<PAGE>
As filed with the Securities and Exchange Commission on February 10, 2000
Registration No. ___-_____
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
CREATIVE HOST SERVICES, INC.
(Exact name of registrant as specified in their charter)
California
(State or other jurisdiction of incorporation or organization of registrant)
33-1069494
(I.R.S. employer identification number)
6335 Ferris Square, Suites G-H
San Diego, California 92126
(619) 587-7300
(Address, including zip code, and telephone number,
including area code, of registrants' principal executive office)
Sayed Ali, President
Creative Host Services, Inc.
6335 Ferris Square, Suite G-H
San Diego, California 92126
(619) 587-7300
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
With copies to:
Mark J. Richardson, Esq.
<PAGE>
Richardson & Associates
1299 Ocean Avenue, Suite 900
Santa Monica, California 90401
(310) 393-9992
(310) 393-2004 (fax)
Approximate date of commencement of
proposed sale to the public: From time to time
after the effective date of this Registration
Statement.
If any of the securities being registered on this form are to be offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1993, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X] If this Form is
filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] _____.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. Registration No. _______.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Aggregate Price Aggregate Amount of
Securities to be Registered Registered(1) Per Share(2) Offering Price Registration Fee
<S> <C> <C> <C> <C>
Common Stock.................................... 1,140,951 $ 8.25 $ 9,412,845.70 $3,190.80
Common Stock Underlying Warrants................ 120,000 $ 1.375 $ 165,000.00 $ 55.93
Common Stock Issuable Upon Conversion of Notes.. 574,427 $ 2.62 $ 1,504,998.70 $ 510.17
- ------------------------------------------------ ================== ===================== =============== ================
Totals 1,835,378 -- $11,082,844.40 $3,756.90
================================================ ================== ===================== =============== ================
</TABLE>
(1) This Registration Statement covers shares of the Registrant's Common
Stock being registered for resale on behalf of certain Selling
Securityholders, as well as shares issuable upon the exercise of
Warrants issued to certain Selling Securityholders (the "Warrants),
and additional shares of Common Stock as may become issuable upon
conversion of the Company's outstanding 12% Secured Convertible
Promissory Notes (the "Notes"). This Registration Statement registers
securities to be offered pursuant to terms which provide for a change
in the amount of securities being offered or issued to prevent dilution
resulting from stock splits, stock dividends or similar transactions.
Pursuant to Rule 416, this Registration Statement shall be deemed to
cover the additional securities to be offered or issued in connection
with any such provision.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c), or reflects the Warrant exercise and Note conversion
prices.
<PAGE>
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
Subject to Completion, Dated February 10, 2000
PROSPECTUS
CREATIVE HOST SERVICES, INC.
[LOGO]
1,835,378 Shares Common Stock
This Prospectus covers 1,835,378 shares of the Common Stock, no par
value (the "Common Stock") of Creative Host Services, Inc., a California
corporation ("CHST") held by several individuals and entities (collectively,
the "Selling Securityholders"). The shares covered by this Prospectus include
1,140,951 outstanding shares of Common Stock, up to 120,000 shares issuable
upon the exercise of outstanding warrants (the "Warrants"), and up to 574,427
shares issuable upon the conversion of outstanding 12% Convertible Secured
Notes, dated December 21, 1998 (the "Notes"). We will not receive any of the
proceeds from the sale of securities by the Selling Securityholders.
Our Common Stock is traded on the NASDAQ Small Cap Market under the
symbol "CHST." On February 8, 2000, the last bid price and ask price for the
Common Stock as reported on the NASDAQ Small Cap Market was $8.25 and $8.37,
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.
<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
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<PAGE>
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.
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
-3-
<PAGE>
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 intends
to convert $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.
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
-4-
<PAGE>
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 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 $1,505,000, 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 are also planning to file a Form S-8
registration statement with the Securities and Exchange Commission to
register 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 an exercise price of $.93 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.
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.
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<PAGE>
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
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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 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 were issued to them in connection with various transactions.
The Selling Securityholders include the following persons and entities who
have acquired Common Stock, Warrants and Notes:
- Seven individuals who acquired a total of 355,000 shares of our
Common Stock for a purchase price of $1.00 per share in a
private placement of Common Stock made by CHST in November 1999.
The capital raised from that placement was utilized to pay
default interest on the outstanding Notes, to pay for equipment
costs at one of our new concession locations, and for general
working capital.
- A financial advisor who received (a) shares of Common Stock from
the prior exercise of warrants, and (b) additional Warrants, in
consideration for consulting services performed for CHST.
- An individual who purchased $1,495,000 original principal amount
of outstanding 12% Secured Convertible Notes dated December 21,
1998, from their original holder, and then converted them into
570,610 shares of Common Stock.
