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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
Date of Report (Date of earliest event reported) August 30, 1996
JERRY'S FAMOUS DELI, INC.
(Exact name of registrant as specified in its charter)
California 0-26956 95-3302338
(State or other (Commission File Number) (IRS Employer
jurisdiction of incorporation) Identification No.)
12711 Ventura Boulevard, Suite 400
Studio City, California 91604
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (818) 766-8311
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Item 5. Other Events
On August 30, 1996, Jerry's Famous Deli, Inc. (the "Company")
completed the sale to Yucaipa Waterton Deli Investors, L.L.C. ("Yucaipa") of
6,000 shares of Series A Preferred Shares (the "Shares") and a warrant (the
"Warrant") to purchase 65,000 shares of the common stock, no par value, of the
Company (the "Common Stock"), for an aggregate purchase price of $6,000,100.
Yucaipa is an affiliate of The Waterton Investment Group, an investment
partnership formed by Ken Abdalla, formerly of Salomon Brothers, and Ron
Burkle, Chairman of The Yucaipa Companies.
The terms of the sale of the Shares and Warrants are set forth in a
Private Securities Subscription Agreement and Registration Rights Agreement and
two letter agreements between the Company and Waterton Management, L.L.C.
("Waterton"), another affiliate of The Waterton Investment Group. In addition,
The Starkman Family Trust (the "Starkman Trust"), the principal shareholder of
the Company, has entered a letter agreement with Waterton. The rights of the
holders of the Shares are described in the Second Amended and Restated
Certificate of Determination of Rights of Series A Preferred Shares, and the
rights of the holders of the Warrant are described in a Common Stock Purchase
Warrant, all of which documents are filed as exhibits to this Report. The
following is a summary of certain provisions of those documents, and is
qualified by reference to such documents.
Each 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 Share
has a liquidation preference of $1,000 per share. Each 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 the 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 Shares will
automatically convert if Nasdaq approval is obtained. The Series B Preferred
Shares will be identical to the 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, 1999.
The Warrant is exercisable at any time until August 22, 1996 for up to
65,000 shares of Common Stock, at an exercise price of $1.00 per share.
The holders of Common Stock issuable upon conversion of the Shares and
exercise of the Warrant have registration rights which require the Company to
register the
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shares for resale immediately upon the Shares becoming convertible into Common
Stock, as provided for in the Registration Rights Agreement.
The Company has also granted options to Waterton to purchase an
additional $13,000,000 of Shares (or Series B Preferred Shares if Nasdaq
approval is obtained as described above) and warrants to purchase 140,833
shares of Common Stock, upon the same terms and registration rights as the
Shares (or Series B Preferred Shares) and Warrant. The options are exercisable
upon the Company obtaining a waiver from Nasdaq of its requirement for a
shareholder vote to approve an issuance of shares in excess of 20% of the total
outstanding shares or, if such waiver is not obtained, upon the Company's
obtaining shareholder approval of the issuance of additional Shares. In
addition, the exercise of the option is subject to other necessary required
regulatory approvals. If such approval is obtained, Waterton or its designee
will have a period of 30 days in which to complete the purchase of an
additional $6,000,000 of Shares and warrants to purchase 65,000 shares of
Common Stock, and an additional 90 days to purchase an additional $7,000,000 of
Shares and warrants to purchase 75,833 shares of Common Stock.
In the event that Waterton and its designees purchase a total of
$19,000,000 of Shares, Waterton will have a five-day right of first refusal to
purchase any additional shares of Common Stock or other securities convertible
into Common Stock offered by the Company in a private placement for a period of
two years. In addition, the Starkman Trust has agreed to give Waterton or its
designees certain rights of first refusal to purchase any additional shares of
Common Stock offered for sale by the Starkman Trust in excess of 1,000,000 for
a period of two years.
The Company has further agreed to expand its board of directors and to
appoint Ken Abdalla as a director upon request of Waterton. If Waterton or its
designee purchases an additional $13 million of Shares, Waterton shall be
entitled to appoint another director upon notice to the Company.
Item 7. Financial Statements and Exhibits
(c) Exhibits.
3.1 Articles of Incorporation, as amended (including Second Amended and
Restated Certificate of Determination of Rights of Series A Preferred
Shares)
10.1 Private Securities Subscription Agreement and Registration Rights
Agreement.
10.2 Common Stock Purchase Warrant Certificate.
10.3 Letter Agreements dated August 22, 1996 between the Company and
Waterton Management, L.L.C.
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10.4 Letter Agreement dated August 22, 1996 between The Starkman Family
Trust and Waterton Management, L.L.C.
4
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: September 4, 1996 JERRY'S FAMOUS DELI, INC.
By: /s/ ISAAC STARKMAN
------------------------------------
Isaac Starkman,
President and Chief Executive Officer
5
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequentially Numbered
Number Description Page
<S> <C>
3.1 Articles of Incorporation, as amended (including Second Amended and Restated Certificate of Determination of
Rights of Series A Preferred Shares).
10.1 Private Securities Subscription Agreement and Registration Rights Agreement.
10.2 Common Stock Purchase Warrant Certificate.
10.3 Letter Agreements dated August 22, 1996 between the Company and Waterton Management, L.L.C.
10.4 Letter Agreement dated August 22, 1996 between The Starkman Family Trust and Waterton Management, L.L.C.
</TABLE>
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Exhibit 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
JERRY'S FAMOUS DELI, INC.
Isaac Starkman certifies that:
1. He is the President and Secretary of Jerry's Famous Deli,
Inc., a California corporation.
2. The Articles of Incorporation of this Corporation are amended
and restated to read in their entirety as follows:
I
The name of this Corporation is:
JERRY'S FAMOUS DELI, INC.
II
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business
or the practice of a profession permitted to be incorporated by the California
Corporations Code.
III
This Corporation is authorized to issue two classes of shares
designated "Common Stock" and "Preferred Stock," respectively.
A. The number of shares of Common Stock authorized to be issued
is Sixty Million (60,000,000), each and all of which shares shall be without
par value. On the effective date of these Amended and Restated Articles of
Incorporation, each then outstanding share of Common Stock is split-up, divided
and converted into 7,460 shares of Common Stock without par value.
B. The total number of Preferred Shares which this corporation
shall have authority to issue is Five Million (5,000,000). The Board of
Directors is authorized, subject to limitations prescribed by law, to provide
for the issuance of the shares of Preferred Stock in series, and by filing a
certificate pursuant to the
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applicable law of the State of California, to establish from time to time the
number of shares to be included in each such series and to fix the designation,
powers, preferences and rights of the shares of each such series and the
qualifications, limitations or restrictions thereof.
IV
The liability of the directors of the Corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
V
The Corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) for breach of duty
to the Corporation and its shareholders through bylaw provisions or through
agreements with the agents, or both, in excess of the indemnification otherwise
permitted by Section 317 of the California Corporations Code, subject to the
limits on such excess indemnification set forth in Section 204 of the
California Corporations Code.
3. The foregoing amendment and restatement of Articles of
Incorporation has been approved by the Board of Directors of said corporation.
4. The foregoing amendment and restatement of Articles of
Incorporation has been duly approved by the required vote of shareholders in
accordance with Section 902 of the Corporations Code. The total number of
outstanding shares of the corporation is 1,000. The number of shares voting in
favor of the amendment equaled or exceeded the vote required. The percentage
vote required was more than 50%.
He further declares under penalty of perjury under the laws of
the State of California that the matters set forth in the foregoing Certificate
are true and correct of his own knowledge.
Dated: December 13, 1994.
/s/ ISAAC STARKMAN
------------------------------
Isaac Starkman,
President and Secretary
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SECOND AMENDED AND RESTATED
CERTIFICATE OF DETERMINATION OF RIGHTS AND
PREFERENCES OF SERIES A PREFERRED SHARES
OF
JERRY'S FAMOUS DELI, INC.
Isaac Starkman hereby certifies that:
1. He is the duly elected and acting President and Secretary of
Jerry's Famous Deli, Inc., a California corporation (the "Corporation").
2. Pursuant to authority given by the Corporation's Articles of
Incorporation, the Board of Directors of the Corporation has duly adopted the
following resolutions:
Whereas, Article III of the Articles of Incorporation of the
Corporation authorizes one class of shares designated Preferred
Shares, comprising Five Million (5,000,000) shares issuable from time
to time (the "Preferred Stock"), and one class of shares designated
Common Shares, comprising Sixty Million (60,000,000) shares issuable
from time to time (the "Common Stock"); and
Whereas, the Board of Directors of the Corporation is
authorized to fix or alter the rights, preferences, privileges, and
restrictions granted to or imposed upon the Preferred Stock until such
time as any of those shares have been issued, including but not
limited to the dividend rights, dividend rate, conversion rights, and
voting rights; and
Whereas, the Board of Directors has previously adopted a
Certificate of Determination and a subsequent Amended and Restated
Certificate of Determination providing for the issuance of a series of
Preferred Shares of the corporation consisting of Eight Thousand
(8,000) shares designated as "Series A Preferred Stock", and fixing
the rights, preferences, restrictions and other matters relating to
said Series A Preferred Stock; and
Whereas, the Corporation has not heretofore issued any shares
of such Series A Preferred Stock and it is the desire of the Board of
Directors of the Corporation, pursuant to its authority as aforesaid,
to amend the rights, preferences, restrictions and other matters
relating to the Preferred Stock as set forth in such Certificate of
Determination; and
WHEREAS, the Board of Directors has determined that it shall
adopt a Second Amended and Restated Certificate of Determination with
respect thereto;
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Now, Therefore, Be It Resolved, that the Board of Directors
does hereby provide for the issue of a series of preferred shares of
the Corporation consisting of Nineteen Thousand (19,000) shares of
$1,000 par value per share, designated as "Series A Preferred Stock",
and does hereby fix the rights, privileges, preferences, restrictions
and other matters relating to the Series A Preferred Stock as follows:
SECTION 1. GENERAL DEFINITIONS. For purposes of this Certificate of
Determination the following definitions shall apply:
(a) "AUTOMATIC CONVERSION DATE" shall mean the third anniversary
of the initial issuance of the Series A Preferred Stock.
(b) "BOARD OF DIRECTORS" shall mean the Board of Directors of the
Corporation, as such Board of Directors may be constituted from time to time
hereafter.
(c) "CLOSING PRICE" shall, unless another meaning is specified,
mean the average closing bid price of the Common Stock over the five Trading
Days prior to the applicable date, as reported by Bloomberg, L.P.
(d) "COMMON STOCK" shall mean the Common Stock of the Corporation.
(e) "COMMISSION" shall mean the United States Securities and
Exchange Commission, or any successor thereto.
(f) "CONVERSION RATIO" shall have the meaning set forth in Section
5(c) hereof. The Conversion Ratio shall not be calculated until after the
delivery of the Conversion Notice, as defined in Section 5(g) hereof.
(g) "CORPORATION" shall mean Jerry's Famous Deli, Inc., a
California corporation.
(h) "DESIGNATED VALUE" shall mean the sum of One Thousand Dollars
($1,000) per share of Series A Preferred Stock plus all accrued and unpaid
dividends thereon.
(i) "LIQUIDATION PREFERENCE" shall mean, for each share of Series
A Preferred Stock, an amount equal to the Designated Value on the date of the
liquidating distribution.
(j) "PRO RATA SHARE" shall mean, as of any date, a number equal to
the ratio of the number of shares of Series A Preferred Stock of the
Corporation owned by any holder divided by the total number of shares of Series
A Preferred Stock outstanding on such date.
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(k) "SERIES A PREFERRED STOCK" shall mean the Series A Preferred
Stock of the Corporation.
(l) "TRADING DAY" shall mean any day when securities may be bought
or sold on the New York Stock Exchange or the Nasdaq Stock Market.
2. DIVIDEND RIGHTS.
(a) DIVIDEND PAYMENT. The holders of the Series A
Preferred Stock shall be entitled to receive dividends at the rate of Eighty
Dollars ($80.00) per share per year, payable quarterly in arrears on the last
day of March, June, September and December, commencing September 30, 1996, in
cash or, at the option of the Corporation, in shares of Common Stock as set
forth herein. Dividends on the Series A Preferred Stock shall be payable out
of any funds legally available therefor, prior and in preference to any
dividend payment with respect to Common Stock. Dividends on the Series A
Preferred Stock shall be cumulative, so that if dividends required to be paid
on such stock for any quarter or quarters shall not have been paid, the amount
of the deficiency shall be paid in full, without interest, together with any
dividends due for the current quarter, before any distribution of any kind
shall be paid to the holders of the Common Stock.
(b) The Corporation may, at its option, as to any
dividends accruing on or prior to the Automatic Conversion Date, but not
including those dividends payable on the last day of September and December of
1996 and the last day of March and June of 1997, pay accrued dividends on the
Series A Preferred Stock in shares of Common Stock. As to any payment of
dividends as to which the Corporation issues shares of Common Stock in lieu of
cash, each holder of Series A Preferred Stock shall receive the number of
shares of Common Stock equal to the product of (y) the amount of accrued and
unpaid dividends on the Series A Preferred Stock, divided by (z) the Closing
Price of the Common Stock over the five Trading Days ending on the day prior to
the dividend payment date.
(c) No fractional shares of Common Stock will be issued
as dividends upon the Series A Preferred Stock. Any fractional shares which
otherwise result from a dividend on the Series A Preferred Stock will be
redeemed by payment in cash of an amount equal to such fraction by the Closing
Price per share of Common Stock as promptly as funds legally are available
therefor.
SECTION 3. VOTING RIGHTS.
Except as otherwise required by law, the Common Stock shall have
exclusive voting rights and powers, including the exclusive right to notice of
shareholders' meetings. The Series A Preferred Stock shall have no voting
rights, except as required by law.
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SECTION 4. LIQUIDATION PROVISIONS.
(a) LIQUIDATION PREFERENCE. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation
("Liquidation"), the holders of the shares of Series A Preferred Stock shall be
entitled to receive, out of the assets of the Corporation available for
distribution to the holders of equity securities of the Corporation, an amount
equal to the Liquidation Preference for each share of Series A Preferred Stock
held by them, and no more, before any payment shall be made or any assets
distributed to the holders of the shares of Common Stock of the Corporation.
