SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant (X)
Filed by a party other than the Registrant ( )
(X) Preliminary Proxy Statement
( ) Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
( ) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
Fotoball USA, Inc.
----------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rule 14a-(i)(1) and 0-11.
1. Title of each class of securities to which transaction applies:
------------------------------------------------------------------
2. Aggregate number of securities to which transaction applies:
------------------------------------------------------------------
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------
4. Proposed maximum aggregate value of transaction:
----------------
5. Total fee paid:
--------------------------------------------------
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the fate of its filing:
1. Amount Previously Paid:
------------------------------------------
2. Form, Schedule or Registration Statement No.:
--------------------
3. Filing Party:
----------------------------------------------------
4. Date Filed:
------------------------------------------------------<PAGE>
FOTOBALL USA, INC.
3738 Ruffin Road
San Diego, California 92123
__________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 18, 1999
__________________
TO THE HOLDERS OF COMMON STOCK OF FOTOBALL USA, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Fotoball USA, Inc. (the "Corporation") will be held at 2 o'clock P.M.,
local time, on May 18, 1999, at the Corporation's offices located at
3738 Ruffin Road, San Diego, California, for the following purposes:
1. To elect one (1) director of the Corporation to hold office
until the 2002 Annual Meeting of Stockholders and until the
election and qualification of his successor.
2. To increase the number of the Corporation's shares of common
stock reserved for issuance under the Corporation's 1998 Stock
Option Plan (the "Plan") from 500,000 to 700,000.
3. To vote upon the ratification of the appointment of Hollander,
Lumer & Co. LLP as the Corporation's independent auditor for fiscal
year 1999.
4. To transact such other business as may properly come before
the meeting or any and all adjournments thereof.
Only holders of record of the Corporation's common stock at the
close of business on March 29, 1999 are entitled to receive notice of,
and to vote at, the meeting and any adjournment(s) thereof. Such
stockholders may vote in person or by proxy. The stock transfer books
of the Corporation will not be closed.
Stockholders who find it convenient are cordially invited to attend
the meeting in person. If you are not able to do so and wish that your
shares be voted, you are requested to fill in, sign, date and return the
accompanying proxy in the enclosed envelope. No postage is required if
mailed in the United States.
By Order of the Board of Directors,
KAREN M. BETRO
Secretary
Dated: April 15, 1999<PAGE>
FOTOBALL USA, INC.
3738 Ruffin Road
San Diego, California 92123
__________________
PROXY STATEMENT
__________________
Annual Meeting of Stockholders
May 18, 1999
__________________
This statement is furnished in connection with the solicitation by
the Board of Directors of Fotoball USA, Inc. (the "Corporation") of
proxies to be used at the Annual Meeting of Stockholders of the
Corporation to be held at 2:00 P.M., local time, on May 18, 1999, at the
Corporation's offices located at 3738 Ruffin Road, San Diego,
California, and at any adjournment(s) thereof. If proxy cards in the
accompanying form are properly executed and returned, the shares of the
Corporation's common stock, par value $.01 per share (the "Common
Stock"), represented thereby will be voted as instructed on the proxy,
but if no instructions are given, such shares will be voted (1) for the
election as director of the nominee of the Board of Directors named
below, (2) in favor of the increase in the number of shares reserved for
issuance under the Plan from 500,000 to 700,000, (3) in favor of the
ratification of the appointment of Hollander, Lumer & Co. LLP as the
Corporation's independent auditors for fiscal year 1999, and (4) in the
discretion of the proxies named in the proxy card on any other proposals
to properly come before the meeting or any adjournment thereof.
Any proxy may be revoked prior to its exercise, but the attendance
at the meeting by any stockholder who has previously given a proxy will
not have the effect of revoking the proxy unless such stockholder
delivers written notice of revocation to the secretary of the meeting
prior to the exercise of the proxy. The approximate date of mailing of
this Proxy Statement and the accompanying proxy card is April 15, 1999.
