ARDEN GROUP INC, SC 13E4, 1997-07-17

ARDEN GROUP INC
SC 13E4, 1997-07-17
GROCERY STORES

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 13E-4

Issuer Tender Offer Statement

(Pursuant to Section 13(e)(1)
of the Securities Exchange Act of 1934)

ARDEN GROUP, INC.
--------------------------------------------------
(Name of Issuer)

ARDEN GROUP, INC.
--------------------------------------------------
(Name of Person(s) Filing Statement)

Class A Common Stock, par value $.25 per share
--------------------------------------------------
(Title of Class of Securities)

039762 10 9
--------------------------------------------------
(CUSIP Number of Class of Securities)

Ernest T. Klinger
Chief Financial Officer
Arden Group, Inc.
2020 South Central Avenue
Compton, California 90220
(310) 638-2842

with a copy to:

Irwin G. Barnet, Esq.
Sanders, Barnet, Goldman, Simons & Mosk,
A Professional Corporation
1901 Avenue of the Stars, Suite 850
Los Angeles, California 90067
(310) 553-8011
--------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications
on Behalf of the Person(s) Filing Statement)

July 17, 1997
--------------------------------------------------
(Date Tender Offer First Published, Sent
or Given to Security Holders)

Calculation of Filing Fee
- --------------------------------------------------------------------------------
Transaction Valuation* Amount of Filing Fee
$16,250,000 $3,250.00
- --------------------------------------------------------------------------------

*Assumes purchase of 250,000 shares at $65.00 per share.

[ ] Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

Amount Previously Paid: Not applicable
-----------------------------------------
Form or Registration No.: Not applicable
-----------------------------------------
Filing Party: Not applicable
-----------------------------------------
Date Filed: Not applicable
-----------------------------------------

<PAGE>

Preliminary Note: Unless otherwise specified, all references in this
Issuer Tender Offer Statement to material incorporated by reference are to the
Offering Statement dated July 17, 1997 (the "Offering Statement") attached
hereto as Exhibit (a)(1).

ITEM 1. SECURITY AND ISSUER.

(a) The name of the issuer is Arden Group, Inc., a Delaware corporation
(the "Company"). The Company's principal executive office is located at 2020
South Central Avenue, Compton, California 90220.

(b) The Company is offering to purchase up to 250,000 shares of the issued
and outstanding shares of the Class A Common Stock, par value $.25 per share, of
the Company for cash at a rate of $65.00 per share (the "Offer"). If more than
250,000 shares of the Class A Common Stock are tendered, then the Company will
acquire 250,000 shares tendered on a pro rata basis from each tendering
stockholder (with adjustments to avoid purchases of fractional shares) according
to the number of shares of Class A Common Stock tendered by each tendering
stockholder. The Offer is not conditional upon any minimum number of shares
being tendered. As of the date hereof, there are 766,753 shares of the Class A
Common Stock issued and outstanding. Although the Company has been advised that
Bernard Briskin, Chairman of the Board, President and Chief Executive Officer of
the Company, will not participate in the Offer, the Company does not know
whether any of the other officers, directors or affiliates of the Company (other
than the Company's Stock Bonus Plan) will tender shares in the Offer. It is
expected that City National Bank, as Trustee of the Company's Stock Bonus Plan,
will tender shares in the Offer. See "THE OFFER" incorporated herein by
reference.

(c) The principal market in which the Class A Common Stock is traded is
the NASDAQ National Market System. The range of the high and low sales prices
for the Class A Common Stock for each quarterly period during the last two
fiscal years ended December 28, 1996 and the current fiscal year through July
11, 1997, as reported by NASDAQ, is set forth in the Offering Statement under
the heading "PRICE RANGE OF COMMON STOCK," incorporated herein by reference.

(d) Not applicable.

ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.

(a) and (b) The information set forth under "THE OFFER - Funding of
Tender Offer" is incorporated herein by reference.

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<PAGE>

ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.

The information set forth under "THE OFFER - Purpose and Effects of the
Offer" is incorporated herein by reference.

There are no plans or proposals which relate to or would result in any of
the events specified in (a) through (j).

ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.

None.

ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES.

None.

ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.

See "THE OFFER - Payment of Expenses" incorporated herein by reference.

ITEM 7. FINANCIAL INFORMATION.

(a) See "SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION"
incorporated herein by reference.

(b) See "SUMMARY UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION"
incorporated herein by reference.

