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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 24, 1999
REGISTRATION NO. 33-80508
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
POST-EFFECTIVE AMENDMENT NO. 5
ON FORM S-3
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
(619) 467-9900
(Address, including zip code, and
telephone number, including area code, of
registrant's principal executive offices)
--------------
MICHAEL FAVISH
PRESIDENT AND CHIEF EXECUTIVE OFFICER
FOTOBALL USA, INC.
3738 RUFFIN ROAD
SAN DIEGO, CALIFORNIA 92123
(619) 467-9900
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-----------
Copies to:
CHARLES I. WEISSMAN, ESQ.
SWIDLER BERLIN SHEREFF FRIEDMAN, LLP
919 THIRD AVENUE, 20TH FLOOR
NEW YORK, NEW YORK 10022
(212) 758-9500
-----------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]_____
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ] _____
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.[ ]
THIS REGISTRATION STATEMENT SHALL HEREAFTER BECOME EFFECTIVE IN
ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933.
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EXPLANATORY NOTE
This amendment is being filed solely to add exhibits to the
registration statement.
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PART II
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
1.1(P) Form of Underwriting Agreement.(1)
3.1(2)(P) Amended and Restated Certificate of Incorporation.(2)
3.2(2)(P) Amended and Restated By-laws.(2)
4.1(P) Form of Representative's Unit Purchase Option.(2)
4.2 Warrant Agreement, dated as of August 11, 1994, between the
Company and Continental Stock Transfer & Trust Company, as
Warrant Agent.(3)
4.3(P) Specimen Warrant Certificate.(4)
4.4(P) Specimen Stock Certificate.(4)
4.5(1) Specimen Form of Rights Certificate.(5)
4.5(2) Form of Rights Agreement, dated as of August 19, 1996, between
the Company and Continental Stock Transfer & Trust Company.(5)
4.5(3) Form of Certificate of Designation, Preferences and Rights of
Series A Preferred Stock.(5)
4.5(4) Summary of Rights Plan.(5)
5.1(P) Opinion of Shereff, Friedman, Hoffman & Goodman, LLP.(4)
10.1(1) License Agreement with Major League Baseball Properties, Inc.,
dated May 14, 1997.(6)
10.1(2) Amended License Agreement with Major League Baseball
Properties, Inc., dated December 11, 1998.(7)
10.1(3) License Agreement with Major League Baseball Players
Association dated March 29, 1997.(6)
10.1(4) License Agreement with National Football League Properties,
Inc., dated April 14, 1998.(7)
10.2(1)* 1998 Stock Option Plan of the Company.(8)
10.2(2)* Form of Stock Option Agreement.(8)
10.2(3)* Stock Option Agreement dated January 30, 1998 with Salvatore
T. DiMascio.(7)
10.2(4) Stock Option Agreement dated August 11, 1997 with ADR
Management Group Ltd.(7)
10.2(5) Stock Option Agreement dated as of April 1, 1999 with
Integrated Corporate Relations, Inc.(9)
10.2(6) Letter Agreement dated April 19, 1999 with W.A.B. Growth
Equity Research.(9)
10.3(1)*(P) Form of Employment Agreement with Michael Favish.(4)
10.3(2)* Settlement Agreement and Mutual General Release dated
October 1, 1997 with Fred S. Ostern.(6)
10.3(3) Consulting Agreement with ADR Management Group Ltd. dated
August 11, 1997.(6)
10.4(1)(P) Lease, dated February 4, 1994, by and between the Company and
George and Marcel Jach, with respect to 3738 Ruffin Road,
San Diego, California.(10)
10.4(2) Sublease, dated June 19, 1997 by and between the Company and
General Textiles, with respect to 4000 Ruffin Road,
San Diego, California.(6)
10.4(3) Second and Third Amendment dated June 1, 1998, and
September 29, 1998, respectively, to sublease between the
Company and General Textiles, with respect to 4000 Ruffin
Road, San Diego, California.(7)
10.5 Merrill Lynch International Bank Limited irrevocable stand-by
letter of credit dated December 1, 1995.(11)
10.6(1) Revolving Credit Agreement dated November 13, 1996 between the
Company and Scripps Bank.(11)
10.6(2) Amended Revolving Credit Agreement dated February 19, 1998
between the Company and Scripps Bank.(6)
II-1
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10.6(3) Amended Revolving Credit Agreement dated December 28, 1998
between the Company and Scripps Bank.(7)
21 Subsidiaries of the Company.(4)
23.1 Consent of Hollander, Gilbert & Co.(12)
23.2 Consent of Shereff, Friedman, Hoffman & Goodman, LLP
(contained in Exhibit 5.1).(4)
27 Financial data schedule.(12)
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* Indicates exhibits relating to executive compensation.
(P) Indicates that the document was originally filed with the Commission
in paper form and that there have been no changes or amendments to the
document which would require filing of the document electronically at
this time.
(1) Exhibits to the Company's Registration Statement on Form SB-2 filed
with the Commission on August 11, 1994 incorporated herein by
reference.
(2) Exhibits to the Company's Registration Statement on Form SB-2 filed
with the Commission on August 1, 1994 incorporated herein by
reference.
(3) Filed herewith.
(4) Exhibits to the Company's Registration Statement on Form SB-2 filed
with the Commission on August 9, 1994 incorporated herein by
reference.
(5) Exhibits to the Company's Registration Statement on Form 8-A filed
with the Commission on August 30, 1996 incorporated herein by
reference.
(6) Exhibits to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1997 incorporated herein by reference.
(7) Exhibits to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1998 incorporated herein by reference.
