As filed with the Securities and Exchange Commission on July 23, 1998
Registration No. 333-_______
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
incorporation or organization) Identification No.)
3738 Ruffin Road
San Diego, California 92123
(Address of Principal Executive Offices) (Zip Code)
FOTOBALL USA, INC. 1998 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)
1<PAGE>
CALCULATION OF REGISTRATION FEE
Title of Proposed Proposed Amount
Securities Amount maximum maximum of
to be to be offering price aggregate registration
registered registered (1) per share (2) offering price (2) fee
______________________________________________________________________________
Common Stock, 500,000 shares $2.00 $1,000,000 $295.00
par value
$.01 per share
(1) Pursuant to Rule 416, this Registration Statement also covers such
additional securities as may become issuable to prevent dilution
resulting from stock splits, stock dividends or similar transactions.
(2) 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
shares of common stock, par value $.01 per share, of the Registrant on
the Nasdaq Market on July 17, 1998.
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, 1997, 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, 1998.
(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.
In addition, 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. Any
statement contained in the documents incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes
of this registration statement to the extent that a statement contained herein
or in any other subsequently filed document which is also incorporated or
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this registration
statement.
Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel.
Not Applicable.
3<PAGE>
Item 6. Indemnification of Directors and Officers.
The indemnification of officers and directors of the Company is governed
by Section 145 of the Delaware General 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 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.
4<PAGE>
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.
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:
Exhibit Number. Description.
- --------------- ------------
4.1* Fotoball USA, Inc. 1998 Stock Option Plan.
4.2* Form of Stock Option Agreement for the Fotoball USA, Inc.
1998 Stock Option Plan.
5.1 Opinion of Shereff, Friedman, Hoffman & Goodman, LLP.
23.1 Consent of Hollander, Lumer & Co., LLP.
23.2 Consent of Shereff, Friedman, Hoffman & Goodman, LLP
(contained in Exhibit 5.1).
_______________________
* Indicates exhibits relating to executive compensation.
5<PAGE>
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
Securities 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.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration; and
Note: Small business issuers do not need to give the
statements in paragraphs (1)(i) and (1)(ii) of this Item if
the registration statement is on Form S-3 or S-8, and the
information required in a post-effective amendment is
incorporated by reference by periodic reports filed by the
small business issuer under the Exchange Act.
(iii) include any additional or changed material information on
the plan of distribution;
(2) for determining liability under the Securities 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 Securities
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 Securities Act as part of this registration
statement as of the time the Commission declared it effective;
and
(5) for of determining any liability under the Securities 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.
6<PAGE>
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (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 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 or 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 22nd day of July, 1998.
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:
Signature Titles Date
- --------- ------ ----
/s/ Michael Favish President, Chief Executive July 22, 1998
- ------------------ Officer and Director
Michael Favish (Principal Executive Officer)
/s/ David G. Forster Executive Vice President, July 22, 1998
- -------------------- Finance, Treasurer and
David G. Forster Chief Financial Officer (Principal
Financial & Accounting Officer)
/s/ Salvatore T. DiMascio Director July 22, 1998
- -------------------------
Salvatore T. DiMascio
/s/ Joel K. Rubenstein Director July 22, 1998
- ----------------------
Joel K. Rubenstein
/s/ Nicholas A. Giordano Director July 22, 1998
- ------------------------
Nicholas A. Giordano
8<PAGE>
EXHIBIT INDEX
Exhibit Number Description
4.1 Fotoball USA, Inc. 1998 Stock Option Plan.
4.2 Form of Stock Option Agreement for the 1998 Stock Option Plan.
5.1 Opinion of Shereff, Friedman, Hoffman & Goodman, LLP.
23.1 Consent of Hollander, Lumer & Co., LLP.
9<PAGE>
FOTOBALL USA, INC.
FOTOBALL USA, INC. 1998 STOCK OPTION PLAN
___________________________________________________________________
This document is the Summary Plan Description for the Fotoball USA,
Inc. 1998 Stock Option Plan (the "Plan"). This document also constitutes
a prospectus covering securities that have been registered under the
Securities Act of 1933, as amended (the "Securities Act").
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
June 01, 1998
1<PAGE>
GENERAL PLAN INFORMATION
Issuer
This summary plan description ("Plan Summary") relates to shares
("Shares") of common stock, par value $0.01 per share (the "Common
Stock"), of Fotoball USA, Inc., a Delaware corporation (the "Company"),
issuable upon the exercise of Incentive Stock Options (as defined below)
and Non-Qualified Stock Options (as defined below) (collectively,
"Options") granted to employees, officers and directors of the Company
and its subsidiaries in accordance with the terms and provisions of the
Plan. The Company's executive offices are located at 3738 Ruffin Road,
San Diego, California 92123, telephone number (619) 467-9900.
The description set forth in this Plan Summary is qualified in its
entirety by the Plan, a copy of which is filed as an exhibit to the
Company's registration statement on Form S-8 (the "Form S-8") relating
to the registration of 500,000 Shares and is effective as of June 1, 1998.
Capitalized terms used but not defined in this Plan Summary shall have the
meanings ascribed to such terms in the Plan. In the event that anything
stated herein conflicts with the terms of the Plan, the terms of the Plan
shall govern.
Purposes
The purposes of the Plan are to encourage selected employees and
directors of 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.
Approval and Duration
The adoption of the Plan was approved by the Board of Directors
of the Company (the "Board") on March 10, 1998 and by a majority of the
stockholders of the Company on May 28, 1998. 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)
March 9, 2008. 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 (as
hereinafter defined) 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.
