As filed with the Securities and Exchange Commission on September 18, 1998
Registration No. ________________
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
CREATIVE HOST SERVICES, INC.
(Exact name of registrant as specified in their charter)
California
(State or other jurisdiction of incorporation or organization of registrant)
33-1069494
(I.R.S. employer identification number)
6335 Ferris Square, Suites G-H
San Diego, California 92126
(619) 587-7300
(Address, including zip code, and telephone number,
including area code, of registrants' principal executive office)
Sayed Ali, President
Creative Host Services, Inc.
6335 Ferris Square, Suite G-H
San Diego, California 92126
(619) 587-7300
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
With copies to:
James A. Mercer III, Esq.
Luce Forward Hamilton & Scripps LLP
600 West Broadway, Suite 2600
San Diego, California 92101
(619) 699-2447
(619) 645-5340 (fax)
Approximate date of commencement of
proposed sale to the public: From time to time
after the effective date of this Registration
Statement.
If any of the securities being registered on this form are to be 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
1993, 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. Registration No. _______.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Aggregate Price Aggregate Offering Amount of
Securities to be Registered Registered(1) Per Unit(2) Price (2) Registration Fee
<S> <C> <C> <C> <C>
Common Stock.................................... 582,674 $ 5.50 $ 3,204,707 $ 945(3)
Warrants ....................................... 462,500 $ .25 $ 115,625 $ 34(3)
Common Stock Underlying Warrants................ 462,500 $ 5.40 $ 2,497,500 $ 737(3)
Common Stock Issuable Upon Conversion of Notes.. 280,899 $ 1.78 $ 500,000 $ 148
Common Stock Underlying Warrants................ 105,000 $ 2.06 $ 216,563 $ 64
Common Stock Underlying Warrants................ 162,984 $ 1.75 $ 110,222 $ 33
- ------------------------------------------------ ================== ===================== ==================== =================
Totals $ 6,644,617 $1,961(3)
================================================ ================== ===================== ==================== =================
</TABLE>
(1) This Registration Statement covers shares of the Registrant's Common Stock
and Warrants being registered for resale on behalf of certain Selling
Securityholders as well as such indeterminate number of additional shares
of Common Stock as may become issuable upon conversion of the Company's 12%
Bridge Notes (the "Notes"), upon exercise of warrants issued in connection
with the issuance of the Notes, and upon exercise of other warrants issued
to certain Selling Securityholders. This Registration Statement registers
securities to be offered pursuant to terms which provide for a change in
the amount of securities being offered or issued to prevent dilution
resulting from stock splits, stock dividends or similar transactions.
Pursuant to Rule 416, this Registration Statement shall be deemed to cover
the additional securities to be offered or issued in connection with any
such provision.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c).
(3) These securities were previously registered on, and the filing fee was paid
by the Registrant with its filing of a Registration Statement on Form SB-2
on April 3, 1997 (Registration No. 333-6722). An additional fee of $245 is
required with this filing.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION DATED SEPTEMBER 18, 1998
PROSPECTUS
CREATIVE HOST SERVICES, INC.
[LOGO]
953,573 Shares Common Stock
462,500 Warrants
This Prospectus relates to the sale by certain investors (the "Selling
Stockholders") of Creative Host Services, Inc. (the "Company") an aggregate of
of 953,573 shares of the Company's Common Stock ("Common Stock") and 462,500
Redeemable Common Stock Purchase Warrants (the "Public Warrants").
The Company will not receive any of the proceeds from the sale of
securities by the Selling Securityholders. In the event that all the Public
Warrants are fully exercised, the Company will receive gross proceeds of
$2,497,500.
The Common Stock of the Company is traded on the NASDAQ Small Cap
Market under the symbol "CHST." On September 14, 1998, the last bid price and
ask price for the Common Stock as reported on the NASDAQ Small Cap was $1.75 and
$1.81, respectively. The Company has applied to have the Warrants listed on the
NASDAQ Small Cap Market under the symbol "CHSTW."
For a discussion of certain factors that should be considered in
connection with an investment in the Company's Common Stock and Public Warrants,
see "Risk Factors" beginning on page 3.
-------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------------
The Selling Securityholders may from time to time sell all or a
portion of the securities offered herein in transactions in the over-the-counter
market, in negotiated transactions, or otherwise, at fixed prices that may be
changed, at market prices prevailing at the time of sale, or at negotiated
prices. The Selling Securityholders may effect such transactions by selling such
securities directly to purchasers or through dealers or agents who may receive
compensation in the form of discounts, concessions or commissions from the
Selling Securityholders and/or the purchasers of the securities for whom they
may act as agents.
