<PAGE>
As filed with the Securities and Exchange Commission on March 8, 2000
Registration No. 33-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CREATIVE HOST SERVICES, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 33-1069494
- ------------------------ -----------------------------------
(State or Incorporation) (I.R.S. Employer Identification No.)
-------------------------
6335 Ferris Square
Suites G & H
San Diego, California 92126
(Address of principal executive offices and zip codes)
-------------------------
CREATIVE HOST SERVICES, INC.
STOCK OPTION PLAN FOR
DIRECTORS, EMPLOYEES AND KEY CONSULTANTS
(Full title of the plan)
------------------------
Copy To:
Sayed Ali, President Mark J. Richardson, Esq.
Creative Host Services, Inc. Richardson & Associates
6335 Ferris Square 1299 Ocean Avenue
Suites G & H Suite 900
San Diego, California 92126 Santa Monica, California 90401
(858) 587-7300 (310) 393-9992
(Name, address and telephone
number of agent for service)
------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=====================================================================================================================
Proposed Proposed
Title of Each Class Maximum Maximum Amount of
of Securities Amount to be Offering Price Aggregate Registration
to be Registered Registered Per Share Offering Price Fee
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par value 60,000 shares $3.30(2) $ 198,000 $ 52.27
Common Stock, no par value 90,000 shares $3.875(2) $ 348,750 $ 92.07
Common Stock, no par value 15,000 shares $ 4.25(2) $ 63,750 $ 16.83
Common Stock, no par value 55,000 shares $ 0.93(2) $ 51,150 $ 13.50
Common Stock, no par value 10,000 shares $ 1.02(2) $ 10,200 $ 2.69
Common Stock, no par value 50,000 shares $10.00(3) $ 500,000 $132.00
Total 280,000 shares - $1,171,850 $309.36
=====================================================================================================================
</TABLE>
(1) Includes an undeterminable number of shares of Common Stock issuable as a
result of the anti-dilution provisions of the Creative Host Services, Inc.
Stock Option Plan.
(2) Represents the exercise price of these stock options.
(3) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(c) and (h) and based upon the last sale price of the
Company's Common Stock on March 1, 2000 as reported on the NASDAQ
Small-Cap Market.
This Form S-8 consists of 38 pages, including exhibits. The index to
exhibits is set forth on page 4.
================================================================================
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
Creative Host Services, Inc. (the "Company" or "Registrant")
incorporates by reference in this Registration Statement the following
documents:
(a) The Registrant's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1998.
(b) The Registrant's quarterly report on Form 10-QSB for
the quarter ended September 30, 1999.
(c) All other reports filed by the Registrant pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), since December 31, 1997.
All documents subsequently filed by the Registrant pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, subsequent to the date
of the filing hereof and prior to the filing of a post-effective amendment which
indicates that all securities offered have been sold or which deregisters all
securities then remaining unsold, shall be deemed to be incorporated by
reference in this Registration Statement and to be a part hereof from the date
of the filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES.
GENERAL. The authorized capital stock of the Company consists
of 20,000,000 shares of Common Stock, no par value, and 100,000 shares of
Preferred Stock, no par value. At February 29, 2000, the Company had 4,942,324
shares of Common Stock issued and outstanding and no shares of Preferred Stock
issued or outstanding.
COMMON STOCK. All outstanding shares of Common Stock are, and
the shares to be issued as contemplated herein will be, fully paid and
nonassessable. As a class, holders of the Common Stock are entitled to one vote
per share in all matters to be voted upon by the stockholders. Holders of Common
Stock are entitled to receive such dividends when and as declared by the Board
of Directors out of the surplus or net profits of the Company legally available
therefor, equally, on a share for share basis. The Company does not anticipate
paying dividends in the near future. In the event of a liquidation, dissolution
or winding-up of the Company, the holders of Common Stock are entitled to share
equally, on a share for share basis, in all assets remaining after payment of
liabilities, subject to the prior distribution rights of any other classes or
series of capital stock then outstanding. The Common Stock has no preemptive
rights and is neither redeemable nor convertible, and there are no sinking fund
provisions. As of February 29, 2000, the Company's 4,942,324 shares of Common
Stock outstanding were held by 97 stockholders of record.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
The validity of the issuance of the shares of Common Stock covered by
this Prospectus will be passed upon for the Company by Richardson & Associates,
counsel to the Company, 1299 Ocean Avenue, Suite 900, Santa Monica, California,
90401. In consideration for capital contributed to the Company, Mark J.
Richardson Esq. of Richardson & Associates owns 140,000 shares of the Company's
Common Stock.
- 2 -
<PAGE>
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The California Corporations Code and the Company's Bylaws
provide that a director of the Company will have no personal liability to the
Company or its shareholders for monetary damages for breach of fiduciary duty as
a director except (i) for acts or omissions that involve intentional misconduct
or a knowing and culpable violation of law, (ii) for 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) for any transaction from which a director derived an improper
personal benefit, (iv) for 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) for acts or omissions that constitute an
unexcused pattern of inattention that amounts to an abdication of the director's
duty to the corporation or its shareholders, or (vi) for 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 Company's Bylaws and Sections 204 and 317 of the California
Corporations Code contain comprehensive provisions for indemnification of
directors, officers and agents of California corporations against expenses,
judgments, fines and settlements in connection with litigation. The Company has
a policy of providing indemnification for its executive officers, directors and
members of its committees, within the scope of the California Corporations Code.
It has entered into indemnification agreements with its executive officers,
directors and committee members. Under the California Corporations Code, other
than an action brought by or in the right of the Company, such indemnification
is available if it is determined that the proposed indemnitee acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company and, with respect to any criminal action or proceeding,
has no reasonable cause to believe his conduct was unlawful. In actions brought
by or in the right of the Company, such indemnification is limited to expenses
(including attorneys' fees) actually and reasonably incurred if the indemnitee
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company. No indemnification may be made,
however, in respect of any claim, issue or matter as to which such person is
adjudged to be liable to the Company unless and only to the extent that the
court in which the action was brought determines that in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper. To the extent that the
proposed indemnitee has been successful in defense of any action, suit or
proceeding, he must be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the action. The
Company's Articles of Incorporation, as amended, provide for indemnification of
the directors and officers of the Company against liabilities to the maximum
extent provided by California law.
The Company maintains insurance to protect officers and directors
from certain liabilities, including liabilities against which the Company cannot
indemnify its directors and officers.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
The stock options granted under the Registrant's 1997 Stock Option
Plan to date, and any shares which may be issued pursuant to the exercise of
stock options granted or to be granted under the Registrant's 1997 Stock Option
Plan, would be granted or issued pursuant to Rule 506 of Regulation D
promulgated under Section 4(2) of the Securities Act of 1933, as amended.
ITEM 8. EXHIBITS.
4.1 Articles of Incorporation of the Registrant, as amended.(1)
4.2 Bylaws of the Registrant.(1)
4.3 Creative Host Services, Inc. 1997 Stock Option Plan.(1)
- 3 -
<PAGE>
5.1 Opinion of Richardson & Associates as to the legality of the
securities being registered.
23.1 Consent of Richardson & Associates (included as part of
Exhibit 5.1).
23.2 Consent of Stonefield Josephson, Independent Certified Public
Accountants.
24.1 Power of Attorney (contained on page 7 hereof).
99.1 Reoffer Prospectus, dated March 8, 2000.
- -------------------------------------------------------------------
(1) Incorporated by reference from the exhibits included with the Company's
Registration Statement (No. 333-6722) on Form SB-2 filed with the SEC on
April 3, 1997.
ITEM 9. UNDERTAKINGS.