- An individual who purchased a total of 140,000 shares of our
Common Stock for a purchase price of $.80 per share in a private
placement of Common Stock made by CHST in July 1999. The capital
raised from that placement was utilized for general working
capital. This Prospectus covers 90,000 of the 140,000 shares
owned by the individual.
- An institution that purchased $1,505,000 original principal
amount of Notes in December 1998 and which may convert the Notes
into shares of Common Stock at a conversion price of $2.62 per
share. The shares issuable upon the conversion of the Notes are
covered by this Prospectus as a result of the registration
rights of the Noteholder.
- Four individuals who exercised warrants previously granted to
them in consideration for their services and assistance to CHST
in obtaining the proceeds from the issuance of the 12% Secured
Convertible Notes in December 1998.
- The Noteholder that exercised 150,400 warrants to purchase
Common Stock received by it in December 1998 in connection with
providing the financing to CHST evidenced by the Notes. The
Noteholder exercised those warrants in December 1999 on a
"cashless" basis and as a result was issued 94,572 shares of
Common Stock with the right to have them registered for free
trading.
The following tables set forth certain information with respect to
each Selling Securityholder for whom we are registering securities for resale
to the public. Beneficial ownership of the Common Stock by such Selling
Securityholders after this offering will depend on the number of shares of
Common Stock sold by each Selling Securityholder.
The following Selling Securityholders own outstanding shares of Common Stock:
<TABLE>
<CAPTION>
NUMBER OF OUTSTANDING SHARES OFFERED
NAME OF SELLING SECURITYHOLDER BY THIS PROSPECTUS
- ------------------------------ ------------------------------------
<S> <C>
Anthony So (1) 50,000
John Stewart Jackson (1) 105,000
Mark Anthony Hatsis (1) 105,000
John and Virginia Blessom, as Joint Tenants (1) 5,000
Curtiss M. McQueen (1) 5,000
Gerdz Investment Limited Partnership RLLLP (1) 85,000
David C. Olson (2) 10,769
John Stewart Jackson (3) 570,610
Mark J. Richardson (4) 90,000
CapEx, L.P. (5) 94,572
Gregory Fulton (6) 14,664
Katie Johnson (6) 3,665
Clarence Bixler (6) 334
James Cohig (6) 1,337
</TABLE>
The following Selling Securityholders hold Warrants or Notes and
therefore have the right to acquire the number of shares indicated below,
which are covered by this Prospectus:
<TABLE>
<CAPTION>
NUMBER OF SHARES
ISSUABLE UPON EXERCISE
OF WARRANTS OR
NAME OF SELLING SECURITYHOLDER CONVERSION OF NOTES
- ------------------------------ ---------------------------
<S> <C>
David C. Olson (8) 120,000
CapEx, L.P. (9) 574,427
</TABLE>
-7-
<PAGE>
(1) These individuals purchased the shares of Common Stock in a private
placement in November 1999 for a purchase price of $1.00 per share.
(2) David C. Olson was issued 15,000 warrants to purchase up to 15,000
shares of CHST's common stock for an exercise price of $1.375 per share,
in consideration for his assistance in facilitating our borrowing of
$3,000,000 in December 1998 under the 12% Secured Convertible Notes.
Mr. Olson exercised those warrants on a "cashless" basis and as a
result was issued 10,769 shares of Common Stock in January 2000.
(3) John Stewart Jackson purchased $1,495,000 original principal amount of
12% Secured Convertible Notes from their original owner and converted
them into 570,610 shares of Common Stock on December 29, 1999. The
holder of those notes has demand registration rights, which are being
satisfied by the inclusion of those shares of Common Stock in this
Prospectus.
(4) Mark J. Richardson purchased these shares of Common Stock in a private
placement in July 1999 for a purchase price of $.80 per share. Mr.
Richardson is a partner of Richardson & Associates, legal counsel to
CHST. Mr. Richardson owns a total of 140,000 shares of our common stock,
50,000 of which are not covered by this Prospectus.
(5) CapEx, L.P., in connection with its purchase of the Notes in December
1998, was issued 150,400 warrants to purchase up to 150,400 shares of
CHST's common stock for an exercise price of $1.48 per share. CapEx,
L.P. exercised those warrants on a "cashless" basis on December 10, 1999
and as a result was issued 94,572 shares of Common Stock. The holder of
those warrants has demand registration rights, which are being satisfied
by the inclusion of those shares of Common Stock in this Prospectus.
