<PAGE> 1
As filed with the Securities and Exchange Commission on October 22, 1996
Registration No. ___________
=================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
JERRY'S FAMOUS DELI, INC.
(Exact name of registrant as specified in its charter)
12711 Ventura Boulevard
Suite 400
Studio City, California 91604
(818) 766-8311
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
<TABLE>
<S> <C> <C>
California 5812 95-3302338
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
----------------------
Isaac Starkman, Chief Executive Officer
Jerry's Famous Deli, Inc.
Suite 400
12711 Ventura Boulevard
Studio City, California 91604
(818) 766-8311
(Name and address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Catherine DeBono Holmes, Esq.
Jeffer, Mangels, Butler & Marmaro
2121 Avenue of the Stars
10th Floor
Los Angeles, California 90067
(310) 203-8080
Fax (310) 203-0567
Approximate Date of Commencement of Proposed Sale to the Public: As soon as
practicable after this Registration Statement becomes effective.
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
1933, 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. / / _______________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
-i-
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(2) FEE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par 6,539,166 Shs. $8.50 $55,582,911 $16,843
value (2)
===================================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) based on the average high and low market price of the
Registrant's Common Stock on October 18, 1996, as quoted in the Nasdaq
National Market.
(2) Which may be sold from time to time by certain Selling Security Holders.
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 this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
-ii-
<PAGE> 3
JERRY'S FAMOUS DELI, INC.
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K Showing Location in
Prospectus of Information Required by Items of Form S-3
<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING IN LOCATION
FORM S-1 REGISTRATION STATEMENT IN PROSPECTUS
------------------------------- -------------
<S> <C>
1. Forepart of the Registration Statement and Outside Front Facing Page; Cross-Reference Sheet; Outside Front Cover Page
Cover Page of Prospectus................................ of Prospectus
2. Inside Front and Outside Back Cover Pages of Prospectus. Inside Front Cover Page of Prospectus; Outside Back Cover
Page of Prospectus
3. Summary Information, Risk Factors and Ratio of Earnings
to Fixed Charges........................................ Prospectus Summary; Risk Factors
4. Use of Proceeds......................................... Use of Proceeds
5. Determination of Offering Price......................... Not applicable
6. Dilution................................................ Not Applicable
7. Selling Security Holders................................ Selling Security Holders
8. Plan of Distribution.................................... Outside Front Cover Page of Prospectus; Plan of Distribution
9. Description of Securities to be Registered.............. Prospectus Summary; Description of Capital Stock
10. Interests of Named Experts and Counsel.................. Experts
</TABLE>
-iii-
<PAGE> 4
PROSPECTUS
6,539,166 Shares
LOGO
COMMON STOCK
This Prospectus relates to the registration by Jerry's Famous Deli,
Inc. (the "Company"), at its expense, of up to a maximum of 6,539,166 shares
(the "Selling Security Holder Shares") of the common stock of the Company (the
"Common Stock"), for the account of Waterton Management, L.L.C. ("Waterton") and
certain of its affiliates and their assignees (the "Waterton Affiliates"), which
may be issued upon conversion of up to 19,000 Series B Preferred Shares (the
"Preferred Shares") and upon exercise of up to 205,833 warrants (the "Warrants")
to purchase one share each of Common Stock. Of the total Preferred Shares and
Warrants, 6,000 Preferred Shares and 65,000 Warrants were sold on August 30,
1996 to Yucaipa Waterton Deli Investors, L.L.C. ("Yucaipa"), a Waterton
Affiliate, and Waterton holds an option, exercisable by it or a Waterton
Affiliate, to purchase 13,000 additional Preferred Shares and 140,833 Warrants.
Waterton and the Waterton Affiliates are sometimes collectively referred to
herein as the "Selling Security Holders." The Selling Security Holder Shares are
not being underwritten and the Company will not receive any proceeds from the
sale of the Selling Security Holder Shares. See "Selling Security Holders".
Sales of the Selling Security Holder Shares may depress the price of the Common
Stock in the market for the Common Stock.
The Common Stock is traded on the Nasdaq National Market under the
symbol "DELI." On October 18, 1996, the last sale price of the Company's Common
Stock was $8.50.
THESE SECURITIES ARE HIGHLY SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" ON PAGES 10-15 HEREOF.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The sale of the Selling Security Holder Shares may be effected from
time to time in transactions (which may include block transactions by or for the
account of the Selling Security Holders) in the over-the-counter market or in
negotiated transactions, through the writing of options on the Selling Security
Holder Shares, through a combination of such methods of sale or otherwise. Sales
may be made at fixed prices which may be changed, at market prices prevailing at
the time of sale, or at negotiated prices. If any Selling Security Holder sells
his, her or its Selling Security Holder Shares, or options thereon, pursuant to
this Prospectus at a fixed price or at a negotiated price which is, in either
case, other than the prevailing market price or in a block transaction to a
purchaser who resells, or if any Selling Security Holder pays compensation to a
broker-dealer that is other than the usual and customary discounts, concessions
or commissions, or if there are any arrangements either individually or in the
aggregate that would constitute a distribution of the Selling Security Holder
Shares, a post-effective amendment to the Registration Statement of which this
Prospectus is a part would need to be filed and declared effective by the
Securities and Exchange Commission before such Selling Security Holder could
make such sale, pay such compensation or make such a distribution. The Company
is under no obligation to file a post-effective amendment to the Registration
Statement of which this Prospectus is a part under such circumstances.
The Company intends to furnish the holders of the Common Stock annual
reports containing audited consolidated financial statements with a report
thereon by independent accountants, and such other periodic reports as the
Company may determine to be appropriate or as required by law.
All expenses incurred in connection with the registration of the
Selling Security Shares, which expenses are not expected to exceed $110,000, are
being borne by the Company.
THE DATE OF THIS PROSPECTUS IS ___________, 1996
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<PAGE> 5
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), with the
Securities and Exchange Commission (the "Commission") are incorporated herein by
reference: the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995; the Company's Quarterly Reports on Form 10-Q for the fiscal
quarters ended March 31, 1996 and June 30, 1996 and Form 10-QA for the quarter
ended June 30, 1996; and the Company's Reports on Form 8-K for June 30, 1996,
August 30, 1996 and September 9, 1996; amendments to the Form 8-K for June 30,
1996 filed on September 6, 1996 and October 4, 1996; and an amendment to the
Form 8-K for September 9, 1996 filed on October 22, 1996.
All other documents filed by the Company pursuant to Section 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 the offering of the securities under this
Prospectus shall be deemed to be incorporated by reference herein and to be a
part thereof from the date of filing of such documents, except as to any portion
of any future Annual or Quarterly Report to Stockholders which is not deemed to
be filed under said provisions or any portion of a Proxy Statement not deemed
incorporated herein by reference. Any statement made in a document incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that such statement is replaced or modified by a
statement contained in a subsequently dated document incorporated by reference
or contained in this Prospectus. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide without charge to each person to whom a copy
of this Prospectus is delivered, upon the written or oral request of such
person, a copy of any or all of the documents referred to above which have been
or may be incorporated in this Prospectus by reference, other than exhibits to
such documents. Written or oral requests for such copies should be directed to
Christina Sterling, Chief Financial Officer, 12711 Ventura Boulevard, Suite 400,
Studio City, California 91604 (Telephone: (818) 766-8311).
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C., a registration statement under the Securities
Act with respect to the shares of Common Stock registered hereby. This
Prospectus omits certain information contained in said registration statement as
permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the Common Stock, reference is made
to the registration statement, including the exhibits thereto. Statements
contained herein concerning the contents of any contract or any other document
are not necessarily complete, and in each instance, reference is made to such
contract or other document filed with the Commission as an exhibit to the
registration statement, or otherwise, each such statement being qualified in all
respects by such reference. The registration statement, including exhibits and
schedules thereto, may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, at the Chicago Regional Office,
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511 and at the New York Regional Office, 7 World Trade Center,
Suite 1300, New York, New York 10048. Copies of such materials can be obtained
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
-2-
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by
the more detailed information and financial statements and related notes thereto
appearing elsewhere in this Prospectus. Unless otherwise indicated, all
financial information, share and per share information in this Prospectus assume
(i) no exercise of options to purchase an aggregate of up to 150,000 shares
granted to an investment bank in connection with the Company's initial public
offering; (ii) no exercise of warrants for 205,833 shares granted to Yucaipa and
available for grant to Waterton or its affiliates; (iii) no conversion of 19,000
Preferred Shares issued to Yucaipa and available for issuance to Waterton; and
no exercise of options to purchase an aggregate of up to 2,000,000 shares
granted or available to be granted to employees, officers, directors and
consultants pursuant to stock options.
THE COMPANY
Jerry's Famous Deli, Inc. (the "Company" or "JFD")
was established in 1978 to develop the Jerry's Famous Deli restaurant in Studio
City, California. Three additional Jerry's Famous Deli restaurants were opened
prior to 1995 in Encino, California (1989), Marina del Rey, California (1991)
and West Hollywood, California (January, 1994).
