special proxies or
powers of attorney with or without power of substitution; to exercise any
conversion privileges, subscription rights or other options, and to make any
payments incidental thereto; to consent to or otherwise participate in
corporate reorganizations or other changes affecting corporate securities and
to delegate discretionary powers and to pay any assessments or charges in
connection therewith; and generally to exercise any of the powers of an owner
with respect to stocks, bonds, securities or other property held in the Trust;
(f) To pay or cause to be paid from the Trust any and all
real or personal property taxes, income taxes or other taxes or assessments
of any or all kinds levied or assessed upon or with respect to the Trust or
the Plan;
(g) To hold term or ordinary life insurance contracts or to
acquire annuity contracts on the lives of Participants, except that Trustee
shall have no power to name a beneficiary of the policy other than the Trust,
to assign the policy (as distinct from conversion of the policy to a
different form) other than to a successor Trustee (or upon the direction of
the Plan Administrator or Independent Plan Administrator to a named insured
participant or family member), or to loan to any person the proceeds of any
borrowing against such policy (but in the
7
case of conflict between any such contract and the Plan, the terms of the
Plan shall prevail); to pay from the Trust the premiums on such contracts; to
distribute, surrender or otherwise dispose of such contracts; to pay the
proceeds, if any, of such contracts to the proper persons in the event of the
death of the insured Participant; to enter into, modify, renew and terminate
annuity contracts of deposit administration, of immediate participation or
other group or individual type with one or more insurance companies and to
pay or deposit all or any part of the Trust thereunder; to provide in any
such contract for the investment of all or any part of funds so deposited
with the insurance company in securities under separate accounts; to exercise
and claim all rights and benefits granted to the contract holder by any such
contracts. All payments of exercise of all powers with respect to insurance
contracts shall be solely on the direction of the Plan Administrator or
Independent Plan Administrator.
(h) To exercise all the further rights, powers, options and
privileges granted, provided for, or vested in trustees generally under
applicable federal or state laws, as amended from time to time, it being
intended that, except as otherwise provided in this Trust, the powers
conferred upon the Trustee herein shall not be construed as being in
limitation of any authority conferred by law, but shall be construed as in
addition thereto;
(i) Notwithstanding any powers granted to Trustee pursuant to
this Trust Agreement or to applicable law, Trustee shall not have any power
that could give this Trust the objective of carrying on a business and
dividing the gains therefrom, within the meaning of section 301.7701-2 of the
Procedure and Administrative Regulations promulgated pursuant to the Internal
Revenue Code.
(j) To invest funds in any type of interest-bearing account
including, without limitation, time certificates of deposit or
interest-bearing accounts issued by Trustee. To use other services or
facilities provided by Trustee its subsidiaries or affiliates, to the extent
allowed by applicable law and regulation. Such services may include but are
not limited to (1) the placing of orders for the purchase, exchange,
investment or reinvestment of securities through any brokerage service
conducted by, and (2) the purchase of units of any registered investment
company managed or advised by Trustee, its subsidiaries or affiliates and/or
for which Trustee, or its subsidiaries or affiliates act as custodian or
provide other services in addition to the fees payable under this Agreement.
Fee schedules for additional services shall be delivered to the appropriate
party in advance of the provision of such services. Independent fiduciary
approval of compensation being paid to the Trustee will be sought in advance
to the extent required under applicable law and regulation. If Trustee does
not have investment discretion, the services referred to above, as well as
any additional services, shall be utilized only upon the appropriate
direction of an authorized party.
