As filed with the Securities and Exchange Commission on January 31, 2003
Registration No.
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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)
33-0169494
(I.R.S. employer identification number)
16955 Via Del Campo, Suite 110
San Diego, California 92127
(858) 675-7711
(Address, including zip code, and telephone number,
including area code, of registrants' principal executive office)
Sayed Ali, President
Creative Host Services, Inc.
16955 Via Del Campo, Suite 110
San Diego, California 92127
(858) 675-7711
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
With copies to:
M. Richard Cutler, Esq.
Cutler Law Group
3206 West Wimbledon Drive
Augusta, Georgia 30909
(706) 737-6600
(706) 738-1966 (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
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
Common Stock issuable upon exercise
of warrants ..... 452,050 $ 1.87 $ 849,074 $ 212.27
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Totals 452,050 $ 849,074 $ 212.27
================================================ ================== ===================== =============== ================
(1) This Registration Statement covers shares of the Registrant's Common
Stock being registered for resale on behalf of ING Capital LLC for
shares issuable upon the exercise of warrants at $1.87 per share. 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) Based upon the exercise price of the warrants.
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 January 31, 2003
The information in this prospectus is not complete and may be changed. The
Selling Securityholder may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
PROSPECTUS
CREATIVE HOST SERVICES, INC.
[LOGO]
452,050 Shares Common Stock
This Prospectus covers 452,050 shares of the Common Stock, no par value (the
"Common Stock") of Creative Host Services, Inc., a California corporation
("CHST") held or which may be held upon exercise of warrants issued to ING
Capital LLC. We will not receive any of the proceeds from the sale of securities
by the Selling Securityholder but will receive proceeds upon exercise of the
warrants.
Our Common Stock is traded on the NASDAQ Small Cap Market under the symbol
"CHST." On January 28, 2003, the last reported sales price for the Common Stock
as reported on the NASDAQ Small Cap Market was $1.90 per share.
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 4.
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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 Securityholder may from time to time sell all or a portion of the
securities offered by this Prospectus in public or private transactions, in the
over-the-counter market, in block trades, through one or more underwriters on a
firm commitment or best efforts basis, 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 Securityholder may effect such
transactions by selling such securities directly to purchasers or through
underwriters, dealers or agents who may receive compensation in the form of
discounts, concessions or commissions from the Selling Securityholder and/or the
purchasers of the securities for whom they may act as agents. We will pay
substantially all of the expenses incident to the registration of the shares,
except for selling expenses.
The Selling Securityholder and any underwriters, agents or broker-dealers that
participate with the Selling Securityholder in the distribution of the common
stock may be deemed to be "underwriters" within the meaning of the Securities
Act of 1933, and any compensation received by them and any profit on the resale
of the common stock may be deemed to be underwriting commissions or discounts
under the act.
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. 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.sec.gov. 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, 2001 as filed on April 1, 2002 and as amended on
Form 10-KSB/A filed on December 31, 2002.
2. The Company's Quarterly Report on Form 10-QSB for the quarterly
period ended March 31, 2002 as filed on May 15, 2002 and as
amended on Form 10-QSB/A filed on December 31, 2002.
3. The Company's Quarterly Report on Form 10-QSB for the quarterly
period ended June 30, 2002 as filed on August 14, 2002 and as
amended on Form 10-QSB/A filed on December 31, 2002.
4. The Company's Quarterly Report on Form 10-QSB for the quarterly
period ended September 30, 2002 as filed on November 19, 2002.
5. The description of the Company's Common Stock contained in the
Company's Registration Statement on Form SB-2, Amendment No. 2,
filed on December 31, 2002.
6. The Company's Report on Form 8-K filed on January 23, 2003.
7. The Company's Report on Form 8-K filed on May 20, 2002 as amended
on Form 8-K/A filed on June 25, 2002.
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All documents filed by us pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of this Prospectus and prior to the
termination of this offering are deemed incorporated by reference in this
Prospectus and are a part of this Prospectus from the date of the filing of such
documents. See "Additional Information". Any statement contained in a document
incorporated or deemed to be incorporated in this Prospectus by reference shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained in this Prospectus or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference in this Prospectus modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
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., 16955 Via del Campo, Suite 110, San Diego,
California, 92127, telephone number (858) 675-7711.