(6) These individuals were issued a total of 40,000 warrants to purchase up
to 40,000 shares of CHST's common stock for an exercise price of $1.48
per share, in consideration for their services in facilitating our
borrowing of $3,000,000 in December 1998 under the 12% Secured
Convertible Notes. In December 1999 they exercised 20,000 of the
warrants. These individuals exercised those warrants on a "cashless"
basis and as a result, were issued the number of shares of Common Stock
indicated on the table.
(7) David C. Olson was issued these warrants on November 19, 1999 in
consideration for his financial advisory and consulting services to
CHST. The warrants are exercisable at any time until November 19, 2004
at an exercise price of $1.375 per share, and may be exercised on a
"cashless" basis. The holder of these warrants has demand registration
rights, which are being satisfied by inclusion of them in this
Prospectus. If they are exercised on a "cashless" basis, less than
120,000 shares of Common Stock would ultimately be issued.
(8) CapEx, L.P. is the holder of the notes and has the right to convert them
into shares of CHST's Common Stock at a conversion price of $2.62 per
share at any time until they are repaid. CapEx, L.P. has demand
registration rights with respect to the shares issuable upon the
conversion of the Notes, which are being satisfied by inclusion of them
in this Prospectus. CapEx, L.P. has not yet notified CHST as to whether
or not it will convert the Notes prior to their scheduled redemption
date of March 30, 2000.
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
-8-
<PAGE>
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 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
-9-
<PAGE>
(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.
-10-
<PAGE>
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 CREATIVE HOST SERVICES, INC.
solicitation of an offer to buy any
securities other than those specifically [LOGO]
offered hereby or an offer to sell, or a
solicitation of an offer to buy, to any
person in any jurisdiction in which such
offer or sale would be unlawful. Neither
the delivery of this Prospectus nor any
sale made hereunder shall under any
circumstances create any implication
that there has been no change in the
affairs of CHST since the dates as of
which information is furnished or
since the date of this Prospectus.
----------------- -------------------------
PROSPECTUS
-------------------------
TABLE OF CONTENTS
Page
ADDITIONAL INFORMATION..................2
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE...............................2
RISK FACTORS............................3
USE OF PROCEEDS.........................7
SELLING SHAREHOLDERS....................7 February 10, 2000
PLAN OF DISTRIBUTION....................9
LIMITATION ON LIABILITY AND
INDEMNIFICATION OF DIRECTORS...........10
LEGAL MATTERS..........................11
EXPERTS ..............................11
======================================== =======================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Other Expenses Of Issuance And Distribution
The following table sets forth the expenses, other than any
underwriting discounts or commissions, payable in connection with the
distribution of the shares being registered. All expenses incurred are in
connection with the registration. All amounts shown are estimates except for
the SEC registration fee.
SEC Registration Fee $ 3,756.90
NASDAQ Listing Fee $ 0
Blue Sky Fees and Expenses $ 0
Printing and Engraving Expenses $ 5,000
Accounting Fees and Expenses $ 2,000
Legal Fees and Expenses $ 17,000
Registerar and Transfer Agent's Fees
and Expenses $ 2,000
Miscellaneous Expenses $ 1,000
-----------
Total $ 30,756.90
===========
ITEM 15. Indemnification Of Directors And Officers
Under the California Corporations Code and the Company's Amended and
Restated Articles of Incorporation, the Company's directors will have no
personal liability to the Company or its shareholders for monetary damages
incurred as the result of the breach or alleged breach by a director of his
"duty of care". This provision does not apply to the directors' (i) acts or
omissions that involve intentional misconduct or a knowing and culpable
violation of law, (ii) acts or omissions that a director believes to be contrary
to the best interests of the corporation or its shareholders or that involve the
absence of good faith on the part of the director, (iii) approval of any
transaction from which a director derives an improper personal benefit, (iv)
acts or omissions that show a reckless disregard for the director's duty to the
corporation or its shareholders in circumstances in which the director was
aware, or should have been aware, in the ordinary course of performing a
director's duties, of a risk of serious injury to the corporation or its
shareholders, (v) acts or omissions that 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 the Company's Amended and Restated
Articles of Incorporation is to eliminate the rights of the Company and its
shareholders (through shareholder's derivative suits on behalf of the Company)
to recover monetary damages against a director for breach of his fiduciary duty
of care as a director (including breaches resulting from negligent or grossly
negligent behavior) except in the situations described in clauses (i) through
(vi) above. This provision does not limit nor eliminate the rights of the
Company or any shareholder to seek non-monetary relief such as an injunction or
rescission in the event of a breach of a director's duty of care. In addition,
the Company's Restated Articles of Incorporation 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. The Company's Bylaws
II-1
<PAGE>
provide for indemnification of such persons to the full extent allowable under
applicable law. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the Company pursuant to the foregoing provisions, the Company has been informed
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
ITEM 16. Exhibits
4.1 Specimen Certificate for Common Stock(1)
4.2 Warrant for $1.375 Warrants (Warrant Certificate)
4.3 12% Secured Convertible Note and Indenture dated
December 21, 1998(2)
5.1 Opinion of Richardson & Associates
23.1 Consent of Richardson & Associates (contained
in Exhibit 5)
23.2 Consent of Stonefield Josephson, independent accountants
24 Power of Attorney (contained on signature page)
- ------------------
(1) Incorporated by reference from the exhibits included with the Company's
Annual Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 on Form 10-KSB filed with the SEC for fiscal year ended
December 31, 1997.