On October 20, 1995, the Company completed its
initial public offering of 1,955,000 shares of Common Stock (the "Public
Offering"), which resulted in net proceeds of approximately $9,235,800. The
Company has used the proceeds to finance the expansion of the Company's
operations, including: (i) the acquisition and renovation of a new Pasadena,
California restaurant, which opened in February 1996, (ii) the renovation of a
new Westwood, California restaurant, which opened in June 1996, (iii) the
development of a new Costa Mesa, California restaurant scheduled to open in
early 1997, and (iv) the acquisition in July 1996 of two deli-style restaurants,
one of which includes a bakery and is located in Sherman Oaks, California,
which has remained open and operates under the name "Solley's," and the other of
which is located in Woodland Hills, California, which is currently being
renovated and is scheduled to open in late 1996.
On August 22, 1996, the Company entered an agreement
with Waterton for the purpose of raising additional capital to support further
growth. Under the agreement with Waterton, the Company granted Waterton an
option, subject to certain conditions, to purchase, directly or through one or
more Waterton Affiliates, a maximum of 19,000 Preferred Shares at a purchase
price of $1,000 per share and 205,833 Warrants for nominal consideration. The
Company completed the sale of 6,000 Preferred Shares and 65,000 Warrants on
August 30, 1996, resulting in net proceeds of approximately $5,540,000.
A substantial majority of the proceeds was used in September 1996 for the
acquisition of the real property, building and restaurant business of Rascal
House, a well known deli-style restaurant in Miami Beach, Florida. The Company
intends to continue to operate the restaurant under the name " Wolfie Cohen's
Rascal House," and to substantially retain and expand upon the menu and
operating format of the restaurant. However, the hours of operation of the
restaurant will be expanded, probably to a 24-hour operation, and the
restaurant will begin delivery service, taking call-in orders for take out,
and begin taking charge cards, all of which were not previously done at
Rascal House.
All of the restaurants are wholly-owned by the
Company except the Encino restaurant, in which the Company wholly owns one of
the co-general partners of the limited partnership which owns and controls the
Encino restaurant. The Company plans to make an offer to purchase the Encino
restaurant from the limited partnership later this year. With an extensive
menu, 24-hour operation and high energy ambiance, the Jerry's Famous Deli
restaurants as a group averaged over $6,900,000 in annual sales per location
at the four restaurants open for the complete 1995 calendar year.
The Company's current objectives are to expand
operations in Southern California and to other areas consistent with the
Company's location strategy and market niche. The Company is actively reviewing
additional potential locations in California, Nevada and the East Coast.
There is no assurance that the Company's financial or growth objectives can be
achieved or that additional capital will be available to finance the Company's
business plan. See "Risk Factors."
The Company is organized under the laws of the State
of California. The Company's offices are located at 12711 Ventura Boulevard,
Suite 400, Studio City, California 91604. Its telephone number is (818)766-8311.
-3-
<PAGE> 7
<TABLE>
<CAPTION>
THE OFFERING
<S> <C>
Common Stock offered by the Selling Security Holders: 6,539,166 shares
Common Stock outstanding as of October 18, 1996: 10,386,250 shares
Nasdaq National Market Symbol: "DELI"
</TABLE>
-4-
<PAGE> 8
SELECTED FINANCIAL AND RESTAURANT DATA
The selected financial data presented below for the Company for the
years ended December 31, 1995, 1994 and 1993 are derived from the consolidated
(1995) and combined (1994 and 1993) financial statements (hereafter,
"consolidated financial statements") of the Company, which have been audited by
Coopers & Lybrand L.L.P., independent accountants. The selected financial data
of the Company for the years ended December 31, 1992 and 1991 have been derived
from the unaudited combined financial statements of the Company. The selected
financial data presented below for Solley's, Inc., of which substantially all
of the assets were acquired by the Company on June 30, 1996, for the year
ended December 31, 1995, are derived from the financial statements of Solley's,
Inc., which have been audited by Coopers & Lybrand L.L.P. The selected financial
data presented below for One Hundred Seventy Second Collins Corp. d/b/a Rascal
House ("172 Corp.") for the years ended December 31, 1995 and 1994 are derived
from the financial statements of 172 Corp., which have been audited by Coopers &
Lybrand L.L.P. The Company acquired certain restaurant assets (inventory and
property and equipment) and the operations of 172 Corp. and the land and
building in which the Rascal House restaurant is located, from a related party
to 172 Corp. on September 9, 1996. The consolidated financial data for the
Company for the six month periods ended June 30, 1995 and 1996, and the
financial data for Solley's, Inc. and 172 Corp. for the six month period ended
June 30, 1996, are derived from unaudited financial statements of the Company,
Solley's, Inc. and 172 Corp. All of the unaudited financial statement data
referred to above, in the opinion of the Company's management, include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of financial position and the results of operations. The
operating results for the six-month periods ended June 30, 1995 and 1996 are not
necessarily indicative of the operating results for the full year. The selected
consolidated and combined financial data should be read in conjunction with the
financial statements and related notes thereto incorporated by reference in this
Prospectus.
THE COMPANY
Selected Financial and Restaurant Data
<TABLE>
<CAPTION>
Six Months
Year Ended December 31, Ended June 30
---------------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
(dollars in thousands, except net income per share, pro forma data and restaurant operating data)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Revenues $ 18,222 $ 20,921 $ 20,620 $ 28,649 $ 28,030 $ 14,026 $ 15,736
Cost of sales 6,653 7,605 7,263 10,019 9,168 4,671 4,883
-------- -------- -------- -------- -------- -------- --------
Gross profit 11,569 13,316 13,357 18,630 18,862 9,355 10,853
Operating expenses 9,168 10,147 10,267 13,689 13,634 6,808 7,499
General and administrative expenses 2,057 1,820 1,917 2,494 2,924 1,560 1,853
Depreciation and amortization expenses 513 675 778 1,152 977 520 652
Restaurant concept discontinuation costs -- -- -- -- 137 137 --
-------- -------- -------- -------- -------- -------- --------
Total expenses 11,738 12,642 12,962 17,335 17,672 9,025 10,004
-------- -------- -------- -------- -------- -------- --------
Income (loss) from operations (169) 674 395 1,295 1,190 330 849
Interest expense, net (148) (137) (117) (222) (110) (105) (47)
Other income (expense), net 28 (86) 77 (138) (111) (59) (117)
-------- -------- -------- -------- --------- -------- --------
Income (loss) before income taxes (289) 451 355 935 969 166 685
Income tax (provision) benefit(1) (2) (10) (19) (22) (187) 150 (274)
-------- -------- -------- -------- -------- -------- --------
Net income (loss) $ (291) $ 441 $ 336 $ 913 $ 782 $ 316 $ 411
======== ======== ======== ======== ======== ======== ========
Net income per common share $0.04
Weighted average shares outstanding 10,476,241
Pro forma net income per common share(2) $0.08
Pro forma weighted average shares
outstanding(2) 10,386,250
</TABLE>
-5-
<PAGE> 9
Selected Financial and Restaurant Data
<TABLE>
<CAPTION>
Six Months
Year Ended December 31, Ended June 30
------------------------------------------------------------------- ----------------
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
The Company, continued (dollars in thousands, except net income per share, pro forma data and restaurant operating data)
<S> <C> <C> <C> <C> <C> <C> <C>
RESTAURANT OPERATING DATA(3):
For restaurants open for the full year:
Average sales per restaurant $ 7,385,796 $ 6,795,517 $ 6,699,991 $ 7,027,555 $6,922,618
Average sales per seat $ 22,937 $ 19,944 $ 19,659 $ 20,104 $ 19,494
Average sales per square foot $ 1,070 $ 906 $ 893 $ 951 $ 922
Total number of restaurants open
at end of each year 3 3 3 4 4
BALANCE SHEET DATA :
Working capital (deficit) $ (1,605) $ (1,208) $ (4,215) $ (4,911) $ 3,845 $ (2.090) $ (135)
Total assets $ 4,767 $ 5,030 $ 7,080 $ 7,541 $ 18,782 $ 9,424 $23,766
Total debt (including current portion) $ 1,845 $ 749 $ 2,815 $ 2,275 $ 2,430 $ 3,621 $ 7,232
Minority interest(4) $ 398 $ 372 $ 192 $ 188 $ 263 $ 194 $ 342
Equity (deficit) $ (152) $ 1,598 $ 172 $ 147 $ 12,766 $ 3,070 $13,164
</TABLE>
- ----------
(1) For the periods prior to January 11, 1995, the Company was classified as
an S Corporation, and thus had no tax liability. The Company terminated
S Corporation status on January 11, 1995. Accordingly, the conversion
from an S Corporation to a C Corporation resulted in the recognition of
a deferred tax asset as of June 30, 1995.
(2) Pro forma net income per share was calculated using net income and based
on, as if, the 10,386,250 shares of common stock were outstanding for all
of fiscal year 1995. The pro forma shares outstanding are based on (i)
7,460,000 shares outstanding at December 31, 1994, (ii) 40,000 shares
issued on January 9, 1995, per the terms of a consulting agreement, (iii)
931,250 shares sold through a private placement completed in March 1995 and
(iv) an additional 1,955,000 shares sold in the Public Offering in October
1995.
(3) Determined as total sales divided by the number of all restaurants open for
the full period, total seats, and total square feet. Two restaurants were
open for the full year in 1991, three for the full year in 1992,
1993 and 1994 and four for the full year in 1995. However, the West
Hollywood restaurant, which opened on January 18, 1994, has been included
in the Restaurant Operating Data for 1994 as if it were open for the entire
year. Total seats is based upon the typical seating configuration of each
restaurant. Seating configurations in each restaurant are subject to
change.
