As filed with the Securities and Exchange Commission on May 24, 1996
Registration No.33-_________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM S-8
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
----------------
FOTOBALL USA, INC.
(Exact name of registrant as specified in its charter)
Delaware 33-0614889
(State or other jurisdiction of (I.R.S. Employer Identifiation
incorporation or organization) Number)
3738 Ruffin Road
San Diego, California 92123
(Address of Principal Executive Offices) (Zip Code)
--------------------
FOTOBALL USA, INC. 1994 STOCK OPTION PLAN
(Full title of the plan)
---------------------
MICHAEL FAVISH CHARLES I. WEISSMAN, ESQ.
President and Chief Executive Officer Shereff, Friedman, Hoffman
Fotoball USA, Inc. & Goodman, LLP
3738 Ruffin Road 919 Third Avenue
San Diego, California 92123 New York, New York 10022
(619) 467-9900 (212) 758-9500
(Name, address and telephone number, including area code, of agents for
service)
Page 1 of 22
<PAGE>
CALCULATION OF REGISTRATION FEE
Proposed Proposed
maximum maximum Amount of
Title of Securities Amount offering aggregate registration
to be registered to be price offering fee <F2>
registered per share<F1> price <F1>
- ------------------ ---------- ----------- ---------- ------------
Common Stock, par 375,000 shares $8.75 $3,281,250 $1,131.47
value $.01 per
share
<F1> Estimated in accordance with Rule 457(c) and (h) of the Securities Act of
1933, as amended (the "Act"), solely for the purpose of calculation of
the registration fee. The price shown is the closing bid price for
the shares of common stock, par value $.01 per share (the
"Common Shares"), of the Registrant on the Nasdaq SmallCap Market on
May 22, 1996.
<F2> The registration fee has been calculated pursuant to Rule 457(c) and
(h) of the Act as follows: one-twenty-ninth of one percent of
$3,281,250, the closing bid price for the Common Shares on the Nasdaq
SmallCap Market on May 22, 1996, multiplied by 375,000, the number of
Common Shares registered hereby.
(2)
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents which have been filed by Fotoball USA, Inc., a
Delaware corporation (the "Registrant"), with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), are incorporated herein by reference:
(a) The Registrant's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1995, which is the Registrant's latest Annual
Report on Form 10-KSB filed pursuant to Section 13(a) or 15(d) of
the Exchange Act and which contains audited financial statements
for the Registrant's latest fiscal year for which a Form 10-KSB
was required to have been filed.
(b) The Registrant's Quarterly Report on Form 10-QSB for the three months
ended March 31, 1996.
(c) The description of the Registrant's common stock, par value $.01 per
share, which is contained in a registration statement filed under
Section 12 of the Exchange Act, including any amendment or report
filed for the purpose of updating such description.
All documents subsequently filed by the Registrant pursuant to Section 13(a),
13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a post-
effective amendment which indicates that all securities offered have been sold
or which deregisters all securities then remaining unsold, shall be deemed to
be incorporated by reference in this registration statement and to be a part
hereof from the date of filing of such documents.
Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel.
Not Applicable.
Item 6. Indemnification of Directors and Officers.
The indemnification of officers and directors of the Company is governed by
Section 145 of the Delaware Gereral Corporation Law (the "DGCL") and the
Certificate of Incorporation (the "Certificate") and By-Laws of the Company.
Among other things, the DGCL permits indemnification of a director, officer,
employee or agent in civil, criminal, administrative or investigative actions,
suits or proceedings (other than an action by or in the right of the
corporation) to which such person is a party or is threatened to be made a
party by reason of the fact of such relationship with the corporation or the
fact that such person is or was serving in a similar capacity with another
entity at the request of the corporation against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
(3)<PAGE>
reasonably incurred by him if such person acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, if he had
no reasonable cause to believe his conduct was unlawful. No indemnification
may be made in any such suit to any person adjudged to be liable to the
corporation unless and only to the extent that the Delaware Court of Chancery
or the court in which the action was brought determines that, despite the
adjudication of liability, such person is under all circumstances, fairly and
reasonably entitled to indemnity for such expenses which such court shall deem
proper. Under the DGCL, to the extent that a director, officer, employee or
agent is successful, on the merits or otherwise, in the defense of any action,
suit or proceeding or any claim, issue or matter therein (whether or not the
suit is brought by or in the right of the corporation), he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him. In all cases in which indemnification is permitted
(unless ordered by a court), it may be made by the corporation only as
authorized in the specific case upon a determination that the applicable
standard of conduct has been met by the party to be indemnified. The
determination must be made by a majority vote of a quorum consisting of the
directors who were not parties to the action or, if such a quorum is not
obtainable, or even if obtainable, if a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or by the
stockholders. The statute authorizes the corporation to pay expenses incurred
by an officer or director in advance of a final disposition of a proceeding
upon receipt of an undertaking by or on behalf of the person to whom the
advance will be made, to repay the advances if it shall ultimately be
determined that he was not entitled to indemnification. The DGCL provides that
indemnification and advances of expenses permitted thereunder are not to be
exclusive of any rights to which those seeking indemnification or advancement
of expenses may be entitled under any by-law, agreement, vote of stockholders
or disinterested directors, or otherwise. The DGCL also authorizes the
corporation to purchase and maintain liability insurance on behalf of its
directors, officers, employees and agents regardless of whether the
corporation would have the statutory power to indemnify such persons against
the liabilities insured.