(2) Incorporated by reference from Exhibit 4.4 included with the
Company's Annual Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 on Form 10-KSB filed with the SEC for fiscal
year ended December 31, 1998.
ITEM 17. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by
those paragraphs is contained in the periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act
that are incorporated by reference in the registration statement.
II-2
<PAGE>
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934
that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the indemnification provisions described
under Item 15, or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereto duly authorized,
in the City of San Diego, State of California, on February 9, 2000.
CREATIVE HOST SERVICES, INC.
By: /s/ SAYED ALI
-----------------------------------
Sayed Ali, President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Sayed Ali, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place, and stead, in any and all capacities, to sign
any and all amendments (including post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirement of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ SAYED ALI President, Chief Financial February 9, 2000
- ------------------------------ Officer and Director
Sayed Ali
/s/ BOOKER T. GRAVES Director February 9, 2000
- ------------------------------
Booker T. Graves
/s/ JOHN P. DONOHUE, JR. Director February 9, 2000
- ------------------------------
John P. Donohue, Jr.
/s/ CHARLES B. RADLOFF Director February 9, 2000
- ------------------------------
Charles B. Radloff
II-4
THIS SECURITY HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
OFFERED OR SOLD UNLESS REGISTERED AND QUALIFIED PURSUANT TO THE APPLICABLE
PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM
SUCH REGISTRATION OR QUALIFICATION APPLIES. THEREFORE, NO SALE OR TRANSFER OF
THIS SECURITY 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 HAS BEEN DULY REGISTERED UNDER THE
ACT AND QUALIFIED OR APPROVED UNDER APPROPRIATE STATE SECURITIES LAWS, OR (B)
THE ISSUER HAS FIRST RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO IT THAT SUCH REGISTRATION, QUALIFICATION OR APPROVAL IS NOT REQUIRED.
WARRANT
For the Purchase of Shares of Common Stock
of
CREATIVE HOST SERVICES, INC.
Void After 5 P.M. November 19, 2004
No. 1 Date: November 19, 1999
Warrant to Purchase One Hundred and Twenty Thousand (120,000) Shares of Common
Stock
THIS IS TO CERTIFY, that, for value received, David C. Olson, or
registered assigns (the "Holder"), is entitled, subject to the terms and
conditions hereinafter set forth, on or after the date hereof, and at any
time prior to 5 P.M., Pacific Standard Time ("PST"), on November 19, 2004 but
not thereafter, to purchase such number of shares of Common Stock, no par
value ("Common Stock" or the "Shares"), of Creative Host Services, Inc. (the
"Company"), from the Company as set forth above and upon payment to the
Company of an amount per Share of $1.375 (the "Purchase Price"), if and to
the extent this Warrant is exercised, in whole or in part, during the period
this Warrant remains in force, subject in all cases to adjustment as provided
in Section 2 hereof, and to receive a certificate or certificates
representing the Shares so purchased, upon presentation and surrender to the
Company of this Warrant, with the form of Subscription Agreement attached
hereto, including changes thereto reasonably requested by the Company, duly
executed and accompanied by payment of the Purchase Price of each Share.
SECTION 1.
TERMS OF THIS WARRANT
1.1 TIME OF EXERCISE. This Warrant may be exercised at any time and
from time to time after 9:00 A.M., PST, on the date hereof, (the "Exercise
Commencement Date"), but no later than 5:00 P.M., November 19, 2004 (the
"Expiration Time") at which time this Warrant shall become void and all
rights hereunder shall cease.
<PAGE>
1.2 MANNER OF EXERCISE.
1.2.1 The Holder may exercise this Warrant, in whole or in
part, upon surrender of this Warrant, with the form of Subscription Agreement
attached hereto duly executed, to the Company at its corporate office in San
Diego, California, and upon payment to the Company of the full Purchase Price
for each Share to be purchased in lawful money of the United States, or by
certified or cashier's check, or wired funds, and upon compliance with and
subject to the conditions set forth herein.
