THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS
(COLLECTIVELY, THE "LAWS"). THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
LAWS, OR (II) AN OPINION OF COUNSEL PROVIDED TO THE ISSUER IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER TO THE EFFECT THAT REGISTRATION IS
NOT REQUIRED UNDER THE LAWS DUE TO AN AVAILABLE EXCEPTION TO OR EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE LAWS.
DATE: JANUARY 29, 2002
U.S. $___________
CREATIVE HOST SERVICES, INC.
CONVERTIBLE PROMISSORY NOTE
DUE DECEMBER 31, 2006
FOR VALUE RECEIVED, the Company promises to pay to _______________________,
the registered holder ("Holder") hereof and its successors and assigns (the
"Holder"), the principal sum of ________________ Dollars ($___________) on
December 31, 2006 (the "Maturity Date"), and to pay interest on the principal
sum outstanding, at the rate of nine percent (9%) per annum due and payable in
quarterly installments in arrears, on March 31, June 30, September 30 and
December 31 of each year during the term of this Note, with the first such
payment to be made on December 31, 2001. Accrual of interest on the outstanding
principal amount, payable in cash or Common Stock (defined hereinafter) at the
Holder's option, shall commence on the date hereof and shall continue until
payment in full of the outstanding principal amount has been made or duly
provided for. The interest so payable will be paid to the person in whose name
this Note is registered on the records of the Company regarding registration and
transfers of the Note (the "Note Register").
The principal of, and interest on, this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts, at the address last appearing on
the Note Register of the Company as designated in writing by the Holder hereof
from time to time. The Company will pay the outstanding principal of and any and
all accrued and unpaid interest due upon this Note on the Maturity Date, less
any amounts required by law to be deducted or withheld, to the record Holder of
this Note as of the fifth business day prior to the Maturity Date and addressed
to such Holder at the last address appearing on the Note Register. The
forwarding of such funds shall constitute a payment of outstanding principal and
interest hereunder and shall satisfy and discharge the liability for principal
and interest on this Note to the extent of the sum represented by such payment
plus any amounts so deducted or withheld. Interest may be paid in Common Stock,
with the number of shares of Common Stock to be delivered in payment of such
interest determined by taking the dollar amount of interest being paid divided
by the average of the closing bid prices for the Common Stock for the twenty
(20) trading days prior to the due date of such interest.
This Note is subject to the following additional provisions:
1. Note Exchangeable. The Note is exchangeable commencing thirty
------------------
(30) days from the date hereof for an equal aggregate principal amount of Notes
of different authorized denominations, as requested by the Holder surrendering
the same, but not of denominations of less than Fifty Thousand United States
Dollars (US$50,000.00) without the Company's written consent. No service charge
will be made for such registration or transfer or exchange.
2. Withholding. The Company shall be entitled to withhold from all
-----------
payments of principal or interest pursuant to this Note any amounts required to
be withheld under the applicable provisions of the United States income tax or
other applicable laws at the time of such payments.
3. Transfer/Exchange of Note; Registered Holder; Opinion of Counsel;
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Legend. This Note has been issued subject to investment representations of the
----
original purchaser hereof and may be transferred or exchanged only in compliance
with the Securities Act of 1933, as amended (the "1933 Act") and applicable
state securities laws. Prior to due presentment for transfer of this Note, the
Company and any agent of the Company may treat the person in whose name this
Note is duly registered on the Company's Note Register as the owner hereof for
the purpose of receiving payment as herein provided and for all other purposes,
whether or not his Note be overdue, and neither the Company nor any such agent
shall be affected or bound by notice to the contrary.