The Certificate provides that no director of the Company shall be
personally liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director except for liability (i) for any breach
of the director's duty of loyalty to the Company or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) for paying a dividend or approving a stock
repurchase in violation of Section 174 of the DGCL or (iv) for any transaction
from which the director derived an improper personal benefit.
The By-Laws provide that directors, officers and others shall be
indemnified to the fullest extent authorized by the DGCL, as in effect (or, to
the extent indemnification is broadened, as it may be amended), against any
and all judgments, fines and amounts paid in settling or otherwise disposing
of threatened, pending or completed actions, suits or proceedings, whether
civil, criminal, administrative or investigative and expenses incurred by such
person in connection therewith. The By-Laws further provide that, to the
extent permitted by law, expenses so incurred by any such person in defending
a civil or criminal action or proceeding shall, at his request, be paid by the
Company in advance of the final disposition of such action or proceeding.
(4)<PAGE>
The By-Laws provide that the right to indemnification and the payment of
expenses incurred in defending a proceeding in advance of its final
disposition shall not be exclusive of any other right which any person may
have or acquire under any statute, provision of the Certificate or By-Laws or
otherwise.
The Company maintains directors and officers liability and company
reimbursement insurance which, among other things, (i) provides for payment on
behalf of its officers and directors against loss as defined in the policy
stemming from acts committed by directors and officers in their capacity such
and (ii) provides for payment on behalf of the Company against such loss but
only when the Company shall be required or permitted to indemnify directors or
officers for such loss pursuant to statutory or common law or pursuant to duly
effective Certificate or By-Law provisions.
Item 7. Exemption from Registration Claimed.
Not Applicable.
Item 8. Exhibits.
The following exhibits are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- ----------------------
<S> <C>
4.1 Form of Representative's Unit Purchase Option.(1)
4.2 Form of Warrant Agreement.(1)
4.3 Specimen Warrant Certificate.(2)
4.4 Specimen Stock Certificate.(2)
4.5* 1994 Stock Option Plan of the Company, as amended.
4.6(1)* Form of Stock Option Agreement.(3)
4.6(2)* Form of Directors' Stock Option Agreement.(3)
5.1 Opinion of Shereff, Friedman, Hoffman & Goodman, LLP.
23.1 Consent of Hollander, Gilbert & Co.
23.2 Consent of Shereff, Friedman, Hoffman & Goodman, LLP
(contained in Exhibit 5.1).
</TABLE>
(5)<PAGE>
_______________________
* Indicates exhibits relating to executive compensation.
(1) Exhibits to the Company's Registration Statement on Form SB-2 filed
with the Commission on August 1, 1994 incorporated herein by reference.
(2) Exhibits to the Company's Registration Statement on Form SB-2 filed
with the Commission on August 9, 1994 incorporated herein by reference.
(3) Exhibits to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1994 incorporated herein by reference.
Item 9. Undertakings.
The undersigned small business issuer hereby undertakes that it will:
(1) file, during any period in which it offers or sell securities,
a post-effective amendment to this registration statement to:
(i) include any prospectus required by Section 10(a)(3) of
the Act;
(ii) reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information set forth in the registration statement; and
(iii) include any additional or changed material information on the
plan of distribution;
(2) for determining liability under the Act, treat each post-effective
amendment as a new registration statement of the securities offered,
and the offering of such securities at that time to be the initial
bona fide offering.
(3) file a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(4) for purposes of determining any liability under the Act, treat the
information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the small business issuer pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Act as part of this
registration statement as of the time the Commission declared it
effective; and
(5) for the purpose of determining any liability under the Act, treat
each post-effective amendment that contains a form of prospectus
as a new registration statement for the securities offered in the
registration statement, and that offering of such securities at
that time as the initial bona fide offering of those securities.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the small business
issuer pursuant to the foregoing provisions, or otherwise, the small business
issuer has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
(6)<PAGE>
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the small
business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of
any action, suit or proceeding) is asserted by such director, officer of
controlling person in connection with the securities being registered, the
small business issuer will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
(7)<PAGE>
SIGNATURES
------------
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Diego, State of California on this 23rd day of
May, 1996.
FOTOBALL USA, INC.