If upon such Liquidation the assets available for distribution to the holders
of the Series A Preferred Stock shall be insufficient to permit the payment to
those persons of the full Liquidation Preference for all shares of Series A
Preferred Stock held by them, then the entire remaining assets of the
Corporation available for such distribution shall be distributed ratably among
the holders of the shares of Series A Preferred. So long as shares of Series A
Preferred Stock are issued and outstanding, no shares of any class of preferred
stock of the Corporation shall be issued with a liquidation preference senior
to the Series A Preferred Stock, although such liquidation preference may be
equal to the Series A Preferred Stock.
(b) SERIES A PREFERRED STOCK NON-PARTICIPATING. Upon any
Liquidation of the Corporation, after payment or distribution of the aggregate
Liquidation Preference for all then-outstanding shares of Series A Preferred
Stock, as provided in Section 4(a) hereof, all remaining assets of the
Corporation shall be distributed ratably among the holders of the Common Stock
of the Corporation, and the holders of shares of the Series A Preferred Stock
shall have no right to participate therein.
SECTION 5. CONVERSION.
(a) CONVERSION BY HOLDERS. The Series A Preferred Stock shall be
convertible at the option of the holders thereof into such number of shares of
Common Stock as is determined under the Conversion Ratio beginning ninety (90)
days following the initial issuance of the Series A Preferred Stock.
(b) AUTOMATIC CONVERSION. Any shares of Series A Preferred Stock
not converted into Common Stock prior to the Automatic Conversion Date shall,
on that date, automatically be converted into such number of shares of Common
Stock as is determined under the Conversion Ration.
(c) CONVERSION RATIO. Upon a conversion of Preferred Shares in
accordance with Section 5(a) or (b) hereof, each share of Series A Preferred
Stock shall be converted into the number of shares of Common Stock resulting
from the product of the Designated Value, divided by the product of (y) the
Closing Price, multiplied by (z) 0.83 (the "Conversion Ratio"); provided, that
notwithstanding the foregoing, the denominator of the
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Conversion Ratio shall never exceed $6.00 per share of Common Stock (the
"Maximum Ratio"), or be less than $3.00 per share of Common Stock (the "Minimum
Ratio").
(d) FRACTIONAL SHARES UPON CONVERSION. No fractional
shares of Common Stock will be issued upon conversion of Series A Preferred
Stock and any fractional shares which otherwise result from conversion by a
holder of all his shares of Series A Preferred Stock (taken together as a
group) will be redeemed by payment in cash of an amount equal to such fraction
by the Closing Price per share of Common Stock as promptly as funds legally are
available therefor.
(e) ADJUSTMENT FOR COMBINATION OR CONSOLIDATIONS OF
COMMON STOCK. If the Corporation at any time or from time to time after the
effective date of the initial sale of the Series A Preferred Stock (hereafter
referred to as the "Original Issue Date") effects a subdivision or combination
of its outstanding Common Stock into a greater or lesser number of shares
without a proportionate and corresponding subdivision or combination of its
outstanding Series A Preferred Stock, then the existing Conversion Ratio for
the Series A Preferred Stock will be increased or decreased proportionately.
(f) ADJUSTMENT FOR DIVIDENDS, DISTRIBUTIONS AND COMMON
STOCK EQUIVALENTS. If the Corporation at any time or from time to time after
the Original Issue Date makes or issues a dividend payable in Common Stock to
holders of record of its Common Stock, or fixes a record date for the
determination of holders of Common Stock entitled to receive a dividend or
other distribution payable in additional shares of Common Stock or other
securities or rights ("Common Stock Equivalents"), convertible into or
entitling the holder thereof to receive additional shares of Common Stock
without payment of any consideration by such holder for Common Stock
Equivalents or the additional shares of Common Stock, then and in such event,
for the purpose of protecting the holders of Series A Preferred Stock from any
dilution in connection therewith, the maximum number of shares (as set forth in
the instrument relating thereto without regard to any provisions contained
therein for a subsequent adjustment of such number) of Common Stock issuable in
payment of such dividends or distribution or upon conversion or exercise of
such Common Stock Equivalents will be deemed to be issued and outstanding as of
the time of such issuance or, in the event such a record date has been fixed,
as of the close of business on such a record date. In each such event the then
existing Conversion Ratio for the Series A Preferred Stock will be increased as
of the time of such issuance or, in the event such a record date has been
fixed, as of the close of business on such record date, by multiplying the
Conversion Ratio for the Series A Preferred Stock by a fraction, the numerator
of which will be the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock issuable
in payment of such dividend or distribution or upon conversion or exercise of
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such Common Stock Equivalents, and the denominator of which will be the total
number of shares of Common Stock issued and outstanding immediately prior to
the time of such issuance or the close of business on such record date;
provided, however, if such record date has been fixed and such dividend is not
fully paid or if such distribution is not made on the date fixed therefor, the
Conversion Ratio for the Series A Preferred Stock will be recomputed
accordingly as of the close of business on such record date and thereafter the
Conversion Ratio for the Series A Preferred Stock will be adjusted pursuant to
this paragraph 5(f) as of the date of actual payment of such dividends or
distributions.
(g) MECHANICS OF CONVERSION. Any holder of Series A
Preferred Stock may exercise its conversion right on or after ninety days after
the issuance of the Series A Preferred Stock and before the Automatic
Conversion Date by delivery to the Corporation of a notice (a "Conversion
Notice"), stating the number of shares of Series A Preferred Stock to be
converted, which may be delivered by facsimile for purposes of fixing the date
of conversion so long as the certificates for the Series A Preferred Stock to
be converted are in physical custody of the Corporation or its transfer agent
not later than the fifth business day after the facsimile is sent. Before any
holder of Series A Preferred Stock will be entitled to convert the same into
shares of Common Stock, it will surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or of any transfer
agent for the Series A Preferred Stock, and it will give written notice to the
Corporation stating the name or names in which it wishes the certificate or
certificates for shares of Common Stock to be issued. The Corporation, as soon
as practicable but in any event no later than five business (5) days after the
date of receipt by the Corporation of the Conversion Notice provided the
Corporation has physical custody of the certificates for the Preferred Stock on
such date, will issue and deliver to such holder of Series A Preferred Stock or
to its nominee or nominees, a certificate or certificates for the number of
shares of Common Stock to which it will be entitled as aforesaid. Such
conversion will be deemed to have been made immediately prior to the close of
business on the date that the Corporation has received such notice and
certificate(s), and the person or persons entitled to receive the shares of
Common Stock issuable upon conversion will be treated for all purposes as the
record holder or holders of such shares of Common Stock on such date.
(h) NO IMPAIRMENT. The Corporation, whether by amendment
of its Articles of Incorporation, or through any reorganization, transfer of
assets, merger, dissolution, issue or sale of securities or any other voluntary
action, will not avoid or seek to avoid the observance or performance of any of
the terms to be observed hereunder by the Corporation, but at all times in good
faith will assist in the carrying out of all of such action as may be necessary
or appropriate in order to
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protect the conversion rights of the holders of the Series A Preferred Stock
against impairment.
(i) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation at all times will reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purposes of effecting the
conversion of the shares of the Series A Preferred Stock, such number of its
shares of Common Stock as from time to time will be sufficient to effect the
conversion of all of the then outstanding shares of the Series A Preferred
Stock; and if at any time the number of authorized but unissued shares of
Common Stock is not sufficient to effect the conversion of all of the then
outstanding shares of the Series A Preferred Stock, in addition to such other
remedies as may be available to the holders of Series A Preferred Stock for
such failure, the Corporation will take such actions as, in the opinion of its
counsel, may be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as will be sufficient for such purposes.
Resolved Further, that the President and the Secretary of the
Corporation hereby are authorized and directed to prepare, execute,
verify, file and record a certificate of determination of preferences
in accordance with the foregoing resolutions and the provisions of
California law.
3. The authorized number of shares of Series A Preferred Stock is
Nineteen Thousand (19,000), none of which has been issued.
4. No vote of the shareholders was required.
Dated: August 23, 1996
/s/ ISAAC STARKMAN
------------------------------
Isaac Starkman,
President and Secretary
The undersigned declares under penalty of perjury that the matters set
forth in the foregoing certificate are true of his own knowledge.
Executed at Los Angeles, California, on August 23, 1996.
/s/ ISAAC STARKMAN
-------------------------------
Isaac Starkman,
President and Secretary
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EXHIBIT 10.1
PRIVATE SECURITIES SUBSCRIPTION AGREEMENT
JERRY'S FAMOUS DELI, INC./YUCAIPA WATERTON DELI INVESTORS, L.L.C.
August 22, 1996
THIS PRIVATE SECURITIES SUBSCRIPTION AGREEMENT (hereinafter the
"Agreement") has been executed by the undersigned in connection with the sale
in a private placement pursuant to Section 4(2) of the Securities Act of 1933,
as amended (the "Securities Act"), of certain shares of convertible preferred
stock (hereinafter the "Preferred Shares"), convertible into shares of common
stock (hereinafter the "Common Shares" and, collectively with the Preferred
Shares, the "Shares") and warrants (the "Warrants" and, collectively with the
Shares, the "Securities") to purchase Common Shares, of Jerry's Famous Deli,
Inc., a California corporation (DELI), located at 12711 Ventura Boulevard,
Suite 400, Studio City, CA 91604 ("SELLER"), to Yucaipa Waterton Deli
Investors, L.L.C., a Delaware limited liability company, located at 10000 Santa
Monica Blvd, 5th Flr., Los Angeles, CA 90067 ("BUYER"). SELLER and BUYER
(hereinafter collectively the "parties") each hereby represents, warrants and
agrees as follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE
(i) SELLER and BUYER are executing and delivering this
Agreement in reliance upon the exemption from securities registration
afforded by Rule 506 under Regulation D ("Regulation D") as
promulgated by the United States Securities and Exchange Commission
under the Securities Act; and
(ii) BUYER hereby subscribes for Six Thousand (6,000)
Preferred Shares, at a purchase price of One Thousand Dollars ($1,000)
U.S. per share, said shares convertible into Common Shares in
accordance with the terms set forth in the Certificate of
Determination attached as Exhibit A to this Agreement, for an
aggregate purchase price of Six Million Dollars ($6,000,000) U.S.
payable in United States Dollars at the Closing, as defined in
Paragraph 4 hereof.
(iii) BUYER hereby subscribes for Warrants to purchase
Sixty Five Thousand (65,000) Common Shares in accordance with the
terms set forth in the form of Warrant attached as Exhibit B to this
Agreement, for an aggregate purchase price of One Hundred Dollars
($100.00) U.S., to be paid at the Closing.
(iv) BUYER shall pay the purchase price for the Preferred
Shares and the Warrants by delivering same day funds in United States
Dollars to
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Private Sec. Sub. Agreement: Jerry's Famous Deli, Inc./Yucaipa Waterton Deli
Investors, L.L.C. August 22, 1996 Page 2
an escrow agent or as otherwise agreed between the parties, to be
delivered to the order of SELLER upon delivery of the Shares.
2. BUYER'S REPRESENTATIONS AND AGREEMENTS
Buyer represents, warrants and agrees as follows:
(i) BUYER understands that the Securities have not been
registered under the Securities Act, or any other applicable
securities law, and, accordingly, none of the Securities may be
offered, sold, transferred, pledged, hypothecated or otherwise
disposed of unless registered pursuant to, or in a transaction exempt
from registration under, the Securities Act and any other applicable
securities law;
(ii) BUYER is an "accredited investor" within the meaning
of Rule 501(a)(1), (2), (3), or (7) of Regulation D (an "Accredited
Investor") that is acquiring the Securities either for its own account
or as a fiduciary or agent for one or more institutional accounts as
to which it exercises sole discretion, each of which is an Accredited
Investor. BUYER has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks
of an investment in the Securities. BUYER has had a reasonable
opportunity to ask questions of and receive answers from SELLER
concerning SELLER and the offering of the Securities. BUYER is not
subscribing for the Securities as a result of or pursuant to any
advertisement, article, notice, or other communication published in
any newspaper, magazine, or similar media or broadcast over television
or radio. BUYER is aware that it (or such institutional account) may
be required to bear the economic risk of an investment in the
Securities for an indefinite period, and it (or such institutional
account) is able to bear such risk for an indefinite period;
(iii) BUYER is acquiring the Securities for its own account
or for one or more institutional accounts as described in Paragraph
2(ii) hereof, in each case for investment purposes and not with a view
to, or for offer or sale in connection with, any distribution thereof
(subject to any requirement of law that the disposition of its
property or the property of such institutional account or accounts
remain within its or their control). BUYER agrees on its own behalf
and on behalf of any such institutional account for which it is
acquiring the Shares and/or the Warrants to offer, sell or otherwise
transfer any Securities only to Accredited Investors (subject to any
requirement of law that the disposition of its property or the
property of such institutional account or accounts remain within its
or their control) in conformity with the Securities Act and any other
applicable securities law and with the restrictions on transfer set
forth on the
<PAGE> 3
Private Sec. Sub. Agreement: Jerry's Famous Deli, Inc./Yucaipa Waterton Deli
Investors, L.L.C. August 22, 1996 Page 3
certificate(s) evidencing the Shares or the Warrants. BUYER
acknowledges that each certificate evidencing the Preferred Shares
shall bear a legend substantially to the effect of the foregoing
paragraphs 2(i) and 2(ii) and this paragraph 2(iii). Such legend
shall be in substantially the following form:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
OFFERED OR SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH
REGISTRATION. THE HOLDER OF THIS CERTIFICATE IS THE BENEFICIARY OF
CERTAIN OBLIGATIONS OF THE COMPANY SET FORTH IN A PRIVATE SECURITIES
SUBSCRIPTION AGREEMENT BETWEEN THE COMPANY AND YUCAIPA WATERTON DELI
INVESTORS, L.L.C. DATED AUGUST 22, 1996. A COPY OF THE PORTION OF THE
AFORESAID SUBSCRIPTION AGREEMENT EVIDENCING SUCH OBLIGATIONS MAY BE
OBTAINED FROM THE COMPANY'S EXECUTIVE OFFICES."