(8) Exhibits to the Company's Registration Statement on Form S-8 filed
with the Commission on July 23, 1998 incorporated herein by reference.
(9) Exhibits to the Company's Registration Statement on Form S-3 filed
with the Commission on June 4, 1999 incorporated herein by reference.
(10) Exhibits to the Company's Registration Statement on Form SB-2 filed
with the Commission on June 20, 1994 incorporated herein by reference.
(11) Exhibits to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1996 incorporated herein by reference.
(12) Exhibits to Post-Effective Amendment No. 4 to the Company's
Registration Statement on Form SB-2 (filed on Form S-3) filed with the
Commission on August 19, 1997 incorporated herein by reference.
(b) Financial Statement Schedules
All schedules for which provision is made in the applicable accounting
regulations of the Commission are not required under the related instructions or
are inapplicable and, therefore, have been omitted.
II-2
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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-3 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 the 18th day of
June, 1999.
FOTOBALL USA, INC.
By: /s/ Michael Favish
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Michael Favish
President, Chief Executive Officer and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
NAME AND SIGNATURE TITLE DATE
------------------ ----- ----
President and Chief Executive June 18, 1999
/s/ Michael Favish Officer and a Director (Principal
- ------------------------- Executive Officer and Principal
Michael Favish Financial Officer)
/s/ Salvatore DiMascio Director June 18, 1999
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Salvatore DiMascio
/s/ Nicholas Giordano Director June 18, 1999
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Nicholas Giordano
/s/ Joel K. Rubenstein Director June 18, 1999
- -------------------------
Joel K. Rubenstein
II-3
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EXHIBIT INDEX
1.1(P) Form of Underwriting Agreement.(1)
3.1(2)(P) Amended and Restated Certificate of Incorporation.(2)
3.2(2)(P) Amended and Restated By-laws.(2)
4.1(P) Form of Representative's Unit Purchase Option.(2)
4.2 Warrant Agreement, dated as of August 11, 1994, between the
Company and Continental Stock Transfer & Trust Company, as
Warrant Agent.(3)
4.3(P) Specimen Warrant Certificate.(4)
4.4(P) Specimen Stock Certificate.(4)
4.5(1) Specimen Form of Rights Certificate.(5)
4.5(2) Form of Rights Agreement, dated as of August 19, 1996, between
the Company and Continental Stock Transfer & Trust Company.(5)
4.5(3) Form of Certificate of Designation, Preferences and Rights of
Series A Preferred Stock.(5)
4.5(4) Summary of Rights Plan.(5)
5.1(P) Opinion of Shereff, Friedman, Hoffman & Goodman, LLP.(4)
10.1(1) License Agreement with Major League Baseball Properties, Inc.,
dated May 14, 1997.(6)
10.1(2) Amended License Agreement with Major League Baseball
Properties, Inc., dated December 11, 1998.(7)
10.1(3) License Agreement with Major League Baseball Players
Association dated March 29, 1997.(6)
10.1(4) License Agreement with National Football League Properties,
Inc., dated April 14, 1998.(7)
10.2(1)* 1998 Stock Option Plan of the Company.(8)
10.2(2)* Form of Stock Option Agreement.(8)
10.2(3)* Stock Option Agreement dated January 30, 1998 with Salvatore
T. DiMascio.(7)
10.2(4) Stock Option Agreement dated August 11, 1997 with ADR
Management Group Ltd.(7)
10.2(5) Stock Option Agreement dated as of April 1, 1999 with
Integrated Corporate Relations, Inc.(9)
10.2(6) Letter Agreement dated April 19, 1999 with W.A.B. Growth
Equity Research.(9)
10.3(1)*(P) Form of Employment Agreement with Michael Favish.(4)
10.3(2)* Settlement Agreement and Mutual General Release dated October
1, 1997 with Fred S. Ostern.(6)
10.3(3) Consulting Agreement with ADR Management Group Ltd. dated
August 11, 1997.(6)
10.4(1)(P) Lease, dated February 4, 1994, by and between the Company and
George and Marcel Jach, with respect to 3738 Ruffin Road, San
Diego, California.(10)
10.4(2) Sublease, dated June 19, 1997 by and between the Company and
General Textiles, with respect to 4000 Ruffin Road, San Diego,
California.(6)
10.4(3) Second and Third Amendment dated June 1, 1998, and September
29, 1998, respectively, to sublease between the Company and
General Textiles, with respect to 4000 Ruffin Road, San Diego,
California.(7)
10.5 Merrill Lynch International Bank Limited irrevocable stand-by
letter of credit dated December 1, 1995.(11)
10.6(1) Revolving Credit Agreement dated November 13, 1996 between the
Company and Scripps Bank.(11)
10.6(2) Amended Revolving Credit Agreement dated February 19, 1998
between the Company and Scripps Bank.(6)
10.6(3) Amended Revolving Credit Agreement dated December 28, 1998
between the Company and Scripps Bank.(7)
23.1 Consent of Hollander, Gilbert & Co.(12)
23.2 Consent of Shereff, Friedman, Hoffman & Goodman, LLP
(contained in Exhibit 5.1).(4)
27 Financial data schedule.(12)
<PAGE>
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* Indicates exhibits relating to executive compensation.
(P) Indicates that the document was originally filed with the Commission
in paper form and that there have been no changes or amendments to the
document which would require filing of the document electronically at
this time.
(1) Exhibits to the Company's Registration Statement on Form SB-2 filed
with the Commission on August 11, 1994 incorporated herein by
reference.
