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EXHIBIT 4.1
THIS CONVERTIBLE DEBENTURE AND THE UNDERLYING SHARES OF COMMON STOCK HAVE NOT
BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"1933 ACT"). UNTIL THE FORTY-FIRST (41ST) DAY AFTER THE SALE OF THIS CONVERTIBLE
DEBENTURE PURSUANT TO REGULATION S IS COMPLETED, NO CONVERTIBLE DEBENTURE OR
UNDERLYING SHARES MAY BE OFFERED, SOLD OR TRANSFERRED (INCLUDING ANY INTERESTS
THEREIN) IN THE UNITED STATES OR TO A "U.S. PERSON" (AS DEFINED IN REGULATION S
PROMULGATED UNDER THE ACT) OR FOR THE ACCOUNT AND BENEFIT OF ANY U.S. PERSON,
EXCEPT AS PROVIDED IN SAID REGULATION S. ANY RESALE THEREAFTER MUST BE PURSUANT
TO REGISTRATION UNDER THE ACT OR AN AVAILABLE EXEMPTION.
CINEMASTAR LUXURY THEATERS,INC.
A California Corporation
Dated: May 21, 1996
NO. 2
CinemaStar Luxury Theaters, Inc., a California corporation (the
"Corporation"), is indebted and, for value received, promises to pay to the
order of La Salle Investment Ltd., on May 21, 1999 (the "Due Date") (unless this
Debenture shall have been sooner called for redemption as herein provided), upon
presentation of this Debenture, five hundred thousand dollars ($500,000) (the
"Principal Amount") and to pay interest on the Principal Amount at the rate of
4% per annum as provided herein.
The Corporation covenants, promises and agrees as follows:
1. Interest. Interest which shall accrue on the Principal Amount shall be
payable in four quarterly installments on the first day of each fiscal quarter
beginning on the first day of the fiscal quarter following the fiscal quarter in
which payment of the Principal Amount is made to the Corporation. Interest for
the first quarter shall be pro rata for the number of days of the first fiscal
quarter after payment of the Principal Amount is made to the Corporation. All
accrued and unpaid interest shall be payable on the Due Date. All payments of
principal and interest or principal or interest shall be made at c/o Sagem-JC-
Roder, 14 Cour de Rive, Geneva, Switzerland, or at such other place as may be
designated in writing by the holder hereof.
2. Redemption.
2.1. This Debenture is subject to redemption at the option of the
Corporation in whole or in part prior to the Due Date at any time and from time
to time without penalty or premium. The Corporation may exercise its right to
redeem this Debenture prior to maturity by giving notice (the "Redemption
Notice") thereof to
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the holder of this Debenture as it appears on the books of the Corporation,
which notice shall specify the terms of redemption (including the place at which
the holder of the Debenture may obtain payment), the principal amount of the
Debenture to be redeemed (the "Redemption Amount") and shall fix a date for
redemption (the "Redemption Date"), which date shall not be less than 30 days
nor more than 60 days after the date of the Redemption Notice.
2.2. On the Redemption Date, the Corporation shall pay all accrued and
unpaid interest on the Debenture up to and including the Redemption Date and
shall pay to the holder hereof a dollar amount equal to the Redemption Amount.
2.3 The foregoing notwithstanding, the Corporation may redeem this
Debenture and repay the principal and accrued interest in lieu of delivery of
common stock of the Borrower pursuant to the holder's Conversion Notice as set
forth below.
3. Conversion.
3.1. The holder of this Debenture shall have the right, at such
holder's option, at any time, to convert all or part of the principal and
accrued interest of this Debenture into such number of fully paid and
nonassessable shares of Common Stock of the Corporation (the "Common Stock") as
shall be provided herein.
3.2. The holder of this Debenture may exercise the conversion right
provided in this Section 3 by giving written notice (the "Conversion Notice") to
the Corporation of the exercise of such right and stating the name or names in
which the stock certificate or stock certificates for the shares of Common Stock
are to be issued and the address to which such certificates shall be delivered.
The Conversion Notice shall be accompanied by the Debenture. The number of
shares of Common Stock that shall be issuable upon conversion of the Debenture
shall equal the outstanding principal and accrued interest divided by $4.25;
provided, however, that no fractional shares have been issued and the number of
shares of Common Stock to be issued rounded up to the next whole share.
3.3. Conversion shall be deemed to have been effected on the date the
Conversion Notice is given (the "Conversion Date"). Within 10 business days
after receipt of the Conversion Notice, the Corporation shall issue and deliver
against a signed receipt therefor or by United States registered mail, return
receipt requested, to the address designated by the holder of this Debenture in
the Conversion Notice, a stock certificate or stock certificates of the
Corporation representing the number of shares of Common Stock to which such
holder is entitled.
3.4 Reservation of Shares. The Corporation shall at all times reserve
and keep available, free from preemptive rights,
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unissued or treasury shares of Common Stock sufficient to effect the conversion
of this Debenture.
4. Default.
4.1. The entire unpaid and unredeemed balance of the Principal Amount
and all Interest accrued and unpaid on this Debenture shall, at the election of
the holder, be and become immediately due and payable upon the occurrence of any
of the following events (a "Default Event"):
(a) The non-payment by the Corporation when due of principal and
interest or of any other payment as provided in this Debenture.
(b) If the Corporation (i) applies for or consents in writing to
the appointment of, or if there shall be a taking of possession by, a receiver,
trustee or liquidator for the Corporation of all or substantially all of its
property; (ii) admits in writing its inability to pay its debts as they become
due; (iii) makes a general assignment for the benefit of creditors; (iv) files
any petition for relief under the Bankruptcy Code or any similar federal or
state statute; (v) defaults with respect to any evidence of indebtedness or
liability for borrowed money, or any such indebtedness shall not be paid as and
when due and payable; or (vi) has assessed or imposed against it, or if there
shall exist, any general or specific lien for any federal, state or local taxes
or charges against any of its property or assets other than liens for taxes not
yet due or being contested in good faith.
