CinemaStar Luxury Theaters Signs Definitive $15 Million Equity
Agreement
SAN DIEGO (Sept. 24) BUSINESS WIRE -Sept. 24, 1997--CinemaStar Luxury
Theaters Inc. (Nasdaq:LUXY) Wednesday announced that it has signed a
definitive agreement for CinemaStar Acquisition Partners, L.L.C., to
acquire a majority equity interest in CinemaStar through a $15 million
purchase of newly issued shares of CinemaStar's common stock.
CinemaStar Acquisition Partners is a private investment group led by
SCP Private Equity, Partners, L.P., of Wayne, Pa., and Jack R. Crosby,
founder and chairman of the Rust Group, an Austin, Texas,
venture-capital firm.
Under the terms of the definitive agreement, CinemaStar Acquisition
Partners will purchase 17,684,464 shares of common stock for a purchase
price of $0.848202 per share. CinemaStar Acquisition Partners also
will receive at closing warrants to purchase 1,630,624 shares of common
stock at an exercise price of approximately $0.848202 per share.
Upon signing the definitive agreement, CinemaStar Acquisition Partners
received an additional warrant to purchase 1 million shares of common
stock at an exercise price of the lower of $0.848202, or the previous
five-day trading price of the CinemaStar common stock.
CinemaStar may be obligated to issue additional adjustment shares of
common stock to CinemaStar Acquisition Partners with respect to certain
expenses, liabilities and operating losses of CinemaStar arising or
disclosed after Aug. 31, 1997. CinemaStar's board of directors will be
reconstituted to reflect the majority interest of the investment group.
As of Aug. 31, 1997, the outstanding capital stock of CinemaStar
consisted of 8,019,182 shares of common stock.
Completion of the transaction is subject to certain other conditions,
including shareholder approval. CinemaStar plans to hold a special
shareholder meeting on a date to be announced. It is anticipated that
the transaction will be completed in December 1997.
Concurrent with the signing of the definitive agreement, CinemaStar
received a $3 million bridge loan from an affiliate of CinemaStar
Acquisition Partners to complete existing projects and to pay off
certain indebtedness. It is anticipated that the loan will be repaid
from the proceeds of the $15 million equity investment. The bridge
loan is convertible into 3 million shares of common stock of CinemaStar
at $1 per share.
In connection with the bridge loan, CinemaStar issued a warrant to the
lender to purchase 3 million shares of common stock at an exercise
price of $0.848202 per share, and a second warrant to purchase 1.5
million shares at an exercise price of $0.848202 per share. The second
warrant will be canceled upon the completion of the equity financing.
CinemaStar plans to use the $15 million as working capital and to
continue its expansion program, which began last year and will result
in the company opening more new theater complexes in Southern
California over the next 18 to 24 months.
Commenting on the transaction, John Ellison Jr., president and chief
executive officer of CinemaStar, said: ''Our goal has been to seek
additional capital to continue our expansion program, keeping in mind
the interests of our shareholders.
''We are fortunate to find partners who have a long history of success
in the entertainment industry and the theater-exhibition business and
who will help provide the support we need to grow and meet our
long-term goal, which is to enhance shareholder value in CinemaStar.''
As founder and chairman of the Rust Group, Crosby has focused on
investing in companies in the movie-exhibition, cable-television,
satellite-communications, media, entertainment, banking, real-estate-
development and oil-field-services industries.
Among his many investment activities, Crosby, along with a group of
co-investors, joined E.M. Warburg Pincus & Co. and Home Box Office in
funding the Orion Pictures purchase of Filmways in 1982. From 1982
through early 1985, he served as a director of Orion.
The Rust Group, along with a group of co-investors, purchased selected
theaters from Wometco Theaters Inc. in 1990 before selling them in
1994.
''CinemaStar is an exciting company, and this investment will provide
much needed equity capital, which we believe will enhance the company's
opportunity to execute its growth strategy. We've had great success in
the theater-exhibition business and we look forward to our new
partnership,'' Crosby said.
SCP Private Equity Partners, L.P., is a post-venture-stage private
equity fund affiliated with Safeguard Scientifics Inc. (NYSE:SFE). SCP
invests in a broad range of industries, including communications,
media, financial services, information technology and consumer
products.
CinemaStar recently completed the expansion of its Mission Marketplace
8 theater complex, adding five more screens, making the new Ultraplex
13 at Mission Marketplace the largest multiscreen entertainment center
in north San Diego County.
The company also is completing construction of a 10-screen multitheater
complex in Tijuana, Mexico. The theater complex is scheduled to open
before the end of the year.
Founded in 1989, CinemaStar Luxury Theaters currently operates seven
first-run movie theaters, and has a total of 69 screens in Southern
California. CinemaStar theaters feature high-quality projection and
sound capabilities, including LucasFilm THX Stereo Surround Sound
environment system in most auditoriums, along with luxury amenities
such as high-back, reclining seats and extra-wide aisles between seat
rows. -0-
The information contained in this news release contains certain
forward-looking statements that involve risk and uncertainties, such as
the statements of the company's plan, objectives, expectations and
intentions. The company's actual results could differ materially from
those indicated by such statements as a result of various factors,
including those discussed in the company's Form 10-KSB and Form 10-QSB
on file with the Securities and Exchange Commission.
--30--tjm/la* db/la
CONTACT: CinemaStar Luxury Theaters Inc.
John Ellison Jr./Alan Grossberg, 619/630-2011
or
Pondel Parsons & Wilkinson
Craig Parsons/Michael Pollock, 310/207-9300
KEYWORD: CALIFORNIA
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