-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JyIUu0GZwDmdxuQ9A4X+a//dmzTVTgdykIfr1ocg/19WPBFyGy8jbHDVaPTLyzLx v4eJznQNFaJhzP1t2A4/NQ== 0001074140-03-000002.txt : 20030131 0001074140-03-000002.hdr.sgml : 20030131 20030131133831 ACCESSION NUMBER: 0001074140-03-000002 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20030131 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CREATIVE HOST SERVICES INC CENTRAL INDEX KEY: 0000933098 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 330169494 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-102869 FILM NUMBER: 03534076 BUSINESS ADDRESS: STREET 1: 16955 VIA DEL CAMPO STREET 2: SUITE 110 CITY: SAN DIEGO STATE: CA ZIP: 92127 BUSINESS PHONE: 8586757711 MAIL ADDRESS: STREET 1: 16955 VIA DEL CAMPO STREET 2: SUITE 110 CITY: SAN DIEGO STATE: CA ZIP: 92127 FORMER COMPANY: FORMER CONFORMED NAME: ST CLAIR DEVELOPMENT CORP DATE OF NAME CHANGE: 19970319 S-3 1 doc1.txt As filed with the Securities and Exchange Commission on January 31, 2003 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) 33-0169494 (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 - ------------------------------------------------ ================== ===================== =============== ================ 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. ------------------------- 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. -2- 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 -5- 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. -6- 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
- ---------- (1) Reflects fully-diluted shares outstanding. -9- 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. -10- 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. -11- 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 -12- (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. -13- 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. II-2 (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 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 II-4 EX-4.1 3 doc2.txt WARRANT CERTIFICATE ------------------- THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. SAID SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION, OR AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL TO THE HOLDER) AS TO AN EXEMPTION, FROM THE REGISTRATION PROVISIONS OF SAID ACT OR LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF A WARRANT PURCHASE AGREEMENT, DATED AS OF JANUARY 17, 2003, BETWEEN CREATIVE HOST SERVICES, INC. (THE "COMPANY") AND ING CAPITAL LLC (THE "PURCHASER") AND A REGISTRATION RIGHTS AGREEMENT, DATED AS OF JANUARY 17, 2003, BETWEEN THE COMPANY AND THE PURCHASER, COPIES OF EACH OF WHICH ARE ON FILE AT THE MAIN OFFICE OF THE COMPANY. ANY SALE OR TRANSFER OF THE SECURITIES EVIDENCED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS OF THOSE AGREEMENTS AND ANY SALE OR TRANSFER OF SUCH SECURITIES IN VIOLATION OF SAID AGREEMENTS SHALL BE INVALID. Certificate No. ING #1 452,050 Warrants Warrant Certificate CREATIVE HOST SERVICES, INC. This Warrant Certificate certifies that ING Capital LLC, or registered assigns, is the registered holder of the number of Warrants (the "Warrants") set forth above to purchase shares of common stock, no par value per share (the "Common Stock"), of CREATIVE HOST SERVICES, INC., a California corporation (the "Company"). Each Warrant entitles the holder upon exercise to receive from the Company one fully paid and nonassessable share of Common Stock (a "Warrant Share") at the initial exercise price (the "Exercise Price") of $1.87, payable in lawful money of the United States of America, upon surrender of this Warrant Certificate and payment of the Exercise Price, if applicable, at the office of the Company designated for such purpose, subject to the conditions set forth herein and in the Warrant Agreement referenced below. The Exercise Price and number and type of Warrant Shares issuable upon exercise of the Warrants are subject to adjustment before and after issue upon the occurrence of certain events, as set forth in the Warrant Agreement. Each Warrant also entitles the holder to convert such Warrant into the number of Warrant Shares determined in accordance with Section 11(b) of the Warrant Agreement. The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants, and are issued or to be issued pursuant to a Warrant Purchase Agreement dated as of January 17, 2003 (the "Warrant Agreement"), duly executed and delivered by the Company and ING Capital LLC ("ING"), which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, obligations and duties hereunder of the Company and the holders of the Warrants (the words "holders" or "holder" meaning the registered holders or registered holder). A copy of the Warrant Agreement may be obtained by the holder hereof upon written request to the Company. The holder of Warrants evidenced by this Warrant Certificate may exercise such Warrants under and pursuant to the terms and conditions of the Warrant Agreement by surrendering this Warrant Certificate, with the form of election to purchase attached hereto (and by this reference made a part hereof) properly completed and executed, together with payment of the Exercise Price in cash at the office of the Company designated for such purpose. In the event that any exercise of Warrants evidenced hereby shall be for less than the total number of Warrants evidenced hereby, there shall be issued by the Company to the holder hereof or such holder's registered assignee a new Warrant Certificate evidencing the number of Warrants not exercised. The Warrant Agreement provides that upon the occurrence of certain events the Exercise Price set forth on the face hereof may, subject to certain conditions, be adjusted. If the Exercise Price is adjusted, the Warrant Agreement provides that the number of shares of Warrant Shares issuable upon the exercise of each Warrant shall be adjusted. No fractional shares of Warrant Shares will be issued upon the exercise of any Warrant, but the Company will pay the cash value thereof determined as provided in the Warrant Agreement. The holders of the Warrants are entitled to certain registration rights as set forth in a Registration Rights Agreement dated as of January 17, 2003, among the Company and ING (the "Registration Rights Agreement"). By acceptance of this Warrant Certificate, the holder hereof agrees that upon exercise of any or all of the Warrants evidenced hereby, such holder will be bound by the Registration Rights Agreement. A copy of the Registration Rights Agreement may be obtained by the holder hereof upon written request to the Company. Warrant Certificates, when surrendered at the office of the Company by the registered holder thereof in person or by legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, for another Warrant Certificate or Warrant Certificates of like tenor evidencing in the aggregate a like number of Warrants. The Company may deem and treat the registered holder(s) thereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing made hereon) for the purpose of any exercise hereof, of any distribution to the holder(s) hereof and for all other purposes, and the Company shall not be affected by any notice to the contrary. Neither the Warrants nor this Warrant Certificate entitles any holder hereof to any rights of a stockholder of the Company. IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be signed by its duly authorized officer and has caused its corporate seal to be affixed hereunto or imprinted hereon. Dated: January 17, 2003 CREATIVE HOST SERVICES, INC. By: /s/ Sayed Ali ---------------- Name: Sayed Ali Title: President [CORPORATE SEAL] EX-4.2 4 doc3.txt WARRANT PURCHASE AGREEMENT BETWEEN CREATIVE HOST SERVICES, INC. AND ING CAPITAL LLC Dated as of January 17, 2003 TABLE OF CONTENTS ----------------- Page ---- RECITALS: 1 SECTION 1. Definitions 1 SECTION 2. Purchase and Sale of Warrants; Closing 7 SECTION 3. Investment Representations 7 SECTION 4. Conditions Precedent 7 SECTION 5. Warranties, etc. 9 (a) Credit Agreement Warranties 9 (b) Power, Authority, etc. 9 (c) Due Authorization 9 (d) Validity, etc. 9 (e) Capitalization and Ownership of the Company 9 (f) Authorization and Issuance of Warrants 10 (g) Securities Laws 10 (h) No Integration of Issue 10 SECTION 6. Covenants 10 (a) Financial and Business Information 11 (b) Information 11 (c) Maintenance of Corporate Existence, etc. 12 (d) Maintenance of Books and Records 12 (e) Inconsistent Agreements 12 (f) Organic Documents 12 (g) Transactions with Affiliates 12 (h) Issuance of Additional Rights, Options and Warrants 13 (i) Antitakeover Statutes 13 (j) Governmental Approvals 13 (k) Cash Distributions and Dividends 13 SECTION 7. Warrant Certificates 13 SECTION 8. Execution of Warrant Certificates 13 SECTION 9. Registration 14 SECTION 10. Registration of Transfers and Exchanges 14 SECTION 11. Exercise of Warrants; Conversion of Warrants 17 SECTION 12. Payment of Taxes 18 SECTION 13. Mutilated or Missing Warrant Certificates 18 SECTION 14. Reservation of Warrant Shares. 18 SECTION 15. Adjustment of Exercise Price and Number of Warrant Shares Issuable 19 (b) Adjustment for Common Stock Issues 19 (c) Adjustment for Convertible Securities Issues 20 (d) Adjustment for Right, Option and Warrant Issues 21 (e) Consideration Received 22 (f) Reorganization of the Company. 23 (g) Adjustment in Number of Shares. 24 (h) Special Adjustment in Respect of Exercise of Eight-Dollar Option Securities. 24 SECTION 16. Determination of Fair Market Value per Share 25 SECTION 17. Fractional Interests 25 SECTION 18. Notice to Warrant Holders 26 SECTION 19. Tag-Along Rights; Limitation on Put Rights 27 SECTION 20. Notices 28 SECTION 21. Costs and Expenses 29 SECTION 22. Indemnification 29 SECTION 23. Successors 30 SECTION 24. Termination 30 SECTION 25. Governing Law 30 SECTION 26. Benefits of this Agreement 31 SECTION 27. Counterparts 31 SECTION 28. Amendments; Waiver 31 SECTION 29. Waiver of Jury Trial 31 SECTION 30. Jurisdiction 31 SECTION 31. Specific Performance 32 SECTION 32. Confidentiality 32 SECTION 33. Entire Agreement 33 SECTION 34. Severability 33 WARRANT PURCHASE AGREEMENT -------------------------- THIS WARRANT PURCHASE AGREEMENT (this "Agreement") is made and entered into as of January 17, 2003 by and between CREATIVE HOST SERVICES, INC., a California corporation (the "Company"), and ING CAPITAL LLC, a Delaware limited liability company (the "Purchaser"). W I T N E S S E T H: ------------------- RECITALS: - -------- A. Simultaneously herewith, Purchaser is entering into a Credit Agreement, dated of even date herewith, by and among Company, Purchaser as lender (Purchaser and any subsequent lender under the Credit Agreement, a "Lender" and collectively the "Lenders"), and Purchaser as agent for the Lenders, pursuant to which Purchaser has agreed, upon the terms and subject to the conditions set forth therein, to make Loans from time to time to the Borrower and to cause the issuance of Letters of Credit from time to time for the account of the Borrower and its Subsidiaries; B. It is a condition precedent to the making of the initial Loans by Purchaser pursuant to the Credit Agreement and the issuance of the initial Letters of Credit that the Company agree to issue to the Purchaser warrants initially exercisable for 452,050 shares of common stock, no par value, of the Company for an initial exercise price of $1.87 per share; and C. The Purchaser and the Company desire to set forth in this Agreement the terms and provisions of such warrants and the conditions to the issuance and sale of such warrants to the Purchaser; NOW, THEREFORE, in consideration of the premises and the agreements herein set forth and to induce Purchaser to proceed with the transactions contemplated by the Credit Agreement, the parties hereto, intending to be legally bound, hereby agree as follows SECTION 1. Definitions. Capitalized terms appearing herein and not otherwise defined herein shall have the meanings ascribed thereto in the Credit Agreement (irrespective of whether the Credit Agreement is in effect or has been terminated). The following terms (whether or not underscored) when used in this Agreement, including its preamble and recitals, shall, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof): "Affiliate" of any Person means any other Person which, directly or indirectly, controls or is controlled by or under common control with such Person (excluding any trustee under, or any committee with responsibility for administering, any Plan). A Person shall be deemed to be "controlled by" any other Person if such other Person possesses, directly or indirectly, power: (i) to vote 5% or more of the securities having ordinary voting power for the election of directors of such Person; or (ii) to direct or cause the direction of the management or policies of such Person whether by contract or otherwise; provided that no Lender shall be deemed to constitute an Affiliate of the Company solely by virtue of holding Warrants or Warrant Shares. "Agreement" means this Warrant Purchase Agreement as in effect on the date hereof and as hereafter amended, supplemented, restated or otherwise modified. "Business Day" means any day which is neither a Saturday, a Sunday nor a legal holiday on which banks are authorized or required to be closed in New York, New York. "Change in Control" shall have the meaning set forth in the Credit Agreement. "Closing" means the closing of the sale and purchase of the Warrants as contemplated hereby. "Closing Date" means January 17, 2003, the date of the Closing. "Common Stock" means shares now or hereafter authorized of any class of common stock of the Company and any other capital stock of the Company, however designated, that has the right (subject to any prior rights of any class or series of preferred stock) to participate in any distribution of the assets upon voluntary or involuntary liquidation, dissolution or winding up of the Company or in the earnings of the Company without limit as to per share amount, and shall include, without limitation, the presently authorized 20,000,000 shares of Common Stock, no par value per share. "Company" is defined in the Preamble. "Conversion Right" is defined in Section 11(b). "Convertible Securities" is defined in Section 15(c). "Credit Agreement" means the Credit Agreement, dated as of even date herewith, by and among the Company, Purchaser and any other Lenders, and Purchaser as agent for the Lenders, as in effect on the date hereof and hereafter amended, supplemented, restated or otherwise modified. "Eight-Dollar Option Securities" means Option Securities issued by the Company and outstanding on the Closing Date having an exercise price equal to or greater than $8.00 per share of Common Stock. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. "Excluded Shares" means (i) shares of Common Stock to be issued upon exercise or conversion of the Warrants and (ii) shares of Common Stock issuable upon exercise or conversion of any Eight-Dollar Option Securities. "Exercise Price" means $1.87 per share of Common Stock issuable upon exercise of the Warrants, as adjusted from time to time in accordance with this Agreement. "Fair Market Value per Share" means the fair market value of a share of Common Stock of the Company, and shall be equal to (A) as long as the Company constitutes a Public Company and shares of Common Stock are traded on a national securities exchange or quoted in a national inter-dealer quotation system, the Quoted Price for Common Stock on the trading day immediately preceding the date of determination and (B) otherwise the quotient of (x) the fair market value of the Company and its Subsidiaries taken as a whole on the date of determination, taking into account all the factors relevant thereto, including, without limitation, the highest of the prices that could be obtained from an arms'-length sale without time constraints of (1) all or substantially all of the assets of the Company and the Subsidiaries subject to or after satisfaction of all liabilities of the Company and the Subsidiaries or (2) all of the Fully Diluted Shares, whether by stock sale, merger, consolidation or otherwise, divided by (y) the number of Fully Diluted Shares on the date of determination. In no event shall the Fair Market Value per Share be reduced or discounted on the basis that any securities to be valued on the basis of such Fair Market Value per Share may represent the right to acquire a minority interest in the Company or may not be freely transferable under federal or state securities laws, or for any other reason. The Fair Market Value per Share shall be determined as provided in Section 16. "Fully Diluted Shares" means, as of any date of determination, the number of shares of Common Stock of the Company equal to the sum of (i) the number of shares of Common Stock outstanding on such date of determination, plus (ii) the number of Warrant Shares receivable upon conversion of all outstanding Warrants as of such date of determination pursuant to Section 11(b), plus (iii) the number of shares of Common Stock that would be issued in respect of all Option Securities and Convertible Securities of the Company (other than Eight-Dollar Option Securities) outstanding and immediately exercisable or convertible as of such date of determination if such Option Securities or Convertible Securities were to be converted into shares of Common Stock in accordance with the following formula: X = Y (A - B) ------------ A where: X = the number of shares to be issued to the holders of such Option Securities or Convertible Securities; Y = the number of shares for which such Option Securities or Convertible Securities are exercisable or convertible; A = the Fair Market Value per Share as of the date of determination; and B = the exercise or conversion price for such Option Securities or Convertible Securities; provided, however, that the term "Fully Diluted Shares" as used in the definition of Fair Market Value per Share shall mean the number of issued and outstanding shares of Common Stock plus the number of Warrant Shares purchasable and receivable upon exercise of the rights represented by the Warrant Certificates pursuant to Section 11(a). "Fiscal Quarter" means any quarter of a Fiscal Year. "Fiscal Year" means each twelve-month accounting period of the Company ending December 31 of any calendar year. "GAAP" means generally accepted accounting principles in effect from time to time in the United States. "Governmental Authority" means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Holders" means, collectively, Purchaser and any subsequent registered holders, from time to time, of Warrant Securities. "Indemnified Liabilities" is defined in Section 22. "Indemnified Parties" is defined in Section 22. "Lien" shall have the meaning set forth in the Credit Agreement. "Lender" is defined in Recital A. "Obligations" means all obligations of the Company with respect to the repayment or performance of any obligations (monetary or otherwise) of the Company arising under or in connection with the Credit Agreement or the other "Loan Documents" (as such term is defined in the Credit Agreement) and the Warrant Documents. "Offer" is defined in Section 19(a). "Offer Notice" is defined in Section 19(a). "Option Securities" is defined in Section 15(d). "Organic Document" means, relative to any Person, its articles or certificate of incorporation or organization or certificate of limited partnership or organization, its bylaws, partnership or operating agreement or other organizational documents, and all stockholders agreements, voting trusts and similar arrangements applicable to any of its Stock or partnership interests or other ownership interests, in each case, as amended. "Person" means any natural person, corporation, partnership, limited liability company, firm, association, government, governmental agency or any other entity, whether acting in an individual, fiduciary or other capacity. "Preferred Stock" means shares hereafter authorized of any class of capital stock of the Company other than Common Stock. "Prospective Purchaser" shall have the meaning set forth in Section 19(a). "Public Company" means a company (i) which is subject to the reporting requirements of Section 15(d) of the Exchange Act, or (ii) any of whose securities are registered pursuant to Section 12(b) or 12(g) of the Exchange Act. "Purchaser" is defined in the Preamble. "Quoted Price" of Common Stock for each day means the last reported sales price of Common Stock on such day as reported by NASDAQ or NASDAQ Small Cap or, if Common Stock is listed on a national securities exchange, the last reported sales price of Common Stock on such exchange (which shall be consolidated trading if applicable to such exchange) on such day, or if not so reported or listed, the average of the last reported bid and ask prices of Common Stock on such day, in each case as appropriately adjusted for any stock splits or reverse stock splits occurring after the Closing Date. "Registration Rights Agreement" means the Registration Rights Agreement, dated of even date herewith, between the Company and the Purchaser, as in effect on the date hereof and as hereafter amended, supplemented, restated or otherwise modified. "Regulatory Approval" means each and every approval, consent, filing and registration by or with any federal, state or other regulatory authority (domestic or foreign) necessary to authorize or permit the execution, delivery or performance of this Agreement or any other Warrant Document, for the validity or enforceability hereof or thereof or for the consummation of the transactions contemplated hereby or thereby. "Required Holders" means Holders holding at least 66-2/3% of the Warrant Securities outstanding (treating all Warrants as fully exercised for the Warrant Shares to which Holders would be entitled upon exercise of such Warrants) or, if any matter affects the interest of less than all of the Holders, then Holders holding at least 66-2/3% of the Warrant Securities so affected, as the context may require. "SEC" means the United States Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended from time to time. "Securities Legend" is defined in Section 10(d). "Stock" means any capital stock of the Company. "Subsidiary" of any corporation means any other corporation, partnership or limited liability company of which greater than 50% of the outstanding shares of Stock or other ownership interests having ordinary voting power for the election of directors (or others serving equivalent functions) is owned directly or indirectly by such corporation. Except as otherwise indicated herein, references to Subsidiaries shall refer to Subsidiaries of the Company. "Substitute Securities" is defined in Section 15(f). "Transfer Agent" is defined in Section 14. "Warrant Certificates" means the certificates evidencing the Warrants in the form of Exhibit A. "WarrantDocuments" means, collectively, this Agreement, the Warrants, the Registration Rights Agreement and any other document, instrument or agreement executed or delivered in connection with any of the foregoing to which the Company is a party, but excluding the Credit Agreement and the other "Loan Documents" (as such term is defined in the Credit Agreement). "Warrant Securities" means, collectively, the Warrants and Warrant Shares. "Warrant Shares" means the securities which a Holder may acquire upon exercise or conversion of a Warrant, together with any other securities which such Holder may acquire on account of any such Warrant Shares whether upon the making or paying of any dividend or other distribution on Common Stock, upon any split-up of such Common Stock, upon a