By:/s/ Michael Favish
----------------------
Michael Favish
President, Chief Executive
Officer and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities
and on the dates indicated:
<TABLE>
<CAPTION>
Signature Titles Date
- ------------------ --------------- -----------
<S> <C> <C>
/s/ Michael Favish President, Chief Executive Officer May 23, 1996
- ------------------ Director (Principal Executive
Michael Favish Officer)
/s/ David G. Forster Vice President, Finance, Treasurer May 23, 1996
- -------------------- Chief Financial Officer (Principal
David G. Forster Financial & Accounting Officer)
/s/ William R. Hasvold Director May 23, 1996
- ----------------------
William R. Hasvold
/s/ Joel K. Rubenstein Director May 23, 1996
- ----------------------
Joel K. Rubenstein
/s/ Sabin C. Streeter Director May 23, 1996
- ---------------------
Sabin C. Streeter
/s/ Robert N. Weingarten Director May 23, 1996
- ------------------------
Robert N. Weingarten
</TABLE>
(8)
<PAGE>
EXHIBIT INDEX
----------------
<TABLE>
<CAPTION>
Exhibit Number Description
- ------------------ ---------------------
<S> <C>
4.5 1994 Stock Option Plan of the Company, as amended.
5.1 Opinion of Shereff, Friedman, Hoffman & Goodman, LLP.
23.1 Consent of Hollander, Gilbert & Co.
23.2 Consent of Shereff, Friedman, Hoffman &
Goodman, LLP (contained in Exhibit 5.1).
</TABLE>
(9)
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-8 of our report dated February 16, 1996,
relating to the financial statements of Fotoball USA, Inc. which are
incorporated by reference in such Prospectus. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
/s/ HOLLANDER, GILBERT & CO.
HOLLANDER, GILBERT & CO.
Los Angeles, California
May 21, 1996
(10)
FOTOBALL USA, INC.
1994 STOCK OPTION PLAN
Section 1. PURPOSE
The purposes of this Fotoball USA, Inc. 1994 Stock Option Plan (the
"Plan") are to encourage selected employees and directors of Fotoball USA,
Inc., a Delaware corporation (together with any successor thereto, the
"Company"), to acquire a proprietary interest in the growth and performance of
the Company, to generate an increased incentive to contribute to the Company's
future success and prosperity, thus enhancing the value of the Company for the
benefit of its stockholders, and to enhance the ability of the Company to
attract and retain qualified individuals upon whom, in large measure, the
sustained progress, growth, and profitability of the Company depend.
Section 2. DEFINITIONS
As used in the Plan, the following terms shall have the meanings set
forth below:
(a) "Affiliate" shall mean any entity that, directly or through
one or more intermediaries, is controlled by, controls or is under common
control with the Company.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(d) "Committee" shall mean (i) prior to the effective date of
the Company's initial public offering of securities, the entire Board of
Directors of the Company and, (ii) subsequent to the effective date of the
Company's initial public offering of securities, a committee of the Board
designated by the Board to administer the Plan and composed of not less than
two directors, each of whom is both a "disinterested person" within the
meaning of Rule 16b-3 and an "outside director" as that term is defined for
purposes of Section 162(m) of the Code.
(e) "Fair Market Value" shall mean, with respect to Shares or
other securities (i) the closing price per Share of the Shares on the
principal exchange on which the Shares are then trading, if any, on such date,
or, if the Shares were not traded on such date, then on the next preceding
trading day during which a sale occurred; or (ii) if the Shares are not traded
on an exchange but are quoted on NASDAQ or a successor quotation system, (1)
the last sales price (if the Shares are then listed as a National Market Issue
under the NASDAQ National Market System) or (2) the mean between the closing
representative bid and asked prices (in all other cases) for the Shares on
such date as reported by NASDAQ or such successor quotation system; or (iii)
if the Shares are not publicly traded on an exchange and not quoted on NASDAQ
or a successor quotation system, the mean between the closing bid and asked
prices for the Shares on such date as determined in good faith by the
Committee; or (iv) if the Shares are not publicly traded, the fair market
value established by the Committee acting in good faith.
(11)
<PAGE>
(f) "Incentive Stock Option" shall mean an option granted under
Section 6 of the Plan that meets the requirements of Section 422 of the Code
or any successor provision thereto.
(g) "Independent Director" shall mean each member of the Board
who is not an employee of the Company or any Affiliate.
(h) "Key Employee" shall mean any officer, director or other
employee who is a regular full-time employee of the Company or its present and
future Affiliates.
(i) "Non-Qualified Stock Option" shall mean an Option granted
under Section 7 or an Option granted under Section 6 of the Plan that is not
an Incentive Stock Option.
(j) "Option" shall mean an Incentive Stock Option or a
Non-Qualified Stock Option.
(k) "Option Agreement" shall mean a written agreement, contract,
or other instrument or document evidencing an Option granted under the Plan.