ITEM 8. ADDITIONAL INFORMATION.

(a) None.
(b) None.
(c) None.
(d) None.
(e) The information set forth in the Offering Statement and the related
Letter of Transmittal attached hereto as Exhibit (a)(2) is incorporated herein
by reference.

ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.

3
<PAGE>

(a)(5) Form of letter to brokers, dealers, commercial banks, trust
companies and other nominees.
(a)(6) Form of letter to clients for use by brokers, dealers, commercial
banks, trust companies and other nominees.
(a)(7) Form of Tender Election Notice for Employees in the Arden Group,
Inc. Stock Bonus Plan together with form of Arden Group, Inc.
Stock Bonus Plan Tender Election Form and Notice of IRS Tax
Withholding Requirements.
(a)(8) Form of Tender and Distribution Election Notice for Former
Employees in the Arden Group, Inc. Stock Bonus Plan, together
with form of Arden Group, Inc. Stock Bonus Plan Tender Election
Form, form of Arden Group, Inc. Stock Bonus Plan Distribution
Election Form for Former Employees, Notice of IRS Tax Withholding
Requirements, form of Arden Group, Inc. Stock Bonus Plan Rollover
Election Form and form of Arden Group, Inc. Stock Bonus Plan -
California Withholding Election Statement.
(a)(9) Form of Press Release, dated July 17, 1997.
(b) Loan Agreement dated December 23, 1993, as amended by a Second
Amendment thereto dated December 20, 1995, a Third Amendment
thereto dated December 18, 1996 and a Fourth Amendment thereto
dated January 13, 1997, between Arden Group, Inc. and Union Bank
(incorporated by reference to Exhibit 4.2 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 28,
1996).
(c) None.
(d) None.
(e) None.
(f) None.
(g) Audited Consolidated Financial Statements of the Company for
the years ended December 28, 1996 and December 30, 1995
(incorporated by reference to the Company's Annual Report on Form
10-K for the fiscal year ended December 28, 1996).

SIGNATURE

After due 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: July 17, 1997 ARDEN GROUP, INC.

By: /s/ Ernest T. Klinger
-------------------------
Ernest T. Klinger,
Vice President Finance and
Administration and Chief
Financial Officer

4
<PAGE>

EXHIBIT INDEX

SCHEDULE 13E-4

EXHIBIT
NO. ITEM

(a)(1) Form of Offering Statement, dated July 17, 1997.
(a)(2) Form of Letter of Transmittal together with Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9.
(a)(3) Form of Letter to Stockholders from Bernard Briskin, Chairman of the
Board, President and Chief Executive Officer of the Company dated
July 17, 1997.
(a)(4) Registrant's Quarterly Report on Form 10-Q for the Quarter Ended March
29, 1997.
(a)(5) Form of letter to brokers, dealers, commercial banks, trust companies
and other nominees.
(a)(6) Form of letter to clients for use by brokers, dealers, commercial
banks, trust companies and other nominees.
(a)(7) Form of Tender Election Notice for Employees in the Arden Group, Inc.
Stock Bonus Plan together with form of Arden Group, Inc. Stock Bonus
Plan Tender Election Form and Notice of IRS Tax Withholding
Requirements.
(a)(8) Form of Tender and Distribution Election Notice for Former Employees
in the Arden Group, Inc. Stock Bonus Plan, together with form of Arden
Group, Inc. Stock Bonus Plan Tender Election Form, form of Arden
Group, Inc. Stock Bonus Plan Distribution Election Form for Former
Employees, Notice of IRS Tax Withholding Requirements, form of Arden
Group, Inc. Stock Bonus Plan Rollover Election Form and form of Arden
Group, Inc. Stock Bonus Plan - California Withholding Election
Statement.
(a)(9) Form of Press Release, dated July 17, 1997.
(b) Loan Agreement dated December 23, 1993, as amended by a Second
Amendment thereto dated December 20, 1995, a Third Amendment thereto
dated December 18, 1996 and a Fourth Amendment thereto dated January
13, 1997, between Arden Group, Inc. and Union Bank (incorporated by
reference to Exhibit 4.2 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 28, 1996).
(c) None.
(d) None.
(e) None.
(f) None.
(g) Audited Consolidated Financial Statements of the Company for the years
ended December 28, 1996 and December 30, 1995 (incorporated by
reference to the Company's Annual Report on Form 10-K for the fiscal
year ended December 28, 1996).