(2) Exhibits to the Company's Registration Statement on Form SB-2 filed
with the Commission on August 1, 1994 incorporated herein by
reference.
(3) Filed herewith.
(4) Exhibits to the Company's Registration Statement on Form SB-2 filed
with the Commission on August 9, 1994 incorporated herein by
reference.
(5) Exhibits to the Company's Registration Statement on Form 8-A filed
with the Commission on August 30, 1996 incorporated herein by
reference.
(6) Exhibits to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1997 incorporated herein by reference.
(7) Exhibits to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1998 incorporated herein by reference.
(8) Exhibits to the Company's Registration Statement on Form S-8 filed
with the Commission on July 23, 1998 incorporated herein by reference.
(9) Exhibits to the Company's Registration Statement on Form S-3 filed
with the Commission on June 4, 1999 incorporated herein by reference.
(10) Exhibits to the Company's Registration Statement on Form SB-2 filed
with the Commission on June 20, 1994 incorporated herein by reference.
(11) Exhibits to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1996 incorporated herein by reference.
(12) Exhibits to Post-Effective Amendment No. 4 to the Company's
Registration Statement on Form SB-2 (filed on Form S-3) filed with the
Commission on August 19, 1997 incorporated herein by reference.
<PAGE>
EXHIBIT 4.2
WARRANT AGREEMENT
Agreement made as of August 11, 1994, between Fotoball USA, Inc., a
Delaware corporation with offices at 3738 Ruffin Road, San Diego, California
92123 ("Company"), and Continental Stock Transfer & Trust Company, a New York
corporation with offices at 2 Broadway, New York, New York 10004 (herein called
"Warrant Agent").
WHEREAS, the Company is engaged in a public offering of Units ("Public
Offering") and in connection therewith, has determined to issue and deliver up
to (i) 1,411,673 Redeemable Common Stock Purchase Warrants ("Public Warrants")
to the public investors which includes 146,673 Public Warrants underlying the
Units issued to certain investors in the Company's bridge financing and 165,000
Public Warrants underlying the Units subject to the over-allotment option and
(ii) 110,000 Public Warrants to Gaines, Berland Inc. ("Representative") or its
designees ("Representative's Warrants" and together with the Public Warrants, as
hereinafter referred to as the "Warrants"), each of such Warrants evidencing the
right of the holder thereof to purchase one share of common stock, $.01 par
value per share, of the Company's Common Stock ("Common Stock") for $6.50; and
WHEREAS, the Company has filed with the Securities and Exchange
Commission a Registration Statement on Form SB-2 (Registration No. 33-80508)
("Registration Statement"), for the registration, under the Securities Act of
1933, as amended, of, among others, the Warrants and the Common Stock issuable
upon exercise of the Warrants; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer, exchange, redemption and exercise of the
Warrants; and
WHEREAS, the Company desires to provide for the form and provisions of
the Warrants, the terms upon which they shall be issued and exercised, and the
respective rights, limitation of rights, and immunities of the Company, the
Warrant Agent, and the holders of the Warrants; and
WHEREAS, all acts and things have been done and performed which are
necessary to make the Warrants, when executed on behalf of the Company and
countersigned by or on behalf of the Warrant Agent, as provided herein, the
valid, binding and legal obligations of the Company, and to authorize the
execution and delivery of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
1. Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent
to act as agent for the Company for the Warrants, and the Warrant Agent hereby
accepts such appointment and agrees to perform the same in accordance with the
terms and conditions set forth in this Agreement.
<PAGE>
2. Warrants.
2.1. Form of Warrant. Each Warrant certificate shall be issued in
registered form only, shall be in substantially the form of Exhibit A hereto the
provisions of which are incorporated herein and shall be signed by, or bear the
facsimile signature of, the Chairman of the Board or President and Secretary or
Assistant Secretary of the Company and shall bear a facsimile of the Company's
seal. In the event the person whose facsimile signature has been placed upon any
Warrant certificate shall have ceased to be Chairman of the Board or President
and Secretary or Assistant Secretary of the Company before such Warrant
certificate is issued, it may be issued with the same effect as if he had not
ceased to be such at the date of issuance. The Warrants represented by a Warrant
certificate may not be exercised until such certificate has been countersigned
by the Warrant Agent as provided in Section 2.3 hereof.
2.2. Effect of Countersignature. Unless and until countersigned by the
Warrant Agent pursuant to this Agreement, a Warrant certificate shall be invalid
and of no effect.
2.3. Events for Countersignature. The Warrant Agent shall countersign a
Warrant certificate only upon the occurrence of either of the following events:
(i) if the Warrant certificate is to be issued in exchange or
substitution for one or more previously countersigned Warrant certificates, as
hereinafter provided, or
(ii) if the Company instructs the Warrant Agent to do so.
2.4. Registration.
2.4.1. Warrant Register. The Warrant Agent shall maintain books
("Warrant Register"), for the registration of original issuance and the
registration of transfer of the Warrants. Upon the initial issuance of the
Warrants, the Warrant Agent shall issue and register the Warrants in the names
of the respective holders thereof in such denominations and otherwise in
accordance with instructions delivered to the Warrant Agent by the Company.
2.4.2. Registered Holder. Prior to due presentment for
registration of transfer of any Warrant Certificate, the Company and the Warrant
Agent may deem and treat the of any Warrant certificate, the Company and person
in whose name such Warrant certificate shall be registered upon the Warrant
Register ("registered holder"), as the absolute owner of such Warrant and of
each Warrant represented thereby (notwithstanding any notation of ownership or
other writing on the Warrant certificate made by anyone other than the Company
or the Warrant Agent), for the purpose of any exercise thereof, and for all
other purposes, and neither the Company nor the Warrant Agent shall be affected
by any notice to the contrary.