The Holder understands and acknowledges by its acceptance hereof that (i)
this Note and the shares of common stock in the Company issuable upon conversion
thereof as herein provided ("Conversion Shares") have not been and are not being
registered under the 1933 Act or any state securities laws, and may not be
offered for sale, sold, assigned or transferred unless (a) subsequently
registered thereunder, or (b) the Holder shall have delivered to the Company an
opinion of counsel, reasonably satisfactory in form, substance and scope to the
Company, to the effect that the securities to be sold, assigned or transferred
may be sold, assigned or transferred pursuant to an exemption from such
registration; (ii) any sale of such securities made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any resale of such
securities under circumstances in which the seller (or the person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined in
the 1933 Act) may require compliance with some other regulation and/or exemption
under the 1933 Act or the rules and regulations of the United States Securities
and Exchange Commission (the "SEC") thereunder; and (iii) neither the Company
nor any other person is under any obligation to register such securities under
the 1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder.
Any Conversion Shares issued upon conversion of this Note, and if
applicable, any common stock of the Company issued in payment of interest as
herein provided, shall, if and only to the extent required by law, bear legends
in similar form to the legends set forth on the first page of this Note.
4. Conversion of Note into Common Stock
-----------------------------------------
The Holder of this Note is entitled, at its option, at any time after
issuance to convert all or a portion of the original principal face amount of
this Note into shares of common stock in the Company, $.001 par value per share
(defined herein as the "Common Stock"), at a conversion price (the "Conversion
Price") for each share of Common Stock equal to $1.05 per share [110% of the
average market price for the five trading days immediately preceding the closing
date].
Any conversion of this Note shall be achieved by submitting to the Company
the fully completed form of conversion notice attached hereto as Exhibit I (a
"Notice of Conversion"), executed by the Holder of this Note evidencing such
Holder's intention to convert this Note or the specified portion (as herein
provided) hereof. A Notice of Conversion may be submitted via facsimile to the
Company at the telecopier number for the Company provided in the subscription
agreement (or at such other number as requested in advance of such conversion in
writing by the Company), and if so submitted the original Notice of Conversion
shall be delivered to the Company within three (3) business days thereafter. The
Company and the Holder shall each keep records with respect to the portion of
this Note then being converted and all portions previously converted; upon
receipt by the Holder of the requisite Conversion Shares, the outstanding
principal amount of the Note shall be reduced by the amount specified in the
Notice of Conversion resulting in such Conversion Shares. The Company may from
time to time, but is not required to, instruct the Holder and the Holder shall
surrender this Note along with the Notice of Conversion for the purposes of
making a notation thereon as to the amount of principal being converted, or of
canceling this Note and issuing a new Note in the same form with the principal
amount of such Note reduced by the amount converted. Such new or notated Note
shall be delivered to the Holder within three (3) business days after such
Holder's surrender to the Company. No fractional shares or scrip representing
fractions of shares will be issued on conversion, but the number of shares
issuable shall be rounded to the nearest whole share. Accrued interest on the
converted portion of the Note shall be payable upon conversion thereof, in cash
or Common Stock at the Conversion Price, at the Company's option. The date on
which a notice of conversion is given (the "Conversion Date") shall be deemed to
be either the date on which the Company receives from the Holder an original
Notice of Conversion duly executed, or, if earlier, the date set forth in such
Notice of Conversion if the original Notice of Conversion is received by the
Company within three (3) business days thereafter.
In all cases, the Company shall deliver the Conversion Shares to the Holder
within three (3) business days after the Conversion Date with respect to such
Conversion Shares being delivered, and at the address specified in the Notice of
Conversion.
5. Sales Restrictions upon Conversion. The Conversion Shares issuable
-----------------------------------
upon conversion of this Note may not be resold by the holder for a period of six
months from conversion. All such Conversion Shares shall contain the following
legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS
(COLLECTIVELY, THE "LAWS"). THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
LAWS, OR (II) AN OPINION OF COUNSEL PROVIDED TO THE ISSUER IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER TO THE EFFECT THAT REGISTRATION IS
NOT REQUIRED UNDER THE LAWS DUE TO AN AVAILABLE EXCEPTION TO OR EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE LAWS. THE SECURITIES REPRESENTED HEREBY
ARE SUBJECT TO AN AGREEMENT WITH THE COMPANY THAT THEY MAY NOT BE RESOLD,
PLEDGED, HYPOTHECATED OR OTHERWISE ENCUMBERED FOR A PERIOD OF SIX MONTHS FROM
THE DATE OF CONVERSION. A COPY OF THIS RESTRICTION AGREEMENT IS AVAILABLE FROM
THE COMPANY..
