<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- - ---- EXCHANGE ACT OF 1934
For the quarterly period ended April 2, 1994
-------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- - ---- SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 0-9904
------
ARDEN GROUP, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-3163136
- - ------------------------------------ ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2020 South Central Avenue, Compton, California 90220
- - ---------------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 638-2842
--------------
No Change
- - -------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
the filing requirements for at least the past 90 days. Yes X No
---- ----
The number of shares outstanding of the registrant's classes of common
stock as of April 2, 1994 was:
1,269,408 of Class A common stock
343,316 of Class B common stock
This report contains a total of 18 pages.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
BALANCE SHEETS (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
April 2, January 1,
1994 1994
-------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $34,076 $39,526
Marketable securities 24,452 23,038
Notes and accounts receivable, net 7,729 9,007
Inventories 10,614 10,902
Prepaid and other 1,631 1,040
------- -------
Total current assets 78,502 83,513
Notes and contracts receivable 487 459
Property for resale or sublease, at lower
of cost or market 1,923 1,877
Property, plant and equipment, at cost less
accumulated depreciation and amortization
of $30,501 and $29,615, respectively 27,474 24,867
Other assets 1,752 1,755
------- -------
Total assets $110,138 $112,471
-------- --------
-------- --------
</TABLE>
See Notes to Financial Statements
2
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PART I. FINANCIAL INFORMATION, Continued
ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
BALANCE SHEETS (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
April 2, January 1,
1994 1994
---------- ----------
<S> <C> <C>
Current liabilities:
Accounts payable, trade $10,173 $13,221
Other current liabilities 12,998 12,242
Current portion of long-term debt 5,746 6,501
-------- ---------
Total current liabilities 28,917 31,964
Long-term debt, including obligations under
capital leases of $5,395 and $5,540, respectively 7,463 7,654
Deferred income taxes 1,473 1,926
Other liabilities 3,207 3,392
-------- ---------
Total liabilities 41,060 44,936
-------- ---------
Commitments and contingent liabilities
Stockholders' equity:
Class A common stock 402 402
Class B common stock 86 86
Capital surplus 7,571 7,571
Notes receivable from officer/director (506) (1,502)
Retained earnings 65,278 64,731
-------- ---------
72,831 71,288
Less: treasury stock, at cost 3,753 3,753
-------- ---------
Total stockholders' equity 69,078 67,535
-------- ---------
Total liabilities and stockholders' equity $110,138 $112,471
-------- ---------
-------- ---------
</TABLE>
See Notes to Financial Statements
3
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PART I. FINANCIAL INFORMATION, Continued
ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
STATEMENTS OF OPERATIONS (Unaudited)
(In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------------
April 2, April 3,
1994 1993
(restated)
----------- ----------
<S> <C> <C>
Sales $63,151 $60,261
Cost of sales 39,225 38,014
--------- ----------
Gross profit 23,926 22,247
Delivery, selling, general and administrative expenses 22,342 21,079
--------- ----------
Operating income 1,584 1,168
Interest, dividend and other income (expense), net 222 (163)
Net unrealized loss on marketable securities (893)
--------- ----------
Income from continuing operations before income taxes 913 1,005
Income tax provision 366 409
--------- ----------
Income from continuing operations (net of income taxes) 547 596
Discontinued operations:
Income from operations (net of income taxes of $321) 476
--------- ----------
Net income $547 $1,072
--------- ----------
--------- ----------
Income per common share (computed on common
shares outstanding):
Income from continuing operations $ .34 $ .37
Income from discontinued operations .29
--------- ----------
Net income .34 $ .66
--------- ----------
--------- ----------
</TABLE>
See Notes to Financial Statements
4
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PART I. FINANCIAL INFORMATION, Continued
ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
STATEMENTS OF CASH FLOWS (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------
April 2, April 3,
1994 1993
(restated)
-------- ----------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $63,672 $61,835
Cash paid to suppliers and employees (61,275) (58,445)
Interest and dividends received 693 187
Interest paid (395) (351)
Income taxes paid (19) (278)