-3-
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.
RISK OF DEFAULT ON CREDIT FACILITIES
In January 2003, we entered into a senior secured financing with ING Capital,
LLC pursuant to the terms of a credit agreement. The credit agreement provides
for a total financing commitment of $13,000,000 consisting of two separate
facilities, a term loan facility and an expansion facility. These loans are
secured by virtually all of our assets. We are required to make payments on
these financings from the cash flow of our business. We are also required to
make certain prepayments on these financings based on our annual cash flow and
in the case of certain other events. The credit agreement also has affirmative,
negative and financial covenants we must comply with. If we are unable to meet
these obligations because of declines in the cash flow from our business, our
ability to operate our business or to acquire additional concession locations
could be impaired
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. Like other concession business
operators, we must maintain our reputation 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.
The Company operated two locations in 2001 that sustained operating losses.
During 2001, the location in Asheville, North Carolina had an operating loss of
$49,300 on revenue of $299,067 and one of the Denver, Colorado locations had an
operating loss of $43,654 on revenue of $112,450. Both of these locations were
sold in the third quarter of 2001. 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. We cannot be certain 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.
Prior to our initial public offering in July 1997, we qualified as a
Disadvantaged Business Enterprise ("DBE") based on Mr. Ali's ownership of all of
our common stock. Mr. Ali serves as our Chairman and President. Our historical
success in securing concession locations may have been partially attributed to
our DBE status. The impact of the initial public offering on our status as a DBE
and the impact of any such potential loss of DBE status on our ability to secure
new concession locations is unclear. To the extent that our historic rate of
success in securing new airport concessions was partially 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.
-4-
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 our 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. Nevertheless, we cannot be certain that these airport authorities
will not exercise their contractual right to early termination of the concession
contracts in the future which could hurt our profitability.
POSSIBLE DELAY IN COMMENCEMENT OF CONCESSION OPERATIONS.
The commencement of our concession operations at any airport location is 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.
We have, in the past, experienced delays in commencing operations because of
decisions by airport authorities. One of our franchisees 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 cash flow.
DEPENDENCE ON KEY PERSONNEL AND NEED TO ATTRACT QUALIFIED MANAGEMENT.
Our success will depend largely upon our management team. Sayed Ali, our
Chairman of the Board, President and Chief Executive Officer, entered into a
five-year employment agreement which commenced as of January 1, 2000. The
employment agreement provides for an annual salary for Mr. Ali of $248,000 in
2003 and $275,000 in 2004. Mr. Ali was also entitled to be granted 60,000
additional stock options, which have been issued and are now vested. The
exercise price is 110% of the fair market value of the stock on the date of
grant and the exercise period is three years from the date of vesting. In the
event of a loss of the services of Mr. Ali, our business could be harmed because
we may not be able to obtain successor management of equivalent talent and
experience. We obtained a $2,500,000 key man life insurance policy on Mr. Ali
which we own, but the proceeds of which have been pledged as additional security
pursuant to the terms of the credit agreement with ING Capital LLC. 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. The failure to attract,
assimilate and train key personnel could harm our business.
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
us, including, but not limited to, HMS Host, 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 we have. Many of our
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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. We may not be able to successfully compete for concessions with
these businesses which may slow our profitability and growth.
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 we have not experienced difficulties in obtaining
necessary government approvals to date, the failure to obtain and retain food
licenses or any other governmental approvals could harm our 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 make those closed facilities
unprofitable. 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. We cannot be sure
the trademark office will grant 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. Should we believe that our trademarks are being infringed
upon by competitors, we may not have the financial resources necessary to
enforce or defend our trademarks and service marks.
SEASONALITY.
Historically, we have experienced seasonal variability in quarterly operating
results with higher concessions revenue in the second and third quarters than in
the first and fourth quarters. The higher concessions revenues in the second and
third quarters improve profitability by increasing revenues and reducing the
impact of fixed costs. This seasonal impact on operating results is expected to
continue.