<PAGE>
OFFERING STATEMENT
ARDEN GROUP, INC.
OFFERS
TO PAY $65.00 IN CASH
FOR
EACH SHARE OF CLASS A COMMON STOCK TENDERED
UP TO A MAXIMUM OF 250,000 SHARES OF CLASS A COMMON STOCK

Arden Group, Inc. (the "Company") hereby offers to purchase, upon the terms
and conditions set forth herein and in the related Letter of Transmittal
accompanying this Offering Statement (which together constitute the "Offer"), up
to 250,000 shares of the issued and outstanding shares of the Class A Common
Stock, par value $.25 per share (the "Class A Common Stock"), of the Company for
cash at the rate of $65.00 per share. If more than 250,000 shares of Class A
Common Stock are tendered, then the Company will acquire 250,000 shares tendered
on a pro rata basis from each stockholder tendering (with adjustments to avoid
purchases of fractional shares) according to the number of shares of Class A
Common Stock tendered by each tendering stockholder. The Offer is not
conditional upon any minimum number of shares being tendered. The Company will
(subject to possible proration as discussed above) accept any and all shares of
Class A Common Stock validly tendered by and not withdrawn before the Expiration
Date (as defined herein). The Offer is subject to certain conditions. See "THE
OFFER--Conditions of the Offer" below. The Company reserves the right to extend,
amend or terminate the Offer at any time on or prior to the Expiration Date.

Tenders may be withdrawn at any time prior to the Expiration Date. See "THE
OFFER--Withdrawal Rights" below.
------------------------

THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS
WILL EXPIRE AT 12:00 MIDNIGHT,
LOCAL TIME IN NEW YORK CITY,
ON WEDNESDAY, AUGUST 13, 1997,
UNLESS THE OFFER IS EXTENDED BY THE COMPANY.
------------------------

Any stockholder desiring to tender all or any portion of such stockholder's
shares of Class A Common Stock should either (1) complete and sign the Letter of
Transmittal or a facsimile thereof in accordance with the instructions in the
Letter of Transmittal, mail or deliver it and any other required documents to
the Depositary, and deliver the certificates for shares of Class A Common Stock
to the Depositary along with the Letter of Transmittal or (2) request such
stockholder's broker, dealer, commercial bank, trust company or nominee to
effect the transaction for such stockholder. A stockholder whose shares of Class
A Common Stock are registered in the name of a broker, dealer, commercial bank,
trust company or nominee must contact such broker, dealer, commercial bank,
trust company or nominee if such stockholder desires to tender such shares of
Class A Common Stock. Any stockholder who desires to tender shares of Class A
Common Stock and whose certificates for such shares of Class A Common Stock are
not immediately available should tender such shares by following the procedures
for guaranteed delivery set forth in "THE OFFER--How To Tender" herein. The
Company's Stock Bonus Plan (the "Stock Bonus Plan") holds shares of Class A
Common Stock in accounts of participants therein. Under the terms of the Stock
Bonus Plan, a participant may instruct City National Bank, as Trustee under the
Stock Bonus Plan (the "Trustee"), to tender or not to tender shares of Class A
Common Stock allocated to the participant's account. See "THE OFFER--How To
Tender" below.
------------------------

JULY 17, 1997
------------------------

Stockholders (other than participants in the Stock Bonus Plan) wishing to
retain the shares of the Class A Common Stock presently held by them need not do
anything in response to the Offer.

NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO
ANY STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES OF THE
CLASS A COMMON STOCK. EACH STOCKHOLDER MUST MAKE HIS, HER OR ITS OWN DECISION
WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER.

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NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE
COMPANY AS TO WHETHER STOCKHOLDERS SHOULD TENDER SHARES PURSUANT TO THE OFFER.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN
OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH RECOMMENDATION AND SUCH
INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY.

