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                              EMPLOYMENT AGREEMENT

         This EMPLOYMENT AGREEMENT (the "Agreement") is dated as of August 10,
1999 by and between FOTOBALL USA, INC., a Delaware corporation (the "Company"),
and Michael Favish ("Executive").

                              W I T N E S S E T H :

         WHEREAS, Executive is currently serving as the President and Chief
Executive Officer of the Company under a five-year employment agreement with the
Company dated as of August 10, 1994 (the "Old Agreement");

         WHEREAS, the Company and Executive desires to extend the employment
relationship upon the terms set forth in this Agreement;

         NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the adequacy and
receipt of which are hereby acknowledged, the parties agree as follows:

         1. Employment. (a) The Company hereby employs (the "Employment")
Executive as the President and Chief Executive Officer of the Company. It is the
intention of the parties to vest full authority to control the day-to-day
operations of the Company with Executive, subject to the general supervision,
control and guidance of the Board of Directors of the Company (the "Board").
Executive hereby accepts the Employment and agrees to (i) render such executive
services, (ii) perform such executive duties and (iii) exercise such executive
supervision and powers to, for and with respect to the Company, as may be
established by the Board, for the period and upon the terms set forth in this
Agreement.

            (b) Executive shall devote substantially all of his business time
and attention to the business and affairs of the Company consistent with his
executive positions with the Company, except for vacations permitted pursuant to
Section 3.5 and Disability (as defined in Section 6.2). This Agreement shall not
be construed as preventing Executive from engaging in charitable and community
affairs, or giving attention to his passive investments, provided that such
activities do not interfere with the regular performance of his duties and
responsibilities under this Agreement.

         2. Term. Except as otherwise specifically provided in Section 6 below,
the term of this Agreement (as may be extended, the "Term") shall commence on
the date hereof, and shall continue until August 9, 2002, subject to the terms
and conditions of this Agreement. The Term may be extended for consecutive
one-year renewal terms by written notice by either party to the other between
sixty (60) and ninety (90) days prior to the end of the original three-year term
or one-year renewal terms.



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         3. Compensation.

            3.1 Base Salary. Executive shall be paid a base salary (the "Base
Salary") at an annual rate of one hundred ninety thousand dollars ($190,000),
payable at such intervals as the other executive officers of the Company are
paid, but in any event at least on a monthly basis. The Base Salary shall be
reviewed by the Board on or before January 1 of each year during the Term, with
such reviews to commence prior to such date, and shall be subject to increase in
the discretion of the Board, taking into account merit, corporate and individual
performance and general business conditions, including changes in the consumer
price index published by the United States Bureau of Labor, Bureau of Labor
Statistics, for the San Diego, California metropolitan area. Such increase, if
any, in Executive's Base Salary shall be effective on January 1 of each year
during the Term commencing in 2000.

            3.2 Bonus. In addition to the Base Salary, Executive shall be
entitled to such bonus compensation ("Bonus Compensation") as may be determined
from time to time by the Compensation Committee of the Board, in its sole
discretion.

            3.3 Stock Options.

                (a) During each year of this Agreement (August-August), the
Company shall cause the issuance to Executive of non-qualified options (the
"Options") to purchase not less than 10,000 shares of common stock, $.01 par
value (the "Common Stock"), of the Company at a per share exercise price equal
to the then-current fair market value of the Common Stock, subject to three-year
vesting and subject to and in accordance with the terms of the 1998 Stock Option
Plan of the Company or any successor stock option plan (the "Plan").

                (b) Executive's vested Options shall be exercisable for a period
of ten years from the date of issuance. Upon the termination of this Agreement,
any unvested Options shall lapse, except as otherwise provided in Section 6
below, and Executive shall have ninety (90) days from the date of termination in
accordance with the terms of this Agreement to exercise any vested Options (one
year in the case of termination by reason of death or Disability of Executive).

            3.4 Employee Benefits. In addition to the Base Salary and the Bonus
Compensation, Executive shall be entitled (i) to continue to receive the fringe
benefits now provided by the Company in addition to any additional benefits
hereafter provided to its executive offers, including, but not limited to, life,
hospitalization, surgical, major medical and disability insurance and sick
leave, (ii) to be a full participant in all of the Company's other benefit
plans, pension plans, retirement plans and profit-sharing plans which may be in
effect from time to time or may hereafter be adopted by the Company and (iii) to
all costs and expenses for the maintenance, including insurance, and operation
of Executive's automobile; provided, however, that such costs and expenses shall
not exceed $750 in any month.



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            3.5 Vacation. During the Term, Executive shall be entitled to such
vacation with pay during each calendar year of his Employment hereunder
consistent with his position as an executive officer of the Company, but in no
event less than four (4) weeks in any such calendar year (pro-rated as necessary
for partial calendar years during the Term). Such vacation may be taken, in
Executive's discretion, at such time or times as are not inconsistent with the
reasonable business needs of the Company. Executive shall not be entitled to any
additional compensation in the event that Executive, for whatever reason, fails
to take such vacation during any year of his Employment hereunder. Executive
shall also be entitled to all paid holidays given by the Company to its
executive officers.

         4. Indemnification. Executive shall be entitled at all times to the
benefit of the maximum indemnification and advancement of expenses available
from time to time under the laws of the State of Delaware.

         5. Expenses. During the Term, the Company shall reimburse Executive
upon presentation of appropriate vouchers or receipts in accordance with the
Company's expense reimbursement policies for executive officers, for all
out-of-pocket business travel and entertainment expenses incurred or expended by
Executive in connection with the performance of his duties under this Agreement.

         6. Consequences of Termination of Employment.

            6.1 Death. In the event of the death of Executive during the Term,
Executive's Employment hereunder shall be terminated as of the date of his death
and Executive's designated beneficiary, or, in the absence of such designation,
the estate or other legal representative of Executive (collectively, the
"Estate") shall be paid, Executive's unpaid Base Salary through the month in
which the death occurs and any unpaid Bonus Compensation for any fiscal year
which has ended as of the date of such termination or which was at least one
half (1/2) completed as of the date of death. In the case of such incomplete
fiscal year, the Bonus Compensation shall be pro-rated and all such Bonus
Compensation payable as a result of this Section 6.1 shall be otherwise payable
as determined by the Compensation Committee of the Board, in its sole
discretion. The Estate shall be entitled to all other death benefits in
accordance with the terms of the Company's benefit programs and plans.

            6.2 Disability. In the event Executive shall be unable to render the
services or perform his duties hereunder by reason of illness, injury or
incapacity (whether physical, mental, emotional or psychological) (any of the
foregoing shall be referred to herein as a "Disability") for a period of either
(i) ninety (90) consecutive days or (ii) one hundred eighty (180) days in any
consecutive three hundred sixty-five (365) day period, the Company shall have
the right to terminate this Agreement by giving Executive ten (10) days prior
written notice. If Executive's Employment hereunder is so terminated, Executive
shall be paid, in addition to payments under any disability insurance policy in
effect, Executive's unpaid Base



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Salary through the month in which the termination occurs, plus Bonus
Compensation on the same basis as is set forth in Section 6.1 above.

            6.3 Termination of Employment of Executive by the Company for Cause.

                (a) Nothing herein shall prevent the Company from terminating
Executive's Employment for Cause (as defined below). From and after the date of
such termination, Executive shall no longer be entitled to receive Base Salary
and Bonus Compensation and the Company shall no longer be required to pay
premiums on any life insurance or disability policy for Executive. Any rights
and benefits which Executive may have in respect of any other compensation or
any employee benefit plans or programs of the Company, whether pursuant to
Section 3.4 or otherwise, shall be determined in accordance with the terms of
such other compensation arrangements or plans or programs. The term "Cause," as
used herein, shall mean that: (i) Executive shall embezzle funds or
misappropriate other property of the Company or any subsidiary; or (ii)
Executive shall willfully disobey a lawful directive of the Board, whether
through commission or omission; or (iii) Executive shall breach the Agreement in
a material manner or engage in fraudulent conduct as regards the Company.

                (b) The Company shall provide Executive with written notice
stating that it intends to terminate Executive's Employment for Cause under this
Section 6.3 and specifying the particular act or acts on the basis of which the
Board intends to so terminate Executive's Employment. Executive shall then be
given the opportunity, within fifteen (15) days of his receipt of such notice,
to have a meeting with the Board to discuss such act or acts (other than with
respect to an action described in Section 6.3(a)(i) above as to which the Board
may immediately terminate Executive's Employment for Cause). Other than with
respect to an action described in Section 6.3(a)(i) above, Executive shall be
given seven (7) days after his meeting with the Board to take reasonable steps
to cease or correct the performance (or nonperformance) giving rise to such
written notice. In the event Board determines that Executive has failed within
such seven-day period to take reasonable steps to cease or correct such
performance (or nonperformance), Executive shall be given the opportunity,
within ten (10) days of his receipt of written notice to such effect, to have a
meeting with the Board to discuss such determination. Following that meeting, if
the Board believes that Executive has failed to take reasonable steps to cease
or correct his performance (or nonperformance) as above described, the Board may
thereupon terminate the Employment of Executive for Cause.

            6.4 Termination of Employment Other than for Cause, Death or
Disability.

                (a) Termination. This Agreement may be terminated by the Company
(in addition to termination pursuant to Sections 6.1, 6.2 or 6.3 above) at any
time and for any reason or upon the expiration of the Term.



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                (b) Severance and Non-Competition Payments.

                    (1) If this Agreement is terminated by the Company,
including a Constructive Termination (as defined below), other than as a result
of death or Disability of Executive or for Cause (and other than in connection
with a change in control (as defined below) of the Company), the Company shall
pay Executive a severance and non-competition payment equal to the sum of (x) an
amount equal to the Base Salary for the remainder of the Term plus (y) an amount
equal to the Bonus Compensation earned by Executive in respect of the last full
fiscal year immediately preceding the year of termination multiplied by the
number of full fiscal years remaining in the Term; provided, however, that a
termination during the last twelve (12) months of the Term shall be governed by
Section 6.4(b)(5) below. Such severance and non-competition payment shall be
payable, in Executive's sole discretion, either (i) in a lump sum on the first
day of the month following the termination or (ii) in equal monthly installments
commencing on the first day of the month following termination and continuing
for the remainder of the Term. In addition, all unvested Options shall be deemed
to have vested on the date of such termination.

                    (2) For purposes of this Agreement, a "change in control" of
the Company shall be deemed to have occurred if (i) the Company shall have
merged or consolidated with an unaffiliated entity in which (A) the Company is
not the surviving corporation or (B) the Company shall have transferred or sold
all or substantially all of its assets to an unaffiliated entity (other than a
transaction which would cause the stockholders immediately prior to such
transaction to own at least fifty (50%) of the voting securities of the Company
immediately after such transaction), or (ii) there shall be a change in the
constituency of a majority of the members of the Board within any twelve (12)
month period (other than a change of which a majority of the existing directors
voted in favor).

                    (3) For purposes of this Agreement, "Constructive
Termination" shall be deemed to have occurred upon (x) the removal of Executive
from, or a failure of Executive to continue as, President and Chief Executive
Officer of the Company and (y)(i) any material diminution in the nature or scope
of the authorities, powers, functions, duties or responsibilities attached to
such positions or (y)(ii) the material breach by the Company of this Agreement
and, in any such case, Executive does not agree to such change and elects to
terminate his Employment.

                    (4) In the event of a termination of Employment (including a
Constructive Termination) within six (6) months following a change in control of
the Company, the Company shall pay Executive a severance and non-competition
payment equal to the greater of (x) the sum of (i) an amount equal to the Base
Salary for the remainder of the Term plus (ii) an amount equal to the Bonus
Compensation earned by Executive in respect of the last full fiscal year
immediately preceding the year of termination multiplied by the number of full
fiscal years remaining in the Term; or (y) 2.99 times the sum of the Base Salary
plus the Bonus Compensation in respect of the year immediately preceding the
year of




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termination. Such severance and non-competition payment shall be payable, in
Executive's sole discretion, either (i) in a lump sum on the first day of the
month following the termination or (ii) in equal monthly installments commencing
on the first day of the month following termination and continuing for the
remainder of the Term. In addition, all unvested Options shall be deemed to have
vested on the date of such change in control.