(4) The minority interest represents the limited partners share and the other
general partner's 5% share of accumulated net income or loss and dividends
in the Encino restaurant. From 1989 until April 30, 1996, the minority
interest was 80%; beginning May 1, 1996, the minority interest has been
72.45%.
-6-
<PAGE> 10
Selected Financial and Restaurant Data
<TABLE>
<CAPTION>
Year Ended Six Months
SOLLEY'S, INC. December 31, Ended June 30,
------------ ----------------------
INCOME STATEMENT DATA: 1995 1995 1996
---- ---- ----
(dollars in thousands)
<S> <C> <C> <C>
Revenues $ 7,460 $ 3,776 $ 3,537
Cost of sales 2,523 1,257 1,219
------- ------- -------
Gross profit 4,937 2,519 2,318
Operating expenses 4,195 2,073 2,115
General and administrative expenses 527 324 279
Depreciation and amortization expenses 175 85 87
------- ------- -------
Total expenses 4,897 2,482 2,481
Income (loss) from operations 40 37 (163)
Interest expense, net (88) (46) (39)
Other income, net 21 20 1
------- ------- -------
Income (loss) before income taxes (27) 11 (201)
Income tax provision (1) (1) (1)
------- ------- -------
Net income (loss) $ (28) $ 10 $ (202)
======= ======= =======
BALANCE SHEET DATA:
Working capital (deficit) $ (134) $ (1,334)
Total assets $ 1,151 $ 937
Total debt (including current portion) $ 1,150 $ 1,108
Equity (deficit) $ (453) $ (654)
</TABLE>
<TABLE>
<CAPTION>
Year Six Months
172 CORP. Ended December 31, Ended June 30,
------------------ --------------
INCOME STATEMENT DATA: 1994 1995 1995 1996
---- ---- ---- ----
(dollars in thousands)
<S> <C> <C> <C> <C>
Revenues $8,107 $ 7,775 $4,210 $4,255
Cost of sales 2,595 2,610 1,383 1,434
------ ------- ------ ------
Gross profit 5,512 5,165 2,827 2,821
Operating expenses 3,600 3,590 1,852 1,813
General and administrative expenses 1,513 1,536 798 724
Depreciation and amortization expenses 36 45 22 40
------ ------- ------ ------
Total expenses 5,149 5,171 2,672 2,577
Income (loss) from operations 363 (6) 155 244
Interest income, net 17 22 12 16
Other income, net 21 19 14 6
------ ------- ------ ------
Net income* $ 401 $ 35 $ 181 $ 266
====== ======= ====== ======
BALANCE SHEET DATA:
Working Capital $ 591 $ 330 $ 621
Total assets $1,088 $ 872 $1,154
Total debt -- -- --
Equity $ 676 $ 428 $ 694
</TABLE>
- ----------
* For all periods presented, 172 Corp. was taxed as an S Corporation and,
accordingly, no income tax provision was provided.
-7-
<PAGE> 11
<TABLE>
<CAPTION>
Selected Financial and Restaurant Data
PRO FORMA CONSOLIDATED 172 Corp. Pro Forma
--------- ---------
The Company Solley's Inc. Year Ended Consolidated
----------- ------------- ---------- ------------
Year Ended Year Ended Adjustments December 31, Adjustments Year Ended
---------- ---------- ----------- ------------ ----------- ----------
December 31, 1995 to Solley's 1995 to 172 Corp. December 31,1995
----------------- ----------- ---- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Revenues $ 28,030 $ 7,460 $ -- $ 7,775 $ -- $ 43,265
Cost of sales 9,168 2,523 -- 2,610 -- 14,301
-------- ------- ----- ------- ----- --------
Gross profit 18,862 4,937 -- 5,165 -- 28,964
Operating expenses 13,634 4,195 -- 3,590 $(238)(d) 21,181
General and administrative expenses 2,924 527 $(233)(a) 1,536 (413)(e) 4,341
Depreciation and amortization expenses 977 175 153(b) 45 198(f) 1,548
Restaurant concept discontinuation
costs 137 -- -- -- -- 137
-------- ------- ----- ------- ----- --------
Total expenses 17,672 4,897 (80) 5,171 (453) 27,207
-------- ------- ----- ------- ----- --------
Income (loss) from operations 1,190 40 (80) (6) 453 1,757
Interest income (expense), net (110) (88) 91(c) 22 -- (85)
Other, net (111) 21 -- 19 -- (71)
-------- ------- ----- ------- ----- --------
Income (loss) before income taxes 969 (27) 171 35 453 1,601
Income tax provision (187) (1) -- -- (194)(g) (382)
-------- ------- ----- ------- ----- --------
Net income (loss) $ 782 $ (28) $ 171 $ 35 $ 259 $ 1,219
======== ======= ===== ======= ===== ========
Pro forma net income per common
share $0.08 $0.11
Pro forma weighted average shares
outstanding 10,386,250(j) 10,451,250(h)
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA CONSOLIDATED The Company Solley's Inc. 172 Corp. Pro Forma
- ---------------------- ----------- ------------- --------- ---------
Six Month Period Six Month Period Six Months Period Adjustments Consolidated
---------------- ---------------- ----------------- ----------- ------------
Ended June 30, Adjustments Ended June 30, to 172 Six Months Period
-------------- ----------- -------------- ------ -----------------
1996 to Solley's 1996 Corp. Ended June 30, 1996
---- ----------- ---- ----- -------------------
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Revenues $ 15,736 $ 3,537 $ -- $ 4,255 $ -- $ 23,528
Cost of sales 4,883 1,219 -- 1,434 -- 7,536
------------ -------- ----- ------- ----- --------
Gross profit 10,853 2,318 -- 2,821 -- 15,992
Operating expenses 7,499 2,115 -- 1,813 (119)(d) 11,308
General and administrative expenses 1,853 278 (118)(a) 724 (147)(e) 2,590
Depreciation and amortization expenses 652 87 77 (b) 40 81 (f) 937
------------ -------- ----- ------- ----- ------
Total expenses 10,004 2,480 (41) 2,577 (185) 14,835
------------ -------- ----- ------- ----- --------
Income (loss) from operations 849 (162) 41 244 185 1,157
Interest income (expense), net (47) (39) 41 (c) 16 -- (29)
Other, net (117) 1 -- 6 -- (110)
------------ -------- ----- ------- ----- --------
Income (loss) before income taxes 685 (200) 82 266 185 1,018
Income tax provision (274) (1) -- -- (180)(g) (455)
------------ -------- ----- ------- ----- --------
Net income (loss) $ 411 $ (201) $ 82 $ 266 $ 5 $ 563
============ ======== ===== ======= ===== ========
Net income per common share $ 0.04
Common shares outstanding 10,541,241
Pro forma net income per common share $ 0.05
Pro forma weighted average
shares outstanding 10,451,250(h)
Balance Sheet Data :
Working capital (deficit) $ (135) $ 79 $ (54)(k) $ 102 $ 535(l) $ 527
Total assets $ 23,766(i) $ 684 $(684)(k) $ 172 $5,368(m) $ 29,306
Total debt (including current portion) $ 7,232 -- -- -- -- $ 7,232
Equity $ 13,164 -- -- -- $5,540 $ 18,704
</TABLE>
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<PAGE> 12
SELECTED FINANCIAL AND RESTAURANT DATA
(a) Total compensation and benefits for the prior owner of Solley's in the
amounts of approximately $233,000 and $118,000 for the twelve and six
months, respectively, have been eliminated.
(b) Includes amortization of goodwill of $73,000 and $37,000 and of the covenant
not to compete of $80,000 and $40,000 for the twelve and six months,
respectively.
(c) Since no debt or other liabilities of Solley's were assumed by the Company,
interest expense of $91,000 and $41,000 for the twelve and six months,
respectively, has been eliminated.
(d) Rent expense paid to the partnership which owned the real property, in the
amounts of approximately $238,000 and $119,000 for the twelve and six
months, respectively, has been eliminated.
(e) Compensation to the prior owners of 172 Corp. in the amounts of
approximately $413,000 and $147,000 for the twelve and six months,
respectively, has been eliminated.
(f) Includes amortization expense of goodwill of $59,000 and $29,000,
amortization expense of the covenant not to compete of $92,000 and $46,000
and depreciation expense of $92,000 and $46,000 for the twelve and six
months, respectively. Depreciation expense of $45,000 and $40,000 taken by
172 Corp. for the twelve and six months, respectively, has been eliminated.
(g) Assumes the provision for income taxes is based on a 40% effective income
tax rate, based on adjusted 172 Corp. income.
(h) Includes 65,000 common shares from the treatment of a warrant as a
common stock equivalent.
(i) At June 30, 1996, the Company included the purchase price of Solley's
under "Acquisition deposit in escrow," a long-term asset.
(j) Based on, as if, the 10,386,250 shares of common stock were outstanding
for all of fiscal year 1995. The pro forma shares outstanding are based
on (i) 7,460,000 shares outstanding at December 31, 1994, (ii) 40,000
shares issued on January 9, 1995, per the terms of a consulting agreement,
(iii) 931,250 shares sold through a private placement completed in
March 1995 and (iv) an additional 1,955,000 shares sold in the Public
Offering in October 1995.