------- -------
Net cash provided by operating activities 2,676 2,948
------- -------
Cash flows from investing activities:
Capital expenditures (3,579) (565)
Investment in marketable securities (2,307)
Proceeds from the sale of property, plant and equipment,
liquor licenses and leasehold interests 5 50
Payments received on notes from the sale of property,
plant and equipment and liquor licenses 16 1
------- -------
Net cash used in investing activities (5,865) (514)
------- -------
Cash flows from financing activities:
Payments related to sale of discontinued operations (2,314)
Transfer from Telautograph Corporation 1,319
Principal payments under capital lease obligations (263) (359)
Payment of loan from officer/director 1,000
Principal payments on long-term debt (684) (10)
------- -------
Net cash provided by (used in) financing activities (2,261) 950
------- -------
Net increase (decrease) in cash (5,450) 3,384
Cash at beginning of year 39,526 20,954
------- -------
Cash at end of quarter $34,076 $24,338
------- -------
------- -------
</TABLE>
See Notes to Financial Statements
5
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PART I. FINANCIAL INFORMATION, Continued
ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
STATEMENTS OF CASH FLOWS, Continued (Unaudited)
(In Thousands)
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------
April 2, April 3,
1994 1993
(restated)
--------- ---------
<S> <C> <C>
Net income $547 $1,072
Adjustments to reconcile net income to net cash
provided by operating activities:
Income from discontinued operations (476)
Depreciation and amortization 988 1,027
Unrealized loss on marketable securities 893
Provision for losses on accounts and notes receivable 44 49
Net gain from the sale of property, plant and equipment,
liquor licenses and early lease terminations (2) (23)
Interest differential on note payable 6
Notes receivable from officer/director (4) (3)
Change in assets and liabilities net of effects from noncash
investing and financing activities:
(Increase) decrease in assets:
Notes and accounts receivable 1,191 1,684
Inventories 288 1,112
Prepaid expenses (519) (520)
Other assets (62) (32)
Increase (decrease) in liabilities:
Accounts payable and other current liabilities (50) 316
Deferred income taxes (453) (1,213)
Other liabilities (185) (51)
------- ------
Net cash provided by operating activities $2,676 $2,948
------- ------
------- ------
</TABLE>
See Notes to Financial Statements
6
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PART I. FINANCIAL INFORMATION, Continued
ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
These financial statements reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results of operations for the
periods presented.
1. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements of Arden Group, Inc. (the "Company")
include the accounts of the Company and its direct and indirect
subsidiaries except for Telautograph Corporation, an indirect wholly-owned
subsidiary of the Company, ("Telautograph") which was carried at equity in
net assets of discontinued operations through September 17, 1993 when the
communications business was sold. The consolidated financial statements
have been retroactively restated to present GPS Pool Supply, Inc. ("GPS")
as a continuing operation because the previously announced spin-off of the
communication equipment business of Telautograph and all the capital stock
of GPS, a wholly-owned subsidiary of Telautograph, to the stockholders of
Arden was abandoned. Intercompany balances and transactions are eliminated.
2. SUBSEQUENT EVENT:
As a result of an arbitration hearing, in April 1994 the Company was
awarded $1,750,000 for parts inventory which was purchased by Danka
Industries, Inc. as part of the sale of the Company's communication
equipment business in 1993. The valuation of such inventory had been in
dispute. No amount with respect to this inventory had been included in the
1993 gain from the sale of such business. Expenses related to the
arbitration will be netted against the award. Additionally, there is an
arbitration with regard to certain items on the closing balance sheet of
the communication equipment business which are being disputed. The Company
does not believe adjustments resulting from the second arbitration, if
any, will have a material adverse impact on its financial position.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FIRST QUARTER ANALYSIS
During the first quarter of 1994, the Company had net income of $547,000
compared to net income of $1,072,000 during the first quarter of 1993. Pretax
income from continuing
7
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PART I. FINANCIAL INFORMATION, Continued
operations was $913,000 compared to pretax income of $1,005,000 for the first
quarter of 1993.