(l) "Participant" shall mean a Key Employee or Independent
Director who has been granted an Option under the Plan.
(m) "Person" shall mean any individual, corporation,
partnership, association, joint-stock company, trust, unincorporated
organization, or government or political subdivision thereof.
(n) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934,
as amended, or any successor rule or regulation thereto.
(o) "Shares" shall mean the common stock of the Company, $.01
par value, and such other securities or property as may become the subject of
Options pursuant to an adjustment made under Section 4(b) of the Plan.
(p) "Ten Percent Stockholder" shall mean a Person, who together
with his or her spouse, children and trusts and custodial accounts for their
benefit, immediately at the time of the grant of an Option and assuming its
immediate exercise, would beneficially own, within the meaning of Section
424(d) of the Code, Shares possessing more than ten percent (10%) of the total
combined voting power of all of the outstanding capital stock of the Company.
Section 3. ADMINISTRATION
(a) Generally. The Plan shall be administered by the Committee.
Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations and other decisions under or with respect to
the Plan or any Option shall be within the sole discretion of the Committee,
may be made at any time, and shall be final, conclusive, and binding upon all
Persons, including the Company, any Participant, any holder or beneficiary of
any Option, any stockholder of the Company and any employee of the Company.
(12)<PAGE>
(b) Powers. Subject to the terms of the Plan and applicable law
and except as provided in Section 7 hereof, the Committee shall have full
power and authority to: (i) designate Participants; (ii) determine the type or
types of Options to be granted to each Participant under the Plan; (iii)
determine the number of Shares to be covered by Options; (iv) determine the
terms and conditions of any Option; (v) determine whether, to what extent, and
under what circumstances Options may be settled or exercised in cash, Shares,
other Options, or other property, or canceled, forfeited, or suspended, and
the method or methods by which Options may be settled, exercised, canceled,
forfeited, or suspended; (vi) interpret and administer the Plan and any
instruments or agreements relating to, or Options granted under, the Plan;
(vii) establish, amend, suspend, or waive such rules and regulations and
appoint such agents as it shall deem appropriate for the proper administration
of the Plan; and (viii) make any other determination and take any other action
that the Committee deems necessary or desirable for the administration of the
Plan.
(c) Reliance, Indemnification. The Committee may employ
attorneys, consultants, accountants or other persons and the Committee, the
Company and its officers and directors shall be entitled to rely upon the
advice, opinions or valuations of any such persons. No member of the
Committee shall be personally liable for any action, determination or
interpretation taken or made in good faith with respect to the Plan, or
Options granted thereunder, and all members of the Committee shall be fully
indemnified and protected by the Company in respect of any such action,
determination or interpretation.
Section 4. SHARES AVAILABLE FOR OPTIONS
(a) Shares Available. Subject to adjustment as provided in
Section 4(b):
(i) Limitation on Number of Shares. Options
issuable under the Plan are limited such that the maximum aggregate number of
Shares which may issued pursuant to, or by reason of, Options is 375,000, of
which 330,000 may be issued pursuant to, or by reason of, Options granted to
Key Employees and 45,000 may be issued pursuant to, or by reason of, Options
granted to Independent Directors. Further, no Participant shall be granted
Options to purchase more than 100,000 Shares in any one fiscal year. To the
extent that an Option granted to a (A) Key Employee or (B) an Independent
Director ceases to remain outstanding by reason of termination of rights
granted thereunder, forfeiture or otherwise, the Shares subject to such Option
shall again become available for award under the Plan to (x) Key Employees and
(y) Independent Directors, respectively; provided, however, that in the case
of the cancellation or termination of an Option in the same fiscal year that
such Option was granted (or for purposes of determining the maximum number of
Options which may be granted to any Participant under the Plan, the
termination of an Option at any time), both the cancelled Option and the newly
granted Option shall be counted in determining whether the Participant has
received the maximum number of such Options permitted to be issued to any one
Participant under the Plan.
(13)<PAGE>
(ii) Accounting for Awards. For purposes of
this Section 4, the number of Shares covered by an Option to a (A) Key
Employee or (B) Independent Director shall be counted on the date of grant of
such Option against the aggregate number of Shares available for granting
Options under the Plan to (x) Key Employees or (y) Independent Directors,
respectively.
(iii) Sources of Shares Deliverable Under
Options. Any Shares delivered pursuant to an Option may consist, in whole or
in part, of authorized and unissued Shares or of treasury Shares.