(k) To cause all or any part of the Trust to be held in the
name of the Trustee (which in such instance need not disclose its fiduciary
capacity) or, as permitted by law, in the name of any nominees, including the
nominee name of any depository, and to acquire for the Trust any investment
in bearer form; but the books and records of the Trust shall at all times
show that all such investments are a part of the Trust and the Trustee shall
hold evidences of title to all such investments as are available;
8
(l) To serve as custodian with respect to the Trust assets,
to hold assets or to hold eligible assets at the Depository Trust Company or
other depository;
(m) To employ such agents and counsel as may be reasonably
necessary in administration and protection of the Trust assets and to pay
them reasonable compensation; to employ any broker-dealer covered in the
self-dealing section, and pay to such broker-dealer its standard commissions;
to settle, compromise or abandon all claims and demands in favor of or
against the Trust; and to charge any premium on bonds purchased at par value
to the principal of the Trust without amortization from the Trust, regardless
of any law relating thereto;
(n) To abandon, compromise, contest arbitrate or settle
claims or demands; to prosecute, compromise and defend lawsuits but without
obligation to do so, all at the risk and expense of the Trust;
(o) To permit such inspections of documents at the principal
office of the Trustee as are required by law, subpoena or demand by United
States or state agency during normal business hours of the Trustee;
(p) To comply with all requirements imposed by law;
(q) To seek written instructions from the Company or Plan
Administrator on any matter and await written instructions without incurring
any liability. If at any time the Trustee should fail to receive requested
directions, the Trustee may act in the manner that in its discretion it deems
advisable under the circumstances for carrying out the purposes of this
Trust. Such actions shall be conclusive on the Company, the Plan
Administrator and the Participants on any matter if written notice of the
proposes action is given to the Company or Plan Administrator five (5) days
prior to the action being taken, and the Trustee receives no response;
(r) To compensate such executive, consultant, actuarial,
accounting, investment, appraisal administrative, clerical secretarial,
custodial, depository and legal firms, personnel and other employees or
assistants as are engaged by the Company or the Plan Administrator in
connection with the administration of the Plan and to pay from the Trust the
necessary expenses of such firms, personnel and assistants, to the extent not
paid by the Company;
(s) To impose a reasonable charge to cover the cost of
furnishing to Participants statements or documents;
(t) To act upon proper written directions of the Company,
Plan Administrator, or any Participant including directions given by
photostatic teletransmission using facsimile signature. If oral instructions
are given, to act upon those in Trustee's discretion prior to receipt of
written instructions. Trustee's recording or lack of recording of any such
oral instructions taken in Trustee's course of business shall constitute
conclusive proof of Trustee's receipt or non-receipt of the oral instructions;
9
(u) To pay from the Trust the expenses reasonably incurred in
the administration of the Trust;
(v) To maintain insurance for such purposes, in such amounts
and with such companies as the Plan Administrator shall elect, including
insurance to cover liability or losses occurring by reason of the acts or
omissions of fiduciaries (but only if such insurance permits recourse by the
insurer against the fiduciary in the case of a breach of a fiduciary
obligation by such fiduciary);
(w) As directed by the Plan Administrator, to cause the
benefits provided under the Plans to be paid directly to the person entitled
thereto under the Plans, and in the amounts and at the times and in the
manner specified by the Plans, and to charge such payments against the Trust
and Accounts with respect to which such benefits are payable.
SECTION 7. DISPOSITION OF INCOME.
During the term of this Trust, all income received by the
Trust, net of expenses and taxes, shall be accumulated and reinvested.
SECTION 8. ACCOUNTING BY TRUSTEE.
Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions required to
be made, including such specific records as shall be agreed upon in writing
between Company and Trustee. Within 90 days following the close of each
calendar year and within 90 days after the removal or resignation of Trustee,
Trustee shall deliver to Company a written account of its administration of
the Trust during such year or during the period from the close of the last
preceding year to the date of such removal or resignation, setting forth all
investments, receipts, disbursements and other transactions effected by it,
including a description of all securities and investments purchased and sold
with the cost or net proceeds of such purchases or sales (accrued interest
paid or receivable being shown separately), and showing all cash, securities
and other property held in the Trust at the end of such year or as of the
date of such removal or resignation, as the case may be. The Company shall
have sixty (60) days after the Trustee's mailing of each such quarterly or
final account within which to file with the Trustee written objections to
such account. Upon the expiration of each such period, the Trustee shall be
forever released and discharged from all liability and accountability to the
Company with respect to the propriety of its acts and transactions shown in
such account except with respect to any such acts or transactions as to which
the Company files written objections within such sixty-day period with the
Trustee.