Buyer further acknowledges that the Warrants shall bear a legend in
substantially the following form:
NO SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION OF THIS WARRANT OR THE
SHARES PURCHASABLE HEREUNDER SHALL BE MADE EXCEPT PURSUANT TO
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR PURSUANT
TO AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT
REGISTRATION IS NOT REQUIRED. TRANSFER OF THIS WARRANT IS ALSO
RESTRICTED BY AN AGREEMENT DATED AUGUST 22, 1996. A COPY OF WHICH IS
AVAILABLE FROM THE ISSUER.
Upon conversion of the Preferred Shares or exercise of the
Warrants, SELLER shall issue a Common Stock certificate without such
legend to the holder of such shares if (a) such Shares are sold
pursuant to an effective registration statement under the Securities
Act or (b) such holder provides SELLER with an opinion of counsel
reasonably acceptable to SELLER to the effect that a public sale or a
transfer of such security may be made without registration under the
Securities Act or (c) such holder provides SELLER with reasonable
assurances that such security can be sold free of any volume
limitations pursuant to Rule 144 under the Securities Act (or a
successor thereto).
<PAGE> 4
Private Sec. Sub. Agreement: Jerry's Famous Deli, Inc./Yucaipa Waterton Deli
Investors, L.L.C. August 22, 1996 Page 4
(iv) BUYER acknowledges that SELLER or any transfer agent
of SELLER shall register the transfer or exchange of any of the
Securities only upon receipt of the certificate(s) evidencing such
Securities with the transfer notice set forth thereon appropriately
completed and upon receipt in writing from the transferee or the
recipient of such Securities in such transfer or exchange (as the case
may be) of a certificate setting forth the representations in
Paragraph 2 hereof;
(v) If BUYER is acquiring any Securities as fiduciary or
agent for one or more institutional accounts, BUYER represents that it
has sole investment discretion with respect to each such account and
that it has full power to make the foregoing acknowledgments,
representations and agreements on behalf of each such institutional
account;
(vi) BUYER acknowledges that SELLER and others will rely
upon the truth and accuracy of the foregoing acknowledgments,
representations and agreements and further agrees that if, prior to
the closing, any of such acknowledgments, representations and
agreements made by BUYER are no longer accurate, BUYER will promptly
notify SELLER;
(vii) BUYER has received all information necessary to make
an informed business decision with respect to an investment in the
Securities, including but not limited to SELLER'S latest Form 10-K,
all Forms 10-Q and 8-K filed thereafter, the Proxy Statement for its
latest fiscal year and the Prospectus of SELLER dated October 20,
1995, along with an update of the risk factors set forth in the
Prospectus, prepared by SELLER;
(viii) This Agreement has been duly authorized, validly
executed, and delivered on behalf of BUYER and is a valid and binding
agreement enforceable in accordance with its terms, subject to general
principles of equity and to bankruptcy or other laws affecting the
enforcement of creditors' rights generally; and
(ix) BUYER has not engaged and agrees not to engage in any
short sales of SELLER'S Common Stock prior to the date the Preferred
Shares have been converted, except to the extent that any such short
sale is fully covered by shares of common stock of the Company other
than the Common Shares purchased pursuant to this Agreement.
3. SELLER'S REPRESENTATIONS AND AGREEMENTS
SELLER represents, warrants and agrees as follows:
<PAGE> 5
Private Sec. Sub. Agreement: Jerry's Famous Deli, Inc./Yucaipa Waterton Deli
Investors, L.L.C. August 22, 1996 Page 5
(i) SELLER has not conducted any general solicitation or
general advertising (as defined in Regulation D) with respect to any
of the Securities;
(ii) The Securities, when issued and delivered will be
duly and validly authorized and issued, fully-paid and nonassessable,
free and clear of any liens, encumbrances, charges, or adverse claims
of any nature whatsoever, and will not subject the holders thereof to
personal liability by reason of being such holders. There are no
preemptive rights of any shareholder of SELLER with respect to the
Shares;
(iii) This Agreement has been duly authorized, validly
executed and delivered on behalf of SELLER and is a valid and binding
agreement in accordance with its terms, subject to general principles
of equity and to bankruptcy or other laws affecting the enforcement of
creditors' rights generally;
(iv) The execution and delivery of this Agreement and the
consummation of the issuance of the Securities and the transactions
contemplated by this Agreement do not and will not conflict with or
result in a breach by SELLER of any of the terms or provisions of, or
constitute a default under, the articles of incorporation (or charter)
or bylaws of SELLER, or any indenture, mortgage, deed of trust or
other material agreement or instrument to which SELLER is a party or
by which it or any of its properties or assets are bound, or any
existing applicable decree, judgment or order of any court, federal or
state regulatory body, administrative agency or other governmental
body having jurisdiction over SELLER or any of its properties or
assets;
(v) No authorization, approval or consent of or filing
with any federal, state or local governmental body of the United
States is legally required for the issuance and sale of the Securities
as contemplated by this Agreement;
(vi) The information provided by or on behalf of SELLER to
BUYER and referred to in Section 2(vii) of this Agreement does not
contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in
the light of the circumstance under which they are made, not
misleading. Since March 31, 1996, there has been no material adverse
development in the business, properties, operations, financial
condition or results of operations of SELLER, except as disclosed in
the documents referred to in Section 2(vii) hereof.
<PAGE> 6
Private Sec. Sub. Agreement: Jerry's Famous Deli, Inc./Yucaipa Waterton Deli
Investors, L.L.C. August 22, 1996 Page 6
(vii) SELLER will issue one or more certificates
representing the Preferred Shares in the name of BUYER in such
denominations to be specified by BUYER prior to closing. The
Preferred Shares will bear the restrictive legend specified in Section
2(iii) of this Agreement. Seller shall issue a single Warrant bearing
the restrictive legend specified in Section 2(iii) of this Agreement.
SELLER further warrants that no instructions other than these
instructions and stop transfer instructions to give effect to Section
2(i) hereof will be given to the transfer agent and also warrants that
the Securities shall otherwise be transferable on the books and
records of SELLER as and to the extent provided in this Agreement,
subject to compliance with Federal and State securities laws.
Following registration of the Common Shares, upon conversion of the
Preferred Shares or exercise of the Warrants, SELLER agrees to furnish
new instructions to the transfer agent advising it of registration and
instructing it to issue the Common Shares without a legend. Nothing
in this Section shall affect in any way BUYER'S obligations and
agreement to comply with all applicable securities laws upon resale of
the Securities.
4. CLOSING. Share certificates and Warrant certificates shall be
delivered to BUYER and the funds therefor shall be delivered to SELLER
on August 23, 1996 (the "Closing") or at such time to be mutually
agreed.
5. FIRST REFUSAL
In the event SELLER determines to offer common shares, or
securities convertible into common shares, to any party in a private
placement of SELLER'S securities, SELLER agrees to offer BUYER, on a
right of first refusal basis, the right to purchase any such
securities during the period ending ninety (90) days following the
Closing. SELLER shall offer such securities to BUYER on the same
terms as offered to any other potential purchaser, and BUYER shall
have five (5) business days during which it may elect to purchase such
securities. If BUYER does not elect to purchase such securities,
BUYER shall be deemed to have rejected the offer and SELLER shall be
free to complete the transaction with another party or parties on the
same terms offered to BUYER.
6. CONDITIONS TO CLOSING
(i) BUYER understands that SELLER'S obligation to sell
the Preferred Shares and the Warrants is conditioned upon delivery
into escrow or otherwise as agreed between BUYER and SELLER by BUYER
of the amounts set forth in Paragraph 1 hereof.
<PAGE> 7
Private Sec. Sub. Agreement: Jerry's Famous Deli, Inc./Yucaipa Waterton Deli
Investors, L.L.C. August 22, 1996 Page 7
(ii) SELLER understands that BUYER'S obligation to
purchase the Preferred Shares and the Warrants is conditioned upon
delivery of certificate(s) representing Preferred Shares as described
in Paragraph 1(ii) hereto and provision of an opinion of counsel
confirming the matters set out in Section 3(ii), (iii), (iv) and (v)
above.
(iii) SELLER understands that BUYER'S obligation to purchase
the Preferred Shares and the Warrants is conditioned upon SELLER and
BUYER entering into a Registration Rights Agreement substantially in
the form of Annex I hereto.
7. GOVERNING LAW; INTERPRETATION
This Agreement shall be governed by and interpreted in
accordance with the laws of the State of California without giving
effect to rules governing the conflict of laws. Facsimile signatures
of this agreement shall be binding on all parties hereto.
IN WITNESS WHEREOF, this Agreement was duly executed on the
date first written above.
Official Signatory of BUYER:
YUCAIPA WATERTON DELI INVESTORS, L.L.C.
WATERTON MANAGEMENT, L.L.C.,
MANAGING MEMBER
BY: KENNETH ABDALLA, MANAGING
MEMBER OF WATERTON MANAGEMENT
Official Signatory of SELLER:
JERRY'S FAMOUS DELI, INC.
ISAAC STARKMAN
CHAIRMAN AND CEO
<PAGE> 8
EXHIBIT A
CERTIFICATE OF DETERMINATION
<PAGE> 9
EXHIBIT B
FORM OF WARRANT
<PAGE> 10
August 22, 1996
Via Facsimile
(818) 766-8315
Mr. Isaac Starkman
Chairman and CEO
Jerry's Famous Deli, Inc.
12711 Ventura Boulevard, Suite 400
Studio City, CA 91604
RE: CONFIRMATION OF PURCHASE AND CLOSING INSTRUCTIONS
Dear Ike:
This is to confirm the sale of Six Thousand (6,000) Shares of
Convertible Preferred Stock ("Preferred Shares") of Jerry's Famous Deli, Inc.
(DELI) ("Seller") and Warrants ("Warrants") to purchase Sixty Five Thousand
(65,000) Shares of common stock of Jerry's Famous Deli, Inc. to Yucaipa
Waterton Deli Investors, L.L.C. ("Buyer"), issued by Seller pursuant to Section
4(2) of the Securities Act of 1933, at a gross price of Six Million One Hundred
Dollars ($6,000,100) U.S. to Seller, pursuant to a Private Securities
Subscription Agreement between Seller and Buyer dated August 22, 1996.
Shoreline Pacific Institutional Finance, the Institutional Division of
Financial West Group ("Shoreline Pacific"), will be paid a commission of Six
Percent (6%), which will be deducted from that gross amount (as set forth
below), such that net proceeds to Seller will total Five Million Six Hundred
Forty Thousand Ninety Four Dollars ($5,640,094) U.S. The transaction is
scheduled to close on August 23, 1996 (the "Closing"). The Royal Bank of
Scotland plc, 600 Montgomery Street, San Francisco, CA 94111-2880, tel: (415)
788-4500, will act as escrow agent for this transaction (the "Escrow Agent").
The following outlines the closing information for this transaction.
FOR THIS TRANSACTION TO CLOSE, SELLER MUST:
1. Deliver to the Escrow Agent Six Thousand (6,000) Preferred Shares of
Jerry's Famous Deli, Inc., each Preferred Share representing One
Thousand Dollars ($1,000.00) U.S., in the form of Ten (10)
certificates each representing Six Hundred (600) Preferred Shares in
the name of Yucaipa Waterton Deli Investors, L.L.C., bearing
substantially the following legend: "The shares evidenced by this
certificate have not been registered under the Securities Act of 1933
(the "Act") and may not
<PAGE> 11
Seller's Confirmation: Jerry's Famous Deli, Inc./Yucaipa Waterton Deli
Investors, L.L.C. August 22, 1996 Page 2
be offered or sold, transferred, pledged, hypothecated or otherwise
disposed of except pursuant to an effective registration statement
under the Act or pursuant to an available exemption from such
registration. The holder of this certificate is the beneficiary of
certain obligations of the Company set forth in a private securities
subscription agreement between the Company and Yucaipa Waterton Deli
Investors, L.L.C. dated August 22, 1996. A copy of the portion of the
aforesaid subscription agreement evidencing such obligations may be
obtained from the Company's executive offices."
2. Deliver to the Escrow Agent a signed Common Stock Purchase Warrant
Certificate in the name of Yucaipa Waterton Deli Investors, L.L.C. to
purchase Sixty Five Thousand (65,000) shares of common stock of
Jerry's Famous Deli, Inc.;
3. Deliver to the Escrow Agent an opinion letter from Seller's securities
counsel stating that, among other things, upon issuance of the
Preferred Shares and the Common Shares issuable upon the conversion
thereof, such shares will be duly and validly authorized and issued,
fully-paid and nonassessable shares of Jerry's Famous Deli, Inc.
4. Deliver to Shoreline Pacific a signed Private Securities Subscription
Agreement and a signed Registration Rights Agreement;
5. Deliver to Shoreline Pacific a signed closing instructions/hold
harmless letter addressed to the Escrow Agent.
Items 4 and 5 should be faxed to the attention of Virginia Allen, at (415)
332-7808, with a hard copy sent via private overnight mail service. Item 5
should also be faxed directly to the Escrow Agent at (415) 781-8010.
BUYER HAS BEEN INSTRUCTED TO:
1. Wire funds to the Escrow Agent's escrow account for purchase of the
Preferred Shares and Warrants;
2. Deliver to Shoreline Pacific a signed Private Securities Subscription
Agreement and a signed Registration Rights Agreement;
3. Deliver to Shoreline Pacific and the Escrow Agent a signed closing
instructions/hold harmless letter addressed to the Escrow Agent.
THE ESCROW AGENT WILL:
1. Collect the funds from Buyer and the certificates from Seller;
<PAGE> 12
Seller's Confirmation: Jerry's Famous Deli, Inc./Yucaipa Waterton Deli
Investors, L.L.C. August 22, 1996 Page 3
2. Release funds in the amount of Five Million Six Hundred Forty Thousand
Ninety Four Dollars ($5,640,094) U.S. to Seller via wire transfer
pursuant to Seller's instructions and release the Preferred Share
certificates and Common Stock Purchase Warrant Certificate to Buyer
via private overnight mail service pursuant to Buyer's instructions,
once all material has been received.