VOTING
Holders of record of the Common Stock on March 29, 1999 (the
"Record Date") will be entitled to vote at the Annual Meeting or any
adjournment thereof. As of that date, there were 2,699,242 shares of
Common Stock outstanding and entitled to vote and a majority, or
1,349,622 of these shares, will constitute a quorum for the transaction
of business. Each share of Common Stock entitles the holder thereof to
one vote on all matters to come before the meeting, including the
election of the director named herein.
The favorable vote of a plurality of the votes cast at the meeting
is necessary to elect the director nominated for election at the
meeting. The favorable vote of a majority of the shares represented in
person or by proxy and entitled to vote at the meeting is necessary to
1<PAGE>
(i) approve an increase in the number of shares reserved for issuance
under the Plan from 500,000 to 700,000 and (ii) ratify the appointment
of Hollander, Lumer & Co. LLP as the Corporation's independent auditors
for fiscal year 1999. Abstentions will have the same effect as votes
against the proposals. Broker non-votes (i.e., instances where brokers
are prohibited from exercising discretionary authority for beneficial
owners who have not returned a proxy) will be disregarded for the
proposals set forth above and will have no effect on the outcome of the
votes for such proposals. The Board of Directors recommends a vote FOR
each of the proposals set forth above.
ELECTION OF DIRECTORS
The Corporation's Certificate of Incorporation and By-laws provide
for a Board of Directors divided into three classes of directors serving
staggered three-year terms. The Board of Directors approved a reduction
in the size of the Board from five members to four. At the forthcoming
meeting to be held on May 18, 1999, one director from the second class
will be elected for a term expiring at the 2002 Annual Meeting of
Stockholders. The Board of Directors has recommended Joel K. Rubenstein
as the nominee for election as a director from such class. The
continuing directors from the first class, Salvatore T. DiMascio and
Nicholas A. Giordano, are serving terms that expire on the date of the
2001 Annual Meeting of Stockholders and the continuing director from the
third class, Michael Favish, is serving a term that expires on the date
of the 2000 Annual Meeting of Stockholders.
Unless otherwise specified in the accompanying proxy, the shares
voted pursuant thereto will be cast for Joel K. Rubenstein as the
director from the second class, to hold office until the 2002 Annual
Meeting of Stockholders and until his successor shall be duly elected
and shall have qualified. If, for any reason, at the time of election,
Mr. Rubenstein should be unwilling to accept nomination or election, it
is intended that such proxy will be voted for the election, in his
place, of a substitute nominee recommended by the Board of Directors.
However, the Board of Directors has no reason to believe that Mr.
Rubenstein will be unable or unwilling to serve as a director, if
elected.
Information with respect to the Corporation's directors is set
forth below.
Positions and Offices Has Been
Presently Held With a Director
Name Age the Corporation Since
---- --- --------------------- ----------
Current Nominee:
Joel K. Rubenstein 62 Director 1994
Directors From First Class:
Salvatore T. DiMascio 59 Director 1997
Nicholas A. Giordano 56 Director 1998
Director From Third Class:
Michael Favish 50 President, Chief 1988
Executive Officer
and Director
2<PAGE>
Joel K. Rubenstein has served as a director of the Corporation
since August 1994. From April 1990 through April 1992 and from March
1994 to present, Mr. Rubenstein has been a partner of the Contrarian
Group, Inc., an operating management company. In addition, from April
1993 to present, Mr. Rubenstein has been a principal of Oracle One
Partners, Inc., a marketing management company. From April 1992 through
March 1994, Mr. Rubenstein served as the Senior Project Manager,
Business and Economic Development for Rebuild L.A., the recovery
organization created after the Los Angeles riots. Prior to such time,
from January 1985 through April 1990, Mr. Rubenstein served as the Vice
President, Corporate Marketing for Major League Baseball, Office of the
Commissioner.
Salvatore T. DiMascio has served as a director of the Corporation
since August 1997. Since 1986, Mr. DiMascio has been President of
DiMascio Venture Management, Inc., a management and investment firm.