2.5. Detachability of Warrants. The Warrant Agent understands that the
Warrants are being issued as part of Units together with shares of the Company's
Common Stock and that the shares of Common Stock and the Warrants are
immediately detachable and may be traded separately.
2
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3. Terms and Exercise of Warrants
3.1. Warrant Price. Each Warrant shall entitle the registered holder
thereof, subject to the provisions of such Warrant certificate and of this
Warrant Agreement, to purchase from the Company the number of shares of Common
Stock stated therein, at the price of $6.50 per whole share, subject to the
adjustments provided in Section 4. hereof. Notwithstanding the foregoing, the
Representative's Warrants shall entitle the registered holder thereof, subject
to the provisions of such Warrant certificate and of this Warrant Agreement, to
purchase from the Company the number of shares of Common Stock stated therein,
at the price of $7.93 per whole share, subject to the adjustments provided in
Section 4. hereof. Notwithstanding anything else contained herein, the Company
may, in its sole discretion, reduce the Warrant Price, as defined below, at any
time for such period of time as the Company shall determine. The term "Warrant
Price" as used in this Warrant Agreement refers to the price per share at which
Common Stock may be purchased at the time a Warrant is exercised.
3.2. Duration of Warrants. Subject to Section 3.3.6 hereof, a Warrant
may be exercised only during the period ("Exercise Period") commencing on August
11, 1995, and terminating on the earlier of August 10, 1999 or the date fixed
for redemption of such Warrant or provided in Section 6 of this Agreement
("Expiration Date"). Each Warrant not exercised on or before its expiration date
shall become void, and all rights thereunder and all rights in respect thereof
under this Agreement shall cease at the close of business on its Expiration
Date. The Company in its sole discretion may extend the duration of the Warrants
by delaying the Expiration Date. The Representative's Warrants shall have the
same duration as the Public Warrants.
3.3. Exercise of Warrants.
3.3.1. Payment. A Warrant, when countersigned by the Warrant
Agent, may be exercised by the registered holder thereof by surrendering the
certificate representing such Warrant, at the office of the Warrant Agent, or at
the office of its successor as Warrant Agent, in the Borough of Manhattan, City
and State of New York, with the subscription form, as set forth on the Warrant
certificate and in substantially the form of Exhibit A hereto, duly executed,
and by paying in full, in lawful money of the United States, in cash, good
certified check or bank draft payable to the order of the Company, the Warrant
Price for each full share of Common Stock as to which the Warrant is exercised
and any and all applicable taxes due in connection with the exercise of the
Warrant, the exchange of the Warrant for the Common Stock, and the issuance of
the Common Stock.
3.3.2. Issuance of Certificates. As soon as practicable after the
exercise of any Warrant and the clearance of the funds in payment of the Warrant
Price, the Company shall issue to or upon the written order of the registered
holder of such Warrant a certificate or certificates for the number of full
shares of Common Stock to which he is entitled, registered in such name or names
as may be directed by him, and if such Warrant shall not have been exercised in
full, a new countersigned Warrant certificate for the number of shares as to
which such Warrant shall not have been exercised. Notwithstanding the foregoing,
the Company shall not be obligated to deliver any securities pursuant to the
exercise of a Warrant
3
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unless a registration statement under the Securities Act of 1933 with respect to
the securities is effective. Warrants may not be exercised by, or securities
issued to, any registered holder in any state in which such exercise would be
unlawful.
3.3.3. Valid Issuance. All shares of Common Stock issued upon the
proper exercise of a Warrant in conformity with this Agreement shall be validly
issued.
3.3.4. Date of Issuance. Each person in whose name any such
certificate for shares of Common Stock is issued shall for all purposes be
deemed to have become the holder of record of such shares on the date on which
the Warrant certificate was surrendered and payment of the Warrant Price was
made, irrespective of the date of delivery of such certificate, except that, if
the date of such surrender and payment is a date when the stock transfer books
of the Company are closed, such person shall be deemed to have become the holder
of such shares at the close of business on the next succeeding date on which the
stock transfer books are open.
3.3.5. Warrant Solicitation and Warrant Solicitation Fee.
(a) The Company has engaged the Representative, on a
non-exclusive basis, as its agent for the solicitation of the exercise of the
Warrants. The Company, at its cost, will (i) assist the Representative with
respect to such solicitation, if requested by the Representative, and (ii)
provide the Representative, and direct the Company's transfer and warrant agent
to deliver to the Representative, lists of the record, and, to the extent known,
beneficial owners of the Company's Warrants. Accordingly, the Company hereby
instructs the Warrant Agent to cooperate with the Representative in every
respect in connection with the Representative's solicitation activities,
including, but not limited to, providing to the Representative, at the Company's
cost, a list of record and, to the extent known, beneficial holders of the
Warrants and circulating a prospectus or offering circular disclosing the
compensation arrangements referenced in Section 3.3.5.(b) hereinbelow to holders
of the Warrants at the time of exercise of the Warrants. In addition to the
conditions set forth in Section 3.3.5.(b) hereinbelow, the Representative shall
only accept payment of the warrant solicitation fee provided in Section
3.3.5.(b) if it has provided bona fide services to the Company in connection
with the exercise of the Warrants. In addition to soliciting, either orally or
in writing, the exercise of Warrants by a Warrantholder, such services may also
include disseminating information, either orally or in writing, to
Warrantholders about the Company or the market for the Company's securities, or
assisting in the processing of the exercise of Warrants.