-------------------------
The date of this Prospectus is ____________, 1998
<PAGE>
ADDITIONAL INFORMATION
This Prospectus is part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") which has been filed by the Registrants with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"), relating to the securities offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information, reference is made to the
Registration Statement. Statements made in this Prospectus as to the contents of
any contract, agreement or other document referred to herein are not necessarily
complete. With respect to each such contract, agreement or other document filed
as an exhibit to the Registration Statement, reference is made to the exhibit
for a more complete description of the matter involved, and each such statement
shall be deemed qualified in its entirety by such reference.
The Company is subject to the informational reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy and information statements and other
information with the Commission. Such reports, proxy and information statements
and other information as well as the Registration Statement and Exhibits of
which this Prospectus is a part, filed by the Company may be inspected and
copied at the public reference facilities of the Commission, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549, as well as at the
following Regional Offices: 7 World Trade Center, 13th Floor, New York, New York
10048 and Citicorp Center, 500 West Madison Street--Suite 1400, Chicago,
Illinois 60661. Copies of such material can be obtained from the Commission by
mail at prescribed rates. Requests should be directed to the Commission's Public
Reference Section, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, DC 20549. The Commission maintains a web site that contains reports,
proxies, and information statement regarding registrants that file
electronically with the Commission. The address of the web site is
http://www.secgov. The Company's Common Stock is traded on the Nasdaq National
Market System. Reports and other information concerning the Company can also be
obtained at the offices of the National Association of Security Dealers, Inc.,
Market Listing Section, 1735 K Street, N.W., Washington, D.C., 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference into this Prospectus the
following documents previously filed with the Commission:
1. The Company's Annual Report on Form 10-KSB for the year ended
December 31, 1997.
2. The Company's Quarterly Report on Form 10-QSB for quarterly
period ended June 30, 1998.
3. The description of the Company's Common Stock (the "Common
Stock") and the Public Warrants contained in the Company's
Registration Statement on Form SB-2.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering made hereby shall be deemed
incorporated by reference in this Prospectus and to be a part hereof from the
date of the filing of such documents. See "Additional Information". Any
statement contained in a document incorporated or deemed to be incorporated
herein by reference shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charges to each person to whom this
Prospectus is delivered, upon request of any such person, a copy of any or all
of the foregoing documents incorporated herein by reference (other than exhibits
2
<PAGE>
to such documents not specifically incorporated by reference). Written or
telephone requests should be directed to the President of the Company at its
principal executive offices: Creative Host Services, Inc., 6335 Ferris Square,
Suites G-H, San Diego, California, telephone number (619) 587-7300.
RISK FACTORS
The following factors should be carefully considered in evaluating a
potential investment in the Company.
Forward-Looking Statements. The following cautionary statements are
made pursuant to the Private Securities Litigation Reform Act of 1995 in order
for the Company to avail itself of the "safe harbor" provisions of that Act. The
discussions and information in this Prospectus including the documents
incorporated by reference herein may contain both historical and forward-looking
statements. To the extent that the Prospectus contains forward-looking
statements regarding the financial condition, operating results, business
prospects or any other aspect of the Company, please be advised that the
Company's actual financial condition, operating results and business performance
may differ materially from that projected or estimated by the Company in
forward-looking statements. The Company has attempted to identify, in context,
certain of the factors that it currently believes may cause actual future
experience and results to differ from the Company's current expectations. The
differences may be caused by a variety of factors, including but not limited to
adverse economic conditions, general decreases in air travel, intense
competition, including entry of new competitors, increased or adverse federal,
state and local government regulation, inadequate capital, unexpected costs,
lower revenues and net income than forecast, loss of airport concession bids or
existing locations, price increases for supplies, inability to raise prices,
failure to obtain new concessions, the risk of litigation and administrative
proceedings involving the Company and its employees, higher than anticipated
labor costs, the possible fluctuation and volatility of the Company's operating
results and financial condition, adverse publicity and news coverage, inability
to carry out marketing and sales plans, loss of key executives, changes in
interest rates, inflationary factors, and other specific risks that may be
alluded to in this Prospectus.
Need for Substantial Additional Capital. The Company does not
anticipate that the cash flow from its current operations will be sufficient to
permit it to acquire additional locations at its historic growth rate. The
Company will be required to raise substantial additional capital in the future
in order to have sufficient funds to build out capital improvements for any
newly awarded concession locations. No assurances can be provided that
additional capital to sustain such growth will be available on terms acceptable
to the Company or at all. Failure to secure adequate capital to bid, win, retain
or service concession contracts, will hinder the Company's growth or force it to
franchise valuable locations that it would otherwise prefer to operate directly.