Additionally, from 1994 to 1997, Mr. DiMascio was Executive Vice
President of Anchor Gaming, Inc., a publicly-held gaming company. From
1978 to 1986, Mr. DiMascio was Senior Vice President and Chief Financial
Officer of Conair Corporation, a publicly-held manufacturer of health
and beauty products. Mr. DiMascio's previous business experience
includes Audit Manager with Arthur Young & Co., a national CPA firm, and
as Controller of Revlon Inc. Mr. DiMascio is currently serving on the
Board of Directors of U.S. Communications Inc., H.E.R.C. Products Inc.,
and Colorado Casino Resort Inc., all of which are publicly-held
corporations.
Nicholas A. Giordano has served as a director of the Corporation
since July 1998. In July 1998, Mr. Giordano was appointed interim
President of LaSalle University for a one-year term. From late 1997
through 1998, Mr. Giordano was a consultant for financial service
organizations. Additionally, from 1971 through August 1997, Mr.
Giordano held various positions at The Philadelphia Stock Exchange,
including from 1981 to 1997 as President and Chief Executive Officer.
He also served as Chairman of the Board of the exchange's two
subsidiaries: Stock Clearing Corporation of Philadelphia and
Philadelphia Depository Trust Company. Mr. Giordano's previous business
experience includes serving as Chief Financial Officer at two brokerage
firms (1968-1971) and as a Certified Public Accountant at Price
Waterhouse (1965-1971).
Michael Favish has served as President and a director of the
Corporation since his founding of the Corporation in December 1988 and
as President, Chief Executive Officer and a director of the Corporation
since March 1994. Mr. Favish has over 26 years of product design,
manufacturing and sourcing experience.
MEETINGS OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 1998, the Board of
Directors held six meetings. During such period, each of the then-
current directors of the Corporation attended 75% or more of the
aggregate of (1) the total number of meetings of the Board of Directors
and (2) the total number of meetings held by all committees of the Board
of Directors on which such director served.
3<PAGE>
The Board of Directors has standing audit and compensation
committees.
The members of the audit committee are Salvatore T. DiMascio and
Nicholas A. Giordano. The audit committee's primary responsibilities are
to recommend the appointment of the Corporation's independent auditors
and to review the scope and results of the audits, the internal
accounting controls of the Corporation, audit practices and the
professional services furnished by the independent auditors. The audit
committee held two meetings during the year ended December 31, 1998.
The members of the compensation committee are Joel K. Rubenstein
and Salvatore T. DiMascio. The compensation committee's primary
responsibility is to review the compensation arrangements relating to
senior officers of the Corporation and to administer the Plan. The
compensation committee held three meetings during the year ended
December 31, 1998.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), requires the Corporation's directors and executive
officers and persons who own beneficially more than ten percent of the
Common Stock to file with the Securities and Exchange Commission initial
reports of beneficial ownership and reports of changes in beneficial
ownership of the Common Stock. Officers, directors and persons owning
more than ten percent of the Common Stock are required to furnish the
Corporation with copies of all such reports. To the Corporation's
knowledge, based solely on a review of copies of such reports furnished
to the Corporation, the Corporation believes that during fiscal 1998,
all Section 16(a) filing requirements applicable to its officers,
directors and persons owning beneficially more than ten percent of the
Common Stock were complied with.
4<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of April 12,
1999 with respect to the Common Stock of the Corporation beneficially
owned by (a) all persons known to the Corporation to own beneficially
more than 5% of any class of voting security of the Corporation, (b) all
directors and nominees, (c) the Named Executives (as defined under the
caption "Executive Compensation") and (d) all executive officers and
directors of the Corporation as a group.