Notwithstanding anything herein to the contrary, the Trustee
shall have no duty or responsibility to obtain valuations of any assets of
the Trust Fund, the value of which is not readily determinable on an
established market. Company shall bear sole responsibility for determining
said valuations and shall be responsible for providing said valuations to
Trustee in a
10
timely manner. Trustee may conclusively rely on such valuations provided by
Company and shall be indemnified and held harmless by Company with respect to
such reliance.
SECTION 9. RESPONSIBILITY OF TRUSTEE.
(a) FIDUCIARY RESPONSIBILITY. Trustee shall act with the
care, skill, prudence and diligence under the circumstances then prevailing
that a prudent person acting in like capacity and familiar with such matters
would use in the conduct of an enterprise of a like character and with like
aims, provided, however, that Trustee shall incur no liability to any person
for any action taken pursuant to a direction, request or approval given by
the Plan Administrator or the Independent Plan Administrator, as applicable,
which is contemplated by, and in conformity with, the terms of the Plan (as
certified to Trustee by the Plan Administrator or the Independent Plan
Administrator, as applicable) or this Trust and is given in writing. In the
event of a dispute between Company and a party, Trustee may apply to a court
of competent jurisdiction to resolve the dispute.
(b) LIMITATION ON TRUSTEE'S RESPONSIBILITY. Trustee is not a
party to, and has no duties or responsibilities under, the Plan other than
those that may be expressly contained in this Trust Agreement. In any case
in which a provision of this Trust Agreement conflicts with any provision in
the Plan, this Trust Agreement shall control. Trustee shall have no
responsibility:
(i) to administer the Plan, including, without
limitation, to determine the eligibility of any individual to participate in
the Plan, the amount of any participant's account balance under the Plan,
issuing statements to participants of their interest in the Trust or the
Plan, or the amount or timing of any benefit distributions under the Plan;
(ii) to compute any amount to be transferred or paid
to the Trust by the Company;
(iii) to collect any contributions or transfers of
assets to the Trust;
(iv) to question any investment direction received
from the Plan Administrator (prior to a Change in Control) or the Independent
Plan Administrator (on or after a Change in Control);
(v) to review any securities or property acquired
at the direction of the Plan Administrator (prior to a Change in Control) or
the Independent Plan Administrator (on or after a Change in Control);
(vi) to make any suggestions to the Plan
Administrator or the Independent Plan Administrator in connection with the
investment of the Trust assets;
(vii) to inquire into the acts or omissions of the
Company, the Plan Administrator or the Independent Plan Administrator;
11
(viii) to satisfy the reporting and disclosure
obligations of the Code and ERISA with respect to the Plan; or
(ix) to determine whether the terms of the Plan
document satisfy the requirements of applicable law.
(c) TITLE. Trustee shall not be responsible for the title,
validity or genuineness of any property or evidence of title thereto received
by it or delivered by it pursuant to this Trust Agreement and shall be held
harmless in acting upon any notice, request, direction, instruction, consent,
certification or other instrument believed by it to be genuine and delivered
by the proper party or parties.