In addition, the Company presently utilizes equipment leasing to finance some of
its operations. Additional lease financing with rates acceptable to the Company
may not be available, in which case the Company will be required to raise
additional capital or cease its expansion program until such financing or
capital is made available, if ever.
Dependence on Airport Concession Business. The Company is currently
dependent on the airport concession business for substantially all of its
revenues and expects such dependence to continue for the foreseeable future. The
concession business is highly competitive and subject to the uncertainties of
the bidding and proposal process. Sophisticated bid packages and persuasive
presentations are required in order to have an opportunity to win concession
contracts at airports and other public venues. While there are thousands of
airport concessions nationwide, the majority of those concessions are located in
the largest 125 airports, resulting in a relatively small market for airport
concessions. Concession business operators, such as the Company, must maintain
their reputations with the various airport authorities and other government,
quasi government and public agencies in order to remain eligible to win
contracts. The terms and conditions of concession contracts must be carefully
analyzed to ensure that they can be profitable for the Company. For the fiscal
year ended December 31, 1997, the Company's locations at Allentown and Portland
operated at an aggregate loss of approximately $130,000. Because the Company's
concession agreements contain minimum rent guarantees, the Company is
constrained in its ability to terminate under-performing locations. In addition,
the failure of any single concession could have a material adverse impact on the
Company's reputation with airport authorities
3
<PAGE>
generally, and hinder the Company's ability to renew existing concessions or
secure new ones. There is no assurance that the Company will continue to be
awarded concession contracts by airports or by any other public venue, that the
concession contracts will be profitable, or that the Company will not lose
contracts that it has been awarded.
Concessions Subject To Set Asides and Special Requirements. Rules
issued by the Federal Aviation Administration ("FAA") require a portion of
airport concession contracts to be awarded to certain classes of entities or
persons designated as disadvantaged business enterprises ("DBEs"). The rules do
not specify the method in which the DBEs must participate, whether through
owning the concession, employment or providing services. Competitors in the
industry have relied on combinations of using DBE employees or vendors to meet
this requirement. Prior to the Company's initial public offering in July 1997,
Mr. Sayed Ali, a native of Pakistan, owned all of the Company's Common Stock,
thereby satisfying FAA rules. As a result of the change in ownership resulting
from the initial public offering, the Company's status as a DBE is less clear.
Certain existing concession contracts designate the Company as a DBE and may
have to be reaffirmed. Management believes that even if Mr. Ali's current equity
ownership of the Company is no longer sufficient to qualify as a DBE, the
Company would be able to maintain all of its contracts and can continue to
satisfy DBE rules by hiring or contracting with minority parties or other
entities qualifying as DBEs, if required. However, it has not discussed with any
airport authority the possible impact of its change in status; nor has the
Company attempted to reaffirm any existing contract. The Company's status as a
DBE assisted it in securing concessions with several airports. The Company
believes it can continue to secure new concessions on the basis of the products
and services it offers and its industry reputation. The Company has secured
concessions to operate 7 additional locations after its initial public offering
and the resultant dilution of ownership, although the Company is not aware of
the extent to which the Company's DBE status, or lack thereof, was a factor in
the airport authorities' decisions to award such contracts to the Company. To
the extent that the Company's historic rate of success in securing new airport
concessions was attributable to its status as a DBE, that growth rate may
decline if the Company is not recognized as a DBE or if DBE programs are
eliminated or curtailed.
Possible Early Termination of Concessions. Certain airport authorities
or airlines that operate concession locations provide in their concession
agreements for the right to reacquire the concession from the concessionaire
upon reimbursement of equipment and build out costs and, sometimes, a percentage
of anticipated profits during the balance of the concession term. Certain of the
Company's significant concession contracts, including Los Angeles International,
Des Moines, Iowa, Columbia, South Carolina and Cedar Rapids, Iowa, provide for
such early termination. See "BUSINESS -- The Concession Business." To date, the
Company has not had any of its concessions terminated, and the Company has not
received notice that any airport authority is contemplating the early
termination of any of the Company's concessions. No assurances can be provided,
however, that these airport authorities will not exercise their contractual
right to early termination of the concession contracts in the future.
Possible Delay in Commencement of Concession Operations The
commencement of the Company's concession operations at any airport location are
subject to a number of factors which are outside the Company's control,
including construction delays and decisions by airport authorities to delay the
opening of concessions. The Company has, in the past, experienced delays in
commencing operations because of decisions by airport authorities. The Company's
franchisee had completed capital improvements for a facility at the Denver
International Airport, only to have the airport authority close the concourse
when a major airline withdrew its operations from that airport. The Company has
also been asked to delay commencement of its operations at JFK International
Airport in New York. Consequently, the Company bears the risk that after a
concession has been awarded, the completion of capital improvements or the
commencement of operations at completed facilities may be delayed. Any such
delay or requirement by an airport authority for the Company to construct
facilities during peak travel periods would adversely impact the Company's
financial projections and cash flow planning, and may have a material adverse
impact on the Company's financial position.