(b) In each instance in which a Warrant is exercised, the Warrant
Agent shall promptly give written notice of such exercise to the Company and the
Representative ("Warrant Agent's Exercise Notice"). If, upon the exercise of any
Warrant more than one year from the Effective Date, (i) the market price of the
Company's Common Stock is greater than the Warrant Price, (ii) disclosure of
compensation arrangements was made both at the time of the original offering and
at the time of exercise (by delivery of the Prospectus or as otherwise required
by applicable law, rule or regulation), (iii) the exercise of the Warrant was
solicited by the Representative, (iv) the Warrant was not held in a
discretionary account, and (v) the solicitation of the exercise of the Warrant
was not in violation of Rule 10b-6 (as such rule or any successor rule may be in
effect as of such time of exercise) promulgated under the
4
<PAGE>
Securities Exchange Act of 1934, then the Warrant Agent, simultaneously with the
distribution of proceeds to the Company received upon exercise of the Warrant(s)
so exercised, shall, on behalf of the Company, pay from the proceeds received
upon exercise of the Warrant(s), a fee of 4% of the Warrant Price to the
Representative, provided that the Representative delivers to the Warrant Agent
within ten (10) business days from the date on which the Representative has
received the Warrant Agent's Exercise Notice, a certificate that the conditions
set forth in the preceding clauses (iii), (iv) and (v) have been satisfied. The
Representative and the Company may at any time during business hours, examine
the records of the Warrant Agent, including its ledger of original Warrant
certificates returned to the Warrant Agent upon exercise of Warrants.
(c) The provisions of this Section 3.3.5. may not be modified,
amended or deleted without the prior written consent of the Representative.
3.3.6. Representative's Warrants. The Representative's Warrants
shall have the same terms as the Public Warrants except that the exercise price
of the Representative's Warrants shall be $7.93, i.e., 122% of the exercise
price of the Public Warrants.
4. Adjustments.
4.1. Stock Dividends - Split-Ups. If after the date hereof, and subject
to the provisions of Section 4.5. below, the number of outstanding shares of
Common Stock is increased by a stock dividend payable in shares of Common Stock
or by a split-up of shares of Common Stock or other similar event, then, on the
effective date thereof, the number of shares issuable on exercise of each
Warrant shall be increased in proportion to such increase in outstanding shares
and the then applicable Warrant Price shall be correspondingly decreased.
4.2. Aggregation of Shares. If after the date hereof, and subject to
the provisions of Section 4.5., the number of outstanding shares of Common Stock
is decreased by a consolidation, combination or reclassification of shares of
Common Stock or other similar event, then, upon the effective date of such
consolidation, combination or reclassification, the number of shares issuable on
exercise of each Warrant shall be decreased in proportion to such decrease in
outstanding shares and the then applicable Warrant Price shall be
correspondingly increased.
4.3. Replacement of Securities Upon Reorganization, etc. If after the
date hereof any capital reorganization or reclassification of the Common Stock
of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation or other similar event shall be effected, then, as a condition of
such reorganization, reclassification, consolidation, merger, or sale, lawful
and fair provision shall be made whereby the Warrant holders shall thereafter
have the right to purchase and receive, upon the basis and upon the terms and
conditions specified in the Warrants and in lieu of the shares of Common Stock
of the Company immediately theretofore purchasable and receivable upon the
exercise of the rights represented thereby, such shares of stock, securities, or
assets as may be issued or payable with respect to or in exchange for the number
of outstanding shares of such Common Stock equal to the number of shares of such
stock immediately theretofore purchasable and receivable upon the exercise
5
<PAGE>
of the rights represented by the Warrants, had such reorganization,
reclassification, consolidation, merger, or sale not taken place and in such
event appropriate provision shall be made with respect to the rights and
interests of the Warrant holders to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the Warrant Price
and of the number of shares purchasable upon the exercise of the Warrants) shall
thereafter be applicable, as nearly as may be in relation to any share of stock,
securities, or assets thereafter deliverable upon the exercise hereof. The
Company shall not effect any such consolidation, merger, or sale unless prior to
the consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger, or the corporation purchasing such
assets, shall assume by written instrument executed and delivered to the Warrant
Agent the obligation to deliver to the Warrant holders such shares of stock,
securities, or assets as, in accordance with the foregoing provisions, such
holders may be entitled to purchase.
4.4. Notices of Changes in Warrant. Upon every adjustment of the
Warrant Price or the number of shares issuable on exercise of a Warrant, the
Company shall give written notice thereof to the Warrant Agent, which notice
shall state the Warrant Price resulting from such adjustment and the increase or
decrease, if any, in the number of shares purchasable at such price upon the
exercise of a Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based. Upon the
occurrence of any event specified in Sections 4.1., 4.2., or 4.3., then, in any
such event, the Company shall give written notice in the manner set forth above
of the record date for such dividend, distribution, or subscription rights, or
the effective date of such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation, winding up or issuance. Such notice
shall also specify the date as of which the holders of Common Stock of record
shall participate in such dividend, distribution, or subscription rights, or
shall be entitled to exchange their Common Stock for stock, securities, or other
assets deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation, winding up or issuance. Failure to give
such notice, or any defect therein, shall not affect the legality or validity of
such event.
