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As filed with the Securities and Exchange Commission on November 25, 1996
Registration No. 333-14629
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
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)
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California 5812 95-3302338
(State or other jurisdiction of Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
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Isaac Starkman, Chief Executive Officer
Jerry's Famous Deli, Inc.
12711 Ventura Boulevard, Suite 400
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. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(2) FEE
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Common Stock, no par 8,539,166 Shs. $5.88 $50,210,296 $15,215*
value (2)
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*Previously paid.
(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 November 19, 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.
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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
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ITEM NUMBER AND HEADING IN LOCATION
FORM S-3 REGISTRATION STATEMENT IN PROSPECTUS
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1. Forepart of the Registration Statement and Outside Front
Cover Page of Prospectus . . . . . . . . . . . . . . . Facing Page; Cross-Reference Sheet; Outside Front
Cover Page 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
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PROSPECTUS
8,539,166 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 8,539,166 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 25,000 Series A or B Preferred Shares
(the "Preferred Shares") and upon exercise of warrants (the "Warrants") to
purchase up to 205,833 shares of the common stock, no par value, of the Company
(the "Common Stock"). Of the total Preferred Shares and Warrants, 6,000
Preferred Shares and a Warrant for 65,000 shares of Common Stock were sold on
August 30, 1996 to Yucaipa Waterton Deli Investors, L.L.C. ("Yucaipa"), a
Waterton Affiliate, and an additional 6,000 Preferred Shares and a Warrant for
an additional 65,000 shares of Common Stock were sold to Jerry's Investors, LLC
("JILLC"), also a Waterton Affiliate, on November 8, 1996 and Waterton holds an
option, exercisable by it or a Waterton Affiliate, to purchase 13,000 additional
Preferred Shares and Warrants for 75,833 shares of Common Stock. 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 November 19, 1996, the last sale price of the
Company's Common Stock was $5.88.
THESE SECURITIES ARE HIGHLY SPECULATIVE AND INVOLVE A HIGH
DEGREE OF RISK. SEE "RISK FACTORS" ON PAGES 4-8 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.
All expenses incurred in connection with the registration of the
Selling Security Holder 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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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, June 30, 1996 and September 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 12, 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 is subject to the informational requirements of the
Exchange Act and in accordance therewith files reports, proxy statements and
other information with the Securities and Exchange Commission (the
"Commission"). These reports, proxy statements and other information can be
inspected and copied at prescribed rates at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following Regional Offices of the Commission: The Chicago Regional
Office, Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511 and the New York Regional Office, 7 World Trade Center, 12th
Floor, New York, New York 10048. Such reports, proxy statements and other
information filed by the Company can also be inspected at the offices of the
National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006. Copies of such materials can also be obtained by mail at
prescribed rates upon written request addressed to the Public Reference Section
of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549 and at the SEC's web site (http//:www.sec.gov.)
The Company has filed with the Commission, 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 and at the SEC's web site.
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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 JILLC and available for grant to Waterton or its affiliates; (iii)
no conversion of 25,000 Preferred Shares issued to Yucaipa and JILLC 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. Concurrent with the
sale, the Company agreed to convert all Series A Preferred Shares into
Series B Preferred Shares, which would be substantially identical to Series A
Preferred Shares, except that each Series B Preferred Share will have voting
rights equal to 109 shares of Common Stock. 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 have been
expanded to a 24-hour operation, and the restaurant has begun delivery service,
taking call-in orders for take out, and taking charge cards, all of which were
not previously done at Rascal House.
On November 8, 1996, Waterton designated JILLC to exercise its right
to purchase an additional 6,000 Preferred Shares and a Warrant for 65,000
shares of Common Stock (as to which JILLC designated Waterton as holder),
resulting in net proceeds of approximately $5,540,000. A substantial majority
of the proceeds will be used to renovate new restaurant properties as they are
developed by the Company.
On October 31, 1996, the Company granted an additional option to
Waterton to purchase 6,000 Preferred Shares (also convertible into Series B
Preferred Shares), such that Waterton or its affiliates now have the right to
purchase a total of 13,000 Preferred Shares, in addition to the 12,000
Preferred Shares they have already purchased as of November 8, 1996.
The Company has further entered into a separate letter agreement with
Waterton providing that, if, at the time of conversion of Preferred Shares to
Common Stock, the market price of the Common Stock is between $6.00 and $3.00
per share and, in the reasonable opinion of Waterton's legal counsel, the
conversion of the Preferred Shares would result in a deemed purchase of Common
Stock on the conversion date at a price less than the current market value of
the Common Stock at the time of conversion under Section 16(b) of the Securities
Exchange Act of 1934, the Company will in good faith proceed to take all
reasonable actions to obtain all necessary approvals, including any Nasdaq or
regulatory approvals for the Company to agree as follows. Notwithstanding the
terms of the Preferred Shares, in addition to the Common Stock to be received
upon conversion equal to the market value of the Common Stock, in lieu of a like
dollar amount of Common Stock equal to a 17% discount on the market value of the
Common Stock, the Company will pay Waterton, if it so requests, an amount in
cash equal to 17% of the market value of the Common Stock, which cash payment
may be made up to 90 days from the conversion date.
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,
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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.
THE OFFERING
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Common Stock offered by the Selling Security Holders: 8,539,166 shares
Common Stock outstanding as of November 20, 1996: 10,386,250 shares
Nasdaq National Market Symbol: "DELI"
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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 OR INCORPORATES INTO IT 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 and the August and November 1996
sales of the 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.