Dependence on Key Personnel and Need to Attract Qualified Management.
The Company's success will depend largely upon the Company's management. While
management has had previous experience in concession and restaurant operations,
there can be no assurance that the Company's operations will be successful.
Sayed Ali, Chairman
4
<PAGE>
of the Board, President and Chief Executive Officer of the Company, has entered
into a five-year employment agreement with the Company which commenced on
January 1, 1997. In the event of a loss of the services of Mr. Ali, the Company
could be materially adversely affected because there is no assurance that the
Company could obtain successor management of equivalent talent and experience.
The Company is currently listed as beneficiary of a $220,000 key man life
insurance policy which is owned by Mr. Ali and is pledged as security for a
Small Business Administration ("SBA") loan. In addition, the Company has
obtained a $1,000,000 key man policy on Mr. Ali which the Company owns. Given
the Company's stage of development, the Company is dependent upon its ability to
identify, hire, train, retain and motivate highly qualified personnel,
especially management personnel which will be required to supervise the
Company's expansion into various geographic areas. There can be no assurance
that the Company will be able to attract qualified personnel or that the
Company's current employees will continue to work for the Company. The failure
to attract, assimilate and train key personnel could have a material adverse
effect on the Company's business, financial condition and results of operations.
Highly Competitive Industry Dominated by Larger Competitors. The
Company competes with certain national and several regional companies to obtain
the rights from airport and other authorities to operate food, beverage, news,
gift, merchandise and inflight catering concessions. The airport concession
market is principally serviced by several companies which are significantly
larger than the Company, including, but not limited to, Host Marriott Services,
Inc., CA One Services, Concessions International, and Ogden Food Services. Each
of these well established competitors possesses substantially greater financial,
marketing, administrative and other resources than the Company. Many of the
Company's competitors have achieved significant brand name and product
recognition. They engage in extensive advertising and promotional programs, both
generally and in response to efforts by additional competitors to enter new
markets or introduce new products. There can be no assurance that the Company
will be able to compete successfully in its chosen markets.
Dependence Upon Continuing Approvals from Government Regulatory
Authorities. The food and beverage service industry is subject to various
federal, state and local government regulations, including those related to
health, safety, wages and working conditions. While the Company has not
experienced difficulties in obtaining necessary government approvals to date,
the failure to obtain and retain food licenses or any other governmental
approvals could have a material adverse effect on the Company's operating
results. Moreover, the Company's failure to meet government regulations could
result in the temporary closure of one or more of its concession facilities,
restaurants or the food preparation center, any of which would have a material
adverse impact on the Company's financial condition and result of operations. In
addition, operating costs are affected by increases in the minimum hourly wage,
unemployment tax rates, sales taxes and similar matters over which the Company
has no control. The Company is also subject to federal and state laws, rules and
regulations that govern the offer and sale of franchises.
No Assurance of Enforceability of Trademarks. The Company utilizes
trademarks in its business and has registered its Creative Croissants(R)
trademark. While the Company intends to file federal trademark registrations for
certain of its other trademarks, it has not yet done so. There can be no
assurance that the Company will be granted registration for such trademarks or
that the Company's trademarks do not or will not violate the proprietary rights
of others, that the Company's trademarks would be upheld if challenged or that
the Company will not be prevented from using its trademarks, any of which could
have a material adverse effect on the Company. Should the Company believe that
its trademarks are being infringed upon by competitors, there can be no
assurance that the Company will have the financial resources necessary to
enforce or defend its trademarks and service marks.
Seasonality. Because the Company's airport concession business is
dependent on pedestrian traffic at domestic airports, the Company experiences
some seasonality consistent with enplanements and general air traffic patterns.
Accordingly, the Company's revenues and income are generally expected to be
lowest in the first quarter of the year and become progressively stronger
through the fourth quarter, which includes the holiday travel periods.
Control by Principal Shareholder. The principal shareholder of the
Company, Mr. Sayed Ali, beneficially owns 30% of the outstanding shares of
capital stock of the Company. Accordingly, Mr. Ali has significant influence
5
<PAGE>
over the outcome of all matters submitted to the shareholders for approval,
including the election of directors of the Company.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the shares
offered hereby by the Selling Securityholders.
SELLING SECURITYHOLDERS
The shares of Common Stock and the Public Warrants being offered by the
Selling Securityholders and their transferees hereby were issued to the Selling
Securityholders in connection with various transactions.