You have instructed us that Seller's instructions for wiring funds
from the proceeds of this transaction are as follows:
Bank of America
Woodland Hills, California
ABA# 121-000-358
For further credit to: Jerry's Famous Deli, Inc.
Account # 14656-00915
3. Release to Shoreline Pacific Three Hundred Sixty Thousand Six Dollars
($360,006) U.S. pursuant to their instructions.
If these terms and timetable are acceptable to you, please confirm by signing
below and returning this letter to my office by fax, together with the private
securities subscription agreement and escrow agent closing instructions/hold
harmless letter.
Facsimile signatures of this agreement shall be binding on all parties hereto.
Sincerely,
/s/ HARLAN P. KLEIMAN
- --------------------------
Harlan P. Kleiman,
Executive Vice President
of Institutional Sales
AGREED AND ACCEPTED
JERRY'S FAMOUS DELI, INC.
/s/ ISAAC STARKMAN
- --------------------------
Isaac Starkman,
Chairman and CEO
<PAGE> 13
[ SELLER'S LETTERHEAD ]
August 22, 1996
Mr. John MacGregor
Senior Vice President and Manager
The Royal Bank of Scotland plc
600 Montgomery Street
San Francisco, CA 94111-2880
Dear Mr. MacGregor:
We shall deliver to you no later than August 23, 1996 Six Thousand (6,000)
Shares of Convertible Preferred Stock of Jerry's Famous Deli, Inc. (DELI) in
the form of Ten (10) certificates each representing Six Hundred (600) Preferred
Shares in the name of Yucaipa Waterton Deli Investors, L.L.C., together with a
Common Stock Purchase Warrant Certificate in the name of Yucaipa Waterton Deli
Investors, L.L.C. for the purchase of Sixty Five Thousand (65,000) shares of
common stock of Jerry's Famous Deli, Inc.
Upon receipt of the funds from Yucaipa Waterton Deli Investors, L.L.C.
("Buyer") and other required documents, please release the certificates to
Buyer pursuant to Buyer's delivery instructions provided to you by Shoreline
Pacific Institutional Finance, the Institutional Division of Financial West
Group.
We understand that you are acting as escrow agent in this transaction and in no
other capacity. We agree that you will have no liability whatsoever for any
actions taken or not taken by you in connection with this transaction, unless
such actions or omissions result from your gross negligence or willful
misconduct.
We agree to indemnify you and hold you harmless against any loss, liability,
claim, or other damage arising from or in connection with this transaction
other than any loss, liability, claim or other damage resulting from your gross
negligence or willful misconduct.
We further agree that you are expressly authorized to and shall be protected in
relying on the genuineness of facsimile signatures on documents you receive in
this transaction.
Sincerely,
/s/ ISAAC STARKMAN
- -----------------------------
Isaac Starkman,
Chairman and CEO
<PAGE> 14
August 22, 1996
Via Facsimile
(310) 789-7218
Mr. Kenneth Abdalla
Yucaipa Waterton Deli Investors, L.L.C.
10000 Santa Monica Blvd., 5th Floor
Los Angeles, CA 90067
RE: CONFIRMATION OF PURCHASE AND CLOSING INSTRUCTIONS
Dear Ken:
The following outlines the closing information for the transaction
between Yucaipa Waterton Deli Investors, L.L.C. ("Buyer") and Jerry's Famous
Deli, Inc. (DELI) ("Seller") involving the purchase of Six Thousand (6,000)
Shares of Convertible Preferred Stock of Jerry's Famous Deli, Inc. and warrants
to purchase Sixty Five Thousand (65,000) shares of common stock of Jerry's
Famous Deli, Inc., issued by Seller pursuant to Section 4(2) of the Securities
Act of 1933 (the "Preferred Shares"). The Royal Bank of Scotland plc, The
Pyramid, 600 Montgomery Street, San Francisco, CA 94111-2880, tel: (415)
788-4500, will act as escrow agent for this transaction (the "Escrow Agent").
FOR THIS TRANSACTION TO CLOSE, BUYER MUST:
1. Wire funds in the amount of Six Million One Hundred Dollars
($6,000,100) U.S. no later than August 23, 1996 to the Escrow Agent's
escrow account, identified immediately below. If any of the following
information is not included in the wire from Buyer's financial
institution, the Escrow Agent may be unable to identify the funds as
pertaining to this transaction:
<PAGE> 15
Buyer's Confirmation: Jerry's Famous Deli, Inc./Yucaipa Waterton Deli
Investors, L.L.C. August 22, 1996 Page 2
Wells Fargo Bank N.A.
San Francisco, CA
ABA #: 121000248
In favor of: The Royal Bank of Scotland plc
San Francisco Office
Account #: 4000-824581
For further credit: The Royal Bank of Scotland Escrow Account
Account #: 370000
Reference: Royal Bank of Scotland/Financial West Group/
Jerry's Famous Deli, Inc./Yucaipa Waterton
Deli Investors, L.L.C.
2. Deliver to Shoreline Pacific Institutional Finance, the Institutional
Division of Financial West Group ("Shoreline Pacific") a signed
Private Securities Subscription Agreement and a signed Registration
Rights Agreement;
3. Deliver to Shoreline Pacific a signed closing instructions/hold
harmless letter addressed to the Escrow Agent.
Items 2 and 3 should be faxed to the attention of Virginia Allen, at (415)
332-7808, with a hard copy sent via private overnight mail service. Item 3
should also be faxed directly to the Escrow Agent at (415) 781-8010.
If these instructions are not followed completely, TRANSACTIONS WILL NOT CLOSE.
SELLER HAS BEEN INSTRUCTED TO:
1. Deliver to the Escrow Agent Six Thousand (6,000) Preferred Shares of
Jerry's Famous Deli, Inc., each Preferred Share representing One
Thousand Dollars ($1,000.00) U.S., in the form of Ten (10)
certificates each representing Six Hundred (600) Preferred Shares in
the name of Yucaipa Waterton Deli Investors, L.L.C., bearing
substantially the following legend: "The shares evidenced by this
certificate have not been registered under the Securities Act of 1933
(the "Act") and may not be offered or sold, transferred, pledged,
hypothecated or otherwise disposed of except pursuant to an effective
registration statement under the Act or pursuant to an available
exemption from such registration. The holder of this certificate is
the beneficiary of certain obligations of the Company set forth in a
private securities subscription agreement between the Company and
Yucaipa Waterton Deli Investors, L.L.C. dated August 22, 1996. A copy
of the portion of the aforesaid
<PAGE> 16
Buyer's Confirmation: Jerry's Famous Deli, Inc./Yucaipa Waterton Deli
Investors, L.L.C. August 22, 1996 Page 3
subscription agreement evidencing such obligations may be obtained
from the Company's executive offices."
2. Deliver to the Escrow Agent a signed Common Stock Purchase Warrant
Certificate in the name of Yucaipa Waterton Deli Investors, L.L.C. to
purchase Sixty Five Thousand (65,000) shares of common stock of
Jerry's Famous Deli, Inc.;
3. Deliver to the Escrow Agent an opinion letter from Seller's securities
counsel stating that, among other things, upon issuance of the
Preferred Shares and the Common Shares issuable upon the conversion
thereof, such shares will be duly and validly authorized and issued,
fully-paid and nonassessable shares of Jerry's Famous Deli, Inc.
4. Deliver to Shoreline Pacific a signed Private Securities Subscription
Agreement and a signed Registration Rights Agreement;
5. Deliver to Shoreline Pacific and the Escrow Agent a signed closing
instructions/hold harmless letter addressed to the Escrow Agent.
THE ESCROW AGENT WILL:
1. Collect the funds from Buyer and the common stock certificates and
Common Stock Purchase Warrant Certificate from Seller;
2. Release funds to Seller via wire transfer pursuant to Seller's
instructions and release the Preferred Share certificates and Common
Stock Purchase Warrant Certificate to Buyer via private overnight mail
service pursuant to Buyer's instructions, once all material has been
received.
You have instructed us that Buyer's instructions for delivery of the
certificates are as follows:
Yucaipa Waterton Deli Investors, L.L.C.
c/o Goldman Sachs & Co.
One New York Plaza
44th Floor
New York, NY 10004
Attn: Jim Schaad
(212) 902-1257
<PAGE> 17
Buyer's Confirmation: Jerry's Famous Deli, Inc./Yucaipa Waterton Deli
Investors, L.L.C. August 22, 1996 Page 4
If these terms and timetable are acceptable to you, please confirm by signing
below and returning this letter to my office by fax, together with the private
securities subscription agreement and escrow agent closing instructions/hold
harmless letter.
Facsimile signatures of this agreement shall be binding on all parties hereto.
Sincerely,
/s/ HARLAN P. KLEIMAN
- ------------------------
Harlan P. Kleiman,
Executive Vice President
of Institutional Sales
AGREED AND ACCEPTED:
Yucaipa Waterton Deli Investors, L.L.C.
/s/ KENNETH ABDALLA
- ------------------------
Waterton Management, L.L.C.,
Managing Member
By: Kenneth Abdalla, Managing
Member of Waterton Management
<PAGE> 18
[ BUYER'S LETTERHEAD ]
August 22, 1996
Mr. John MacGregor
Senior Vice President and Manager
The Royal Bank of Scotland plc
600 Montgomery Street
San Francisco, CA 94111-2880
Dear Mr. MacGregor:
We will be wiring to you no later than August 23, 1996 funds in the amount of
Six Million One Hundred Dollars ($6,000,100) U.S. for the purchase of Six
Thousand (6,000) Shares of Convertible Preferred Stock of Jerry's Famous Deli,
Inc. (DELI) and warrants to purchase Sixty Five Thousand (65,000) shares of
common stock of Jerry's Famous Deli, Inc.
Upon receipt of the share certificates and Common Stock Warrant Purchase
Certificate from Jerry's Famous Deli, Inc. ("Seller") and other required
documents, please release the funds to Seller pursuant to Seller's instructions
provided to you by Shoreline Pacific Institutional Finance, the Institutional
Division of Financial West Group.
We understand that you are acting as escrow agent in this transaction and in no
other capacity. We agree that you will have no liability whatsoever for any
actions taken or not taken by you in connection with this transaction, unless
such actions or omissions result from your gross negligence or willful
misconduct.
We agree to indemnify you and hold you harmless against any loss, liability,
claim, or other damage arising from or in connection with this transaction
other than any loss, liability, claim or other damage resulting from your gross
negligence or willful misconduct.
We further agree that you are expressly authorized to and shall be protected in
relying on the genuineness of facsimile signatures on documents you receive in
this transaction.
Sincerely,
/s/ KENNETH ABDALLA
- -----------------------------
Waterton Management, L.L.C.,
Managing Member
By: Kenneth Abdalla, Managing
Member of Waterton Management
<PAGE> 19
August 22, 1996
Via Facsimile
(415) 781-8010
Mr. John MacGregor
Senior Vice President & Manager
The Royal Bank of Scotland plc
The Pyramid
600 Montgomery Street
San Francisco, CA 94111-2880
RE: ESCROW CLOSING INSTRUCTIONS
The following sets forth the closing instructions for the transaction between:
the Buyer:
Yucaipa Waterton Deli Investors, L.L.C.
10000 Santa Monica Boulevard
5th Floor
Los Angeles, CA 90067
(hereinafter referred to as "Buyer")
(310) 789-7215 Telephone
(310) 789-7218 Fax
and the Seller:
Jerry's Famous Deli, Inc.
12711 Ventura Boulevard, Suite 400
Studio City, CA 91604
(hereinafter referred to as "Seller ")
(818) 766-8311 Telephone
(818) 766-8315 Fax
Mr. Isaac Starkman
Chairman and CEO
for the sale of Six Thousand (6,000) Shares of Convertible Preferred Stock of
Jerry's Famous Deli, Inc. (DELI) and warrants to purchase Sixty Five Thousand
(65,000) shares of common stock of Jerry's Famous Deli, Inc., issued by Seller
pursuant to Section 4(2) of the Securities Act of 1933 (the "Preferred
Shares"). The Royal Bank of
<PAGE> 20
Mr. John MacGregor: Jerry's Famous Deli, Inc./Yucaipa Waterton Deli
Investors, L.L.C. August 22, 1996 Page 2
Scotland plc will act as escrow agent for the transaction (the "Escrow Agent"),
which is scheduled to close on August 23, 1996.
BUYER WILL PROVIDE:
1. A signed Private Securities Subscription Agreement and a signed
Registration Rights Agreement;
2. A signed closing instructions/hold harmless letter addressed to the
Escrow Agent regarding its capacity as escrow agent;
3. Funds wired to the Escrow Agent's escrow account in the amount of Six
Million One Hundred Dollars ($6,000,100) U.S.
SELLER WILL PROVIDE:
1. A signed Private Securities Subscription Agreement and a signed
Registration Rights Agreement;
2. A signed closing instructions/hold harmless letter addressed to the
Escrow Agent regarding its capacity as escrow agent;
3. Six Thousand (6,000) Shares of Convertible Preferred Stock of Jerry's
Famous Deli, Inc. (DELI), each Preferred Share representing One
Thousand Dollars ($1,000.00) U.S., in the form of Ten (10)
certificates each representing Six Hundred (600) Preferred Shares in
the name of Yucaipa Waterton Deli Investors, L.L.C., bearing
substantially the following legend: "The shares evidenced by this
certificate have not been registered under the Securities Act of 1933
(the "Act") and may not be offered or sold, transferred, pledged,
hypothecated or otherwise disposed of except pursuant to an effective
registration statement under the Act or pursuant to an available
exemption from such registration. The holder of this certificate is
the beneficiary of certain obligations of the Company set forth in a
private securities subscription agreement between the Company and
Yucaipa Waterton Deli Investors, L.L.C. dated August 22, 1996. A copy
of the portion of the aforesaid subscription agreement evidencing such
obligations may be obtained from the Company's executive offices."