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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 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 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
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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 adopted in November 1996 will
effect 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.
Management of the Company intends to adopt changes in its pricing in order to
reflect the increase in labor costs, but there can be no assurance that pricing
changes will entirely offset the increase in labor costs.
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 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
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<PAGE> 10
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.
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.
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.
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.
POSSIBLE ADVERSE IMPACT ON MARKET PRICE OF FUTURE SALES OF SHARES
ISSUED UPON CONVERSION OF PREFERRED SHARES OR EXERCISE OF WARRANTS. A minimum
of 4,166,666 shares and a maximum of 8,333,333 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
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 12,000 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> 11
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 8,539,166 shares of Common Stock
issuable upon conversion of a total 25,000 Preferred Shares and exercise of
205,833 warrants. Of this amount, Yucaipa owns 6,000 Preferred Shares and a
warrant for 65,000 shares of Common Stock, JILLC owns 6,000 Preferred Shares
and Waterton owns a warrant for 65,000 shares of Common Stock. Waterton holds
an option to purchase the remaining 13,000 Preferred Shares and warrants for
75,833 shares. Upon conversion of all of the 25,000 Preferred Shares and
warrants for 205,833 shares of Common Stock issued and issuable to Waterton
and/or its affiliates, these entities would own 8,539,166 shares of Common
Stock, constituting approximately 45.12% 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 November 20, 1996, there were 10,386,250 shares of Common Stock
outstanding and 12,000 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 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. Prior to the
exercise of the fourth option by Waterton or its affiliates, the Company intends
to file an amendment to its Articles of Incorporation increasing to 25,000 the
Preferred Shares authorized to be issued. 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 the third anniversary of the date of
issuance, into Common Stock, at a conversion price equal to the average market
price of the Common Stock for the five days preceding the conversion, less a 17%
discount from such market price, provided that the maximum conversion price will
be more than $6.00 per share and the minimum conversion price will be no less
than $3.00 per share.
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<PAGE> 12
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.
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.
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.
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<PAGE> 13
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
<TABLE>
<CAPTION>
Page
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<S> <C>
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
_______________
</TABLE>
8,539,166 Shares of
Common Stock
JERRY'S FAMOUS DELI, INC.
________________
PROSPECTUS
________________
___, 1996
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<PAGE> 14
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 . . . . . . . . . . . $ 15,215
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 . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,785
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.
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<PAGE> 15
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
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 "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 Form 8-K.
4.3 Private Securities Subscription Agreement and Registration Rights Agreement, incorporated by
reference to the 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 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 Form 8-K.
4.6 Letter Agreements dated October 31, 1996, November 4, 1996 and November 5, 1996 between the
Company and Waterton Management L.L.C., incorporated by reference to the Form 10-Q filed for the
Quarter ended September 30, 1996.
5.1 Opinion of Jeffer, Mangels, Butler & Marmaro L.L.P.
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).
</TABLE>
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.
II-2
<PAGE> 16
(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> 17
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 21st day of November, 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>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
s/ISAAC STARKMAN Director, Chief Executive November 21, 1996
----------------
Isaac Starkman Officer and Chairman of the
Board
s/GUY STARKMAN Director November 21, 1996
--------------
Guy Starkman
s/JASON STARKMAN Director November 21, 1996
----------------
Jason Starkman
s/CHRISTINA STERLING Chief Financial Officer November 21, 1996
--------------------
Christina Sterling (Principal Financial and
Accounting Officer)
s/PAUL GRAY Director November 21, 1996
-----------
Paul Gray
s/STANLEY SCHNEIDER Director November 21, 1996
-------------------
Stanley Schneider
</TABLE>
II-4
<PAGE> 1
[JEFFER, MANGELS, BUTLER & MARMARO LETTERHEAD]
November 22, 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
25,000 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 6,000 shares of Series A Preferred Stock and a warrant for
65,000 shares of Common Stock were issued and sold to Jerry's Investors, LLC
("JILLC"), an affiliate of Waterton, pursuant to a Private Securities
Subscription Agreement dated November 5, 1996 (collectively, the subscription
agreements dated August 22, 1996 and November 5, 1996, are referred to herein
as the "Subscription Agreements"). You have advised us that the Corporation
has received payment for all 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 filed with the Commission on October 22, 1996 a
<PAGE> 2
JEFFER, MANGELS, BUTLER & MARMARO
Jerry's Famous Deli, Inc.
November 22, 1996
Page 2
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 amended on November
22, 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.
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 Agreements of Yucaipa and JILLC.
We are familiar with the actions taken and proposed to be taken by you
in connection with the authorization of the
<PAGE> 3
JEFFER, MANGELS, BUTLER & MARMARO
Jerry's Famous Deli, Inc.
November 22, 1996
Page 3
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, Yucaipa and JILLC in the Subscription
Agreements 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 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
<PAGE> 4
JEFFER, MANGELS, BUTLER & MARMARO
Jerry's Famous Deli, Inc.
November 22, 1996
Page 4
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 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,
/s/ JEFFER, MANGELS, BUTLER & MARMARO LLP
JEFFER, MANGELS, BUTLER & MARMARO LLP
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration
statement, as amended, on Form S-3 (File No. 333-14629) 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-KA 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. We also consent to the reference
of our firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
----------------------------
COOPERS & LYBRAND L.L.P
Los Angeles, California
November 22, 1996
II-5