6. Obligations of the Company Herein are Unconditional. No
---------------------------------------------------------
provision of this Note shall alter or impair the obligation of the Company,
which obligation is absolute and unconditional, to repay the principal amount of
this Note at the time, place, rate, and in the coin currency, hereinabove
stated. This Note and all other Notes now or hereafter issued in replacement of
this Note on the same or similar terms are direct obligations of the Company.
This Note ranks at least equally with all other Notes now or hereafter issued
under the terms set forth herein. The Conversion Price and number of shares of
Common Stock issuable upon conversion shall be subject to adjustment from time
to time as provided in Section 6 below.
7. Adjustments.
-----------
(a) In the event the Company should at any time or from time to time,
after the date of this Note, fix a record date for the effectuation of a split
or subdivision of the outstanding shares of Common Stock or the determination of
holders of Common Stock entitled to receive a dividend or other distribution
payable in additional shares of Common Stock (equal to at least ten percent
(10%) or more of the Company's then issued and outstanding shares of Common
Stock) or other securities or rights convertible into, or entitling the holder
thereof to receive directly or indirectly additional shares of Common Stock
(hereinafter referred to as "Common Stock Equivalents") without payment of any
consideration by such holder for the additional shares of Common Stock or the
Common Stock Equivalents (including the additional shares of Common Stock
issuable upon conversion or exercise thereof), then, as of such record date (or
the date of such dividend, distribution, split or subdivision if no record date
is fixed), the Conversion Price shall be appropriately decreased so that the
number of shares of Common Stock issuable on conversion of this Note shall be
increased in proportion to such increase in the aggregate number of shares of
Common Stock outstanding and those issuable with respect to such Common Stock
Equivalents.
(b) If the number of shares of Common Stock outstanding at any time
after the date of this Note is decreased by a combination of the outstanding
shares of Common Stock, then, following the record date of such combination, the
Conversion Price shall be appropriately increased so that the number of shares
of Common Stock issuable upon conversion of this Note shall be decreased in
proportion to such decrease in outstanding shares.
(c) In the event the Company, at any time while all or any portion of
this Note is outstanding, shall be consolidated with or merged into any other
corporation or corporations or shall sell or lease all or substantially all of
its property and business as an entirety, then lawful provisions shall be made
as part of the terms of such consolidation, merger, sale or lease so that the
holder of this Note may thereafter receive in lieu of such Common Stock
otherwise issuable to such holder upon conversion of this Note, but at the
conversion rate which would otherwise be in effect at the time of conversion, as
hereinbefore provided, the same kind and amount of securities or assets as may
be issuable, distributable or payable upon such consolidation, merger, sale or
lease with respect to Common Stock of the Company.
8. Reservation of Shares. The Company shall at all times reserve
-----------------------
and keep available out of its authorized but unissued shares of Common Stock,
solely for the purpose of effecting the conversion of this Note, such number of
its shares of Common Stock as shall from time to time be sufficient to effect
the conversion of all of the outstanding principal amount, and if at any time
the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of this Note, in addition to such other
remedies as shall be available to Holder, the Company will take such corporate
action as may, in the opinion of its counsel, be necessary to increase the
number of authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes, including without limitation,
using its best efforts to obtain the requisite stockholder approval necessary to
increase the number of authorized shares of the Company's Common Stock.
9. Note Holder Not Deemed a Stockholder. No Holder, as such, of
----------------------------------------
this Note shall be entitled (prior to conversion of this Note into Common Stock,
and only then to the extent of such conversion) to vote or receive dividends or
be deemed the holder of shares of the Company for any purpose, nor shall
anything contained in this Note be construed to confer upon the Holder hereof,
as such, any of the rights of a stockholder of the Company or any right to vote,
give or withhold consent to any corporate action (whether any reorganization,
issue of stock, reclassification of stock, consolidation, merger, conveyance or
otherwise), receive notice of meetings, receive dividends or subscription
rights, or otherwise, prior to the issuance to the holder of this Note of the
Conversion Shares which he or she is then entitled to receive upon the due
conversion of all or a portion of this Note. Notwithstanding the foregoing, the
Company will provide the Holder with copies of the same notices and other
information given to the stockholders of the Company generally,
contemporaneously with the giving thereof to the stockholders.
