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EXHIBIT 4.2
OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT
THIS OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT is executed in
reliance upon the transactional "safe harbor" afforded by Regulation S
("Regulation S") as promulgated by the Securities and Exchange Commission
("SEC"), under the Securities Act of 1933, as amended ("1933 Act").
THIS AGREEMENT has been executed by the undersigned in
connection with the placement of $500,000 principal amount of Convertible
Debentures (hereinafter referred to as the "Convertible Debentures") of
CINEMASTAR LUXURY THEATERS, INC. ("Seller") by the Seller located at 431 College
Boulevard, Oceanside, California 92057, a corporation organized under the laws
of California, United States of America (hereinafter referred to as "Seller").
The undersigned (hereinafter referred to as "Buyer") is located at and is a
corporation organized under the laws of or is a citizen and resident of the
country set forth below the Buyer's signature, hereby represents and warrants
to, and agrees with the Seller as follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
a. PURCHASE PRICE. The undersigned hereby subscribes for
Convertible Debentures in the principal amount of Five Hundred Thousand Dollars
($500,000) (the "Convertible Debentures") of the Seller, convertible into shares
of Common Stock of CinemaStar at a conversion price at $4.25 per Share, for an
aggregate Purchase Price of Five Hundred Thousand Dollars ($500,000) payable in
United States Dollars.
b. FORM OF PAYMENT. The Buyer shall pay the Purchase Price by
delivering good funds in United States Dollars to the Company for closing by
delivery of the Shares versus payment of the Purchase Price.
2. SUBSCRIBER REPRESENTATIONS; ACCESS TO INFORMATION; INDEPENDENT
INVESTIGATION.
a. OFFSHORE TRANSACTION. The Buyer represents and warrants to
the Seller as follows:
(i) The Buyer is not organized under the laws of or is
not a citizen or resident of the United States and, if not an individual, was
not formed for the purpose of investing in Regulation S securities, does not
have any of its securities registered under the Securities Exchange Act of 1934
and is not owned by U.S. Persons as defined in Regulation S and herein;
(ii) At the time the buy order to purchase the
Convertible Debentures was originated, the Buyer was outside the United States;
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(iii) No offer to purchase the Convertible Debentures
was made in the United States nor were any "directed selling efforts" as defined
in Rule 902 of Regulation S made in the United States;
(iv) The Buyer is purchasing the Convertible Debentures
for the Buyer's own account and for investment purposes and not with the view
toward distribution of the Convertible Debentures or the shares of Common Stock
issuable upon conversion of the Convertible Debentures. The Buyer does not have
any contract, understanding or arrangement with any person to sell, transfer or
grant participation to such person or any third person with respect to the
Convertible Debentures or the shares of Common Stock issuable upon conversion of
the Convertible Debentures;
(v) All subsequent offers and sales of the Convertible
Debentures and the shares of Common Stock issuable upon conversion of the
Convertible Debentures shall be made in compliance with Regulation S, pursuant
to registration of the securities under the 1933 Act or pursuant to an exemption
from such registration;
(vi) The Buyer understands that the Convertible
Debentures and the shares of Common Stock issuable upon conversion of the
Convertible Debentures are being offered and sold to the Buyer in reliance on
specific safe harbor from the registration requirements of the 1933 Act and that
the Seller is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of the Buyer set
forth herein in order to determine the applicability of such safe harbor and the
suitability of the Buyer to acquire the Convertible Debentures and the shares of
common stock issuable upon conversion of the Convertible Debentures. The Buyer
understands the conditions of the exemption from registration afforded by
Section 4(1) of the Securities Act and acknowledges that there can be no
assurance that it will be able to rely on such exemption;
(vii) The Buyer acknowledges that the Buyer has
received and reviewed the information supplied by the Company pursuant to
Section 3b hereof;
(viii) The Buyer agrees that from the date hereof until
after the fortieth (40th) day after the last closing of the purchase of the
Convertible Debentures hereunder and any similar sales under substantially
identical Offshore Securities Subscription Agreements (the "Restrictive Period")
upon any offer, sale or transfer of the Convertible Debentures or the shares of
common stock issuable upon conversion of the Convertible Debentures (including
any interests therein), that the Buyer, or any successor, or any Professional
(as defined in Section 3a(xv) hereof) (except for sales of any Convertible
Debentures or shares of Common Stock registered under the 1933
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Act or otherwise exempt from such registration) (a) will not sell to a U.S.