Amount and
Nature of Percent of
Beneficial Common Stock
Name and Address Ownership (1) Ownership (1)
----------------- ------------- -------------
Michael Favish
3738 Ruffin Road
San Diego, CA 92123............ 535,752 (2) 19.1%
Salvatore T. DiMascio
22951 Aegean Sea Drive
Monarch Beach, CA 92629........ 14,500 (3) *
Nicholas A. Giordano
1755 Governor's Way
Blue Bell, PA 19422........... 9,500 (4) *
Joel K. Rubenstein
1071 Camelback Street, Suite 111
Newport Beach, CA 92660........ 14,000 (5) *
David G. Forster
3738 Ruffin Road
San Diego, CA 92123............ 70,209 (6) 2.6%
Carl E. Francis
3738 Ruffin Road
San Diego, CA 92123............ 20,000 (7) *
Jon D. Schneider
3738 Ruffin Road
San Diego, CA 92123........... 17,363 (8) *
All executive officers and
directors as a group
(consisting of 9 persons)..... 731,853 24.9%
____________
*Less than 1%.
(1) This table identifies persons and entities having sole voting
and/or investment power with respect to the shares set forth opposite
their names as of April 12, 1999 according to information furnished to
5<PAGE>
the Corporation by each of them. A person is deemed to be the
beneficial owner of securities that can be acquired by such person
within 60 days from the date of this Proxy Statement upon the conversion
of convertible securities or the exercise of warrants or options.
Percent of Common Stock ownership is based on 2,699,242 shares of Common
Stock outstanding, and assumes that in each case the person or entity
only, or the group only, exercised his or its rights to purchase all
shares of Common Stock underlying stock options and warrants.
(2) Includes 110,000 shares of Common Stock issuable upon exercise of
currently exercisable options at a per share exercise price of $1.69.
(3) Includes 2,500 and 5,000 shares of Common Stock issuable upon
exercise of currently exercisable options at per share exercise prices
of $1.38 and $2.38, respectively.
(4) Includes 5,000 shares of Common Stock issuable upon exercise of
currently exercisable options at a per share exercise price of $2.38.
(5) Includes 7,500 and 5,000 shares of Common Stock issuable upon
exercise of currently exercisable options at per share exercise prices
of $1.69 and $2.38, respectively.
(6) Includes 35,333 shares of Common Stock issuable upon exercise of
currently exercisable options at a per share exercise price of $1.69.
(7) Includes 20,000 shares of Common Stock issuable upon exercise of
currently exercisable options at a per share exercise price of $1.69.
(8) Includes 16,667 shares of Common Stock issuable upon exercise of
currently exercisable options at a per share exercise price of $1.69.
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table shows, for the fiscal years ended December 31,
1996, 1997 and 1998, the compensation paid by the Corporation, as well
as certain other compensation paid or accrued for those years, to
Michael Favish, the Corporation's President and Chief Executive Officer,
David G. Forster, the Corporation's Executive Vice President and Chief
Financial Officer, Carl E. Francis, the Corporation's Senior Vice
President of Sales and Marketing and Jon D. Schneider, the Corporation's
Vice President, Marketing, Team Business (the "Named Executives"). No
6<PAGE>
other person who served as an executive officer of the Corporation
received salary and bonus in excess of $100,000 during the fiscal year
ended December 31, 1998.
Summary Compensation Table
--------------------------
Annual Long-Term
Compensation Compensation
--------------------------------- ------------
Name and Other Annual
Principal Position Year Salary($) Bonus($) Compensation($) Options(#)
- ------------------ ---- --------- -------- --------------- ----------
Michael Favish 1998 165,000 20,000 0 10,000
President and Chief 1997 165,000 0 22,070 (1) 0
Executive Officer 1996 153,247 74,250 0 10,000
David G. Forster 1998 82,000 30,000 13,864 (2) 32,000
Executive Vice President, 1997 80,000 15,000 0 0
Chief Financial Officer 1996 76,010 55,750 0 10,500
Carl E. Francis 1998 80,000 40,000 0 20,000
Senior Vice President, 1997 75,000 17,000 0 0
Sales and Marketing 1996 70,000 23,688 0 5,000
Jon D. Schneider 1998 72,000 43,250 0 17,500
Vice President, Marketing, 1997 52,000 14,000 0 0
Team Business 1996 47,500 17,250 0 5,000
(1) Includes $9,000 for reimbursement of automobile expenses and $7,700
for disability insurance coverage.
(2) Includes $9,000 for reimbursement of automobile expenses and $4,864
for health insurance coverage.