A. 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;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or
the most recent post-effective amendment hereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in this Registration
Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this
Registration Statement or any material change to such
information in this 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 periodic reports filed by the Registrant
pursuant to Section 13 or 15(d) of the Exchange Act that are incorporated
by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered herein, 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.
B. The undersigned Registrant hereby undertakes that, for the
purposes of determining any liability under the Securities Act, each filing of
the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference into this Registration Statement shall be deemed to be
a new registration statement relating to the securities offered herein and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
- 4 -
<PAGE>
C. Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers, and controlling
persons of the Registrant pursuant to the foregoing provisions, 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 Securities 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 of whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the finial adjudication of such issue.
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
or 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 attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming that said attorney-in-fact and agent or the substitute or substitutes
of him, may lawfully do or cause to be done by virtue hereof.
- 5 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused his 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 8th day of
March 2000.
CREATIVE HOST SERVICES, INC.
BY: /s/ Sayed Ali
------------------------------------
Sayed Ali, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Sayed Ali President and Director (Chief Executive March 8, 2000
- -------------------------------------- Officer and Principal Financial Officer)
Sayed Ali
/s/ Tasneem Vakharia Secretary (Principal Accounting Officer) March 8, 2000
- -------------------------------------
Tasneem Vakharia
/s/ Booker T. Graves Director March 8, 2000
- -------------------------------------
Booker T. Graves
/s/ John P. Donohue, Jr. Director March 8, 2000
- -------------------------------------
John P. Donohue, Jr.
/s/ Charles B. Radloff Director March 8, 2000
- -------------------------------------
Charles B. Radloff
</TABLE>
- 6 -
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 8, 2000
REGISTRATION NO. 33-
--------------
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
CREATIVE HOST SERVICES, INC.
--------------------
EXHIBIT VOLUME
TO THE
REGISTRATION STATEMENT
================================================================================
<PAGE>
INDEX TO THE EXHIBIT VOLUME TO
REGISTRATION STATEMENT ON FORM S-8
4.1 Articles of Incorporation of the Registrant, as amended.(1)
4.2 Bylaws of the Registrant.(1)
4.3 Creative Host Services, Inc. 1997 Stock Option Plan.(1)
5.1 Opinion of Richardson & Associates as to the legality of the
securities being registered.
23.1 Consent of Richardson & Associates (included as part of
Exhibit 5.1).
23.2 Consent of Stonefield Josephson, Independent Certified Public
Accountants.
24.1 Power of Attorney.
99.1 Reoffer Prospectus, dated March 8, 2000.
- --------------------------------------------------------------
(1) Incorporated by reference from the exhibits included in the Company's
Registration Statement (No. 333-6722) on Form SB-2 filed with the SEC on
April 3, 1997.
- 8 -
<PAGE>
EXHIBIT 5.1
LEGAL OPINION
<PAGE>
RICHARDSON & ASSOCIATES
ATTORNEYS AT LAW
WILSHIRE PALISADES BUILDING
1299 OCEAN AVENUE
SUITE 900
SANTA MONICA, CALIFORNIA 90401
TELEPHONE (310) 393-9992
FACSIMILE (310) 393-2004
March 8, 2000
Creative Host Services, Inc.
6335 Ferris Square
Suites G & H
San Diego, California 92126
RE: CREATIVE HOST SERVICES, INC. - VALIDITY OF ISSUANCE OF SHARES
-------------------------------------------------------------
Ladies and Gentlemen:
We have acted as special counsel to you in connection with the
registration on Form S-8 (File No. _________ under the Securities Act of
1933, as amended ("Registration Statement"), of a total of 280,000 shares of
the Common Stock of Creative Host Services, Inc., no par value, comprised of
280,000 shares (the "Plan Shares") issuable upon the exercise of 280,000
options (the "Plan Options") to purchase Common Stock at various exercise
prices established and to be determined, pursuant to the Creative Host
Services, Inc. 1997 Stock Option Plan for Directors and Employees of and Key
Consultants to Creative Host Services, Inc. and its Subsidiaries (the
"Plan"). You have requested our opinion in connection with the registration
of the Plan Shares covered by the Registration Statement. In connection with
our acting as counsel, we have examined the laws of the State of California
together with Plan attached as Exhibit 4.3 to the Registration Statement and
certain other documents and instruments prepared on behalf of Creative Host
Services, Inc. as we have deemed necessary and relevant in the preparation of
our opinion as hereinafter set forth.
In our examination, we have assumed the genuineness of all signatures
on original documents and the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted
to us as certified, conformed or photostatic copies of originals, the
authenticity of such latter documents, and the proper execution, delivery and
filing of the documents referred to in this opinion.
Based upon the foregoing, we are of the opinion that the Plan shares to
be issued by Creative Host Services, Inc. pursuant to the exercise of the
Plan Options have been and will be duly created and have been and will be
validly issued shares of the Common Stock, no par value, of Creative Host
Services, Inc. Upon payment for the Shares and full compliance with all of
the terms and conditions of the Plan and relating to the issuance of the
Plan Shares, the Plan Shares will be fully paid and nonassessable.
For the purposes of this opinion, we are assuming the proper execution
of the Plan and the Plan Options, and that the appropriate certificates are
duly filed and recorded in every jurisdiction in which such filing and
recordation is required in accordance with the laws of such jurisdictions. We
express no opinion as to the laws of any state or jurisdiction other than
California.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and we further consent to the use of our name in the Registration
Statement and the Prospectus which is a part of said Registration Statement.
Respectfully submitted,
Richardson & Associates
<PAGE>
EXHIBIT 23.2
CONSENT OF STONEFIELD JOSEPHSON
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The undersigned independent certified public accounting firm hereby
consents to the inclusion of its report on the financial statements of Creative
Host Services, Inc. for the year ending December 31, 1998, and to the reference
to it as experts in accounting and auditing relating to said financial
statements, in the Registration Statement on Form S-8 for Incomnet, Inc., dated
March 8, 2000.
/s/ Stonefield Josephson Accountancy Corporation
- -------------------------------------------------
STONEFIELD JOSEPHSON ACCOUNTANCY CORPORATION
Santa Monica, California
March 8, 2000
<PAGE>
EXHIBIT 99.1
REOFFER PROSPECTUS
<PAGE>
DATED MARCH 8, 2000
PROSPECTUS
CREATIVE HOST SERVICES, INC.
280,000 Shares of Common Stock
This Prospectus covers 280,000 shares of the Common Stock, no par value
(the "Common Stock") of Creative Host Services, Inc., a California corporation
("CHST"), issuable upon the exercise of stock options granted and to be granted
under CHST's 1997 Stock Option Plan (the "Plan"). The shares covered by this
Prospectus include 230,000 shares of Common Stock issuable upon the exercise of
230,000 outstanding stock options already granted under the Plan, and up to
50,000 additional shares of Common Stock which may be issued upon the exercise
of stock options which have not yet been granted under the Plan. Stock options
granted or to be granted under the Plan are held or are expected to be held by
the directors, executive officers, employees and key consultants of CHST
(collectively, the "Selling Securityholders"). We will not receive any of the
proceeds from the sale of securities by the Selling Securityholders.
A copy of the complete Plan is attached to this Prospectus as Exhibit A.
The Plan describes its general purpose, its duration, the scope of persons
eligible to participate, the securities offered, the procedure for the exercise
of stock options, and other terms and conditions of the Plan. Please review the
Plan carefully before exercising stock options or purchasing shares from Selling
Securityholders.
Our Common Stock is traded on the NASDAQ Small Cap Market under the symbol
"CHST." On March 1, 2000, the last bid price and ask price for the Common
Stock as reported on the NASDAQ Small Cap Market was $10.00 and $10.25,
respectively.
For a discussion of certain factors that should be considered in connection
with an investment in the Company's Common Stock, 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 by this Prospectus 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.
-1-
<PAGE>
ADDITIONAL INFORMATION
This Prospectus is part of a Registration Statement on Form S-3 (together
with all amendments and exhibits (the "Registration Statement") which has been
filed by CHST with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Securities Act"), relating to
the securities offered by this Prospectus. 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, you may read the Registration Statement.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document referred to in this Prospectus are not necessarily complete.
With respect to each such contract, agreement or other document filed as an
exhibit to the Registration Statement, you may read 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.
We are subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance with the Exchange Act we file 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 us 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. You may obtain copies of such material from the
Commission by mail at prescribed rates. You should direct your requests 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 statements regarding registrants that
file electronically with the Commission. The address of the web site is
http://www.secgov. Our Common Stock is traded on the Nasdaq Small Cap Market.
Reports and other information concerning us 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
We hereby incorporate 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, 1998.
2. The Company's Quarterly Report on Form 10-QSB for the
quarterly period ended September 30, 1999.
3. The description of the Company's Common Stock contained in
the Company's Registration Statement on Form SB-2, dated
July 22, 1997.
All documents filed by us 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 this offering are deemed incorporated by reference in this
Prospectus and are a part of this Prospectus from the date of the filing of such
documents. See "Additional Information". Any statement contained in a document
incorporated or deemed to be incorporated in this Prospectus by reference shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained in this Prospectus or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference in this Prospectus 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.
-2-
<PAGE>
We will provide without charge to each person to whom this Prospectus is
delivered, upon request of any such person, a copy of any of the foregoing
documents incorporated in this Prospectus by reference, other than exhibits to
such documents not specifically incorporated by reference. Written or telephone
requests should be directed to our President at our principal executive offices:
Creative Host Services, Inc., 6335 Ferris Square, Suites G-H, San Diego,
California, telephone number (858) 587-7300.
RISK FACTORS
Purchasing shares of Common Stock in Creative Host Services, Inc. is risky.
You should be able to bear a complete loss of your investment. You should
carefully consider the following factors, among others.
FORWARD-LOOKING STATEMENTS. The following cautionary statements are made
pursuant to the Private Securities Litigation Reform Act of 1995 in order for
CHST to avail itself of the "safe harbor" provisions of that Act. The
discussions and information in this Prospectus including the documents
incorporated by reference 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 CHST, please be advised that our actual
financial condition, operating results and business performance may differ
materially from that projected or estimated by us in forward-looking statements.
We have attempted to identify, in context, certain of the factors that we
currently believe may cause actual future experience and results to differ from
our 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 or in other reports filed by us.
NEED FOR ADDITIONAL CAPITAL. We may not have sufficient cash flow from our
current operations to enable us to acquire and build additional locations at our
historic growth rate. We may be required to raise additional capital in the
future to build out capital improvements for any newly awarded concession
locations. Furthermore, on December 29, 1999, we notified the Noteholder of the
exercise of our right to prepay in full $1,505,000 original principal amount of
outstanding 12% Secured Convertible Notes, dated December 21, 1998. The
repayment date has been set as March 30, 2000, in accordance with the terms of
the Note. On February 9, 2000, the Noteholder notified us that it converted
$720,500 outstanding principal amount of Notes into 275,000 shares of CHST's
Common Stock. If the Noteholder does not convert the balance of the outstanding
Note into Common Stock and we do not have sufficient cash to repay the Note plus
accrued interest plus premium as required by the Note by March 30, 2000, then we
would be in default on the Note. While we believe that we will have sufficient
funds to repay the balance of the Note, if it is not converted, and to continue
our growth, assurances can be given that additional capital will be available on
terms acceptable to us or at all. One source of additional capital is the
potential proceeds from the exercise of 462,500 outstanding warrants which have
an exercise price of $5.40 per share, although there is no assurance that those
warrants will be exercised. Failure to secure adequate capital to bid, win,
retain or service concession contracts will hinder our growth or force us to
franchise valuable locations that we would otherwise prefer to operate directly.
In addition, we presently utilize equipment leasing to finance some of our
operations. Additional lease financing with rates acceptable to us may not be
available, in which case we will be required to raise additional capital or
cease our expansion program until such financing or capital is made available,
if ever.
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<PAGE>
DEPENDENCE ON AIRPORT CONCESSION BUSINESS. We are currently dependent on
the airport concession business for substantially all of our revenues. We expect
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. Concession business operators, such as CHST, 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 us. Certain of our locations have
incurred and may in the future incur net operating losses. Because our
concession agreements contain minimum rent guarantees, we are constrained in our
ability to terminate under-performing locations. In addition, the failure of any
single concession could have a material adverse impact on our reputation with
airport authorities generally, and hinder our ability to renew existing
concessions or secure new ones. There is no assurance that we will continue to
be awarded concession contracts by airports or by any other public venue, that
the concession contracts will be profitable, or that we will not lose contracts
that we have 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 CHST'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, CHST's status as a DBE is less clear. Certain existing
concession contracts designate CHST as a DBE and may have to be reaffirmed. We
believe that even if Mr. Ali's current equity ownership of CHST is no longer
sufficient to qualify as a DBE, we would be able to maintain all of our
contracts and continue to satisfy DBE rules by hiring or contracting with
minority parties or other entities qualifying as DBEs, if required. However, we
have not discussed with any airport authority the possible impact of our change
in status, nor have we attempted to reaffirm any existing contract. Our status
as a DBE assisted us in securing concessions with several airports. We believe
we can continue to secure new concessions on the basis of the products and
services we offer and our industry reputation. We have secured concessions to
operate 25 additional locations after our initial public offering and the
resultant dilution of ownership, although we are not aware of the extent to
which CHST's DBE status, or lack thereof, was a factor in the airport
authorities' decisions to award such contracts to us. To the extent that our
historic rate of success in securing new airport concessions was attributable to
our status as a DBE, that growth rate may decline if we are 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, Cedar Rapids, Iowa, and others,
provide for such early termination. To date, we have not had any of our
concessions terminated, and we have not received notice that any airport
authority is contemplating the early termination of any of our 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 our concession operations at any airport location are subject to a number of
factors which are outside our control, including construction delays and
decisions by airport authorities to delay the opening of concessions. CHST has,
in the past, experienced delays in commencing operations because of decisions by
airport authorities. CHST'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. Consequently, we bear the risk that after a concession
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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 us to construct facilities during peak travel
periods would adversely impact our financial projections and cash flow planning,
and may have a material adverse impact on our financial position.
CHST'S LIABILITIES AND RISKS UNDER THE NOTE. CHST is obligated to pay the
outstanding Note in accordance with its terms. The outstanding principal balance
of the Note is $784,500, payable interest only on a monthly basis, with all
principal and accrued but unpaid interest due in full on December 21, 2003. The
Note also contains requirements for maintenance of coverage and cash flow
ratios, as well as other restrictions. During 1999 CHST was in technical default
on certain of those covenants, triggering the accrual of default interest equal
to an additional 3% per annum, raising the overall interest rate on the Note
during that period to 15% per annum. Restrictions in the Note also contributed
to preventing us from submitting bid proposals for three airport locations that
we otherwise would have sought in 1999. We do not believe that we are in
technical default under the Note any longer, and we have notified the Noteholder
that we intend to repay the Note in full on March 30, 2000, as permitted under
the optional redemption provisions of the Note. Furthermore, we have tendered
the default interest payment to the Noteholder and are current with our
payments. The Noteholder has received the default interest payment of
approximately $39,000, but is claiming that we agreed to issue approximately
106,000 warrants to the Noteholder in lieu of the cash payment for default
interest. The Noteholder is claiming that the warrants would entitle it to
purchase our common stock at prices prevailing in October or November of 1999.