4.5. No Fractional Shares. Notwithstanding any provision contained in
this Warrant Agreement to the contrary, the Company shall not issue fractional
shares upon exercise of Warrants. If, by reason of any adjustment made pursuant
to this Section 4., the holder of any Warrant would be entitled, upon the
exercise of such Warrant, to receive a fractional interest in a share, the
Company shall, upon such exercise, purchase such fractional interest at the
current value, determined as follows:
(i) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such exchange or listed
for trading on the Nasdaq National Market or Nasdaq SmallCap Market, the current
value shall be the last reported sale price of the Common Stock on such exchange
on the last business day prior to the date of exercise of this Warrant or if no
such sale is made on such day, the average of the closing bid and asked prices
for such day on such exchange; or
(ii) If the Common Stock is not listed or admitted to unlisted
trading privileges, the current value shall be the mean of the last reported bid
and asked prices
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reported by the National Quotation Bureau, Inc. on the last business day prior
to the date of the exercise of a Warrant; or
(iii) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so reported, the
current value shall not be an amount determined in such reasonable manner as may
be prescribed by the Board of Directors of the Company.
4.6. Form of Warrant. The form of Warrant need not be changed because
of any adjustment pursuant to this Section 4., and Warrants issued after such
adjustment may state the same Warrant Price and the same number of shares as is
stated in the Warrants initially issued pursuant to this Agreement. However, the
Company may at any time in its sole discretion make any change in the form of
Warrant that the Company may deem appropriate and that does not affect the
substance thereof, and any Warrant thereafter issued or countersigned, whether
in exchange or substitution for an outstanding Warrant or otherwise, may be in
the form as so changed.
5. Transfer and Exchange of Warrants.
5.1. Registration of Transfer. The Warrant Agent shall register the
transfer, from time to time, of any outstanding Warrant upon the Warrant
Register, upon surrender of a Warrant certificate for transfer, properly
endorsed with signatures properly guaranteed and accompanied by appropriate
instructions for transfer. Upon any such transfer, a new Warrant certificate
representing an equal aggregate number of Warrants shall be issued and the old
Warrant certificate shall be cancelled by the Warrant Agent. The Warrant
certificate so cancelled shall be delivered by the Warrant Agent to the Company
from time to time upon request.
5.2. Procedure for Surrender of Warrants. Warrant certificates may be
surrendered to the Warrant Agent, together with a written request for exchange,
and thereupon the Warrant Agent shall issue in exchange therefor one or more new
Warrant certificates as requested by the registered holder of the Warrant
certificates so surrendered, representing an equal aggregate number of Warrants;
provided, however, that in the event that a Warrant certificate surrendered for
transfer bears a restrictive legend, the Warrant Agent shall not cancel such
Warrant certificate and issue new Warrant certificates in exchange therefor
until the Warrant Agent has received an opinion of counsel for the Company
stating that such transfer may be made and indicating whether the new Warrant
certificates must also bear a restrictive legend.
5.3. Fractional Warrants. The Warrant Agent shall not be required to
effect any registration of transfer or exchange which will result in the
issuance of a Warrant certificate for a fraction of a Warrant.
5.4. Service Charges. No service charge shall be made for any exchange
or registration of transfer of Warrants.
5.5. Warrant Execution and Countersignature. The Warrant Agent is
hereby authorized to countersign and to deliver, in accordance with the terms of
this Agreement, the
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Warrants required to be issued pursuant to the provisions hereof, and the
Company, whenever required by the Warrant Agent, will supply the Warrant Agent
with Warrant certificates duly executed on behalf of the Company for such
purpose.
6. Redemption.
6.1. Redemption. Subject to Section 6.4. hereof, the Warrants may be
redeemed, at the option of the Company, as a whole or at any time or in part
from time to time, after they become exercisable and prior to their expiration,
by lot, in any proportion as the Company in its sole discretion may determine,
at the office of the Warrant Agent, upon the notice referred to in Section 6.2.,
at the price of $.01 per Warrant ("Redemption Price"), provided that (a) the
last sale price of the Common Stock has been at least one hundred and fifty
percent (150%) of the then effective exercise price of the Warrants on each of
the twenty (20) consecutive trading days ending on the third business day prior
to the date on which notice of redemption is given, the satisfaction of which
condition shall be certified by the Company, (b) it is prior to the Expiration
Date and (c) the Company has furnished five-days' prior written notice to the
Representative. The provisions of this Section 6.1. may not be modified, amended
or deleted without the prior written consent of the Representative.
6.2. Date Fixed for, and Notice of, Redemption. In the event the
Company shall elect to redeem all or any part of the Warrants, the Company shall
fix a date for the redemption. Notice of redemption shall be mailed by first
class mail, postage prepaid, by the Company or the Company's agent at its
direction not less than 30 days from the date fixed for redemption to the
registered holders of the Warrants to be redeemed at their last address as they
shall appear on the registration books. Any notice mailed in the manner herein
provided shall be conclusively presumed to have been duly given whether or not
the registered holder received such notice.
6.3. Exercise After Notice of Redemption. The Warrants may be exercised
in accordance with Section 3 of this Agreement at any time after notice of
redemption shall have been given by the Company pursuant to Section 6.2. hereof
and prior to the date fixed for redemption. On and after the redemption date,
the record holder of the Warrants shall have no further rights except to
receive, upon surrender of the Warrants, the redemption price.
6.4. Reserved.
7. Other Provisions Relating to Rights of Holders of Warrants.
7.1. No Rights as Stockholder. A Warrant does not entitle the
registered holder thereof to any of the rights of a stockholder of the Company,
including, without limitation, the right to receive dividends, or other
distributions, exercise any preemptive rights to vote or to consent or to
receive notice as stockholders in respect of the meetings of stockholders or the
election of directors of the Company or any other matter.