Certain Relationships and Related Transactions
Michael Favish, President and Chief Executive Officer of the
Corporation, and Karen Betro, Vice President-Operations of the
Corporation, have a long-term relationship. Derrick Favish, a non-
officer employee and stockholder of the Corporation, is the brother of
Michael Favish, the President and Chief Executive Officer of the
Corporation. Greg Favish and Terry Favish, non-officer employees of the
Corporation, are the sons of Michael Favish.
Any future transaction with directors, executive officers or their
affiliates, including, without limitation, any granting or forgiveness
of loans, will be made only if the transaction has been approved by a
majority of the then independent and disinterested members of the Board
of Directors and is on terms no less favorable to the Corporation than
could have been obtained from unaffiliated parties.
7<PAGE>
Stock Options
The following table contains information concerning the grant of
stock options under the Plan to the Named Executives during the
Corporation's last fiscal year:
Option Grants in Last Fiscal Year
Individual Grants
------------------------------------------------------------
% of Total Options
Granted to
Employees in
Fiscal Year Exercise Price Expiration
Name Options Granted(#) (of 210,050) ($/Sh) Date
- -------------- ------------------ ------------ -------------- ----------
Michael Favish 10,000 4.8 2.69 12/6/08
David G. Forster 32,000 15.2 (1) (1)
Carl E. Francis 20,000 9.5 (2) (2)
Jon D. Schneider 17,500 8.3 (3) (3)
Options granted under the Plan become exercisable in three equal
installments on each of the first, second and third anniversary of the
date of grant. The options were granted at an exercise price equal to
not less than the fair market value of the Common Stock on the date of grant.
The Corporation does not currently grant stock appreciation rights.
(1) Includes 22,000 and 10,000 options with an exercise price of $1.69
and $2.69, with expiration dates of 6/8/08 and 12/6/08, respectively.
(2) Includes 15,000 and 5,000 options with an exercise price of $1.69
and $2.69, with expiration dates of 6/8/08 and 12/6/08, respectively.
(3) Includes 12,500 and 5,000 options with an exercise price of $1.69
and $2.69, with expiration dates of 6/8/08 and 12/6/08, respectively.
Option Holdings
No stock options were exercised by any of the Named Executives
during the Corporation's last fiscal year. The following table sets
forth information with respect to the unexercised options held by the
Named Executives as of the end of the Corporation's last fiscal year.
Securities Underlying Unexercised Value of Unexercised In-the-
Options at FY-End (#) Money Options at FY-End ($)
----------------------------------------------------------------
Exercisable Unexercisable
Name (1) Exercisable Unexercisable
- -------------------------------------------------------------------------------
Michael Favish 110,000 10,000 $185,900 $ 16,900
David G. Forster 28,000 32,000 $ 47,320 $ 54,080
Carl E. Francis 15,000 20,000 $ 25,350 $ 33,800
Jon D. Schneider 12,500 17,500 $ 21,125 $ 29,575
8<PAGE>
(1) This represents the total number of shares subject to stock options
held by the Named Executives as of December 31, 1998. These options were
granted on various dates during the years 1994 through 1998.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
The Corporation is party to an employment agreement (the "Favish
Agreement") with Michael Favish, which provides that Mr. Favish will
serve as President and Chief Executive Officer for an initial term of
five years commencing on August 11, 1994. Mr. Favish's annual base
salary is $165,000 per year, with annual cost of living increases and
additional increases at the discretion of the compensation committee.
For 1999, Mr. Favish's salary was increased to $190,000 by the
compensation committee.
Mr. Favish is also entitled to a bonus at the discretion of the
compensation committee and has been granted options, vesting over a
three-year period, to purchase 120,000 shares of Common Stock at per
share exercise prices of $1.69 - $2.69. The Favish Agreement also
provides that Mr. Favish will not engage in a business which competes
with the Corporation for the term of the Favish Agreement and for two
years thereafter. In the event that Mr. Favish's employment is
terminated as a result of a Constructive Termination (as defined in the
Favish Agreement), the Favish Agreement provides that the Corporation
will pay Mr. Favish the base salary and bonus compensation payable to
Mr. Favish through the remainder of the term of the Favish Agreement.