recapitalization, merger, consolidation, share exchange, reorganization or other transaction or series of related transactions in which shares of Common Stock are changed into or exchanged for securities of another corporation, upon exercise of any preemptive right (or the exercise or conversion of any security which such Holder may acquire in connection with the exercise of any preemptive right) with respect to any such Common Stock or otherwise. "Warrants" is defined in Section 2. (b) Terms Defined in Credit Agreement. Capitalized terms appearing herein and not otherwise defined herein shall have the meanings ascribed thereto in the Credit Agreement (irrespective of whether the Credit Agreement is in effect or has been terminated). (c) Cross-References. Unless otherwise specified, references in this Agreement to any Article or Section are references to such Article or Section of this Agreement, and unless otherwise specified, references in any Article, Section or definition to any clause or subsection are references to such clause or subsection of such Section, Article or definition. SECTION 2. Purchase and Sale of Warrants; Closing. Subject to the funding of the Loans by Purchaser pursuant to the Credit Agreement, the Company hereby agrees to sell to the Purchaser and, subject to the provisions of Section 4, the Purchaser hereby agrees to purchase from the Company, for an aggregate purchase price of $1.00 and other good and valuable consideration, all of which shall be deemed to have been received by the Company upon the funding of the initial Loans under the Credit Agreement, warrants to purchase 452,050 shares of Common Stock of the Company for an initial exercise price of $1.87 per share (together with any warrants issued in substitution or replacement therefore, the "Warrants"). The sale and purchase of the Warrants shall take place at the Closing at the offices of King & Spalding, 1185 Avenue of the Americas, New York, NY 10036, at 10:00 a.m. on January 17, 2003, or such other place and time as may be agreed upon by the Purchaser and the Company. At the Closing, the Company will deliver to the Purchaser, upon payment therefor, Warrant Certificates in the form of Exhibit A evidencing the Warrants to be purchased by the Purchaser in such denomination or denominations as the Purchaser may request and registered in its name or the name of its nominee and dated the Closing Date. SECTION 3. Investment Representations. Purchaser represents and warrants that it is purchasing the Warrants and any Warrant Shares issuable upon exercise or conversion of the Warrants for its own account, for investment purposes and not with a view to the distribution thereof; provided, however, that the foregoing representation shall not be construed as imposing any limitation on the Purchaser's right to transfer any of the Warrants or Warrant Shares that is not otherwise expressly set forth in the Warrant Documents or required under applicable law. Purchaser represents and warrants that, as of the date hereof, Purchaser qualifies as an "accredited investor" as such term is defined in Rule 501(a) of Regulation D under the Securities Act. SECTION 4. Conditions Precedent. The obligation of the Purchaser to purchase the Warrants on the Closing Date pursuant to Section 2 hereof shall be subject to the prior or concurrent satisfaction of each of the conditions precedent set forth in this Section 4, except as the Purchaser shall otherwise consent: (a) the accuracy of the representations and warranties set forth in this Agreement and in the other Warrant Documents in all material respects; (b) the compliance by the Company in all material respects with all covenants and agreements required to be performed by it under the Warrant Documents and the Loan Documents on or prior to the Closing; (c) the satisfaction of all of the conditions precedent set forth in Article 4 of the Credit Agreement; (d) Purchaser's receipt of Warrant Certificates registered in Purchaser's name (or in the name of a nominee of Purchaser) evidencing the Warrants; (e) Purchaser's receipt of the Registration Rights Agreement with respect to the Warrants, in form and substance satisfactory to Purchaser, duly executed and delivered by the Company and dated the Closing Date; (f) Purchaser's receipt of a copy of the Company's articles of incorporation, including provisions reasonably satisfactory to the Purchaser relating to the Company's capital structure, certified as of a recent date by the Secretary of State of the State of California; (g) Purchaser's receipt of a certificate of the secretary or an assistant secretary of the Company, together with true and correct copies of the bylaws and resolutions of the Board of Directors and, to the extent necessary, the stockholders of the Company authorizing or ratifying the execution, delivery and performance of this Agreement and the other Warrant Documents, and authorizing the creation and issuance of the Warrants and the Warrant Shares; and setting forth the names of the officers of the Company authorized to execute this Agreement and the other Warrant Documents, together with a specimen of the true signatures of each such authorized officer; (h) Purchaser's receipt of certified copies of all documents evidencing any other necessary corporate action, consents and governmental approvals or filings (if any) with respect to this Agreement and the other Warrant Documents; (i) Purchaser's receipt of an opinion, dated the Closing Date, from Mike Zybala, counsel to the Company, in form and substance satisfactory to Purchaser and its counsel, and covering such matters as the Purchaser may request; (j) All proceedings taken in connection with the transactions contemplated by this Agreement and the other Warrant Documents shall be satisfactory in form and substance to Purchaser and its counsel, and Purchaser and its counsel shall have received copies (executed or certified as may be appropriate) of all documents, instruments and agreements which Purchaser or its counsel may request in connection with the consummation of such transactions. SECTION 5. Warranties, etc. In order to induce Purchaser to enter into this Agreement, to engage in the transactions contemplated herein and in the other Warrant Documents and to purchase the Warrants hereunder, the Company represents and warrants unto Purchaser as set forth in this Section 5, each and all of which representations and warranties are made as of the Closing Date and shall survive the execution and delivery of this Agreement and the Closing: (a) Credit Agreement Warranties. Each of the representations and warranties of the Company set forth in the Credit Agreement is true and correct. (b) Power, Authority, etc. The Company has full power and authority to enter into and perform its obligations under this Agreement and each of the other Warrant Documents. (c) Due Authorization. The execution and delivery by the Company of this Agreement and each of the other Warrant Documents, the performance by the Company of its obligations hereunder and thereunder and the issuance of the Warrants hereunder by the Company have been duly authorized by all necessary corporate action, do not require any Regulatory Approval (except those Regulatory Approvals already obtained), do not and will not conflict with, result in any violation of, or constitute any default under, any provision of any Organic Document of the Company or any Subsidiary, any agreement or instrument to which the Company or any of it's Subsidiaries is a party or by which it or any of its property is bound, or any law or governmental regulation or court decree or order and will not result in or require the creation or imposition of any lien on any of the Company's or any Subsidiary's properties pursuant to the provisions of any such agreement or instrument. No vote (including any vote under the rules of any securities exchange or trading system or market on which any of the Company's securities are listed or traded) on the part of the stockholders of the Company, other than those which have been obtained, is required to approve or authorize any of the transactions contemplated by this Agreement, any of the other Warrant Documents or any of the Loan Documents or the authorization of the issuance of Warrant Securities or any shares of capital stock to be issued pursuant to the Loan Documents. None of the transactions contemplated by this Agreement, any of the other Warrant Documents or any of the Loan Documents (including the issuance of the Warrant Securities or any shares of capital stock to be issued pursuant to the Loan Documents) will give rise to any payment or the acceleration of any obligation (whether with or without the passage of time or upon the occurrence of any event) to any director, officer or employee of the Company or any Subsidiary. (d) Validity, etc. This Agreement and each of the other Warrant Documents constitutes the legal, valid and binding obligations of the Company enforceable in accordance with their respective terms, subject to (i) the effect of any applicable bankruptcy, insolvency, moratorium or similar laws affecting creditors' rights generally; and (ii) the effect of general principles of equity (regardless of whether considered in a proceeding in equity or at law). (e) Capitalization and Ownership of the Company. The authorized capital stock of the Company consists of 200,000,000 shares of Common Stock, 8,006,210 shares of which are outstanding on the Closing Date. The record and, to the best knowledge of the Company, beneficial ownership of the outstanding capital stock of the Company as of the Closing Date is set forth in Exhibit B. All such outstanding shares are duly authorized, validly issued, fully paid and nonassessable, and are not, and will not have been, issued in violation of any preemptive rights. No issued, no authorized but unissued and no treasury shares of capital stock of the Company are subject to any preemptive right, option, warrant, right of conversion or purchase or any similar right issued or granted by the Company or, to the best knowledge of the Company, by any of its shareholders. Except as set forth in Section 19, there are no agreements or understandings with respect to the voting, sale or transfer of any shares of capital stock of the Company to which the Company or, to the best knowledge of the Company, any of its shareholders is a party. (f) Authorization and Issuance of Warrants. The issuance of the Warrants has been duly authorized and, upon delivery to Purchaser of the Warrant Certificates therefor in accordance with the terms hereof, the Warrants will have been validly issued and fully paid and nonassessable, free and clear of all Liens and the issuance thereof will not give rise to any preemptive rights. The issuance of the shares of Common Stock upon exercise or conversion of the Warrants has been duly authorized and, when issued upon exercise or conversion of the Warrants in accordance with the terms hereof, such shares will have been validly issued and fully paid and nonassessable. 452,050 shares of Common Stock have been duly reserved for issuance upon the exercise or conversion of the Warrants. Except as set forth in the Registration Rights Agreement, no Person has the right to demand or any other right to cause the Company to file any registration statement under the Securities Act relating to any securities of the Company or any right to participate in the any such registration. (g) Securities Laws. In reliance on the investment representations contained in Section 3, the offer, issuance, sale and delivery of the Warrants to the Purchaser as provided in this Agreement, and the issuance and delivery of Common Stock upon the exercise or conversion of the Warrants by the Purchaser, are and will be exempt from the registration requirements of the Securities Act and all applicable state securities laws, as such laws are currently in effect. (h) No Integration of Issue. Neither the Company nor any Person authorized or employed by the Company as agent, broker or otherwise in connection with the offering of the Warrants has offered the Warrants for sale to, or solicited any offers to buy the Warrants from, or otherwise approached or negotiated or communicated in respect thereof with, anyone other than Purchaser. Neither the Company nor any Person acting on behalf of the Company will sell or offer any class of securities to, or solicit any offers to buy any class of securities from, or otherwise approach, negotiate or communicate in respect thereof with, any Person so as to require the registration of the Warrants under the Securities Act or any applicable state securities laws. SECTION 6. Covenants. The Company agrees with each Holder that, until the termination of this Agreement pursuant to Section 24, the Company will perform the obligations set forth in this Section 6: (a) Financial and Business Information. The Company will furnish, or will cause to be furnished, to each Holder copies of the following financial statements, reports and information: (i) promptly when available and in any event within ninety (90) days after the close of each Fiscal Year, a consolidated and consolidating balance sheet at the close of such Fiscal Year, and related consolidated and consolidating statements of income and cash flows for such Fiscal Year, of the Company and its Subsidiaries (with comparable information at the close of and for the prior Fiscal Year), certified (in the case of consolidated statements) without qualification by Deloitte & Touche, L.L.P. or other nationally recognized independent public accountants, together with a report containing management's discussion and analysis of financial condition and results of operation of the Company and its Subsidiaries (delivery to the Holders of an annual report on Form 10-K filed under the Exchange Act for such Fiscal Year shall satisfy the requirements of this clause (a)(i) with respect to such Fiscal Year); (ii) promptly when available and in any event within forty-five (45) days after the close of each calendar month of each Fiscal Year, consolidated and consolidating balance sheets at the close of each calendar month, and consolidated and consolidating statements of operations, retained earnings, and cash flows for such month and for the period commencing at the close of the previous month and ending with the close of such month, of the Company and its Subsidiaries (with comparable information at the close of and for the corresponding month of the prior Fiscal Year and for the corresponding portion of such prior Fiscal Year), certified by the chief financial or executive officer of the Company (delivery to the Holders of a quarterly report on Form 10-Q filed under the Exchange Act with respect to any Fiscal Quarter will satisfy the requirements of this clause (a)(ii) with respect to such Fiscal Quarter); (iii) within forty-five (45) days after the close of each Fiscal Quarter, a brief report containing management's discussion and analysis of the financial condition and results of operations of the Company and its Subsidiaries (including a discussion and analysis of any changes compared to prior results); and (iv) promptly upon the sending or filing thereof, copies of all reports that the Company sends to its security holders generally, and copies of all reports and registration statements that the Company or any of its Subsidiaries files with the SEC or any national securities exchange. (b) Information. Company shall provide the following: (i) Filings. The Company will file with the SEC on or before the required date all regular or periodic reports required pursuant to the Exchange Act and deliver to each Holder, promptly upon its becoming available, one copy of each report, notice or proxy statement sent by the Company to its stockholders generally, and of each regular or periodic report filed pursuant to the Exchange Act and any registration statement, prospectus or written communication (other than transmittal letters) pursuant to the Securities Act filed by the Company with (i) the SEC or (ii) any national securities exchange; and (ii) Rule 144. The Company will use its best efforts to make publicly available information concerning the Company sufficient to allow any Holder to dispose of all or a portion of the Warrant Securities pursuant to Rule 144 (or any successor provision) promulgated by the SEC under the Securities Act. (c) Maintenance of Corporate Existence, etc. The Company will cause to be done at all times all things necessary to maintain and preserve the corporate existence of the Company and its Subsidiaries (d) Maintenance of Books and Records. The Company will, and will cause each Subsidiary to, keep books and records reflecting all of its business affairs and transactions in accordance with GAAP. (e) Inconsistent Agreements. The Company will not, and will not permit any Subsidiary to, enter into any agreement containing any provision which would be violated or breached by the issuance of the Warrants or the Warrant Shares or by the performance by the Company or any Subsidiary of its obligations under this Agreement or under any other Warrant Documents. (f) Organic Documents. The Company shall not permit to occur any amendment, alteration or modification to its Organic Documents, as constituted on the date hereof, the effect of which would be to alter, impair or materially adversely affect either the rights and benefits of Purchaser or the Holders or the duties and obligations of the Company under this Agreement and the other Warrant Documents. (g) Transactions with Affiliates. The Company will not, and will not permit any Subsidiary to, enter into, or cause, suffer or permit to exist: (i) any arrangement or contract with any of its Affiliates of a nature customarily entered into by Persons which are Affiliates of each other (including management or similar contracts or arrangements relating to the allocation of revenues, expenses or otherwise) requiring any payments to be made by the Company or any of its Subsidiaries to any Affiliate, other than any arrangement solely among the Company and its wholly-owned Subsidiaries; and (ii) any other transaction, arrangement or contract with any of its Affiliates which is on terms which are less favorable than are obtainable in a transaction from any Person which is not one of its Affiliate. (h) Issuance of Additional Rights, Options and Warrants. The Company shall not issue any rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities), whether or not the right to exercise such rights, options or warrants or to convert or exchange such Convertible Securities is immediately exercisable or is conditioned upon the passage of time, an occurrence or non-occurrence of some other event, or both; provided, however, that the Company may issue options to purchase its Common Stock to its employees and directors provided that the maximum number of shares of Common Stock issuable upon exercise of such options together with the maximum number of shares of Common Stock issuable upon exercise of all Option Securities outstanding on the Closing Date (other than Eight-Dollar Option Securities) shall not exceed 800,621 (as adjusted appropriately adjusted for any stock splits or reverse stock splits occurring after the Closing Date). (i) Antitakeover Statutes. The Company shall take all action necessary to avoid the application of any "fair price," "moratorium," "control share acquisition," "business combination," "shareholder protection" or similar antitakeover statute to the transactions contemplated by this Agreement or any other Warrant Document (including the issuance of the Warrant Securities). (j) Governmental Approvals. The Company will, and will cooperate with the Holders to, secure all necessary consents, approvals, authorizations and exemptions from all governmental authorities in connection with the exercise or conversion of the Warrants and the issuance of shares of Common Stock upon exercise or conversion of the Warrants. (k) Cash Distributions and Dividends. The Company shall not pay a dividend or make a distribution to the holders of its Stock of any securities (other than Stock) or property (including cash and securities of other companies) of the Company, or any rights, options or warrants to purchase securities (other than Stock) or property (including securities of other companies) of the Company. SECTION 7. Warrant Certificates. The Warrant Certificates to be delivered pursuant to this Agreement shall be in registered form only as provided in Section 9 and in the form set forth as ExhibitA. SECTION 8. Execution of Warrant Certificates. Warrant Certificates shall be signed on behalf of the Company by the duly authorized officers of the Company under its corporate seal. Each such signature upon the Warrant Certificates may be in the form of a facsimile signature of the duly authorized officers of the Company and may be printed or otherwise reproduced on the Warrant Certificates and for that purpose the Company may adopt and use the facsimile signature of any person who shall have been a duly authorized officer of the Company, notwithstanding the fact that at the time the Warrant Certificates shall be delivered or disposed of such person shall have ceased to hold such office. The seal of the Company may be in the form of a facsimile thereof and may be impressed, affixed, imprinted or otherwise reproduced on the Warrant Certificates. In case any officer of the Company who shall have signed any of the Warrant Certificates shall cease to be such officer before the Warrant Certificates so signed shall have been disposed of by the Company, such Warrant Certificates nevertheless may be delivered or disposed of as though such person had not ceased to be such officer of the Company; and any Warrant Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Warrant Certificate, shall be a proper officer of the Company to sign such Warrant Certificate although at the date of the execution of this Agreement such person was not such officer. SECTION 9. Registration. The Company shall number and register the Warrant Certificates in a register as they are issued. The Company may deem and treat the registered holder(s) of the Warrant Certificates as the absolute owner(s) thereof (notwithstanding any notation of ownership or other writing thereon made by anyone) for all purposes and shall not be affected by any notice to the contrary. SECTION 10. Registration of Transfers and Exchanges. (a) The Company shall from time to time register the transfer of any outstanding Warrant Certificates in a Warrant register to be maintained by the Company upon surrender of such Warrant Certificates accompanied by a written instrument or instruments of transfer in form reasonably satisfactory to the Company, duly executed by the Holder or Holders thereof or by the duly appointed legal representative thereof or by a duly authorized attorney; provided, however, that prior to effecting such transfer, the transferee shall agree (in a form reasonably satisfactory to the Company) to be bound by the terms of this Agreement. Upon any such registration of transfer, a new Warrant Certificate shall be issued to the transferee(s) and the surrendered Warrant Certificate shall be canceled and disposed of by the Company. Until the Warrant Certificate is transferred on the Warrant register of the Company, the Company may treat the Holder as shown in the Warrant register as the absolute owner of the Warrant Certificate for all purposes, and notwithstanding any notice to the contrary. The Company agrees that it will make the Warrant register available for inspection by the Holders during normal business hours at its office and that the Holders may rely on the Warrant register