During the first quarter of 1994, the Company's operating income from its
Gelson's and Mayfair Markets operations was $1,796,000 compared to operating
income of $1,523,000 during the first quarter of 1993. Sales from the Company's
12 supermarkets in the greater Los Angeles area were $60,813,000 in the first
quarter of 1994, an increase of 5.0% from the first quarter of 1993, when sales
were $57,939,000. The strong comparative sales increase is partially
attributable to the timing of Easter and Passover observances which fell near
the end of the first quarter in 1994 but in the second quarter in 1993.
The Company's gross profit from market operations as a percentage of sales was
38.6% in the first quarter of 1994 compared to 37.6% in the same period of 1993.
Union wage and benefit cost increases was one of the factors which contributed
to an overall increase in product pricing.
Delivery, selling, general and administrative ("DSG&A") expenses for market
operations were $21,669,000 in the first quarter of 1994 compared to $20,291,000
in the first quarter of 1993. Expenses as a percentage of sales were 35.6% in
the first quarter of 1994, compared to 35.0% in the same period of 1993. The
Company recorded a charge to operations of $1,300,000 in the first quarter of
1994 to cover the estimated uninsured portion of losses related to the January
17, 1994 earthquake centered in Northridge, California. This increase in DSG&A
expense was partially offset by contractual credits taken against health and
welfare payments due the retail clerks and meat cutters unions of approximately
$1,100,000.
The swimming pool chemical processing and distribution operations, conducted by
GPS, posted an operating loss of $212,000 in first quarter 1994 compared to an
operating loss of $355,000 for the same period in 1993. GPS's sales for the
first quarter of 1994 were $2,338,000, virtually unchanged from $2,322,000 in
the first quarter of 1993.
GPS's gross profit as a percentage of sales was 19.7% for the first quarter of
1994 compared to 18.6% for the same period last year, principally because of
productivity improvements in its processing operations and lower costs on raw
materials used in producing liquid chlorine.
DSG&A expense was $673,000 (28.8% of sales) for the first quarter of 1994,
compared to $788,000 (33.9% of sales) for the same period of 1993. This was
primarily due to a reduction in marketing expense and administrative staff
expense at its headquarters office.
The Company's interest and dividend income was $676,000 in the first quarter of
1994 compared to $224,000 for the same period in 1993. This increase in
interest income was primarily the result of an increased level of short-term
investments and marketable securities.
8
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PART I. FINANCIAL INFORMATION, Continued
In the first quarter of 1994, the market value of the Company's holdings in
marketable securities declined. The Statement of Financial Accounting Standards
No. 115, (Accounting for Certain Investments in Debt and Equity Securities),
which became effective for fiscal years beginning after December 16, 1993,
requires that unrealized holding gains and losses for certain marketable
securities shall be included in the determination of net income. As a result,
unrealized losses of $893,000 related to marketable securities were included in
the determination of the first quarter 1994 net income.
CAPITAL EXPENDITURES/LIQUIDITY
In the first quarter of 1994, the Company used approximately $3,000,000 of cash
on hand to purchase the properties upon which two existing Mayfair markets are
located. Additionally, the Company paid off at maturity the $634,000 balance of
the mortgage on its headquarters facility in Compton.
There have been no significant changes in the Company's capital expenditures
plan and no material changes in the utilization of the Company's lines of
credit.
9
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PART II. OTHER INFORMATION
ITEM 1. THROUGH 5.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(1) Exhibits:
10.7 Amendment to Employment Agreement dated April 27, 1994 by and
between Arden Group, Inc., Arden-Mayfair, Inc., AMG Holdings, Inc. and
Gelson's Markets and Bernard Briskin.
10.8 Modification and Fourth Extension Agreement dated as of January 1,
1994 regarding promissory notes held by the Registrant between Arden
Group, Inc. and Bernard Briskin.
(b) Reports on Form 8-K:
None
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 thereunto duly authorized.
ARDEN GROUP, INC.