An aggregate of 582,674 shares of Common Stock and 462,500 Public
Warrants may be offered by the Selling Securityholders who received their shares
of Common Stock and Public Warrants in connection with transactions which took
place prior to the Company's initial public offering, including a private
placement by the Company in February 1997 of 400,000 Units consisting of an
aggregate of 800,000 shares of 8% Convertible Redeemable Preferred Stock and
400,000 Private Warrants. Effective on the Company's initial public offering
which took place on July 21, 1997 each share of 8% Convertible Redeemable
Preferred Stock was automatically converted into Common Stock and the Private
Warrants converted into Public Warrants. Each Public Warrant entitles the holder
to purchase one share of Common Stock at an exercise price of $5.40 subject to
adjustment, until July 21, 2000.
On June 17, 1998, the Company sold $500,000 of 12% Convertible Notes
and 105,000 warrants in a private placement. The holders of the Notes are
entitled to convert the principal and interest of the Notes into shares of
Common Stock. Each warrant is exercisable into one share of Common Stock.
In August and September, 1998, the Company issued to certain
Securityholders an aggregate of $710,000 in promissory notes and 62,984 warrants
in a series of private placement transactions. Each warrant is exercisable into
one share of Common Stock.
The following table sets forth certain information with respect to each
Selling Securityholder for whom the Company is registering securities for resale
to the public. Beneficial ownership of the Common Stock by such Selling
Securityholders after this offering will depend on the number of shares of
Common Stock sold by each Selling Securityholder. With the exception of David
Sugarman, a former Director of the Company, there are no material relationships
between any of the Selling Securityholders and the Company, nor have any such
relationships existed within the past three years.
6
<PAGE>
<TABLE>
Number of Shares
Beneficially Owned As of Common Warrants
Selling Securityholder June 30, 1998(1) Shares Offered Offered
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Don Stephen Aron Separate Property 11,898 6,898 5,000
Jim L. Biddix 11,898 6,898 5,000
Al Blum & Co. Restated Employee Retirement Plan DTD 23,796 13,796 10,000
8/19/94
Frederick Boos 11,898 6,898 5,000
Theodore A. Buder 11,898 6,898 5,000
Felix Campos & Joyce Campos JTWROS 11,898 6,898 5,000
Caribou Capital 17,847 10,347 7,500
Stanley Chason & Barbara Chason JTWROS 11,898 6,898 5,000
Victor L. Chinn 11,898 6,898 5,000
John Chrabasz 7,648 5,148 2,500
Robert Cohen 11,898 6,898 5,000
Coombs & Company 11,898 6,898 5,000
Cord Investment Company 93,435 17,935 75,500
James E. Dean 5,949 3,449 2,500
Norman M. Dean 11,898 6,898 5,000
David W. Dennin 11,898 6,898 5,000
Dennis Erickson 11,898 6,898 5,000
Joel T. Feldman 5,949 3,449 2,500
Ronald Feltenstein 5,198 198 5,000
S. Marcus Finkle 25,990 990 25,000
William J. Forden 11,898 6,898 5,000
Alan W. George 11,898 6,898 5,000
Gerald Gray 8,329 4,829 3,500
Michael B. Gray 5,949 3,449 2,500
Robert J. Zappa 11,898 6,898 5,000
Harden Retirement Plan
John C. Harden & Margaret D. Harden, Trustees DTD 7/1/86 11,898 6,898 5,000
Bill R. Hay 11,898 6,898 5,000
Richard C. Jelinek 71,388 41,388 30,000
Berkeley D. Johnson 11,898 6,898 5,000
Samuel L. Johnson & Margaret R. Johnson JTWROS 11,898 6,898 5,000
Kearney Investments 11,898 6,898 5,000
Allen E. Knutson & Mary P. Knutson JTWROS 11,898 6,898 5,000
Michael Lee 11,898 6,898 5,000
W.B. Lindley 10,396 396 10,000
Rudy D. Luther 11,898 6,898 5,000
Carolyn B. Macrossie 23,796 13,796 10,000
Roger McKinney 11,898 6,898 5,000
Nicholas Mellilo & James Mellilo & Stella Mellilo JTWROS 16,657 9,657 7,000
Min Computer Consultants, Inc. 11,898 6,898 5,000
Thomas A Moore & Carolyn W. Moore JTWROS 11,898 6,898 5,000
Alexander Neel 11,898 6,898 5,000
Scott Richter 11,898 6,898 5,000
Cal J. Rickel and Amanda Rae Rickel 8,871 8,871
Alan Rosenbaum 9,518 5,518 4,000
Jeffrey Rubin 11,898 6,898 5,000
Wayne Saker 5,198 198 5,000
Lee Schlessman 57,140 52,140 5,000
The Schlessman Family Foundation 8,871 8,871
Gerald R. Sensabaugh Jr. & Elizabeth J. Sensabaugh JTWROS 11,898 6,898 5,000
C. Gary Skartvedt 11,898 6,898 5,000
Richard Baldwin Small 11,898 6,898 5,000
Robert Smith 5,198 198 5,000
David Sugarman 190,000 35,000
Swedbank (Luxembourg) S.A. 118,980 68,980 50,000
Scott Thornock 5,949 3,449 2,500
John M. Tonani 10,396 396 10,000
Steven M. Walker 11,898 6,898 5,000
Jeanette Ward Bugge 23,796 13,796 10,000
</TABLE>
7
<PAGE>
<TABLE>
Number of Shares
Beneficially Owned As of Common Warrants
Selling Securityholder June 30, 1998(1) Shares Offered Offered