for purposes of complying with the preceding sentence. (b) The Warrants shall be transferable in whole or in part and, in the event that a Warrant Certificate is transferred in respect of fewer than all the Warrants evidenced by the Warrant Certificate, a new Warrant Certificate evidencing the remaining Warrant or Warrants will be issued and delivered pursuant to the provisions of this Section 10 and of Section 8. (c) If any transfer of Warrants or Warrant Shares is not made pursuant to an effective registration statement under the Securities Act, the Holder will, if reasonably requested by the Company, deliver to the Company an opinion of counsel, which may be counsel to the Holder but which must be reasonably satisfactory to the Company, reasonably satisfactory in form, scope and substance to the Company, that such Warrants or Warrant Shares may be sold without registration under the Securities Act, as well: (i) as an investment covenant reasonably satisfactory to the Company signed by the proposed transferee (except that no such covenant will be required in connection with a transfer effected in accordance with Rule 144A under the Securities Act); and (ii) an agreement by such transferee to the impression of the restrictive legends set forth below on the Warrant Certificate or on the certificate evidencing such Warrant Shares. (d) The Holders agree that each Warrant Certificate and each certificate representing Warrant Shares will bear the following legend (the "Securities Legend"): "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. SAID SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION, OR AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL TO THE HOLDER REASONABLY ACCEPTABLE TO THE COMPANY) AS TO AN EXEMPTION, FROM THE REGISTRATION PROVISIONS OF SAID ACT OR LAWS." (e) Notwithstanding the foregoing provisions of this Section 10, the restrictions upon the transferability of the Warrant Securities and the Securities Legend requirement set forth in this Section 10 shall terminate as to any of the Warrant Securities (i) when and so long as such Warrant Security shall have been effectively registered under the Securities Act and disposed of pursuant thereto or (ii) when the Company shall have received an opinion of counsel reasonably satisfactory to it that such Securities Legend is not required in order to ensure compliance with the Securities Act. Whenever the restrictions imposed by this Section 10 shall terminate as to any Warrant Securities, the Holder thereof shall be entitled to receive from the Company, a new Warrant Certificate or certificate for Warrant Shares bearing the following legend in place of the Securities Legend set forth above: "THE RESTRICTIONS ON TRANSFERABILITY OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE TERMINATED ON ______________, 20__, AND ARE OF NO FURTHER FORCE AND EFFECT." (f) The Holders further agree that each Warrant Certificate and each certificate representing Warrant Shares will bear the following legend: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF A WARRANT PURCHASE AGREEMENT, DATED AS OF JANUARY 17, 2003, BETWEEN CREATIVE HOST SERVICES, INC. (THE "COMPANY") AND ING CAPITAL LLC (THE "PURCHASER"), AND A REGISTRATION RIGHTS AGREEMENT, DATED AS OF JANUARY 17, 2003, BETWEEN THE COMPANY AND THE PURCHASER, COPIES OF EACH OF WHICH ARE ON FILE AT THE MAIN OFFICE OF THE COMPANY. ANY SALE OR TRANSFER OF THE SECURITIES EVIDENCED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS OF THOSE AGREEMENTS AND ANY SALE OR TRANSFER OF SUCH SECURITIES IN VIOLATION OF SAID AGREEMENTS SHALL BE INVALID." (g) Warrant Certificates may be exchanged at the option of the Holder(s) thereof when surrendered to the Company at its office for another Warrant Certificate or other Warrant Certificates of like tenor and representing in the aggregate a like number of Warrants, including, without limitation, upon an adjustment in the Exercise Price or in the number of Warrant Shares purchasable upon exercise of the Warrants. Warrant Certificates surrendered for exchange shall be canceled and disposed of by the Company. SECTION 11. Exercise of Warrants; Conversion of Warrants. (a) Subject to the terms of this Agreement, each Holder shall have the right, which may be exercised at any time or from time to time prior to January 17, 2012, to receive from the Company the number of fully paid and nonassessable Warrant Shares which such Holder may at the time be entitled to receive on exercise or any part of the Warrants and payment of the appropriate Exercise Price then in effect for such Warrant Shares. A Warrant may be exercised upon surrender to the Company at its office designated for such purpose (the address of which is set forth in Section 20) of the certificate or certificates evidencing the Warrants to be exercised with the form of election to purchase attached thereto properly completed and signed, upon payment to the Company of the appropriate Exercise Price for the number of Warrant Shares in respect of which such Warrants are then exercised. Payment of the aggregate Exercise Price shall be made in cash or by check payable to the order of the Company. Upon such surrender of Warrant Certificates and payment of the appropriate Exercise Price, the Company shall issue and cause to be delivered with all reasonable dispatch (and in any event within ten (10) Business Days of such surrender and payment) to or upon the written order of the Holder, and in the name of the Holder or the Holder's nominee, a certificate or certificates for the number of full Warrant Shares issuable upon the exercise of such Warrants together with such other property (including cash) and securities as may then be deliverable upon such exercise, including cash for fractional Warrant Shares as provided in Section 17. Such certificate or certificates shall be deemed to have been issued and the Person so named therein shall be deemed to have become a holder of record of such Warrant Shares as of the date of the surrender of such Warrant Certificates and payment of the Exercise Price. (b) Subject to the terms of this Agreement, each Holder shall have the right (the "Conversion Right"), which may be exercised at any time or from time to time prior to January 17, 2012, to convert the Warrants, in whole or in part, into the number of fully paid and nonassessable Warrant Shares calculated pursuant to the following formula: X = Y (A-B) -------- A where: X = the number of Warrant Shares to be issued to the Holders upon conversion; Y = the number of Warrant Shares for which the Conversion Right is being exercised; A = the Fair Market Value per Share as of the date of exercise of such Conversion Right; and B = the Exercise Price with respect to such Warrants. (c) A Warrant may be converted upon surrender to the Company at its office designated for such purpose (the address of which is set forth in Section 20) of the certificate or certificates evidencing the Warrants to be converted with the form of election to convert attached thereto properly completed and signed. Upon such surrender of Warrant Certificates, the Company shall issue and cause to be delivered with all reasonable dispatch (and in any event within ten (10) Business Days of such surrender) to or upon the written order of the Holder, and in the name of the Holder or the Holder's nominee, a certificate or certificates for the number of full Warrant Shares issuable upon the conversion of such Warrants together with such other property (including cash) and securities as may then be deliverable upon such conversion, including cash for fractional Warrant Shares as provided in Section 16. Such certificate or certificates shall be deemed to have been issued and the Person so named therein shall be deemed to have become a holder of record of such Warrant Shares as of the date of the surrender of such Warrant Certificates. (d) The Warrants shall be exercisable and convertible, at the election of the Holders thereof, either in full or from time to time in part, and in the event that a Warrant Certificate is exercised or converted in respect of fewer than all of the Warrant Shares issuable pursuant to such Warrant Certificate at any time prior to the date of expiration of the Warrants, a new Warrant Certificate evidencing the remaining Warrant or Warrants will be issued and delivered pursuant to the provisions of this Section 11 and of Section 8. All Warrant Certificates surrendered upon exercise or conversion of Warrants shall be canceled and disposed of by the Company. The Company shall keep copies of this Agreement and any notices received hereunder available for inspection during normal business hours at its office. The Company will furnish, at its expense, copies of this Agreement and all such notices, upon request, to any Holder of any Warrant Certificates. SECTION 12. Payment of Taxes. The Company will pay all stamp and transfer taxes in connection with the issuance, sale and delivery of the Warrants hereunder, as well as all such taxes attributable to the initial issuance of Warrant Shares upon the exercise of Warrants and payment of the appropriate Exercise Price or upon conversion of the Warrants. The Company will not, however, be required to pay any tax or other similar charges imposed in connection with any transfer of any Warrant Securities. Nothing herein shall be construed as requiring the Company to pay any taxes imposed in respect of income realized by any Holder upon the purchase, transfer or exercise of Warrants. SECTION 13. Mutilated or Missing Warrant Certificates. Upon receipt by the Company of evidence reasonably satisfactory to the Company (which shall include an affidavit of the Holder) that any Warrant Certificate shall have been mutilated, lost, stolen or destroyed and, in the case of loss, theft or destruction, a customary indemnity agreement from the Holder of such Warrant Certificate, the Company shall issue, in exchange and substitution for and upon cancellation of the mutilated Warrant Certificate, or in lieu of and substitution for the Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor and representing an equal number of Warrants. SECTION 14. Reservation of Warrant Shares. The Company will at all times that any Warrant is exercisable reserve and keep available, free from preemptive or similar rights, out of the aggregate of its authorized but unissued capital stock or its authorized and issued capital stock held in its treasury, for the purpose of enabling it to satisfy any obligation to issue Warrant Shares upon exercise or conversion of Warrants, the maximum number of shares of each class of capital stock constituting a part of the Warrant Shares which may then be deliverable upon the exercise or conversion of all outstanding Warrants. The Company shall cause all shares of Common Stock issuable upon exercise or conversion of the Warrants to be (x) listed (or to be listed subject to notice of issuance) on each securities exchange on which shares of Common Stock are listed, or (y) admitted for trading in any inter-dealer quotation system on which shares of Common Stock are traded. The Company or, if appointed, the transfer agent for shares of each class of capital stock of the Company (the "Transfer Agent") and every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise or conversion of the Warrants will be irrevocably authorized and directed at all times to reserve such number of authorized shares as shall be required for such purpose. The Company will keep a copy of this Agreement on file with the Transfer Agent and with every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of the rights of purchase or conversion represented by the Warrants. The Company will furnish such Transfer Agent a copy of all notices of adjustments, and certificates related thereto, transmitted to each Holder pursuant to Section 8. Before taking any action which would cause an adjustment pursuant to Section 15 to the maximum number of Warrant Shares deliverable upon the exercise of all outstanding Warrants the then authorized number of shares of Common Stock, the Company shall cause to be authorized additional shares of Common Stock such that such maximum number of shares of Common Stock deliverable upon exercise of all outstanding Warrants does not exceed the number of shares of Common Stock authorized pursuant to the Organic Documents of the Company. Before taking any action which would cause an adjustment pursuant to Section 15 to reduce the Exercise Price below the then par value (if any) of the Warrant Shares, the Company will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares at the Exercise Price as so adjusted. SECTION 15. Adjustment of Exercise Price and Number of Warrant Shares Issuable. The Exercise Price and the number of Warrant Shares issuable or issued upon the exercise of each Warrant are subject to adjustment from time to time upon the occurrence of any of the events enumerated in this Section 15. (a) Adjustment for Change in Capital Stock of the Company. If the Company (i) subdivides its outstanding shares of any class of Common Stock into a greater number of shares, (ii) combines its outstanding shares of any class of Common stock into a smaller number of shares, (iii) makes a distribution on any class of its Common Stock in shares of its Stock other than Common Stock, or (iv) issues by reclassification of any class of its Common Stock any shares of its Stock, then the Exercise Price in effect immediately prior to such action shall be proportionately adjusted so that the Holder of any Warrant thereafter exercised may receive the aggregate number and kind of shares of capital stock of the Company which it would have owned immediately following such action if such Warrant had been exercised immediately prior to such action. Such adjustment shall be made successively whenever any event listed above shall occur, and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification. If after an adjustment a Holder of a Warrant upon exercise of such Warrant may receive shares of two or more classes of capital stock of the Company, the Board of Directors of the Company shall determine in the good faith exercise of its reasonable business judgment the allocation of the adjusted Exercise Price between the classes of capital stock. After such allocation, the exercise privilege and the Exercise Price of each class of capital stock shall thereafter be subject to adjustment on terms comparable to those in this Section 15. (b) Adjustment for Common Stock Issues. If the Company issues shares of Common Stock for a consideration per share less than the Fair Market Value per Share on the date the Company fixes the offering price of such additional shares, the Exercise Price shall be adjusted in accordance with the following formula: P - E' = E x (O + M) ------- A where: E' = the adjusted Exercise Price; E = the then current Exercise Price; O = the number of shares of Common Stock outstanding immediately prior to the issuance of such additional shares; P = the aggregate consideration received for the issuance of such additional shares; M = the Fair Market Value per Share on the date the Company fixes the offering price of such additional shares; and A = the number of shares of Common Stock outstanding immediately after the issuance of such additional shares. The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance. This Section 15(b) does not apply to (i) the transactions described in Section 15(a) or (ii) any transaction for which an adjustment has been made pursuant to the provisions of Section 15(c) or Section 15(d), or (iii) the issuance of any Excluded Shares. (c) Adjustment for Convertible Securities Issues. If the Company issues any evidences of indebtedness, shares of stock or other securities which, with or without payment of additional consideration in cash or property, are convertible into or exchangeable for shares of Common Stock, whether or not the right to convert or exchange there-under is immediately exercisable or is conditioned upon the passage of time, the occurrence or non-occurrence of some other event, or both ("Convertible Securities"), for a consideration per share of Common Stock initially deliverable upon conversion or exchange of such Convert-ible Securities less than the Fair Market Value per Share on the date of issuance of such Convertible Securities, the Exercise Price shall be adjusted in accordance with the following formula: P - E' = E x O + M ------- O + D where: E' = the adjusted Exercise Price; E = the then current Exercise Price; O = the number of shares of Common Stock outstanding immediately prior to the issuance of such Convertible Securities; P = the aggregate consideration received for the issuance of such Convertible Securities; and M = the Fair Market Value per Share on the date of issuance of such Convertible Securities; and D = the maximum number of shares of Common Stock deliverable upon exercise, conversion or in exchange of such Convertible Securities at the lowest price at which the Convertible Securities can be converted into or exchanged for Common Stock, regardless of whether such lowest price is the initial price or is conditioned upon the passage of time, the occurrence or non-occurrence of some other event, or both. The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance. This Section 15(c) shall not apply to the issuance of any Convertible Securities for which an adjustment has been made pursuant to Section 15(d). (d) Adjustment for Right, Option and Warrant Issues. If the Company issues any rights, options or warrants to subscribe for or purchase or otherwise acquire Common Stock or Convertible Securities, whether or not the right to exercise such rights, options or warrants is immediately exercisable or is conditioned upon the passage of time, the occurrence or non-occurrence of some other event, or both (the "Option Securities"), for a consideration per share of Common Stock initially deliverable upon exercise of such Option Securities (and in the case of Option Securities to acquire Convertible Securities, upon conversion or exchange of such Convertible Securities) less than the Fair Market Value per Share on the date of issuance of such Option Securities, the Exercise Price shall be adjusted in accordance with the following formula: P - E' = E x O + M ------- O + D where: E' = the adjusted Exercise Price; E = the then current Exercise Price; O = the number of shares of Common Stock outstanding immediately prior to the issuance of such Option Securities; P = the aggregate consideration received for the issuance of such Option Securities; M = the Fair Market Value per Share on the date of issuance of such Option Securities; and D = the maximum number of shares of Common Stock deliverable upon exercise, conversion or in exchange of such Option Securities at the lowest price at which the Option Securities may be exercised to purchase or otherwise acquire Common Stock, regardless of whether the lowest price is the initial price or is conditioned upon the passage of time, the occurrence or non-occurrence of some other event, or both. The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance. (e) Consideration Received. For purposes of any computation respecting consideration received pursuant to any subsection of this Section 15, the following shall apply: (i) In the case of the issuance of shares of Common Stock for cash, the consideration received shall be the amount of cash receivable by the Company therefor, without deduction therefrom of any reasonable expenses incurred by the Company in connection therewith or any reasonable underwriters' discounts, fees and commissions paid or allowed by the Company in connection therewith. (ii) In the case of the issuance of shares of Common Stock for a consideration consisting in whole or in part of other than cash, the consideration other than cash shall, subject to the following provision of this paragraph (ii), be deemed to be the fair market value thereof as determined by the Board of Directors of the Company in the good faith exercise of its business judgment, without deduction therefrom of any reasonable expenses incurred by the Company in connection therewith. In any circumstances in which the fair market value of any such consideration is to be determined pursuant to this paragraph (ii), the Company shall give to the Holders written notice of the proposed fair market value, as determined in good faith by the Board of Directors of the Company. If the Company and the Required Holders agree upon the fair market value then the fair market value for purposes of this paragraph (ii) shall be as so agreed. If the Required Holders and the Company do not agree upon such fair market value, then the Required Holders and the Company shall appoint a recognized investment banking firm of national reputation, reasonably acceptable to the Required Holders and the Company. If the Company and the Required Holders cannot agree on the appointment of a mutually acceptable investment banking firm, or if the firm so appointed declines or fails to serve, then the Required Holders and the Company shall each choose one such investment banking firm and the respective firms so chosen shall appoint another recognized investment banking firm of national reputation. The investment banking firm so selected shall appraise the fair market value for the purposes of this paragraph (ii), and such investment banking firm shall make such appraisal (which shall be in the form of a written report signed by such investment banking firm) and, for the purposes of determining the fair market value pursuant to this paragraph (ii), such appraised fair market value determined as herein provided shall be final and conclusive on the Company and the Holders. If the appraised value of the Company as determined by such investment banking firm is equal to or less than that determined by the Board of Directors of the Company in accordance with this paragraph (ii), then all fees and expenses of such investment banking firm shall be paid by the Holders requesting such appraisal. If the appraised value of the Company as determined by such investment banking firm is greater than that determined by the Board of Directors in accordance with this paragraph (ii), then all fees and expenses of such investment banking firm shall be paid by the Company. (iii) In the case of the issuance of Convertible Securities or Option Securities, the aggregate consideration received therefor shall be deemed to be the consideration received by the Company for the issuance of such Convertible Securities or Option Securities, as the case may be, plus the additional minimum consideration, if any, to be received by the Company upon the conversion, exchange or exercise thereof (the consideration in each case to be determined in the same manner as provided in clauses (i) and (ii) of this subsection (e)). (f) Reorganization of the Company. In the event of any capital reorganization, recapitalization or reclassification of the capital stock of the Company, or consolidation, merger or amalgamation of the Company with another entity, any acquisition of capital stock of the Company by means of a share exchange, or the sale, lease, transfer, conveyance or other disposition of all or substantially all of its assets to another entity, then, as a condition of such reorganization, recapitalization, reclassification, consolidation, merger, amalgamation, share exchange or sale, lease, transfer, conveyance or other disposition, lawful and adequate provision shall be made whereby the Holders of the Warrant Certificates shall thereafter have the right to purchase and receive, on the basis and upon the terms and conditions specified in this Agreement and in