RISKS OF DECLINE IN STOCK PRICE.
Our stock price has been volatile. The closing price of our stock has ranged
from a low of $0.97 to a high of $2.24 during 2002. The stock market in general
has been extremely vulnerable and we cannot promise that the price of our common
stock on the NASDAQ market will not decline. We may register more shares of
stock in the future, potentially increasing the supply of free trading shares
and possibly exerting downward pressure on our stock price.
CONTROL BY PRINCIPAL SHAREHOLDER.
The principal shareholder of the Company, Mr. Sayed Ali, beneficially owns
approximately 12.9% of the outstanding shares of our capital stock. 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.
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FORWARD-LOOKING STATEMENTS.
The foregoing 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, our business prospects or any other aspect of our business, 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,
acts of terrorism, price increases for supplies, inability to raise prices,
failure to obtain new concessions, the risk of litigation and administrative
proceedings involving us and our employees, higher than anticipated labor costs,
the possible fluctuation and volatility of operating results and financial
condition, failure to make planned business acquisitions, failure of new
businesses, if acquired, to be economically successful, decline in our stock
price, 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.
-7-
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the shares offered by
the Selling Securityholder. The Company will use the proceeds from the receipt
of the exercise price of the warrants for future growth and expansion.
SELLING SECURITYHOLDER
The shares of Common Stock being offered by the Selling Securityholder were
issued to them in connection with the following transactions:
On January 17, 2003, the Company closed a senior secured financing with ING
Capital, LLC ("ING") pursuant to the terms of a credit agreement. The credit
agreement provides for a total financing commitment of $13,000,000 consisting of
two separate facilities: a term loan facility and an expansion facility.
The term loan facility provides for financing in an amount up to $7,400,000 to
be used to refinance the Company's and its subsidiaries' existing debt, finance
the purchase price of acquisitions consummated prior to closing on the
financing, and lender-approved acquisitions after the financing, to finance
build- outs of the Company's concession locations and pay fees and expenses
associated with the financing and the acquisitions. The term loan facility
matures on the fifth anniversary of the financing, with quarterly principal
payments scheduled to commence on June 30, 2004 in amounts equal to percentages
of the outstanding principal amount of the term loan facility as scheduled in
the credit agreement.
The expansion facility, in an amount up to $5,600,000, may be used to finance
the cash purchase price for approved acquisitions, to finance build outs of
concessions, to provide ongoing working capital needs of the Company and to
provide a letter of credit sub-facility of $4,000,000. Availability under the
expansion facility will be reduced by outstanding letters of credit. The
expansion facility matures on the sixth anniversary of the financing with
certain amortization of principal payments required beginning the twenty first
calendar quarter following the closing of the financing.
Outstanding loans under the term loan facility will bear interest at a fixed per
annum rate set forth in the credit agreement. Outstanding loans under the
expansion facility will bear interest at the floating per annum rates of
interest set forth in the credit agreement, and outstanding letters of credit
under the expansion facility will accrue a letter of credit fee as set forth in
the credit agreement. There is also an unused fee charged on the unused amount
of the expansion facility and the term loan facility as well as certain
pre-payment and termination fees for termination or reduction of the financing
prior to the third anniversary of the closing of the financing.
-8-
There is also a requirement that the Company make certain principal prepayments
of the financing in amounts equal to certain percentages of the Company's annual
excess cash flow and the principal repayment of the financing upon the
occurrence of certain other events, all as more particularly described in the
credit agreement.
The facility is secured by perfected first security interests in, and first
mortgages on, substantially all of the assets of the Company and its
subsidiaries, existing and future. The credit agreement also contains
affirmative, negative and financial covenants, as well as events of default, all
as more particularly described in the credit agreement.
As additional compensation for the financing, the Company issued to ING 452,050
warrants to purchase 452,050 shares of its common stock, representing
approximately 4% of the fully diluted capital stock of the Company (excluding
warrants and options with exercise prices exceeding $8.00 per share). The
warrants have a ten year life with an exercise price of $1.87 per share, which
was equal to the closing price of the Company's Common Stock on the business day
immediately prior to closing the financing. Terms and conditions of the warrants
include, among others, shelf and piggyback registration rights, anti-dilution
protection and "tag-along" rights. This registration statement effectuates the
registration of the resale of the shares by ING of the shares issuable upon
exercise of the warrants.