4. A signed Common Stock Purchase Warrant Certificate in the name of
Yucaipa Waterton Deli Investors, L.L.C. to purchase Sixty Five
Thousand (6,500) shares of common stock of Jerry's Famous Deli, Inc.;
5. An opinion letter from Seller's securities counsel stating that, among
other things, upon issuance of the Preferred Shares and the Common
Shares issuable upon the conversion thereof, such shares will be duly
<PAGE> 21
Mr. John MacGregor: Jerry's Famous Deli, Inc./Yucaipa Waterton Deli
Investors, L.L.C August 22, 1996 Page 3
and validly authorized and issued, fully-paid and nonassessable shares
of Jerry's Famous Deli, Inc.
WE EXPECT YOU TO COLLECT THE MATERIAL FROM BOTH BUYER AND SELLER. WE FURTHER
EXPECT THAT, ONCE ALL MATERIALS HAVE BEEN RECEIVED, YOU WILL TAKE THE FOLLOWING
STEPS:
1. Release to Seller Five Million Six Hundred Forty Thousand Ninety Four
Dollars ($5,640,094) U.S. via wire transfer pursuant to Seller's
instructions, as follows:
Bank of America
Woodland Hills, California
ABA# 121-000-358
For further credit to: Jerry's Famous Deli, Inc.
Account # 14656-00915
2. Release stock certificates, Common Stock Purchase Warrant Certificate,
and a copy of opinion letter from Seller's counsel to Buyer pursuant
to Buyer's instructions, as follows:
Yucaipa Waterton Deli Investors, L.L.C.
c/o Goldman Sachs & Co.
One New York Plaza, 44th Floor
New York, NY 10004
Attn: Jim Schaad
(212) 902-1257
3. Wire transfer Three Hundred Sixty Thousand Six Dollars ($360,006) U.S.
as follows:
Bank of New York
ABA #021000018
BNF-Correspondent Services Corp.
AC#8900186968
OBI-FBO Account Title/AC XX12345 (Account Number)
Financial West Group/UA99100
FINANCIAL WEST GROUP
/s/ HARLAN P. KLEIMAN
- -------------------------------------
Harlan P. Kleiman,
Executive Vice President
Institutional Sales
ACCEPTED:
THE ROYAL BANK OF SCOTLAND PLC
By: /s/ JOHN MACGREGOR
- -------------------------------------
John MacGregor, Senior Vice President
<PAGE> 22
ANNEX I
ANNEX I
TO
SUBSCRIPTION
AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of August 22, 1996 (this
"Agreement"), is made by and among Jerry's Famous Deli, Inc., a California
corporation (the "Company"), and the person named on the signature page hereto
(the "Initial Investor").
W I T N E S S E T H :
WHEREAS, in connection with the Private Securities
Subscription Agreement, dated as of August 22, 1996, between the
Initial Investor and the Company (the "Subscription Agreement"), the
Company has agreed, upon the terms and subject to the conditions of
the Subscription Agreement, to issue and sell to the Initial Investor
shares (the "Shares") of Convertible Preferred Stock (the "Preferred
Stock") and Warrants (the "Warrants") to purchase shares of Common
Stock, no par value (the "Common Stock") of the Company; and
WHEREAS, to induce the Initial Investor to execute and
deliver the Subscription Agreement, the Company has agreed to provide
certain registration rights under the Securities Act of 1933, as
amended, and the rules and regulations thereunder, or any similar
successor statute (collectively, the "Securities Act"), and applicable
state securities laws with respect to the shares of Common Stock
isssuable upon conversion of the Preferred Stock or exercise of the
Warrants (the "Registrable Securities");
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Initial Investor hereby agree as
follows:
<PAGE> 23
Jerry's Famous Deli, Inc./Yucaipa Waterton Deli Investors, L.L.C.
Registration Rights Agreement August 22, 1996
Page 2
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall
have the following meanings:
(i) "Investor" means the Initial Investor and any
transferee or assignee who agrees to become bound by the provisions of
this Agreement in accordance with Section 9 hereof.
(ii) "register," "registered," and "registration" refer to
a registration effected by preparing and filing a Registration
Statement or Statements in compliance with the Securities Act on such
appropriate registration form promulgated by the Commission as shall
be selected by the Company, and, when requested by the Initial
Investor or any Investor pursuant to Section 2(b) hereof, shall (A) be
reasonably acceptable to the holders of a majority of the Registrable
Securities to which such registration relates, and (B) shall permit
the disposition of Registrable Securities in accordance with the
intended method or methods specified in the Investor's request for
such registration, and the declaration or ordering of effectiveness of
such Registration Statement by the United States Securities and
Exchange Commission ("SEC").
(iii) "Registrable Securities" means the shares of Common
Stock issued or issuable upon conversion of the Shares.
(iv) "Registration Statement" means a registration
statement under the Securities Act registering securities of the
Company.
(b) As used in this Agreement, the term Investor includes
(i) each Investor (as defined above) and (ii) each person who is a
permitted transferee or assignee of the Registrable Securities
pursuant to Section 9 of this Agreement.
(c) Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings set forth in the
Subscription Agreement.
2. REGISTRATION.
(A) REGISTRATION BY THE COMPANY. Prior to the date the
Shares become convertible into shares of Common Stock in accordance
with their terms, the Company shall file with the SEC a Registration
<PAGE> 24
Jerry's Famous Deli, Inc./Yucaipa Waterton Deli Investors, L.L.C.
Registration Rights Agreement August 22, 1996
Page 3
Statement registering the Registrable Securities for resale by the
Investors. If the Registration Statement has not been declared
effective by the SEC prior to the date the Shares become convertible,
the provisions of Section 2(e) hereof shall apply.
(B) PIGGY-BACK REGISTRATIONS. If (i) at any time after
120 days following the purchase of the Shares pursuant to the
Subscription Agreement, if a Registration Statement for the resale of
the Common Stock has not been filed with the SEC or, (ii) at any time
after the date the Shares become convertible into shares of Common
Stock, if a Registration Statement for the resale of the Common Stock
has not been declared effective by the SEC, the Company shall
determine to prepare and file with the SEC a Registration Statement
relating to an offering for its own account or the account of others
under the Securities Act any of its equity securities, other than on
Form S-4 or Form S-8 or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of
any entity or business or equity securities issuable in connection
with stock option or other employee benefit plans, the Company shall
send to each Investor, who is entitled to registration rights under
this Section 2(b) written notice of such determination and, if within
twenty (20) days after receipt of such notice, such Investor shall so
request in writing, the Company shall include in such Registration
Statement all or any part of the Registrable Securities such Investor
requests to be registered, except that if, in connection with any
underwritten public offering for the account of the Company the
managing underwriter(s) thereof shall impose a limitation on the
number of shares of Common Stock which may be included in the
Registration Statement because, in such underwriter(s)' judgment, such
limitation is necessary to effect an orderly public distribution, then
the Company shall be obligated to include in such Registration
Statement only such limited portion, if any, of the Registrable
Securities with respect to which such Investor has requested inclusion
hereunder. Any exclusion of Registrable Securities shall be made pro
rata among the Investors seeking to include Registrable Securities, in
proportion to the number of Registrable Securities sought to be
included by such Investors; provided, however, that the Company shall
not exclude any Registrable Securities unless the Company has first
excluded all outstanding securities the holders of which are not
entitled by right to inclusion of securities in such Registration
Statement; and provided, further, however, that, after giving effect
to the immediately preceding proviso, any exclusion of Registrable
Securities shall be made pro rata with holders of other securities
having the right to include such securities in the Registration
Statement to the extent such pro rata
<PAGE> 25
Jerry's Famous Deli, Inc./Yucaipa Waterton Deli Investors, L.L.C.
Registration Rights Agreement August 22, 1996
Page 4
allotment is permitted under the Company's currently existing
agreements with such holders of the Company's securities. No right to
registration of Registrable Securities under this Section 2(b) shall
be construed to limit any registration required or permitted under any
other provision of this Agreement. The obligations of the Company
under this Section 2(b) may be waived by Investors holding a majority
in interest of the Registrable Securities and shall expire (i) after
the Company has afforded the opportunity for the Investors to exercise
registration rights under this Section 2(b) for two registrations;
provided, however, that any Investor who shall have had any
Registrable Securities excluded from any Registration Statement in
accordance with this Section 2(b) shall be entitled to include in an
additional Registration Statement filed by the Company the Registrable
Securities so excluded or (ii) when all of the Registrable Securities
held by any Investor may be sold by such Investor under Rule 144 under
the Securities Act ("Rule 144") within any three-month period.
(C) DEMAND REGISTRATION. If, at any time after the
Shares become convertible into Common Stock, if a Registration
Statement for the resale of the Registrable Securities is not then in
effect, any Investor holding a majority of the Registrable Securities
shall notify the Company in writing that it intends to offer or cause
to be offered for public sale Registrable Securities held by such
Investor, the Company shall cause such of the Registrable Securities
as may be requested by any Investor to be registered, on one occasion
only, under the Securities Act and applicable state laws as
expeditiously as possible. Once the right for registration of any
Registrable Securities under this Section 2(c) has been exercised by
any Investor, the Company shall prepare and file a Registration
Statement covering such Registrable Securities with the SEC within
seven (7) days of the exercise of such registration right.
(D) If any offering pursuant to a Registration Statement
pursuant to Section 2(c) hereof involves (at the Company's election)
an underwritten offering, the Investors who hold a majority in
interest of the Registrable Securities subject to such underwritten
offering shall have the right to select one legal counsel and an
investment banker or bankers and manager or managers to administer the
offering, which investment banker or bankers or manager or managers
shall be reasonably satisfactory to the Company. The Investors who
hold the Registrable Securities to be included in such underwriting
shall pay all underwriting discounts and commissions and other fees
and expenses of such investment banker or bankers and manager or
managers so selected in accordance with this Section 2(d) (other than
fees and expenses relating to registration of Registrable Securities
under federal
<PAGE> 26
Jerry's Famous Deli, Inc./Yucaipa Waterton Deli Investors, L.L.C.
Registration Rights Agreement August 22, 1996
Page 5
or state securities laws which are payable by the Company pursuant to
Section 5 hereof) with respect to their Registrable Securities and the
fees and expenses of such legal counsel selected by the Investors.
(E) PAYMENTS BY THE COMPANY. If the Registration
Statement covering the Registrable Securities is not effective prior
to the date the Shares become convertible into Common Stock, then the
Company will make payments to each holder of Registrable Securities
(each, a "Holder") in such amounts and at such times as shall be
determined pursuant to this Section 2(e). The amount to be paid by
the Company to the Holders shall be determined and paid as of each
Computation Date, and such amount shall be equal to three percent (3%)
of the aggregate subscription price paid by the Initial Investor for
the Shares pursuant to the Subscription Agreement (the "Periodic
Amount"); provided, however, that if any Computation Date is less than
30 days subsequent to another Computation Date, then the Periodic
Amount payable on the later Computation Date shall be prorated. The
Periodic Amount shall be divided among all the Holders in the same
proportion as each Holder's Registrable Securities bears to the total
of the outstanding Registrable Securities. The Periodic Amount shall
be paid by the Company within five business days after each
Computation Date and shall be payable in cash; provided, however, that
the Company may elect in lieu of payment of any Periodic Amount in
cash to deliver to the Initial Investor shares of Common Stock having
an Aggregate Market Value equal to the amount of the Periodic Amount
if, but only if, (1) such shares are freely tradable by the Initial
Investor without any restriction under the Securities Act or any state
securities or "blue sky" law and (2) after the issuance of such
shares to the Holder, the aggregate number of shares of Common Stock
beneficially owned by the Holder (determined in accordance with
Section 13(d) of, and Regulations 13 D-G under, the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) would not
exceed 4.9% of the outstanding shares of Common Stock unless such
provision is waived by the Holder.
As used in this Section 2(e), the following terms shall have
the following meanings:
"Aggregate Market Value" of any shares of Common Stock as of
any Computation Date means the product obtained by multiplying (a)
such number of shares of Common Stock times (b) the Average Market
Price of the Common Stock for such Computation Date.
<PAGE> 27
Jerry's Famous Deli, Inc./Yucaipa Waterton Deli Investors, L.L.C.
Registration Rights Agreement August 22, 1996
Page 6
"Average Market Price" of any security for any period shall be
computed as the average closing price of the shares over the five
trading-day period ending on the relevant Computation Date, as
reported by Bloomberg, L.P.
"Computation Date" means the date which is 30 days after the
date the Shares become convertible and, if the Registration Statement
required to be filed by the Company has not theretofore been declared
effective by the SEC, each date which is 30 days after a Computation
Date and, if the Registration Statement required to be filed by the
Company is not declared effective by the SEC within 30 days after the
date the Shares become convertible, the date on which such
Registration Statement is declared effective.
3. OBLIGATIONS OF THE COMPANY. In connection with
the registration of the Registrable Securities, the Company shall:
(a) prepare and file with SEC in accordance with section
2(a) hereof, by a date which the Company and its counsel reasonably
believes will allow the Registration Statement to be declared
effective prior to the date the Shares become convertible, or prepare
promptly and file with the SEC promptly (but in no event later than 7
days) after a request in accordance with Section 2(c) hereof, a
Registration Statement or Statements with respect to all Registrable
Securities to be included therein, and thereafter use its best efforts
to cause the Registration Statement to become effective as soon as
reasonably possible after such filing. If such Registration Statement
is filed pursuant to Rule 415, the Company shall keep the Registration
Statement effective pursuant to Rule 415 at all times until such date
as is three years after the date such Registration Statement is first
ordered effective by the SEC. In any case, the Registration Statement
(including any amendments or supplements thereto and prospectuses
contained therein) filed by the Company shall not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
provided, however, that, subject to the conditions set forth in
Section 4(a) below, each Investor may notify the Company in writing
that it wishes to exclude all or a portion of its Registrable
Securities from such Registration Statement; provided further,
however, that if at any time the Investors shall be entitled to sell
all Registrable Securities held by them pursuant to Rule 144
promulgated under the Securities Act or any other similar rule or
regulation of the SEC that may at any time permit the Investors to
sell securities of the Company to the public
<PAGE> 28
Jerry's Famous Deli, Inc./Yucaipa Waterton Deli Investors, L.L.C.