(k) The change in working capital reflects the $54,000 decrease in inventory
acquired. The change in total assets reflects: (i) the $2,543,000 decrease
in "Acquisition deposit in escrow;" (ii) the allocation of the $2,543,000
cash purchase price; and (iii) the reductions of $79,000 in inventory
acquired and $605,000 in property and equipment acquired. The cash purchase
price of $2,543,000 reflected under the Company's long-term asset caption
"Acquisition deposit in escrow," was allocated to the following based on
their fair value on the date of acquisition: $25,000 to inventory;
$667,000 to property and equipment; $400,000 for the covenant not to
compete which will be amortized on a straight-line basis over five years;
$110,000 for deposits to the landlords; and the balance to goodwill which
will be amortized on a straight-line basis over 18 years. Other than the
inventory and property and equipment, no other assets were acquired. In
addition, no debt or other liabilities were assumed from Solley's. Since
funding for the purchase came from the proceeds of the Company's October
1995 Public Offering and earlier bank borrowings, reflected under the
Company "Long-term debt and other liabilities" caption, no additional
debt was incurred.
(l) The change in working capital reflects: (i) the net increase in cash and
cash equivalents as a result of net proceeds received from the issuance
of 6,000 shares of 8% convertible preferred stock to Yucaipa on August 30,
1996 of approximately $5,540,000 less the net purchase price of $4,924,000
for the acquisition of certain assets of 172 Corp. and a related party;
(ii) the $52,000 decrease in inventory; and (iii) the $29,000 decrease
in other current assets.
(m) The change in total assets reflects the net change in cash and cash
equivalents (as described in footnote (l) above) and the purchase price
of $4,924,000 for the acquisition of certain assets of 172 Corp. and a
related party, less an adjustment of $172,000 for inventory and fixed
assets acquired from 172 Corp. The purchase price of $4,924,000 was
allocated to the following: $50,000 in inventory; a $29,000 reduction to
prepaid property taxes; $1,064,000 to land; $1,300,000 to building and
$594,000 to building improvements, property and equipment which are
depreciated on a straight-line basis over 30 and four years, respectively;
$184,000 for a covenant not to compete, which is amortized on a
straight-line basis over two years; and the balance to goodwill, which
is amortized on a straight-line basis over 30 years. Other than inventory
and land, building, building improvements, property and equipment, no
other assets were acquired. In addition, no debt or other liabilities were
acquired from 172 Corp. or the related party.
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<PAGE> 13
RISK FACTORS
AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVES A
HIGH DEGREE OF RISK. IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THE
PROSPECTUS AND INFORMATION INCORPORATED HEREIN BY REFERENCE, PROSPECTIVE
INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS BEFORE MAKING AN
INVESTMENT. THIS PROSPECTUS CONTAINS CERTAIN FORWARD LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES, SUCH AS STATEMENTS OF THE COMPANY'S PLANS,
OBJECTIVES, EXPECTATIONS AND INTENTIONS. THE CAUTIONARY STATEMENTS MADE IN THIS
PROSPECTUS AND INCORPORATED BY REFERENCE HEREIN SHOULD BE READ AS BEING
APPLICABLE TO ALL RELATED FORWARD-LOOKING STATEMENTS WHEREVER THEY APPEAR IN OR
ARE INCORPORATED HEREIN BY REFERENCE INTO THIS PROSPECTUS. THE COMPANY'S ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED HERE OR INCORPORATED HEREIN
BY REFERENCE. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE
THOSE DISCUSSED BELOW, AS WELL AS THOSE DISCUSSED ELSEWHERE HEREIN.
LIMITED OPERATING HISTORY WITH MULTIPLE RESTAURANTS. The Company was
founded in 1978 with the opening of its Studio City restaurant. Three additional
restaurants were opened in 1989, 1991 and 1994, respectively, and have each been
in operation for over two years. Two additional restaurants were opened in
February and June 1996, respectively, two additional restaurants (Solley's) were
acquired as of June 30, 1996, and one additional restaurant (Rascal House) was
acquired September 9, 1996. Accordingly, the Company has a limited operating
history in its current size and configuration, and there is no assurance that
such restaurants, or the Company as a whole, will be profitable in the future.
LACK OF DIVERSIFICATION. At the present time, the Company intends to
invest only in restaurants based on the Jerry's Famous Deli concept. As a
result, changes in consumer preferences, including a change in consumer
preferences for restaurants of the type to be operated by the Company, may have
a disproportionate and materially adverse impact on the Company's business and
its operating results.
POSSIBLE NEED FOR ADDITIONAL FINANCING. Management believes that the
proceeds of the October 1995 Public Offering, the August 1996 sale of the
Preferred Shares and proceeds from any future sales of the remaining authorized
Preferred Shares, along with the funds anticipated to be generated from the
Company's operations will be sufficient to fund the Company's cash requirements
for at least the next 12 months. This estimate is based on certain assumptions,
including certain assumptions as to the Company's revenues, net income and other
factors, and there is no assurance that such assumptions will prove to be
accurate or that unbudgeted costs will not be incurred. Future events, including
the problems, delays, additional expenses and difficulties frequently
encountered by similarly situated companies, as well as changes in economic,
regulatory or competitive conditions, may lead to cost increases that could make
the Company's existing capital and the funds anticipated to be generated from
the Company's operations insufficient to fund the Company's operations and
expansion plans for the next 12 months. Management may also determine that it is
in the best interest of the Company to expand more rapidly than currently
intended. In any case, additional financing may be required. There is no
assurance that the Company will be able to obtain such additional financing, or
that such additional financing will be available on terms acceptable to the
Company and at the times required by the Company. Failure to obtain such
financing may adversely impact the growth, development or general operations of
the Company. If, on the other hand, such financing can be obtained, it will most
likely result in additional leverage or dilution of existing shareholders.
UNCERTAIN ABILITY TO MANAGE GROWTH AND EXPANSION. In order to achieve
growth, Management believes that the Company must develop new restaurants. The
Company's expansion plan calls for the addition of several new restaurants per
year. Management does not have experience opening restaurants at the current
expansion plan rate. The Company's ability to successfully expand will depend on
a number of factors, including without limitation, the selection and
availability of suitable locations, the hiring and training of sufficiently
skilled management and personnel, the availability of adequate financing,
distributors and suppliers, the obtaining of necessary governmental permits and
authorizations, and contracting with appropriate development and construction
firms, some of which are beyond the control of the Company. There is no
assurance that the Company will be able to open any new restaurants, or that any
new restaurants will be opened at budgeted costs or in a timely manner, or that
such restaurants can be operated profitably.
LIMITATIONS AND VULNERABILITY AS A RESULT OF GEOGRAPHIC CONCENTRATION.
Because all of the Company's current restaurants (other than the recently
acquired Rascal House in Florida) are located in
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<PAGE> 14
Southern California, the Company is vulnerable to the Southern California
economy, which has experienced adverse results in recent years. In addition,
since the Company's operating experience is limited to Southern California,
there is no assurance that the Jerry's Famous Deli concept will be successful in
other geographic areas if or as the Company expands its geographic reach. For
example, the Company's experience with construction and development outside the
Los Angeles metropolitan area is limited, which may increase associated risks of
development and construction as the Company expands outside this area. Expansion
to other geographic areas may require substantially more funds for advertising
and marketing since the Company will not initially have name recognition or word
of mouth advertising available to it in areas outside of Southern California.
The centralization of the Company's management in Southern California may be a
problem in terms of expansion to new geographic areas, since the Company may
suffer from lack of experience with local distributors, suppliers and consumer
factors and from other issues as a result of the distance between the Company's
main headquarters and its restaurant sites. These factors could impede the
growth of the Company.
SIGNIFICANT RESTAURANT INDUSTRY COMPETITION. The restaurant industry is
intensely competitive with respect to price, service, location, ambiance and
quality, both within the casual dining field and in general. As a result, the
rate of failure for restaurants is very high and the business of owning and
operating restaurants involves greater risks than for businesses generally.
There are many competitors of the Company in the casual dining segment that have
substantially greater financial and other resources than the Company and may be
better established in those markets where the Company has opened or intends to
open restaurants. There is no assurance that the Company will be able to
successfully meet its competition.
DEPENDENCE UPON CONSUMER TRENDS. The Company's restaurants are, by
their nature, dependent upon consumer trends with respect to the public's
tastes, eating habits (including increased awareness of nutrition), and
discretionary spending priorities, all of which can shift rapidly. In general,
such trends are significantly affected by many factors, including the national,
regional or local economy, changes in area demographics, increases in regional
competition, food, liquor and labor costs, traffic patterns, weather, natural
disasters, and the availability and relative cost of automobile fuel. Any
negative change in any of the above factors could negatively affect the Company
and its operations.
DEPENDENCE ON KEY PERSONNEL. The Company believes that the development
of its business has been, and will continue to be, highly dependent on Isaac
Starkman, the Chairman of the Board and Chief Executive Officer of the Company.
In addition, any outstanding balances under the Company's $2.5 million loan with
Bank of America become immediately due and payable upon the death of any
principal officer or majority shareholder. Isaac Starkman is currently 58
years old. Mr. Starkman has an employment agreement which requires that he
devote a substantial majority of his time to the Company; however, he does have,
and will continue to have, limited involvement with certain concession and
souvenir businesses in New York, and other business ventures, each unrelated to
the Company and its business. Guy and Jason Starkman, Vice Presidents of the
Company, are currently 25 and 22 years old, respectively. The Company has
obtained key man life insurance of $2,000,000 face amount on Isaac Starkman and
$1,000,000 on Guy Starkman. However, especially in light of Guy and Jason
Starkman's relative youth, if Isaac Starkman's services become unavailable for
any reason, it could affect the Company's business and operations adversely.