1.2.2 Upon receipt of this Warrant with the form of
Subscription Agreement duly executed and accompanied by payment of the
aggregate Purchase Price for the Shares for which this Warrant is then being
exercised, the Company shall cause to be issued certificates for the total
number of whole Shares for which this Warrant is being exercised in such
denominations as are required for delivery to the Holder, and the Company
shall thereupon deliver such certificates to the Holder or its nominee.
1.2.3 In case the Holder shall exercise this Warrant with
respect to less than all of the Shares that may be purchased under this
Warrant, the Company shall execute a new Warrant for the balance of the
Shares that may be purchased upon exercise of this Warrant and deliver such
new Warrant to the Holder.
1.2.4 The Company covenants and agrees that it will pay
when due and payable any and all taxes which may be payable in respect of the
issue of this Warrant, or the issue of any Shares upon the exercise of this
Warrant. The Company shall not, however, be required to pay any tax which may
be payable in respect of any transfer involved in the issuance or delivery of
this Warrant or of the Shares in a name other than that of the Holder at the
time of surrender, and until the payment of such tax the Company shall not be
required to issue such Shares.
1.3 "CASHLESS" NET ISSUE EXERCISE.
1.3.1 Notwithstanding any provisions herein to the
contrary, if the Current Market Price of one Share is greater than the
Purchase Price, in lieu of exercising this Warrant by payment with cash,
certified check, or wired funds, the Holder may elect to receive that number
of Shares (as determined below) equal to the value of this Warrant (or the
portion thereof being exercised) by surrender of this Warrant at the
corporate office of the Company together with the duly executed form of
Subscription Agreement and notice of such election, in which event the
Company shall issue to the Holder a number of shares of Common Stock computed
using the following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Common Stock to be
issued to the Holder
-2-
<PAGE>
Y = the total number of shares of Common Stock
to be purchased
A = the Current Market Price of one Share of
the Company's Common Stock on the day prior
to exercise hereunder.
B = Purchase Price.
1.3.2 The Current Market Price shall be determined as follows:
(a) if the security at issue is listed on a
national securities exchange or admitted to unlisted trading privileges on
such an exchange or quoted on either the National Market System or the Small
Cap Market of the automated quotation service operated by Nasdaq, Inc.
("NASDAQ"), the current value shall be the last reported sale price of that
security on such exchange or system on the day for which the Current Market
Price is to be determined or, if no such sale is made on such day, the
average of the highest closing bid and lowest asked price for such day on
such exchange or system; or
(b) if the security at issue is not so listed or
quoted or admitted to unlisted trading
privileges and bid and asked prices are not reported, the current market
value shall be determined in good faith and in such reasonable manner as may
be prescribed from time to time by the Board of Directors of the Company.
1.4 EXCHANGE OF WARRANT. This Warrant may be divided into,
combined with or exchanged for another Warrant or Warrants of like tenor to
purchase a like aggregate number of Shares. If the Holder desires to divide,
combine or exchange this Warrant, he shall make such request in writing
delivered to the Company at its corporate office and shall surrender this
Warrant and any other Warrants to be so divided, combined or exchanged. The
Company shall execute and deliver to the person entitled thereto a Warrant or
Warrants, as the case may be, as so requested. The Company shall not be
required to effect any division, combination or exchange which will result in
the issuance of a Warrant entitling the Holder to purchase upon exercise a
fraction of a Share. The Company may require the Holder to pay a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any division, combination or exchange of Warrants.
1.5 HOLDER AS OWNER. Prior to surrender of this Warrant in
accordance with Section 1.6 for registration of assignment, the Company may
deem and treat the Holder as the absolute owner of this Warrant
(notwithstanding any notation of ownership or other writing hereon) for the
purpose of any exercise hereof and for all other purposes, and the Company
shall not be affected by any notice to the contrary.
1.6 METHOD OF ASSIGNMENT. Any assignment or transfer of any
portion or all of this Warrant shall be made by surrender of this Warrant to
the Company at its principal office with the form of assignment attached
hereto duly executed and accompanied by funds sufficient to pay any transfer
tax. In such event, the Company shall, without charge, execute and deliver a
new Warrant
-3-
<PAGE>
in the name of the assignee named in such instrument of assignment and this
Warrant shall promptly be canceled.
1.7 RIGHTS OF HOLDER. Nothing contained in this Warrant shall be
construed as conferring upon the Holder the right to vote, consent or receive
notice as a shareholder in respect of any meetings of shareholders for the
election of directors or any other matter, or as having any rights whatsoever as
a shareholder of the Company.