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Kristina B. Weller 23,796 13,796 10,000
Richard Wham & Julia K. Wham JTWROS 2,500 2,500
Newport Advisors 15,000 15,000
James Samuelson 3,000 3,000
John Michael McNutt 7,000 7,000
Eastbrokers International 15,000 15,000
Profutures Special Entities Fund, L.P. 345,899 345,899
===========================================================
Total 1,416,073 953,573 462,500
</TABLE>
- ------------------
(1) Includes shares of Common Stock which will be received upon the
exercise of the Public Warrants, Bridge Note Warrants, and Promissory
Note Warrants, and upon conversion of the Bridge Notes held by the
Selling Securityholders.
8
<PAGE>
PLAN OF DISTRIBUTION
Sales of the shares of Common Stock and the Public Warrants, by the
Selling Securityholders may be effected from time to time in transactions (which
may include block transactions) in the over-the-counter market, in negotiated
transactions, through the writing of options on the Common Stock or a
combination of such methods of sale, at fixed prices that may be changed, at
market prices prevailing at the time of sale, or at negotiated prices. The
Selling Securityholders may effect such transactions by selling the shares of
Common Stock and Public Warrants directly to purchasers or through
broker-dealers that may act as agents or principals. Such broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
the Selling Securityholders and/or the purchasers of shares of Common Stock or
Public Warrants for whom such broker- dealers may act as agents or to whom they
sell as principals, or both (which compensation as to a particular broker-dealer
might be in excess of customary commissions).
The Selling Securityholders and any broker-dealers that act in
connection with the sale of the shares of Common Stock or the Public Warrants as
principals may be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act and any commissions received by them and any profit
on the resale of the shares of Common Stock or Public Warrants, as principals
might be deemed to be underwriting discounts and commission under the Securities
Act. The Selling Securityholders may agree to indemnify any agent, dealer or
broker-dealer that participates in transactions involving sales of the shares of
Common Stock or the Public Warrants against certain liabilities, including
liabilities under the Securities Act. The Company will not receive any proceeds
from the sale of the shares of Common Stock or Public Warrants. The Company will
receive $2,824,287.50 in proceeds from the exercise of the Public Warrants, the
Bridge Note Warrants and the Promissory Note Warrants if all such warrants are
exercised.
The shares of Common Stock and the Public Warrants are offered by the
Selling Securityholders on a delayed or continuous basis pursuant to Rule 415
under the Securities Act. The Company has agreed to pay all expenses incurred in
connection with the registration of the shares and warrant offered by the
Selling Securityholders; provided, however, that the Selling Securityholders
shall be exclusively liable to pay any and all commissions, discounts and other
payments to broker-dealers incurred in connection with their sale of Common
Stock and Public Warrants.
LIMITATION ON LIABILITY AND INDEMNIFICATION OF DIRECTORS
Under the California Corporations Code and the Company's Amended and
Restated Articles of Incorporation, the Company's directors will have no
personal liability to the Company or its shareholders for monetary damages
incurred as the result of the breach or alleged breach by a director of his
"duty of care". This provision does not apply to the directors' (i) acts or
omissions that involve intentional misconduct or a knowing and culpable
violation of law, (ii) acts or omissions that a director believes to be contrary
to the best interests of the corporation or its shareholders or that involve the
absence of good faith on the part of the director, (iii) approval of any
transaction from which a director derives an improper personal benefit, (iv)
acts or omissions that show a reckless disregard for the director's duty to the
corporation or its shareholders in circumstances in which the director was
aware, or should have been aware, in the ordinary course of performing a
director's duties, of a risk of serious injury to the corporation or its
shareholders, (v) acts or omissions that constituted an unexcused pattern of
inattention that amounts to an abdication of the director's duty to the
corporation or its shareholders, or (vi) approval of an unlawful dividend,
distribution, stock repurchase or redemption. This provision would generally
absolve directors of personal liability for negligence in the performance of
duties, including gross negligence.
The effect of this provision in the Company's Amended and Restated
Articles of Incorporation is to eliminate the rights of the Company and its
shareholders (through shareholder's derivative suits on behalf of the Company)
to recover monetary damages against a director for breach of his fiduciary duty
of care as a director (including breaches resulting from negligent or grossly
negligent behavior) except in the situations described in clauses (i) through
9
<PAGE>
(vi) above. This provision does not limit nor eliminate the rights of the
Company or any shareholder to seek non-monetary relief such as an injunction or
rescission in the event of a breach of a director's duty of care. In addition,
the Company's Restated Articles of Incorporation provides that if California law
is amended to authorize the future elimination or limitation of the liability of
a director, then the liability of the directors will be eliminated or limited to
the fullest extent permitted by the law, as amended. The California Corporations
Code grants corporations the right to indemnify their directors, officers,
employees and agents in accordance with applicable law. The Company's Bylaws
provide for indemnification of such persons to the full extent allowable under
applicable law.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
LEGAL MATTERS
The validity of the Common Stock and Public Warrants being offered
hereby will be passed upon by Luce, Forward, Hamilton & Scripps, LLP 600 West
Broadway, Suite 2600, San Diego, California 92101.
EXPERTS
The financial statements and the related supplemental schedules
incorporated in this Prospectus by reference from the Company's Annual Report on
Form 10-SB K for the year ended December 31, 1997 have been audited by
Stonefield Josephson, independent certified public accountants, as set forth in
their report appearing with the financial statements, have been so included in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
10
<PAGE>
No dealer, salesman or any other person
has been authorized by the Company to
give any information or to make any
representations other than those
contained in this Prospectus in
connection with the offering made
hereby, and if given or made, such
information or representations may not
be relied upon. The Prospectus does not
constitute an offer to sell or the CREATIVE HOST SERVICES, INC.
solicitation of an offer to buy any
securities other than those specifically [LOGO]
offered hereby or an offer to sell, or a
solicitation of an offer to buy, to any
person in any jurisdiction in which such
offer or sale would be unlawful. Neither
the delivery of this Prospectus nor any
sale made hereunder shall under any
circumstances create any implication
that there has been no change in the
affairs of the Company since any of the
date as of which information is
furnished or since the date of this
Prospectus.
----------------- -------------------------
PROSPECTUS
-------------------------
TABLE OF CONTENTS
Page
ADDITIONAL INFORMATION.................2
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE..............................2
RISK FACTORS...........................3
USE OF PROCEEDS........................5
SELLING SHAREHOLDERS...................6 _________, 1998
PLAN OF DISTRIBUTION...................8
LIMITATION ON LIABILITY AND
INDEMNIFICATION OF DIRECTORS...........9
LEGAL MATTERS..........................9
EXPERTS ..............................9
======================================== =======================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Other Expenses Of Issuance And Distribution
The following table sets forth the expenses other than any underwriting
discounts or commissions, payable in connection with the distribution of the
shares being registered. All expenses incurred in connection with the
registration.
All amounts shown are estimates except for SEC Registration fee.
SEC Registration Fee $ 245
NASDAQ Listing Fee $ 2,000
Blue Sky Fees and Expenses $ 0
Printing and Engraving Expenses $ 5,000
Accounting Fees and Expenses $ 2,000
Legal Fees and Expenses $ 15,000
Registerer and Transfer Agent's Fees
and Expenses $ 2,000
Miscellaneous Expenses $ 3,000
----------
Total $ 29,245
==========
ITEM 15. Indemnification Of Directors And Officers
Under the California Corporations Code and the Company's Amended and
Restated Articles of Incorporation, the Company's directors will have no
personal liability to the Company or its shareholders for monetary damages
incurred as the result of the breach or alleged breach by a director of his
"duty of care". This provision does not apply to the directors' (i) acts or
omissions that involve intentional misconduct or a knowing and culpable
violation of law, (ii) acts or omissions that a director believes to be contrary
to the best interests of the corporation or its shareholders or that involve the
absence of good faith on the part of the director, (iii) approval of any
transaction from which a director derives an improper personal benefit, (iv)
acts or omissions that show a reckless disregard for the director's duty to the
corporation or its shareholders in circumstances in which the director was
aware, or should have been aware, in the ordinary course of performing a
director's duties, of a risk of serious injury to the corporation or its
shareholders, (v) acts or omissions that constituted an unexcused pattern of
inattention that amounts to an abdication of the director's duty to the
corporation or its shareholders, or (vi) approval of an unlawful dividend,
distribution, stock repurchase or redemption. This provision would generally
absolve directors of personal liability for negligence in the performance of
duties, including gross negligence.
The effect of this provision in the Company's Amended and Restated
Articles of Incorporation is to eliminate the rights of the Company and its
shareholders (through shareholder's derivative suits on behalf of the Company)
to recover monetary damages against a director for breach of his fiduciary duty
of care as a director (including breaches resulting from negligent or grossly
negligent behavior) except in the situations described in clauses (i) through
(vi) above. This provision does not limit nor eliminate the rights of the
Company or any shareholder to seek non-monetary relief such as an injunction or
rescission in the event of a breach of a director's duty of care. In addition,
the Company's Restated Articles of Incorporation provides that if California law
is amended to authorize the future elimination or limitation of the liability of
a director, then the liability of the directors will be eliminated or limited to
the fullest extent permitted by the law, as amended. The California Corporations
Code grants corporations the right to indemnify their directors, officers,
employees and agents in accordance with applicable law. The Company's Bylaws
II-1
<PAGE>
provide for indemnification of such persons to the full extent allowable under
applicable law. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the Company pursuant to the foregoing provisions, the Company has been informed
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
ITEM 16. Exhibits
4.1 Specimen Certificate for Common Stock(1)
4.3 Warrant Agreement for $5.40 Warrants (including form of
Warrant Certificate)(2)
5.1 Opinion of Luce, Forward, Hamilton & Scripps, LLP
23.1 Consent of Luce, Forward, Hamilton & Scripps, LLP (contained
in Exhibit 5)
23.2 Consent of Stonefield Josephson, independent accountants(3)
24 Power of Attorney (contained on signature page)
- ------------------
(1) Incorporated by reference from the exhibits included with the Company's
Annual Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 on Form 10-KSB filed with the SEC for fiscal year ended
December 31, 1997.
(2) Incorporated by reference from the exhibits included with the Company's
Registration Statement on Form SB-2 filed with the SEC on April 3,
1997.
(3) To be filed by amendment.
ITEM 17. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by
those paragraphs is contained in the periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act
that are incorporated by reference in the registration statement.
II-2
<PAGE>
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934
that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the indemnification provisions described
under Item 15, or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
In accordance with 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 of filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereto duly authorized,
in the City of San Diego, State of California, on September 15, 1998.
CREATIVE HOST SERVICES, INC.
By: /s/ SAYED ALI
-----------------------------------
Sayed Ali, President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Sayed Ali, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place, and stead, in any and all capacities, to sign
any and all amendments (including post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirement of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ SAYED ALI President, Chief Financial September 15, 1998
- ------------------------------ Officer and Director
Sayed Ali
/s/ BOOKER T. GRAVES Director September 15, 1998
- ------------------------------
Booker T. Graves
/s/ JOHN P. DONOHUE, JR. Director September 15, 1998
- ------------------------------
John P. Donohue, Jr.
/s/ PAUL A. KARAS Director September 15, 1998
- ------------------------------
Paul A. Karas
II-4
September 15, 1998
Creative Host Services, Inc.
6335 Ferris Street, Suite G-H
San Diego, CA 92126
Re: Registration Statement on Form S-3for
953,573 Shares of Common Stock
and 462,500 Warrants
Ladies and Gentlemen:
We have acted as your counsel in the preparation of a Registration Statement on
Form S-3 (the "Registration Statement") to be filed with the Securities and
Exchange Commission to cover the resale of up to 953,573 shares of common stock
(the "Common Stock") and 462,500 Warrants (the "Public Warrants") of Creative
Host Services, Inc., a California corporation (the "Company") by certain Selling
Securityholders as more particulary described in the Registration Statement.
For purposes of rendering this opinion, we have made such legal and factual
examinations as we have deemed necessary under the circumstances and, as part of
such examination, we have examined, among other things, originals and copies,
certified or otherwise, identified to our satisfaction, of such documents,
corporate records and other instruments as we have deemed necessary or
appropriate. For the purposes of such examination, we have assumed the
genuineness of all signatures on original documents and the conformity to
original documents of all copies submitted to us.
On the basis of and in reliance upon the foregoing examination and assumptions,
we are of the opinion that assuming the Registration Statement shall have become
effective pursuant to the provisions of the Securities Act of 1933, as amended,
the shares of Common Stock and Public Warrants to be sold by the Selling
Securityholders, have been duly authorized, validly issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
LUCE, FORWARD, HAMILTON & SCRIPPS LLP