DILUTION TO HOLDERS OF COMMON STOCK UPON CONVERSION OF PREFERRED SHARES
AND WARRANTS. Each Preferred Share is convertible into shares of Common Stock at
a conversion price equal to a 17% discount from the average market price of the
Common Stock for the five days preceding the conversion, provided that the
maximum conversion price is $6.00 per share and the minimum conversion price is
$3.00 per share. The Warrants are exercisable at a price of $1.00 per share. If
the Common Stock is trading at a per share price in excess of $6.00 per share on
the date(s) that Preferred Shares are converted and/or the Warrants are
exercised, it may cause substantial dilution to the holders of Common Stock.
POSSIBLE HIGHER COSTS UNDER EXISTING RELATED PARTY LEASES. The Company
currently leases its Westwood restaurant building and eight adjacent parking
spaces, along with three parking lots and a 1,200 square foot building adjacent
to its West Hollywood restaurant, from The Starkman Family Partnership ("The
Starkman Family Partnership"), an entity controlled by Isaac Starkman, the
controlling beneficial shareholder of the Company. There is no assurance that
the leases between The Starkman Family Partnership and the Company are as
favorable as the Company could have obtained from an unaffiliated third party.
These leases were not negotiated at arm's length and Isaac Starkman, the
controlling
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<PAGE> 15
beneficial shareholder and the Chief Executive Officer of the Company, had a
conflict of interest in negotiating these transactions. In addition, several of
the leases are subject to renewal at their then fair market value, which could
involve substantial increases, depending upon the real estate leasing market at
the time of renewal of each of such leases. In the future, the Company will not
lease new restaurant sites or facilities or renew existing leases from The
Starkman Family Partnership or other affiliated persons or entities unless the
terms of the lease have been approved by the Company's independent directors and
deemed at least as favorable as would be available from a non-affiliated third
party by an independent national or regional real estate evaluation firm or
commercial leasing firm in a written opinion.
CERTAIN DISCONTINUED RESTAURANT CONCEPTS HAVE BEEN UNSUCCESSFUL.
Certain other restaurant operations established by Isaac Starkman, the
controlling beneficial shareholder of the Company, have not met with success. In
November 1984, Isaac Starkman established a casual dining restaurant named
Starky's, which combined a deli operation with pizza parlor and arcade at the
top of the Beverly Center, a large shopping mall in Los Angeles, California.
Starky's had no street visibility, and due to its location in an enclosed mall,
had restricted hours of operation and problems with hygienic conditions at the
mall which were outside of Management's control. A lawsuit was filed by Starky's
primarily related to the landlord's property maintenance which resulted in a
settlement subject to a confidentiality agreement and the closing of the
restaurant in December 1992. In addition, Jerry's Famous Pizza, a 2,300 square
foot pizza restaurant in Sherman Oaks, California ("Jerry's Famous Pizza"),
operated by Pizza by the Pound, Inc., a wholly-owned subsidiary acquired by the
Company on January 12, 1995, was not profitable. Jerry's Famous Pizza had been
in operation since May 1989 and operated at a net loss. The Company nonetheless
acquired the operation based on the belief that the one existing operation was
not performing well due to its limited exposure and access unique to its mall
location. Management believed that this facet could be corrected by developing
additional Jerry's Famous Pizza operations in more favorable locations. In
addition, prior to the private placement of stock by the Company in January of
1995, the Company was wholly-owned by The Starkman Family Trust. Isaac Starkman
was the Chief Executive Officer of the Company, a 50% owner of Pizza by the
Pound, Inc. and Co-Trustee of The Starkman Family Trust. Ami Saffron was
Director of Operations and Procurement of the Company and a 50% owner of Pizza
by the Pound, Inc. Mr. Starkman, Mr. Saffron and counsel to the Company believed
it would be inappropriate for the Company to sell shares of the Company to
non-affiliated persons who would become minority shareholders of the Company
while Mr. Starkman and Mr. Saffron owned and operated a separate restaurant
business outside the Company. Thus, on January 12, 1995, the Company acquired
all of the shares of Pizza by the Pound, Inc. Management believed that Jerry's
Famous Pizza represented a strong concept for profitable expansion. However, as
the Company decided to offer shares to the public, and after evaluating advice
of its professional advisers and the nature of the market for public company
restaurant stocks, Management determined that it was in the interest of
shareholder value that the Company focus on its core business of high volume
deli style restaurants rather than confuse the financial markets' perception of
the Company by developing comparatively low volume restaurants in the fast food
pizza segment. As a result, the Company ceased operations of Jerry's Famous
Pizza.
INCREASES IN FOOD COSTS. Among various other factors, the Company's
profitability is highly sensitive to changes in food costs, which sensitivity
requires Management to be able to anticipate and react to such changes. Various
factors beyond the Company's control, including adverse weather, labor strikes
and delays in any of the restaurants' frequent deliveries, may negatively affect
food costs, quality and availability. While in the past, Management has been
able to anticipate and react to increasing food costs through, among other
things, purchasing practices, menu changes and price adjustments, there can be
no assurance that it will be able to do so in the future.
INCREASE IN MINIMUM WAGE. On August 20, 1996, President Clinton signed
legislation which will increase the federal minimum wage from $4.25 an hour to
$4.75 effective October 1, 1996, and again to $5.15 effective September 1, 1997.
In addition, a California initiative is pending on the November ballot that
proposes another two-step increase making the state minimum wage $5.75 an hour
by early 1998. Approximately one-third of employees working in restaurants
operated by the Company receive salaries equal to the federal minimum wage and
an increase in the minimum wage is expected to increase the operating expenses
of the Company.
SECURITY CONCERNS AND EXPENSES AT RESTAURANT SITES. In light of, among
other things, the 24-hour operation of the Company's restaurants, security for
patrons and workers at restaurant locations is an ongoing
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<PAGE> 16
and increasing concern and expense. The Company has previously had criminal
incidents at its restaurants, some of which have resulted in lawsuits. There is
no assurance that there will not be any additional problems at any of the
locations. The Company maintains its own security personnel at each location.
The Company also maintains general liability insurance.
POTENTIAL UNINSURED LOSSES. The Company has comprehensive insurance,
including general liability, fire and extended coverage, which the Company
considers adequate. However, there are certain types of losses which may be
uninsurable or not economically insurable. Such hazards may include earthquake,
hurricane and flood losses. While the Company currently maintains limited
earthquake coverage, it may not be economically feasible to do so in the future.
Since the Company's operations are currently concentrated in one area of
Southern California, the Company has had temporary interruptions in its
operations due to such hazards in the past. Punitive damage awards are generally
not covered by insurance; thus, any awards of punitive damages as to which the
Company may be liable could adversely affect the ability of the Company to
continue to conduct its business, to expand its operations or to develop
additional restaurants. If such a loss should occur, the Company would, to the
extent that it is not covered for such loss by insurance, suffer a loss of the
capital invested in, as well as anticipated profits and/or cash flow from,
such damaged or destroyed properties. There is no assurance that any insurance
coverage maintained by the Company will be adequate, that it can continue to
obtain and maintain such insurance at all or that the premium costs will not
rise to an extent that they adversely affect the Company or the Company's
ability to economically obtain or maintain such insurance.
POTENTIAL "DRAM SHOP" LIABILITY. Restaurants in California and most
other states are subject to "dram shop" laws, rules and regulations, which
impose liability on licensed alcoholic beverage servers for injuries or damages
caused by their negligent service of alcoholic beverages to a visibly
intoxicated person or to a minor, if such service is the proximate cause of the
injury or damage and such injury or damage is reasonably foreseeable. While the
Company has limited amounts of liquor liability insurance and intends to
maintain liquor liability insurance as part of its comprehensive general
liability insurance which it believes should be adequate to protect against such
liability, there is no assurance that it will not be subject to a judgment in
excess of such insurance coverage or that it will be able to obtain or continue
to maintain such insurance coverage at reasonable costs, or at all. The
imposition of a judgment substantially in excess of the Company's current
insurance coverage would have a materially adverse effect on the Company and its
operations. The failure or inability of the Company to maintain or increase
insurance coverage could materially and adversely affect the Company and its
operations. In addition, punitive damage awards are generally not covered by
such insurance. Thus, any awards of punitive damages as to which the Company may
be liable could adversely affect the ability of the Company to continue to
conduct its business, to expand its operations or to develop additional
restaurants.
TRADEMARK AND SERVICE MARK RISKS. The Company has not had a challenge
to its use of the "Jerry's" service mark as of this time. However, to date, the
Company has used the service mark only in Southern California. In addition, the
Company has not secured clear rights to the use of the "Jerry's" service mark or
any other name, service mark or trademark used in the Company's business
operations, other than "JFD," in connection with restaurants. There are other
restaurants using the name "Jerry's" throughout the United States, and use of
the service mark or any other name, service mark or trademark in the Company's
business operations, other than "JFD," may be subject to challenge.