1.8 LOST CERTIFICATES. If this Warrant is lost, stolen, mutilated
or destroyed, the Company shall, on such reasonable terms as to indemnity or
otherwise as it may impose (which shall, in the case of a mutilated Warrant,
include the surrender thereof), issue a new Warrant of like denomination and
tenor as, and in substitution for, this Warrant, which shall thereupon become
void. Any such new Warrant shall constitute an additional contractual obligation
of the Company, whether or not the Warrant so lost, stolen, destroyed or
mutilated shall be at any time enforceable by anyone.
1.9 COVENANTS OF THE COMPANY. The Company covenants and agrees
as follows:
1.9.1 At all times the Company shall reserve and keep
available for the exercise of this Warrant such number of authorized shares of
Common Stock as are sufficient to permit the exercise in full of this Warrant.
1.9.2 The Company covenants that all Shares when issued upon
the exercise of this Warrant will be validly issued, fully paid, nonassessable
and free of preemptive rights.
SECTION 2.
ADJUSTMENT OF PURCHASE PRICE
AND NUMBER OF SHARES PURCHASABLE UPON EXERCISE
2.1 STOCK SPLITS. If the Company at any time or from time to time
after the issuance date of this Warrant effects a subdivision of the outstanding
Common Stock, the Purchase Price then in effect immediately before that
subdivision shall be proportionately decreased, and conversely, if the Company
at any time or from time to time after the issuance date of this Warrant
combines the outstanding shares of Common Stock, the Purchase Price then in
effect immediately before the combination shall be proportionately increased.
Any adjustment under this subsection 2.1 shall become effective at the close of
business on the date the subdivision or combination becomes effective.
2.2 DIVIDENDS AND DISTRIBUTIONS. In the event the Company at any
time, or from time to time after the issuance date of this Warrant makes, or
fixes a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in additional shares of Common
Stock, then and in each such event the Purchase Price then in effect shall be
decreased as of the time of such issuance or, in the event such a record date is
fixed, as of the close of business on such record date, by multiplying the
Purchase Price then in effect by a fraction (i) the
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<PAGE>
numerator of which is the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date, and (ii) the denominator of which shall be the
total number of shares of Common Stock issued and outstanding immediately prior
to the time of such issuance or the close of business on such record date plus
the number of shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Purchase Price shall be recomputed accordingly as of the
close of business on such record date and thereafter the Purchase Price shall be
adjusted pursuant to this subsection 2.2 as of the time of actual payment of
such dividends or distributions.
2.3 RECAPITALIZATION OR RECLASSIFICATION. If the Shares issuable
upon the exercise of the Warrant are changed into the same or a different number
of shares of any class or classes of stock, whether by recapitalization,
reclassification or otherwise (other than a subdivision or combination of shares
or stock dividend or a reorganization, merger, consolidation or sale of assets,
provided for elsewhere in this Section 2), then, and in any such event, the
Holder shall thereafter be entitled to receive upon exercise of this Warrant
such number and kind of stock or other securities or property of the Company to
which a holder of Shares deliverable upon exercise of this Warrant would have
been entitled on such reclassification or other change, subject to further
adjustment as provided herein.
2.4 SALE OF THE COMPANY. If at any time or from time to time
there is a capital reorganization of the Common Stock (other than a
recapitalization, subdivision, combination, reclassification or exchange of
shares provided for elsewhere in this Section 2) or a merger or consolidation
of the Company with or into another Company, or the sale of all or
substantially all of the Company's properties and assets to any other person,
then, as a part of such reorganization, merger, consolidation or sale,
provision shall be made so that the Holder shall thereafter be entitled to
receive upon exercise of this Warrant such number of shares of stock or other
securities or property of the Company, or of the successor Company resulting
from such merger or consolidation or sale, to which a holder of Shares
deliverable upon exercise would have been entitled on such capital
reorganization, merger, consolidation, or sale. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section
2 with respect to the rights of the holders of the Warrants after the
reorganization, merger, consolidation or sale to the end that the provisions
of this Section (including adjustment of the Purchase Price then in effect
and number of shares purchasable upon exercise of the Warrants) shall be
applicable after that event and be as nearly equivalent to the provisions
hereof as may be practicable.
2.5 OBSERVANCE OF DUTIES. The Company will not, by amendment of
its Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company but will at all
times in good faith assist in the carrying out of all the provisions of this
Section 2 and in the taking of all such action as may be necessary or
appropriate in order to protect the Exercise Rights of the holders of the
Warrants against dilution or other impairment.
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<PAGE>
SECTION 3.