(b) Adjustments. In the event that the Committee shall
determine that any (i) subdivision or consolidation of Shares, (ii) dividend
or other distribution (whether in the form of cash, Shares, other securities,
or other property), (iii) recapitalization or other capital adjustment of the
Company or (iv) merger, consolidation or other reorganization of the Company
or other rights to purchase Shares or other securities of the Company, or
other similar corporate transaction or event, affects the Shares such that an
adjustment is determined by the Committee to be appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan, then the Committee shall, in such manner
as it may deem necessary to prevent dilution or enlargement of the benefits or
potential benefits intended to be made under the Plan, adjust any or all of
(x) the number and type of Shares which thereafter may be made the subject of
Options, (y) the number and type of Shares subject to outstanding Options, and
(z) the grant, purchase, or exercise price with respect to any Option or, if
deemed appropriate, make provision for a cash payment to the holder of an
outstanding Option; provided, however, in each case, that (i) with respect to
Incentive Stock Options no such adjustment shall be authorized to the extent
that such adjustment would cause the Plan to violate Section 422 of the Code
or any successor provision thereto; (ii) each such adjustment shall be made in
such manner as not to constitute a cancellation and reissuance of a Non-
Qualified Stock Option for purposes of Section 162(m) of the Code, or the
regulations promulgated thereunder, to the extent that such reissuance would
result in the grant of such Options in excess of the maximum permitted to be
granted to any Participant in any fiscal year; and (iii) the number of Shares
subject to any Option denominated in Shares shall always be a whole number.
Section 5. ELIGIBILITY
Except as provided in Section 7, Options may be granted only to Key
Employees. In determining the Persons to whom Options shall be granted and
the number of Shares to be covered by each Option, the Committee shall take
into account the nature of the Person's duties, such Person's present and
potential contributions to the success of the Company and such other factors
as it shall deem relevant in connection with accomplishing the purposes of the
Plan. An Independent Director will not be eligible to receive an Option
except as specifically provided in Section 7. A Key Employee who has been
granted an Option or Options under the Plan may be granted an additional
Option or Options, subject to such limitations as may be imposed by the Code
on the grant of Incentive Stock Options.
(14)<PAGE>
Section 6. OPTIONS.
The Committee is hereby authorized to grant Options to Participants
upon the following terms and the conditions (except to the extent otherwise
provided in Section 7) and with such additional terms and conditions, in
either case not inconsistent with the provisions of the Plan, as the Committee
shall determine:
(a) Exercise Price. The purchase price per Share purchasable
under Options shall not be less than the greater of (i) 100% of the Fair
Market Value of a Share on the date of grant or (ii) $5.25; except that in the
case of a grant to a Ten Percent Stockholder the purchase price per Share
purchasable under Incentive Stock Options shall not be less than the greater
of (i) 110% of the Fair Market Value of a Share on the date of grant or (ii)
$5.25.
(b) Option Term. The term of each Non-Qualified Stock Option
shall be fixed by the Committee but generally shall not exceed 10 years from
the date of grant. The term of each Incentive Stock Option shall in no event
be more than 10 years from the date of grant, or in the case of an Incentive
Stock Option granted to a Ten Percent Stockholder, 5 years from the date of
grant.
(c) Time and Method of Exercise. The Committee shall determine
the time or times at which an Option may be exercised in whole or in part, and
the method or methods by which, and the form or forms in which, payment of the
option price with respect thereto may be made or deemed to have been made
(including, without limitation, (i) cash, Shares, outstanding Options or other
consideration, or any combination thereof, having a Fair Market Value on the
exercise date equal to the relevant option price and (ii) a broker-assisted
cashless exercise program established by the Committee), provided in each case
that such methods avoid "short-swing" profits to the Participant under Section
16(b) of the Securities Exchange Act of 1934, as amended. The payment of the
exercise price of an Option may be made in a single payment or transfer, in
installments, or on a deferred basis, in each case in accordance with rules
and procedures established by the Committee.
(d) Early Termination. The unexercised portion of any Option
granted to a Key Employee under the Plan will generally be terminated (i)
thirty (30) days after the date on which the Key Employee's employment is
terminated for any reason other than (A) Cause (as defined below), (B)
retirement or mental or physical disability, or (C) death; (ii) immediately
upon the termination of the Key Employee's employment for Cause; (iii) three
months after the date on which the Key Employee's employment is terminated by
reason of retirement or mental or physical disability; or (iv)(A) 12 months
after the date on which the Key Employee's employment is terminated by reason
of the death of the Key Employee, or (B) three months after the date on which
the Key Employee shall die if such death shall occur during the three-month
period following the termination of the Key Employee's employment by reason of
retirement or mental or physical disability. The term "Cause," as used
herein, shall mean (w) the Key Employee's willful misconduct or fraud in the
performance of his duties under such Key Employee's employment arrangement
with the Company, (x) the continued failure or refusal of the Key Employee
(following written notice thereof) to carry out any reasonable request of the
Board for the provision of services under such Key Employee's employment
arrangement with the Company, (y) the material breach by the Key Employee of
his employment arrangement with the Company or (z) the entering of a plea of
(15)<PAGE>
guilty or nolo contendere to or the conviction of the Key Employee for a
felony or any other criminal act involving moral turpitude, dishonesty, theft
or unethical business conduct. For purposes of this paragraph (d), no act
shall be considered willful unless done or omitted to be done not in good
faith and without reasonable belief that such action or omission was in the
best interest of the Company.
(e) Incentive Stock Options. All terms of any Incentive Stock
Option granted under the Plan shall comply in all respects with the provisions
of Section 422 of the Code, or any successor provision thereto, and any
regulations promulgated thereunder.
(f) No Cash Consideration for Awards. Awards shall be granted
for no cash consideration or such minimal cash consideration as may be
required by applicable law.
(g) Limits on Transfer of Options. Subject to Code Section 422,
no Option and no right under any such Option, shall be assignable, alienable,
saleable, or transferable by a Participant otherwise than by will or by the
laws of descent and distribution or pursuant to a qualified domestic relations
order as defined in the Code or Title I of the Employee Retirement Income
Security Act, or the rules thereunder; provided, however, that, if so
determined by the Committee, a Participant may, in the manner established by
the Committee, designate a beneficiary or beneficiaries to exercise the rights
of the Participant, and to receive any property distributable, with respect to
any Option upon the death of the Participant. Each Option, and each right
under any such Option, shall be exercisable during the Participant's lifetime,
only by the Participant or, if permissible under applicable law with respect
to any Option that is not an Incentive Stock Option, by the Participant's
guardian or legal representative. No Option and no right under any such
Option, may be pledged, alienated, attached, or otherwise encumbered, and any
purported pledge, alienation, attachment, or encumbrance thereof shall be void
and unenforceable against the Company or any Affiliate.
(h) Term of Options. Except as set forth in Section 6(b) and
Section 7, the term of each Option shall be for such period as may be
determined by the Committee.
(i) Share Certificates. All certificates for Shares or other
securities of the Company delivered under the Plan pursuant to any Option or
the exercise thereof shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan or the rules,
regulations, and other restrictions of the Securities and Exchange Commission,
any stock exchange upon which such Shares or other securities are then listed,
and any applicable Federal or state securities laws, and the Committee may
cause a legend or legends to be put on any such certificates to make
appropriate reference to such restrictions.
(16)<PAGE>
Section 7. OPTIONS AWARDED TO INDEPENDENT DIRECTORS.
Each Independent Director who is a member of the Board on July 1 of
a year (beginning in 1995) during the term of the Plan shall automatically be
granted a Non-Qualified Stock Option to purchase 2,500 Shares on July 1 of
each of the first three years of service on the Board as an Independent
Director during the term of the Plan. No Independent Director shall receive
an automatic grant of Non-Qualified Stock Options to purchase 2,500 Shares on
July 1 of more than an aggregate of three years notwithstanding such
Independent Director may be a member of the Board for more than an aggregate
of three years. All Options granted pursuant to this Section 7 shall (a) be
at an exercise price per Share not less than the greater of (i) 100% of the
Fair Market Value of a Share on the date of the grant or (ii) $5.25; (b) have
a term of 10 years; (c) terminate (i) upon termination of an Independent
Director's service as a director of the Company for any reason other than
mental or physical disability or death, (ii) three months after the date the
Independent Director ceases to serve as a director of the Company due to
physical or mental disability or (iii)(A) 12 months after the date the
Independent Director ceases to serve as a director due to the death of the
Independent Director or (B) three months after the death of the Independent
Director if such death shall occur during the three month period following the
date the Independent Director ceased to serve as a director of the Company due
to physical or mental disability; and (d) be otherwise on the same terms and
conditions as all other Options granted pursuant to the Plan.
Section 8. AMENDMENT AND TERMINATION
Except to the extent prohibited by applicable law and unless
otherwise expressly provided in an Option Agreement or in the Plan:
(a) Amendments to the Plan. The Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from
time to time by the Board, but no amendment without the approval of the
stockholders of the Company shall be made if such amendment would constitute a
"material modification" as that term is defined for purposes of Section 162(m)
of the Code or if stockholder approval would be required under Section 422 of
the Code, Rule 16b-3 or any other law or rule of any governmental authority,
stock exchange or other self-regulatory organization to which the Company is
subject. Neither the amendment, suspension nor termination of the Plan shall,
without the consent of the holder of such Option, alter or impair any rights
or obligations under any Option theretofore granted.
(b) Adjustments of Options Upon Certain Acquisitions. In the
event the Company shall assume outstanding employee awards in connection with
the acquisition of another business or another corporation or business entity,
the Committee may make such adjustments, not inconsistent with the terms of
the Plan, in the terms of Options as it shall deem appropriate in order to
achieve reasonable comparability or other equitable relationship between the
assumed awards and the Options granted under the Plan as so adjusted.
(17)<PAGE>
(c) Adjustments of Options Upon the Occurrence of Certain
Unusual or Nonrecurring Events. The Committee shall be authorized to make
adjustments in the terms and conditions of, and the criteria included in,
Options in recognition of unusual or nonrecurring events (including, without
limitation, the events described in Section 4(b) hereof) affecting the Company
or the financial statements of the Company or of changes in applicable laws,
regulations, or accounting principles, whenever the Committee determines that
such adjustments are appropriate in order to prevent dilution or enlargement
of the benefits or potential benefits to be made available under the Plan.
(d) Correction of Defects, Omissions, and Inconsistencies. The
Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Option in the manner and to the extent it
shall deem desirable to carry the Plan into effect.
Section 9. ELECTION TO HAVE SHARES WITHHELD
(a) In combination with or in substitution for cash withholding
or any other legal method of satisfying federal and state withholding tax
liability, a Participant may elect to have Shares withheld by the Company in
order to satisfy federal and state withholding tax liability (a "share
withholding election"), provided, (i) the Committee shall not have revoked its
advance approval of the holder's share withholding election; and (ii) the
share withholding election is made on or prior to the date on which the amount
of withholding tax liability is determined (the "Tax Date"). If a Participant
elects within thirty (30) days of the date of exercise to be subject to
withholding tax on the exercise date pursuant to the provisions of Section
83(b) of the Code, then the share withholding election may be made during such
thirty (30) day period. Notwithstanding the foregoing, a holder whose
transactions in Common Stock are subject to Section 16(b) of the Securities
Exchange Act of 1934, as amended, may make a share withholding election only
if the following additional conditions are met: (i) the share withholding
election is made no sooner than six (6) months after the date of grant of the
Option, except, however, such six (6) month condition shall not apply if the
Participant's death or disability (as shall be determined by the Committee)
occurs within such six (6) month period; and (ii) the share withholding
election is made (x) at least six (6) months prior to the Tax Date, or (y)
during the period beginning on the third business day following the date of
release of the Company's quarterly or annual financial results and ending on
the twelfth business day following such date.
(b) A share withholding election shall be deemed made when
written notice of such election, signed by the Participant, has been hand
delivered or transmitted by registered or certified mail to the Secretary of
the Company at its then principal office. Delivery of said notice shall
constitute an irrevocable election to have Shares withheld.
(18)<PAGE>
(c) If a Participant has made a share withholding election
pursuant to this Section 9; and (i) within thirty (30) days of the date of
exercise of the Option, the Participant elects pursuant to the provisions of
Section 83(b) of the Code to be subject to withholding tax on the date of
exercise of the Option, then such Participant will be unconditionally
obligated to immediately tender back to the Company the number of Shares
having an aggregate fair market value (as determined in good faith by the
Committee), equal to the amount of tax required to be withheld plus cash for
any fractional amount, together with written notice to the Company informing
the Company of the Participant's election pursuant to Section 83(b) of the
Code; or (ii) if the Participant has not made an election pursuant to the
provisions of Section 83(b) of the Code, then on the Tax Date, such
Participant will be unconditionally obligated to tender back to the Company
the number of Shares having an aggregate fair market value (as determined in
good faith by the Committee), equal to the amount of tax required to be
withheld plus cash for any fractional amount.
Section 10. VESTING LIMITATION ON INCENTIVE STOCK OPTIONS
The Fair Market Value of Shares subject to Incentive Stock Options
(determined as of the date such Incentive Stock Options are granted)
exercisable for the first time by any individual during any calendar year
shall in no event exceed $100,000.
Section 11. GENERAL PROVISIONS
(a) No Rights to Awards. No Key Employee shall have any claim
to be granted any Option under the Plan, and there is no obligation for
uniformity of treatment of Key Employees or holders or beneficiaries of
Options under the Plan. The terms and conditions of Options need not be the
same with respect to each recipient.
(b) No Limit on Other Plans. Nothing contained in the Plan
shall prevent the Company from adopting or continuing in effect other or
additional compensation arrangements and such arrangements may be either
generally applicable or applicable only in specific cases.
(c) No Right to Employment. The grant of an Option shall not be
construed as giving a Participant the right to be retained in the employ of
the Company. Further, the Company may at any time dismiss a Participant from
employment, free from any liability, or any claim under the Plan, unless
otherwise expressly provided in the Plan or in any Option Agreement.
(d) Governing Law. The validity, construction, and effect of
the Plan and any rules and regulations relating to the Plan shall be
determined in accordance with the laws of the State of Delaware and applicable
Federal law.
(e) Severability. If any provision of the Plan or any Option is
or becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction, or would disqualify the Plan or any Option under any law deemed
applicable by the Committee, such provision shall be construed or deemed
amended to conform to applicable laws, or if it cannot be construed or deemed
amended without, in the determination of the Committee, materially altering
the intent of the Plan, such provision shall be deemed void, stricken and the
remainder of the Plan and any such Option shall remain in full force and
effect.
(19)<PAGE>
(f) No Trust or Fund Created. Neither the Plan nor any Option
shall create or be construed to create a trust or separate fund of any kind or
a fiduciary relationship between the Company and a Participant or any other
Person. To the extent that any Person acquires a right to receive payments
from the Company pursuant to an Option, such right shall be no greater than
the right of any unsecured general creditor of the Company.
(g) No Fractional Shares. No fractional Shares shall be issued
or delivered pursuant to the Plan or any Option, and the Committee shall
determine whether cash, other securities, or other property shall be paid or
transferred in lieu of any fractional Shares or whether such fractional Shares
or any rights thereto shall be cancelled, terminated, or otherwise eliminated.
(h) Headings. Headings are given to the Sections and
subsections of the Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the
construction or interpretation of the Plan or any provision hereof.
Section 12. EFFECTIVE DATE OF THE PLAN
The Plan is effective as of June 1, 1994.
Section 13. TERM OF THE PLAN
The Plan shall continue until the earlier of (i) the date on which
all Options issuable hereunder have been issued, (ii) the termination of the
Plan by the Board or (iii) May 31, 2004. However, unless otherwise expressly
provided in the Plan or in an applicable Option Agreement, any Option
theretofore granted may extend beyond such date and the authority of the
Committee to amend, alter, adjust, suspend, discontinue, or terminate any such
Option or to waive any conditions or rights under any such Option, and the
authority of the Board to amend the Plan, shall extend beyond such date.
(20)
May 23, 1996
Fotoball USA, Inc.
3738 Ruffin Road
San Diego, California 92123
Dear Sirs:
Fotoball USA, Inc., a Delaware corporation (the "Company"), intends to
transmit for filing with the Securities and Exchange Commission a registration
statement under the Securities Act of 1933, as amended, on Form S-8 (the
"Registration Statement") which relates to 375,000 shares of the Company's
common stock, par value $.01 per share (the "Shares"), which are being offered
in connection with the Company's 1994 Stock Option Plan (the "Plan"). This
opinion is an exhibit to the Registration Statement.
We have acted as counsel to the Company in connection with the proposed
offer and sale of the Shares as contemplated by the Registration Statement.
However, we are not general counsel to the Company and would not ordinarily be
familiar with or aware of matters relating to the Company unless they are
brought to our attention by representatives of the Company. We have examined
copies (in each case signed, certified or otherwise proved to our
satisfaction) of the Company's Certificate of Incorporation, its By-Laws as
presently in effect, minutes and other instruments evidencing actions taken by
its directors and stockholders, and such other documents and instruments
relating to the Company and the proposed offering as we have deemed necessary
under the circumstances. In our examination of all such agreements,
documents, certificates and instruments, we have assumed the genuineness of
all signatures and the authenticity of all agreements, documents, certificates
and instruments submitted to us as originals and the conformity with the
originals of all agreements, instruments, documents and certificates submitted
to us as copies. Insofar as this opinion relates to securities to be issued
in the future, we have assumed that all applicable laws, rules and regulations
in effect at the time of such issuance are the same as such laws, rules and
regulations in effect as of the date hereof.
We note that we are members of the Bar of the State of New York and do
not hold ourselves out as experts in the law of any other state. We express
no opinion as to the laws of any other jurisdiction, except with respect to
the federal laws of the United States of America and except to the extent that
matters of Delaware general corporate law are involved in the opinions
expressed below.
(21)
<PAGE>
Fotoball USA, Inc.
May 23, 1996
Page 2
Based on the foregoing, and subject to and in reliance on the accuracy
and completeness of the information relevant thereto provided to us, it is our
opinion that:
1. The Company has been duly incorporated under the laws of the State of
Delaware and has an authorized capital stock consisting of 15,000,000 shares
of common stock, par value $.01 per share, and 1,000,000 shares of preferred
stock, par value $.01 per share.
2. The Shares to be issued upon the exercise of options issued pursuant to
the Plan have been duly authorized and (subject to the effectiveness of the
Registration Statement and compliance with applicable state securities laws),
when issued and paid for in accordance with the terms of the Plan, will be
legally and validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and as an exhibit to any filing made by the Company
under the securities or "Blue Sky" laws of any state.
This opinion is furnished to you in connection with the filing of the
Registration Statement, and is not to be used, circulated, quoted or otherwise
relied upon for any other purposes, except as expressly provided in the
preceding paragraph.
Very truly yours,
/s/ SHEREFF, FRIEDMAN, HOFFMAN & GOODMAN, LLP
SHEREFF, FRIEDMAN, HOFFMAN & GOODMAN, LLP
SFH&G:CIW:GA:AMF
(22)