Amendment or Termination
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 of Directors of the Company (the "Board"), but no amendment
without the approval of the stockholders of the Company shall be made if
such amendment would be required under Sections 162(m) or 422 of the
2<PAGE>
Internal Revenue Code of 1986, as amended (the "Code"), or if
stockholder approval would be required under Section 422 of the Code,
Rule 16b-3 promulgated by the Securities and Exchange Commission (the
"Commission") under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or any other law or rule of any governmental
authority, stock exchange or other self-regulatory organization to which
the Company may then be subject. Neither the amendment, suspension
nor termination of the Plan shall, without the consent of the holder of an
Option, alter or impair any rights or obligations under any Option
theretofore granted. 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.
ERISA
The Plan is not subject to any of the provisions of the Employee
Retirement Income Security Act of 1974 ("ERISA").
Administration
The Plan is administered by a committee of the Board designated
by the Board to administer the Plan and will at all times be composed of
not less than two directors (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.
Other than with respect to grants of Options to independent
directors, 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.
SECURITIES TO BE OFFERED
Options issuable under the Plan are limited such that the maximum
aggregate number of Shares which may be issued pursuant to, or by
reason of, Options is 500,000. Further, no participant shall be granted
3<PAGE>
Options to purchase more than 125,000 Shares in any one fiscal year;
provided, however, that the Committee may adopt procedures for the
counting of Shares relating to any grant of Options to ensure appropriate
counting, avoid double counting, and provide for adjustments in any case
in which the number of Shares actually distributed differs from the number
of Shares previously counted in connection with such grant; provided
further, however, that the options granted under the Company's 1994
Stock Option Plan shall not be treated as outstanding. To the extent that
an Option granted to any officer, director or other employee who is a
regular full-time employee of the Company or its present and future
subsidiaries (a "Key Employee") or (B) a non-employee director (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. Any Shares delivered pursuant to an Option may consist, in
whole or in part, of authorized and unissued Shares or of treasury Shares.
EMPLOYEES WHO MAY PARTICIPATE IN THE PLAN
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. 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.
PURCHASE OF SECURITIES PURSUANT TO THE PLAN AND PAYMENT FOR SECURITIES OFFERED
Grant of Options under the Plan
Types of Options. Options granted under the Plan may be (i)
Incentive Stock Options or (ii) Non-Qualified Stock Options. Any Option
which is designated as a Non-Qualified Stock Option will not be treated
by the Company or the individual to whom the Option is granted as an
Incentive Stock Option for federal income tax purposes. "Incentive Stock
Option" means an Option granted under the Plan that satisfies the
requirements of Section 422 of the Code and is so designated by the
Committee. "Non-Qualified Stock Option" means an Option granted
under the Plan that is not an Incentive Stock Option.
Vesting. The Committee shall determine the time or times at
which the right to exercise an Option may vest.
Term. The term of each Non-Qualified Stock Option granted under the
Plan shall be fixed by the Committee but generally shall not exceed ten (10)
years from the date of grant. The term of each Incentive Stock Option
granted under the Plan shall be fixed by the Committee but shall in no event
be more than ten (10) years from the date of grant or, in the case of an
Incentive Stock Option granted to a person possessing more than 10% of the
4<PAGE>
total combined voting power of all of the outstanding stock of the Company
(a "10% Stockholder"), five (5) years from the date of grant.
Exercise Price. The exercise price per Share purchasable under Options
shall be determined by the Committee at the time the Option is granted but
generally shall not be less than the Fair Market Value of the Shares covered
thereby at the time the Option is granted. For purposes of the Plan, "Fair
Market Value" shall mean, with respect to Shares or other securities, the
fair market value of the Shares or other securities determined by such methods
or procedures as shall be established from time to time by the Committee in
good faith or in accordance with applicable law. Unless otherwise determined
by the Committee, the Fair Market Value of Shares shall mean (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 The Nasdaq Stock Market or a successor quotation system, (1) the last
sales price (if the Shares are then listed as a National Market Issue under
The Nasdaq Stock Market) 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 The Nasdaq Stock Market or such successor quotation system; or
(iii) if the Shares are not publicly traded on an exchange and not quoted on
The Nasdaq Stock Market 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.
Manner of Exercise of Options
The Committee shall determine the method or methods by which, and the
form or forms in which, payment of the option price with respect to exercises
of such Option 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 Exchange Act. 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.
Election to Have Shares Withheld
The Company or any subsidiary is authorized to withhold from any Option
granted any payment relating to an Option under the Plan, including from the
exercise of an Option, amounts of withholding and other taxes due in
connection with any transaction involving an Option, and to take such other
action as the Committee may deem advisable to enable the Company and
participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Option. This authority shall include
authority to withhold or receive Shares or other property and to make cash
payments in respect thereof in satisfaction of a participant's tax
obligations.
5<PAGE>
Loan Provisions
With the consent of the Committee, and subject at all times to laws and
regulations and other binding obligations or provisions applicable to the
Company, the Company may make, guarantee, or arrange for a loan or loans to a
participant with respect to the exercise of any Option, including the payment
by a participant of any or all federal, state, or local income or other
taxes due in connection with the exercise of any Option. Subject to such
limitations, the Committee shall have full authority to decide whether to
make a loan or loans hereunder and to determine the amount, terms, and
provisions of any such loan or loans, including the interest rate to be
charged in respect of any such loan or loans, whether the loan or loans are
to be with or without recourse against the borrower, the terms on which the
loan is to be repaid and the conditions, if any, under which the loan or
loans may be forgiven.
Termination of Options under the Plan
The Committee shall determine the circumstances under which the right to
exercise an Option shall terminate.
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.