REGISTRATION UNDER THE SECURITIES ACT OF 1933
3.1 REGISTRATION AND LEGENDS. This Warrant and the Shares
issuable upon exercise of this Warrant have not been registered under the
Securities Act of 1933, as amended ("the Act"). Upon exercise, in whole or in
part, of this Warrant, the certificates representing the Shares shall bear
the following legend:
THIS SECURITY HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933 ("ACT") OR THE SECURITIES LAWS OF ANY STATE
AND MAY NOT BE OFFERED OR SOLD UNLESS REGISTERED AND QUALIFIED
PURSUANT TO THE APPLICABLE PROVISIONS OF FEDERAL AND STATE
SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION OR
QUALIFICATION APPLIES. THEREFORE, NO SALE OR TRANSFER OF THIS
SECURITY 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 HAS BEEN DULY
REGISTERED UNDER THE ACT AND QUALIFIED OR APPROVED UNDER
APPROPRIATE STATE SECURITIES LAWS, OR (B) THE ISSUER HAS FIRST
RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO IT THAT SUCH
REGISTRATION, QUALIFICATION OR APPROVAL IS NOT REQUIRED.
3.2 DEMAND REGISTRATION RIGHTS. On one occasion at any time
before the Expiration Date, the Company shall, upon the demand of the holders
of a majority of the Registrable Securities, register such securities and
file all necessary undertakings with the Securities and Exchange Commission
(the "SEC") so as to permit the Holder the right to sell publicly the Shares
issued on exercise of this Warrant.
3.3 PIGGYBACK REGISTRATION RIGHTS. In the event that the right
to demand that the Registrable Securities be registered pursuant to Section
3.2 has not been exercised, the Company agrees to include any Shares issuable
upon exercise of this Warrant in any registration statement filed by the
Company at any time after the Exercise Commencement Date and before the
Expiration Date.
SECTION 4.
OTHER MATTERS
4.1 BINDING EFFECT. All the covenants and provisions of this
Warrant by or for the benefit of the Company shall bind and inure to the
benefit of its successors and assigns hereunder.
-6-
<PAGE>
4.2 NOTICES. Notices or demands pursuant to this Warrant to be
given or made by the Holder to or on the Company shall be sufficiently given
or made if sent by certified or registered mail, return receipt requested,
postage prepaid, or facsimile and addressed, until another address is
designated in writing by the Company, as follows:
Creative Host Services, Inc.
6335 Ferris Square, Suites G & H
San Diego, California 92121
Telephone No.: (858) 587-7300
Facsimile No.: (858) 587-7309
Attention: Sayed Ali, President
Notices to the Holder provided for in this Warrant shall be deemed given or
made by the Company if sent by certified or registered mail, return receipt
requested, postage prepaid, and addressed to the Holder at his last known
address as it shall appear on the books of the Company.
4.3 GOVERNING LAW. The validity, interpretation and performance
of this Warrant shall be governed by the laws of the State of California. The
venue for any legal proceedings under this Warrant will be in the appropriate
forum in the County of San Diego, State of California.
4.4 PARTIES BOUND AND BENEFITTED. Nothing in this Warrant
expressed and nothing that may be implied from any of the provisions hereof
is intended, or shall be construed, to confer upon, or give to, any person or
corporation other than the Company and the Holder any right, remedy or claim
under any promise or agreement hereof, and all covenants, conditions,
stipulations, promises and agreements contained in this Warrant shall be for
the sole and exclusive benefit of the Company and its successors and of the
Holder, its successors and permitted assigns.
4.5 HEADINGS. The Section headings herein are for convenience
only and are not part of this Warrant and shall not affect the interpretation
thereof.
IN WITNESS WHEREOF, this Warrant has been duly executed by the
Company as of November 19, 1999.
CREATIVE HOST SERVICES, INC.
By:
------------------------
Sayed Ali, President
-7-
<PAGE>
ASSIGNMENT OF WARRANT
FOR VALUE RECEIVED, _______________________ hereby sells, assigns and
transfers
unto _____________________________ the within Warrant and the rights represented
thereby, and
does hereby irrevocably constitute and appoint _______________________________
Attorney, to
transfer said Warrant on the books of the Company, with full power of
substitution.
Dated: _____________________
Signed:___________________
Signature guaranteed:
- ----------------------------
-1-
<PAGE>
SUBSCRIPTION AGREEMENT
FOR THE EXERCISE OF WARRANTS
The undersigned hereby irrevocably subscribes for the purchase of
_____________ Shares pursuant to and in accordance with the terms and
conditions of this Warrant, which Shares should be delivered to the
undersigned at the address stated below. If said number of Shares are not all
of the Shares purchasable hereunder, a new Warrant of like tenor for the
balance of the remaining Shares purchasable hereunder should be delivered to
the undersigned at the address stated below.