(d) INDEMNIFICATION. The Company hereby agrees to indemnify
and hold harmless the Trustee, its officers, directors, employees or agents,
from and against any and all liabilities, claims for breach of fiduciary duty
or otherwise, demands, damages, costs and expenses, including reasonable
attorneys' fees arising from (i) any act taken or omitted by the Trustee in
good faith in accordance with or due to the absence of directions from the
Company, its agents, or any Plan Participant, (ii) any act taken or omitted
by a Fiduciary other than the Trustee in breach of such Fiduciary
responsibilities under the Plan or this Agreement, (iii) any failure by the
Company to pay premiums on any individual life insurance policy held by the
Trust, or contribute funds and direct Trustee to pay premiums on any
individual life insurance policy held by the Trust, (iv) any action taken by
the Trustee pursuant to a notification of an order to purchase or sell
securities issued by Company or a Plan Participant directly to a broker or
dealer or (v) any lawsuit or other proceeding involving the Plan or the Trust
for any reason including, without limitation, an alleged breach by the
Trustee of its responsibilities under this Agreement, unless a final judgment
or determination entered in any such lawsuit or proceeding holds or
determines that the Trustee is guilty of gross negligence, willful misconduct
or a breach of fiduciary responsibility. If the final judgment or
determination entered in any such lawsuit or proceeding holds or determines
that the Trustee is guilty of gross negligence, willful misconduct or a
breach of fiduciary responsibility, the Company's obligation to indemnify the
Trustee hereunder shall be limited to liability in excess of the Trustee's
allocable share of such liability. The Company shall have the right, but not
the obligation, to conduct the defense of the Trustee in any legal proceeding
covered by this section. However, any legal counsel selected to defend the
Trustee must be acceptable to the Trustee, and the Trustee may elect to
choose counsel, including in-house counsel, other than that selected by the
Company. The Company may, but shall not be required to, satisfy all or any
part of its obligations under this section through insurance arrangements
acceptable to the Trustee.
(e) DEFENSE COSTS. If Trustee, on behalf of the Trust,
undertakes or defends any litigation arising in connection with this Trust,
Company agrees to indemnify Trustee against Trustee's costs, expenses and
liabilities (including, without limitation, attorneys' fees and expenses)
relating thereto and to be primarily liable for such payments. If Company
does
12
not pay such costs, expenses and liabilities in a reasonably timely manner,
Trustee may obtain payment from the Trust.
(f) COUNSEL. Trustee may consult with legal counsel (who may
also be counsel for Company generally) with respect to any of its duties or
obligations hereunder.
(g) AUTHORITY. Trustee may hire agents, accountants,
actuaries, investment advisors, financial consultants or other professionals
to assist it in performing any of its duties or obligations hereunder.
(h) LIMITATION WITH RESPECT TO INSURANCE POLICIES. Trustee
shall have, without exclusion, all powers conferred on Trustees by applicable
law, unless expressly provided otherwise herein, provided, however, that if
an insurance policy is held as an asset of the Trust, Trustee shall have no
power to name a beneficiary of the policy other than the Trust or to loan to
any person other than Company the proceeds of any borrowing against such
policy.
(i) LIMITATION WITH RESPECT TO TRUST AS A BUSINESS.
Notwithstanding any powers granted to Trustee pursuant to this Trust
Agreement or to applicable law, Trustee shall not have any power that could
give this Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of section 301.7701-2 of the Procedure
and Administrative Regulations promulgated pursuant to the Internal Revenue
Code.
(j) Trustee shall not be responsible or liable for any losses
to the Trust resulting from nationalization, expropriation, devaluation,
seizure, or similar action by any governmental authority, de facto or de
jure; or enactment, promulgation, imposition or enforcement by any such
governmental authority of currency restrictions, exchange controls, levies or
other charges affecting the Trust's property; or acts of war, terrorism,
insurrection or revolution; or acts of God; or any other similar event beyond
the control of Trustee or its agents. This Section shall survive the
termination of this Trust Agreement.
(k) In the event the Company attempts to enjoin any benefit
payment that the Trustee has been directed to make under the terms of this
Trust Agreement, the Trustee shall commence legal action to allow such
payment. Subject to the Company's obligation to indemnify Trustee under
Section 8(e) hereof for the expenses of any such action, the Trustee may
withdraw from the Trust assets any amounts it deems necessary to pay legal
expenses, including attorneys fees, incurred in the course of such legal
action. Under no circumstances shall the Trustee be required to make such
payments for benefits or expenses from any source other than the Trust.