EFFECTS OF COMPLIANCE WITH GOVERNMENT REGULATION. The Company is
subject to various federal, state and local laws, rules and regulations
affecting its businesses and operations. Each of the Company's restaurants is
and shall be subject to licensing regulation and reporting requirements by
numerous, governmental authorities which may include alcoholic beverage control,
building, land use, health and safety and fire agencies in the state or
municipality in which the restaurant is located. Difficulties in obtaining or
failures to obtain the necessary licenses or approvals could delay or prevent
the development or operation of a given restaurant or limit, as with the
inability to obtain a liquor or restaurant license, its products and services
available at a given restaurant. Any problems which the Company may encounter in
renewing such licenses in one jurisdiction may adversely affect its licensing
status on a federal, state or municipal level in other relevant jurisdictions.
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<PAGE> 17
HIGHER COSTS ASSOCIATED WITH POTENTIAL HEALTH CARE REFORM. The Company
currently pays a portion of the health insurance coverage for its managerial and
certain non-managerial restaurant personnel and more extensive health coverage
for its corporate staff employees. Many proposals being discussed at the state
and federal level for universal or broadened health care coverage could impose
costly requirements to provide additional coverage, which could adversely impact
the Company. At the present time it is unclear what, if any, reforms in health
care coverage will be adopted at the federal or state level.
INCREASED CORPORATE TAX AFTER SUBCHAPTER S TERMINATION. The Company was
an S corporation from its organization until January 10, 1995. As an S
corporation, the Company's shareholder, not the Company, paid federal income
taxes on the profits of the Company. In addition, the Company's shareholder paid
California state income taxes on the profits of the Company and the Company paid
California state income taxes on the profits of the Company at a significantly
reduced rate. On January 11, 1995, the Company became a C corporation, liable
for federal income taxes and California state income taxes at a significantly
higher rate. If the Company had been subject to federal income tax, in addition
to higher California state income taxes for 1994, for example, Management
estimates that net income would have been reduced by approximately $383,000.
Taxation as a C corporation will generally decrease net income of the Company
versus taxation as an S corporation as a result of the income tax expense on a
going forward basis.
LIMITED CONTROL AND INFLUENCE ON THE COMPANY. The current officers and
directors, including the controlling beneficial shareholder, of the Company in
the aggregate, directly or beneficially, currently own approximately 64.4% of
the total outstanding Common Stock. In addition, three out of five directors are
members of the Starkman family. As a result, these individuals are in a position
to materially influence, if not control the outcome of all matters requiring
shareholder or board approval, including the election of directors. Such
influence and control is likely to continue for the foreseeable future and
significantly diminishes control and influence which future shareholders
may have on the Company.
POTENTIAL ADVERSE IMPACT OF THE LACK OF SHAREHOLDER GUARANTEES IN THE
FUTURE. Prior to the completion of the Public Offering, numerous leases and
other obligations of the Company have been obtained with the additional security
of a personal guarantee from Isaac Starkman, the controlling beneficial
shareholder of the Company, and, in certain cases, his spouse or affiliated
family trusts. In the future, Mr. Starkman is not obligated to, and does not
intend to, provide such personal guarantees. The lack of such guarantees may
adversely affect the Company's ability to obtain financing or other commitments
from landlords, banks or others.
NO DIVIDENDS. It is the current policy of the Company that it will
retain earnings, if any, for expansion of its operations, remodeling of existing
restaurants and other corporate purposes and it will not pay any cash dividends
in respect of the Common Stock in the foreseeable future.
POTENTIAL INFLUENCE ON THE MARKET OF THE BOSTON GROUP, L.P. A
significant number of the shares of the Common Stock currently outstanding were
sold to clients of The Boston Group, L.P. ("TBG"), which acted as lead
underwriter of the Public Offering. Although TBG currently makes a market in the
Common Stock, it has no legal obligation, contractual or otherwise, to continue
to do so. The prices and liquidity of the Common Stock may be significantly
affected by the degree, if any, of TBG's participation in the market for the
Common Stock. There is no assurance that the market activities of TBG will
continue in the future.
POSSIBLE ADVERSE IMPACT ON MARKET PRICE OF FUTURE SALES OF SHARES
ISSUED UPON CONVERSION OF PREFERRED SHARES OR EXERCISE OF WARRANTS. A minimum of
3,166,666 shares and a maximum of 6,333,333 shares of Common Stock could be
issued upon conversion of the Preferred Shares, assuming that Waterton or the
Waterton Affiliates purchase all of the remaining 13,000 Preferred Shares under
their option. In addition, a maximum of 205,833 shares could be issued upon
exercise of all of the Warrants if Waterton or the Waterton Affiliates purchase
the remaining 140,833 Warrants under their option. The increase in volume of
shares available for sale may have an adverse effect on the market price of the
shares of Common Stock.
POSSIBLE ADVERSE IMPACT ON POTENTIAL BIDS TO ACQUIRE SHARES DUE TO
ISSUANCE OF PREFERRED OR COMMON STOCK. The Board of Directors of the Company has
authority to issue up to 5,000,000 shares of preferred stock of the Company (the
"Preferred Stock") and to fix the rights, preferences, privileges and
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<PAGE> 18
restrictions of such shares without any further vote or action by the
shareholders. In addition, the Company has authorized 60,000,000 shares of
Common Stock. Only 10,386,250 shares of Common Stock and 6,000 Preferred Shares
are currently outstanding, and the Company has granted an option to Waterton to
purchase an additional 13,000 Preferred Shares. The potential issuance of
authorized and unissued Preferred Shares or Common Stock of the Company may
result in special rights and privileges, including voting rights, to individuals
designated by the Company and have the effect of delaying, deferring or
preventing a change in control of the Company. As a result, such potential
issuance may adversely affect the marketability and potential market price of
the shares. The Company currently has no plans to issue additional shares of
Preferred Stock or additional shares of Common Stock. See "Description of
Capital Stock." However, if additional acquisition opportunities become
available, Management may determine to issue and sell additional Common Stock or
Preferred Shares at any time in the future.
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<PAGE> 19
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of shares of
Common Stock offered by the Selling Security Holders.
SELLING SECURITY HOLDERS
This Prospectus covers a total of 6,539,166 shares of Common Stock
issuable upon conversion of a total 19,000 Preferred Shares and exercise of
205,833 warrants. Of this amount, Yucaipa beneficially owns 6,000 Preferred
Shares and a warrant for 65,000 shares. Waterton holds an option to purchase the
remaining 13,000 Preferred Shares and warrants for 140,833 shares. Upon
conversion of all of the 19,000 Preferred Shares and warrants for 205,833
shares issuable under the agreement with Waterton, Waterton and/or its
affiliates would own 6,539,166 shares of Common Stock, constituting
approximately 38.43% of the total outstanding shares of Common Stock.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 60,000,000 shares of
Common Stock, no par value, and 5,000,000 shares of Preferred Stock, no par
value. As of October 18, 1996, there were 10,386,250 shares of Common Stock
outstanding and 6,000 Preferred Shares outstanding.
COMMON STOCK
The holders of outstanding Common Stock are entitled to receive
dividends out of assets legally available therefor at such times and in such
amounts as the Board of Directors may from time to time determine. The Company
has no present intention of paying dividends on its Common Stock. Upon
liquidation, dissolution or winding up of the Company, and subject to the
priority of any outstanding Preferred Stock, the assets legally available
for distribution to shareholders are distributable ratably among the holders
of Common Stock at the time outstanding.
No holder of shares of Common Stock has a preemptive right to subscribe
to future issuances of securities by the Company. Accordingly, all holders of
Common Stock will suffer dilution of their percentage interest in the Company
upon future sales of Common Stock or securities convertible into Common Stock.
Holders of Common Stock are entitled to cast one vote for each share
held of record on all matters presented to shareholders, other than with respect
to the election of directors, for which cumulative voting is currently required
under certain circumstances by applicable provisions of California law. Under
cumulative voting, each shareholder may give any one candidate whose name is
placed in nomination prior to the commencement of voting a number of votes equal
to the number of directors to be elected, multiplied by the number of votes to
which the shareholder's shares are normally entitled, or distribute such number
of votes among as many candidates as the shareholder sees fit. The effect of
cumulative voting is that the holders of a majority of the outstanding shares of
Common Stock may not be able to elect all of the Company's directors. The Common
Stock will be, when issued pursuant to the terms of this Prospectus, fully paid
and nonassessable.
PREFERRED SHARES
The Company is authorized to issue 5,000,000 shares of Preferred Stock.
The Company's Board of Directors is authorized to issue the Preferred Stock in
one or more Series and, with respect to each series, to determine the
preferences and rights and the qualifications, limitations or restrictions
thereof, including the
-16-
<PAGE> 20
dividend rights, conversion rights, voting rights, redemption rights and terms,
liquidation preferences, sinking fund provisions, the number of shares
constituting each Series and the designation of such series. The Board of
Directors could, without shareholder approval, issue Preferred Stock with voting
and other rights that could adversely affect the voting rights of the holders of
Common Stock and could have certain anti-takeover effects.
On August 30, 1996, the Company filed a Certificate of Determination in
connection with the issuance of up to 19,000 Preferred Shares. Each Preferred
Share has a right to dividends of $80.00 per share per year, payable quarterly
in arrears, in cash or shares of Common Stock. Each Preferred Share has a
liquidation preference of $1,000 per share. Each Preferred Share is convertible
at the option of the holders, at any time commencing ninety days following the
initial issuance of shares, and is automatically converted on August 30, 1999,
into Common Stock, at a conversion price equal to a 17% discount from the
average market price of the Common Stock for the five days preceding the
conversion, provided that the maximum conversion price is $6.00 per share and
the minimum conversion price is $3.00 per share.