10. No Limitation on Corporate Action. No provisions of this Note
-----------------------------------
and no right or option granted or conferred hereunder shall in any way limit,
affect or abridge the exercise by the Company of any of its corporate rights or
powers to recapitalize, amend its Certificate of Incorporation, reorganize,
consolidate or merge with or into another corporation, or to transfer all or any
part of its property or assets, or the exercise of any other of its corporate
rights and powers.
11. Representations of Holder. Upon conversion of all or a portion
--------------------------
of this Note, the Holder shall confirm in writing, in a form reasonably
satisfactory to the Company, that the Conversion Shares so purchased are being
acquired solely for the Holder's own account and not as a nominee for any other
party, and that such Holder is an Accredited Investor (as defined in Rule 501(a)
of Regulation D promulgated under the 1933 Act). The Company acknowledges that
Holder's duly executed certification on the Notice of Conversion is satisfactory
confirmation of the facts set forth in the immediately preceding sentence. If
such Holder cannot make such representations because they would be factually
incorrect, it shall be a condition to such Holder's conversion of all or a
portion of the Note that the Company receive such other representations as the
Company considers reasonably necessary to assure the Company that the issuance
of its securities upon conversion of the Note shall not violate any United
States or state securities laws.
12. Waiver of Demand, Presentment, Etc. The Company hereby expressly
------------------------------------
waives demand and presentment for payment, notice of nonpayment, protest, notice
of protest, notice of dishonor, notice of acceleration or intent to accelerate,
bringing of suit and diligence in taking any action to collect amounts called
for hereunder and shall be directly and primarily liable for the payment of all
sums owing and to be owing hereunder, regardless of and without any notice,
diligence, act or omission as or with respect to the collection of any amount
called for hereunder.
13. Attorney's Fees. The Company agrees to pay all costs and
----------------
expenses, including without limitation reasonable attorney's fees, which may be
incurred by the Holder in collecting any amount due under this Note or in
enforcing any of Holder's conversion rights as described herein.
14. Default. If one or more of the following described "Events of
-------
Default" shall occur:
(a) The Company shall continue in default in the payment of principal
or interest on this Note for a period of ten (10) days after a notice of default
is received by the Company with respect to any such payment, or the Company
shall not timely honor any Notice of Conversion as specified herein; or
(b) Any of the representations or warranties made by the Company herein
or in any certificate or financial or other written statement heretofore or
hereafter furnished by or on behalf of the Company in connection with the
execution and delivery of this Note shall be false or misleading in any material
respect at the time made and the Holder shall have provided seven (7) days prior
written notice to the Company of the alleged misrepresentation or breach of
warranty and the same shall continue uncured for a period of seven (7) days
after such written notice from the Holder; or
(c) The Company shall fail to perform or observe, in any material
respect, any other covenant, term, provision, condition, agreement or obligation
of the Company under this Note and such failure shall continue uncured for a
period of seven (7) days after written notice from the Holder of such failure;
or
(d) The Company shall either: (i) become insolvent; (ii) admit in
writing its inability to pay its debts generally or as they become due; (iii)
make an assignment for the benefit of creditors or commence proceedings for its
dissolution; or (iv) apply for, or consent to the appointment of, a trustee,
liquidator, or receiver for its or for a substantial part of its property or
business; or
(e) A trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or business without the
Company's consent and such appointment is not discharged within sixty (60) days
after such appointment; or
(f) Any governmental agency or any court of competent jurisdiction at
the instance of any governmental agency shall assume custody or control of the
whole or any substantial portion of the properties or assets of the Company and
shall not be dismissed within sixty (60) days thereafter; or
(g) Any money judgment, writ or Note of attachment, or similar process
in excess of Five Hundred Thousand United States Dollars (US $500,000.00) in the
aggregate shall be entered or filed against the Company or any of its properties