Transferability 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,
and such Option, and each right under any such Option, shall be exercisable
during the participant's lifetime, only by the paticipant or, if permissible
under applicable law (including Code Section 422, in the case of 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. Notwithstanding the foregoing, the Committee may, in its
discretion, provide that Non-Qualified Stock Options be transferable, without
consideration, to immediate family members (i.e., children, grandchildren or
spouse), to trusts for the benefit of such immediate family members and to
partnerships in which such family members are the only partners. The
Committee may attach to such transferability feature such terms and
conditions as it deems advisable. In addition, a participant may, in the
manner established by the Committee, designate a beneficiary (which may be a
person or a trust) to exercise the rights of the participant, and to
receive any distribution, with respect to any Option upon the death of the
participant. A beneficiary, guardian, legal representative or other person
claiming any rights under the Plan from or through any participant shall be
subject to all terms and conditions of the Plan and any Option agreement
applicable to such participant, except as otherwise determined by the
Committee, and to any additional restrictions deemed necessary or appropriate
by the Committee.
6<PAGE>
Adjustments Upon Certain Events
In the event that the Committee shall determine that any change in
corporate capitalization, such as a dividend or other distribution of Shares,
or a corporate transaction, such as a merger, consolidation, reorganization
or partial or complete liquidation 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) such adjustment shall be made in
such manner as not to adversely affect the status of any Option as
"performance-based compensation" under Section 162(m) of the Code; and
(iii) the number of Shares subject to any Option denominated in Shares shall
always be a whole number.
Options Awarded to Independent Directors
Each Independent Director who is a member of the Board on July 1 of a
year during the term of the Plan shall automatically be granted a
Non-Qualified Stock Option to purchase 5,000 Shares on July 1 of each year
of service on the Board as an Independent Director. All Options so granted
shall (a) be at an exercise price per Share equal to 100% of the Fair Market
Value of a Share on the date of the grant; (b) have a term of ten (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 (3) 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) twelve (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 (3) months after the death of the
Independent Director if such death shall occur during the three (3) 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.
RESALE RESTRICTIONS
This Plan Summary has been prepared in accordance with the requirements
of a registration statement on Form S-8 under the Securities Act and
accordingly is not available for reoffers or resales of Shares. The
Commission has indicated that holders of securities who have acquired such
securities pursuant to a bona fide public offering registered on Form S-8 and
who are not affiliates of the Company at the time of their proposed reoffer
or resale, may generally reoffer or resell the securities so acquired.
Holders of such securities who are affiliates of the Company may resell or
reoffer securities so acquired only if such reoffer or resale is made
7<PAGE>
pursuant to an exemption from the registration requirements of the Securities
Act or pursuant to a prospectus which meets the requirements of General
Instruction C of Form S-8. The exemption provided by Rule 144 promulgated
under the Securities Act would be available to affiliates of the Company so
long as the Company continues to be in compliance with the reporting and
other requirements of that Rule. For purposes of the Securities Act, in
general an "affiliate" of the Company is "a person" (as defined in the
Securities Act) that "directly, or indirectly through one or more
intermediates, controls, or is controlled by or is under common control with"
the Company. The Committee may require any individual receiving Shares
pursuant to an Option granted under the Plan, as a condition precedent to
receipt of such Shares, to represent and warrant to the Company in writing
that the Shares acquired by such individual are acquired without a view to
any distribution thereof and will not be sold or transferred other than
pursuant to an effective registration thereof under said Act or pursuant to
an exemption applicable under the Securities Act or the rules and regulations
promulgated thereunder. The certificates evidencing any of such Shares shall
be appropriately legended to reflect their status as restricted securities as
aforesaid.
In addition to the foregoing restrictions on reoffers and resales, the
operation of Section 16(b) of the Exchange Act may limit the ability of
officers, directors and holders of more than 10% of the outstanding Shares
("Beneficial Owners") to engage in transactions involving securities issued
under the Plan. Generally, Section 16(b) of the Exchange Act provides that
all profits realized by officers, directors and Beneficial Owners as a result
of any sale of any equity security of the Company within six months before or
after the purchase of any other equity security of the Company may be
recoverable by the Company. The term "equity security" includes, among other
things, common stock, preferred stock and stock options. The terms "purchase"
and "sale" are defined broadly for purposes of Section 16(b). For example,
the term "purchase" includes the grant of an Option and the term "sale"
includes the delivery of previously owned Shares as payment for the exercise
of an Option. Purchases in one class of equity securities may be matched
with sales in another class of equity securities for purposes of Section
16(b). Further, in any six month period, the lowest purchase price will be
matched with the highest sale price and, therefore, although the Beneficial
Owner, officer or director may have realized an economic loss, he or she may
be treated for Section 16(b) purposes as having realized a "profit."
Certain acquisitions of securities issued under the Plan, which would
otherwise be considered purchases for Section 16(b) purposes, are exempt from
liability. Accordingly, the grant of an Option under the Plan is not deemed
a purchase for Section 16(b) purposes if (i) the transaction is approved by
the Committee, (ii) the transaction is approved in advance, or subsequently
ratified not later than the date of the next annual meeting of shareholders,
by shareholders, or (iii) a period of at least six months elapses between the
date of grant of the Option and the date of sale of the underlying Shares
acquired upon exercise of such Option (the requirements provided for in
(i) and (ii) above are sometimes hereinafter referred to as the "Approval
Conditions"). The acquisition of Shares upon the exercise of an Option is
also not deemed a purchase if the Option is in-the-money at the time of
exercise (the exercise of an out-of-the-money option is not exempt unless
the exercise is necessary to comport with certain provisions of the Code or
one of the Approval Conditions was met with respect to such exercise).
8<PAGE>
Generally, a cashless exercise (paying the exercise price of an Option
by surrender of Shares issuable upon exercise of such Option) and the
surrender of previously owned Shares as payment for the exercise of an Option
are deemed sales for Section 16(b) purposes. However, these sales will be
exempt from Section 16(b) liability if one of the Approval Conditions is met
prior to such exercise with respect to the insider's right to direct that
(i) the Shares be withheld (in the case of a cashless exercise), or
(ii) the Shares be delivered or surrendered (in the case of a surrender of
previously owned Shares). The right to have stock withheld by the Company
upon the exercise of an Option to satisfy the tax withholding requirements
attendant to such transaction is deemed to be a sale of the withheld Shares
to the Company. The deemed sale will be exempt for Section 16(b) purposes if
one of the Approval Conditions was met with respect to the grant of the tax
withholding right.