Person or to an account of or for the benefit of a U.S. Person or anyone
believed to be a U.S. Person; (b) will not engage in any efforts to sell the
Convertible Debentures or any shares of common stock issuable upon conversion of
the Convertible Debentures in the United States; (c) will, at the time the buy
order or transfer is originated, believe the buyer or transferee is outside the
United States; (d) will send to a Professional acting as agent or principal, a
confirmation or other notice stating that the Professional is subject to the
same restrictions on transfer to U.S. Persons or for the account of or benefit
of U.S. Persons during the Restrictive Period as provided herein; and (e) will
not in connection with the common stock of the Seller engage in the United
States in any short selling, option writing, equity swaps or other types of
hedging transactions or derivative transactions. The Seller will not honor or
register and will not be obligated to honor or register any transfer in
violation of these provisions.
(ix) The Buyer understands that the Convertible
Debentures and the shares of common stock issuable upon conversion of the
Convertible Debentures are being offered and sold to it in reliance on specific
provisions of federal and state securities laws and that the Seller is relying
upon the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the applicability of such provisions. Accordingly, the Buyer agrees to
notify the Seller of any events which would cause the representations and
warranties of the Buyer to be untrue or breached at any time after the execution
of this Agreement by the Buyer and prior to the expiration of the Restricted
Period;
(x) This Offshore Securities Subscription Agreement has
been duly authorized, validly executed, and delivered on behalf of the Buyer and
is a valid and binding agreement enforceable against the Buyer in accordance
with its terms, subject to general principles of equity and to bankruptcy or
other laws affecting the enforcement of creditors' rights generally;
(xi) Any offering documents received by the Buyer
include statements to the effect that the Convertible Debentures and the shares
of common stock issuable upon conversion of the Convertible Debentures have not
been registered under the Securities Act and may not be offered or sold in the
United States or to U.S. persons during the Restricted Period, unless the
Convertible Debentures and shares of common stock issuable upon conversion of
the Convertible Debentures are registered or unless such resale is exempt from
or not subject to the registration requirements of the Securities Act;
(xii) The Buyer, in making the decision to purchase the
Convertible Debentures and shares of common stock
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issuable upon conversion of the Convertible Debentures subscribed for, has
relied upon independent investigations made by it and has not relied on any
information or representations made by third parties and the Buyer believes that
the Purchase Price is reasonably related to the Restricted Period, the
historical validity of the market price of the Common Stock of the Seller, the
current financial condition of the Seller, the dilution represented by the sale
of the Convertible Debentures and shares of common stock issuable upon
conversion of the Convertible Debentures and any other sales of the Common Stock
of the Seller occurring simultaneously or concurrently herewith, current stock
market conditions and other relevant information concerning the Seller; the
Buyer acknowledges that it is a sophisticated investor, that it has invested in
other Regulation S transactions by other issuers, and that an investment in the
Convertible Debentures and shares of common stock issuable upon conversion of
the Convertible Debentures involves a high degree of risk;
(xiii) The Buyer has not taken any action that would
cause the Seller to be subject to any claim for commission or other fee or
remuneration by any broker, finder, or other person and the Buyer hereby
indemnifies the Seller against any such claim caused by the actions of the Buyer
or any of its employees or agents; however, the Buyer acknowledges that The
Boston Group, L.P. will in connection with the sale of the Convertible
Debentures and shares of common stock issuable upon conversion of the
Convertible Debentures receive a 10% commission and a 3% non-accountable expense
allowance;
(xiv) For purposes hereof, in general, a "U.S. Person"
means any natural person, resident of the United States; any partnership or
corporation organized or incorporated under the laws of the United States or any
state or territory thereof; any estate of which any executor or administrator is
a U.S. Person; any trust of which any trustee is a U.S. Person; any agency or
branch of a foreign entity located in the United States; any nondiscretionary
account or similar account, other than estate or trust, held by a dealer or
other fiduciary for the benefit or account of the U.S. Person; any discretionary
account or similar account, other than estate or trust, held by dealer or other
fiduciary organized, incorporated or (if an individual) resident of the United
States; and any partnership or corporation if organized or incorporated under
the laws of any foreign jurisdiction and formed by a U.S. Person principally for
the purpose of investing in securities and not registered under the 1933 Act
unless it is organized and incorporated and owned by "accredited investors," as
defined under Rule 501(a) under the 1933 Act, who are not natural persons,
estates or trusts. "U.S. Person" is further defined in Rule 902(o) under the
1933 Act;
(xv) A "Professional" is a "distributor" as defined in
Rule 902(c) under the 1933 Act (generally any underwriter, or other person, who
participates, pursuant to a contractual arrangement, in the distribution of the
Convertible
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Debentures and shares of common stock issuable upon conversion of the
Convertible Debentures); a dealer as defined in Section 2(12) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (encompassing those who
engage in the business of trading or dealing in securities as agent, broker, or
principal); or a person receiving a selling concession, fee or other
remuneration in respect of the Convertible Debentures and shares of common stock
issuable upon conversion of the Convertible Debentures sold.