In the event that Mr. Favish's employment is terminated following a
Change in Control (as defined in the Favish Agreement) of the
Corporation, the Favish Agreement provides that the Corporation will pay
Mr. Favish a termination and non-competition payment equal to the
greater of (i) the base salary and bonus compensation payable to Mr.
Favish through the remainder of the term of the Favish Agreement or (ii)
2.99 times Mr. Favish's base salary and bonus compensation for the
calendar year prior to such termination. The Corporation and Mr. Favish
are discussing an extension of Mr. Favish's employment agreement.
Director Compensation
Directors who are not employees of the Corporation receive cash
compensation of $6,000 per calendar year and options to purchase 5,000
shares of Common Stock under the Plan on July 1 of each of their first
three years of service on the Board of Directors. All directors are
reimbursed for reasonable expenses incurred in connection with
attendance of meetings.
9<PAGE>
APPROVAL OF AN AMENDMENT TO THE CORPORATION'S
1998 STOCK OPTION PLAN INCREASING THE NUMBER OF SHARES
AVAILABLE FOR ISSUANCE UPON EXERCISE OF OPTIONS FROM 500,000 TO 700,000
The Plan provides for issuance of options to purchase up to an
aggregate of 500,000 shares of Common Stock (subject to adjustment in
the event of stock splits, stock dividends and similar dilutive events)
to regular, full-time employees and non-employee directors of the
Corporation or any parent or subsidiary (as defined in the Plan) of the
Corporation. On March 9, 1999, the compensation committee, the
administrator of the Plan, approved an increase of the number of shares
available for issuance upon exercise of options granted under the Plan
from 500,000 to 700,000 in order to ensure an adequate pool of stock
options to attract qualified employees.
To date, the Corporation has granted options to purchase 467,550
shares of Common Stock under the Plan. The maximum number of shares for
which options may be granted under the Plan in any fiscal year to any
one employee is 125,000; provided, however, that the compensation
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.
Description of the Plan
The Plan authorizes the issuance of both (i) incentive stock
options ("ISOs"), as defined in Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), and (ii) non-qualified stock options
("NQSOs") which do not conform to the requirements of Section 422 of the
Code or which the compensation committee otherwise elects to treat as
NQSOs. Pursuant to the Plan, employees of the Corporation may be
granted either ISOs or NQSOs and non-employee directors of the
Corporation may be granted only NQSOs. The exercise price of each NQSO
or ISO shall be fixed by the compensation committee, but generally shall
not be less than 100% of the fair market value of the Common Stock at
the time of grant, except that the exercise price of each ISO granted to
an employee who owns 10% or more of the outstanding stock of the
Corporation or a subsidiary or parent of the Corporation ("10%
Stockholder") shall not be less than 110% of the fair market value on
the date of grant. The term of each NQSO shall be fixed by the
administrator of the Plan, but generally shall not exceed ten years from
the date of the grant. The term of each ISO shall in no event be more
than ten years from the date of the grant or, in the case of an ISO
granted to a 10% Stockholder, five years from the date of the grant. No
stock options may be granted under the Plan after the earliest to occur
of (i) the date on which all options issuable under the Plan have been
issued, (ii) the termination of the Plan by the Board of Directors or
(iii) March 9, 2008.
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,
10<PAGE>
shall be exercisable during the participant's lifetime, only by the
participant or if permissible under applicable law (including Code
Section 422, in the case of an ISO) 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 Corporation. Notwithstanding the
foregoing, the compensation committee may, in its discretion, provide
that NQSOs be transferable, without the benefit of such immediate family
members and to partnerships in which such family members are the only
partners.
Payments by optionholders upon exercise of an option may be made
(as determined by the compensation committee) in cash or such other form
of payment as may be permitted under the Plan, including, without
limitation, shares of Common Stock, outstanding options or other
consideration or a broker-assisted cashless exercise program established
by the compensation committee. Upon the exercise of an option, the
optionholder shall pay to the Corporation the exercise price plus the
amount of the required federal and state withholding taxes, if any. The
Plan also allows participants to elect to have shares withheld upon
exercise for the payment of federal and state withholding taxes.