As a condition of the financing, the Company was required to close an
acquisition transaction concurrent with the financing using proceeds from the
term loan facility to finance the purchase price for the acquisition. The
Company used $1,075,542 of the financing proceeds to acquire the assets and
concession leases of three locations at the Sanford International Airport in
Orlando Florida in satisfaction of that condition. The Company is expected to
utilize the term loan facility and expansion facility to finance additional
acquisitions in the future. As part of the financing, the Company also retired
substantially all of its existing debt (other than certain capital lease
obligations), which included its bank note and line of credit. Transaction
fees, commissions and related due diligence expenses were also paid from the
financing proceeds.
The following table sets forth certain information with respect to the Selling
Securityholder for whom we are registering securities for resale.
The Selling Securityholder may from time to time offer and sell pursuant to this
prospectus any or all of the shares, and there can be no assurance that any of
the shares offered hereby will be sold. If any shares are sold, the Selling
Securityholder will receive all of the net proceeds from the sale.
The following Selling Securityholder owns outstanding shares of Common Stock:
NUMBER OF OUTSTANDING NUMBER OF SHARES
SHARES OFFERED PERCENTAGE OF BENEFICIALLY OWNED PRIOR
NAME OF SELLING SECURITYHOLDER BY THIS PROSPECTUS OUTSTANDING SHARES (1) TO OFFERING
- - ------------------------------ --------------------- ------------------ -------------------------
ING Capital LLC 452,050 approximately 4.0% 452,050
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(1) Reflects fully-diluted shares outstanding.
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PLAN OF DISTRIBUTION
The Selling Securityholder may from time to time, in one or more
transactions, sell all or a portion of the common stock in such transactions at
prices then prevailing or related to the then current market price or at
negotiated prices. The offering price of the shares from time to time will be
determined by the Selling Securityholder and, at the time of such determination,
may be higher or lower than the market price of the shares. In connection with
an underwritten offering, underwriters or agents may receive compensation in the
form of discounts, concessions or commissions from the Selling Securityholder or
from purchasers of shares for whom they may act as agents, and underwriters may
sell shares to or through dealers, and such dealers may receive compensation in
the form of discounts, concessions or commissions from the underwriters and/or
commissions from the purchasers for whom they may act as agents. Under
agreements that may be entered into by the Company, the Selling Securityholder,
underwriters, dealers and agents who participate in the distribution of shares
may be entitled to indemnification by the Company or the Selling Securityholder
against certain liabilities, including liabilities under the Securities Act of
1933, or to contribution with respect to payments which such underwriters,
dealers or agents may be required to make in respect thereof. The shares may be
sold directly or through broker-dealers acting as principal or agent, or
pursuant to a distribution by one or more underwriters on a firm commitment or
best-efforts basis.
The Selling Securityholder, or its pledges, donees, transferees or other
successors in interest, may offer and sell shares of common stock in the
following manner:
- - on the NASDAQ Small Cap Market or other exchanges or inter-dealer quotation
systems on which the common stock is listed or traded at the time of sale;
- - in the over-the-counter market or otherwise at prices and at terms then
prevailing or at prices related to the then current market price;
- - in underwritten offerings;
- - in privately negotiated transactions;
- - in a block trade in which the broker or dealer so engaged will attempt to
sell the shares as agent, but may position and resell a portion of the
block as principal to facilitate the transaction;
- - a broker or dealer may purchase as principal and resell such shares for its
own account pursuant to this prospectus;
- - an exchange distribution in accordance with the rules of the exchange; or
- - ordinary brokerage transactions and transactions in which the broker
solicits purchasers.
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The Selling Securityholder may accept and, together with any agent of the
Selling Securityholder, reject in whole or in part any proposed purchase of the
shares of common stock offered by this prospectus.