                    (5) If this Agreement is not renewed beyond the Term by the
parties hereto or if this Agreement is terminated by the Company, including a
Constructive Termination, other than as a result of death or Disability of
Executive or for Cause (and other than in connection with a change in control)
in accordance with this Section 6, during the last twelve (12) months of the
Term, the Company shall pay Executive a severance and non-competition payment
equal to the sum of (x) an amount equal to the Base Salary in respect of the
calendar year immediately preceding the year of termination plus (y) an amount
equal to the Bonus Compensation earned by Executive in respect of the calendar
year immediately preceding the year of termination. Such severance and
non-competition payment shall be payable, in Executive's sole discretion, either
(i) in a lump sum of the first day of the month following the termination or
(ii) in twelve (12) equal monthly installments commencing on the first day of
the month following termination. In addition, all unvested Options shall be
deemed to have vested on the date of such termination.

                    (6) Executive shall not be required to mitigate the amount
of any severance and non-competition payment provided for under this Agreement
by seeking other employment or otherwise.

         7. Confidential Information.

            7.1 Executive covenants and agrees that he will not at any time,
either during the Term or thereafter, use, disclose or make accessible to any
other person, firm, partnership, corporation or any other entity any
Confidential Information (as defined below) pertaining to the business of the
Company except (i) while employed by the Company, in the business of and for the
benefit of the Company or (ii) when required to do so by a court of competent
jurisdiction, by any governmental agency having supervisory authority over the
business of the Company, or by any administrative body or legislative body
(including a committee thereof) with jurisdiction to order the Company to
divulge, disclose or make accessible such information. For purposes of this
Agreement, "Confidential Information" shall mean non-public information
concerning the Company's financial data, statistical data, strategic business
plans, product development (or other proprietary product data), customer and
supplier lists, customer and supplier information, information relating to
practices, processes, methods, trade secrets, marketing plans and other
non-public, proprietary and confidential information of the Company; provided,
however, that Confidential Information shall not include any information which
(x) is known generally to the public other than as a result of unauthorized
disclosure by Executive, (y) becomes available to the Executive on a
non-confidential basis from a source other than the Company or (z) was available
to Executive




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on a non-confidential basis prior to its disclosure to Executive by the Company.
It is specifically understood and agreed by Executive that any Confidential
Information received by Executive during his Employment by the Company is deemed
Confidential Information for purposes of this Agreement. In the event
Executive's Employment is terminated hereunder for any reason, he immediately
shall return to the Company all Confidential Information in his possession.

            7.2 Executive and the Company agree that this covenant regarding
Confidential Information is a reasonable covenant under the circumstances, and
further agree that if, in the opinion of any court of competent jurisdiction,
such covenant is not reasonable in any respect, such court shall have the right,
power and authority to excise or modify such provision or provisions of this
covenant as to the court shall appear not reasonable and to enforce the
remainder of the covenant as so amended. Executive agrees that any breach of the
covenant contained in this Section 7 would irreparably injure the Company.
Accordingly, Executive agrees that the Company, in addition to pursuing any
other remedies it may have in law or in equity, may obtain an injunction against
Executive from any court having jurisdiction over the matter, restraining any
further violation of this Section 7.

         8. Non-Competition; Non-Solicitation.

            8.1 Executive agrees that during the Non-Competition Period (as
defined in Section 8.4 below), without the prior written consent of the Company:
(i) he shall not be a principal, manager, agent, consultant, officer, director
or employee of, or, directly or indirectly, own more than one (1%) percent of
any class or series of equity securities in, any partnership, corporation or
other entity, which, now or at such time, has material operations which are
engaged in any business activity competitive (directly or indirectly) with the
business of the Company; and (ii) he shall not, on behalf of any competing
entity, directly or indirectly, have any dealings or contact with any suppliers
or customers of the Company.

