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EXHIBIT 10.3
JERRY'S FAMOUS DELI, INC.
00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx Xxxx, Xxxxxxxxxx 00000
October 31, 1996
Xx. Xxxxxxx X. Xxxxxxx
Waterton Management, L.L.C.
00000 Xxxxx Xxxxxx Xxxxxxxxx, 0xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Dear Xxx:
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 convertible into shares of Common Stock of Jerry's
Famous Deli, Inc. (the "Company"). The Company has previously agreed with
Waterton that, upon the completion of the Nasdaq waiver and Xxxx-Xxxxx-Xxxxxx
process the Company will issue a new class of Series B Preferred Shares with
the same terms as the Series A except that the Series B will have voting rights
equal to 109 shares of Common Stock for each preferred share. Waterton will
have the right to convert all Series A Preferred Shares into Series B Preferred
Shares.
You have advised us that there are certain concerns about problems
under Section 16 (b) of the Securities Act of 1933, as amended (the "Act") in
the circumstance where the Series B Preferred Shares would convert into common
stock at a percentage discount to the market with the price being between $3
and $6 per share, as adjusted for stock splits and similar events pursuant to
the Certificate of Determination (the "Price Range"). We have agreed upon the
following solution in consideration of Waterton exercising on the next tranche
of $6,000,000 by November 5, 1996 and the next tranche of $7,000,000 within 30
days thereafter, in both cases conditioned upon completion of mutually
satisfactory documentation substantially the same as used in respect of the
first $6,000,000 investment. If, in the reasonable opinion of your counsel,
the conversion of Series B Preferred Shares as it applies within the Price
Range would result in a deemed purchase of Common Stock on the conversion date
at a price less than the current market value of the Common Stock at the time
of conversion under Section 16(b) (or successor provisions) of the Securities
Act of 1933, as amended (the "Act"), the Company will in good faith proceed to
take all reasonable actions to obtain all necessary approvals for the Company
to agree as follows. Notwithstanding the terms of the Certificate of
Determination of Rights and Preferences of Series B Preferred Shares, if the
market value of Common Stock on the automatic conversion date of the Series B
Preferred Shares is within the Price Range, in lieu of a like dollar amount of
stock at the full market price used to calculate the conversion, the Company
will pay Waterton, if Waterton so requests, in cash an amount equal to 17% of
the market value of the Common Stock otherwise issuable upon such conversion,
which cash payment may be made up to 90 days from the
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Xx. Xxxxxxx X. Xxxxxxx
October 31, 996
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conversion date, and, to the extent so delayed, will be paid with interest at a
10% annualized rate based upon a 365 day year.
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,
/s/ Xxxxx Xxxxxxxx
Xxxxx Xxxxxxxx
President
Jerry's Famous Deli, Inc.
Agreed and Accepted:
Waterton Management, L.L.C.
By: /s/ Xxxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxxx
Managing Member
Date: 11/7/96