Registration Rights Agreement August 22, 1996
Page 7
without registration and without imposing restrictions arising under
the federal securities laws on the purchases thereof in a period of
three consecutive months, then the Company shall, so long as it meets
the current public information requirements of Rule 144, thereafter no
longer be required to maintain the registration of Registrable
Securities pursuant to this Agreement;
(b) prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep the Registration
Statement effective at all times until such date as is three years
after the date such Registration Statement is first ordered effective
by the SEC, and, during such period, comply with the provisions of the
Securities Act with respect to the disposition of all Registrable
Securities of the Company covered by the Registration Statement until
such time as all of such Registrable Securities have been disposed of
in accordance with the intended methods of disposition by the seller
or sellers thereof as set forth in the Registration Statement;
(c) furnish to each Investor whose Registrable Securities
are included in the Registration Statement, such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Investor may
reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Investor;
(d) use reasonable efforts to (i) register and qualify
the Registrable Securities covered by the Registration Statement under
such other securities or blue sky laws of such jurisdictions as the
Investors who hold a majority in interest of the Registrable
Securities being offered reasonably request, (ii) prepare and file in
those jurisdictions such amendments (including post-effective
amendments) and supplements, (iii) take such other actions as may be
necessary to maintain such registrations and qualifications in effect
at all times for a period of three years after the date such
Registration Statement is first ordered effective by the SEC and (iv)
take all other actions reasonably necessary or advisable to qualify
the Registrable Securities for sale in such jurisdictions; provided,
however, that the Company shall not be required in connection
therewith or as a condition thereto to (I) qualify to do business in
any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d), (II) subject itself to general taxation in
any such jurisdiction, (III) file a general consent to service of
process in any such jurisdiction, (IV) provide any undertakings that
<PAGE> 29
Jerry's Famous Deli, Inc./Yucaipa Waterton Deli Investors, L.L.C.
Registration Rights Agreement August 22, 1996
Page 8
cause more than nominal expense or burden to the Company or (V) make
any change in its charter or by-laws, which in each case the Board of
Directors of the Company determines to be contrary to the best
interests of the Company and its stockholders;
(e) in the event Investors who hold a majority in
interest of the Registrable Securities being offered in the offering
select underwriters for the offering, enter into and perform its
obligations under an underwriting agreement, in usual and customary
form, including, without limitation, customary indemnification and
contribution obligations, with the managing underwriter of such
offering;
(f) as promptly as practicable after becoming aware of
such event, notify each Investor who holds Registrable Securities
being sold pursuant to such registration of the happening of any event
of which the Company has knowledge, as a result of which the
prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading, and use its best efforts promptly to
prepare a supplement or amendment to the Registration Statement to
correct such untrue statement or omission, and deliver a number of
copies of such supplement or amendment to each Investor as such
Investor may reasonably request;
(g) as promptly as practicable after becoming aware of
such event, notify each Investor who holds Registrable Securities
being sold pursuant to such registration (or, in the event of an
underwritten offering, the managing underwriters) of the issuance by
the SEC of any stop order or other suspension of effectiveness of the
Registration Statement at the earliest possible time;
(h) permit a single firm of counsel designated as selling
stockholders' counsel by the Investors who hold a majority in interest
of the Registrable Securities being sold pursuant to such registration
to review the Registration Statement and all amendments and
supplements thereto a reasonable period of time prior to their filing
with the SEC, and shall not file any document in a form to which such
counsel reasonably objects;
(i) make generally available to its security holders as
soon as practical, but not later than ninety (90) days after the
close of the period
<PAGE> 30
Jerry's Famous Deli, Inc./Yucaipa Waterton Deli Investors, L.L.C.
Registration Rights Agreement August 22, 1996
Page 9
covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the Securities Act) covering a twelve-
month period beginning not later than the first day of the Company's
fiscal quarter next following the date of the Registration Statement;
(j) at the request of the Investors who hold a majority
in interest of the Registrable Securities being sold pursuant to such
registration, furnish on the date that Registrable Securities are
delivered to an underwriter for sale in connection with the
Registration Statement (i) a letter, dated such date, from the
Company's independent certified public accountants in form and
substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering,
addressed to the underwriters; and (ii) an opinion, dated such date,
from counsel representing the Company for purposes of such
Registration Statement, in form and substance as is customarily given
in an underwritten public offering, addressed to the underwriters and
Investors;
(k) make available for inspection by any Investor whose
Registrable Securities are being sold pursuant to such registration,
any underwriter participating in any disposition pursuant to the
Registration Statement, and any attorney, accountant or other agent
retained by any such Investor or underwriter (collectively, the
"Inspectors"), all pertinent financial and other records, pertinent
corporate documents and properties of the Company (collectively, the
"Records"), as shall be reasonably necessary to enable each Inspector
to exercise its due diligence responsibility, and cause the Company's
officers, directors and employees to supply all information which any
Inspector may reasonably request for purposes of such due diligence;
provided, however, that each Inspector shall hold in confidence and
shall not make any disclosure (except to an Investor) of any Record or
other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so
notified, unless (i) the disclosure of such Records is necessary to
avoid or correct a misstatement or omission in any Registration
Statement, (ii) the release of such Records is ordered pursuant to a
subpoena or other order from a court or government body of competent
jurisdiction or (iii) the information in such Records has been made
generally available to the public other than by disclosure in
violation of this or any other agreement. The Company shall not be
required to disclose any confidential information in such Records to
any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the
Company) with
<PAGE> 31
Jerry's Famous Deli, Inc./Yucaipa Waterton Deli Investors, L.L.C.
Registration Rights Agreement August 22, 1996
Page 10
the Company with respect thereto, substantially in the form of this
Section 3(k). Each Investor agrees that it shall, upon learning that
disclosure of such Records is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt
notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential. The Company
shall hold in confidence and shall not make any disclosure of
information concerning an Investor provided to the Company pursuant to
Section 4(e) hereof unless (i) disclosure of such information is
necessary to comply with federal or state securities laws, (ii) the
disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other
order from a court or governmental body of competent jurisdiction or
(iv) such information has been made generally available to the public
other than by disclosure in violation of this or any other agreement.
The Company agrees that it shall, upon learning that disclosure of
such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means,
give prompt notice to such Investor, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective
order for, such information;
(l) use its best efforts either to (i) cause all the
Registrable Securities covered by the Registration Statement to be
listed on a national securities exchange and on each additional
national securities exchange on which similar securities issued by the
Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange or (ii)
secure designation of all the Registrable Securities covered by the
Registration Statement as a National Association of Securities Dealers
Automated Quotations System ("NASDAQ") "national market system
security" within the meaning of Rule 11Aa2-1 of the SEC under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the quotation of the Registrable Securities on the NASDAQ National
Market System or, if, despite the Company's best efforts to satisfy
the preceding clause (i) or (ii), the Company is unsuccessful in
satisfying the preceding clause (i) or (ii), to secure listing on a
national securities exchange or NASDAQ authorization and quotation for
such Registrable Securities and, without limiting the generality of
the foregoing, to arrange for at least two market makers to register
with the National Association of Securities Dealers, Inc. ("NASD") as
such with respect to such Registrable Securities;
<PAGE> 32
Jerry's Famous Deli, Inc./Yucaipa Waterton Deli Investors, L.L.C.
Registration Rights Agreement August 22, 1996
Page 11
(m) provide a transfer agent and registrar, which may be
a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement;
(n) cooperate with the Investors who hold Registrable
Securities being sold and the managing underwriter or underwriters, if
any, to facilitate the timely preparation and delivery of certificates
(not bearing any restrictive legends) representing Registrable
Securities to be sold pursuant to the denominations or amounts as the
case may be, and registered in such names as the managing underwriter
or underwriters, if any, or the Investors may reasonably request; and,
within five business days after a Registration Statement which
includes Registrable Securities is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel selected by the
Company to deliver, to the transfer agent for the Registrable
Securities (with copies to the Investors whose Registrable Securities
are included in such Registration Statement) instructions to the
transfer agent to issue new stock certificates without a legend and an
opinion of such counsel that the shares have been registered; and
(o) take all other reasonable actions necessary to
expedite and facilitate disposition by the Investor of the Registrable
Securities pursuant to the Registration Statement;
4. OBLIGATIONS OF THE INVESTORS. In connection with the
registration of the Registrable Securities, the Investors shall have
the following obligations:
(a) It shall be a condition precedent to the obligations
of the Company to take any action pursuant to this Agreement with
respect to each Investor that such Investor shall furnish to the
Company such information regarding itself, the Registrable Securities
held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the
registration of the Registrable Securities and shall execute such
documents in connection with such registration as the Company may
reasonably request. At least fifteen (15) days prior to the first
anticipated filing date of the Registration Statement, the Company
shall notify each Investor of the information the Company requires
from each such Investor (the "Requested Information") if such Investor
elects to have any of such Investor's Registrable Securities included
in the Registration Statement. If within five (5) business days prior
to the filing date the Company has not received the Requested
Information from an
<PAGE> 33
Jerry's Famous Deli, Inc./Yucaipa Waterton Deli Investors, L.L.C.
Registration Rights Agreement August 22, 1996
Page 12
Investor (a "Non-Responsive Investor"), then the Company may file the
Registration Statement without including Registrable Securities of
such Non-Responsive Investor;
(b) Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as
reasonably requested by the Company in connection with the preparation
and filing of the Registration Statement hereunder, unless such
Investor has notified the Company in writing of such Investor's
election to exclude all of such Investor's Registrable Securities from
the Registration Statement;
(c) In the event Investors holding a majority in interest
of the Registrable Securities being registered determine to engage the
services of an underwriter, each Investor agrees to enter into and
perform such Investor's obligations under an underwriting agreement,
in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the managing
underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition
of the Registrable Securities, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such
Investor's Registrable Securities from the Registration Statement;
(d) Each Investor agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described
in Section 3(f) or 3(g), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to the Registration
Statement covering such Registrable Securities until such Investor's
receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(f) or 3(g) and , if so directed by the
Company, such Investor shall deliver to the Company (at the expense of
the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the
prospectus covering such Registrable Securities current at the time of
receipt of such notice; and
(e) No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell such
Investor's Registrable Securities on the basis provided in any
underwriting arrangements approved by the Investors entitled hereunder
to approve such arrangements, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms
<PAGE> 34
Jerry's Famous Deli, Inc./Yucaipa Waterton Deli Investors, L.L.C.
Registration Rights Agreement August 22, 1996
Page 13
of such underwriting arrangements and (iii) agrees to pay its pro rata
share of all underwriting discounts and commissions and other fees and
expenses of investment bankers and any manager or managers of such
underwriting and legal expenses of the underwriter applicable with
respect to its Registrable Securities, in each case to the extent not
payable by the Company pursuant to the terms of this Agreement.
5. EXPENSES OF REGISTRATION. All expenses (other than
underwriting discounts and commissions and other fees and expenses of
investment bankers and other than brokerage commissions) incurred in
connection with registrations, filings or qualifications pursuant to
Section 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees and the fees and
disbursements of counsel for the Company, shall be borne by the
Company; provided, however, that the Investors shall bear the fees and
out-of-pocket expenses of the one legal counsel selected by the
Investors pursuant to Section 3(h) hereof.
6. INDEMNIFICATION. In the event any Registrable
Securities are included in a Registration Statement under this
Agreement:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Investor who holds such Registrable
Securities, the directors, if any, of such Investor, the officers, if
any, of such Investor, each person, if any, who controls any Investor
within the meaning of the Securities Act or the Exchange Act, any
underwriter (as defined in the Securities Act) for the Investors, the
directors, if any, of such underwriter and the officers, if any, of
such underwriter, and each person, if any, who controls any such
underwriter within the meaning of the Securities Act or the Exchange
Act (each, an "Indemnified Person"), against any losses, claims,
damages, expenses or liabilities (joint or several) (collectively
"Claims") to which any of them become subject under the Securities
Act, the Exchange Act or otherwise, insofar as such Claims (or actions
or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any of the following statements,
omissions or violations in the Registration Statement, or any
post-effective amendment thereof, or any prospectus included therein:
(i) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement or any post-effective
amendment thereof or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) any untrue statement or
alleged untrue statement of a material fact contained in any
<PAGE> 35
Jerry's Famous Deli, Inc./Yucaipa Waterton Deli Investors, L.L.C.
Registration Rights Agreement August 22, 1996
Page 14
preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as
amended or supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements
made therein, in light of the circumstances under which the statements
therein were made, not misleading or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act or
any state securities law or any rule or regulation (the matters in the
foregoing clauses (i) through (iv) being, collectively, "Violations").
Subject to the restrictions set forth in Section 6 (d) with respect to
the number of legal counsel, the Company shall reimburse the Investors
and each such underwriter or controlling person, promptly as such
expenses are incurred and are due and payable, for any legal fees or
other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything
to the contrary contained herein, the indemnification agreement
contained in this Section 6(a) (I) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in
conformity with information furnished in writing to the Company by any
Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement
thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c) hereof; (II) with respect to any preliminary
prospectus shall not inure to the benefit of any such person from whom
the person asserting any such Claim purchased the Registrable
Securities that are the subject thereof (or to the benefit of any
person controlling such person) if the untrue statement or omission of
material fact contained in the preliminary prospectus was corrected in
the prospectus, as then amended or supplemented, if such prospectus
was timely made available by the Company pursuant to Section 3(c)
hereof; and (III) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent
of the Company, which consent shall not be unreasonably withheld.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Persons and
shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9.
(b) In connection with any Registration Statement in
which an Investor is participating, each such Investor agrees to
indemnify and hold harmless, to the same extent and in the same manner
set forth in Section 6(a), the Company, each of its directors, each of
its officers who
<PAGE> 36
Jerry's Famous Deli, Inc./Yucaipa Waterton Deli Investors, L.L.C.