The holders of Preferred Shares currently have no voting rights except
as required by law. However, the Company has agreed to seek approval from Nasdaq
to issue a new class of Series B Preferred Shares, into which the Preferred
Shares will automatically convert if Nasdaq approval is obtained. The Series B
Preferred Shares will be identical to the Preferred Shares except for the right
to vote on all matters which may be presented to the shareholders for a vote.
The Company has requested Nasdaq to approve voting rights of each Series B
Preferred Share equal to 109 shares of Common Stock based upon the purchase
price of $1,000 per Series B Preferred Share and a market price of $9-1/8 per
share of the Company's Common Stock on August 23, 1996.
TRANSFER AGENT
U.S. Stock Transfer Corporation, Glendale, California is the transfer
agent and registrar for the shares of Common Stock.
PLAN OF DISTRIBUTION
The sale of the Selling Security Holder Shares may be effected from
time to time in transactions (which may include block transactions by or for the
account of the Selling Security Holders) in the over-the-counter market or in
negotiated transactions, through the writing of options on the Selling Security
Holder Shares, through a combination of such methods of sale, or otherwise.
Sales may be made at fixed prices which may be changed, at market prices
prevailing at the time of sale, or at negotiated prices. If any Selling Security
Holder sells his, her or its Selling Security Holder Shares, or options thereon,
pursuant to this Prospectus at a fixed price or at a negotiated price which is,
in either case, other than the prevailing market price or in a block transaction
to a purchaser who resells, or if any Selling Security Holder pays compensation
to a broker-dealer that is other than the usual and customary discounts,
concessions or commissions, or if there are any arrangements either individually
or in the aggregate that would constitute a distribution of the Selling Security
Holder Shares, a post-effective amendment to the Registration Statement of which
this Prospectus is a part would need to be filed and declared effective by the
Securities and Exchange Commission before such Selling Security Holder could
make such sale, pay such compensation or make such a distribution. The Company
is under no obligation to file a post-effective amendment to the Registration
Statement of which this Prospectus is a part under such circumstances.
The Selling Security Holders may effect transactions in their Selling
Security Holder Shares by selling their securities directly to purchasers,
through broker-dealers acting as agents for the Selling Security Holders or to
broker-dealers who may purchase the Selling Security Holders' Securities as
principals and thereafter sell such securities from time to time in the
over-the-counter market, in negotiated transactions, or otherwise. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Security Holders and/or the
purchasers for whom such broker-dealers may act as agents or to whom they may
sell as principals or both.
The Selling Security Holders and broker-dealers, if any, acting in
connection with such sales might be deemed to be "underwriters" within the
meaning of Section 2(11) of the Act and any commission received by them and any
profit on the resale of such securities might be deemed to be underwriting
discounts and commissions under the Act.
-17-
<PAGE> 21
LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby have
been passed upon for the Company by Jeffer, Mangels, Butler & Marmaro LLP, Los
Angeles, California.
EXPERTS
The financial statements of Jerry's Famous Deli, Inc. as of December
31, 1995 and 1994 and for each of the three years in the period ended December
31, 1995, as well as the balance sheet and statements of operations, equity and
cash flows of Solley's Inc. for the year ended December 31, 1995, and of 172
Corp. for each of the two years in the period ended December 31, 1995,
incorporated by reference herein and in the registration statement, have been
included herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
-18-
<PAGE> 22
- --------------------------------------------------------------------------------
NO DEALER, SALES REPRESENTATIVE OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO
BUY THE COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE.
---------------
TABLE OF CONTENTS
Page
----
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE ......................... 2
ADDITIONAL INFORMATION .................................................. 2
PROSPECTUS SUMMARY ...................................................... 3
RISK FACTORS ............................................................ 10
USE OF PROCEEDS ......................................................... 16
SELLING SECURITY HOLDERS ................................................ 16
DESCRIPTION OF CAPITAL STOCK ............................................ 16
PLAN OF DISTRIBUTION .................................................... 17
LEGAL MATTERS ........................................................... 18
EXPERTS ................................................................. 18
---------------
- --------------------------------------------------------------------------------
6,539,166 SHARES OF COMMON STOCK
JERRY'S FAMOUS DELI, INC.
PROSPECTUS
_________, 1996
- --------------------------------------------------------------------------------
<PAGE> 23
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following tables sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than
underwriting discounts and commissions and non-accountable expense allowance.
All of the amounts shown are estimates except the Securities and Exchange
Commission registration and NASD filing fees.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee $ 16,843
Accounting fees and expenses ...................... $ 50,000
Printing and engraving expenses ................... $ 5,000
Transfer agent and registrar (fees and expenses) .. $ 2,000
Blue Sky fees and expenses (including counsel fees) $ 2,000
Other legal fees and legal expenses ............... $ 30,000
Miscellaneous expenses ............................ $ 4,157
Total ............................................. $110,000
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to provisions of the California General Corporation Law, the
Articles of Incorporation of the registrant (the "Company"), as amended, include
a provision which eliminates the personal liability of its directors to the
Company and its shareholders for monetary damage to the fullest extent
permissible under California law. This limitation has no effect on a director's
liability (i) for acts or omissions that involve intentional misconduct or a
knowing and culpable violation of law, (ii) for acts or omissions that a
director believes to be contrary to the best interests of the Company or its
shareholders or that involve the absence of good faith on the part of the
director, (iii) for any transaction from which a director derived an improper
personal benefit, (iv) for acts or omissions that show a reckless disregard for
the director's duty to the Company or its shareholders in circumstances in which
the director was aware, or should have been aware, in the ordinary course of
performing his or her duties, of a risk of a serious injury to the Company or
its shareholders, (v) for acts or omissions that constitute an unexcused pattern
of inattention that amounts to an abdication of the director's duty to the
Company or its shareholders, (vi) under Section 310 of the California General
Corporation Law (concerning contracts or transactions between the Company and a
director) or (vii) under Section 316 of the California General Corporation Law
(concerning directors' liability for improper dividends, loans and guarantees).
The provision does not eliminate or limit the liability of an officer for any
act or omission as an officer, notwithstanding that the officer is also a
director or that his actions, if negligent or improper, have been ratified by
the Board of Directors. Further, the provision has no effect on claims arising
under federal or state securities or blue sky laws and does not affect the
availability of injunctions and other equitable remedies available to the
Company's shareholders for any violation of a director's fiduciary duty to the
Company or its shareholders.
The Company's Articles of Incorporation authorize the Company to indemnify
its officers, directors and other agents to the fullest extent permitted by
California law. The Company's Articles of Incorporation also authorize the
Company to indemnify its officers, directors and agents for breach of duty to
the corporation and its shareholders through bylaw provisions, agreements or
both, in excess of the indemnification otherwise provided under California law,
subject to certain limitations. The Company has entered into indemnification
agreements with its non-employee directors whereby the Company will indemnify
each such person (an "indemnitee") against certain claims arising out of certain
past, present or future acts, omissions or breaches of duty committed by an
indemnitee while serving in his employment capacity. Such indemnification does
not apply to acts or omissions which are knowingly fraudulent, deliberately
dishonest or arise from willful misconduct. Indemnification will only be
provided to the extent that the indemnitee has not already received payments in
respect of a claim from the Company or from an insurance company. Under certain
circumstances, such indemnification (including reimbursement of expenses
incurred) will be allowed for liability arising under the Securities Act.
THE COMPANY HAS PURCHASED A DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
POLICY INSURING DIRECTORS AND OFFICERS OF THE COMPANY.
II-1
<PAGE> 24
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
Exhibit
Number Description
------ -----------
3.1 Amended and Restated Articles of Incorporation of the Company, as
amended, incorporated by reference to Report on Form 8-K concerning the
purchase of Series A Preferred Stock by Yucaipa, as filed with the
Securities and Exchange Commission on September 4, 1996 (the
"Waterton Form 8-K").
3.2 Bylaws of the Company, incorporated by reference to Registration
Statement on Form S-1 (Registration No. 33-94724) of the Company,
declared effective by the Securities and Exchange Commission on October
20, 1995 (the "1995 Registration Statement").
4.1 Specimen Stock Certificate of the Company, incorporated by reference
to the 1995 Registration Statement.
4.2 Common Stock Purchase Warrant Certificate, incorporated by reference to
the Waterton Form 8-K.
4.3 Private Securities Subscription Agreement and Registration Rights
Agreement, incorporated by reference to the Waterton Form 8-K.
4.4 Letter Agreements dated August 22, 1996 between the Company and
Waterton Management, L.L.C., incorporated by reference to the
Waterton Form 8-K.
4.5 Letter Agreement dated August 22, 1996 between The Starkman Family
Trust and Waterton Management, L.L.C., incorporated by reference to the
Waterton Form 8-K.
5.1 Opinion of Jeffer, Mangels, Butler & Marmaro
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Jeffer, Mangels, Butler & Marmaro (included in Exhibit 5.1)
24 Power of Attorney (incorporated by reference to page II-4 of the
Registration Statement on Form S-3).