To the extent required, we will set forth in a prospectus supplement
accompanying this prospectus, or, if appropriate, in a post-effective amendment,
the following information: (i) the amount of the shares of common stock to be
sold; (ii) purchase prices; (iii) public offering prices; (iv) the names of any
agents, dealers or underwriters; and (v) any applicable commission or discounts
with respect to a particular offer.
We have not registered or qualified the shares of common stock offered by
this prospectus under the laws of any country, other than the United States. In
certain states, the Selling Securityholder may not offer or sell their shares of
common stock unless (i) we have registered or qualified such shares for sale in
such states or (ii) we have complied with an available exemption from
registration or qualification. Also, in certain states, to comply with such
state securities laws, the Selling Securityholder can offer and sell its shares
of common stock only through registered or licensed brokers or dealers.
The Selling Securityholder 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 Securityholder
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 Securityholder 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 Securityholder except that the Selling
Securityholder is exclusively liable to pay all commissions, discounts and other
payments to broker-dealers incurred in connection with their sale of Common
Stock.
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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
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(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 Cutler Law Group, 3206 West Wimbledon Drive, Augusta, Georgia 30909.
Cutler Law Group owns 25,000 shares of the Company's Common Stock.
EXPERTS
The financial statements incorporated in this prospectus by reference for
Creative Host Services, Inc. for the fiscal years ended December 31, 2001 and
2000 have been audited by Stonefield Josephson, Inc. independent certified
public accountants, as set forth in their report appearing with the financial
statements, and have been so included in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
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No dealer, salesman or any other person
has been authorized by CHST to give any
information or to make any represent-
ations other than those contained in
this Prospectus in connection with the
offering made hereby, and if given or
made, such information or represent-
ations may not be relied upon. The
Prospectus does not constitute an offer CREATIVE HOST SERVICES, INC.
to sell or the solicitation of an offer
to buy any securities other than those [LOGO]
specifically offered hereby or an offer
to sell, or a solicitation of an offer
to buy, to any person in any juris-
diction 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............................4
USE OF PROCEEDS.........................8
SELLING SECURITYHOLDER....................8 JANUARY 31, 2003
PLAN OF DISTRIBUTION...................10
LIMITATION ON LIABILITY AND
INDEMNIFICATION OF DIRECTORS...........12
LEGAL MATTERS..........................13
EXPERTS ..............................13
======================================== =======================================
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 $ 212.27
NASDAQ Listing Fee $ 0.00
Blue Sky Fees and Expenses $ 0.00
Printing and Engraving Expenses $ 500.00
Accounting Fees and Expenses $ 1,500.00
Legal Fees and Expenses $ 8,000.00
Registerar and Transfer Agent's Fees
and Expenses $ 500.00
Miscellaneous Expenses $ 287.73
------------
Total $ 11,000.00
============
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
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 Form of Warrant Certificate
4.2 Warrant Purchase Agreement, dated as of January 17,
2003, between Creative Host Services, Inc. and ING
Capital LLC
4.3 Registration Rights Agreement, dated as of January 17,
2003, between Creative Host Services, Inc. and ING
Capital LLC
5.1 Opinion of Cutler Law Group
23.1 Consent of Cutler Law Group (contained in Exhibit 5)
23.2 Consent of Stonefield Josephson, independent accountants
24 Power of Attorney (contained on signature page)
- - ------------------
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.
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(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.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-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 January 30, 2003.
CREATIVE HOST SERVICES, INC.
By: /s/ SAYED ALI
-----------------------------------
Sayed Ali, President and
Chief Executive Officer
By: /s/ LYNETTE MCCULLOUGH
-----------------------------------
Lynette McCullough,
Chief Financial Officer
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.
January 30, , 2003 /s/ Sayed Ali
----------------------------------
Sayed Ali, Director and Chairman
January 30, 2003 /s/ Booker T. Graves
----------------------------------
Booker T. Graves, Director
January 30, 2003 /s/ John P. Donohue, Jr.
----------------------------------
John P. Donohue, Jr., Director
January 30, 2003 /s/ Charles B. Radloff
-----------------------------------
Charles B. Radloff, Director
By: /s/ John P. Donohue, Jr.
Attorney in Fact
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