b. NO GOVERNMENT RECOMMENDATION OR APPROVAL. The Buyer
understands that no Federal, State or foreign governmental agency has passed on
or made any recommendation or endorsement of the Convertible Debentures and
shares of common stock issuable upon conversion of the Convertible Debentures.
c. SALES OF THE CONVERTIBLE DEBENTURES AND SHARES OF COMMON
STOCK ISSUABLE UPON CONVERSION OF THE CONVERTIBLE DEBENTURES, IF ANY, TO BE MADE
THROUGH THE BOSTON GROUP, L.P. The Buyer covenants that any sale of the
Convertible Debentures and shares of common stock issuable upon conversion of
the Convertible Debentures shall be made through the Buyer's account at The
Boston Group, L.P., on usual and customary terms. Any such sale of the
Convertible Debentures and shares of common stock issuable upon conversion of
the Convertible Debentures shall be made in compliance with Regulation S, shall
not be made prior to the end of the Restrictive Period, and shall otherwise
conform with all of the conditions set forth elsewhere in this Agreement.
3. SELLER REPRESENTATIONS.
a. REPORTING COMPANY STATUS. The Seller is a "reporting
company" as defined by Rule 902 of Regulation S. The Seller is in full
compliance, to the extent applicable, with all reporting obligations under
Section 12(g) of the Exchange Act. The Seller has registered its Common Stock
pursuant to Section 12(g) of the Exchange Act and the Common Stock trades on the
NASDAQ Small Capital Market.
b. CURRENT PUBLIC INFORMATION. The Seller has furnished the
Buyer with copies of the Seller's Post-Effective Amendment No. 1 to Form SB-2
Registration Statement and its Form 10-K/SB for the year ended March 31, 1995
and the Form 10-Q/SB for the quarter ended December 31, 1995 (collectively the
"SEC Filings"), and other publicly available documents, and the Seller's
Regulation S Offering Circular dated May , 1996.
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c. OFFSHORE TRANSACTION.
(i) The Seller has not offered the Convertible
Debentures and shares of common stock issuable upon conversion of the
Convertible Debentures which are the subject of this Agreement to any person in
the United States, any identifiable groups of U.S. citizens abroad, or to any
U.S. Person as that term is defined in Regulation S.
(ii) At the time the buy order was originated, the
Seller and/or its agents reasonably believed the Buyer was outside of the United
States and was not a U.S. Person.
(iii) The Seller and/or its agents reasonably believe
that the transaction has not been pre-arranged with a buyer in the United
States.
d. NO DIRECTED SELLING EFFORTS. In regard to the transaction
contemplated by this Agreement, the Seller has not conducted any "directed
selling efforts" as that term is defined in Rule 902 of Regulation S nor has the
Seller conducted any general solicitation relating to the offer and sale of the
securities which are the subject of this transaction to persons resident within
the United States or elsewhere.
e. CONCERNING THE CONVERTIBLE DEBENTURES AND SHARES OF COMMON
STOCK ISSUABLE UPON CONVERSION OF THE CONVERTIBLE DEBENTURES. The Convertible
Debentures and shares of common stock issuable upon conversion of the
Convertible Debentures when issued and delivered will be duly and validly
authorized and issued, fully paid and non-assessable and will not subject the
holders thereof to personal liability by reason of being such holders. There are
no preemptive rights of any shareholder of the Company.
f. SUBSCRIPTION AGREEMENT. This Offshore Securities
Subscription Agreement has been duly authorized, validly executed and delivered
on behalf of the Seller and is a valid and binding agreement of the Seller
enforceable against it in accordance with its terms, subject to general
principles of equity and to bankruptcy or other laws affecting the enforcement
of creditors' rights generally.
g. NON-CONTRAVENTION. The execution and delivery of this
Offshore Securities Subscription Agreement and the consummation of the issuance
of the Convertible Debentures and shares of common stock issuable upon
conversion of the Convertible Debentures and the transactions contemplated by
this Offshore Securities Subscription Agreement do not and will not conflict
with or result in a breach by the Seller of any of the terms or provisions of,
or constitute a default under, the articles of incorporation or bylaws of the
Seller or any indenture, mortgage, deed of trust or other material agreement or
instrument to which the Seller is a party or by which it or any
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of its respective properties or assets are bound, or any existing applicable
law, rule or regulation or any applicable decree, judgment or order of any
court, Federal or State regulatory body, administrative agency or other
governmental body having jurisdiction over the Seller or any of its properties
or assets.