-----------------------------------------
Registrant
Date May 16, 1994
------------------- ERNEST T. KLINGER
-----------------------------------------
Ernest T. Klinger
Vice President Finance and Administration
and Chief Financial Officer
(Principal Financial Officer and
Authorized Signatory)
10
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EXHIBIT 10.7
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (the "Amendment") is made and
entered into on April 27, 1994 by and between Arden Group, Inc., a Delaware
corporation ("Arden Group"), Arden-Mayfair, Inc., a Delaware corporation and a
wholly-owned subsidiary of Arden Group ("Arden-Mayfair"), AMG Holdings, Inc.,
formerly known as Telautograph Corporation, a Virginia corporation and a wholly-
owned subsidiary of Arden-Mayfair ("AMG"), Gelson's Markets, a California
corporation and a wholly-owned subsidiary of Arden-Mayfair ("Gelson's")(Arden
Group, Arden-Mayfair, AMG and Gelson's are herein sometimes referred to
collectively as the "Companies" and individually as a "Company"), and Bernard
Briskin ("Employee"), with reference to the following facts:
A. The parties hereto are parties to that certain Employment Agreement
dated as of May 13, 1988 (the "Agreement").
B. Pursuant to Section 13 of the Agreement, the Boards of Directors of
the Companies have examined the terms of the Agreement, the duties and
performance of Employee and the future needs of the Companies and have made a
good faith determination that the terms of employment thereunder should be
revised. Accordingly, the parties desire to amend the Agreement, effective
January 1, 1994, to make certain changes to the Agreement, including an increase
in the base salary and Bonus payable to Employee and an extension of the term
thereof.
NOW, THEREFORE, for and in consideration of the promises, covenants and
agreements hereinafter set forth, the parties hereto agree as follows:
1. The name "Telautograph" is hereby changed to "AMG" wherever it appears
in the Agreement.
2. The first sentence of Section 2 of the Agreement is hereby amended in
its entirety to read as follows:
"The Companies agree to and hereby do employ Employee, and Employee agrees
to and hereby does enter the employ of the Companies, as president and
chief executive officer of Arden Group and Arden-Mayfair, and as chief
executive officer of AMG and Gelson's; in addition, Employee shall serve as
Chairman of the Board of Directors of Arden Group, commencing upon the
earlier to occur of (a) the date upon which there shall be a vacancy in
such office, or (b) January 1, 1995."
3. The first sentence of Section 3 of the Agreement is hereby amended in
its entirety to read as follows:
"The initial term of this Agreement, which commenced at 12:00 A.M. on
January 3, 1988 and was originally scheduled to expire at 12:00 A.M. on
January 1, 1995, is hereby
1
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extended to 12:00 A.M. on January 1, 2001, subject to termination or
extension as hereinafter provided."
The remainder of Section 3 shall remain in full force and effect, in accordance
with its terms, and all references therein and in the rest of the Agreement to
the expiration of the initial term shall mean 12:00 A.M. on January 1, 2001.
4. Section 5 of the Agreement is hereby amended in its entirety to read
as follows:
"5. COMPENSATION.
"(a) All compensation payable to Employee hereunder shall be paid to
Employee by Arden Group, with such inter-company adjustments in respect of
such payments as the Companies deem appropriate. Arden Group shall be
primarily liable for the payment of all compensation payable to Employee
hereunder, and Arden-Mayfair, AMG and Gelson's shall be liable to Employee
for the payment of any such compensation only in the event of non-payment
thereof by Arden Group.
"(b) Commencing January 1, 1994, but as to the Bonus for 1995 and
thereafter contingent upon the satisfaction of the requirements in
Section 5(c) below, for all services to be rendered by Employee hereunder,
Employee shall be paid an annual base salary (the "Base Salary"), payable
in equal installments no less frequently than twice monthly, as provided in
subsection (1) below, and incentive compensation consisting of a cash bonus
(the "Bonus") for each complete or partial fiscal year of Arden Group
during Employee's employment hereunder, as provided in subsection (2)
below.
"(1) Employee's Base Salary for the period beginning on
January 1, 1994 and ending on December 31, 1994 shall be $440,000.