Registration Rights Agreement August 22, 1996
Page 15
signs the Registration Statement, each person, if any, who controls
the Company within the meaning of the Securities Act or the Exchange
Act, any underwriter and any other stockholder selling securities
pursuant to the Registration Statement or any of its directors or
officers or any person who controls such stockholder or underwriter
within the meaning of the Securities Act or the Exchange Act
(collectively and together with an Indemnified Person, an "Indemnified
Party"), against any Claim to which any of them may become subject,
under the Securities Act, the Exchange Act or otherwise, insofar as
such Claim arises out of or is based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished to
the Company by such Investor expressly for use in connection with such
Registration Statement; and such Investor will promptly reimburse any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such Claim; provided, however, that the
indemnity agreement contained in this Section 6(b) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor, which consent
shall not be unreasonably withheld; provided, further, however, that
the Investor shall be liable under this Section 6(b) for only that
amount of a Claim as does not exceed the net proceeds to such Investor
as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9. Notwithstanding
anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(b) with respect to any
preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected on a timely
basis in the prospectus, as then amended or supplemented.
(c) The Company shall be entitled to receive indemnities
from underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in any distribution,
to the same extent as provided above, with respect to information such
persons so furnished in writing by such persons expressly for
inclusion in the Registration Statement.
(d) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement
of any action (including any governmental action), such Indemnified
<PAGE> 37
Jerry's Famous Deli, Inc./Yucaipa Waterton Deli Investors, L.L.C.
Registration Rights Agreement August 22, 1996
Page 16
Person or Indemnified Party shall, if a Claim in respect thereof is to
made against any indemnifying party under this Section 6, deliver to
the indemnifying party a written notice of the commencement thereof
and this indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires, jointly with any
other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying
parties; provided, however, that an Indemnified Person or Indemnified
Party shall have the right to retain its own counsel, with the fees
and expenses to be paid by the indemnifying party, if, in the
reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate
due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and other party represented by
such counsel in such proceeding. The Company shall pay for only one
separate legal counsel for the Investors; such legal counsel shall be
selected by the Investors holding a majority in interest of the
Registrable Securities. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability
to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in its
ability to defend such action. The indemnification required by this
Section 6 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as such expense,
loss, damage or liability is incurred and is due and payable.
7. CONTRIBUTION. To the extent any indemnification
provided for herein is prohibited or limited by law, the indemnifying
party agrees to make the maximum contribution with respect to any
amounts for which it would otherwise be liable under Section 6 to the
fullest extent permitted by law; provided, however, that (a) no
contribution shall be made under circumstances where the maker would
not have been liable for indemnification under the fault standards set
forth in Section 6, (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty of such fraudulent
misrepresentation and (c) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
<PAGE> 38
Jerry's Famous Deli, Inc./Yucaipa Waterton Deli Investors, L.L.C.
Registration Rights Agreement August 22, 1996
Page 17
8. REPORTS UNDER EXCHANGE ACT. With a view to
making available to the Investors the benefits of Rule 144 or any
other similar rule or regulation of the SEC that may at any time
permit the Investors to sell securities of the Company to the public
without registration, until such time as the Investors have sold all
the Registrable Securities pursuant to a Registration Statement or
Rule 144, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the
Exchange Act; and
(c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement
by the Company that it has complied with the reporting requirements of
Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the
most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company and (iii) such other
information as may be reasonably requested to permit the Investors to
sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to
have the Company register Registrable Securities pursuant to this
Agreement shall be automatically assigned by the Investors to
transferees or assignees of all or any portion of such securities only
if: (a) the Company is, within a reasonable time after such transfer
or assignment, furnished with written notice of (i) the name and
address of such transferee or assignee and (ii) the securities with
respect to which such registration rights are being transferred or
assigned, (b) immediately following such transfer or assignment the
further disposition of such securities by the transferee or assignee
is restricted under the Securities Act and applicable state securities
laws, and (c) at or before the time the Company received the written
notice contemplated by clause (a) of this sentence the transferee or
assignee agrees in writing with the Company to be bound by all of the
provisions contained herein.
10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this
Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively
or prospectively), only with the written consent of the
<PAGE> 39
Jerry's Famous Deli, Inc./Yucaipa Waterton Deli Investors, L.L.C.
Registration Rights Agreement August 22, 1996
Page 18
Company and Investors who hold a majority in interest of the
Registrable Securities. Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon each Investor
and the Company.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of
Registrable Securities whenever such person or entity owns of record
such Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more persons or
entities with respect to the same Registrable Securities, the Company
shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.
(b) Notices required or permitted to be given hereunder shall
be in writing and shall be deemed to be sufficiently given when
personally delivered or when sent by registered mail, return receipt
requested, addressed (i) if to the Company, at Jerry's Famous Deli,
Inc., 12711 Ventura Blvd., Suite 400, Studio City, CA 91604 ,
Attention: Mr. Isaac Starkman, Chairman and CEO, (ii) if to the
Initial Investor, at the address set forth under its name in the
Subscription Agreement and (iii) if to any other Investor, at such
address as such Investor shall have provided in writing to the
Company, or at such other address as each such party furnishes by
notice given in accordance with this Section 11(b), and shall be
effective, when personally delivered, upon receipt, and when so sent
by certified mail, four business days after deposit with the United
States Postal Service.
(c) Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising
such right or remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be enforced, governed by and
construed in accordance with the laws of the State of California
applicable to the agreements made and to be performed entirely within
such state. In the event that any provision of this Agreement is
invalid or unenforceable under any applicable statute or rule of law,
then such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform with
such statute or rule of law. Any provision hereof which may prove
invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision hereof.
<PAGE> 40
Jerry's Famous Deli, Inc./Yucaipa Waterton Deli Investors, L.L.C.
Registration Rights Agreement August 22, 1996
Page 19
(e) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are
no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein. This Agreement supersedes all
prior agreements and understandings among the parties hereto with
respect to the subject matter hereof.
(f) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may
require.
(h) The headings in the Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning
hereof.
<PAGE> 41
Jerry's Famous Deli, Inc./Yucaipa Waterton Deli Investors, L.L.C.
Registration Rights Agreement August 22, 1996
Page 20
(i) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same agreement. This Agreement,
once executed by a party, may be delivered to the other party hereto
by telephone line facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed by their respective officers thereunto duly
authorized as of day and year first above written.
JERRY'S FAMOUS DELI, INC.
By /s/ ISAAC STARKMAN
------------------------------
Isaac Starkman,
Chairman & CEO
YUCAIPA WATERTON DELI INVESTORS, L.L.C.
By /s/ KENNETH ABDALLA
-------------------------------
Waterton Management, L.L.C.,
Managing Member
By: Kenneth Abdalla, Managing
Member of Waterton Management
<PAGE> 1
EXHIBIT 10.2
NEITHER THIS WARRANT NOR ANY SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "SECURITIES
ACT"). THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
REGISTRATION UNDER THE SECURITIES ACT OR SUCH OFFER, SALE OR TRANSFER IS
EXEMPT FROM SUCH REGISTRATION.
COMMON STOCK PURCHASE WARRANT CERTIFICATE
Dated: August 26, 1996
Warrants
to Purchase 65,000 Shares
of Common Stock, No Par Value Per Share
JERRY'S FAMOUS DELI, INC., a California corporation (the "Company"),
hereby certifies that Yucaipa Waterton Deli Investors, L.L.C., its permissible
transferees, designees, successors and assigns (collectively, the "Holder"),
for value received, is entitled to purchase from the Company at any time
commencing on August 22, 1996, and expiring on the third anniversary of such
date, up to Sixty Five Thousand (65,000) shares (the "Shares") of the Company's
common stock, par value $0.10 per share (the "Common Stock"), at $1.00 per
share (the "Exercise Price").
1. Exercise of Warrants. Upon presentation and surrender of this
Common Stock Purchase Warrant Certificate ("Warrant Certificate" or "this
Certificate"), with the attached Purchase Form duly executed, at the principal
office of the Company at 12711 Ventura Boulevard, Suite 400, Studio City, CA
91604, together with a check payable to the Company in the amount of the
Exercise Price multiplied by the number of Shares being purchased, the Company,
or the Company's Transfer Agent as the case may be, shall deliver to the holder
hereof, certificates of Common Stock which in the aggregate represent the
number of Shares being purchased. All or less than all of the Warrants
represented by this Certificate may be exercised and, in case of the exercise
of less than all, the Company, upon surrender hereof, will deliver to the
holder a new Warrant Certificate or Certificates of like tenor and dated the
date hereof entitling said holder to purchase the number of Shares represented
by this Certificate which have not been exercised and to receive Registration
Rights with respect to such Shares.
2. Exchange and Transfer. This Certificate at any time prior to the
exercise hereof, upon presentation and surrender to the Company, may be
exchanged, alone or with other Certificates of like tenor registered in the
name of the same holder, for another Certificate or Certificates of like tenor
in the name of such holder exercisable for the aggregate number of Shares as
the Certificate or Certificates surrendered.
3. Rights and Obligations of Holders of this Certificate. (a) The
Holder of this Certificate shall not, by virtue hereof, be entitled to any
rights of a stockholder in the Company, either at law or in equity; provided,
however, that in the event any certificate
<PAGE> 2
Common Stock Purchase Warrant Certificate
Page 2
representing shares of Common Stock or other securities is issued to the holder
hereof upon exercise of some or all of the Warrants, such holder shall, for all
purposes, be deemed to have become the holder of record of such Common Stock on
the date on which this Certificate, together with a duly executed Purchase
Form, was surrendered and payment of the aggregate Exercise Price was made,
irrespective of the date of delivery of such share certificate.
(b) In case the Company shall (i) pay a dividend in Common Stock or
make a distribution in Common Stock, (ii) subdivide its outstanding Common
Stock into a greater number of shares, or (iii) combine its outstanding Common
Stock into a smaller number of shares (including a recapitalization in
connection with a consolidation or merger in which the Company is the
continuing corporation), then (x) the Exercise Price on the record date of such
division or the effective date of such action shall be adjusted by multiplying
such Exercise Price by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately before such event and the
denominator of which is the number of shares of Common Stock outstanding
immediately after such event and (y) the number of shares of Common Stock for
which this Warrant Certificate may be exercised immediately before such event
shall be adjusted by multiplying such number by a fraction, the numerator of
which is the Exercise Price immediately before such event and the denominator
of which is the Exercise Price immediately after such event.
(c) In case of any consolidation or merger of the Company with or
into another corporation (other than any consolidation or merger in which the
Company is the continuing corporation and which does not result in any
reclassification of the outstanding shares of Common Stock or the conversion of
such outstanding shares of Common Stock into shares or other stock or other
securities or property), or the sale or transfer of the property of the Company
as an entirety or substantially as an entirety, there shall be deliverable upon
exercise of the Warrant Certificate (in lieu of the number of shares of Common
Stock theretofore deliverable) the number of shares of stock or other
securities or property to which a holder of the number of shares of Common
Stock which would otherwise have been deliverable upon the exercise of this
Warrant Certificate would have been entitled upon such action if this Warrant
Certificate had been exercised immediately prior to such action.
4. Common Stock. (a) The Company covenants and agrees that all
shares of Common Stock issuable upon exercise of this Warrant Certificate will,
upon delivery, be duly and validly authorized and issued, fully-paid and
non-assessable.
(b) The Company covenants and agrees that it will at all times
reserve and keep available an authorized number of shares of its Common Stock
and other applicable securities sufficient to permit the exercise in full of
all outstanding options, warrants and rights, including the Warrants.
5. Registration Rights. In the event the Company files a
Registration Statement with the Securities and Exchange Commission for
registration of any shares of the Company's Common Stock, the Company agrees to
include the number of shares of
<PAGE> 3
Common Stock Purchase Warrant Certificate
Page 3
Common Stock represented by this Warrant Certificate in any such Registration
Statement.
6. Issuance of Certificates. As soon as possible after full or
partial exercise of this Warrant, but in any event not more than three (3)
business days, the Company, at its expense, will cause to be issued in the name
of and delivered to the holder of this Warrant, a certificate or certificates
for the number of fully paid and non-assessable shares of Common Stock to which
that holder shall be entitled on such exercise. No fractional shares will be
issued on exercise of this Warrant. If on any exercise of this Warrant a
fraction of a share results, the Company will pay the cash value of that
fractional share, calculated on the basis of the Exercise Price. Prior to
registration of the shares of Common Stock underlying this Warrant Certificate,
as provided in Section 5 hereof, all such certificates shall bear a restrictive
legend to the effect that the Shares represented by such certificate have not
been registered under the Securities Act of 1933, as amended, and the Shares
may not be sold or transferred in the absence of such registration or an
exemption therefrom, such legend to be substantially in the form of the bold
face language appearing on Page 1 of this Warrant Certificate.
7. Disposition of Warrants or Shares. The holder of this Warrant
Certificate, each transferee hereof and any holder and transferee of any
Shares, by his or its acceptance thereof, agrees that no public distribution of
Warrants or Shares will be made in violation of the provisions of the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (collectively, the "Act"). Furthermore, it shall be a condition to
the transfer of the Warrants that any transferee thereof deliver to the Company
his or its written agreement to accept and be bound by all of the terms and
conditions contained in this Warrant Certificate.
8. Notices. Except as otherwise specified herein to the contrary,
all notices, requests, demands and other communications required or desired to
be given hereunder shall only be effective if given in writing by certified or
registered mail, return receipt requested, postage prepaid, or by U. S. express
mail service or private overnight mail service (e.g. Federal Express). Any
such notice shall be deemed to have been given (a) on the business day
immediately subsequent to mailing, if sent by U. S. express mail service or
private overnight mail service, or (b) three (3) business days following the
mailing thereof, if mailed by certified or registered mail, postage prepaid,
return receipt requested, and all such notices shall be sent to the following
addresses (or to such other address or addresses as a party may have advised
the other in the manner provided in this Section 8):
If to the Company:
Mr. Isaac Starkman
Jerry's Famous Deli, Inc.
12711 Ventura Boulevard
Suite 400
Studio City, CA 91604
<PAGE> 4
Common Stock Purchase Warrant Certificate
Page 4
If to the Holder:
Kenneth J. Abdalla
Waterton Management LLC
10000 Santa Monica Blvd, 5th Flr.
(Century Park E./Prime Sports Bldg)
Los Angeles, CA 90067
9. Governing Law. This Warrant Certificate and all rights and
obligations hereunder shall be deemed to be made under and governed by the laws
of the State of California without giving effect to the conflicts of laws
provisions. The Holder hereby irrevocably consents to the venue and
jurisdiction of the State and Federal Courts located in the State of
California, County of Los Angeles.