SECTION 10. PERSONS TO RECEIVE PAYMENT.
(a) The Trustee shall, except as otherwise provided
otherwise, pay all amounts payable hereunder to the person or persons
designated under the Plans or deposit such amounts to the Participant's
checking or savings account as directed by the Company and not to any other
13
person or corporation, and only to the extent of assets held in the Trust,
and shall follow written instructions by the Company. The Company's written
instructions, to the Trustee to make distributions or not to make
distributions, and the amount thereof, shall be conclusive on all
Participants.
(b) Should any controversy arise as to the person or persons
to whom any distribution or payment is to be made by the Trustee, or as to
any other matter arising in the administration of the Plans or Trust, the
Trustee may retain the amount in controversy pending resolution of the
controversy or the Trustee may file an action seeking declaratory relief
and/or may interplead the Trust assets in issue, and name as necessary
parties the Company, the Participants and/or any or all persons making
conflicting demands.
(c) The Trustee shall not be liable for the payment of any
interest or income, except for that earned as a Trust investment, on any
amount withheld or interpleaded under subsection (b).
(d) The expense of the Trustee for taking any action under
subsection (b) shall be paid to the Trustee from the Trust.
SECTION 11. COMPENSATION AND EXPENSES OF TRUSTEE.
Company shall pay all administrative and Trustee's fees and
expenses. If not so paid, the fees and expenses shall be paid from the
Trust. Trustee shall be entitled to the fees listed on Appendix B attached
hereto as reasonable compensation for the services rendered under this Trust
Agreement. To the extent Trustee advances funds to the Trust for
disbursements or to effect the settlement of purchase transactions, Trustee
shall be entitled to collect from the Trust an amount equal to what would
have been earned on the sums advanced (an amount approximating the "federal
funds" interest rate).
The Trustee reserves the right to alter this rate of
compensation at any time by providing the Company with notice of such change
of at least thirty (30) days prior to its effective date. Reasonable
compensation shall include compensation for any extraordinary services or
computations required, such as determination of valuation of assets when
current market values are not published and interest on funds to cover
overdrafts. The Trustee shall have a lien on the Trust for compensation and
for any reasonable expenses including counsel, appraisal, or accounting fees,
and if the Company fails to pay such amounts directly within 30 days of
presentment of an invoice, these amounts may be withdrawn from the Trust and
the Trust may be reimbursed by the Company.
SECTION 12. RESIGNATION AND REMOVAL OF TRUSTEE.
(a) Trustee may resign at any time by written notice to
Company, which shall be effective 30 days after receipt of such notice unless
Company and Trustee agree otherwise.
14
(b) Trustee may be removed by Company 30 days notice or upon
shorter notice accepted by Trustee.
(c) Upon a Change of Control, as defined herein, Trustee may
not be removed by Company for six (6) months following the Change of Control.
If Trustee resigns or is removed within six (6) months following the Change
of Control, notwithstanding anything to the contrary in Section 11 hereof,
the Independent Plan Administrator may appoint a successor Trustee according
to the provisions of Section 11 hereof.
(d) Upon resignation or removal of Trustee and appointment of
a successor or Trustee, all assets shall subsequently be transferred to the
successor Trustee. The transfer shall be completed within 60 days after
receipt of notice of resignation, removal or transfer, unless Company and
Trustee agree to extend the time limit.
(e) If Trustee resigns or is removed, a successor shall be
appointed, in accordance with Section 11 hereof, by the effective date of
resignation or removal under paragraph (a) or (b) of this section. If no
such appointment has been made, Trustee may apply to a court of competent
jurisdiction for appointment of a successor or for instructions. All
expenses of Trustee in connection with the proceeding shall be allowed as
administrative expenses of the Trust. Until a successor Trustee is
appointed, the Trustee shall be entitled to be compensated for its service
according to its published fee schedule then in effect for acting as Trustee.
SECTION 13. APPOINTMENT OF SUCCESSOR.