7.2. Lost, Stolen, Mutilated, or Destroyed Warrants. If any Warrant
certificate is lost, stolen, mutilated, or destroyed, the Company and the
Warrant Agent may on such terms as to indemnity or otherwise as they may in
their discretion impose (which shall, in the case of a mutilated Warrant
certificate, include the surrender thereof), issue a new Warrant
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certificate of like denomination, tenor, and date as the Warrant certificate so
lost, stolen, mutilated, or destroyed. Any such new Warrant certificate shall
constitute a substitute contractual obligation of the Company, whether or not
the allegedly lost, stolen, mutilated, or destroyed Warrant certificate shall be
at any time enforceable by anyone.
7.3. Reservation of Common Stock. The Company shall at all times
reserve and keep available a number of its authorized but unissued shares of
Common Stock that will be sufficient to permit the exercise in full of all
outstanding Warrants issued pursuant to this Agreement.
7.4. Registration of Common Stock. The Company agrees that prior to the
commencement of the Exercise Period it shall file with the Securities and
Exchange Commission a post-effective amendment to the Registration Statement, if
possible, or a new registration statement, for the registration, under the
Securities Act of 1933, of the Common Stock issuable upon exercise of the
Warrants. In either case, the Company agrees to use its best efforts to cause
the same to become effective promptly thereafter and to maintain the
effectiveness of such registration statement and keep current a prospectus
thereunder until the expiration of the Warrants and the Representative's
Warrants in accordance with the provisions of this Agreement.
8. Concerning the Warrant Agent and Other Matters.
8.1. Payment of Taxes. The Company will from time to time promptly pay
all taxes and charges that may be imposed upon the Company or the Warrant Agent
in respect of the issuance or delivery of shares of Common Stock upon the
exercise of Warrants, but the Company shall not be obligated to pay any transfer
taxes in respect of the Warrants or such shares.
8.2. Resignation, Consolidation, or Merger of Warrant Agent.
8.2.1. Appointment of Successor Warrant Agent. The Warrant Agent,
or any successor to it hereafter appointed, may resign its duties and be
discharged from all further duties and liabilities (other than those incurred
prior to such resignation or discharge) hereunder after giving sixty (60) days'
notice in writing to the Company. If the office of the Warrant Agent becomes
vacant by resignation or incapacity to act or otherwise, the Company shall
appoint in writing a successor Warrant Agent in place of the Warrant Agent. If
the Company shall fail to make such appointment within a period of thirty (30)
days after it has been notified in writing of such resignation or incapacity by
the Warrant Agent or by a holder of Warrants (who shall, with such notice,
submit his Warrant for inspection by the Company), then the holder of any
Warrant may apply to the Supreme Court of the State of New York for the County
of New York for the appointment of a successor Warrant Agent. Any successor
Warrant Agent, whether appointed by the Company or by such court, shall be a
corporation organized, existing and in good standing and authorized under the
laws of the state in which it was incorporated to exercise corporate trust
powers, shall maintain an office in the Borough of Manhattan, City and State of
New York for the transfer of the Warrants and, if not incorporated in the State
of New York, shall be authorized to do business in the State of New York as a
foreign corporation, and subject to supervision or examination by federal or
state authority and shall be authorized to serve as Warrant Agent for the
Warrants under the
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Securities Exchange Act of 1934, as amended. After appointment, any successor
Warrant Agent shall be vested with all the authority, powers, rights,
immunities, duties, and obligations of its predecessor Warrant Agent with like
effect as if originally named as Warrant Agent hereunder, without any further
act or deed; but if for any reason it becomes necessary or appropriate, the
predecessor Warrant Agent shall execute and deliver, at the expense of the
Company, an instrument transferring to such successor Warrant Agent all the
authority, powers, and rights of such predecessor Warrant Agent hereunder; and
upon request of any successor Warrant Agent the Company shall make, execute,
acknowledge, and deliver any and all instruments in writing for more fully and
effectually vesting in and confirming to such successor Warrant Agent all such
authority, powers, rights, immunities, duties, and obligations.
8.2.2. Notice of Successor Warrant Agent. In the event a
successor Warrant Agent shall be appointed, the Company shall give notice
thereof to the predecessor Warrant Agent and the transfer agent for the Common
Stock not later than the effective date of any such appointment.
8.2.3. Merger or Consolidation of Warrant Agent. Any corporation
into which the Warrant Agent may be merged or with which it may be consolidated
or any corporation resulting from any merger or consolidation to which the
Warrant Agent shall be a party, if it shall be eligible to serve as Warrant
Agent under Section 8.2.1., shall be the successor Warrant Agent under this
Agreement without any further act.
8.3. Fees and Expenses of Warrant Agent
8.3.1. Remuneration. The Company agrees to pay the Warrant Agent
reasonable remuneration for its services as such Warrant Agent hereunder and
will reimburse the Warrant Agent upon demand for all expenditures that the
Warrant Agent may reasonably incur in the execution of its duties hereunder.
8.3.2. Further Assurances. The Company agrees to perform,
execute, acknowledge, and deliver or cause to be performed, executed,
acknowledged, and delivered all such further and other acts, instruments, and
assurances as may reasonably be required by the Warrant Agent for the carrying
out or performing of the provisions of this Agreement.
8.4. Liability of Warrant Agent.
8.4.1. Reliance on Company Statement. Whenever in the performance
of its duties under this Warrant Agreement, the Warrant Agent shall deem it
necessary or desirable that any fact or matter be proved or established by the
Company prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed) may
be deemed to be conclusively proved and established by a statement signed by the
President of the Company and delivered to the Warrant Agent. The Warrant Agent
may rely upon such statement for any action taken or suffered in good faith by
it pursuant to the provisions of this Agreement.