II-2
<PAGE> 25
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; notwithstanding the foregoing,
any increase or decrease in volume of
securities offered (if the total dollar
value of securities offered would not exceed
that which was registered) and any deviation
from the low or high end of the estimated
maximum offering range may be reflected in
the form of prospectus filed with the
Commission pursuant to Rule 424(b) (Section
230.424(b) of this Chapter) if, in the
aggregate, the changes in volume and price
represent no more than a 20% change in the
maximum aggregate offering price set forth
in the "Calculation of Registration Fee"
table in the effective registration
statement; and
(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.
(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.
Insofar as indemnification for liabilities arising from the
Securities Act of 1933 (the "Act") may be permitted to directors, officers, and
controlling persons of the Registrant, 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.
For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a form
of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or Rule
497(h) under the Act shall be deemed to be part of this Registration Statement
as of the time it was declared effective.
For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of Prospectus
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.
II-3
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 18th day of October, 1996.
JERRY'S FAMOUS DELI, INC.
By: /s/ ISAAC STARKMAN
------------------
Isaac Starkman, Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Isaac
Starkman his true and lawful attorney-in-fact and agent, acting alone, with full
powers of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, any Amendments
thereto and any Registration Statement for the same offering which is effective
upon filing pursuant to Rule 462(b) under the Securities Act of 1933, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, each acting alone, full powers and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all said attorney-in-fact
and agent, acting alone, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of the Company in the capacities and on the dates indicated.
<TABLE>
Signature Capacity Date
- --------- -------- ----
<S> <C> <C>
/s/ ISAAC STARKMAN Director, Chief Executive Officer October 18, 1996
- ------------------------ and Chairman of the Board
Isaac Starkman
/s/ GUY STARKMAN Director October 18, 1996
- ------------------------
Guy Starkman
/s/ JASON STARKMAN Director October 18, 1996
- ------------------------
Jason Starkman
/s/ CHRISTINA STERLING Chief Financial Officer (Principal October 18, 1996
- ------------------------ Financial and Accounting
Christina Sterling Officer)
/s/ PAUL GRAY Director October 18, 1996
- ------------------------
Paul Gray
/s/ STANLEY SCHNEIDER Director October 21, 1996
- ------------------------
Stanley Schneider
</TABLE>
II-4
<PAGE> 1
EXHIBIT 5.1
[JEFFER, MANGELS, BUTLER & MARMARO LLP LETTERHEAD]
October 18, 1996
Jerry's Famous, Deli, Inc.
12711 Ventura Boulevard, Suite 400
Studio City, California 91604
Re: Validity Opinion
Ladies and Gentlemen:
We have acted as special counsel to Jerry's Famous Deli, Inc.,
a California corporation (the "Corporation"), in connection with an agreement
(the "Agreement") between the Corporation and Waterton Management, L.L.C., the
terms of which provide for the issuance and sale by the Corporation of up to
19,000 shares of Series A Preferred Stock (the "Preferred Stock"), which
Preferred Stock may be converted into shares of the common stock, no par value,
of the Corporation (the "Common Stock"), and the issuance and sale of warrants
(the "Warrants") exercisable for up to 205,833 shares of Common Stock.
Pursuant to the Agreement, 6,000 shares of Preferred Stock and a Warrant for
65,000 shares of Common Stock were issued and sold to Yucaipa Waterton Deli
Investors, L.L.C. ("Yucaipa"), an affiliate of Waterton, pursuant to a Private
Securities Subscription Agreement dated August 22, 1996 (the "Subscription
Agreement"), and you have advised us that the Corporation has received payment
for such shares of Preferred Stock and Warrant.
The offering of the right to purchase the Preferred Stock and
Warrants under the Agreement was conducted pursuant to Regulation D of the
Securities and Exchange Commission (the "Commission), as promulgated under the
Securities Act of 1993, as amended (the "Act"). Pursuant to the terms of the
Agreement, the Corporation has prepared a Registration Statement on Form S-3
(the "Registration Statement") for the purpose of registering for resale the
maximum number of shares of Common Stock into which the Preferred Stock and
Warrants issuable under the Agreement may be converted, which Registration
Statement is intended to be filed on October 21, 1996. It is contemplated that
shares of Common Stock into which the Preferred Stock and Warrants may be
converted or exercised will be resold in accordance with a Prospectus (the
"Prospectus") to be filed as a part of the Registration Statement, in the form
in which it is declared effective by the Commission or the form in which it is
filed with the Commission pursuant to Rule 424(b) of the Commission, as
required by the Act and the rules of the Commission.
<PAGE> 2
Jerry's Famous Deli, Inc.
October 18, 1996
Page 2
In connection with this opinion, we have examined and
relied upon originals or copies, certified or otherwise identified to our
satisfaction as being true copies, of the following documents (the
"Documents"):
(a) The Agreement;
(b) The Articles of Incorporation of the Corporation,
certified by the California Secretary of State on July 8, 1996 (the "Articles
of Incorporation");
(c) The Second Amended and Restated Certificate of
Determination of the Corporation as filed with the California Secretary of
State on August 29, 1996 (the "Certificate of Determination");
(d) The Bylaws of the Corporation, certified to us by an
officer of the Corporation as being accurate, complete and in full force and
effect as of the date of this opinion;
(e) Resolutions of the Board of Directors of the
Corporation relating to the Agreement and the transactions contemplated thereby
as made available to us by the Corporation for inspection;
(f) Filings made by the Corporation with the Securities
and Exchange Commission and the California Department of Corporations relating
to the issuance of the Preferred Stock and Warrants; and
(g) The Subscription Agreement.
We are familiar with the actions taken and proposed to be
taken by you in connection with the authorization of the Agreement, the
authorization of the issuance of the Preferred Stock and Warrants, and the
preparation of the Registration Statement and the Prospectus.
On the basis of the foregoing, and assuming that the
representations and warranties made by the Corporation and Yucaipa in the
Subscription Agreement are true, it is our opinion that:
1. The Preferred Stock and Warrants issued and to be
issued pursuant to the Agreement have been duly authorized and have been,
or upon the issuance and sale thereof in accordance
<PAGE> 3
Jerry's Famous Deli, Inc.
October 18, 1996
Page 3
with the Agreement, will be, legally issued, fully paid and nonassessable.
2. The terms of the Preferred Stock and the Warrants
constitute valid and binding obligations of the Corporation in accordance with
their terms, subject to:
(a) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application
(including, without limitation, general principles of equity, whether considered
in a proceeding in equity or at law), now or hereafter in effect relating to
creditors' rights and claims generally and/or general laws generally affecting
or relating to the enforcement of creditors' rights, including, but not limited
to Section 547 of the Federal Bankruptcy Reform Act of 1978; and
(b) the remedy of specific performance and
injunctive and other forms of equitable relief which are subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
3. The shares of Common Stock to be sold upon conversion
of the Preferred Stock or exercise of the Warrants will constitute legally
issued, fully paid and nonassessable shares of Common Stock of the Corporation.
We express no opinion as to compliance with the securities or
"blue sky" laws of any state in which the Preferred Stock, Warrants or Common
Stock are proposed to be offered and sold or as to the effect, if any, which
non-compliance with such laws might have on the validity of issuance of such
securities.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement; to the filing of this opinion in connection with
such filings of applications by the Corporation as may be necessary to
register, qualify or establish eligibility for an exemption from registration
or qualification of the securities under the blue sky laws of any state or
other jurisdiction; and to the reference, if any, to this firm in the
Prospectus under the heading "Legal Matters." In giving this consent, we do
not admit that we are in the category of persons whose consent is required
under Section 7 of the Act or the rules and regulations of the Commission
promulgated thereunder.
The opinions set forth herein are based upon the federal laws
of the United States of America and the laws of the State of California, all as
now in effect. We express no opinion
<PAGE> 4
Jerry's Famous Deli, Inc.
October 18, 1996
Page 4
as to whether the laws of any particular jurisdiction apply, and no opinion to
the extent that the laws of any jurisdiction other than those identified above
are applicable to the subject matter hereof.
The information set forth herein is as of the date of this
letter. We disclaim any undertaking to advise you of changes which may be
brought to our attention after the effective date of the Registration
Statement.
Respectfully submitted,
JEFFER, MANGELS, BUTLER & MARMARO LLP
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
__________________________
We consent to the incorporation by reference in this registration
statement on Form S-3 of our report dated March 22, 1996 on our audits of the
consolidated financial statements of Jerry's Famous Deli, Inc. as of
December 31, 1995 and 1994 and for each of the three years in the period ended
December 31, 1995, which report is included in the Company's Annual Report on
Form 10-K; our report dated May 17, 1996, except as to the information
presented in Note 7, for which the date is June 30, 1996, on our audit of the
balance sheet and statements of operations, equity and cash flows of Solley's,
Inc. as of and for the year ended December 31, 1995, which report is included
in the Company's Form 8-K/A filed on October 4, 1996; and, our report dated
August 26, 1996, except for Note 7 as to which the date is September 9, 1996,
on our audit of the balance sheet and statements of operations, equity and cash
flows of One Hundred Seventy-Second Collins Corp. d/b/a Rascal House as of
December 31, 1995 and 1994, and for each of the two years in the period ended
December 31, 1995, which report is included in the Company's Form 8-K filed on
October 22, 1996.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Los Angeles, California
October 22, 1996