10. Successors and Assigns. This Warrant Certificate shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns.
11. Headings. The headings of various sections of this Warrant
Certificate have been inserted for reference only and shall not be a part of
this Certificate.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or by facsimile, by one of its officers thereunto
duly authorized.
Jerry's Famous Deli, Inc.
Date: August 30, 1996 By:/s/ ISAAC STARKMAN
---------------------------------
Isaac Starkman,
Chairman and CEO
<PAGE> 5
ELECTION TO PURCHASE
To Be Executed by the Holder
in Order to Exercise the Common Stock
Purchase Warrant Certificate
The undersigned Holder hereby irrevocably elects to exercise _______
of the Warrants represented by this Common Stock Warrant Certificate, and to
purchase the shares of Common Stock issuable upon the exercise of such Warrants
and requests that certificates for securities be issued in the name of:
_________________________________________________
(Please type or print name and address)
_________________________________________________
_________________________________________________
_________________________________________________
(Social Security or tax identification number)
and delivered to _____________________________________________________________
______________________________________________________________________________
(Please type or print name and address
and, if such number of Warrants shall not be all the Warrants evidenced by this
Common Stock Warrant Certificate, that a new Common Stock Warrant Certificate
for the balance of such Warrants be registered in the name of, and delivered
to, the Holder at the address stated below.
In full payment of the purchase price with respect to the Warrants exercised
and trans-fer taxes, if any, the undersigned hereby tenders payment of
$__________ by check or money order payable in United States currency to the
order of Jerry's Famous Deli, Inc.
[HOLDER]
Dated:___________________ By:_________________________________
Name:
Title:
____________________________________
(Address)
____________________________________
____________________________________
(Social Security or tax
identification number)
<PAGE> 1
Exhibit 10.3
Jerry's Famous Deli, Inc.
12711 Ventura Boulevard, Suite 400
Studio City, California 91604
August 26, 1996
Mr. Kenneth J. Abdalla
Waterton Management, LLC
10000 Santa Monica Blvd, 5th Flr.
Los Angeles, CA 90067
Dear Ken:
This letter will confirm our understanding with respect to the purchase by
Waterton Management, L.L.C. or any of its designees ("Waterton") of Series A
Preferred Shares (the "Series A Preferred Shares"), convertible into shares of
Common Stock. The first $6 Million to be invested by Waterton (the "First
Closing") shall be invested directly by Yucaipa Waterton Deli Investors, L.L.C.
("Yucaipa").
1. The Corporation agrees that it will submit an Amended and Restated
Certificate of Designation (the "Series A Certificate") for filing with the
State of California on Monday, August 26, 1996. Such certificate shall contain
a provision that the Series A Preferred Shares shall be non-voting shares. We
agree that the First Closing shall take place as soon after the filing of the
Series A Certificate as practicable.
2. The Corporation agrees that it will prepare a Certificate of
Designation for an additional series of preferred shares (the "Series B
Certificate") which will contain a provision that the Series B Preferred Shares
shall have the maximum voting rights as Nasdaq shall advise is consistent with
its rules and policies, as requested in the letter to Nasdaq attached hereto as
Exhibit 1. If the proposed issuance of the Series B Preferred Shares is not
disapproved by Nasdaq, as set forth in the attached letter, and is accepted and
filed with the Secretary of State of California, the holders of the Series A
Preferred Shares shall be entitled to exchange, for no additional
consideration, their shares for an equivalent number of Series B Preferred
Shares based upon the par value thereof. Each of the Corporation and The
Starkman Family Trust agrees to use its best efforts to obtain the approval of
Nasdaq with respect to the issuance of the Series B Preferred Shares and,
following the receipt of such approval, to have such certificate filed with the
Secretary of State of California. If accepted by Nasdaq and the Secretary of
State of California, then Waterton shall be entitled to purchase shares of
Series B Preferred Shares in lieu of the purchase of the Series A Preferred
Shares as contemplated pursuant
<PAGE> 2
to the options granted to it in that certain letter agreement dated August 22,
1996 between the Corporation and Waterton.
Please confirm your understanding of and agreement to the above terms by
signing below and returning a signed copy of this letter to me.
Sincerely yours,
Isaac Starkman
President
Jerry's Famous Deli, Inc.
The Starkman Family Trust
By:
---------------------
Isaac Starkman
Trustee
Agreed and Accepted:
Waterton Management, L.L.C.
By:
------------------------------
Kenneth J. Abdalla
Managing Member
Date:
<PAGE> 3
Jerry's Famous Deli, Inc.
12711 Ventura Boulevard, Suite 400
Studio City, California 91604
August 22, 1996
Mr. Kenneth J. Abdalla
Waterton Management, LLC
10000 Santa Monica Blvd, 5th Flr.
Los Angeles, CA 90067
Dear Ken:
This letter will confirm our understanding with respect to the purchase by
Waterton Management, L.L.C. or any of its designees ("Waterton") of Series A
Preferred Shares (the "Preferred Shares"), convertible into shares of Common
Stock. The first $6 Million to be invested by Waterton (the "First Closing")
shall be invested directly by Yucaipa Waterton Deli Investors, L.L.C.
("Yucaipa").
1. Either (i) the Corporation shall have received a waiver from NASDAQ
with respect to the issuance of more than 20% of the Corporation's outstanding
Common Stock or (ii) as soon as practicable after the Closing of the first
purchase of Preferred Shares (the "Closing"), the Corporation agrees to hold a
shareholders' meeting or other equivalent voting procedure to obtain
shareholder approval for issuance of an additional $13 Million of Preferred
Shares, for an aggregate of $19 Million of Preferred Shares. Within fifteen
(15) business days of the Corporation's receipt of such waiver or shareholder
approval, Waterton shall have the option to purchase an additional $6 million
of Preferred Shares (and Warrants to purchase 65,000 shares of Common Stock),
but in no event shall Waterton have less than thirty (30) calendar days from
the Closing to exercise such option. In addition, within thirty (30) calendar
days after receipt of the approvals set forth in items (i) or (ii) above, but
in no event less than ninety (90) calendar days of the Closing, Waterton shall
have the option to purchase an additional $7 million of Preferred Shares of the
Corporation (and Warrants to purchase 75,833 shares of Common Stock).
"Warrants" shall mean Warrants issued pursuant to the Common Stock Purchase
Warrant Certificate substantially in the form attached as Exhibit B to the
Subscription Agreement for the First Closing. With respect to either option,
Waterton shall have not less than ten (10) calendar days to complete the
funding for such purchase, which shall be completed with documents which are
substantially similar to those used for the First Closing. Further, you agree
to cooperate with the Corporation with respect to filings required under the
Blue Sky laws and agree to give the Corporation notice of the states in which
the members of the purchasing entity will be located as early as practicable
prior to the respective closing. All of such time
<PAGE> 4
periods shall be extended for the purpose of a Hart-Scott-Rodino filing if
necessary, and shall be extended until five (5) business days following the
approval of such filing or shall terminate upon the denial thereof. The
closing of either option set forth in this Paragraph 1 shall be completed with
documents which are substantially the same as the documents used in connection
with the First Closing.
2. In the event that Waterton exercises its options, as set forth in
Paragraph 1 above, and purchases an aggregate of $19 Million of Preferred
Shares as set forth herein, if the Corporation determines to offer common
shares, or securities convertible into common shares, to any party in a private
placement of the Corporation's securities, the Corporation agrees to offer
Waterton, on a right of first refusal basis, the right to purchase any such
securities during the period ending two (2) years following the Closing. The
Corporation shall offer such securities to Waterton on the same terms as
offered to any other potential purchaser, and Waterton shall have five (5)
business days after receipt of written notice to Waterton of the offer during
which it may elect to purchase such securities. If Waterton does not elect to
purchase such securities, Waterton shall be deemed to have rejected the offer
and the Corporation shall be free to complete the transaction with another
party or parties on the same terms offered to Waterton.
3. We agree that within five (5) business days from notice from you that
Kenneth Abdalla desires to become a member of the Corporation's Board of
Directors, you shall be so nominated, which shall be approved within ten (10)
business days of such nomination. In addition, in the event that Waterton
exercises its options, as set forth in Paragraph 1 above, and purchases an
aggregate of $19 Million of Preferred Shares as set forth herein, Waterton
shall be entitled to designate one additional person to sit on the Board of
Directors of the Corporation. Approval of this action by the Corporation's
Board of Directors shall be obtained by the Corporation within ten (10)
business days of the closing of the final $7 Million purchase of Preferred
Shares.
4. In the event that Waterton exercises its options, as set forth in
Paragraph 1 above, and purchases an aggregate of $19 Million of Preferred
Shares as set forth herein, the Corporation agrees that, for a period of three
(3) years from the Closing, it will not consummate a merger of the Corporation
with another entity or the sale of all or substantially all of the
Corporation's assets without the majority vote of the shareholders of the
Corporation approving such action.
5. The Common Stock issuable upon exercise of the Preferred Shares and
the Warrants purchased pursuant to the options granted to Waterton herein and
any other shares of Common Stock then owned by Waterton shall be subject to
registration rights substantially similar to those included in the Registration
Rights Agreement between the Corporation and Yucaipa Waterton Deli Investors,
L.L.C. dated the date hereof in connection with the purchase of the first $6
Million of Preferred Shares.
6. Waterton agrees that the investor for any portion of the Preferred
Shares purchased by it will be an entity which is an affiliate of the Yucaipa
Companies and will
<PAGE> 5
be controlled by Ron Burkle and/or Kenneth Abdalla, provided that nothing set
forth herein shall restrict the transferability of such shares or warrants in
accordance with applicable law and the applicable agreements relating thereto.
7. The Corporation represents that there are no known material
liabilities of the Corporation, except as may be disclosed in the Corporation's
filings with the Securities and Exchange Commission, or otherwise disclosed to
Waterton.
8. Yucaipa is a limited liability company formed for the purpose of
investing in the Preferred Shares. Each of the equity owners of Yucaipa are
individuals, each of whom are residents of the State of California, and each of
them are "accredited investors" within the meaning of Regulation D under the
Securities Act of 1933.
Please confirm your understanding of and agreement to the above terms by
signing below and returning a signed copy of this letter to me.
Sincerely yours,
Isaac Starkman
President
Jerry's Famous Deli, Inc.
Agreed and Accepted:
Waterton Management, L.L.C.
By:
-------------------------------
Kenneth J. Abdalla
Managing Member
Date:
<PAGE> 1
Exhibit 10.4
The Starkman Family Trust
12711 Ventura Boulevard, Suite 400
Studio City, California 91604
August 22, 1996
Mr. Kenneth J. Abdalla
Waterton Management, LLC
10000 Santa Monica Blvd, 5th Flr.
Los Angeles, CA 90067
Dear Ken:
This letter will confirm our understanding with respect to the purchase by
Waterton Management, L.L.C. or any of its designees ("Waterton") of Series A
Preferred Shares (the "Preferred Shares") of Jerry's Famous Deli, Inc. (the
"Corporation"), convertible into shares of Common Stock (the "Common Stock") of
the Corporation. The first $6 Million to be invested by Waterton shall be
invested directly by Yucaipa Waterton Deli Investors, L.L.C.
1. The undersigned agrees to vote all of the shares of Common Stock of
the Corporation owned by it in favor of a shareholder resolution approving the
issuance of a maximum of $19 Million of Preferred Shares of the Corporation,
which will be included in the proposals to be voted on at a shareholders'
meeting or equivalent voting procedure to be held as soon as practicable after
the closing of the purchase of $6 Million of Preferred Shares by Waterton (the
"Closing"), or to cooperate as may be necessary in obtaining a waiver from
NASDAQ with respect to the issuance of more than 20% of the Corporation's
outstanding Common Stock. The Corporation has been orally advised by the NASD
that such a waiver has been approved.
2. Following your purchase of an aggregate of $19 Million of Preferred
Shares, in the event the undersigned elects to sell more than One Million
shares of Common Stock of the Corporation, the undersigned agrees to offer
Waterton, on a right of first refusal basis, the right to purchase all or any
portion of such securities exceeding One Million shares during the period
ending two (2) years following the Closing; provided, however, that if another
purchaser agrees to purchase all of the shares of Common Stock which the
undersigned is offering to sell, then your right of first refusal would only
permit you to purchase the entire amount (and not less than the entire amount)
of the securities offered. We shall offer such securities to Waterton on the
same terms as offered to any other potential purchaser, and Waterton shall have
five (5) business days during which it may elect to purchase such securities.
If Waterton does not elect to purchase such securities, Waterton shall be
deemed to have rejected the offer and we shall be free to complete the
transaction with another party or parties on the same terms offered to
Waterton. The right of first refusal set forth herein shall not apply to gifts
of stock to family members nor to transfers for estate planning purposes
pursuant to which members of the Starkman family remain in control or continue
to have beneficial
<PAGE> 2
ownership over such shares, and upon any such transfer, the transferee will
execute an equivalent right of first refusal.
In the event the Corporation contemplates an underwritten public offering of
shares, in connection with which the undersigned may be a selling shareholder,
in lieu of the right of first refusal set forth in the prior paragraph, we
agree to offer you the right to purchase such shares prior to signing a letter
of intent for such offering, at a price of Ten Percent (10%) below the then
market price of the Common Stock (market price shall be defined as the average
closing price of the Common Stock over the five trading day period prior to the
date of such offer).
Please confirm your understanding of and agreement to the above terms by
signing and dating this letter, below, and returning a signed copy to me.
Sincerely yours,
The Starkman Family Trust
By: /s/ ISAAC STARKMAN
--------------------------
Isaac Starkman,
Trustee
Agreed and Accepted:
Waterton Management, L.L.C.
By: /s/ KENNETH J. ABDALLA
--------------------------
Kenneth J. Abdalla,
Managing Member
Date:
