<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 2)*
JERRY'S FAMOUS DELI, INC.
-----------------------------
(Name of Issuer)
Common Stock, no par value
-----------------------------
(Title of Class of Securities)
476 523 105
-----------------------------
(CUSIP Number)
Kenneth J. Abdalla
Waterton Management, LLC
10000 Santa Monica Boulevard
Los Angeles, California 90067
(310) 789-7200
-----------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
January 14, 1997
-----------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is subject of this Schedule 13D, and is filing this
statement because of Rule 13d-1(b)(3) or (4), check the following box:
[ ]
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
(Continued on following pages)
The information required in the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
(Page 1 of 11 Pages)
<PAGE> 2
SCHEDULE 13D
CUSIP No. 476 523 105 PAGE 2 OF 11
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
JERRY'S INVESTORS, LLC
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ----------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 1,000,000 SHARES (2,000,000 MAXIMUM)
OWNED BY ----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON ----------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
1,000,000 SHARES (2,000,000 MAXIMUM)
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,000,000 SHARES (2,000,000 MAXIMUM)
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.4% (15.5% MAXIMUM)
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
OO
- --------------------------------------------------------------------------------
<PAGE> 3
SCHEDULE 13D
CUSIP No. 476 523 105 PAGE 3 OF 11
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
YUCAIPA WATERTON DELI INVESTORS, LLC
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ----------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 1,248,478.7 SHARES (1,915,145.3 MAXIMUM)
OWNED BY ----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON ----------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
1,248,478.7 SHARES (1,915,145.3 MAXIMUM)
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,248,478.7 SHARES (1,915,145.3 MAXIMUM)
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
10.3% (14.9% MAXIMUM)
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
OO
- --------------------------------------------------------------------------------
<PAGE> 4
SCHEDULE 13D
CUSIP No. 476 523 105 PAGE 4 OF 11
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
WATERTON MANAGEMENT, LLC
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
OO
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ----------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 3,372,499.7 SHARES (6,539,166.3 MAXIMUM)
OWNED BY ----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON ----------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
3,372,499.7 SHARES (6,539,166.3 MAXIMUM)
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,372,499.7 SHARES (6,539,166.3 MAXIMUM)
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
23.6% (37.5% MAXIMUM)
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
OO
- --------------------------------------------------------------------------------
<PAGE> 5
SCHEDULE 13D
CUSIP No. 476 523 105 PAGE 5 OF 11
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
KENNETH J. ABDALLA
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
OO
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
CALIFORNIA
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ----------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 4,620,978.3 SHARES (8,454,311.7 SHARES MAXIMUM)
OWNED BY ----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON ----------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
4,620,978.3 SHARES (8,454,311.7 SHARES MAXIMUM)
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,620,978.3 SHARES (8,454,311.7 MAXIMUM)
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
29.8% (43.7% MAXIMUM)
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
IN
- --------------------------------------------------------------------------------
<PAGE> 6
ITEM 1 SECURITY AND ISSUER.
This Amendment No. 2 (this "Amendment") to the Schedule 13D (the "Initial
Filing") is being filed to reflect, among other things, the conversion of
Series A Preferred Stock (non-voting) held by the Reporting Persons into shares
of Series B Preferred Stock (voting) of Jerry's Famous Deli, Inc., a California
corporation (the "Company"), which has its principal executive offices at 12711
Ventura Blvd., Suite 4000, Studio City, California 91604. This Amendment also
reflects that one of the Reporting Persons has converted shares of the
Company's Series A Preferred Stock into shares of the Company's Common Stock,
no par value ("Common Stock") and that Kenneth J. Abdalla, a Reporting Person,
has been elected to a seat on the Board of Directors of the Company.
ITEM 2 IDENTITY AND BACKGROUND.
(a) This Amendment is being filed jointly by the Reporting
Persons, which are Yucaipa Waterton Deli Investors, LLC, a Delaware limited
liability company ("Deli Investors"), Waterton Management, LLC, a Delaware
limited liability company ("Waterton"), Jerry's Investors, LLC, a Delaware
limited liability company ("Jerry's Investors") and Kenneth J. Abdalla, an
individual.
(b) The address of the principal business and principal office of
each of the Reporting Persons is 10000 Santa Monica Boulevard, Fifth Floor, Los
Angeles, California 90067.
(c) - (e) There has been no change in the information set forth under
Items 2(c) through 2(e) in Amendment No. 1 to the Initial Filing, dated
November 4, 1996 ("Amendment No. 1").
ITEM 3 SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
There has been no change in the information set forth under Item 3 in
Amendment No. 1.
ITEM 4 PURPOSE OF TRANSACTION.
There has been no change in the information set forth under Item 4 in the
Initial Filing.
ITEM 5 INTEREST IN SECURITIES OF THE ISSUER.
(a) Deli Investors owns 4,000 shares of Series B Preferred Stock
(the "Series B Preferred Stock"), 516,813 shares of Common Stock, and warrants
(the "Warrants") to purchase 65,000 shares of Common Stock of the Company.
Jerry's Investors owns 6,000 shares of Series B Preferred Stock, and Waterton
owns 65,000 Warrants. In addition, pursuant to letter agreements dated August
22, 1996 and November 4, 1996 (the "Option Letters"), Waterton has been granted
options to acquire (i) an additional 7,000 shares of Series B Preferred Stock
and Warrants to acquire an additional 75,833 shares of Common Stock for an
aggregate consideration of $7,000,100 and (ii) an additional 6,000 shares of
Series B Preferred Stock and Warrants to acquire an additional 65,000 shares of
Common Stock for an aggregate consideration of $6,000,100. The periods in
which such options are exercisable have been extended pursuant to the terms of
the Option Letters because of a delay in the receipt of certain required
approvals (see Item 6 of the Initial Filing).
(Page 6 of 11 Pages)
<PAGE> 7
The Series B Preferred Stock is convertible at the option of the holder
into shares of Common Stock, and will automatically convert into Common Stock
on August 30, 1999. Each share of Series B Preferred Stock will convert into a
number of shares of Common Stock to be determined by dividing its Designated
Value (equal to $1,000 per share plus accrued and unpaid dividends) by the
product of (i) the average closing bid price for the Common Stock on the
preceding five trading days (the "Closing Price") and (ii) .83; provided
however, that in no event shall the product of such two items be less that
$3.00 or greater that $6.00 for purposes of any conversion. The Warrants are
exercisable prior to August 22, 1999 at the price of $1.00 per share (subject
to customary anti-dilution adjustments).
Pursuant to such conversion and exercise provisions, (i) Deli Investors
may be deemed to beneficially own a minimum of 1,248,478.7 shares (10.3%) of
the Company's Common Stock and, if the product of the Closing Price and .83 is
$3.00 or less at the time of conversion, a maximum of 1,915,145.3 shares
(14.9%) of the Company's Common Stock and (ii) Jerry's Investors may be deemed
to beneficially own a minimum of 1,000,000 shares (8.4%) of the Company's
Common Stock and, if the product of the Closing Price and .83 is $3.00 or less
at the time of conversion, a maximum of 2,000,000 shares (15.5%) of the
Company's Common Stock.
As a result of Waterton's status as the manager of Jerry's Investors,
Waterton has the ability to vote and dispose its holdings, and consequently may
be deemed to beneficially own all of the Common Stock issuable upon exercise of
the Series B Preferred Stock beneficially owned by Jerry's Investors.
Pursuant to the conversion and exercise provisions (as described above) of the
Series B Preferred Stock and Warrants, Waterton may be deemed to beneficially
own a minimum of 3,372,499.7 shares (23.6%) of the Company's Common Stock, and,
if the product of the Closing Price and .83 is $3.00 or less at the time of
conversion, a maximum of 6,539,166.3 shares (37.5%) of the Company's Common
Stock.
As a result of Mr. Abdalla's status as the manager of Deli Investors and
Waterton, and Waterton's status as the manager of Jerry's Investors, Mr.
Abdalla has the ability to vote and dispose the holdings of all three entities,
and consequently may be deemed to beneficially own all of the Common Stock
issuable upon exercise of the Series B Preferred Stock and Warrants
beneficially owned by Deli Investors, Waterton and Jerry's Investors. This
would represent beneficial ownership of a minimum of 4,620,978.3 shares (29.8%)
of the Company's Common Stock and, if the product of the Closing Price and .83
is $3.00 or less at the time of conversion, a maximum of 8,454,311.7 shares
(43.7%) of the Company's Common Stock.
(b) As a result of Waterton's status as the manager of Jerry's
Investors, Waterton may be deemed to have shared dispositive and voting power
with respect to the minimum of 1,000,000 shares (8.4%) and the maximum of
2,000,000 shares (15.5%) of the Company's Common Stock which may be deemed to
be beneficially owned by Jerry's Investors. As a result of Mr. Abdalla's
status as the manager of Deli Investors and Waterton, and Waterton's status as
the manager of Jerry's Investors, Mr. Abdalla may be deemed to have shared
dispositive and voting power with respect to the minimum of 1,248,478.7 shares
(10.3%) and the maximum of 1,915,145.3 shares (14.9%) of the Company's Common
Stock which may be deemed to be beneficially owned by Deli Investors, the
minimum of 1,000,000 shares (8.4%) and the maximum of 2,000,000 shares (15.5%)
of the Company's Common Stock which may be deemed to be beneficially owned by
Jerry's Investors, and the minimum of 3,372,499.7 shares (23.6%) and the
maximum of 6,539,166.3 shares (37.5%) of the Company's Common Stock which may
be deemed to be beneficially owned by Waterton.
(c) In a series of transactions between December 6, 1996 and
December 10, 1996, pursuant to the terms of the Second Amended and Restated
Certificate of Determination of Rights and Preferences
(Page 7 of 11 Pages)
<PAGE> 8
of Series A Preferred Stock of the Company, Deli Investors converted 2,000
shares of Series A Preferred Stock of the Company (the "Series A Preferred
Stock") to 516,812 shares of Common Stock at an average price of $3.8699 per
share.
On December 31, 1996, Kenneth J. Abdalla, a Reporting Person, was elected
to the Company's Board of Directors pursuant to the terms of a letter agreement
dated August 22, 1996 (the "First Option Letter").
On January 14, 1997, all of the shares of Series A Preferred Stock held by
the Reporting Persons were converted, pursuant to a letter agreement between
the Company and Waterton, dated August 22, 1996 (the "Preferred Stock Voting
Letter"), to an equal number of shares of Series B Preferred Stock. The Series
B Preferred Stock is identical to the Series A Preferred Stock except that the
Series B Preferred Stock has the right to vote on all matters which are
presented to holders of Common Stock for a vote.
(d) Except as stated in this Item 5, to the best knowledge of the
Reporting Persons, no other person has the right to receive or the power to
direct the receipt of dividends from, or the proceeds from the sale of, the
shares of Common Stock owned by the Reporting Persons.
(e) Not applicable.
ITEM 6 CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
Except for the following, there has been no change in the information set
forth under Item 6 in Amendment No. 1.
In a series of transactions between December 6, 1996 and December 10,
1996, Deli Investors converted 2000 shares of Series A Preferred Stock to
516,812 shares of Common Stock. On December 31, 1996, Kenneth J. Abdalla, a
Reporting Person, was elected to the Company's Board of Directors pursuant to
the terms of the First Option Letter.
On January 14, 1997, all of the shares of Series A Preferred Stock held by
the Reporting Persons were converted, pursuant to the Preferred Stock Voting
Letter, to an equal number of shares of Series B Preferred Stock. The rights,
preferences and privileges of the Series B Preferred Stock are set forth in the
Certificate of Determination of Rights and Preferences of Series B Preferred
Stock (the "Series B Certificate"). The Series B Certificate has been filed as
an exhibit to this Amendment and is hereby incorporated by reference.
The terms of the Reporting Persons' investment in the Company, including
the agreements applicable thereto, are described in detail in the Initial
Filing and Amendment No. 1, and reference is made to such documents for further
information applicable to the transactions discussed in this Amendment.
Except as set forth herein, none of the Reporting Persons has any
contracts, arrangements, understandings or relationships (legal or otherwise)
with any person with respect to any securities of the Company, including but
not limited to any contracts, arrangements, understandings or relationships
concerning the transfer or voting of such securities, finder's fees, joint
ventures, loan or option
(Page 8 of 11 Pages)
<PAGE> 9
arrangements, puts or calls, guarantees of profits, division of profits or
losses, or the giving or withholding of proxies.
ITEM 7 MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1. Joint Filing Agreement dated as of February 19,
1997.
Exhibit 2. Certificate of Determination of Rights and
Preferences of Series B Preferred Stock of Jerry's
Famous Deli, as filed with the Secretary of State of
California.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: February 19, 1997 Yucaipa Waterton Deli Investors, LLC
Waterton Management, LLC
By: /s/ KENNETH J. ABDALLA
------------------------------------
Name: Kenneth J. Abdalla
Title: Manager
Dated: February 19, 1997 Jerry's Investors, LLC
By: Waterton Management, LLC
Title: Manager
By: /s/ KENNETH J. ABDALLA
----------------------------------
Name: Kenneth J. Abdalla
Title: Manager
Dated: February 19, 1997 Kenneth J. Abdalla
By: /s/ KENNETH J. ABDALLA
-------------------------------
(Page 9 of 11 Pages)
<PAGE> 10
EXHIBIT INDEX
Exhibit 1. Joint Filing Agreement dated as of February 19, 1997.
Exhibit 2. Certificate of Determination of Rights and Preferences of
Series B Preferred Stock of Jerry's Famous Deli, as filed with
the Secretary of State of California.
(Page 10 of 11 Pages)
<PAGE> 1
EXHIBIT 1
JOINT FILING AGREEMENT
In accordance with Rule 13d-1(f) promulgated under the
Securities Exchange Act of 1934, as amended, the undersigned hereby agree to
the joint filing with all other Reporting Persons (as such term is defined in
the Amendment No. 2 to Schedule 13D referred to below) on behalf of each of
them of a statement on Amendment No. 2 to Schedule 13D with respect to the
common stock, no par value (the "Common Stock"), of Jerry's Famous Deli, Inc.,
a California corporation, and that this Agreement may be included as an Exhibit
to such joint filing.
IN WITNESS WHEREOF, the undersigned hereby execute this
Agreement as of February 19, 1997.
Dated: February 19, 1997 Yucaipa Waterton Deli Investors, LLC
Waterton Management, LLC
By: /s/ KENNETH J. ABDALLA
-----------------------------------
Name: Kenneth J. Abdalla
Title: Manager
Dated: February 19, 1997 Jerry's Investors, LLC
By: Waterton Management, LLC
Title: Manager
By: /s/ KENNETH J. ABDALLA
----------------------------------
Name: Kenneth J. Abdalla
Title: Manager
Dated: February 19, 1997 Kenneth J. Abdalla
By: /s/ KENNETH J. ABDALLA
---------------------------------
(Page 11 of 11 Pages)
<PAGE> 1
EXHIBIT 2
CERTIFICATE OF DETERMINATION OF RIGHTS AND
PREFERENCES OF SERIES B 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 authorized the
issuance of up to Nineteen Thousand (19,000) shares, $1,000 par value
per share, of Preferred Stock designated as "Series A Preferred
Stock", pursuant to a Second Amended and Restated Certificate of
Determination of Rights of Series A Preferred Stock; and
Whereas, the Board of Directors has determined to authorize an
additional series of Preferred Stock designated as "Series B Preferred
Stock," having the
<PAGE> 2
rights, preferences, restrictions set forth in this Certificate of
Determination;
Now, Therefore, Be It Resolved, that the Board of Directors
does hereby provide for the issue of a series of Preferred Stock of
the Corporation consisting of Twenty-Five Thousand (25,000) shares of
$1,000 par value per share, designated as "Series B Preferred Stock",
and does hereby fix the rights, privileges, preferences, restrictions
and other matters relating to the Series B 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, for each share of
Series B Preferred, the third anniversary of the date of issuance thereof or of
any other security which may be exchanged for such share of Series B 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.