lieu of the Warrant Shares immediately theretofore purchasable and receivable upon the exercise of the rights represented by the Warrants, such shares of stock, securities, cash or property as may be issued or payable with respect to or in exchange for the number of Warrant Shares immediately theretofore purchasable and receivable upon the exercise of the rights represented by the Warrant Certificates. If such consolidation, merger, amalgamation, share exchange, sale, lease, transfer, conveyance or other disposition is with any Person or group of Persons (within the meaning of Section 13(d) or 14(d) of the Exchange Act) who shall have made a purchase, tender or exchange offer which was accepted by the holders of not less than twenty percent (20%) of the outstanding shares of Common Stock of the Company, the Holders of the Warrants shall have been given a reasonable opportunity (and, in no event, less than 30 days) to elect to receive, either (x) the stock, securities, cash or property it would have received pursuant to the immediately preceding sentence or (y) the stock, securities, cash or property issued or paid (or to be issued or paid) to holders of the Common Stock in accordance with such offer. In any such case appropriate provision shall be made with respect to the rights and interests of the Holders of the Warrants to the end that the provisions of this Agreement (including, without limitation, provisions for adjustment of the Exercise Price and of the number and type of securities purchasable upon the exercise of the Warrants) shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities, cash or property thereafter deliverable upon the exercise of the Warrants. The Company shall not effect any such consolidation, merger, amalgamation, share exchange or sale, lease, transfer, conveyance or other disposition unless prior to or simultaneously with the consummation thereof the successor entity (if other than the Company) resulting from such consolidation, merger or amalgamation, share exchange or the entity purchasing or otherwise acquiring such assets or shares (i) shall assume by a supplemental Warrant Agreement, satisfactory in form, scope and substance to the Required Holders (which shall be mailed or delivered to the Holders of the Warrants at the last address of such Holders appearing on the books of the Company) the obligation to deliver to such Holders such shares of stock, securities, cash or property as, in accordance with the foregoing provisions, such Holders may be entitled to purchase (the "Substitute Securities") and (ii) shall assume all of the obligations of the Company set forth in this Agreement and the Registration Rights Agreement. Following such assumption such obligations shall apply to the Substitute Securities rather than to the Warrant Shares. If the issuer of securities deliverable upon exercise of Warrants under the supplemental Warrant Agreement is an Affiliate of the formed, surviving, transferee or lessee entity, such issuer shall join the supplemental Warrant Agreement. The foregoing provisions of this paragraph shall similarly apply to successive reorganizations, recapitalizations, reclassifications, consolidations, mergers, amalgamations, share exchanges, sales, leases, transfers, conveyances or other dispositions. (g) Adjustment in Number of Shares. Upon each adjustment of the Exercise Price pursuant to this Section 15, each Warrant outstanding prior to the making of the adjustment in the Exercise Price shall thereafter evidence the right to receive upon payment of the adjusted Exercise Price that number of Warrant Shares (calculated to the nearest hundredth) obtained from the following formula: N'= N x E - E' where: N' = the adjusted number of Warrant Shares issuable upon exercise of a Warrant by payment of the adjusted Exercise Price; N = the number of Warrant Shares previously issuable upon exercise of a Warrant by payment of the Exercise Price prior to adjustment; E' = the adjusted Exercise Price; and E = the Exercise Price prior to adjustment. (h) Special Adjustment in Respect of Exercise of Eight-Dollar Option Securities. In the event that after the Closing Date any Eight-Dollar Option Securities are exercised or converted, immediately prior to the conversion or exercise of any or all of the Warrants pursuant to Section 11, the number of Warrant Shares issuable upon exercise of such Warrants shall be recalculated, and the number of Warrant Shares that have been issued shall be adjusted from time to time, in accordance with the following formula, after taking into account any other adjustments required under this Section 15: N'= N x FDS' ---- FDS where: N' = the number of shares of Common Stock issuable upon exercise of such Warrants immediately following such adjustment; N = the number of shares of Common Stock issuable upon exercise of such Warrants immediately prior to such adjustment; FDS = the number of Fully Diluted Shares prior to such exercise or conversion of Eight-Dollar Options; and FDS' = the number of Fully Diluted Shares immediately after such exercise or conversion of Eight-Dollar Options. SECTION 16. Determination of Fair Market Value per Share. (a) In any circumstance in which the Fair Market Value per Share is required to be determined in this Agreement, not later than ten (10) days following the date as of which such determination is required (and in any event prior to issuing any shares of Common Stock, any Convertible Securities or any Option Securities), the Company shall cause the Board of Directors of the Company to determine in good faith the Fair Market Value per Share. Within five (5) Business Days of such determination by the Board of Directors of the Company (but in no event later than thirty (30) days prior to issuance of Common Stock, Convertible Securities or Option Securities), the Company shall give the Holders written notice of the proposed Fair Market Value per Share. If the Company and such Holders agree upon the Fair Market Value per Share, then the Fair Market Value per Share shall be as so agreed. If the Company and the Required Holders do not agree upon such Fair Market Value per Share, then the Fair Market Value per Share shall be determined as provided in Section 16(b). (b) If the Required Holders and the Company do not agree upon such Fair Market Value per Share, then the Required Holders and the Company shall appoint a recognized investment banking firm of national reputation, reasonably acceptable to the Required Holders and the Company. If the Company and the Required Holders cannot agree on the appointment of a mutually acceptable investment banking firm, then the Required Holders and the Company shall each choose one such investment banking firm and the respective firms so chosen shall appoint another recognized investment banking firm of national reputation. The investment banking firm so selected shall appraise the value of the Company (which shall be in the form of a written report signed by such investment banking firm), and such appraised value of the Company determined as herein provided shall be final and conclusive and binding on the Company and the Holders. All fees and expenses of such investment banking firm shall be paid by the Company. SECTION 17. Fractional Interests. The Company shall not be required to issue fractional Warrant Shares on the exercise of Warrants. If more than one Warrant shall be presented for exercise in full at the same time by the same Holder, the number of full Warrant Shares which shall be issuable upon exercise thereof shall be computed on the basis of the aggregate number of Warrant Shares purchasable on exercise of the Warrants so presented. If any fraction of the Warrant Shares would, except for the provisions of this Section 17, be issuable on the exercise of any Warrants (or specified portion thereof), the Company shall pay an amount in cash equal to the Fair Market Value per Share on the day immediately preceding the date the Warrant is presented for exercise, multiplied by such fraction. SECTION 18. Notice to Warrant Holders. Upon any adjustment of the Exercise Price or number or type of securities purchasable upon exercise of the Warrants pursuant to Section 15, the Company shall promptly thereafter (i) upon the request of the Required Holders, cause to be filed with the Company a certificate of the chief financial officer of the Company setting forth the Exercise Price and the number and type of securities or other property constituting Warrant Shares after such adjustment and setting forth in reasonable detail the method of calculation and the facts upon which such calculations are based and, in the case of an adjustment pursuant to Section 15(f), setting forth the number and type of securities or other property constituting Warrant Shares (or portion thereof) issuable, after such adjustment in the Exercise Price or number of Warrant Shares purchasable upon exercise of the Warrants, upon exercise of a Warrant and payment of the adjusted Exercise Price, and (ii) cause to be given to each of the Holders of the Warrant Certificates written notice of such adjustments, together with a copy of such certificate. Where appropriate, such notice may be given in advance and included as a part of the notice required to be given under the other provisions of this Section 18. In the event: (a) the Company shall authorize the issuance to holders (although not necessarily to all such holders) of shares of Stock or rights, options or warrants to subscribe for or purchase or otherwise acquire shares of Stock or of any other securities or property (including securities of any other issuer) or of any other subscription rights, options or warrants; or (b) the Company shall authorize the payment of any dividend or distribution to holders of shares of Stock of cash, Stock or other securities or property (including securities of any other issuer) of the Company; or (c) of any capital reorganization, reclassification or recapitalization of the Stock of the Company, or any amalgamation, consolidation or merger to which the Company is a party, or any acquisition of Stock of the Company through a share exchange, or of the sale, lease, conveyance, transfer or other disposition of the properties and assets of the Company substantially as an entirety, or a purchase, tender or exchange offer for shares of Common Stock or other securities constituting part of the Warrant Shares (whether by the Company or some other party); or (d) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; or (e) the Company proposes to take any action which would require an adjustment of the Exercise Price or number of Warrant Shares purchasable upon exercise of the Warrants pursuant to Section 15; then the Company shall cause to be given to each of the Holders, at least 20 days prior to the applicable record date hereinafter specified (or promptly in the case of events for which there is no record date), a written notice stating (as applicable) (i) the date as of which the holders of record of shares of Stock entitled to receive any such rights, options, warrants or dividends or distribution are to be determined, (ii) the date on which any such reclassification, recapitalization or reorganization, consolidation, merger, amalgamation, share exchange, sale, lease, conveyance, transfer, disposition, dissolution, liquidation or winding up is expected to become effective or be consummated, or (iii) the initial expiration date set forth in any purchase, tender or exchange offer for shares of Stock, and the date as of which it is expected that holders of record of shares of Stock or other securities constituting a part of the Warrant Shares (or securities into which the Warrant Shares may be converted) shall be entitled to exchange such shares or securities for securities or other property, if any, deliverable upon such reclassification, recapitalization, reorganization, consolidation, merger, amalgamation, share exchange, sale, lease, conveyance, transfer, disposition, dissolution, liquidation or winding up. Nothing contained in this Agreement or in any of the Warrant Certificates shall be construed as conferring upon the Holders the right to vote or to consent as stockholders in respect of the meetings of stockholders or the election of members of the Board of Directors of the Company or any other matter, or any rights whatsoever as stockholders of the Company. SECTION 19. Tag-Along Rights; Limitation on Put Rights. (a) If at any time the Company shall determine to enter into any transaction or series of transactions that would result in a Change of Control (a "Change of Control Transaction") (any third party proposing to enter into such transaction or transactions being hereinafter referred to as a "Prospective Purchaser"), the Company and any Prospective Purchaser shall first give written notice (the "Offer Notice") to all of the Holders, specifying the name and address of the Prospective Purchaser and the number of shares, if any, of Stock proposed to be issued, sold, transferred or otherwise disposed of and setting forth in reasonable detail the price, structure and other terms and conditions of the Change of Control Transaction. The Offer Notice shall represent the offer (the "Offer") from the Prospective Purchaser to each of the Holders of the right to sell to the Prospective Purchaser as a condition to the consummation of the proposed transaction described in the Offer Notice, all Warrant Securities then owned by each Holder to the Prospective Purchaser and, at the option of the Holders, on the same terms and conditions (including price and form of consideration) as are being offered by the Prospective Purchaser to the Company or at the Fair Market Value per Share, determined as of the date of the Offer Notice, minus the Exercise Price (if any). Each Holder shall have thirty (30) days from the date of receipt of the Offer Notice to give written notice of its intention to accept or reject the Offer. Failure to respond within such thirty-day period shall be deemed notice of rejection. In the event that any Holder gives written notice to the Company and the Prospective Purchaser of its intention to accept such Offer, then such written notice, taken in conjunction with the Offer Notice, shall constitute a valid and legally binding agreement, and each of the Holders so giving such written notice shall be entitled to sell to the Prospective Purchaser, contemporaneously with the consummation of the Change of Control Transaction, all of the Warrant Securities at the price specified therefor by such Holder in accordance with this Section 19(a). In the event that all of the Holders reject or are deemed to have rejected the offer represented by the Offer Notice, the Company shall be free to proceed to consummate such Change of Control Transaction on the terms and conditions set forth in the Offer Notice, provided that such sale is not otherwise prohibited by any agreement between the Company and the Purchaser. In the event the Company fails to complete the proposed sale, transfer or other disposition within ninety (90) days after the Holder or Holders rejected or were deemed to have rejected the Offer, such transaction or transactions shall again be subject to the provisions of this Section 19(a). The provisions of this Section 19(a) shall apply until the termination of this Agreement pursuant to Section 24 to any Person who acquires in any manner any Warrant Securities from any Holder. (b) The Company covenants and agrees that, neither the Company nor any of its Subsidiaries shall, directly or indirectly, grant to any Person or agree to or otherwise become obligated in respect of any rights to require the Company or any of its Subsidiaries to purchase securities of the Company upon the demand of any Person. The Company represents and warrants that neither it nor any of its Subsidiaries has previously entered into any agreement granting any such rights to any Person. SECTION 20. Notices. All notices, consents, approvals, agreements and other communications provided hereunder shall be in writing or by telecopy and shall be sufficiently given to the Purchaser, the Holders and the Company if addressed or delivered to them at the following addresses: If to the Purchaser: ING Capital 135 East 57th Street New York, New York 10022 Attention: Chief Credit Officer Telecopier No.: (212) 750-8935 with copies to: ING Capital LLC Acquisition Finance Group 333 South Grand Avenue, Suite 4200 Los Angeles, California 90071 Attention: Steven G. Fleenor Telecopier No.: (213) 346-3991 and a copy to: King & Spalding 191 Peachtree Street Atlanta, Georgia 30303-1763 Attention: Hector E. Llorens, Jr., Esq. Telecopier No.: (404) 572-5100 If to any other At its last known address appearing Holder: on the books of the Company maintained for such purpose If to the Company: Creative Host Services, Inc. 16955 Via Del Campo, Suite 110 San Diego, California 92127 Attention: Sayed Ali Telecopier No.: (858) 675-7720 or at such other address as any party may designate to any other party by written notice. All such notices and communications shall be deemed to have been duly given: (i) at the time delivered by hand, if personally delivered, (ii) when received, if deposited in the mail, postage prepaid, (iii) when transmission is verified, if telecopied, and (iv) on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery. SECTION 21. Costs and Expenses. The Company agrees to pay all reasonable out-of-pocket expenses of the Purchaser (including reasonable fees and expenses of counsel retained by the Purchaser from time to time) in connection with (i) the negotiation, preparation, execution, and delivery of this Agreement and each other Warrant Document, whether or not the transactions contemplated hereby are consummated, and (ii) at the request of the Purchaser, the consideration of legal questions relevant hereto and thereto. The Company also agrees to reimburse the Purchaser and each Holder upon demand for all reasonable out-of-pocket expenses (including reasonable attorneys' fees and expenses) incurred by the Purchaser or such Holder in enforcing the obligations of the Company under this Agreement or any other Warrant Document or in connection with any amendment, waiver, consent, supplement or other modification to this Agreement or any Warrant Document. SECTION 22. Indemnification. In consideration of the transactions contemplated by this Agreement and the other Warrant Documents, the Company hereby agrees to indemnify, exonerate and hold the Purchaser and each Holder, each of their respective successors and assigns, each of the respective officers, directors, employees, attorneys and agents of the Purchaser and each Holder and each of their respective successors and assigns (collectively, the "Indemnified Parties") free and harmless from and against any and all actions, causes of action, suits, losses, costs, liabilities, damages and expenses (irrespective of whether such Indemnified Party is a party to the action for which indemnification hereunder is sought), including reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred by the Indemnified Parties or any of them or asserted or awarded against the Indemnified Parties or any of them as a result of, or arising out of, or relating to: (i) any transaction contemplated by this Agreement or any other Warrant Document; (ii) the making of any claim by any investment banking firm, broker or third party that it is entitled to compensation from any Indemnified Party in connection with this Agreement; (iii) any claim, investigation, litigation, or proceeding made or commenced by a third party related to this Agreement or any other Warrant Documents, whether or not the Indemnified Party or any other Indemnified Party is party thereto; (iv) the breach by the Company of any representation or warranty set forth in this Agreement or in any other Warrant Document; or (v) the failure of the Company to comply with all terms, conditions, and covenants set forth in this Agreement or in any other Warrant Document. except for any such Indemnified Liabilities arising for the account of a particular Indemnified Party by reason of the relevant Indemnified Party's negligence or willful misconduct as determined by a final and nonappealable decision of a court of competent jurisdiction. If and to the extent that the foregoing undertaking may be unenforceable for any reason, the Company hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. The foregoing indemnity shall become effective immediately upon the execution and delivery hereof and shall remain operative and in full force and effect notwithstanding the consummation of the transactions contemplated hereunder, the issuance or exercise of the Warrants hereunder, the termination of this Agreement pursuant to Section 24, the invalidity or unenforceability of any term or provision of this Agreement or any other Warrant Document, or any investigation made by or on behalf of any Holder or the Purchaser. SECTION 23. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Holders shall bind and inure to the benefit of their respective successors and assigns, including those by operation of law, merger, consolidation or as otherwise provided in Section 15(f). SECTION 24. Termination. Except as otherwise provided herein, this Agreement shall terminate when (a) all Warrants have expired unexercised in accordance with their terms, and (b) all obligations of the Company (or any successor to either of them) shall have been satisfied in full and all contingencies in respect thereof shall no longer exist. SECTION 25. Governing Law. THIS AGREEMENT AND THE WARRANTS SHALL BE GOVERNED BY THOSE PROVISIONS OF THE CORPORATE CODE OF THE JURISDICTION IN WHICH THE COMPANY IS INCORPORATED AND ARTICLE 8 OF THE UNIFORM COMMERCIAL CODE OF THE JURISDICTION IN WHICH THE COMPANY IS INCORPORATED WHICH ARE NECESSARILY APPLICABLE TO SECURITIES ISSUED BY A CORPORATION INCORPORATED IN SUCH JURISDICTION AND OTHERWISE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF SAID STATE. SECTION 26. Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any Person other than the Company and the Holders any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company and the Holders. SECTION 27. Counterparts. This Agreement may be executed in any number of counterparts and each such counterpart shall for all purposes be deemed to be an original, and all such counterparts shall together constitute one and the same instrument. SECTION 28. Amendments; Waiver. No provision of this Agreement may be amended or waived except by an instrument in writing signed by the party sought to be bound; provided, however, that any amendment requested or waiver sought from the Holders of any provision of this Agreement which affects Holders generally may be given by the Required Holders and any waiver so given shall be binding on all Holders; provided further, that the provisions of Section 11 with respect to the type of securities for which the Warrants are exercisable may not be changed without the consent of each Holder affected thereby. No failure or delay by any party in exercising any right or remedy hereunder shall operate as a waiver thereof, nor shall a waiver of a particular right or remedy on one occasion be deemed a waiver of any other right or remedy or a waiver of the same right or remedy on any subsequent occasion. SECTION 29. Waiver of Jury Trial. THE PURCHASER, EACH HOLDER AND THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, ON THE WARRANTS OR ON ANY OF THE OTHER WARRANT DOCUMENTS, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT, THE WARRANTS OR ANY OF THE OTHER WARRANT DOCUMENTS, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE PURCHASER, ANY HOLDER OR THE COMPANY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PURCHASER'S ENTERING INTO THIS AGREEMENT. SECTION 30. Jurisdiction. The Company hereby agrees that any legal action or proceeding against it with respect to this Agreement, the Warrants or any of the other Warrant Documents may be brought in the courts of the State of New York or of the United States of America for the Southern District of New York as any Holder may elect, and, by execution and delivery hereof, it consents for itself and in respect of its property, generally and unconditionally, to and accepts the jurisdiction of the aforesaid courts and agrees that such jurisdiction shall be exclusive, unless waived by the Required Holders in writing, with respect to any action or proceeding brought by it against such Holders. The Company hereby irrevocably designates, appoints and empowers CT Corporation System, whose present address is 111 Eighth Avenue, New York, New York 10011, as its authorized agent to receive, for and on its behalf and its property, service of process in the State of New York when and as such legal actions or proceedings may be brought in the courts of the State of New York or of the United States of America sitting in New York, and such service of process shall be deemed complete upon the date of delivery thereof to such agent whether or not such agent gives notice thereof to the Company, or upon the earliest of any other date permitted by applicable law. The Company shall furnish the consent of CT Corporation System so to act to the Agent on or prior to the Closing Date. It is understood that a copy of said process served on such agent will as soon as practicable be forwarded to the Company, at its address set forth below, but its failure to receive such copy shall not affect in any way the service of said process on said agent as the agent of the Company. The Company irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of the copies thereof by certified mail, return receipt requested, postage prepaid, to it at its address set forth herein, such service to become effective upon the earlier of (i) the date 10 calendar days after such mailing and (ii) any earlier date permitted by applicable law. The Company agrees that Sections 5-1401 and 5-1402 of the General Obligations Law of the State of New York shall apply to this Agreement and each of the other Warrant Documents and waives any right to stay or to dismiss any action or proceeding brought before said courts on the basis of forum non conveniens. Nothing herein shall affect the right of any Holder to bring proceedings against the Company in the courts of any other jurisdiction or to serve process in any other manner permitted by applicable law. SECTION 31. Specific Performance. The Company recognizes that the rights of the Holders under this Agreement and the other Warrant Documents are unique and, accordingly, the Holders shall, in addition to such other remedies as may be available to any of them at law or in equity, have the right to enforce their rights hereunder and thereunder by actions for injunctive relief and specific performance to the extent permitted by law. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement or any of the other Warrant Documents and hereby agrees to waive in any action for specific performance the defense that a remedy at law would be adequate. This Agreement is not intended to limit or abridge any rights of the Holders which may exist apart from this Agreement. SECTION 32. Confidentiality. The Holders shall hold all non-public, proprietary or confidential information (which has been identified as such by the Company) obtained pursuant to the requirements of this Agreement in accordance with their customary procedures for handling confidential information of this nature; provided, however, that each Holder may make disclosure of any such information to its examiners, Affiliates, outside auditors, counsel, consultants, appraisers and other professional advisors in connection with this Agreement or as reasonably required by any proposed transferee in connection with the contemplated transfer of any Warrant Securities (but only if the proposed transferee agrees to be bound by the terms of this Section 32) or as required or requested by an Governmental Authority or representative thereof or in connection with the enforcement hereof or of any other Warrant Document or pursuant to legal process. In no event shall any Holder be obligated or required to return any materials furnished to it by the Company. SECTION 33. Entire Agreement. The parties hereto agree that this Agreement, the Registration Rights Agreement and the Loan Documents constitute the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings between them as to such subject matter; and there are no restrictions, agreements, arrangements, oral or written, between any or all of the parties relating to the subject matter hereof which are not fully expressed or referred to herein or therein. SECTION 34. Severability. If any provision of this Agreement shall be held or deemed to be, or shall in fact be, invalid, inoperative or unenforceable as applied to any particular case in any jurisdiction or jurisdictions, or in all jurisdictions or in all cases, because of the conflict of any provision with any constitution, statute, rule or public policy, or for any other reason, such circumstances shall not have the effect of rendering the provision or provisions in question, invalid, inoperative or unenforceable in any other jurisdiction or in any other case or circumstance or of rendering any other provision or provisions herein contained invalid, inoperative or unenforceable to the extent that such other provisions are not themselves actually in conflict with such constitution, statute, rule or public policy, but this Agreement shall be reformed and construed in any such jurisdiction or case as if such invalid, inoperative or unenforceable provision had never been contained herein and such provision reformed so that it would be valid, operative and enforceable to the maximum extent permitted in such jurisdiction or in such case. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written. CREATIVE HOST SERVICES, INC. By: /S/ Sayed Ali ------------- Name: Sayed Ali Title: President ING Capital LLC By: /s/ Steven G. Fleenor --------------------- Steven G. Fleenor Managing Director EXHIBIT A --------- FORM OF WARRANT CERTIFICATE --------------------------- THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. SAID SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION, OR AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL TO THE HOLDER) AS TO AN EXEMPTION, FROM THE REGISTRATION PROVISIONS OF SAID ACT OR LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF A WARRANT PURCHASE AGREEMENT, DATED AS OF JANUARY 17, 2003, BETWEEN CREATIVE HOST SERVICES, INC. (THE "COMPANY") AND ING CAPTIAL LLC (THE "PURCHASER") AND A REGISTRATION RIGHTS AGREEMENT, DATED AS OF JANUARY 17, 2003, BETWEEN THE COMPANY AND THE PURCHASER, COPIES OF EACH OF WHICH ARE ON FILE AT THE MAIN OFFICE OF THE COMPANY. ANY SALE OR TRANSFER OF THE SECURITIES EVIDENCED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS OF THOSE AGREEMENTS AND ANY SALE OR TRANSFER OF SUCH SECURITIES IN VIOLATION OF SAID AGREEMENTS SHALL BE INVALID. Certificate No. __ _______ Warrants Warrant Certificate CREATIVE HOST SERVICES, INC. This Warrant Certificate certifies that _________________________________, or registered assigns, is the registered holder of the number of Warrants (the "Warrants") set forth above to purchase shares of common stock, no par value per share (the "Common Stock"), of CREATIVE HOST SERVICES, INC., a California corporation (the "Company"). Each Warrant entitles the holder upon exercise to receive from the Company one fully paid and nonassessable share of Common Stock (a "Warrant Share") at the initial exercise price (the "Exercise Price") of $_____, payable in lawful money of the United States of America, upon surrender of this Warrant Certificate and payment of the Exercise Price, if applicable, at the office of the Company designated for such purpose, subject to the conditions set forth herein and in the Warrant Agreement referenced below. The Exercise Price and number and type of Warrant Shares issuable upon exercise of the Warrants are subject to adjustment before and after issue upon the occurrence of certain events, as set forth in the Warrant Agreement. Each Warrant also entitles the holder to convert such Warrant into the number of Warrant Shares determined in accordance with Section 11(b) of the Warrant Agreement. The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants, and are issued or to be issued pursuant to a Warrant Purchase Agreement dated as of January 17, 2003 (the "Warrant Agreement"), duly executed and delivered by the Company and ING Capital LLC ("ING"), which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, obligations and duties hereunder of the Company and the holders of the Warrants (the words "holders" or "holder" meaning the registered holders or registered holder). A copy of the Warrant Agreement may be obtained by the holder hereof upon written request to the Company. The holder of Warrants evidenced by this Warrant Certificate may exercise such Warrants under and pursuant to the terms and conditions of the Warrant Agreement by surrendering this Warrant Certificate, with the form of election to purchase attached hereto (and by this reference made a part hereof) properly completed and executed, together with payment of the Exercise Price in cash at the office of the Company designated for such purpose. In the event that any exercise of Warrants evidenced hereby shall be for less than the total number of Warrants evidenced hereby, there shall be issued by the Company to the holder hereof or such holder's registered assignee a new Warrant Certificate evidencing the number of Warrants not exercised. The Warrant Agreement provides that upon the occurrence of certain events the Exercise Price set forth on the face hereof may, subject to certain conditions, be adjusted. If the Exercise Price is adjusted, the Warrant Agreement provides that the number of shares of Warrant Shares issuable upon the exercise of each Warrant shall be adjusted. No fractional shares of Warrant Shares will be issued upon the exercise of any Warrant, but the Company will pay the cash value thereof determined as provided in the Warrant Agreement. The holders of the Warrants are entitled to certain registration rights as set forth in a Registration Rights Agreement dated as of January 17, 2003, among the Company and ING (the "Registration Rights Agreement"). By acceptance of this Warrant Certificate, the holder hereof agrees that upon exercise of any or all of the Warrants evidenced hereby, such holder will be bound by the Registration Rights Agreement. A copy of the Registration Rights Agreement may be obtained by the holder hereof upon written request to the Company. Warrant Certificates, when surrendered at the office of the Company by the registered holder thereof in person or by legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, for another Warrant Certificate or Warrant Certificates of like tenor evidencing in the aggregate a like number of Warrants. The Company may deem and treat the registered holder(s) thereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing made hereon) for the purpose of any exercise hereof, of any distribution to the holder(s) hereof and for all other purposes, and the Company shall not be affected by any notice to the contrary. Neither the Warrants nor this Warrant Certificate entitles any holder hereof to any rights of a stockholder of the Company. IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be signed by its duly authorized officer and has caused its corporate seal to be affixed hereunto or imprinted hereon. Dated: January 17, 2003 CREATIVE HOST SERVICES, INC. By: ____________________________________ Name: Title: [CORPORATE SEAL] FORM OF ELECTION TO PURCHASE [To Be Executed Upon Exercise of Warrant] The undersigned holder hereby represents that such holder is the registered holder of this Warrant Certificate, and hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive ____________ shares of Common Stock, no par value per share (the "Common Stock"), of CREATIVE HOST SERVICES, INC. (the "Company") and herewith tenders payment for such shares to the order of the Company in the amount of $___________ in accordance with the terms hereof. The undersigned requests that a certificate for such shares be registered in the name of the undersigned or such holder's nominee hereinafter set forth, and further that such certificate be delivered to the undersigned at the address hereinafter set forth or to such other person or entity as is hereinafter set forth. If said number of shares is less than all of the shares of Common Stock purchasable hereunder, the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares be registered in the name of the undersigned or such holder's nominee hereinafter set forth, and further that such Warrant Certificate be delivered to the undersigned at the address hereinafter set forth or to such other person or entity as is hereinafter set forth. Certificate to be registered as follows: ---------------------------------------- Name: _______________________________________ Address: _______________________________________ _______________________________________ _______________________________________ Certificate to be delivered as follows: --------------------------------------- Name: _______________________________________ Address: _______________________________________ _______________________________________ _______________________________________ Date:____________________ _______________________________________ (Signature must conform in all respects to the name of the holder as specified on the face of the Warrant Certificate, unless Form of Assignment has been executed) FORM OF ELECTION TO CONVERT [To be Executed Upon Conversion of Warrant] The undersigned holder hereby represents that such holder is the registered holder of this Warrant Certificate, and hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to convert the Warrants evidenced by this Warrant Certificate into ____________ shares of Common Stock, no par value per share (the "Common Stock"), of CREATIVE HOST SERVICES, INC(the "Company"). The undersigned requests that a certificate for such shares be registered in the name of the undersigned or such holder's nominee hereinafter set forth, and further that such certificate be delivered to the undersigned at the address hereinafter set forth or to such other person or entity as is hereinafter set forth. If said number of shares is less than all of the shares of Common Stock convertible hereunder, the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares be registered in the name of the undersigned or such holder's nominee hereinafter set forth, and further that such Warrant Certificate be delivered to the undersigned at the address hereinafter set forth or to such other person or entity as is hereinafter set forth. Certificate to be registered as follows: ---------------------------------------- Name: _______________________________________ Address: _______________________________________ _______________________________________ _______________________________________ Certificate to be delivered as follows: --------------------------------------- Name: _______________________________________ Address: _______________________________________ _______________________________________ _______________________________________ Date:____________________ _______________________________________ (Signature must conform in all respects to the name of the holder as specified on the face of the Warrant Certificate, unless Form of Assignment has been executed) FORM OF ASSIGNMENT [To be executed upon Transfer of Warrant] FOR VALUE RECEIVED, the undersigned registered holder of the enclosed Warrant Certificate hereby sells, assigns and transfers unto _______________________________________ the right represented by such Warrant Certificate to purchase _____________ shares of Common Stock of CREATIVE HOST SERVICES, INC. to which such Warrant Certificate relates, and appoints _________________________________________________ Attorney to make such transfer on the books of CREATIVE HOST SERVICES, INC. maintained for such purpose, with full power of substitution in the premises. Date:___________________ _______________________________________ (Signature must conform in all respects to name of holder as specified on the face of the Warrant Certificate) _____________________________________ (Street Address) _____________________________________ (City) (State) (Zip Code) EXHIBIT B --------- HOLDERS OF THE COMPANY'S STOCK ------------------------------ NAME AND ADDRESS OF AMOUNT AND NATURE PERCENT OF BENEFICIAL OWNER(1) OF BENEFICIAL OWNER(2) CLASS (3) - ------------------- ---------------------- ---------- John Stewart Jackson, IV 2,803,898(4) 34.4% c/o Jackson Burglar Alarm 100 East 20th Avenue Denver, CO 80205-3102 OFFICERS AND DIRECTORS: Sayed Ali 1,045,000(5) 12.9% John P. Donohue 90,000(6) 1.1% Booker T. Graves 77,800(7) 1.0% Charles B. Radloff 35,000(8) 0.4% Tasneem Vakharia 80,000(9) 1.0% Louis Coccoli, Jr. 59,944(10) 0.7% ALL OFFICERS AND DIRECTORS 1,387,744 16.5% AS A GROUP (6 PERSONS) EX-4.3 5 doc4.txt ___________________________________________________________________________ REGISTRATION RIGHTS AGREEMENT BETWEEN CREATIVE HOST SERVICES, INC. AND ING CAPITAL LLC Dated as of January 17, 2003 ___________________________________________________________________________ TABLE OF CONTENTS ------------------- Page ---- Section 1. Definitions 2 Section 2. Registration of Securities by the Company 4 Section 3. Shelf Registration 12 Section 4. Registration Expenses 21 Section 5. Conditions to Registration 22 Section 6. Indemnification 23 Section 7. Exchange Act Registration; Rule 144 Reporting 27 Section 8. Limitation on Registration Rights of Others 29 Section 9. Mergers, etc. 29 Section 10. Notices, etc. 30 Section 11. Entire Agreement 31 Section 12. Waivers and Further Agreements 31 Section 13. Amendments 32 Section 14. Assignment; Successors and Assigns 32 Section 15. Severability 32 Section 16. Counterparts 33 Section 17. Section Headings 33 Section 18. Gender; Usage 33 Section 19. Governing Law 33 Section 20. Termination 33 Section 21. Expenses 33 Section 22. Specific Performance 34 Schedule I Agreements Containing Registration Rights in Favor of Other Shareholders REGISTRATION RIGHTS AGREEMENT ------------------------------- THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered into as of January 17, 2003 by and between CREATIVE HOST SERVICES, INC., a California corporation (the "Company"), and ING CAPITAL LLC, a Delaware limited liability company (the "Purchaser"). W I T N E S S E T H: ---------------------------- RECITALS. - -------- 1) Simultaneously herewith, Purchaser is entering into a Credit Agreement, dated of even date herewith (the "Credit Agreement"), by and among Company, Purchaser as lender (Purchaser and any subsequent lender under the Credit Agreement, a "Lender" and collectively the "Lenders"), and Purchaser as agent for the Lenders, pursuant to which Purchaser has agreed, upon the terms and subject to the conditions set forth therein, to make Loans from time to time to the Borrower; and 2) It is a condition precedent to the initial extensions of credit by the Lenders to the Company contemplated by the Credit Agreement that the Company agree to issue to the Purchaser warrants initially exercisable for 452,050 shares of Common Stock, no par value per share, of the Company for an initial exercise price of $1.87 per share; and 3) The Purchaser is unwilling to extend credit to the Company pursuant to the Credit Agreement or to purchase the Warrants pursuant to the Warrant Agreement (as defined in Section 1) unless it receives the assurances set forth in this Agreement; NOW, THEREFORE, in consideration of the recitals, of the Purchaser's preceding with the consummation of the transactions contemplated by the Warrant Agreement and the Credit Agreement, and the mutual covenants hereinafter set forth, the parties, intending to be legally bound, hereby agree as follows: SECTION 1. Definitions. i) Defined Terms. The following terms (whether or not underscored) when used in this Agreement, including its preamble and recitals, shall, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof): "Agreement" means this Registration Rights Agreement as in effect on the date hereof and as hereafter amended, supplemented, restated or otherwise modified. "Available Securities" is defined in Section 2. "Business Day" is defined in the Warrant Agreement. "Common Stock" is defined in the Warrant Agreement. "Company" is defined in the Preamble. "Credit Agreement" shall have the meaning set forth in the first preamble hereto. "Exchange Act" is defined in the Warrant Agreement. "Holders" shall mean, collectively, the Purchaser and any subsequent registered holders, from time to time, of the Common Stock issuable upon conversion of Warrant Securities. Whenever the phrase "Holder of any Registrable Securities" or any similar phrase is used herein, it shall also include any holders of the Warrants. "Indemnified Person" is defined in Section 6(a). "Indemnifying Person" is defined in Section 6(c). "NASD" means the National Association of Securities Dealers, Inc. "Person" is defined in the Warrant Agreement. "Prospectus" means each prospectus included as part of any Registration Statement, as amended or supplemented, including each preliminary prospectus and all material incorporated by reference in such prospectus. "Purchaser" is defined in the Preamble. "Quoted Price" is defined in the Warrant Agreement. "Registrable Securities" shall mean the shares of Common Stock issued, but excluding (i) shares that have been disposed of under a Registration Statement, the Shelf Registration Statement or any other effective registration statement, and (ii) shares distributed to the public pursuant to Rule 144 under the Securities Act. "Registration Expenses" is defined in Section 4(c). "Registration Statement" means any registration statement of the Company which covers Registrable Securities pur-suant to Section 2 of this Agreement, including the Prospectus, amendments, including post-effective amendments, and supplements to such registration statement and Prospectus and all exhibits and all material incorporated by reference in such registration statement. "Required Holders" shall mean the holders of Warrant Securities which when fully converted would represent at least two-thirds of the voting power of such securities held by all of the Holders. "Securities Act" is defined in the Warrant Agreement. "SEC" is defined in the Warrant Agreement. "Selling Holder" is defined in Section 19(c). "Selling Holder Notice" is defined in Section 19(d). "Selling Holder Offer" is defined in Section 19(d). "Shelf Prospectus" shall mean the prospectus included in the Shelf Registration Statement, including any preliminary prospectus, and any amendment or supplement thereto, including any supplement relating to the terms of the offering of any portion of the Registrable Securities covered by the Shelf Registration Statement, and in each case including all material incorporated by reference therein. "Shelf Registration" shall mean a registration required to be effected pursuant to Section 3 hereof. "Shelf Registration Statement" shall mean a registration statement of the Company (and any other entity required to be a registrant with respect to such registration statement pursuant to the requirements of the Securities Act) that covers all of the Registrable Securities to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, or any similar rule that may be adopted by the SEC, and all amendments (including post-effective amendments) to such registration statement, and all exhibits thereto and materials incorporated by reference therein. "Specified Registrable Securities" is defined in Section 2(a). "Stock" is defined in the Warrant Agreement. "Warrant Agreement" means the Warrant Purchase Agreement, dated of even date herewith, by and between the Purchaser and the Company, as in effect on the date hereof and as hereafter amended, supplemented, restated or otherwise modified. "Warrant Securities" is defined in the Warrant Agreement. "Warrants" is defined in the Warrant Agreement. ii) Cross-References. Unless otherwise specified, references in this Agreement to any Article or Section are references to such Article or Section of this Agreement, and unless otherwise specified, references in any Article, Section, or definition to any clause are references to such clause of such Section, Article or definition. SECTION 2. Registration of Securities by the Company. i) Piggyback Registration. If at any time or from time to time the Company shall propose to file on its behalf or on behalf of any of its security holders a registration state-ment under the Securities Act on Form S-1, S-2 or S-3 (or on any other form for the general registration of securities) with respect to any class of securities (other than a Shelf Registration Statement filed pursuant to Section 3), the Company shall in each case: (1) promptly give written notice to each Holder at least thirty (30) days before the anticipated filing date, indicating the proposed offering price and describing the plan of distribution; (2) include in such registration (and any related qualification under blue sky or other state securities laws or other compliance) and, at the request of any Holder, in any underwriting involved therein, all the Registrable Securities specified by any Holder or Holders of Registrable Securities (the "Specified Registrable Securities") in a written request (the "Registration Request") made within twenty (20) days after receipt of such written notice from the Company; and (3) use its best efforts to cause the managing underwriter(s) of such proposed underwritten offering to permit the Specified Registrable Securities to be included in the Registration Statement for such offering on the same terms and conditions as any similar securities of the Company included therein. Notwith-standing the foregoing, if the managing underwriter(s) of such offering advise(s) the Holders of Specified Registrable Securities in writing that marketing considerations require a limitation on the securities, other than the securities the Company intends to sell, to be included in any Registration Statement filed under this Section 2 to a certain number of shares (the "Available Securities"), then the Company shall in such case be obligated to such Holders only with respect to such number of Available Securities. The limitation on the number of Specified Registrable Securities will be imposed pro rata (based upon the ratio of the number of shares of Specified Registrable Securities which the managing underwriter(s) propose to include at the anticipated initial public offering price to the number of Specified Registrable Securities owned by each Holder) among all Holders of Specified Registrable Securities. Each Registration Request shall set forth the number or amount of Specified Registrable Securities. Notwith-standing any other provision of this Agreement to the contrary, neither the delivery of the notice by the Company nor of the Registration Request by any Holder shall in any way obligate the Company to file a Registration Statement and, notwithstanding such filing, the Company may, at any time prior to the effective date thereof, in its sole discretion, determine not to offer the securities to which the Registration Statement relates without liability to any of the Holders. No registration of Registrable Securities effected under this Section 2 shall relieve the Company of its obligation to effect the registration of Registrable Securities pursuant to Section 3. ii) Piggyback Registration Procedures. If and when the Company shall be required by the provisions of this Section 2 to effect the registration of Registrable Securities under the Securities Act, the Company will use its best efforts to effect such registration to permit the sale of such Registrable Securities in accordance with the intended method or methods of disposition thereof, and pursuant thereto it will, as expeditiously as possible: (1) before filing a Registration Statement or Prospectus or any amendments or supplements thereto, furnish to the Holders of the Registrable Securities covered by such Registration Statement and the underwriter(s), if any, copies of all such documents proposed to be filed, which documents will be made available, on a timely basis, for review by such Holders and underwriters; (2) prepare and file with the SEC such amendments and post-effective amendments to any Registration Statement, and such supplements to the Prospectus, as may be reasonably requested by any Holder of Registrable Securities or the managing underwriter(s), if any, or as may be required by the Securities Act, the Exchange Act or by the rules, regulations or instructions applicable to the registration form utilized by the Company or as may otherwise be necessary to keep such Registration Statement effective until the earlier of such time as all of the Registrable Securities covered by such Registration Statement have been disposed of in accordance with the intended method of disposition set forth in such Registration Statement or Prospectus; and cause the Prospectus as so supplemented to be filed pursuant to Rule 424 (or any successor rule) under the Securities Act; and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended methods of disposition by the sellers thereof set forth in such Registration Statement or Prospectus; (3) promptly notify the selling Holders of Registrable Securities and the managing underwriter(s), if any, and if requested by any such Person, confirm such advice in writing: (a) of the filing of the Prospectus or any supplement to the Prospectus and of the effectiveness of the Registration Statement and/or any post-effective amendment, (b) of any request by the SEC for amendments or supplements to the Registration Statement or the Prospectus or for additional information, (c) of the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose, (d) of the Company's becoming aware at any time that the representations and warranties of the Company contemplated by paragraph (xiv)(a) below have ceased to be true and correct, (e) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation or threat of any proceeding for such purpose, and (f) of the existence of any fact which, to the knowledge of the Company, results in the Registration Statement, the Prospectus or any document incorporated therein by reference containing an untrue statement of material fact or omitting to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (4) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of the Registration Statement or any qualification referred to in paragraph (iii)(e) at the earliest possible moment; (5) if reasonably requested by the managing underwriter(s) or the Required Holders of Registrable Securities being sold in connection with an underwritten offering, immediately incorporate in a supplement to the Prospectus or post-effective amendment to the Registration Statement such information as the managing underwriter(s) or the Required Holders of the Registrable Securities being sold reasonably request to have included therein relating to the plan of distribution with respect to such Registrable Securities, including, without limitation, information with respect to the amount of Registrable Securities being sold to such underwriters, the purchase price being paid therefor by such underwriters and any other terms of the underwritten (or best-efforts underwritten) offering of the Registrable Securities to be sold in such offering; and make all required filings of such supplement to the Prospectus or post-effective amendment to the Registration Statement as soon as notified of the matters to be incorporated in such supplement to the Prospectus or post-effective amendment to the Registration Statement; (6) at the request of any selling Holder of Registrable Securities, furnish to such selling Holder of Registrable Securities and each managing underwriter, if any, without charge, at least one signed copy of the Registration Statement and any post-effective amendment thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits (including those incorporated by reference); (7) deliver to each selling Holder of Registrable Securities and the managing underwriter(s), if any, without charge, as many copies of the Registration Statement, each Prospectus (including each preliminary prospectus) and any amendment or supplement thereto (in each case including all exhibits), as such Persons may reasonably request, together with all documents incorporated by reference in such Registration Statement or Prospectus, and such other documents as such selling Holder may reasonably request in order to facilitate the disposition of its Registrable Securities covered by such Registration Statement; the Company consents to the use of each Prospectus and any supplement thereto by each of the selling Holders of Registrable Securities and the managing underwriter(s), if any, in connection with the offering and sale of the Registrable Securities covered by each Prospectus or any supplement thereto; (8) prior to any public offering of Registrable Securities, register or qualify or reasonably cooperate with the selling Holders of Registrable Securities, the managing underwriter(s), if any, and their respective counsel in connection with the registration or qualification of such Registrable Securities for offer and sale under the securities or blue sky laws of such jurisdictions as any selling Holder or managing underwriter(s) reasonably request(s) and do any and all other acts or things necessary to enable the disposition in such jurisdictions of the Registrable Securities covered by the Registration Statement; (9) cooperate with the selling Holders of Registrable Securities and the managing underwriter(s), if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any legends restricting the transfer thereof; and enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriters may request at least two Business Days prior to any sale of Registrable Securities to the underwriters; (10) use its best efforts to cause the Registrable Securities covered by the applicable Registration Statement to be registered with or approved by such United States, state and local governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriters, if any, to consummate the disposition of such Registrable Securities; (11) if any fact contemplated by paragraph (iii)(b) or (iii)(f) above shall exist, promptly notify each Holder on whose behalf Registrable Securities have been registered and promptly prepare and furnish to such Holders a supplement or post-effective amendment to the Registration Statement or the related Prospectus or any document incorporated therein by reference and promptly file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities, neither the Registration Statement nor the Prospectus will contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; (12) if requested by the Required Holders of the Registrable Securities or by the managing underwriter(s), if any, cause all Registrable Securities covered by the Registration Statement to be (A) listed on each securities exchange on which securities of the same class are then listed or (B) admitted for trading in any inter-dealer quotation system on which securities of the same class are then traded; (13) not later than the effective date of the applicable Registration Statement, provide a CUSIP number for all Registrable Securities covered by the Registration Statement and provide the applicable transfer agent with printed certificates for such Registrable Securities which are in a form eligible for deposit with Depository Trust Company; (14) enter into agreements (including underwriting agreements) and take all other reasonable actions in order to expedite or facilitate the disposition of such Registrable Securities and in such connection, except as otherwise provided, whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration: (a) make such representations and warranties to the Holders selling such Registrable Securities and, in connection with any underwritten offering, to the underwriters, in form, substance and scope as are customarily made by issuers to underwriters in similar underwritten offerings; (b) obtain opinions of counsel to the Company and updates thereof addressed to each selling Holder and the underwriters, if any, covering the matters customarily covered in opinions requested in similar underwritten offerings and such other matters as may be reasonably requested by such Holders and underwriters, which counsel and opinions shall be reasonably satisfactory (in form, scope and substance) to the managing underwriters, if any, and the Required Holders of such Registrable Securities; (c) in connection with any underwritten offering, obtain so-called "cold comfort" letters and updates thereof from the Company's independent certified public accountants addressed to the selling Holders of Registrable Securities and the underwriters, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters to underwriters in connection with similar underwritten offerings; (d) if an underwriting agreement is entered into, cause the same to set forth in full the indemnification and contribution provisions and procedures of Section 6 (or such other substantially similar pro-visions and procedures as the underwriters shall reasonably request) with respect to all parties to be indemnified pursuant to said Section 6; and (e) deliver such documents and certificates as may reasonably be requested by the Required Holders of the Registrable Securities being sold, or the managing underwriter(s), if any, to evidence compliance with this paragraph (xiv) and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company; the foregoing to be done upon each closing under any underwriting or similar agreement as and to the extent required thereunder and from time to time as may reasonably be requested by any selling Holder of Registrable Securities in connection with the disposition of Registrable Securities pursuant to such Registration Statement, all in a manner consistent with customary industry practice; (15) upon execution and delivery of such confidentiality agreements as the Company may reasonably request, make available to the Holders of the Registrable Securities being sold, any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney or accountant retained by such Holders or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors and employees to supply all information reasonably requested by any such Holder, underwriter, attorney or accountant in connection with the registration, at such time or times as the Person requesting such information shall reasonably determine; (16) otherwise use its best efforts to comply with the Securities Act, the Exchange Act, all applicable rules and regulations of the SEC and all applicable state blue sky and other securities laws, rules and regulations, and make generally available to its security holders an earnings statement satisfying the provisions of Section 11(a) of the Securities Act, as soon as practicable, but in no event later than thirty (30) days after the end of the 12 calendar month period commencing after the effective date of the Registration Statement; (17) cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any underwriter (including any "qualified independent underwriter" that is required to be retained in accordance with the rules and regulations of the NASD); and (18) prior to the filing of any document which is being prepared for incorporation by reference into the Registration Statement or the Prospectus, upon receipt of such confidentiality agreements as the Company may reasonably request, provide copies of such document to counsel to the selling Holders of Registrable Securities, and to the managing underwriter(s), if any, and make the Company's representatives available for discussion of such document. If requested in writing by the Company or the lead underwriter, if any, of any public offering effected pursuant to this Section 2, the Company and each Holder owning Registrable Securities exercisable for or evidencing at least 1% of outstanding Common Stock will execute and deliver an agreement undertaking not to effect any public sale or distribution, including any sale pursuant to Rule 144 under the Securities Act, of any shares of Common Stock (other than as part of such underwritten public offering) within 7 days before or 120 days after the effective date of a registration statement filed pursuant to this Section 2. SECTION 3. Shelf Registration. i) Filing of Shelf Registration Statement. Promptly after the date hereof and in any event on or before the earlier to occur of (i) the 10th Business Day following the date that the Company's draft Registration Statement of Form SB-2 currently filed with the SEC is declared effective, and (ii) January 30, 2003, the Company shall cause to be filed the Shelf Registration Statement providing for the sale by the Holders of all of the Registrable Securities in accordance with the terms hereof, and the Company will use its best efforts to cause such Shelf Registration Statement to be declared effective by the SEC on or before the 30th day following the date of filing of the Shelf Registration Statement. The Company agrees to use its best efforts to keep the Shelf Registration Statement with respect to the Registrable Securities continuously effective so long as any Holder holds Registrable Securities until such time as each Holder has sold all of its Registrable Securities pursuant to such Registration Statement. The Company further agrees to amend the Shelf Registration Statement if and as required by the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement or by the Securities Act or any rules and regulations thereunder; provided, however, that the Company shall not be deemed to have used its best efforts to keep the Shelf Registration Statement effective during the applicable period if it voluntarily takes any action that would result in selling Holders not being able to sell Registrable Securities covered thereby during that period, unless such action is permitted by this Agreement or required under applicable law or the Company has filed a post-effective amendment to the Shelf Registration Statement and the SEC has not declared it effective. ii) Shelf Registration Procedures. In connection with the obligations of the Company with respect to the Shelf Registration Statement contemplated by this Section 3, the Company shall use its best efforts to effect such registration to permit the sale of such Registrable Securities in accordance with the intended method or methods of disposition thereof, and pursuant thereto it will, as expeditiously as possible: (1) before filing a Shelf Registration Statement or Shelf Prospectus or any amendments or supplements thereto, furnish to the Holders of the Registrable Securities covered by such Shelf Registration Statement and the underwriter(s), if any, copies of all such documents proposed to be filed, which documents will be made available, on a timely basis, for review by such Holders and underwriters; and the Company will not file any Shelf Registration Statement or amendment thereto or any Shelf Prospectus or any supple-ment thereto to which the Required Holders of the Registrable Securities covered by such Shelf Registration Statement or the managing underwriter(s), if any, shall reasonably object; (2) prepare and file with the SEC, within the time period set forth in Section 3(a) hereof, the Shelf Registration Statement, which Shelf Registration Statement (a) shall be available for the sale of the Registrable Securities in accordance with the intended method or methods of distribution by the selling Holders thereof and (b) shall comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the SEC to be filed therewith; (3) (a) prepare and file with the SEC such amendments to such Shelf Registration Statement as may be reasonably requested by any Holder of Registrable Securities or the managing underwriter(s), if any, or as may be required by the Securities Act, the Exchange Act or by the rules, regulations or instructions applicable to the registration form utilized by the Company or as may otherwise be necessary to keep such Shelf Registra-tion Statement effective for the applicable period; (b) cause the Shelf Prospectus to be amended or supplemented as may be reasonably requested by any Holder of Registrable Securities or the managing underwriter(s), if any, or as may be required by the Securities Act, the Exchange Act or by the rules, regulations or instructions applicable to the registration form utilized by the Company or as may otherwise be necessary to keep such Shelf Registra-tion Statement effective for the applicable period; (c) cause the Shelf Prospectus as so amended or supplemented to be filed pursuant to Rule 424 (or any successor rule) under the Securities Act; (d) respond as promptly as practicable to any comments received from the SEC with respect to the Shelf Registration Statement or any amendment thereto; and (e) comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Shelf Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the selling Holders thereof; (4) promptly notify the selling Holders of Registrable Securities and the managing underwriter(s), if any, and if requested by any such Person, confirm such advice in writing: (a) of the filing of the Shelf Prospectus or any supplement to the Shelf Prospectus and of the effectiveness of the Shelf Registration Statement and/or any post-effective amendment, (b) of any request by the SEC for amendments or supplements to the Shelf Registration Statement or the Shelf Prospectus or for additional information, (c) of the issuance by the SEC of any stop order suspending the effectiveness of the Shelf Registration Statement or the initiation of any proceedings for that purpose, (d) of the Company's becoming aware at any time that the representations and warranties of the Company contemplated by paragraph (xv)(a) below have ceased to be true and correct, (e) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation or threat of any proceeding for such purpose, and (f) of the existence of any fact which, to the knowledge of the Company, results in the Shelf Registration Statement, the Shelf Prospectus or any document incorporated therein by reference containing an untrue statement of material fact or omitting to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (5) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of the Shelf Registration Statement or any qualification referred to in paragraph (iii)(e) at the earliest possible moment; (6) if reasonably requested by the managing underwriter(s) or the Required Holders of Registrable Securities being sold in connection with an underwritten offering, immediately incorporate in a supplement to the Shelf Prospectus or