or assets and shall remain unpaid, unvacated, unbonded or unstayed for a period
of fifteen (15) days or in any event later than five (5) days prior to the date
of any proposed sale thereunder; or
(h) Bankruptcy, reorganization, insolvency or liquidation proceedings
or other proceedings for relief under any bankruptcy law or any law for the
relief of debtors shall be instituted by or against the Company and, if
instituted against the Company, shall not be dismissed within sixty days after
such institution or the Company shall by any action or answer approve of,
consent to, or acquiesce in any such proceedings or admit the material
allegations of, or default in answering a petition filed in, any such
proceeding; or
(i) The Company shall have its Common Stock delisted from the Nasdaq
Small Cap Market or suspended from trading thereon, and shall not have its
Common Stock relisted on the same or another national securities exchange, or
have such suspension lifted, as the case may be, within ninety days after such
delisting or suspension; or
(j) The Company shall have received a notice of default on the payment
of any debt(s) aggregating in excess of Five Hundred Thousand United States
Dollars (US $500,000.00) beyond any applicable grace period;
then, or at any time thereafter, and in any and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
in one instance shall not be deemed to be a waiver in another instance or for
any other prior or subsequent Event of Default) at the option of the Holder and
in the Holder's sole discretion, the Holder may immediately accelerate the
maturity hereof, whereupon all principal and interest hereunder shall be
immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived by the Company, anything
herein or in any Note or other instrument contained to the contrary
notwithstanding, and the Holder may immediately, and upon the expiration of any
period of grace, enforce any and all of the Holder's rights and remedies
provided herein or any other rights or remedies afforded by law or equity.
15. Enforceability. In case any provision of this Note is held
--------------
by a court of competent jurisdiction to be excessive in scope or otherwise
invalid or unenforceable, such provision shall be adjusted rather than voided,
if possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Note will not in
any way be affected or impaired thereby.
16. Entire Agreement. This Note and Exhibit I attached hereto and
-----------------
the Subscription Document constitute the full and entire understanding between
the Company and the Holder with respect to the subject matter hereof and
thereof. Neither this Note nor any term hereof may be amended, waived,
discharged or terminated other than by a written instrument signed by the
Company and the Holder.
17. Governing Law. This Note shall be governed by and construed in
--------------
accordance with the laws of the state of California without giving effect to
applicable principles of conflict of law.
18. Headings. Headings in this Note are for convenience only, and
--------
shall not be used in the construction of this Note.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized, all as of the date first
hereinabove written.
CREATIVE HOST SERVICES, INC.
By: /s/
Sayed Ali, President
EXHIBIT I
NOTICE OF CONVERSION
(To Be Executed by the Registered Holder in Order to Convert the Note)
The Undersigned hereby irrevocably elects to convert $ of the Convertible
Note Due December 31, 2006 into shares of Common Stock of Creative Host
Services, Inc. (the "Company"), according to the terms and conditions set forth
in such Note, as of the date written below. If securities are to be issued to a
person other than the Undersigned, the Undersigned agrees to pay all applicable
transfer taxes with respect thereto.
The Undersigned represents that it, as of this date, is an "accredited
investor" as such term is defined in Rule 501(a) of Regulation D promulgated by
the SEC under the 1933 Act.
The Undersigned also represents that the Conversion Shares are being
acquired for the Holder's own account and not as a nominee for any other party.
The Undersigned represents and warrants that all offers and sales by the
Undersigned of the Conversion Shares shall be made pursuant to registration of
the same under the 1933 Act, or pursuant to an exemption from registration under
the 1933 Act. The Undersigned acknowledges that the Conversion Shares shall if
(and only if) required by law contain the legend contained on page 1 of the
Note.
Conversion Date:*
Conversion Price: $_____ per share____
Holder (Print True Legal Name):
(Signature of Duly Authorized Representative of Holder)
Address of Holder:
* This original Notice of Conversion must be received by the Company by the
third business day following the Conversion Date.
By:_____________________________________________
Sayed Ali, President