-2-
<PAGE> 3
(h) "DESIGNATED VALUE" shall mean the sum of One Thousand Dollars
($1,000) per share of Series B Preferred Stock plus all accrued and unpaid
dividends thereon.
(i) "LIQUIDATION PREFERENCE" shall mean, for each share of Series
B 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 B Preferred Stock of the
Corporation owned by any holder divided by the total number of shares of Series
B Preferred Stock outstanding on such date.
(k) "SERIES B PREFERRED STOCK" shall mean the Series B 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.
SECTION 2. Dividend Rights.
(a) DIVIDEND PAYMENT. The holders of the Series B
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 March 31, 1997, in cash
or, at the option of the Corporation, in shares of Common Stock as set forth
herein. Dividends on the Series B Preferred Stock shall be payable out of any
funds legally available therefor, prior and in preference to any dividend
payment with respect to Series A Preferred Stock or Common Stock. Dividends on
the Series B 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 March and June of 1997,
pay accrued dividends on the Series B 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 B Preferred Stock
-3-
<PAGE> 4
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 B 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 B Preferred Stock. Any fractional shares which
otherwise result from a dividend on the Series B 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.
The Series B Preferred Stock shall have the right to vote upon all
matters presented for the vote of the Common Stock, with each share of Series B
Preferred Stock having a vote equal to 109 shares of Common Stock.
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 B 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 B 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 Series A Preferred Stock or 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
B Preferred Stock shall be insufficient to permit the payment to those persons
of the full Liquidation Preference for all shares of Series B 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 B Preferred. So long as shares of Series B 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
B Preferred Stock, although such liquidation preference may be equal to the
Series B Preferred Stock.
-4-
<PAGE> 5
(b) SERIES B 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 B Preferred
Stock, as provided in Section 4(a) hereof, all remaining assets of the
Corporation shall be distributed first ratably among the holders of the Series
A Preferred Stock up to the liquidation preference for such stock, and then
among the holders of the Common Stock of the Corporation, and the holders of
shares of the Series B Preferred Stock shall have no right to participate
therein.
SECTION 5. CONVERSION.
(a) CONVERSION BY HOLDERS. Each share of Series B Preferred Stock
shall be convertible at the option of the holder thereof into such number of
shares of Common Stock as is determined under the Conversion Ratio beginning on
the date which is ninety (90) days following the issuance thereof or of any
other security which may be exchanged for such share of Series B Preferred
Stock.
(b) AUTOMATIC CONVERSION. Any share of Series B Preferred Stock
not converted into Common Stock prior to its Automatic Conversion Date shall,
on that date, automatically be converted into such number of shares of Common
Stock as is determined under the Conversion Ratio.
(c) CONVERSION RATIO. Upon a conversion of Preferred Shares in
accordance with Section 5(a) or (b) hereof, each share of Series B 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 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 B Preferred
Stock and any fractional shares which otherwise result from conversion by a
holder of all his shares of Series B 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.
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(e) ADJUSTMENT FOR COMBINATION OR CONSOLIDATIONS OF
COMMON STOCK. If the Corporation at any time or from time to time after the
initial date of issuance of the first share of Series B 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 B Preferred Stock, then the existing Conversion Ratio
for the Series B 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 B 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 B 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 B 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
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 B Preferred Stock
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will be recomputed accordingly as of the close of business on such record date
and thereafter the Conversion Ratio for the Series B 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 one or more
shares of Series B Preferred Stock may exercise the conversion right on or
after ninety days following the issuance of such shares of Series B Preferred
Stock (or the issuance of any security exchanged for such shares of Series B
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 B 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 B 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 B
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 B 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 B 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 B 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 B 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 B 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 B Preferred Stock, in addition to such other
remedies as may be available to the holders of Series B 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 B Preferred Stock is
Twenty-Five Thousand (25,000), none of which has been issued.
4. No vote of the shareholders was required.
Dated: _________ __, 1996
______________________________
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 __________, __________, on _______ __, 1996.
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----------------------------
Isaac Starkman,
President and Secretary
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