post-effective amendment to the Shelf Registration Statement such information as the managing underwriter(s) or the Required Holders of the Registrable Securities being sold reasonably request to have included therein relating to the plan of distribution with respect to such Registrable Securities, including, without limitation, information with respect to the amount of Registrable Securities being sold to such underwriters, the purchase price being paid therefor by such underwriters and any other terms of the underwritten (or best-efforts underwritten) offering of the Registrable Securities to be sold in such offering; and make all required filings of such supplement to the Shelf Prospectus or post-effective amendment to the Shelf Registration Statement as soon as notified of the matters to be incorporated in such supplement to the Shelf Prospectus or post-effective amendment to the Shelf Registration Statement; (7) at the request of any selling Holder of Registrable Securities, furnish to such selling Holder of Registrable Securities and each managing underwriter, if any, without charge, at least one signed copy of the Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits (including those incorporated by reference); (8) deliver to each Holder of Registrable Securities and the managing underwriter(s), if any, without charge, as many copies of the Shelf Registration Statement, each Shelf Prospectus and any amendment or supplement thereto (in each case including all exhibits), as such Persons may reasonably request, together with all documents incorporated by reference in such Shelf Registration Statement or Shelf Prospectus, and such other documents as such selling Holder may reasonably request in order to facilitate the disposition of its Registrable Securities; the Company consents to the use of the Shelf Prospectus and any amendment or supplement thereto by each such Holder of Registrable Securities and the underwriter(s), if any, in connection with the offering and sale of the Registrable Securities covered by the Shelf Prospectus or amendment or supplement thereto; (9) prior to the time the Shelf Registration Statement is declared effective by the SEC, register or qualify the Registrable Securities or reasonably cooperate with the selling Holders, the underwriter(s), if any, and their respective counsel in connection with the registration or qualification of such Registrable Securities for offer and sale under the securities or blue sky laws of such jurisdictions as any selling Holder or managing underwriter(s), if any, reasonably request(s), keep each such registration or qualification effective during the period such Shelf Registration Statement is required to be kept effective, and do any and all other acts or things necessary to enable the disposition in such jurisdic-tions of the Registrable Securities covered by the Shelf Registration Statement; (10) cooperate with the selling Holders of Registrable Securities and the managing underwriter(s), if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any legends restricting the transfer thereof; and enable such Registrable Securities to be in such denominations and registered in such names as the selling Holders or the managing underwriters, if any, may request at least two Business Days prior to any sale of Registrable Securities; (11) use its best efforts to cause the Registrable Securities covered by the Shelf Registration Statement to be registered with or approved by such United States, state and local governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriters, if any, to consummate the disposition of such Registrable Securities; (12) if any fact contemplated by paragraph (iv)(b) or (iv)(f) above shall exist, promptly notify each Holder on whose behalf Registrable Securities have been registered and promptly prepare and furnish to such Holders a supplement or post-effective amendment to the Shelf Registration Statement or the related Shelf Prospectus or any document incorporated therein by reference and promptly file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities, neither the Shelf Registration Statement nor the Shelf Prospectus will contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; (13) if requested by the Required Holders of the Registrable Securities or by the managing underwriter(s), if any, cause all Registrable Securities covered by the Shelf Registration Statement to be (a) listed on each securities exchange on which securities of the same class are then listed or (b) admitted for trading in any inter-dealer quotation system on which securities of the same class are then traded; (14) not later than the effective date of the Shelf Registration Statement, provide a CUSIP number for all Registrable Securities covered by the Shelf Registration Statement and provide the applicable transfer agent with printed certificates for such Registrable Securities which are in a form eligible for deposit with Depository Trust Company; (15) enter into agreements (including underwriting agreements) and take all other reasonable actions in order to expedite or facilitate the disposition of such Registrable Securities and in such connection, except as otherwise provided, whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration: (a) make such representations and warranties to the Holders selling such Registrable Securities and, in connection with any underwritten offering, to the underwriters, in form, substance and scope as are customarily made by issuers to underwriters in similar underwritten offerings; (b) obtain opinions of counsel to the Company and updates thereof addressed to each selling Holder and the underwriters, if any, covering the matters customarily covered in opinions requested in similar underwritten offerings and such other matters as may be reasonably requested by such Holders and underwriters, which counsel and opinions shall be reasonably satisfactory (in form, scope and substance) to the managing underwriters, if any, and the Required Holders of such Registrable Securities; (c) in connection with any underwritten offering, to obtain so-called "cold comfort" letters and updates thereof from the Company's independent certified public accountants addressed to the selling Holders of Registrable Securities and the underwriters, if any, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters to underwriters in connection with similar underwritten offerings; (d) if an underwriting agreement is entered into, cause the same to set forth in full the indemnification and contribution provisions and procedures of Section 6 (or such other substantially similar pro-visions and procedures as the underwriters shall reasonably request) with respect to all parties to be indemnified pursuant to said Section 6; and (e) deliver such documents and certificates as may reasonably be requested by the Required Holders of the Registrable Securities being sold, or the managing underwriter(s), if any, to evidence compliance with this paragraph (xiv) and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company; the foregoing to be done upon each closing under any underwriting or similar agreement as and to the extent required thereunder and from time to time as may reasonably be requested by any selling Holder of Registrable Securities in connection with the disposition of Registrable Securities pursuant to such Shelf Registration Statement, all in a manner consistent with customary industry practice; (16) upon execution and delivery of such confidentiality agreements as the Company may reasonably request, make available to the Holders of the Registrable Securities being sold, any underwriter participating in any disposition pursuant to such Shelf Registration Statement, and any attorney or accountant retained by such Holders or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors and employees to supply all information reasonably requested by any such Holder, underwriter, attorney or accountant in connection with the registration, at such time or times as the Person requesting such information shall reasonably determine; (17) otherwise use its best efforts to comply with the Securities Act, the Exchange Act, all applicable rules and regulations of the SEC and all applicable state blue sky and other securities laws, rules and regulations, and make generally available to its security holders, as soon as practicable, an earnings statement satisfying the provisions of Section 11(a) of the Securities Act; (18) cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any underwriter (including any "qualified independent underwriter" that is required to be retained in accordance with the rules and regulations of the NASD); and (19) prior to the filing of any document which is being prepared for incorporation by reference into the Registration Statement or the Prospectus, upon receipt of such confidentiality agreements as the Company may reasonably request, provide copies of such document to counsel to the selling Holders of Registrable Securities, and to the managing underwriter(s), if any, and make the Company's representatives available for discussion of such document. iii) Covenants of Holders. In connection with and as a condition to the Company's obligations with respect to the Shelf Registration Statement pursuant to this Section 3, each Holder covenants and agrees that (i) upon receipt of any notice from the Company contemplated by Section 3(b)(iv) (in respect of the occurrence of an event contemplated by clause (f) of Section 3(b)(iv)), such Holder shall not offer or sell any Registrable Securities pursuant to the Shelf Registration Statement until such Holder receives copies of the supplemented or amended Shelf Prospectus contemplated by Section 3(b)(xii) hereof and receives notice that any post-effective amendment has become effective, and, if so directed by the Company, such Holder will deliver to the Company (at the expense of the Company) all copies in its possession, other than permanent file copies then in such Holder's possession, of the Shelf Prospectus as amended or supplemented at the time of receipt of such notice; (ii) such Holder and any of its officers, directors or affiliates, if any, will comply with the provisions of Rule 10b-6 and 10b-7 under the Exchange Act as applicable to them in connection with sales of Registrable Securities pursuant to the Shelf Registration Statement; and (iii) such Holder and any of its officers, directors or affiliates, if any, will comply with the prospectus delivery requirements of the Securities Act as applicable to them in connection with sales of Registrable Securities pursuant to the Shelf Registration Statement. iv) Mechanics of Shelf Registration. Each registration effected pursuant to this Section 3 shall be effected by the filing of a Shelf Registration State-ment on Form S-1 or Form S-3 (provided that if Form S-3 is used the Shelf Prospectus shall contain the information that would have been required to be included therein had Form S-1 been used), unless the use of a different form has been agreed upon in writing by the Required Holders; provided, however, that if the intended method of disposition by the requesting Holders is to be an underwritten offering, the Company shall use such form of Registration Statement as is acceptable to the underwriter(s). Whenever a registration requested by one or more Holders pursuant to this Section 3 is for an underwritten offering, only Registrable Securities which are to be distributed by the underwriters may be included in such registration, without the written consent of the Required Holders. v) Blackout Period. The Company shall be entitled to elect that the Shelf Registration Statement not be usable, for a reasonable period of time, but not in excess of 30 days (a "Blackout Period"), if the Company determines in good faith that the registration and distribution of Registrable Securities (or the use of the Shelf Registration Statement or related Shelf Prospectus) would interfere with any pending material financing, acquisition or corporate reorganization or similar transaction involving the Company or any of its subsidiaries because it would require premature disclosure thereof and promptly gives the Holders of Registrable Securities written notice of such determination, containing a general statement of the reasons for such postponement or restriction on use and an approximation of the anticipated delay; provided, however, that the aggregate number of days included in all Blackout Periods during any consecutive 12 months shall not exceed 60 days and no financing, acquisition or corporate reorganization that is the basis for any Blackout Period may be the basis for any subsequent Blackout Period; provided, further however, that no Blackout Period shall be effective, and the Company shall not engage in any material financing, acquisition or corporate reorganization or similar transaction involving the Company or any of its subsidiaries, at any time prior to the date that is 60 days following the date on which the Shelf Registration Statement is declared effective by the SEC. vi) Holdback Agreement. Subject to the provisions of this sentence becoming effective in accordance with the immediately following sentence, if (i) the Company shall file a registration statement (other than in connection with the registration of securities issuable pursuant to an employee stock option, stock purchase or similar plan or pursuant to a merger, exchange offer or a transaction of the type specified in Rule 145(a) under the Securities Act) with respect to its Common Stock and (ii) with reasonable prior notice, the managing underwriter or underwriters advises the Company in writing (in which case the Company shall notify the Holders) that a public sale or distribution of Registrable Securities would adversely impact such offering, then each Holder of Registrable Securities shall, to the extent not inconsistent with applicable law, refrain from effecting any public sale or distribution of Registrable Securities during the 10-day period prior to, and during the 90-day period beginning on, the effective date of such registration statement. The provisions set forth in the preceding sentence shall not become effective until the Company shall have entered into agreements with the holders of at least two-thirds of the shares entitled to registration rights pursuant to the World Registration Rights Agreement providing that (i) such holders agree to waive any priority to which they are entitled over the Holders in connection with the exercise of incidental or piggyback registration rights and instead agree that in connection with any reductions in the shares entitled to participate in an underwritten offering such holders under the World Registration Rights Agreement, the Holders and any other holders entitled to an equal priority with the Holders will bear such reductions on a pro rata basis based on the number of shares held by each such Person, and (ii) such holders agree to a holdback agreement on terms no less favorable to the Company than set forth in the preceding sentence. (g) Liquidated Damages. The parties hereto acknowledge and agree that in the event the Company fails to file the Shelf Registration Statement with the SEC on or before the date it is required to do so under Section 3(a) or the Company fails use its best efforts to cause such Shelf Registration Statement to be declared effective by the SEC on or before the 30th calendar day following the date of filing of the Shelf Registration Statement as required under Section 3(a), the holders of Registrable Securities will suffer damages that are substantial but difficult or impracticable to ascertain. Accordingly, the Company hereby agrees that in the event that the Company fails to file the Shelf Registration Statement with the SEC on or before the date it is required to do so under Section 3(a) or the Company fails use its best efforts to cause such Shelf Registration Statement to be declared effective by the SEC on or before the 30th calendar day following the date of filing of the Shelf Registration Statement as required under Section 3(a), in addition and not in lieu of any right or remedy available to the Holders under this Agreement or under applicable law, the Company shall pay to the Holders of Registrable Securities the amount of $1000, such amount to be increased by $1000 for each day thereafter that such failure continues as liquidated damages for such failure, and the Company acknowledges and agrees that any such amount, as so increased, shall constitute a fair and reasonable measure of the damages suffered by such Holders as a result of such failure. SECTION 4. Registration Expenses. i) All expenses incident to the Company's performance of or compliance with its obligations under this Agreement (excluding underwriting discounts, selling commissions and brokerage fees, which will be paid by the selling Holders) will be paid by the Company, regardless of whether Registrable Securities are sold pursuant to any Registration Statement or Shelf Registration Statement, including, without limitation: (1) all registration, filing and listing fees; (2) fees and expenses of compliance with securities or blue sky laws (including, without limita-tion, the fees and disbursements of counsel for the underwriters, if any, or selling Holders in connection with blue sky and state securities qualifications of Registrable Securities and determination of their eligibility for investment under the laws of such jurisdictions as the managing underwriter(s), if any, or the Required Holders of the Registrable Securities covered by such Registration Statement or Shelf Registration Statement may reasonably designate); (3) printing (including, without limitation, expenses of printing or engraving certificates for the Registrable Securities in a form eligible for deposit with Depository Trust Company and of printing prospectuses), messenger, telephone and delivery expenses; (4) fees and disbursements of counsel for the Company and, subject to Section 4(b), counsel for the selling Holders of the Registrable Securities; (5) fees and disbursements of all independent certified public accountants of the Company (including, without limitation, the expenses of any special audit and, in connection with any underwritten offering, "cold comfort" letters required by or incident to such performance); (6) Securities Act liability insurance if the Company so desires or if the managing underwriters, if any, so require(s); (7) fees and expenses of other Persons (including special experts) retained by the Company; and (8) fees and expenses associated with any NASD filing required to be made in connection with any Registration Statement or Shelf Registration Statement, including, if applicable, the fees and expenses of any "qualified independent underwriter" (and its counsel) that is required to be retained in accordance with the rules and regulations of the NASD. The Company will, in any event, pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the securities to be registered on each securities exchange on which securities of the same class are then listed or the qualification for trading of the securities to be registered in each inter-dealer quotation system in which securities of the same class are then traded, and rating agency fees. ii) In connection with each Registration Statement or Shelf Registration Statement required hereunder, the Company will reimburse the Holders of Registrable Securities being registered pursuant to such Registration Statement or Shelf Registration Statement for the reasonable fees and disbursements of not more than one counsel chosen by the Required Holders of the Registrable Securities being sold; the expense of any additional counsel for the Holders shall be paid by the Holders. (c) The term "Registration Expenses" shall mean the expenses payable by the Company pursuant to the provisions of this Section 4. SECTION 5. Conditions to Registration. Each Holder's right to have Registrable Securities included in any Registration Statement or Shelf Registration Statement filed by the Company in accordance with the provisions of Section 2 or Section 3 shall be subject to the following conditions: i) The Holders on whose behalf such Registrable Securities are to be included shall be required to furnish the Company in a timely manner with all information required by the applicable rules and regulations of the SEC concerning the proposed method of sale or other disposition of such securities, the identity of and compensation to be paid to any proposed underwriters to be employed in connection therewith, and such other information as may be reasonably required by the Company properly to prepare and file such Registration Statement or Shelf Registration Statement in accordance with applicable provisions of the Securities Act; ii) If any such Holder desires to sell and distribute Registrable Securities over a period of time, or from time to time, at then prevailing market prices, then any such Holder shall execute and deliver to the Company such written undertakings as the Company and its counsel may reasonably require in order to assure full compliance with relevant provisions of the Securities Act and the Exchange Act; iii) In the case of any registration requested pursuant to the provisions of Section 2, the offering price for any Registrable Securities to be so registered shall be no less than for any securities of the same class then to be registered for sale for the account of the Company or other security holders, unless such Registrable Securities are to be offered from time to time based on the prevailing market price; iv) Upon receipt of any notice from the Company of the happening of any event of the kind described in paragraph (xi) of Section 2(b) or paragraph (xii) of Section 3(b), such Holder will forthwith discontinue disposition of Registrable Securities until such Holder's receipt of the copies of the supplemented Prospectus contemplated by such paragraph, or until it is advised in writing by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings which are incorporated by reference in the Prospectus, and, if so directed by the Company, such Holder will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice; and v) In the case of any underwritten offering on behalf of the Holders of Registrable Securities, such Holders will enter into such agreements (including underwriting agreements and lock-up agreements) as the managing underwriters shall reasonably request and as are customary in similar circumstances. SECTION 6. Indemnification. i) Indemnification by the Company. In the event of the registration of any Registrable Securities under the Securities Act pursuant to the provisions hereof, the Company will indemnify and hold harmless the seller of such Registrable Securities, its partners, directors, officers, employees and agents, each underwriter, broker and dealer, if any, who participates in the offering or sale of such securities, and each other Person, if any, who controls such seller or any such underwriter, broker or dealer within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act (each such Person being hereinafter sometimes referred to as an "Indemnified Person", provided that for purposes of clauses (b), (c) and (d) of this Section 6 "Indemnified Person" shall include the Company, its partners, directors, officers, employees and agents, and each other Person, if any who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act) from and against any losses, claims, damages, liabilities or expenses, joint or several, to which such indemnified Person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained or incorporated by reference in any Registration Statement, Shelf Registration Statement, Prospectus or Shelf Prospectus or any amendment or supplement thereto, or any document incorporated by reference therein, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each such Indemnified Person for any legal or other expenses reasonably incurred by such Indemnified Person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability (i) arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made or incorporated by reference in the Registration Statement, Shelf Registration Statement, Prospectus or Shelf Prospectus or any amendment or supplement thereto, in reliance upon and in conformity with written information furnished to the Company by such Indemnified Person for use in preparation thereof or (ii) arises out of the use of any Prospectus or Shelf Prospectus by an Indemnified Party after the Company has provided such Indemnified Party with the notice and supplement referred to in Section 2(b)(xi) or Section 3(b)(xii) if such Prospectus or Shelf Prospectus is the subject of such notice. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Person and shall survive the transfer of such Registrable Securities by such seller. ii) Indemnification by Holders of Registrable Securities. In the event of the registration of any Registrable Securities under the Securities Act pursuant to the provisions hereof, each Holder on whose behalf such Registrable Securities shall have been registered will indemnify and hold harmless each and every Indemnified Person against any losses, claims, damages or liabilities, joint or several, to which such Indemnified Person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained or incorporated by reference in any Registration Statement, Shelf Registration Statement, Prospectus or Shelf Prospectus or any amendment or supplement thereto or any document incorporated by reference therein, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, which untrue statement or alleged untrue statement or omission or alleged omission has been made or incorporated therein in reliance upon and in conformity with written information furnished to the Company by such Holder specifically stating that it is for use in preparation thereof, and will reimburse each such Indemnified Person for any legal and other expenses reasonably incurred by such Indemnified Person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the liability of each Holder hereunder shall be limited to the proceeds received by such Holder from the sale of Registrable Securities covered by such Registration Statement or Shelf Registration Statement. iii) Procedure. Promptly after receipt by an Indemnified Person of notice of the commencement of any action (including any governmental investigation or inquiry), such Indemnified Person will, if such Indemnified Person intends to make a claim in respect thereof against the party agreeing to indemnify such Indemnified Person pursuant to paragraphs (a) or (b) hereof (each such Person being hereinafter referred to as an "Indemnifying Person"), give written notice to such Indemnifying Person of the commencement thereof, but the omission so to notify the Indemnifying Person shall not relieve the Indemnifying Person from any of its obligations pursuant to the provisions of this Section 6 except to the extent that the Indemnifying Person is actually prejudiced by such failure to give notice. In case any such action is brought against any Indemnified Person and it notifies an Indemnifying Person of the commencement thereof, the Indemnifying Person shall be entitled to participate in, and to the extent that it may wish, jointly with any other Indemnifying Person similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such Indemnified Person, and after notice from the Indemnifying Person to such Indemnified Person, the Indemnifying Person shall not, except as hereinafter provided, be responsible for any legal or other expenses subsequently incurred by such Indemnified Person in connection with the defense thereof. No Indemnifying Person will consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Person of a release from all liability in respect of such claim or litigation. Such Indemnified Person shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall be the expense of such Indemnified Person unless (a) the Indemnifying Person has agreed to pay such fees and expenses or (b) the Indemnifying Person shall have failed to assume the defense of such action or proceeding or has failed to employ counsel reasonably satisfactory to such Indemnified Person in any such action or proceeding or (c) the named parties to any such action or proceeding (including any impleaded parties) include both such Indemnified Person and the Indemnifying Person and such Indemnified Person shall have been advised by counsel that representation of both parties by the same counsel would be inappropriate due to actual or potential material differing interests between them (in which case, if such Indemnified Person notifies the Indemnifying Person in writing that it elects to employ separate counsel at the expense of the Indemnifying Person, the Indemnifying Person shall not have the right to assume the defense of such action or proceeding on behalf of such Indemnified Person). The Indemnifying Person shall not be liable for any settlement of any such action or proceeding effected without its written consent, which consent shall not unreasonably be withheld, delayed or conditioned, but if settled with its written consent, or if there is a final judgment for the plaintiff in any such action or proceeding, the Company agrees to indemnify and hold harmless such Indemnified Persons from and against any loss or liability by reason of such settlement or judgment. iv) Contribution. If the indemnification provided for in this Section 6 is unavailable to a party that would have been an Indemnified Person under this Section 6 in respect of any losses, claims, damages, liabilities or expenses (or actions in respect thereof) referred to herein, then each party that would have been an Indemnifying Person thereunder shall, in lieu of indemnifying such Indemnified Person, contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages, liabilities or expenses (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Indemnifying Person on the one hand and the Indemnified Person on the other in connection with the statement or omission which resulted in such losses, claims, damages, liabilities or expenses (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission of a material fact relates to information supplied by the Indemnifying Person or the Indemnified Person and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 6(c), any legal or other fees or expenses reasonably incurred by such party in connection with the investigation or defense of any action or claim. The Company and each Holder of Registrable Securities agrees that it would not be just and equitable if contribution pursuant to this Section 6 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 6. Notwithstanding the provisions of this Section 6(d), no Holder of Registrable Securities shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities sold by it exceeds the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. Indemnification or, if appropriate, contribution, similar to that specified in the preceding provisions of this Section 6 (with appropriate modifications) shall be given by the Company and each seller of Registrable Securities with respect to any required registration or other qualification of such securities under any federal or state law or regulation or governmental authority other than the Securities Act. In the event of any underwritten offering of Registrable Securities under the Securities Act pursuant to the provisions of Section 2 or Section 3, the Company and each Holder on whose behalf such Registrable Securities shall have been registered agree to enter into an underwriting agreement, in standard form, with the underwriters, which underwriting agreement may contain additional provisions with respect to indemnification and contribution in lieu thereof. SECTION 7. Exchange Act Registration; Rule 144 Reporting. The Company covenants and agrees that until such time as the Holders no longer hold any Registrable Securities it will: i) if required by law, maintain an effective registration statement (containing such information and documents as the SEC shall specify) with respect to the Common Stock of the Company under Section 12(g) of the Exchange Act; ii) make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times after the effective date that the Company becomes subject to the reporting requirements of the Securities Act or the Exchange Act (even if the Company subsequently ceases to be subject to such reporting requirements); -iii) file with the SEC in a timely manner all reports and documents required of the Company under the Securities Act and the Exchange Act; iv) furnish to any Holder promptly upon request (i) a written statement by the Company as to its compliance with the reporting requirements of Rule 144 (and any similar or successor rules) and of the Securities Act and the Exchange Act, (ii) a copy of the most recent annual or quarterly report of the Company (beginning after the Company becomes subject to such reporting requirements), and (iii) such other reports and documents of the Company and other information in the possession of or reasonably attainable by the Company as such Holder may reasonably request in availing itself of any rule or regulation of the SEC allowing such Holder to sell any such securities without registration; and v) take such further action as any Holder of Registrable Securities may from time to time reasonably request to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (i) Rule 144 under the Securities Act, as such rule may be amended from time to time, or (ii) any similar rule or regulation hereafter adopted by the SEC. The Company represents and warrants that such registration statement or any information, document or report filed with the SEC in connection therewith or any information so made public shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements contained therein not misleading. The Company agrees to indemnify and hold harmless (or to the extent the same is not enforceable, make contribution to) the Holders, their partners, officers, directors, employees and agents, each broker, dealer or underwriter (within the meaning of the Securities Act) acting for any Holder in connection with any offering or sale by such Holder of Registrable Securities or any Person controlling (within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act) such Holder and any such broker, dealer or underwriter from and against any and all losses, claims, damages, liabilities or expenses (or actions in respect thereof) arising out of or resulting from any breach of the foregoing representation or warranty, all on terms and conditions comparable to those set forth in Section 6. SECTION 8. Limitation on Registration Rights of Others. The Company represents and warrants that, except as set forth on Schedule I to this Agreement, it has not granted to any Person the right to request or require the Company to register any securities issued by the Company. The Company covenants and agrees that after the date hereof, so long as any Holder holds any Warrant Securities, the Company will not, directly or indirectly, grant to any Person (except as provided in Section 3(a) hereof) or agree to or otherwise become obligated in respect of (a) any registration rights of securities of the Company upon the demand of any Person (including any shelf registration) without the prior written consent of the Required Holders; or (b) rights of registration in the nature or substantially in the nature of those set forth in Section 2 unless such rights are expressly subject and subordinated to the rights of registration of the Holders pursuant to Section 2 hereof on terms reasonably satisfactory to the Required Holders. SECTION 9. Mergers, etc. In addition to any other restrictions on mergers, consolidations and reorganizations contained in the Credit Agreement, the Warrant Agreement or in the certificate of incorporation, by-laws or agreements of the Company, the Company covenants and agrees that it shall not, directly or indirectly, enter into any merger, consolidation or reorganization in which the Company shall not be the surviving corporation and in which the Holders shall not have had the right to receive cash for all their Registrable Securities, unless the surviving corporation shall, prior to such merger, consolidation or reorganization, agree in a writing satisfactory in form, scope and substance to the Required Holders to assume the obligations of the Company under this Agreement, and for such purpose references hereunder to "Registrable Securities" shall be deemed to include the securities which such Holders would be entitled to receive in exchange for Registrable Securities pursuant to any such merger, consolidation or reorganization. If, and as often as, there are any changes in the Registrable Securities by way of stock split, stock dividend, combination or classification, or through merger, consolidation, reorganization or recapitalization, or by any other means, appropriate adjustments shall be made in the provisions hereof as may be required, so that the rights and privileges granted hereby shall continue with respect to the Registrable Securities as so changed. SECTION 10. Notices, etc. All notices, consents, approvals, agreements and other communications provided hereunder shall be in writing or by telex or telecopy and shall be sufficiently given to the Purchaser, the Holders and the Company if addressed or delivered to them at the following addresses: If to the Purchaser: ING Capital 135 East 57th Street New York, New York 10022 Attention: Chief Credit Officer Telecopier No.: (212) 750-8935 with copies to: ING Capital LLC Acquisition Finance Group 333 South Grand Avenue, Suite 4200 Los Angeles, California 90071 Attention: Steven G. Fleenor Telecopier No.: (213) 346-3991 and a copy to: King & Spalding 191 Peachtree Street Atlanta, Georgia 30303-1763 Attention: Hector E. Llorens, Jr., Esq. Telecopier No.: (404) 572-5100 If to any other At its last known address appearing Holder: on the books of the Company maintained for such purpose If to the Company: Creative Host Services, Inc. 16955 Via Del Campo, Suite 110 San Diego, California 92127 Attention: Sayed Ali Telecopier No.: (858) 675-7720 or at such other address as any party may designate to any other party by written notice. All such notices and communications shall be deemed to have been duly given: (i) at the time delivered by hand, if personally delivered, (ii) when received, if deposited in the mail, postage prepaid, (iii) when transmission is verified, if telecopied, and (iv) on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery. SECTION 11. Entire Agreement. The parties hereto agree that this Agreement and the agreements specifically referred to in Section 33 of the Warrant Agreement constitute the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings between them as to such subject matter; and there are no restrictions, agreements, arrangements, oral or written, between any or all of the parties relating to the subject matter hereof which are not fully expressed or referred to herein or therein. SECTION 12. Waivers and Further Agreements. Any waiver of any terms or conditions of this Agreement shall not operate as a waiver of any other breach of such terms or conditions or any other term or condition, nor shall any failure to enforce any provision hereof operate as a waiver of such provision or of any other provision hereof; provided, however, that no such written waiver unless it by its own terms explicitly provides to the contrary, shall be construed to effect a continuing waiver of the provision being waived and no such waiver in any instance shall constitute a waiver in any other instance or for any other purpose or impair the right of the party against whom such waiver is claimed in all other instances or for all other purposes to require full compliance with such provision. Each of the parties hereto agrees to execute all such further instruments and documents and to take all such further action as the other parties may reasonably require in order to effectuate the terms and purposes of this Agreement. SECTION 13. Amendments. This Agreement may not be amended nor shall any waiver, change, modification, consent or discharge be effected except by an instrument in writing executed by or on behalf of the party or parties against whom enforcement of any amendment, waiver, change, modification, consent or discharge is sought; provided, however, that any waiver sought from the Holders of any provision of this Agreement which affects the Holders generally, and any action required to be taken by the Holders as a group pursuant to this Agreement, shall be given or taken by the Required Holders, and any such waiver or action so given or taken shall be binding on all Holders. No failure or delay by any party in exercising any right or remedy hereunder shall operate as a waiver thereof, and a waiver of a particular right or remedy on one occasion shall not be deemed a waiver of any other right or remedy or a waiver of the same right or remedy on any subsequent occasion. SECTION 14. Assignment; Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, legal representatives, successors and permitted assigns, including, without limitation, any Holders, from time to time of the Registrable Securities. Anything in this Agreement to the contrary notwithstanding, the term "Holders" as used in this Agreement shall be deemed to include the registered Holders from time to time of the Warrant Securities. SECTION 15. Severability. If any provision of this Agreement shall be held or deemed to be, or shall in fact be, invalid, inoperative or unenforceable as applied to any particular case in any jurisdiction or jurisdictions, or in all jurisdictions or in all cases, because any provision conflicts with any constitution, statute, rule or public policy, or for any other reason, such circumstance shall not have the effect of rendering the provision or provisions in question, invalid, inoperative or unenforceable in any other jurisdiction or in any other case or circumstance or of rendering any other provision or provisions herein contained invalid, inoperative or unenforceable to the extent that such other provisions are not themselves actually in conflict with such constitution, statute, rule or public policy, but this Agreement shall be reformed and construed in any such jurisdiction or case as if such invalid, inoperative or unenforceable provision had never been contained herein and such provision reformed so that it would be valid, operative and enforceable to the maximum extent permitted in such jurisdiction or in such case. SECTION 16. Counterparts. This Agreement may be executed in two or more counterparts (each of which need not be executed by each of the parties), each of which shall be deemed an original, but all of which together shall constitute one and the same instrument, and in pleading or proving any provision of this Agreement, it shall not be necessary to produce more than one such counterpart. SECTION 17. Section Headings. The headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. SECTION 18. Gender; Usage. Whenever used herein the singular number shall include the plural, the plural shall include the singular, and the use of any gender shall include all genders. The words "hereof," "herein" and "hereunder," and words of similar import, when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. SECTION 19. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK OTHER THAN THE CONFLICTS OF LAWS PRINCIPLES THEREOF. SECTION 20. Termination. The rights of any Holder under Sections 2 and 3 of this Agreement shall terminate as to any Registrable Securities when such Registrable Securities have been effectively registered under the Securities Act and sold pursuant to a Registration Statement or Shelf Registration Statement covering such Registrable Securities. The indemnification and contribution provisions of Sections 6 and 7 shall survive any termination of this Agreement. SECTION 21. Expenses. The Company shall be obligated to pay to the Holders, on demand, all costs and expenses (includ-ing, without limitation, court costs and attorneys' fees and expenses and interest to the extent permitted by applicable law on overdue amounts) paid or incurred in collecting any sums due from, or enforcing any other obligations of, the Company. SECTION 22. Specific Performance. The Company recognizes that the rights of the Holders under this Agreement are unique and, accordingly, the Holders shall, in addition to such other remedies as may be available to any of them at law or in equity, have the right to enforce their rights hereunder by actions for injunctive relief and specific performance to the extent permitted by law. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. This Agreement is not intended to limit or abridge any rights of the Holders which may exist apart from this Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written. CREATIVE HOST SERVICES, INC. By: /s/ Sayed Ali --------------- Name: Sayed Ali Title: President ING Capital LLC By: /s/ Steven G. Fleenor --------------------- Steven G. Fleenor Managing Director EX-5 6 doc5.txt [LETTERHEAD OF CUTLER LAW GROUP] January 31, 2003 Securities and Exchange Commission Division of Corporate Finance Washington, D.C. 20549 Re: Creative Host Services, Inc. Ladies and Gentlemen: This office represents Creative Host Services, Inc., a California corporation (the "Registrant") in connection with the Registrant's Registration Statement on Form S-3 under the Securities Act of 1933 (the "Registration Statement"), which relates to the resale of up to 452,050 shares by ING Capital LLC upon exercise of warrants at $1.87 per share.(the "Registered Securities"). In connection with our representation, we have examined such documents and undertaken such further inquiry as we consider necessary for rendering the opinion hereinafter set forth. Based upon the foregoing, it is our opinion that the Registered Securities, when issued as set forth in the Registration Statement, will be legally issued, fully paid and nonassessable. We acknowledge that we are referred to under the heading "Legal Matters" in the Prospectus which is a part of the Registrant's Form S-3 Registration Statement relating to the Registered Securities, and we hereby consent to such use of our name in such Registration Statement and to the filing of this opinion as Exhibit 5 to the Registration Statement and with such state regulatory agencies in such states as may require such filing in connection with the registration of the Registered Securities for offer and sale in such states. Very truly yours, /s/ Cutler Law Group CUTLER LAW GROUP EX-23.1 7 doc6.txt EXHIBIT 23.1 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 15, 2002, except for Notes (1) and (6) as to which the date is November 7, 2002, on the consolidated financial statements of Creative Host Services, Inc. and subsidiaries, in the Company's Form S-3 to be filed with the Securities and Exchange Commission on January 30, 2003. We also consent to the reference to us as experts in matters of accounting and auditing in the registration statement and prospectus. /s/ Stonefield Josephson, Inc. Santa Monica, California January 31, 2003 -----END PRIVACY-ENHANCED MESSAGE-----