Subject to the provisions of the Plan, the compensation committee
has the authority to determine the individuals to whom options are to be
granted, the number of shares to be covered by each option, the exercise
price, the type of option, the option period, the restrictions, if any,
on the exercise of the option, the terms for the payment of the option
price and other terms and conditions. The compensation committee has
the authority, subject to the terms of the Plan, to construe and
interpret any of the provisions of the Plan or any option granted
thereunder. Such Interpretations are binding on the Corporation and the
optionholder.
In addition to the ISOs and the NQSOs which may be granted to
employees under the Plan at the discretion of the administrator of the
Plan, each non-employee director automatically receives an option to
purchase 5,000 shares of Common Stock on July 1 of each year of service
as a non-employee director on the Board of Directors during the term of
the Plan. The exercise price of the shares of the Common Stock subject
to options granted to each non-employee director shall be equal to the
fair market value of the shares of the Common Stock on the date of
grant. Options granted under the Plan to non-employee directors, with
limited exceptions, may only be exercised within ten years of the date
of grant and while the recipient of the option is a director of the
Corporation.
During 1998, 225,050 stock options were granted, 7,500 stock
options were exercised, and 25,000 stock options were canceled.
The Plan, as originally adopted, provided for the issuance of
options to purchase up to 500,000 shares of Common Stock (subject to
adjustments in the event of stock splits, stock dividends and similar
11<PAGE>
dilutive events). Since the adoption of the Plan, however, the number
of shares available for issuance has become inadequate to insure an
appropriate supply of options to be provided as incentives to new
employees. Therefore, on March 9, 1999, the Board of Directors approved
an increase in the number of shares available for issuance upon exercise
of options granted under the Plan from 500,000 to 700,000. The Board of
Directors believes that this larger number will be sufficient to provide
for the Corporation's needs for the near future. Under the terms of the
Plan, such an increase in the number of shares in the Plan must be
approved by the holders of a majority of the Corporation's voting stock.
Except for the increase in the number of shares, the Plan will
remain in full force and effect as at present. The amendment to the Plan
would provide that the first sentence of Section (4) (a) (i) of the Plan
be amended to read in its entirety:
Options issuable under the Plan are limited such that the maximum
aggregate number of Shares which issued to, or by reason of,
Options is 700,000.
Board Recommendation
The Board of Directors recommends that the stockholders vote FOR
approval of an amendment to the Plan increasing the number of shares
available for issuance upon exercise of options from 500,000 to 700,000.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Upon recommendation of the audit committee, the Board of Directors
has appointed Hollander, Lumer & Co. LLP as the Corporation's
independent auditors for the fiscal year ending December 31, 1999.
In the event stockholders do not ratify the appointment of Hollander,
Lumer & Co. LLP as the Corporation's independent auditors for the
forthcoming fiscal year, such appointment will be reconsidered by the
audit committee and the Board of Directors.
A representative of Hollander, Lumer & Co. LLP will be present at
the Annual Meeting to respond to appropriate questions and to make
statements as he may desire.
Board Recommendation
The Board of Directors recommends that the stockholders vote FOR
ratification of the appointment of Hollander, Lumer & Co. LLP as the
Corporation's independent auditors.
OTHER BUSINESS
The Board of Directors of the Corporation knows of no other matters
that may be presented at the Annual Meeting. However, if any other
matters properly come before the meeting, or any adjournment thereof, it
is intended that proxies in the accompanying form will be voted in
accordance with the judgment of the persons named therein.
12<PAGE>
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the next
annual meeting of the Corporation's stockholders must be received by the
Corporation for inclusion in the Corporation's 2000 Proxy Statement on
or prior to January 18, 2000.