The undersigned elects to pay the aggregate Purchase Price for such
Shares in the following manner:
[ ] by the enclosed cash or check made payable to the
Company in the amount of $________;
[ ] by wire transfer of United States funds to the
account of the Company in the amount of
$____________, which transfer has been made before or
simultaneously with the delivery of this Notice
pursuant to the instructions of the Company; or
[ ] by cashless exercise pursuant to Section 1.3 of the
Warrant.
The undersigned agrees that: (1) the undersigned will not offer,
sell, transfer or otherwise dispose of any Shares unless either (a) a
registration statement, or post-effective amendment thereto, covering the
Shares has been filed with the Securities and Exchange Commission pursuant to
the Securities Act of 1933, as amended (the "Act"), such sale, transfer or
other disposition is accompanied by a prospectus meeting the requirements of
Section 10 of the Act forming a part of such registration statement, or
post-effective amendment thereto, which is in effect under the Act covering
the Shares to be so sold, transferred or otherwise disposed of, and all
applicable state securities laws have been complied with, or (b) counsel
reasonably satisfactory to Creative Host Services, Inc. has rendered an
opinion in writing and addressed to Creative Host Services, Inc. that such
proposed offer, sale, transfer or other disposition of the Shares is exempt
from the provisions of Section 5 of the Act in view of the circumstances of
such proposed offer, sale, transfer or other disposition; (2) Creative Host
Services, Inc. may notify the transfer agent for the Shares that the
certificates for the Shares acquired by the undersigned are not to be
transferred unless the transfer agent receives advice from Creative Host
Services, Inc. that one or both of the conditions referred to in (1)(a) and
(1)(b) above have been satisfied; and (3) Creative Host Services, Inc. may
affix the legend set forth in Section 3.1 of this Warrant to the certificates
for the Shares hereby subscribed for, if such legend is applicable.
Dated:___________________________ Signed:______________________________
Signature guaranteed: Address:_____________________________
_____________________________
- ---------------------------------
-2-
<PAGE>
<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
February 10, 2000
Creative Host Services, Inc.
6355 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-3 (File No.___________________ ) under the Securities Act
of 1933, as amended (the "Registration Statement") of 1,835,378 shares of the
Common Stock of Creative Host Services, Inc., a California corporation (the
"Company"), no par value per share, consisting of 1,140,951 outstanding shares
of the Company's Common Stock (collectively, the "Shares"), up to 120,000 shares
of the Company's Common Stock issuable upon the exercise of 120,000 outstanding
warrants (collectively, the "Warrants") to purchase the Company's Common Stock,
and up to 574,427 shares of the Company's Common Stock issuable upon the
conversion of $1,505,000 outstanding principal amount of 12% Secured Convertible
Promissory Notes dated December 21, 1998 (collectively, the "Notes"). The shares
of the Company's Common Stock issuable upon the exercise of the Warrants and
conversion of the Notes are collectively referred to herein as the "Underlying
Shares". You have requested our opinion in connection with the registration of
the Shares and Underlying Shares covered by the Prospectus, dated February 10,
2000 (the "Prospectus"). In connection with our acting as counsel, we have
examined the laws of the State of California together with the Warrant entered
into by the Company and the Warrantholder attached as Exhibit 4.2 to the
Registration Statement and the Notes issued by the Company attached as Exhibit
4.3 to the Registration Statement, as well as the Prospectus and certain other
documents and instruments prepared on behalf of the Company as we 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.
<PAGE>
Creative Host Services, Inc.
February 10, 2000
Page Two
Based upon the foregoing, we are of the opinion that the outstanding
Shares and the Underlying Shares to be issued by the Company pursuant to the
conversion of the Notes and the exercise of the Warrants have been and will be
duly created, and have been and will be validly issued shares of the Common
Stock, no par value per share, of the Company. Upon proper exercise of the
outstanding Warrants and payment for the Underlying Shares issuable upon the
exercise of the Warrants, and upon the proper conversion of the Notes, the
Underlying Shares will be fully paid and nonassessable.
For the purposes of this opinion we are assuming the proper execution
of the Notes and Warrants and all certificates evidencing the Notes and
Warrants, 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,
Mark J. Richardson, Esq.
MJR:csc
<PAGE>
TYPE: EX-23
DESCRIPTION: EXHIBIT 23.2 CONSENT OF INDEPENDENT AUDITORS
Board of Directors
Creative Host Services, Inc.
San Diego, California
We consent to the incorporation by reference of our Independent Auditors'
Report dated March 9, 1999, on the financial statements of Creative Host
Services, Inc. for the year ended December 31, 1998, and to the reference to
us as experts, in the Registration Statement on Form S-3, filed with the
Securities and Exchange Commission on February 10, 2000.
/s/ Stonefield Josephson, Inc.
CERTIFIED PUBLIC ACCOUNTANTS
Santa Monica, California
February 9, 2000