(c) Any failure by the Corporation to issue and deliver shares of
Common Stock as provided herein upon conversion of this Debenture.
Notwithstanding the foregoing, the Corporation shall have thirty days (30) days
from the receipt of a written Notice of Default to cure said Default Event, and
no acceleration of payments hereunder shall be deemed to have occurred until the
thirtieth day after the Corporation's receipt of a written Notice of Default
from the holder of this Debenture. Upon such cure, the terms of this Debenture
shall continue in effect.
4.2. Each right, power or remedy of the holder hereof upon the
occurrence of any Default Event as provided for in this Debenture or now or
hereafter existing at law or in equity or by statute shall be cumulative and
concurrent and shall be in addition to every other right, power or remedy
provided for in this Debenture or now or hereafter existing at law or in equity
or by statute, and the exercise or beginning of the exercise by the holder or
transferee hereof of any one or more of such rights, powers or remedies shall
not preclude the simultaneous or later exercise by the holder hereof of any or
all such other rights, powers or remedies.
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5. Failure to Act and Waiver. No failure or delay by the holder hereof to
insist upon the strict performance of any term of this Debenture or to exercise
any right, power or remedy consequent upon a Default Event hereunder shall
constitute a waiver of any such term or of any such breach, or preclude the
holder hereof from exercising any such right, power or remedy at any later time
or times. By accepting payment after the due date of any amount payable under
this Debenture, the holder hereof shall not be deemed to waive the right either
to require payment when due of all other amounts payable under this Debenture,
or to declare a Default Event for failure to effect such payment of any such
other amount.
The failure of the holder of this Debenture to give notice of any failure
or breach of the Corporation under this Debenture shall not constitute a waiver
of any right or remedy in respect of such continuing failure or breach or any
subsequent failure or breach.
6. Consent to Jurisdiction. The Corporation hereby agrees and consents that
any action, suit or proceeding arising out of this Debenture may be brought in
any appropriate court in the State of California, including the United States
District Court for the Central District of California or in any other court
having jurisdiction over the subject matter, all at the sole election of the
holder hereof, and by the issuance and execution of this Debenture the
Corporation irrevocably consents to the jurisdiction of each such court.
7. Transfer/Negotiability. This Debenture shall be transferred on the books
of the Corporation only by the registered holder hereof or by his/her attorney
duly authorized in writing or by delivery to the Corporation of a duly executed
Assignment substantially in the form attached hereto as Exhibit A. The foregoing
notwithstanding, the Corporation shall not transfer this Debenture nor any of
the shares of common stock issuable upon conversion in the United States or to a
"U.S. Person" (as defined in Regulation S promulgated under the Act) or for the
account and benefit of any U.S. Person, except as provided in said Regulation S,
until forty-one days from the date of issuance of this Debenture. The
Corporation shall be entitled to treat any holder of record of the Debenture as
the holder in fact thereof and shall not be bound to recognize any equitable or
other claim to or interest in this Debenture in the name of any other person,
whether or not it shall have express or other notice thereof, save as expressly
provided by the Laws of California. Subject to receipt of a duly executed
Assignment, the Debenture shall be assigned by the holder thereof for value, to
a Holder in Due Course as defined by the Uniform Commercial
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Code. The Borrower hereby makes an unconditional promise to repay the principal
and accrued interest of this Debenture on or before the date due to any such
Holder in Due Course and acknowledges that repayment to a Holder in Due Course
is not subject to any claims or defenses the Borrower may have against the
Lender.
8. Notices. All notices and communications under this Debenture shall be in
writing and shall be either delivered in person or accompanied by a signed
receipt therefor or mailed first-class United States certified mail, return
receipt requested, postage prepaid, and addressed as follows:
if to the Corporation, to:
CinemaStar Luxury Theaters, Inc.
431 College Blvd.
Oceanside, CA 92057-5435
with a copy to:
Joel I. Bennett, Esq.
Jeffer, Mangels, Butler & Marmaro, LLP
2121 Avenue of the Stars, Tenth Floor
Los Angeles, California 90067-5010
and, if to the holder of this Debenture, to the address of such holder as it
appears in the books of the Corporation. Any notice of communication shall be
deemed given and received as of the date of such delivery or three days after
deposit with an overnight courier service or five (5) days after deposit with
the U.S. Postal Service as first class air mail.
9. Governing Law. This Debenture shall be governed by and construed and
enforced in accordance with the laws of the State of California, or, where
applicable, the laws of the United States, without regard to conflicts of law.
10. Incorporation by Reference. The terms and conditions set forth in that
certain Offshore Securities Subscription Agreement between the corporation and
La Salle Investment Ltd., are incorporated herein by this reference, and any
transferee or subsequent holder of this Debenture (or the shares of common
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stock issued upon conversion thereof, during the Restricted Period as defined by
Regulation S) shall be subject to and bound by the provisions of such agreement.
IN WITNESS WHEREOF, the Corporation has caused this Debenture to be duly
executed.
CINEMASTAR LUXURY THEATERS, INC.
By: ___________________
John Ellison, Jr.
President
Attest:
_________________
Jon Meloan
Secretary
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Exhibit A
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby assigns to:
________________________ the three year 4% Convertible Debenture of CINEMASTAR
LUXURY THEATERS, INC., No. and hereby irrevocably appoints ,
Attorney, to transfer said debenture on the books of the within named
corporation, with full power of substitution in the premises.
WITNESS my hand and seal this day of , 199_.
(SEAL)
(SEAL)
WITNESS:
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