8.4.2. Indemnity. The Warrant Agent shall be liable hereunder
only for its own or willful misconduct. The Company agrees to indemnify the
Warrant Agent and
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save it harmless against any and all liabilities, including judgments, costs and
reasonable counsel fees, for anything done or omitted by the Warrant Agent in
the execution of this Agreement except as a result of the Warrant Agent's
negligence, willful misconduct, or bad faith.
8.4.3. Exclusions. The Warrant Agent shall have no responsibility
with respect to the validity of this Agreement or with respect to the validity
or execution of any Warrant (except its countersignature thereof); nor shall it
be responsible for any breach by the Company of any covenant or condition
contained in this Agreement or in any Warrant; nor shall it be responsible to
make any adjustments required under the provisions of Section 4. hereof or
responsible for the manner, method, or amount of any such adjustment or the
ascertaining of the existence of facts that would require any such adjustment;
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Common Stock to
be issued pursuant to this Agreement or any Warrant or as to whether any shares
of Common Stock will when issued be valid and fully paid and nonassessable.
8.5. Acceptance of Agency. The Warrant Agent hereby accepts the agency
established by this Agreement and agrees to perform the same upon the terms and
conditions herein set forth and among other things, shall account promptly to
the Company with respect to Warrants exercised and concurrently account for, and
pay to the Company, all moneys received by the Warrant Agent for the purchase of
shares of the Company's Common Stock through the exercise of Warrants.
9. Miscellaneous Provisions.
9.1. Successors. All the covenants and provisions of this Agreement by
or for the benefit of the Company or the Warrant Agent shall bind and inure to
the benefit of their respective successors and assigns.
9.2. Notices. Any notice, statement or demand authorized by this
Warrant Agreement to be given or made by the Warrant Agent or by the holder of
any Warrant to or by the Company shall be sufficiently given or made if sent by
certified mail, or private courier service, postage prepaid, addressed (until
another address is filed in writing by the Company with the Warrant Agent), as
follows:
Fotoball USA, Inc.
3738 Ruffin Road
San Diego, California 92123
Attention: Michael Favish,
President and Chief Executive Officer
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with a copy to:
Shereff, Friedman, Hoffman & Goodman
919 Third Avenue
New York, New York 10022
Attention: Charles I. Weissman, Esq.
Any notice, statement or demand authorized by this Agreement to be given or made
by the holder of any Warrant or by the Company to or on the Warrant Agent shall
be sufficiently given or made if sent by certified mail or private courier
service, postage prepaid, addressed (until another address is filed in writing
by the Warrant Agent with the Company), as follows:
Continental Stock Transfer & Trust Company
2 Broadway
New York, New York 10004
Attention: Steven G. Nelson, Chairman
9.3. Applicable Law; Jurisdiction. The validity, interpretation, and
performance of this Agreement and of the Warrants shall be governed in all
respects by the law of the State of New York, without giving effect to
principles of conflicts of law. The Company hereby agrees that any action,
proceeding or claim against it arising out of or relating in any way to this
Agreement shall be brought and enforced in the courts of the State of New York
or of the United States of America for the Southern District of New York, and
irrevocably submits, to such jurisdiction, which jurisdiction shall be
exclusive. The Company hereby waives any objection to such exclusive
jurisdiction and that such courts represent an inconvenience forum. Any such
process or summons to be served upon the Company may be served by transmitting a
copy thereof by registered or certified mail, return receipt requested, postage
prepaid, addressed to it at the address set forth in Section 9.2. hereof. Such
mailing shall be deemed personal service and shall be legal and binding upon the
Company in any action, proceeding or claim.
9.4. Persons Having Rights Under This Agreement. Nothing in this
Agreement expressed and nothing that may be implied from any of the provisions
hereof is intended, or shall be construed, to confer upon, or give to, any
person or corporation other than the parties hereto and the registered holders
of the Warrants and, for the purposes of Sections 3.3.5. and 6.1. through 6.3.
hereof, the Representative, any right, remedy, or claim under or by reason of
this Warrant Agreement or of any covenant, condition, stipulation, promise, or
agreement hereof. Representative shall be deemed to be a third-party beneficiary
of this Agreement with respect to such Sections. All covenants, conditions,
stipulations, promises, and agreements contained in this Warrant Agreement shall
be for the sole and exclusive benefit of the parties hereto (and the
Representative to the extent set forth above) and their successors and assigns
and of the registered holders of the Warrants.
9.5. Examination of the Warrant Agreement. A copy of this Agreement
shall be available at all reasonable times at the office of the Warrant Agent in
the Borough of
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Manhattan, City and State of New York, for inspection by the registered holder
of any Warrant. The Warrant Agent may require any such holder to submit his or
her Warrant for inspection by it.
9.6. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
9.7. Effect of Headings. The Section headings herein are for
convenience only and are not part of this Warrant Agreement and shall not affect
the interpretation thereof.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto under their respective corporate seals as of the day and year
first above written.
Attest: FOTOBALL USA, INC.
/s/ Karen M. Betro By: /s/ Michael Favish
- ------------------------- ------------------------------------
Name: Karen M. Betro Name: Michael Favish
Title: Secretary Title: President and Chief Executive
Officer
Attest: CONTINENTAL STOCK TRANSFER
& TRUST COMPANY
/s/ Michael J. Nelson By: /s/ Steven G. Nelson
- ------------------------- ------------------------------------
Name: Michael J. Nelson Name: Steven G. Nelson
Title: Pres. Title: Chairman
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