            8.2 During the Non-Competition Period, Executive agrees that,
without the prior written consent of the Company (and other than on behalf of
the Company), Executive shall not, on his own behalf or on behalf of any person
or entity, directly or indirectly hire or solicit the employment of any employee
who has been employed by the Company at any time during the six (6) months
immediately preceding such date of hiring or solicitation.

            8.3 Executive and the Company agree that the covenants of non-
competition and non-solicitation are reasonable covenants under the
circumstances, and further agree that if, in the opinion of any court of
competent jurisdiction such covenants are not reasonable in any respect, such
court shall have the right, power and authority to excise or modify such
provision or provisions of these covenants as to the court shall appear not
reasonable and to enforce the remainder of these covenants as so amended.
Executive agrees that any breach of the covenants contained in this Section 8
would irreparably injure the



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Company. Accordingly, Executive agrees that the Company, in addition to pursuing
any other remedies it may have in law or in equity, may obtain an injunction
against Executive from any court having jurisdiction over the matter,
restraining any further violation of this Section 8.

            8.4 The provisions of this Section 8 shall extend for the Term and
survive the termination of this Agreement for one year from the date of such
termination (herein referred to as the "Non-Competition Period").

         9. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been given if delivered personally or
sent by facsimile transmission, overnight courier, or certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally or sent by facsimile transmission (provided that a
confirmation copy is sent by overnight courier), one day after deposit with an
overnight courier, or if mailed, five (5) days after the date of deposit in the
United States mails, as follows:

If to the Company, to:           Fotoball USA, Inc.
                                 3738 Ruffin Road
                           San Diego, California  92123
                           Telecopy:  (619) 467-9947
                           Attention: Chief Financial Officer

If to Executive, to:       Mr. Michael Favish
                           4181 Raya Way
                           San Diego, California  92122

         10. Entire Agreement. This Agreement and the Plan contain the entire
agreement between the parties hereto with respect to the matters contemplated
herein and supersede all prior agreements or understandings among the parties
related to such matters, including the Old Agreement.

         11. Binding Effect. Except as otherwise provided herein, this Agreement
shall be binding upon and inure to the benefit of the Company and its successors
and assigns and upon Executive. "Successors and assigns" shall mean, in the case
of the Company, any successor pursuant to a merger, consolidation, or sale, or
other transfer of all or substantially all of the assets or Common Stock of the
Company.

         12. No Assignment. Except as contemplated by Section 11 above, this
Agreement shall not be assignable or otherwise transferable by either party.

         13. Amendment or Modification; Waiver. No provision of this Agreement
may be amended or waived unless such amendment or waiver is authorized by the
Board and is agreed to in writing, signed by Executive and by a duly authorized
officer of the Company




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(other than Executive). Except as otherwise specifically provided in this
Agreement, no waiver by either party hereto of any breach by the other party
hereto of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of a similar or dissimilar provision or
condition at the same or at any prior or subsequent time.

         14. Fees and Expenses. If either party institutes any action or
proceedings to enforce any rights the party has under this Agreement, or for
damages by reason of any alleged breach of any provision of this Agreement, or
for a declaration of each party's rights or obligations hereunder or to set
aside any provision hereof, or for any other judicial remedy, the prevailing
party shall be entitled to reimbursement from the other party for its costs and
expenses incurred thereby, including but not limited to, reasonable attorneys'
fees and disbursements.

         15. Governing Law. The validity, interpretation, construction,
performance and enforcement of this Agreement shall be governed by the internal
laws of the State of California, without regard to its conflicts of law rules.

         16. Titles. Titles to the Sections in this Agreement are intended
solely for convenience and no provision of this Agreement is to be construed by
reference to the title of any Section.

         17. Counterparts. This Agreement may be executed in one or more
counterparts, which together shall constitute one agreement. It shall not be
necessary for each party to sign each counterpart so long as each party has
signed at least one counterpart.

         18. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms and
provisions of this Agreement in any other jurisdiction.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first set forth above.

                                            FOTOBALL USA, INC.


                                            By: -------------------------------
                                                Clifford A. Lyon
                                                Chief Financial Officer


                                            -----------------------------------
                                            Michael Favish



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