Employee's Base Salary shall be adjusted effective as of January 1, 1995
and effective as of each January 1 thereafter (the "Adjustment Date")
during the term of this Agreement by the amount of the increase, if any, in
the Consumer Price Index for All Urban Wage Earners and Clerical Workers,
Los Angeles-Anaheim-Riverside Metropolitan Area (1982-84 = 100) published
by the Bureau of Labor Statistics of the United States Department of Labor
(the "Index"), calculated in accordance with this subsection (1); provided,
however, that on each January 1 the Base Salary shall be adjusted for one
hundred percent (100%) of any increase in the Index up to three percent
(3%) and for fifty percent (50%) of any increase in the Index in excess of
three percent (3%) up to five percent (5%), but there shall be no
adjustment for any increase in the Index in excess of five percent (5%)
(such adjustments for the increase in the Index are hereinafter referred to
as the "Allowable Adjustments"). The amount of the increase in the Index
shall be calculated by dividing the Index for the month of
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October immediately preceding the applicable Adjustment Date (the
"Comparison Index") by the Index for the October of the immediately
preceding calendar year (the "Base Index"). No carryover of any increase
in the Index of more than five percent (5%) shall be permitted.
"For example, the adjustment to the Base Salary on January 1,
1995 shall be determined as follows. First, calculate the increase in the
Index by dividing the Index for October 1994 by the Index for October 1993.
By way of illustration only, if the Index in effect for October 1994 is
115.5 and the Index in effect for October 1993 was 110, the increase in the
Index would be 115.5/110 = 5%. Next, multiply the Base Salary for 1994 by
the Allowable Adjustments for the increase in the Index, and add this
amount to the Base Salary for 1994 to arrive at the Base Salary on January
1, 1995. Continuing the foregoing illustration, the Base Salary beginning
on January 1, 1995 would be $440,000 + (3% x 440,000) + (50% x 2% x
440,000), or $457,600. If the increase in the Index had been 6% instead of
5%, the Base Salary beginning on January 1, 1995 would also be $457,600,
since there is no adjustment for any increase in the Index in excess of 5%.
The adjustment to the Base Salary on January 1, 1996 would be determined in
a similar manner, with the adjustment being made to the Base Salary for
1995.
"In no event shall the Base Salary on any January 1 be less than
the amount of the Base Salary during the preceding twelve-month period.
"In the event that publication of the Index is changed or
discontinued, the parties shall select a replacement index published by a
governmental agency. In the event that the references or techniques
employed in the calculation of the Index shall be modified and such
modification would have resulted in a different figure for the Base Index
to be used to calculate the increase in the Index, the parties agree that
the Base Index shall be appropriately adjusted and that the Index, as
modified, shall be used as provided hereunder.
"(2) Commencing January 1, 1994, the Bonus in respect of any
fiscal year shall be an amount equal to the Applicable Percentage (as
hereinafter defined) of the Pre-Tax Profits (as hereinafter defined) for
such fiscal year. "Pre-Tax Profits" for a particular fiscal year shall be
the amount shown on the audited Consolidated Statement of Operations of
Arden Group for such fiscal year as "Income Before Income Taxes and
Extraordinary Items," adjusted so as to exclude any charge, accrual or
deduction for any Bonus paid or payable to Employee. With respect to each
fiscal year, the Applicable Percentage shall be as follows: with respect
to the first $2,000,000 of Pre-Tax Profits for the applicable fiscal year,
the Applicable Percentage shall be
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two and five-tenths percent (2.5%); with respect to all Pre-Tax Profits in
excess of $2,000,000 for the applicable fiscal year, the Applicable
Percentage shall be three and five-tenths percent (3.5%).
"No later than fifteen (15) days after the close of each fiscal
year of Arden Group, a good faith estimate of the Bonus which will be
payable for said fiscal year shall be made and there shall be advanced to
Employee an amount equal to seventy five percent (75%) of said estimate.
All such sums so advanced for any fiscal year shall be credited against the
Bonus for such fiscal year, and the amount of the Bonus in excess of such
amount so advanced shall be paid to Employee at the conclusion of the audit
for such fiscal year. If the amount so advanced to Employee exceeds the
amount of the Bonus to which he is entitled for such fiscal year, such
excess shall be returned within thirty (30) days after Employee receives a
written demand therefor.
"(c) It is the parties intention that the provisions of subsection
5(b)(2) of this Agreement, which set forth the formula for the annual Bonus
payable to Employee, shall constitute "other performance-based
compensation" within the meaning of Section 162(m)(4)(C) of the Internal
Revenue Code of 1986, as amended (the "Code") and "qualified performance-
based compensation" within the meaning of Proposed Treasury Regulation
1.162-27(e). Payment of the Bonus to Employee for 1995 and thereafter is
contingent upon (i) approval by the shareholders of Arden Group of the
material terms of the Bonus formula in accordance with the requirements of
Proposed Treasury Regulation 1.162-27(e)(4), and (ii) prior to payment of
the Bonus with respect to each fiscal year, the Compensation Committee of
Arden Group shall certify in writing in accordance with the requirement of
Proposed Treasury Regulation 1.162-27(e)(5) that the performance goals
were in fact satisfied, i.e., the Pre-Tax Profits with respect to such
fiscal year were in fact achieved and that the other material terms of the
Bonus formula were in fact satisfied. Arden Group agrees to timely place
before the shareholders clause (i) (by asking the shareholders of Arden
Group to approve the payment of all bonuses prior to April 1, 1995) and to
timely seek the certifications required pursuant to clause (ii). In the
event that Proposed Treasury Regulation 1.162-27(e) is amended, superseded
or replaced, the payment of the Bonus with respect to each fiscal year
shall, if required by then applicable law or regulation (taking into
account any grandfather provisions) be subject to compliance with the
applicable requirements of any future Treasury Regulations, whether
proposed, temporary or final, with respect to "other performance-based
compensation" within the meaning of Code Section 162(m)(4)(C), in lieu of
the foregoing provisions of this subsection 5(c), and Arden Group agrees to
use its best efforts to comply with all such requirements. If in any year
after 1994 the conditions for paying a Bonus to
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Employee as set forth in this subsection (c) are not satisfied, Employee
may terminate the Agreement upon six (6) months' prior written notice to
the Companies."
6. Section 6 is hereby amended to add the following at the end of said
section:
"In addition, the Company shall reimburse Employee (as a working condition
fringe benefit) for attorneys fees incurred by him in connection with the
negotiation and drafting of the Amendment, up to a maximum reimbursement of
twenty thousand dollars ($20,000)."
7. Clause (3) and clause (4) (other than the reference to the $16,257
payment due on February 15, 1994) of Section 10(a) are hereby deleted.
Clause (3) of Section 10(b) is hereby deleted. Clause (c) of Section 11 is
hereby deleted.
8. Section 11 is hereby amended to add the following at the end of said
section:
"In addition, if Employee's employment is terminated because of death,
permanent disability or without cause during the initial term of this
Agreement, as extended by the Amendment, or during any extended term of
this Agreement, then upon such termination Arden Group shall forgive any
and all amounts of principal and accrued interest outstanding under (a)
that certain Note Secured by Deed of Trust dated April 2, 1979 in the
original principal amount of $212,500, executed by Employee and payable to
Arden Group, as amended, and under (b) that certain Promissory Note Secured
by Deed of Trust dated July 9, 1980 in the original principal amount of
$303,750, executed by Employee and payable to Arden Group, as amended."
9. The sentence in Section 12 reading, "The percentage of Pre-Tax Profits
payable to Employee pursuant to Section 5(b) hereof shall remain equal to two
and one-half percent (2 1/2%) of said Pre-Tax Profits" is hereby deleted. The
following sentence shall be added at the end of Section 12: "For the purpose of
calculating the Bonus at the end of any fiscal quarter, the first $2,000,000 of
Pre-Tax Profits shall be pro rated, and the Applicable Percentage shall be
3 1/2% of Pre-Tax Profits above such pro rated amount."
10. Section 13 is hereby amended in its entirety to read as follows:
"13. GOOD FAITH REEVALUATION OF COMPENSATION. The parties agree
that, during the 1997 fiscal year of Arden Group, the Compensation
Committee of Arden Group and Employee shall meet to discuss in good
faith whether, based on the services being performed by Employee
hereunder and the needs of the Companies, there should be an
adjustment to the Base Salary and/or
5
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Bonus structure payable to him pursuant to Section 5 hereunder;
provided, however, that the parties acknowledge and agree that the
Companies shall not have any legal obligation to make such an
adjustment."