h. APPROVALS. The Seller is not aware of any authorization,
approval or consent of any governmental body which is legally required for the
issuance and sale of the Convertible Debentures and shares of common stock
issuable upon conversion of the Convertible Debentures as contemplated by the
Offshore Securities Subscription Agreement.
i. MISCELLANEOUS. The sale of the Convertible Debentures and
shares of common stock issuable upon conversion of the Convertible Debentures
and any other shares of the Common Stock of the Seller occurring simultaneously
or concurrently herewith, are not part of a plan or scheme to evade the
registration requirements of the 1933 Act. The Seller believes that the Purchase
Price is reasonably related to the Restricted Period, the historical validity of
the market price of the Common Stock of the Seller, the current financial
condition of the Seller, the dilution represented by the sale of the Convertible
Debentures and shares of common stock issuable upon conversion of the
Convertible Debentures and any other sales of the Common Stock of the Seller
occurring simultaneously or concurrently herewith, current stock market
conditions and other relevant information concerning the Seller.
4. SAFE HARBOR RELIANCE ON REPRESENTATIONS. The Buyer understands that
the offer and sale of the Convertible Debentures and shares of common stock
issuable upon conversion of the Convertible Debentures are not being registered
under the 1933 Act. The Seller is relying on the rules governing offers and
sales made outside the United States pursuant to Regulation S.
5. TRANSFER AGENT INSTRUCTIONS. The Seller's transfer agent will be
instructed to issue one or more share certificates representing the Convertible
Debentures and shares of common stock issuable upon conversion of the
Convertible Debentures with a Regulation S restrictive legend as set forth in
the Regulation S Offering Circular in the name of the Buyer and in such
denominations to be specified prior to closing. The Seller further warrants that
such Regulation S restrictive legend and a "stop transfer" notice will remain on
the certificates for the Convertible Debentures and shares of common stock
issuable upon conversion of the Convertible Debentures only until the end of the
Restrictive Period. Nothing in this Section 5, however, shall affect in any way
the Buyer's obligations and agreement to comply with all applicable securities
laws upon resale of the Convertible Debentures and shares of common stock
issuable upon conversion of the Convertible Debentures.
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6. SHARE DELIVERY INSTRUCTIONS. The Share certificates shall be
delivered to the Buyer on a delivery versus payment basis at such times and
places to be mutually agreed.
7. CLOSING DATE. The date of the issuance and the sale of the
Convertible Debentures and shares of common stock issuable upon conversion of
the Convertible Debentures (the "closing") shall be May 21, 1996, or such other
mutually agreed to time and place.
8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The Buyer
understands that the Seller's obligation to sell the Convertible Debentures and
shares of common stock issuable upon conversion of the Convertible Debentures is
conditioned upon:
a. The receipt and acceptance by the Seller of this Offshore
Securities Subscription Agreement for all of the Convertible Debentures and
shares of common stock issuable upon conversion of the Convertible Debentures as
evidenced by execution of this Subscription Agreement by the President or any
Vice President of the Seller; and
b. Delivery to the Company by the Buyer of good funds as
payment in full for the purchase of the Convertible Debentures and shares of
common stock issuable upon conversion of the Convertible Debentures.
9. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE. The Seller
understands that the Buyer's obligation to purchase the Convertible Debentures
and shares of common stock issuable upon conversion of the Convertible
Debentures is conditioned upon:
a. Acceptance by the Buyer of a satisfactory Offshore
Securities Subscription Agreement for the sale of the Convertible Debentures and
shares of common stock issuable upon conversion of the Convertible Debentures as
evidenced by execution of this Offshore Securities Subscription Agreement by the
President or any Vice President of the Buyer or if an individual, by the Buyer;
and
b. Delivery of Convertible Debentures and shares of common
stock issuable upon conversion of the Convertible Debentures with restrictive
legend as described herein.
10. GOVERNING LAW. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of California, United States of
America. A facsimile transmission of this signed agreement shall be legal and
binding on all parties hereto.
11. INTERPRETATION. All terms used herein that are defined in
Regulation S under the 1933 Act shall have the meaning set forth therein.
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IN WITNESS WHEREOF, this Offshore Securities Subscription Agreement was
duly executed on the date first written below.
Dated this 15th day of the month of May, 1996.
Official Signatory of the CINEMASTAR LUXURY THEATERS,
Seller: INC.
By:________________________
John Ellison, Jr.,
President
Accepted this 15th day of the month of May, 1996.
Official Signatory of the ___________________________________
Buyer: ____________________________
By:________________________________
(Authorized Signature)
___________________________________
(Print Name and Title)
___________________________________
(Address)
___________________________________
___________________________________
(Jurisdiction of
Incorporation
or Formation or Jurisdiction
of Citizenship and Residency)
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