FEDERAL INCOME TAX EFFECTS OF PLAN PARTICIPATION
The following discussion is a brief summary of the principal United
States federal income tax consequences under current federal income tax laws
relating to Options awarded under the Plan. This summary is not intended to
be exhaustive and, among other things, does not describe state, local or
foreign income and other tax consequences.
A participant will not recognize any taxable income upon the grant of a
Non-Qualified Stock Option and the Company will not be entitled to a tax
deduction with respect to such grant. Upon exercise of a Non-Qualified Stock
Option, the excess of the fair market value of the Common Stock on the
exercise date over the exercise price will be taxable as compensation
income to the participant, subject, in the case of an employee, to tax
withholding. Subject to the participant including such excess amount in
income or the Company satisfying applicable reporting requirements, the
Company should be entitled to a tax deduction in the amount of such
compensation income. The participant's tax basis for the Common Stock
received pursuant to the exercise of a Non-Qualified Stock Option will equal
the sum of the compensation income recognized and the exercise price.
In the event of a sale of Common Stock received upon the exercise of a
Non-Qualified Stock Option, any appreciation or depreciation after the
exercise date generally will be taxed as capital gain or loss, provided that
any gain will be subject to reduced rates of tax if the Common Stock was held
for more than twelve (12) months and will be subject to further reduced rates
if the Common Stock was held for more than eighteen (18) months.
Generally, a participant should not recognize taxable income at the time
of grant or exercise of an Incentive Stock Option and the Company should not
be entitled to a tax deduction with respect to such grant or exercise. The
exercise of an Incentive Stock Option generally will give rise to an item of
tax preference that may result in alternative minimum liability for the
participant.
A sale or other disposition by a participant of shares acquired upon the
exercise of an Incentive Stock Option more than one year after the transfer
of the shares to such participant and more than two (2) years after the date
of grant of the Incentive Stock Option should result in any difference
between the net sale proceeds and the exercise price being treated as
long-term capital gain or loss to the participant with no deduction being
allowed to the Company, provided that any gain will be subject to a further
9<PAGE>
reduced rate of tax if the shares acquired upon exercise of the Option are
held for more than eighteen (18) months. Upon a sale or other disposition of
shares acquired upon the exercise of an Incentive Stock Option within one
year after the transfer of shares to the participant or within two years
after the date of grant of the Incentive Stock Option (including the deliver
of such shares in payment of the exercise price of another Incentive Stock
Option within such period), any excess of (a) the lesser of (i) the fair
market value of the shares at the time of exercise of the Option and
(ii) the amount realized on such disqualifying sale or other disposition of
the shares over (b) the exercise price of such shares, should constitute
ordinary income to the participant and the Company should be entitled to a
deduction in the amount of such income. The excess, if any, of the amount
realized on a disqualifying sale over the fair market value of the shares at
the time of the exercise of the Option generally will constitute capital gain
subject to tax at a rate which is based on the holding period of the shares,
and will not be deductible by the Company.
Under certain circumstances the accelerated vesting or exercise of
Options in connection with a Change in Control of the Company might be deemed
an "excess parachute payment" for purposes of the golden parachute tax
provisions of Section 280G of the Code. To the extent it is so considered,
the participant may be subject to a 20% excise tax and the Company may be
denied a tax deduction.
Section 162(m) of the Code generally disallows a federal income tax
deduction to any publicly held corporation for compensation paid in excess of
$1 million in any taxable year to the chief executive officer or any of the
four other most highly compensated executive officers who are employed by the
Company on the last day of the taxable year. Compensation attributable to
Options granted under the Plan with an exercise price at least equal to the
fair market value of the underlying Common Stock on the date of grant should
not be subject to the deduction limitation. Compensation attributable to
Options granted under the Plan with an exercise below fair market value of
the underlying Common Stock on the date of grant may be subject to the
deduction limitations of Section 162(m) of the Code.
REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION
The following documents which have been filed by the Company with the
Commission are incorporated by reference in the prospectus, of which this
document forms a part, covering the securities issuable upon the exercise of
Options granted under the Plan (the "Prospectus"):
(a) The Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1997, which is the Company'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 Company's latest
fiscal year for which a Form 10-KSB was required to have been filed.
(b) The Company's Quarterly Report on Form 10-QSB for the three
months ended March 31, 1998.
(c) The description of the Company's Common Stock, par value $0.01
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.
10<PAGE>
All documents subsequently filed by the Company pursuant to Section 13,
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 the Prospectus and to be a part thereof from the
time of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference in the Prospectus
shall be deemed to be modified or superseded for purpose of the Prospectus to
the extent that a statement contained herein or any other subsequently filed
document which also is or is deemed to be incorporated by referenced in the
Prospectus modifies or supersedes such statement. Any such statement so
modified or so superseded shall not be deemed, except as so modified or
superseded, to constitute a part of the Prospectus.
Copies of the above documents, and copies of all reports, proxy
statements and other communications distributed to the Company's security
holders generally, may be obtained by each person to whom a Plan Summary is
delivered, upon the written or oral request of such person, without charge
from Fotoball USA, Inc., 3738 Ruffin Road, San Diego, California 92123,
Attention: Karen Betro, Secretary, telephone number (619) 467-9900.
Plan participants may use the foregoing address and telephone number to
obtain additional information about the Plan and its administrators.
11
FOTOBALL USA, INC.
STOCK OPTION AGREEMENT
----------------------
Fotoball USA, Inc., a Delaware corporation (the "Company"), has
duly adopted the 1998 Stock Option Plan (the "Plan"), the terms of which
are hereby incorporated by reference. In the case of any conflict between
the provisions hereof and those of the Plan, the provisions of the Plan shall
be controlling. A copy of the Plan is available upon request by the
Optionee to the Secretary of the Company.
In accordance with Section 6 of the Plan, a committee of the Board
of Directors (the "Board") of the Company designated by the Board to
administer the Plan (the "Committee") adopted a resolution granting you
(the "Optionee") a stock option (the "Option") under the Plan to purchase
the number of shares (the "Shares") of the Company's common stock, par
value $.01 per share (the "Common Stock"), specified below, for the
exercise price specified below and on the terms and subject to the
conditions set forth in this Agreement and in the Plan.
This page is the first page of this Agreement, which describes in
detail your rights with respect to the Option granted to you hereby and
constitutes a legal agreement between you and the Company.
Name of Optionee:
Address of Optionee:
Date of Grant:
Option Exercise Price: (subject to Paragraph 4): $
Number of Shares Subject to Option:
Type of Option: Nonqualified Stock Option [ ]
Incentive Stock Option [ ]
IN WITNESS WHEREOF, the parties have witnessed this
Agreement to be duly executed and delivered as of the Date of Grant
specified above.
FOTOBALL USA, INC.
____________________________ By:_______________________________
Optionee Name:
Title:
1<PAGE>
1. (a) Unless the Option is previously terminated pursuant to the Plan or
this Agreement and subject to the terms of any other agreement between the
Optionee and the Company (including, without limitation, any employment or
other agreement which may provide for, among other things, an accelerated
vesting schedule), the Option shall be exercisable in three equal
installments on the first, second and third anniversary of the Date of Grant.
In no event shall any Shares be purchasable under this Agreement after the
tenth (10th) anniversary after the Date of Grant (the "Expiration Date").
Except as provided in subparagraph (b) hereof, the Option shall cease to be
exercisable thirty (30) days after the date the Optionee terminates services
as an employee of the Company or any Affiliate of the Company for reasons
other than Cause and immediately upon the termination of the Optionee for
Cause, and all rights of the Optionee hereunder shall thereupon terminate.
(b) If the Optionee ceases to be an employee of the Company or any
Affiliate of the Company and this cessation is due to retirement (as defined
by the Committee in its sole discretion), or to mental or physical disability
(as defined in each case by the Committee in its sole discretion) or to death,
the Option shall be exercisable as provided in this subparagraph. The
Optionee or, in the event of his mental or physical disability, if
permissible under applicable law with respect to any option that is not an
incentive stock option (an "ISO") under Section 422 of the Internal Revenue
Code, as amended (the "Code"), his duly appointed guardian or legal
representative or, in the event of his death, his executor or administrator
shall have the privilege of exercising the unexercised portion of the Option
which the Optionee could have exercised on the day on which he ceased to be
an employee of the Company or any Affiliate of the Company; provided,
however, that such exercise must be in accordance with the terms of this
Agreement and within (i) three (3) months after the date on which the
Optionee's employment is terminated by reason of the Optionee's retirement
or mental or physical disability or (ii)(A) twelve (12) months after the
date on which the Optionee's employment is terminated by reason of the
Optionee's death or (B) three (3) months after the date on which the
Optionee's employment is terminated by reason of the Optionee's death if such
death occurs during the three (3) month period following the termination of
the Optionee's employment by reason of retirement or mental or physical
disability, as the case may be. In no event, however, shall the Optionee,
his duly appointed guardian or legal representative, or his executor or
administrator, as the case may be, exercise the Option after the Expiration
Date. For all purposes of this Agreement, an approved leave of absence shall
not constitute an interruption or cessation of the Optionee's service as an
employee of the Company or any Affiliate of the Company.
2. Nothing contained herein shall be construed to confer on the Optionee
any right to be retained in the employ of the Company or any Affiliate of
the Company or to derogate from any right of the Company or any Affiliate
thereof to dismiss the Optionee from employment, free from any liability,
or any claim under this Agreement or the Plan, unless otherwise expressly
provided in the Plan or in this Agreement.
3. Subject to Section 422 of the Code, no Option and no right under any
such Option shall be assignable, alienable, saleable or transferable by the
Optionee otherwise than by will or by the laws of descent and distribution,
2<PAGE>
and such Option, and each right under any such Option, shall be exercisable
during the Optionee's lifetime only by the Optionee or, if permissible under
applicable law, by the Optionee's guardian or legal representative. However,
the Committee may, in its discretion, provide that nonqualified stock options
be transferable, without consideration, to immediate family members (i.e.,
children, grandchildren or spouse) to trusts for the benefit of such
immediate family members and to partnerships in which such family members
are the only parties. In addition, the Optionee may, in the manner
established by the Committee, designate a beneficiary to exercise the rights
of the Optionee, and to receive any distribution with respect to any Option
upon the death of the Optionee. 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 of the Company.
4. In the event that the Committee shall determine that the outstanding
shares of Common Stock are affected by 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 their
reorganization of the Company or other rights to purchase Shares or other
securities of the Company, or other similar corporate transaction or event,
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 may
be subject to Options, (y) the number and type of Shares subject to the
unexercised portion of the Option, 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 Optionee; provided, however, in each case, that
(i) with respect to ISOs 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
nonqualified 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 the Optionee in any fiscal year; and (iii) the number of Shares
subject to any Option denominated in Shares shall always be a whole
number. In computing any adjustment under this paragraph, any fractional
share shall be eliminated.
5. The Option shall be exercised when written notice of such exercise,
signed by the person entitled to exercise the Option, has been delivered
or transmitted by registered or certified mail, to the Secretary of the
Company at its principal office. Said written notice shall
specify the number of Shares purchasable under the Option which such
person then wishes to purchase and shall be accompanied by such
documentation, if any, as may be required by the Company as provided in
Paragraph 8 below and be accompanied by payment of the aggregate
3<PAGE>
Option price. Such payment of the aggregate Option price shall be,
without limitation, in the form of (i) cash, shares, outstanding Options or
other consideration, or any combination thereof, having a Fair Market
Value on the exercise date equal to the exercise price of the Option or
portion thereof being exercised or (ii) a broker-assisted cashless exercise
program established by the Committee. Delivery of said notice and such
documentation shall constitute an irrevocable election to purchase the
Shares specified in said notice and the date on which the Company receives
said notice and documentation shall, subject to the provisions of Paragraph
7 and 8, be the date as of which the Shares so purchased shall be deemed
to have been issued. The person entitled to exercise the Option shall not
have the right or status as a holder of the Shares to which such exercise
relates prior to receipt by the Company of such payment, notice and
documentation.
6. If the Company shall become obligated to withhold an amount on account
of any tax imposed as a result of the exercise of the Option, including,
without limitation, any federal, state, local or other income tax, or
any F.I.C.A., state disability insurance tax or other employment tax
(the "Withholding Liability"), then the Optionee shall, on the date
of exercise and as a condition to the issuance of the Shares subject
to the Option, pay the Withholding Liability to the Company. Payment
shall be by check payable to the Company; provided, however, that, with
the consent of the Committee, payment may instead be made by delivery to
the Company of a certificate or certificates representing Shares duly
endorsed or accompanied by a duly executed stock power(s), which
delivery effectively transfers to the Company good and valid title to such
Shares, free and clear of any pledge, commitment, lien, claim or other
encumbrance (such Shares to be valued on the basis of the Fair Market
Value thereof on the date of such payment); provided further, however,
that the Company is not then prohibited from purchasing or acquiring such
Shares. The Optionee hereby consents to the Company withholding the
full amount of the Withholding Liability from any compensation or other
amounts otherwise payable to the Optionee if the Optionee does not pay
the Withholding Liability to the Company on the date of exercise of the
Option, and the Optionee agrees that the withholding and payment of any
such amount by the Company to the relevant taxing authority shall
constitute full satisfaction of the Company's obligation to pay such
compensation or other amounts to Optionee.
7. Anything in this Agreement to the contrary notwithstanding, in no
event may the Option be exercisable if the Company shall, at any time
and in its sole discretion, determine that (i) the listing, registration
or qualification of any Shares otherwise deliverable upon such exercise,
upon any securities exchange or under any state or federal law, or
(ii) the consent or approval of any regulatory body or the satisfaction of
withholding tax or other withholding liabilities is necessary or desirable in
connection with such exercise. In such event, such exercise shall be held in
abeyance and shall not be effective unless and until such withholding,
listing, registration, qualification, consent or approval shall have been
affected or obtained free of any conditions not acceptable to the Company.
8. The Committee may require as a condition to the right to exercise the
Option hereunder that the Company receive from the person exercising the
Option representations, warranties and agreements, at the time of any
such exercise, to the effect that the Shares are being purchased for
4<PAGE>
investment only and without any present intention to sell or otherwise
distribute such Shares and that the Shares will not be disposed of
in transactions which, in the opinion of counsel to the Company, would
violate the registration provisions of the Securities Act of 1933, as then
amended, and the rules and regulations thereunder. The certificate issued
to evidence such Shares shall bear appropriate legends summarizing such
restrictions on the disposition thereof.
9. If the cover page of this Agreement states that the Option is intended
to satisfy the requirements for an ISO, then the Option shall not be
exercisable if (i) any other ISO to purchase Common Stock in the Company,
in any parent or subsidiary of the Company or in any predecessor corporation
of such corporations, pursuant to the Plan or otherwise, was granted to
the Optionee and (ii) such previously granted ISO remains outstanding.
If the cover page of this Agreement states that the Option is not intended
to satisfy the requirements for an ISO, then the Option shall be exercisable
in accordance with the terms hereof even if (i) any ISO to purchase Common
Stock in the Company, in any parent or subsidiary of the Company or in any
predecessor corporation of such corporations, pursuant to the Plan or
otherwise, was granted to the Optionee and (ii) such previously granted
ISO remains outstanding. For purposes of this Paragraph, an ISO shall be
treated as outstanding until such option is exercised in full or expires by
reason of lapse of time.
10. 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.
11. The Company makes no representations or warranties as to the income,
estate or other tax consequences to the Optionee of the grant or exercise of
the Option or the sale or other disposition of the Shares acquired pursuant to
the exercise thereof.
12. This Agreement shall be construed and enforced in accordance with the
laws of the State of Delaware and applicable federal law. Subject to
subparagraph 1(b) and 3(a) hereof, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors or assigns, as the case may be.
5<PAGE>
FOTOBALL USA, INC.
INDEPENDENT DIRECTOR
STOCK OPTION AGREEMENT
-----------------------
Fotoball USA, Inc., a Delaware corporation (the "Company"), has
duly adopted the 1998 Stock Option Plan (the "Plan"), the terms of which
are hereby incorporated by reference. In the case of any conflict between
the provisions hereof and those of the Plan, the provisions of the Plan shall
be controlling. A copy of the Plan is available upon request by the
Optionee to the Secretary of the Company.
In accordance with Section 7 of the Plan, you (the "Optionee")
have been automatically granted a stock option (the "Option") under the
Plan to purchase the number of shares (the "Shares") of the Company's
common stock, par value $.01 per share (the "Common Stock"), specified
below, for the exercise price specified below and on the terms and subject
to the conditions set forth in this Agreement and in the Plan.
This page is the first page of this Agreement, which describes in
detail your rights with respect to the Option granted to you hereby and
constitutes a legal agreement between you and the Company.
Name of Optionee:
Address of Optionee:
Date of Grant:
Option Exercise Price: (subject to Paragraph 4): $
Number of Shares Subject to Option: July 1, ____
Type of Option: Nonqualified Stock Option
IN WITNESS WHEREOF, the parties have witnessed this
Agreement to be duly executed and delivered as of the Date of Grant
specified above.
FOTOBALL USA, INC.
___________________________ By:_______________________________
Optionee Name:
Title:
1<PAGE>
1. (a) Unless the Option is previously terminated pursuant to the Plan
or this Agreement and subject to the terms of any other agreement between
the Optionee and the Company (including, without limitation, any other
agreement which may provide for, among other things, an accelerated
vesting schedule), the Option shall be exercisable beginning on the Date
of Grant. In no event shall any Shares be purchasable under this
Agreement after the tenth (10th) anniversary after the Date of Grant
(the "Expiration Date"). Except as provided in subparagraph (b) hereof,
the Option shall cease to be exercisable upon termination of the Optionee's
service as a director of the Company.
(b) If the Optionee terminates service as a director of the Company
and this cessation is due to mental or physical disability (as defined
in each case by a committee of the Board of Directors (the "Board") of
the Company designated by the Board to administer the Plan (the "Committee")
in its sole discretion) or to death, the Option shall be exercisable as
provided in this subparagraph. The Optionee or, in the event of his
mental or physical disability, if permissible under applicable law with
respect to any option that is not an incentive stock option (an "ISO")
under Section 422 of the Internal Revenue Code, as amended (the "Code"),
his duly appointed guardian or legal representative or, in the event of his
death, his executor or administrator shall have the privilege of exercising
the unexercised portion of the Option which the Optionee could have
exercised on the day on which he terminated service as a director of the
Company; provided, however, that such exercise must be in accordance
with the terms of this Agreement and within (i) three (3) months after the
date on which the Optionee's service as a director of the Company is
terminated by reason of the Optionee's retirement or mental or physical
disability or (ii)(A) twelve (12) months after the date on which the
Optionee's service as a director of the Company is terminated by reason of
the Optionee's death or (B) three (3) months after the date on which the
Optionee's service as a director of the Company is terminated by reason of
the Optionee's death if such death occurs during the three (3) month period
following the termination of the Optionee's service as a director of the
Company by reason of mental or physical disability, as the case may be. In
no event, however, shall the Optionee, his duly appointed guardian or legal
representative, or his executor or administrator, as the case may be,
exercise the Option after the Expiration Date. For all purposes of this
Agreement, an approved leave of absence shall not constitute an
interruption or termination of the Optionee's service as a director of the
Company.
2. Nothing contained herein shall be construed to confer on the Optionee
any right to be retained as a director of the Company or to derogate from
any right of the Company to dismiss the Optionee from service as a director,
free from any liability, or any claim under this Agreement or the Plan,
unless otherwise expressly provided in the Plan or in this Agreement.
3. Subject to Section 422 of the Code, no Option and no right under
any such Option shall be assignable, alienable, saleable or transferable
2<PAGE>
by the Optionee otherwise than by will or by the laws of descent and
distribution, and such Option, and each right under any such Option, shall
be exercisable during the Optionee's lifetime only by the Optionee or,
if permissible under applicable law, by the Optionee's guardian
or legal representative. However, the Committee may, in its discretion,
provide that nonqualified stock options be transferable, without
consideration, to immediate family members (i.e., children, grandchildren
or spouse) to trusts for the benefit of such immediate family members and
to partnerships in which such family members are the only parties. In
addition, the Optionee may, in the manner established by the Committee,
designate a beneficiary to exercise the rights of the Optionee, and to
receive any distribution with respect to any Option upon the death of the
Optionee. 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 of the Company.
4. In the event that the Committee shall determine that the outstanding
shares of Common Stock are affected by 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 their reorganization of the Company or other rights to purchase Shares
or other securities of the Company, or other similar corporate transaction
or event, 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 may be subject to Options, (y) the number and type of
Shares subject to the unexercised portion of the Option, 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 Optionee; provided,
however, in each case, that (i) each such adjustment shall be made in
such manner as not to constitute a cancellation and reissuance of a
nonqualified 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 the Optionee in any fiscal year; and
(ii) the number of Shares subject to any Option denominated in Shares shall
always be a whole number. In computing any adjustment under this
paragraph, any fractional share shall be eliminated.
5. The Option shall be exercised when written notice of such exercise,
signed by the person entitled to exercise the Option, has been delivered
or transmitted by registered or certified mail, to the Secretary of
the Company at its principal office. Said written notice shall
specify the number of Shares purchasable under the Option which such
person then wishes to purchase and shall be accompanied by such
documentation, if any, as may be required by the Company as provided in
Paragraph 8 below and be accompanied by payment of the aggregate
3<PAGE>
Option price. Such payment of the aggregate Option price shall be,
without limitation, in the form of (i) cash, shares, outstanding Options or
other consideration, or any combination thereof, having a Fair Market
Value on the exercise date equal to the exercise price of the Option or
portion thereof being exercised or (ii) a broker-assisted cashless exercise
program established by the Committee. Delivery of said notice and such
documentation shall constitute an irrevocable election to purchase the
Shares specified in said notice and the date on which the Company receives
said notice and documentation shall, subject to the provisions of Paragraph
7 and 8, be the date as of which the Shares so purchased shall be deemed
to have been issued. The person entitled to exercise the Option shall not
have the right or status as a holder of the Shares to which such exercise
relates prior to receipt by the Company of such payment, notice and
documentation.
6. If the Company shall become obligated to withhold an amount on
account of any tax imposed as a result of the exercise of the Option,
including, without limitation, any federal, state, local or other
income tax, or any F.I.C.A., state disability insurance tax or other
employment tax (the "Withholding Liability"), then the Optionee shall, on
the date of exercise and as a condition to the issuance of the Shares subject
to the Option, pay the Withholding Liability to the Company. Payment
shall be by check payable to the Company; provided, however, that, with
the consent of the Committee, payment may instead be made by delivery to
the Company of a certificate or certificates representing Shares duly
endorsed or accompanied by a duly executed stock power(s), which
delivery effectively transfers to the Company good and valid title to such
Shares, free and clear of any pledge, commitment, lien, claim or other
encumbrance (such Shares to be valued on the basis of the Fair Market
Value thereof on the date of such payment); provided further, however,
that the Company is not then prohibited from purchasing or acquiring such
Shares. The Optionee hereby consents to the Company withholding the
full amount of the Withholding Liability from any compensation or other
amounts otherwise payable to the Optionee if the Optionee does not pay
the Withholding Liability to the Company on the date of exercise of the
Option, and the Optionee agrees that the withholding and payment of any
such amount by the Company to the relevant taxing authority shall
constitute full satisfaction of the Company's obligation to pay such
compensation or other amounts to Optionee.
7. Anything in this Agreement to the contrary notwithstanding, in no
event may the Option be exercisable if the Company shall, at any time
and in its sole discretion, determine that (i) the listing, registration
or qualification of any Shares otherwise deliverable upon such exercise,
upon any securities exchange or under any state or federal law, or
(ii) the consent or approval of any regulatory body or the satisfaction of
withholding tax or other withholding liabilities is necessary or desirable in
connection with such exercise. In such event, such exercise shall be held in
abeyance and shall not be effective unless and until such withholding,
listing, registration, qualification, consent or approval shall have been
affected or obtained free of any conditions not acceptable to the Company.
4<PAGE>
8. The Committee may require as a condition to the right to exercise
the Option hereunder that the Company receive from the person exercising
the Option representations, warranties and agreements, at the time of any
such exercise, to the effect that the Shares are being purchased for
investment only and without any present intention to sell or otherwise
distribute such Shares and that the Shares will not be disposed of
in transactions which, in the opinion of counsel to the Company, would
violate the registration provisions of the Securities Act of 1933, as then
amended, and the rules and regulations thereunder. The certificate issued
to evidence such Shares shall bear appropriate legends summarizing such
restrictions on the disposition thereof.
9. The Option shall be exercisable in accordance with the terms hereof
even if (i) any ISO to purchase Common Stock in the Company, in any parent
or subsidiary of the Company or in any predecessor corporation of such
corporations, pursuant to the Plan or otherwise, was granted to the
Optionee and (ii) such previously granted ISO remains outstanding.
For purposes of this Paragraph, an ISO shall be treated as outstanding
until such option is exercised in full or expires by reason of lapse of time.
10. 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.
11. The Company makes no representations or warranties as to the income,
estate or other tax consequences to the Optionee of the grant or exercise
of the Option or the sale or other disposition of the Shares acquired
pursuant to the exercise thereof.
12. This Agreement shall be construed and enforced in accordance with
the laws of the State of Delaware and applicable federal law. Subject
to subparagraph 1(b) and 3(a) hereof, this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
heirs, personal representatives, successors or assigns, as the case
may be.
5
July 23, 1998
Fotoball USA, Inc.
3738 Ruffin Road
San Diego, California 92123
Ladies and Gentlemen:
On the date hereof, Fotoball USA, Inc., a Delaware
corporation (the "Company"), intends to transmit for filing with the
Securities and Exchange Commission a Registration Statement on Form S-8
(the "Registration Statement") relating to 500,000 shares (the "Shares") of
common stock, par value $.01 per share, of the Company ("Common
Stock"), that may be issued from time to time upon the exercise of options
granted pursuant to Fotoball USA, Inc. 1998 Stock Option Plan (the "1998
Plan"). This opinion is an exhibit to the Registration Statement.
We have acted as counsel to the Company with respect to
certain corporate and securities matters and, in such capacity, we are familiar
with the various corporate and other proceedings taken by or on behalf of the
Company with respect to 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 of the
Company's Certificate of Incorporation, its by-laws as presently in effect,
minutes of meetings of its directors, stockholders and committees and such
other documents and instruments relating to the Company and the proposed
offering of the Shares as we have deemed necessary under the circumstances,
in each case signed, certified or otherwise proven to our satisfaction to be
genuine. 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 that we
are not admitted to the Bar in the State of Delaware. To the extent that the
opinions expressed herein involve the law of the State of Delaware, such
opinions are based solely upon our reading of the Delaware General Corporation
Law as reported by Corporation Service Company Legal and Financial Services,
without any investigation of the legal decisions or other statutory provisions
in effect in such state that may relate to the opinions expressed herein.
1<PAGE>
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 the Shares to be issued upon the exercise of options
granted pursuant to the 1998 Plan have been duly authorized and (subject to
the effectiveness of the Registration Statement and compliance with
applicable state securities laws), when issued in accordance with the terms
of the 1998 Plan and any option agreements executed pursuant thereto, will
be legally and validly issued, fully paid and non-assessable.
It should be understood that nothing in this opinion is
intended to apply to any disposition of any Shares which any participant in
the 1998 Plan might propose to make.
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 purpose, except as expressly provided in
the preceding paragraph, without our express written consent, and no party
other than you is entitled to rely on it. This opinion is rendered to you as
of the date hereof and we undertake no obligation to advise you of any change,
whether legal or factual, after the date hereof.
Very truly yours,
/s/ Shereff, Friedman, Hoffman & Goodman
-----------------------------------------
SHEREFF, FRIEDMAN, HOFFMAN & GOODMAN, LLP
2
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 20, 1998,
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, Lumer & Co.
--------------------------
Hollander, Lumer & Co.
Los Angeles, California
July 21, 1998