11. The effective date of this Amendment shall be January 1, 1994.
12. Except as expressly modified and amended by this Amendment, the
Agreement shall remain in full force and effect in accordance with its terms.
IN WITNESS WHEREOF, the parties have executed this Amendment effective the
date first written above.
ARDEN GROUP, INC.
By: Ernest Klinger
------------------------------
Title: Vice President
---------------------------
ARDEN-MAYFAIR, INC.
By: Ernest Klinger
------------------------------
Title: Vice President
---------------------------
AMG HOLDINGS, INC.
By: Ernest Klinger
------------------------------
Title: Secretary-Treasurer
---------------------------
GELSON'S MARKETS
By: Ernest Klinger
------------------------------
Title: Secretary-Treasurer
---------------------------
Bernard Briskin
---------------------------------
Bernard Briskin
6
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EXHIBIT 10.7
MODIFICATION AND FOURTH EXTENSION AGREEMENT
This Modification and Fourth Extension Agreement (the "Agreement") is made
and entered into as of January 1, 1994 by and among Arden Group, Inc., a
Delaware corporation ("Arden Group"), Bernard Briskin ("Mr. Briskin") and Judith
Briskin, his wife ("Mrs. Briskin"), with reference to the following facts:
A. Arden Group is the holder of a promissory note dated April 2, 1979, in
the original principal amount of $212,500, executed by Mr. Briskin in favor of
Arden Group (the "1979 Note"), and a second promissory note, dated July 9, 1980,
in the original principal amount of $303,750, executed by Mr. Briskin in favor
of Arden Group (the "1980 Note"). The 1979 Note and the 1980 Note, as amended
by an Extension Agreement dated as of January 4, 1981, by and among Arden Group,
Mr. Briskin and Mrs. Briskin, and by an Extension Agreement made and entered
into as of January 1, 1984 by and among Arden Group, Mr. Briskin and Mrs.
Briskin, and as amended by a Third Extension Agreement made and entered into as
of May 13, 1988 by and among Arden Group, Mr. Briskin and Mrs. Briskin, are
hereinafter collectively referred to as the "Notes."
B. Each of the Notes is secured by an Amended Loan And Stock Pledge
Agreement dated August 24, 1993 among Mr. Briskin and Arden Group (the "Security
Agreement").
C. Concurrently with the execution and delivery of this Agreement, Arden
Group and certain of its subsidiaries and Mr. Briskin are entering into an
Amendment to Employment Agreement which amends the terms of his Employment
Agreement dated as of May 13, 1988. In consideration of Mr. Briskin's entering
into said Amendment to Employment Agreement, Arden Group has agreed to extend
and modify the terms of each of the Notes.
NOW, THEREFORE, for and in consideration of the promises and covenants and
agreements hereinafter set forth, the parties agree as follows:
1. Commencing January 1, 1994, (a) the interest rate on each of the Notes
shall be six percent (6%) per annum, and (b) all accrued and unpaid interest on
each Note shall be payable annually on or before December 31 of each year.
2. Principal on the 1979 Note shall be paid in annual installments of
$30,357.14 commencing on December 31, 1994 and continuing each December 31
thereafter until December 31, 2000, at which time the entire unpaid principal
balance of the 1979 Note, together with all accrued and unpaid interest, shall
be due and payable.
3. Principal on the 1980 Note shall be paid in annual installments of
$43,392.86 commencing on December 31, 1994 and
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continuing each December 31 thereafter until December 31, 2000, at which time
the entire unpaid principal balance of the 1980 Note, together with all accrued
and unpaid interest, shall be due and payable.
4. The execution of this Agreement and the extension of the maturity date
of each of the Notes pursuant hereto shall be endorsed on the face of each of
the Notes.
5. Except as expressly modified by this Agreement, the Notes and the
Security Agreement shall remain in full force and effect in accordance with
their respective terms.
IN WITNESS WHEREOF, the parties have executed this Extension and
Modification Agreement effective the date first set forth above.
ARDEN GROUP, INC.
By: Ernest Klinger
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Title: Vice President
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Bernard Briskin
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Bernard Briskin
Judith Briskin
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Judith Briskin
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