Except as provided in Section 12(c) hereof, if Trustee resigns
or is removed in accordance with Section 12(a) or (b) hereof, Company may
appoint any third party, such as a bank trust department or other party that
may be granted corporate Trustee powers under state law, as a successor to
replace Trustee upon resignation or removal. The appointment shall be
effective when accepted in writing by the new Trustee, who shall have all of
the rights and powers of the former Trustee, including ownership rights in
the Trust assets. The former Trustee shall execute any instrument necessary
or reasonably requested by Company or the successor Trustee to evidence the
transfer.
SECTION 14. SIGNING AUTHORITY.
The Company shall certify in writing to the Trustee the names
and specimen signatures of all those who are authorized to act as or on
behalf of the Company and those names and specimen signatures shall be
updated as necessary by a duly authorized official of the Company. The
Company shall promptly notify the Trustee if any person so designated is no
longer authorized to act on behalf of the Company. Until the Trustee
receives written notice that a person is no longer authorized to act on
behalf of the Company, the Trustee may continue to rely on the Company's
designation of such person.
15
SECTION 15. INFORMATION TO BE PROVIDED TO TRUSTEE.
The Company shall maintain and furnish the Trustee with all
reports, documents and information as shall be required by the Trustee to
perform its duties and discharge its responsibilities under this Trust
Agreement, including without limitation a certified copy of each of the Plans
and all amendments thereto.
The Trustee shall be entitled to rely on the most recent
reports, documents and information furnished to it by the Company. The
Company shall be required to notify the Trustee as to the termination of
employment of any Participant by death, retirement or otherwise.
The Company shall arrange for each insurance company issuing
contracts held by the Trustee pursuant to Section 20, to furnish the Trustee
with such valuations and reports as are necessary to enable the Trustee to
fulfill its obligations under this Trust Agreement, and the Trustee shall be
fully protected in relying upon such valuations and reports.
SECTION 16. MEDIATION AND ARBITRATION OF DISPUTES.
If a dispute arises under this Trust Agreement between or
among the Company and Trustee, except as otherwise provided, the parties
agree first to try in good faith to settle the dispute by mediation under the
Commercial Mediation Rules of the American Arbitration Association.
Thereafter, any remaining unresolved controversy or claim arising out of or
relating to this Agreement, or the performance or breach thereof, shall be
decided by binding arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association and Title 9 of California Code
of Civil Procedure Section 1280 et seq. The sole arbitrator shall be a
retired or former Judge associated with the American Arbitration Association.
Judgment upon any award rendered by the arbitrator shall be final and may be
entered in any court having jurisdiction. Each party shall bear its own
costs, attorneys' fees and its share of arbitration fees. The Alternate
Dispute Resolution provision in this Agreement does not constitute a waiver
of the parties' rights to a judicial forum in instances where arbitration
would be void under applicable law, and does not preclude Trustee from
exercising its rights to interplead the funds of the Account at the cost of
the Account.
SECTION 17. AMENDMENT OR TERMINATION.
(a) This Trust Agreement may be amended by a written
instrument executed by Trustee and Company. Notwithstanding the foregoing,
no such amendment shall conflict with the terms of the Plan (as certified to
Trustee by Company) or shall make the Trust revocable.
(b) The Trust shall not terminate until the date on which
Plan participants and their beneficiaries are no longer entitled to benefits
pursuant to the terms of the Plan (as certified to Trustee by Company). Upon
termination of the Trust any assets remaining in the Trust shall be returned
to Company.
16
(c) Upon written approval of participants or beneficiaries
entitled to payment of benefits pursuant to the terms of the Plan, Company
may terminate this Trust prior to the time all benefit payments under the
Plan have been made. All assets in the Trust at termination shall be returned
to Company.
SECTION 18. MISCELLANEOUS.
(a) Any provision of this Trust Agreement prohibited by law
shall be ineffective to the extent of any such prohibition, without
invalidating the remaining provisions hereof.
(b) Benefits payable to Plan participants and their
beneficiaries under this Trust Agreement may not be anticipated, assigned
(either at law or in equity), alienated, pledged, encumbered or subjected to
attachment, garnishment, levy, execution or other legal or equitable process.
(c) Notwithstanding anything to the contrary contained
elsewhere in this Trust Agreement, any reference to the Plan or Plan
provisions which require knowledge or interpretation of the Plan shall impose
a duty upon the Company, Plan Administrator or Independent Plan
Administrator, as applicable, to communicate such knowledge or interpretation
to Trustee. Trustee shall have no obligation to know or interpret any
portion of the Plan and shall in no way be liable for any proper action taken
contrary to the Plan.
(d) This Trust Agreement shall be governed by and construed
in accordance with the laws of the State of California.
SECTION 19. CHANGE IN CONTROL PROVISIONS.
(a) For purposes of this Trust, a "Change in Control" shall
be deemed to have occurred only if:
(i) the Company is merged or consolidated or
reorganized into or with another corporation and less than a majority of the
combined voting power of the then-outstanding securities of the surviving
corporation immediately thereafter is held in the aggregate by the holders of
Voting Stock (as defined below) of the Company immediately prior to such
transaction;
(ii) the Company sells or otherwise transfers all or
substantially all of its assets to any other corporation, if less than a
majority of the combined voting power of the then-outstanding voting
securities of such corporation immediately after such sale or transfer is
held in the aggregate by the holders of Voting Stock of the Company
immediately prior to such sale or transfer;
(iii) as a result of, or in connection with, any cash
tender or exchange offer, merger, reorganization or other business
combination, sale of assets or contested election, or any combination of the
foregoing transactions (a "Transaction"), the
17
individuals who were members of the Board immediately prior to the
Transaction cease to constitute a majority of the members of the Board or of
the board of directors of any successor to the Company, unless the election
or nomination for election by the holders of the Voting Stock of the Company
was approved by a vote of the majority of Board members then still in office
who were members of the Board immediately prior to the Transaction; or
(iv) in connection with a transfer or assignment of
Voting Stock by the current beneficial owners of Voting Stock, the beneficial
ownership of Voting Stock changes such that less than a majority of the
Voting Stock outstanding immediately after such assignment or transfer is
held by the current beneficial owners of Voting Stock.
For purposes of this Section, (A) "Voting Stock" shall mean shares of the
Company representing the combined voting power of the then outstanding
securities entitled to vote generally in the election of the Board, and (B)
"beneficial ownership" and "beneficial owners" shall have the meaning
ascribed to it under Rule 13d-3 or any successor rule or regulation
promulgated under the Securities Exchange Act of 1934, as amended, as well as
any person or entity who, directly or indirectly, controls, is controlled by
or under common control with such beneficial owner.
(b) The Trustee shall have no independent duty to determine
that a Change in Control has occurred and shall not be required to take any
action or refrain from taking any actions hereunder which are based on a
Change in Control having occurred prior to the time it receives written
notice from the Company or a Participant that a Change in Control has
occurred or will occur and has had a reasonable opportunity to determine
whether a Change in Control, in fact, has occurred. At the Trustee's
request, the Company shall furnish such evidence as may be necessary to
enable the Trustee to determine whether a Change in Control has occurred. In
taking or refraining from any action under this Trust Agreement, the Trustee
may rely on its determination, including an opinion of counsel (who may be
counsel for the Company or the Trustee), that a Change in Control has
occurred. The Trustee's determination as to whether a Change in control has
occurred shall be binding and conclusive on all persons.
SECTION 20. INSURANCE POLICIES AND CONTRACTS.
Prior to a Change in Control, the Company, with the consent of
the Plan Administrator, reserves the right to transfer life insurance,
retirement income or annuity policies or contracts to the Trust, regardless
of the nature or type of such contract and regardless of the Company's
interest in or power to direct the investments under such policies or
contracts. Prior to a Change in Control, the Plan Administrator may direct
the Trustee to purchase any such policies or contracts and, following a
Change in Control, the Independent Plan Administrator shall have the same
powers regarding such insurance policies or contracts. Any such policy or
contract shall be an asset of the Trust subject to the claims of the
Company's creditors in the event of insolvency, as specified in this Trust
Agreement. The proceeds of any life insurance policy shall, upon the death
of the insured, be paid to the Trust. The Trustee shall be under no duty to
question any direction of the Plan Administrator or the Independent Plan
Administrator, to review the form of any such policies or contracts or the
18
selection of the issuer thereof, or to make suggestions to the Plan
Administrator, the Independent Plan Administrator or to the issuer thereof
with respect to the form of such policies or contracts prior to or following
a Change in Control. Prior to a Change in Control, the Plan Administrator
may direct the Trustee to exercise the powers of the contract holder under
any such policies or contracts and, following a Change in Control, the
Independent Plan Administrator shall have the same powers regarding such
insurance policies or contracts. The Trustee shall exercise such powers only
upon the direction of the Plan Administrator or the Independent Plan
Administrator, as applicable. Notwithstanding anything to the contrary in the
Plan or this Trust Agreement, the Trustee shall be fully protected in acting
in accordance with a proper written direction of the Plan Administrator or
Independent Plan Administrator and shall not be liable for any loss of any
kind that may result by reason of any action taken or omitted by it in
accordance with any such direction, or by reason of inaction in the absence
of any such written directions. No insurance carrier shall for any purpose
be deemed a party to this Trust Agreement or be responsible for the validity
or sufficiency hereof. Notwithstanding the fact that it may have knowledge
of the terms of this Trust, the obligations of such insurance carrier shall
be determined solely by reference to the terms and conditions of the policies
or contracts issued by it.
SECTION 21. INDEPENDENT PLAN ADMINISTRATOR.
Various provisions of this Trust Agreement refer to the term
"Independent Plan Administrator" which shall mean a committee of three (3)
participants established after a Change in Control to establish the
investment policy and direct Trustee pursuant to the terms of this Trust
Agreement. The members of the committee shall be appointed by the Company
prior to a Change in Control. In the event of a Change in Control, the
Independent Plan Administrator shall assume the duties and authority of the
Administrator under the terms of the Plan and the duties of the Independent
Plan Administrator specified in this Trust Agreement. After a Change in
Control, the designation of the Independent Plan Administrator may not be
changed without the unanimous written consent of the designated Independent
Plan Administrator. In the event the Independent Plan Administrator fails to
act or resigns after a Change in Control, the Company and all Participants
may jointly agree to the designation of a successor Independent Plan
Administrator. Alternatively, the Company, the Trustee or any Participant
may (but shall not be required to) petition a court of competent jurisdiction
or bring an arbitration proceeding to appoint a successor Independent Plan
Administrator, which shall be an entity which is unrelated to, and
unaffiliated with, the Company. The Trustee shall be entitled to rely on the
determinations and directions of a qualified Independent Plan Administrator.
19
SECTION 22. EFFECTIVE DATE.
The effective date of this amended Trust Agreement shall be December 18,
1998.
IN WITNESS WHEREOF, Company and Trustee have caused their duly authorized
officers to execute this Trust Agreement on the date first written above.
"Company" "Trustee"
Coastcast Corporation Imperial Trust Company
By /s/ Hans H. Buehler By /s/ Cathy Leider
--------------------------------- -------------------------------
Hans Buehler, Chairman and CEO Name: Cathy Leider
Title: Vice President
The undersigned hereby accept the duties and obligations of the Independent
Plan Administrator under the terms of the Plan and this Trust Agreement this
21 day of December, 1998.
/s/ Hans H. Buehler /s/ Robert C. Bruning
- ---------------------------------- -----------------------------------
Hans Buehler Robert C. Bruning
/s/ Robert L. Gates
- ----------------------------------
Robert Gates
20