-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UU/AOljVbguZ/qCDpsC2Slkoi+hCAc1tU9wZVYEivKHAIy7X558XUmB9fmsA1IC9 HrDuGRiDofsCR8SCM4/SPQ== 0000950150-97-000213.txt : 19970223 0000950150-97-000213.hdr.sgml : 19970223 ACCESSION NUMBER: 0000950150-97-000213 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19970221 SROS: NONE GROUP MEMBERS: JERRY'S INVESTORS, LLC GROUP MEMBERS: KENNETH J. ABDALLA GROUP MEMBERS: WATERTON MANAGEMENT LLC GROUP MEMBERS: YUCAIPA WATERTON DELI INVESTORS, LLC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: JERRYS FAMOUS DELI INC CENTRAL INDEX KEY: 0000948308 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 953302338 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-46847 FILM NUMBER: 97541392 BUSINESS ADDRESS: STREET 1: 12711 VENTURA BLVD STREET 2: STE 400 CITY: STUDIO CITY STATE: CA ZIP: 91604 BUSINESS PHONE: 8187668311 MAIL ADDRESS: STREET 1: 12711 VENTURA BLVD STREET 2: STE 400 CITY: STUDIO CITY STATE: CA ZIP: 91604 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: WATERTON MANAGEMENT LLC CENTRAL INDEX KEY: 0001027397 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 10000 SANTA MONICA BLVD CITY: LOS ANGELES STATE: CA ZIP: 90067 MAIL ADDRESS: STREET 1: 10000 SANTA MONICA BLVD CITY: LOS ANGELES STATE: CA ZIP: 90067 SC 13D/A 1 AMENDMENT NO. 2 TO SCHEDULE 13D 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) 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 - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- 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) 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) 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) 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) 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) EX-99.1 2 JOINT FILING AGREEMENT 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) EX-99.2 3 CERTIFICATE OF DETERMINATION OF RIGHTS & PREFERENC 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 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- 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- 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- 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. -5- 6 (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 -6- 7 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 -7- 8 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. -8- 9 ---------------------------- Isaac Starkman, President and Secretary -9- -----END PRIVACY-ENHANCED MESSAGE-----