We vigorously deny the Noteholder's claims and do not believe that we agreed to
issue any warrants to the Noteholder. Nevertheless, there is no assurance
regarding the outcome of the dispute and, if litigation results, we could incur
significant costs. The Noteholder has the right to convert the entire
outstanding principal balance of the Note into shares of Common Stock at a
conversion price of $2.62 per share. If the Noteholder converts the Note into
Common Stock, which is covered by this Prospectus, then there will be additional
free trading shares in the market, possibly causing the market price of our
Common Stock to decline. If the Noteholder does not convert, then we will be
required to tender cash to the Noteholder equal to 104% of the outstanding
principal balance of the Note plus accrued but unpaid interest on March 30,
2000. If we do not have sufficient cash at that time to repay the Note as
required by our optional redemption notice, then we would be in default on the
Note and possibly could be subject to operating restrictions and collection
costs.
RISKS OF DECLINE IN STOCK PRICE. The market trading price of our stock
could decline or become volatile because of the eligibility of the Common Stock
covered by this Prospectus to be sold in the open market. This Prospectus causes
the supply of free trading shares to increase substantially. There is no
assurance that the price of our stock on the NASDAQ market will not decline
because of the availability of the Common Stock covered by this Prospectus for
potential sale, and for other reasons. CHST may register more shares of its
stock in the future, potentially increasing the supply of free trading shares
and possibly exerting downward pressure on our stock price.
RISK OF DILUTION THROUGH ADDITIONAL ISSUANCES OF SHARES. We may issue more
shares of our common or preferred stock in the future in order to raise capital
and make acquisitions of other businesses. Outstanding warrants and stock
options may be exercised, causing more dilution in the outstanding shares of our
capital stock. We are currently offering up to 500,000 shares of our common
stock at a price of $5.00 per share in a private placement to accredited
investors only under Rule 506 of Regulation D promulgated under Section 4(2) of
the Securities Act of 1933, as amended. As part of the placement, we have agreed
to register those shares with the Securities and Exchange Commission for free
trading, subject to a minimum six month holding period required for those
shares. We have also filed a Form S-8 registration statement with the Securities
and Exchange Commission registering the shares authorized and issuable upon the
exercise of stock options granted under our Stock Option Plan for officers,
directors, and key employees and consultants. On October 18, 1999, we granted a
total of 65,000 new stock options to the officers and directors of CHST, all of
which vested immediately and are exercisable for periods ranging from five to
ten years, at exercise prices ranging from $.93 to $1.02 per share. On December
2, 1999, we granted 25,000 new stock options to an independent consultant to
CHST, all of which vested immediately and are exercisable for a period of five
years, at an exercise of $3.875 per share. We are generally permitted to issue
additional shares of our capital stock with the approval of our Board of
Directors and without the consent of CHST's shareholders.
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DEPENDENCE ON KEY PERSONNEL AND NEED TO ATTRACT QUALIFIED MANAGEMENT. Our
success will depend largely upon CHST's management. While management has had
previous experience in concession and restaurant operations, there can be no
assurance that our operations will be successful. Sayed Ali, Chairman of the
Board, President and Chief Executive Officer of CHST, has entered into a
five-year employment agreement with CHST, which commenced on January 1, 1997. In
the event of a loss of the services of Mr. Ali, CHST could be materially
adversely affected because there is no assurance that CHST could obtain
successor management of equivalent talent and experience. CHST has obtained a
$1,000,000 key man policy on Mr. Ali which CHST owns. Given our stage of
development, we are dependent upon our ability to identify, hire, train, retain
and motivate highly qualified personnel, especially management personnel which
will be required to supervise our expansion into various geographic areas. There
can be no assurance that we will be able to attract qualified personnel or that
our current employees will continue to work for us. The failure to attract,
assimilate and train key personnel could have a material adverse effect on our
business, financial condition and results of operations.
HIGHLY COMPETITIVE INDUSTRY DOMINATED BY LARGER COMPETITORS. We compete
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 CHST,
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 CHST. Many of our 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 we will be able to compete successfully
in our 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 CHST 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, our
failure to meet government regulations could result in the temporary closure of
one or more of our concession facilities, restaurants or the food preparation
center, any of which would have a material adverse impact on our 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 we have no control. We are also subject to federal
and state laws, rules and regulations that govern the offer and sale of
franchises.
NO ASSURANCE OF ENFORCEABILITY OF TRADEMARKS. We utilize trademarks in our
business and have registered our Creative Croissants(R) trademark. While we
intend to file federal trademark registrations for certain of our other
trademarks, we have not yet done so. There can be no assurance that we will be
granted registration for such trademarks or that our trademarks do not or will
not violate the proprietary rights of others, that our trademarks would be
upheld if challenged or that we will not be prevented from using our trademarks,
any of which could have a material adverse effect on us. Should we believe that
our trademarks are being infringed upon by competitors, there can be no
assurance that we will have the financial resources necessary to enforce or
defend our trademarks and service marks.
SEASONALITY. Because our airport concession business is dependent on
pedestrian traffic at domestic airports, we experience some seasonality
consistent with enplanements and general air traffic patterns. Accordingly, our
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 approximately 20% of the outstanding shares of
capital stock of CHST. Accordingly, Mr. Ali has significant influence over the
outcome of all matters submitted to the shareholders for approval, including the
election of directors
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of the Company.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the shares
offered by the Selling Securityholders.
SELLING SECURITYHOLDERS
The shares of Common Stock being offered by the Selling Securityholders are
issuable to them upon the exercise of stock options granted or to be granted to
them under CHST's 1997 Stock Option Plan. As of the date of this Prospectus, a
total of 230,000 stock options have been granted under the Plan, none of which
have been exercised, and 50,000 stock options remain authorized and not yet
granted. The following table set forth certain information with respect to the
outstanding stock options under the Plan as of March 1, 2000. Beneficial
ownership of the Common Stock by such Selling Securityholders after this
offering will depend on the number of stock options exercised by them and the
number of shares of Common Stock sold by each Selling Securityholder.
<TABLE>
<CAPTION>
NAME OF STOCK POSITION NO. OF STOCK EXERCISE VESTING EXPIRATION
OPTION HOLDER WITH COMPANY OPTIONS OWNED PRICE SCHEDULE DATE
- ------------- ------------ ------------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Sayed Ali Chairman of the 20,000 $3.30(2) Vested January 1, 2003
Board of Directors
and President
20,000 $3.30 (2) Vested January 1, 2004
20,000 $3.30 (2) Vested January 1, 2005
15,000 $4.25 (2) Vested October 27, 2003
10,000 $1.02 (2) Vested October 18, 2004
Booker T. Graves Director 10,000 $3.875(1) Vested October 27, 2003
15,000 $0.93 (1) Vested October 18, 2004
John P. Donohue, Jr. Director 10,000 $3.875(1) Vested October 27, 2003
15,000 $0.93 (1) Vested October 18, 2004
Charles B. Radloff Director 15,000 $0.93 (1) Vested October 18, 2004
Tasneem Vakharia Secretary 35,000 $3.875(1) Vested October 27, 2003
10,000 $0.93 (1) Vested October 18, 2004
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Paul Karas Prior Director 10,000 $3.875(3) Vested August 19, 2000
David C. Olson Consultant 25,000 $3.875(4) Vested December 2, 2004
</TABLE>
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(1) Equals the fair market value of the Common Stock of CHST on the date of the
grant of the stock option.
(2) Equals 110% of the fair market value of the common stock of CHST on the
date of the grant of the stock option.
(3) Upon Mr. Karas's resignation from the Board of Directors on August 19,
1999, the Company agreed to extend the exercise period on those options
until August 19, 2000.
(4) Granted for consulting services to be performed by Mr. Olson for the
Company, including investor relations.
PLAN OF DISTRIBUTION
Sales of the shares of Common Stock 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 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 for whom such broker-dealers may act as
agents or to whom they sell as principals, or both. Such 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 as principals may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act. Any
commissions received by them and any profit on the resale of the shares of
Common Stock earned by them as principals might be deemed to be underwriting
discounts and commissions 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 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.
The shares of Common Stock are offered by the Selling Securityholders on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act. We
have agreed to pay all expenses incurred in connection with the registration of
the shares offered by the Selling Securityholders except that the Selling
Securityholders are exclusively liable to pay all commissions, discounts and
other payments to broker-dealers incurred in connection with their sale of
Common Stock.
LIMITATION ON LIABILITY AND INDEMNIFICATION OF DIRECTORS
Under the California Corporations Code and CHST's Amended and Restated
Articles of Incorporation, our directors will have no personal liability to CHST
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
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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 constitute 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 CHST's Amended and Restated Articles of
Incorporation is to eliminate the rights of CHST and its shareholders (through
shareholder's derivative suits on behalf of CHST) 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 CHST 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, CHST's Restated Articles of
Incorporation provide 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. CHST'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 CHST pursuant to
the foregoing provisions, CHST 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 being offered hereby will be passed upon
by Richardson & Associates, 1299 Ocean Avenue, Suite 900, Santa Monica,
California 90401.
EXPERTS
The financial statements and the related supplemental schedules
incorporated in this Prospectus by reference from CHST's Annual Report on Form
10-KSB for the year ended December 31, 1998 have been audited by Stonefield
Josephson, independent certified public accountants, as set forth in their
report appearing with the financial statements, and have been so included in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
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No dealer, salesman or any other person has been authorized by CHST 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 solicitation of an offer to buy any
securities other than those specifically 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 CHST since the dates as of which
information is furnished or since the date of this Prospectus.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ADDITIONAL INFORMATION .......................................................2
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE........................................................2
RISK FACTORS..................................................................3
USE OF PROCEEDS ..............................................................7
SELLING SECURITYHOLDERS ......................................................7
PLAN OF DISTRIBUTION .........................................................8
LIMITATION ON LIABILITY AND
INDEMNIFICATION OF DIRECTORS .................................................8
LEGAL MATTERS ................................................................9
EXPERTS ......................................................................9
STOCK OPTION PLAN ..........................................................A-1
</TABLE>
CREATIVE HOST SERVICES, INC.
[LOGO]
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PROSPECTUS
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March 8, 2000
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EXHIBIT A
TO
REOFFER PROSPECTUS, DATED MARCH 8, 2000
CREATIVE HOST SERVICES, INC.
1997 STOCK OPTION PLAN
<PAGE>
CREATIVE HOST SERVICES, INC.
1997 STOCK OPTION PLAN
1. PURPOSE. This Stock Option Plan (the "Plan") is intended to serve as
an incentive to, and to encourage stock ownership by, certain eligible
participants rendering services to Creative Host Services, Inc., a California
corporation (the "Company"), and certain affiliates as set forth below, so that
they may acquire or increase their proprietary interest in the Company and to
encourage them to remain in the service of the Company.
2. ADMINISTRATION.
2.1 COMMITTEE. The Plan shall be administered by the Board of
Directors of the Company, or a committee of two or more directors appointed by
the Board of Directors (the "Committee"). The Committee shall select one of its
members as Chairman and shall appoint a Secretary, who need not be a member of
the Committee. The Committee shall hold meetings at such times and places as it
may determine and minutes of such meetings shall be recorded. Acts by a majority
of the Committee in a meeting at which a quorum is present and acts approved in
writing by a majority of the members of the Committee shall be valid acts of the
Committee.
2.2 TERM. If the Board of Directors selects a Committee, the
members of the Committee shall serve on the Committee for the period of time
determined by the Board of Directors and shall be subject to removal by the
Board of Directors at any time. The Board of Directors may terminate the
function of the Committee at any time and resume all powers and authority
previously delegated to the Committee.
2.3 AUTHORITY. The Committee shall have sole discretion and
authority to grant options under the Plan to eligible participants rendering
services to the Company or any "parent" or "subsidiary" of the Company ("Parent
or Subsidiary"), as defined in Section 424 of the Internal Revenue Code of 1986,
as amended (the "Code"), at such times, under such terms and in such amounts as
it may decide. For purposes of this Plan and any Stock Option Agreement (as
defined below), the term "Company" shall include any Parent or Subsidiary, if
applicable. Subject to the express provisions of the Plan, the Committee shall
have complete authority to interpret the Plan, to prescribe, amend and rescind
the rules and regulations relating to it, to determine the details and
provisions of any Stock Option Agreement, to accelerate any options and to make
all other determinations necessary or advisable for the administration of the
Plan.
2.4 TYPE OF OPTION. The Committee shall have full authority
and discretion to determine, and shall specify, whether the eligible individual
will be granted options intended to qualify as incentive options under Section
422 of the Code ("Incentive Options") or options which are not intended to
qualify under Section 422 of the Code ("Non-Qualified Options"); provided,
however, that Incentive Options shall only be granted to employees of the
Company,
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<PAGE>
or a Parent or Subsidiary thereof, and shall be subject to the special
limitations set forth herein attributable to Incentive Options.
2.5 INTERPRETATION. The interpretation and construction by the
Committee of any provisions of the Plan or of any option granted under the Plan
shall be final and binding on all parties having an interest in this Plan or any
option granted hereunder. No member of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any
option granted under the Plan.
3. ELIGIBILITY.
3.1 GENERAL. All directors, officers, employees of and certain
persons rendering services to the Company relative to the Company's management,
operation or development shall be eligible to receive options under the Plan.
The selection of recipients of options shall be within the sole and absolute
discretion of the Committee. No person shall be granted an option under this
Plan unless such person has executed the grant representation letter set forth
on Exhibit "A," as such Exhibit may be amended by the Committee from time to
time and no person shall be granted an Incentive Option under this Plan unless
such person is an employee of the Company on the date of grant.
3.2 TERMINATION OF ELIGIBILITY.
3.2.1 If an optionee ceases to be employed by the Company
is no longer an officer or member of the Board of Directors of the Company or no
longer performs services for the Company for any reason (other than for "cause,"
as hereinafter defined, or such optionee's death), any option granted hereunder
to such optionee shall expire on the 90th day after the occurrence giving rise
to such termination of eligibility (or 1 year in the event an optionee is
"disabled," as defined in Section 22(e)(3) of the Code) or upon the date it
expires by its terms, whichever is earlier. Any option that has not vested in
the optionee as of the date of such termination shall immediately expire and
shall be null and void. The Committee shall, in its sole and absolute
discretion, decide whether an authorized leave of absence or absence for
military or governmental service, or absence for any other reason, shall
constitute termination of eligibility for purposes of this Section.
3.2.2 If an optionee ceases to be employed by the Company, is
no longer an officer or member of the Board of Directors of the Company, or
no longer performs services for the Company and such termination is as a
result of "cause," as hereinafter defined, then all options granted hereunder
to such optionee shall expire on the date of the occurrence giving rise to
such termination of eligibility or upon the date it expires by its terms,
whichever is earlier, and such optionee shall have no rights with respect to
any unexercised options. For purposes of this Plan, "cause" shall mean an
optionee's personal dishonesty, misconduct, breach of fiduciary duty,
incompetence, intentional failure to perform stated obligations, willful
violation
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<PAGE>
of any law, rule, regulation or final cease and desist order, or any material
breach of any provision of this Plan, any Stock Option Agreement or any
employment agreement.
3.3 DEATH OF OPTIONEE AND TRANSFER OF OPTION. In the event an
optionee shall die, an option may be exercised (subject to the condition that no
option shall be exercisable after its expiration and only to the extent that the
optionee's right to exercise such option had accrued at the time of the
optionee's death) at any time within six months after the optionee's death by
the executors or administrators of the optionee or by any person or persons who
shall have acquired the option directly from the optionee by bequest or
inheritance. Any option that has not vested in the optionee as of the date of
death or termination of employment, whichever is earlier, shall immediately
expire and shall be null and void. No option shall be transferable by the
optionee other than by will or the laws of intestate succession.
3.4 LIMITATION ON OPTIONS. No person shall be granted any
Incentive Option to the extent that the aggregate fair market value of the Stock
(as defined below) to which such options are exercisable for the first time by
the optionee during any calendar year (under all plans of the Company as
determined under Section 422(d) of the Code) exceeds $100,000.
4. IDENTIFICATION OF STOCK. The Stock, as defined herein, subject to
the options shall be shares of the Company's authorized but unissued or acquired
or reacquired common stock (the "Stock"). The aggregate number of shares subject
to outstanding options shall not exceed 280,000 shares of Stock (subject to
adjustment as provided in Section 6). If any option granted hereunder shall
expire or terminate for any reason without having been exercised in full, the
unpurchased shares subject thereto shall again be available for purposes of this
Plan.
5. TERMS AND CONDITIONS OF OPTIONS. Any option granted pursuant to
the Plan shall be evidenced by an agreement ("Stock Option Agreement") in such
form as the Committee shall from time to time determine, which agreement shall
comply with and be subject to the following terms and conditions:
5.1 NUMBER OF SHARES. Each option shall state the number of
shares of Stock to which it pertains.
5.2 OPTION EXERCISE PRICE. Each option shall state the option
exercise price, which shall be determined by the Committee; provided, however,
that (i) the exercise price of any Incentive Option shall not be less than the
fair market value of the Stock, as determined by the Committee, on the date of
grant of such option, (ii) the exercise price of any Incentive Option granted to
an employee who owns more than 10% of the total combined voting power of all
classes of the Company's stock, as determined for purposes of Section 422 of the
Code, shall not be less than 110% of the fair market value of the Stock, as
determined by the Committee, on the date of grant of such option, and (iii) the
exercise price of any Non-Qualified Option shall not be less than 100% of the
fair market value of the Stock, as determined by the Committee, on the date of
grant of such option.
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5.3 TERM OF OPTION. The term of an option granted hereunder
shall be determined by the Committee at the time of grant, but shall not exceed
ten years from the date of the grant. The term of any Incentive Option granted
to an employee who owns more than 10% of the total combined voting power of all
classes of the Company's stock, as determined for purposes of Section 422 of the
Code, shall in no event exceed five years from the date of grant. All options
shall be subject to early termination as set forth in this Plan. In no event
shall any option be exercisable after the expiration of its term.
5.4 METHOD OF EXERCISE. An option shall be exercised by
written notice to the Company by the optionee (or successor in the event of
death) and execution by the optionee of an exercise representation letter in the
form set forth on Exhibit "B," as such Exhibit may be amended by the Committee
from time to time. Such written notice shall state the number of shares with
respect to which the option is being exercised and designate a time, during
normal business hours of the Company, for the delivery thereof ("Exercise
Date"), which time shall be at least 30 days after the giving of such notice
unless an earlier date shall have been mutually agreed upon. At the time
specified in the written notice, the Company shall deliver to the optionee at
the principal office of the Company, or such other appropriate place as may be
determined by the Committee, a certificate or certificates for such shares.
Notwithstanding the foregoing, the Company may postpone delivery of any
certificate or certificates after notice of exercise for such reasonable period
as may be required to comply with any applicable listing requirements of any
securities exchange. In the event an option shall be exercisable by any person
other than the optionee, the required notice under this Section shall be
accompanied by appropriate proof of the right of such person to exercise the
option.
5.5 MEDIUM AND TIME OF PAYMENT. The option exercise price
shall be payable in full on or before the option Exercise Date in any one of the
following alternative forms:
5.5.1 Full payment in cash or certified bank or cashier's
check;
5.5.2 A Promissory Note (as defined below);
5.5.3 Full payment in shares of Stock having a fair market
value on the Exercise Date in the amount equal to the option exercise price;
5.5.4 A combination of the consideration set forth in
Sections 5.5.1, 5.5.2 and 5.5.3 equal to the option exercise price; or
5.5.5 Any other method of payment complying with the
provisions of Section 422 of the Code with respect to Incentive Options,
provided the terms of payment are established by the Committee at the time of
grant and any other method of payment established by the Committee with respect
to Non-Qualified Options.
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5.6 FAIR MARKET VALUE. The fair market value of a share of
Stock on any relevant date shall be determined in accordance with the following
provisions:
5.6.1 If the Stock at the time is neither listed nor
admitted to trading on any stock exchange nor traded in the over-the-counter
market, then the fair market value shall be determined by the Committee after
taking into account such factors as the Committee shall deem appropriate.
5.6.2 If the Stock is not at the time listed or admitted to
trading on any stock exchange but is traded in the over-the-counter market, the
fair market value shall be the mean between the highest bid and lowest asked
prices (or, if such information is available, the closing selling price) of one
share of Stock on the date in question in the over-the-counter market, as such
prices are reported by the National Association of Securities Dealers through
its NASDAQ system or any successor system. If there are no reported bid and
asked prices (or closing selling price) for the Stock on the date in question,
then the mean between the highest bid price and lowest asked price (or the
closing selling price) on the last preceding date for which such quotations
exist shall be determinative of fair market value.
5.6.3 If the Stock is at the time listed or admitted to
trading on any stock exchange, then the fair market value shall be the closing
selling price of one share of Stock on the date in question on the stock
exchange determined by the Committee to be the primary market for the Stock, as
such price is officially quoted in the composite tape of transactions on such
exchange. If there is no reported sale of Stock on such exchange on the date in
question, then the fair market value shall be the closing selling price on the
exchange on the last preceding date for which such quotation exists.
5.7 PROMISSORY NOTE. Subject to the requirements of applicable
state or Federal law or margin requirements, and if provided in the Stock Option
Agreement, payment of all or part of the purchase price of the Stock may be made
by delivery of a full recourse promissory note ("Promissory Note"). The
Promissory Note shall be executed by the optionee, made payable to the Company
and bear interest at such rate as the Committee shall determine, but in no case
less than the minimum rate which will not cause under the Code (i) interest to
be imputed, (ii) original issue discount to exist, or (iii) any other similar
results to occur. Unless otherwise determined by the Committee, interest on the
Note shall be payable in quarterly installments on March 31, June 30, September
30 and December 31 of each year. A Promissory Note shall contain such other
terms and conditions as may be determined by the Committee; provided, however,
that the full principal amount of the Promissory Note and all unpaid interest
accrued thereon shall be due not later than five years from the date of
exercise. The Company may obtain from the optionee a security interest in all
shares of Stock issued to the optionee under the Plan for the purpose of
securing payment under the Promissory Note and shall retain possession of the
stock certificates representing such shares in order to perfect its security
interest.
5
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5.8 RIGHTS AS A SHAREHOLDER. An optionee or successor shall
have no rights as a shareholder with respect to any Stock underlying any option
until the date of the issuance to such optionee of a certificate for such Stock.
No adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such Stock certificate is issued, except as
provided in Section 6.
5.9 MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to
the terms and conditions of the Plan, the Committee may modify, extend or renew
outstanding options granted under the Plan, or accept the surrender of
outstanding options (to the extent not exercised) and authorize the granting of
new options in substitution therefor.
5.10 OTHER PROVISIONS. The Stock Option Agreements shall
contain such other provisions, including without limitation, restrictions upon
the exercise of options, as the Committee shall deem advisable. Thus, for
example, the Committee may require that all or any portion of an option not be
exercisable until a specified period of time has passed or some other event has
occurred.
6. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
6.1 SUBDIVISION OR CONSOLIDATION. Subject to any required
action by shareholders of the Company, the number of shares of Stock covered by
each outstanding option, and the exercise price thereof, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Stock of the Company resulting from a subdivision or consolidation of
shares or the payment of a stock dividend (but only on the Stock) or any other
increase or decrease in the number of such shares effected without receipt of
consideration by the Company. Any fraction of a share subject to option that
would otherwise result from an adjustment pursuant to this Section shall be
rounded downward to the next full number of shares without other compensation or
consideration to the holder of such option.
6.2 CAPITAL TRANSACTIONS. Upon a sale or exchange of all or
substantially all of the assets of the Company, a merger or consolidation in
which the Company is not the surviving corporation, a merger, reorganization or
consolidation in which the Company is the surviving Company and shareholders of
the Company exchange their stock for securities or property, a liquidation of
the Company, or similar transaction ("Capital Transaction"), this Plan and each
option issued under this Plan, whether vested or unvested, shall terminate,
unless such options are assumed by a successor corporation in a merger or
consolidation 15 days prior to such Capital Transaction; provided, however, that
unless the outstanding options are assumed by a successor corporation in a
merger or consolidation, subject to terms approved by the Committee, all
optionees will have the right, until 15 days prior to such Capital Transaction,
to exercise all vested options. The Committee may (but shall not be obligated
to) (i) accelerate the vesting of any option or (ii) apply the foregoing
provisions, including but not limited to termination of this
6
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Plan and options granted pursuant to the Plan, in the event there is a sale of
51% or more of the stock of the Company in any two year period or a transaction
similar to a Capital Transaction.
6.3 ADJUSTMENTS. To the extent that the foregoing adjustments
relate to stock or securities of the Company, such adjustments shall be made by
the Committee, whose determination in that respect shall be final, binding and
conclusive.
6.4 ABILITY TO ADJUST. The grant of an option pursuant to the
Plan shall not affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure or to merge, consolidate, dissolve, liquidate, sell or
transfer all or any part of its business or assets.
6.5 NOTICE OF ADJUSTMENT. Whenever the Company shall take any
action resulting in any adjustment provided for in this Section, the Company
shall forthwith deliver notice of such action to each optionee, which notice
shall set forth the number of shares subject to the option and the exercise
price thereof resulting from such adjustment.
6.6 LIMITATION ON ADJUSTMENTS. Any adjustment, assumption or
substitution of an Incentive Option shall comply with Section 425 of the Code,
1f applicable.
7. NONASSIGNABILITY. Options granted under this Plan may not be
sold, pledged, assigned or transferred in any manner other than by will or by
the laws of intestate succession, and may be exercised during the lifetime of an
optionee only by such optionee. Any transfer by the optionee of any option
granted under this Plan in violation of this Section shall void such option and
any Stock Option Agreement entered into by the optionee and the Company
regarding such transferred option shall be void and have no further force or
effect. No option shall be pledged or hypothecated in any way, nor shall any
option be subject to execution, attachment or similar process.
8. NO RIGHT OF EMPLOYMENT. Neither the grant nor exercise of any
option nor anything in this Plan shall impose upon the Company or any other
corporation any obligation to employ or continue to employ any optionee. The
right of the Company and any other corporation to terminate any employee shall
not be diminished or affected because an option has been granted to such
employee.
9. TERM OF PLAN. This Plan is effective on the date the Plan is
adopted by the Board of Directors and options may be granted pursuant to the
Plan from time to time within a period of ten (10) years from such date, or the
date of any required shareholder approval required under the Plan, if earlier.
Termination of the Plan shall not affect any option theretofore granted.
10. AMENDMENT OF THE PLAN. The Board of Directors of the Company may,
subject to any required shareholder approval, suspend, discontinue or terminate
the Plan, or revise or amend it in any respect whatsoever with respect to any
shares of Stock at that time not subject to options.
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11. APPLICATION OF FUNDS. The proceeds received by the Company from
the sale of Stock pursuant to options may be used for general corporate
purposes.
12. RESERVATION OF SHARES. The Company, during the term of this Plan,
shall at all times reserve and keep available such number of shares of Stock as
shall be sufficient to satisfy the requirements of the Plan.
13. NO OBLIGATION TO EXERCISE OPTION. The granting of an option shall
not impose any obligation upon the optionee to exercise such option.
14. APPROVAL OF BOARD OF DIRECTORS AND SHAREHOLDERS. The Plan shall
not take effect until approved by the Board of Directors of the Company. This
Plan shall be approved by a vote of the shareholders within 12 months from the
date of approval by the Board of Directors. In the event such shareholder vote
is not obtained, all options granted hereunder, whether vested or unvested,
shall be null and void.
15. WITHHOLDING TAXES. Notwithstanding anything else to the contrary
in this Plan or any Stock Option Agreement, the exercise of any option shall be
conditioned upon payment by such optionee in cash, or other provisions
satisfactory to the Committee, of all local, state, federal or other withholding
taxes applicable, in the Committee's judgment, to the exercise or to later
disposition of shares acquired upon exercise of an option (including any
repurchase of an option or the Stock).
16. PARACHUTE PAYMENTS. Any outstanding option under the Plan may not
be accelerated to the extent any such acceleration of such option would, when
added to the present value of other payments in the nature of compensation which
becomes due and payable to the optionee would result in the payment to such
optionee of an excess parachute payment under Section 280G of the Code. The
existence of any such excess parachute payment shall be determined in the sole
and absolute discretion of the Committee.
17. SECURITIES LAWS COMPLIANCE. Notwithstanding anything contained
herein, the Company shall not be obligated to grant any option under this Plan
or to sell, issue or effect any transfer of any Stock unless such grant, sale,
issuance or transfer is at such time effectively (i) registered or exempt from
registration under the Act and (ii) qualified or exempt from qualification under
the California Corporate Securities Law of 1968 and any other applicable state
securities laws. As a condition to exercise of any option, each optionee shall
make such representations as may be deemed appropriate by counsel to the Company
for the Company to use any available exemption from registration under the Act
or any applicable state securities law.
18. RESTRICTIVE LEGENDS. The certificates representing the Stock
issued upon exercise of options granted pursuant to this Plan will bear the
following legends giving notice of restrictions on transfer under the Act and
this Plan, as follows:
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(a) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED
OR TRANSFERRED IN A TRANSACTION WHICH WAS NOT REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE
UPON AN EXEMPTION AFFORDED BY SUCH ACT. NO SALE OR TRANSFER
OF THESE SHARES SHALL BE MADE, NO ATTEMPTED SALE OR TRANSFER
SHALL BE VALID, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE
ANY EFFECT TO ANY SUCH TRANSACTION UNLESS (A) SUCH
TRANSACTION SHALL HAVE BEEN DULY REGISTERED UNDER THE ACT OR
(B) THE ISSUER SHALL HAVE FIRST RECEIVED AN OPINION OF
COUNSEL SATISFACTORY TO IT THAT SUCH REGISTRATION IS NOT
REQUIRED.
(b) Any other legends required by applicable state securities
laws as determined by the Committee.
19. NOTICES. Any notice to be given under the terms of the Plan shall
be addressed to the Company in care of its Secretary at its principal office,
and any notice to be given to an optionee shall be addressed to such optionee at
the address maintained by the Company for such person or at such other address
as the optionee may specify in writing to the Company.
As adopted by the Board of Directors as of January 1, 1997.
CREATIVE HOST SERVICES, INC., a
California corporation
By:
--------------------------------------
Sayed Ali, President
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EXHIBIT A
____________, 1997
Creative Host Services, Inc.
1455 Frazee Road, Suite 512
San Diego, CA 92108
Re: 1997 Stock Option Plan
----------------------
To Whom It May Concern:
This letter is delivered to Creative Host Services, a California
corporation (the "Company"), in connection with the grant to (the "Optionee") of
an option (the "Option") to purchase shares of common stock of the Company (the
"Stock") pursuant to the Creative Host Services, Inc. 1997 Stock Option Plan
dated __________, 1997 (the "Plan"). The Optionee understands that the Company's
receipt of this letter executed by the Optionee is a condition to the Company's
willingness to grant the Option to the Optionee.
The Optionee acknowledges that the grant of the Option by the Company is in
lieu of any and all other promises of the Company to the Optionee, whether
written or oral, express or implied, regarding the grant of options or other
rights to acquire Stock. Accordingly, in anticipation of the grant of the
Option, the Optionee hereby relinquishes all rights to such other rights, if
any, to acquire stock of the Company.
In addition, the Optionee makes the following representations and
warranties with the understanding that the Company will rely upon them in the
Company's determination of whether the grant of the Option meets the
requirements of the "private offering" exemption provided in Section 25102(f) of
the California Corporations Code and certain exemptions provided under the
Securities Act of 1933, as amended.
1. The Optionee acknowledges receipt of a copy of the Plan and
Agreement. The Optionee has carefully reviewed the Plan and Agreement.
EXHIBIT A - PAGE 1
<PAGE>
2. The Option and the Stock will be acquired by the Optionee for
investment only, for the Optionee's own account, and not with a view to or for
sale in connection with any distribution of the Option or the Stock. The
Optionee will not take, or cause to be taken, any action which would cause the
Optionee, or any entity or person affiliated with the Optionee, to be deemed an
underwriter with respect to the Option or the Stock.
3. The Optionee either:
a. has a preexisting personal or business relationship with
the Company or any of its officers, directors or controlling persons of a nature
and duration as would allow the Optionee to be aware of the character, business
acumen, general business and financial circumstances of the Company or of the
person with whom such relationship exists; or
b. by reason of the Optionee's business or financial experience, or
the business or financial experience of the Optionee's professional advisor who
is unaffiliated with and is not compensated by the Company or any affiliate or
selling agent of the Company, directly or indirectly, the Optionee has the
capacity to protect the Optionee's interests in connection with the grant of the
Option and the purchase of the Stock.
4. The Optionee acknowledges that an investment in the Company represents
a speculative investment and a high degree of risk. The Optionee acknowledges
that the Optionee has had the opportunity to obtain and review all information
from the Company necessary to make a reasonably informed investment decision and
that the Optionee has had all questions asked of the Company answered to the
reasonable satisfaction of the Optionee. The Optionee is able to bear the
economic risk of an investment in the Option and the Stock.
5. The grant of the Option has not been accompanied by the publication
of any advertisement.
6. The Optionee understands and acknowledges that the Stock has not
been, and will not be, registered under the Securities Act of 1933, as amended,
or qualified under the California Corporate Securities Law of 1968. The Optionee
understands and acknowledges that the Stock may not be sold without compliance
with the registration requirements of federal and applicable state securities
laws unless an exemption from such laws is available. The Optionee understands
that the certificate representing the Stock shall bear the legends set forth in
the Plan.
7. The Optionee understands and acknowledges that the Option and the
Stock are subject to the terms and conditions of the Plan.
EXHIBIT A - PAGE 2
<PAGE>
8. The Optionee understands and agrees that, at the time of exercise of
any part of the Option for Stock, the Optionee may be required to provide the
Company with additional representations, warranties and/or covenants similar to
those contained in this letter.
9. The Optionee is a resident of the State of __________.
10. The Optionee will notify the Company immediately of any change in
the above information which occurs before the Option is exercised in full by the
Optionee.
The foregoing representations and warranties are given on
______________, 1997 at_________________________.
OPTIONEE:
-------------------------------
EXHIBIT A - PAGE 3
<PAGE>
EXHIBIT B
____________, 1997
Creative Host Services, Inc.
1455 Frazee Road, Suite 512
San Diego, CA 92108
Re: 1997 Stock Option Plan
----------------------
To Whom It May Concern:
I (the "Optionee") hereby exercise my right to purchase ______ shares
of common stock (the "Stock") of Creative Host Services, Inc., a California
corporation (the "Company"), pursuant to the Creative Host Services, Inc.
1997 Stock Option Plan dated _____________, 1997 (the "Plan") and the Stock
Option Agreement (the "Agreement") dated ____________, 1997. As provided in
such Plan, I deliver herewith payment as set forth in the Plan in the amount
of the aggregate option exercise price. Please deliver to me at my address as
set forth above stock certificates representing the subject shares registered
in my name (and (SPOUSE), as (STYLE OF VESTING)).
The Optionee hereby represents as follows:
1. The Optionee acknowledges receipt of a copy of the Plan and
Agreement. The Optionee has carefully reviewed the Plan and Agreement.
2. The Optionee either:
a. has a preexisting personal or business relationship with
the Company or any of its officers, directors or controlling persons of a nature
and duration as would allow the undersigned to be aware of the character,
business acumen, general business and financial circumstances of the Company or
of the person with whom such relationship exists; or
b. by reason of the Optionee's business or financial experience or
the business or financial experience of the Optionee's professional advisor(s)
who is (are) unaffiliated with and is (are) not compensated by the Company or
any affiliate or selling agent of the Company, directly
EXHIBIT B - PAGE 1
<PAGE>
or indirectly, has the capacity to protect the Optionee's interests in
connection with the purchase of nonqualified stock options of the Company and
Stock issuable upon the exercise thereof.
3. The Optionee is able to bear the economic risk of his investment in
the stock options of the Company and the Stock issuable upon exercise thereof.
4. The Optionee acknowledges that an investment in the Company
represents a speculative investment and a high degree of risk. The Optionee
acknowledges that the Optionee has had the opportunity to obtain and review all
information from the Company necessary to make a reasonably informed investment
decision and that the Optionee has had all questions asked of the Company
answered to the reasonable satisfaction of the Optionee.
5. The grant of Options for Stock and the exercise of the Options has not
been accompanied by the publication of any advertisement.
6. The Optionee understands and acknowledges that the Stock has not,
and will not, be registered under the Securities Act of 1933, as amended, or
qualified under the California Securities Law of 1968. The Optionee understands
and acknowledges that the Stock may not be sold without compliance with the
registration and qualification requirements of federal and applicable state
securities laws unless exemptions from such laws are available. The Optionee
understands that the certificate representing the Stock shall bear the legends
set forth in the Plan.
7. The Optionee is a resident of the State of __________.
8. The Optionee hereby is purchasing for the Optionee's own account and
not with a view to or for sale in connection with any distribution of the stock
options of the Company or any Stock issuable upon exercise thereof.
The foregoing representations and warranties are given on ______________,
1997 at _________________________.
OPTIONEE:
----------------------------------
EXHIBIT B - PAGE 2