Such proposals should be sent to the Chief Financial Officer of the
Corporation by certified mail, return receipt requested. A proxy will
confer discretionary authority to management of the Corporation to vote
on any matter at the next annual meeting of the Corporation's
stockholders other than matters for which the Corporation received
notice by a stockholder prior to February 26, 2000; provided, however,
that if the 2000 Annual Meeting of Stockholders is held more than 30
days from May 28, 2000, the Corporation will notify the stockholders of
a revised date for submitting notice to the Corporation.
ANNUAL REPORTS AND FINANCIAL STATEMENTS
The Annual Report to Stockholders of the Corporation for the year
ended December 31, 1998 is being furnished simultaneously herewith.
Such report and the financial statements included therein are not to be
considered a part of this Proxy Statement.
Upon the written request of any stockholder, management will
provide, free of charge, a copy of the Corporation's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1998, including the
financial statements and exhibits thereto. Requests should be directed
to Chief Financial Officer, Fotoball USA, Inc., 3738 Ruffin Road, San
Diego, California 92123.
COST OF SOLICITATION
The cost of soliciting proxies in the accompanying form has been or
will be borne by the Corporation. In addition to solicitation by mail,
solicitations may be made personally, by telephone, by telegraph or by
mail by officers, directors and employees of the Corporation, without
additional remuneration therefor, and arrangements may be made with
brokerage houses and other custodians, nominees and fiduciaries to send
proxies and proxy material to their principals, and the Corporation may
reimburse them for their reasonable out-of-pocket expenses.
It is important that your shares be represented at the meeting. If
you are unable to be present in person, you are respectfully requested
to sign the enclosed proxy and return it in the enclosed stamped and
addressed envelope as promptly as possible.
By Order of the Board of Directors,
KAREN M. BETRO
Secretary
Dated: April 15, 1999
San Diego, California
13<PAGE>
PROXY
FOTOBALL USA, INC.
ANNUAL MEETING OF STOCKHOLDERS, MAY 18, 1999
The undersigned hereby appoints Michael Favish and David G. Forster,
and each of them, his/her attorneys and proxies with full power of
substitution to vote and act with respect to all shares of Common Stock
of Fotoball USA, Inc. (the "Corporation") of the undersigned at the
Annual Meeting of Stockholders of the Corporation to be held at 2:00
P.M., local time, on May 18, 1999 or at any adjournment(s) thereof (the
"Meeting"), and instructs them to vote as indicated on the matters
referred to in the Proxy Statement for the Meeting, receipt of which is
hereby acknowledged, with discretionary power to vote upon such other
business as may properly come before the Meeting or any adjournment(s)
thereof.
PLEASE VOTE, SIGN AND DATE THIS PROXY AND RETURN IT
IN THE ENCLOSED POSTAGE PAID ENVELOPE.
This Proxy will be voted as specified. IF NO SPECIFICATION IS MADE,
THIS PROXY WILL BE VOTED FOR ALL PROPOSALS.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE CORPORATION.
The Board of Directors recommends that you vote FOR the following
proposals: ---
1. To elect one director to hold office until the 2002 Annual Meeting
of Stockholders and until the election and qualification of his
successor:
( ) FOR the nominee listed below ( ) WITHHOLD AUTHORITY to vote for
the nominee listed below
Nominee: Joel K. Rubenstein
- ----------------------------------------------------------------------------
(Continues on the reverse side)
2. To approve the increase in the number of shares of Common Stock
reserved for issuance under the Corporation's 1998 Stock Option Plan
from 500,000 to 700,000.
( ) FOR ( ) AGAINST ( ) ABSTAIN
3. To ratify the appointment of Hollander, Lumer & Co. LLP as the
Corporation's independent auditors for the year ended December 31, 1999.
( ) FOR ( ) AGAINST ( ) ABSTAIN
4. To transact such other business as may properly come before the Meeting.
Receipt of the Notice of Annual
Meeting and Proxy Statement is
hereby acknowledged.
Dated______________________________
___________________________________
___________________________________
Signature(s) of Stockholder(s)
This Proxy shall be signed exactly
as your name(s) appears hereon, if
as attorney, executor, guardian or
in some representative capacity or
as an officer of a corporation,
please add title as such.