TABLE OF CONTENTS

<TABLE>
<S> <C>
SUMMARY OF THE OFFER................................................................... 3
THE OFFER.............................................................................. 5
Terms of the Offer................................................................... 5
Purpose and Effects of the Offer..................................................... 5
Funding of Tender Offer.............................................................. 9
Certain Federal Income Tax Consequences.............................................. 9
Expiration and Extension of the Offer................................................ 10
Conditions of the Offer.............................................................. 10
How to Tender........................................................................ 12
Terms and Conditions of the Letter of Transmittal.................................... 14
Withdrawal Rights.................................................................... 14
Acceptance of Tenders................................................................ 15
Depositary........................................................................... 15
Solicitation of Tenders.............................................................. 15
Payment of Expenses.................................................................. 16
RECENT TRANSACTIONS IN COMMON STOCK.................................................. 16
PRICE RANGE OF COMMON STOCK.......................................................... 16
BUSINESS AND RECENT DEVELOPMENTS..................................................... 17
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION................................ 17
SUMMARY UNAUDITED CONSOLIDATED PRO FORMA
FINANCIAL INFORMATION.............................................................. 18
AVAILABLE INFORMATION................................................................ 20
MISCELLANEOUS........................................................................ 20
</TABLE>

2
<PAGE>
SUMMARY OF THE OFFER

The following is a summary of certain terms of the Offer. It is not intended
to be complete and is qualified in its entirety by the more detailed information
presented hereinafter. Capitalized terms which are not defined in this summary
are used as defined elsewhere in this Offering Statement.

<TABLE>
<S> <C>
Expiration Date................... 12:00 midnight, local time in New York City, on August
13, 1997 unless extended by the Company.
Number of Shares.................. The Offer is not conditioned upon any minimum number of
shares being tendered. The Company is offering to
acquire up to a maximum of 250,000 shares of the Class A
Common Stock. If more than 250,000 shares of Class A
Common Stock are tendered, then the Company will acquire
250,000 shares tendered on a pro rata basis (with
adjustments to avoid purchases of fractional shares)
according to the number of shares tendered by each
tendering stockholder.
Purchase Price.................... $65.00 per share of Class A Common Stock.
Conditions of the Offer........... The Company's obligation to consummate the Offer is
subject to a number of conditions as set forth below
under the heading "THE OFFER--Conditions of the Offer."
Withdrawal Rights................. Tenders may be withdrawn at any time before the
Expiration Date.
How to Tender..................... Stockholders must determine whether they wish to tender
shares of Class A Common Stock in response to the Offer,
and if so, whether they wish to tender some or all of
their shares of Class A Common Stock. Stockholders who
elect to retain their shares of Class A Common Stock
need do nothing in response to the Offer. Stockholders
electing to tender shares of Class A Common Stock must
either (i) complete and sign the accompanying Letter of
Transmittal, have their signatures guaranteed (if
required) and forward the Letter of Transmittal with the
stock certificates representing their tendered shares of
Class A Common Stock and any other required documents to
the Depositary at one of the addresses set forth in the
Letter of Transmittal or (ii) request a broker, dealer,
commercial bank, trust company or other nominee to
effect the transaction for them. Holders of Class A
Common Stock registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must
contact such institution to tender their shares.
Participants in the Stock Bonus Plan should instruct the
Trustee whether to tender shares of Class A Common Stock
allocated to the participant's account in accordance
with the materials sent to them. Questions regarding how
to tender and requests for information or additional
copies of this Offering Statement or of the Letter of
Transmittal should be directed to the Information Agent
at the address or telephone number set forth on the back
cover of this Offering Statement.
Depositary........................ Continental Stock Transfer & Trust Company, New York,
New York.
Acceptance of Tenders............. Subject to the terms and conditions of the Offer, shares
of Class A Common Stock validly tendered and not
withdrawn will
</TABLE>

3
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<TABLE>
<S> <C>
be accepted on the Expiration Date. A check in the full
amount of the cash due will be mailed by the Depositary
as soon as practicable after acceptance. Although the
Company does not presently intend to do so, if it
modifies the terms of the Offer, such modified terms
will be available with respect to all shares of Class A
Common Stock, whether or not such shares have been
tendered or accepted prior to such modification.
Tax Consequences.................. The Company believes that either recognition of gain,
loss or dividend treatment may result for federal income
tax purposes on the receipt by a stockholder of cash
pursuant to the Offer. STOCKHOLDERS SHOULD CONSULT THEIR
TAX ADVISERS FOR ADVICE CONCERNING THE PARTICULAR TAX
CONSEQUENCES TO THEM OF TENDERING SHARES OF CLASS A
COMMON STOCK UNDER THE OFFER.
</TABLE>

4
<PAGE>
THE OFFER

TERMS OF THE OFFER

Arden Group, Inc., a Delaware corporation (the "Company"), whose principal
executive office is located at 2020 South Central Avenue, Compton, California
90220, hereby offers to acquire, upon the terms and conditions set forth herein
and in the accompanying Letter of Transmittal (which together constitute the
"Offer"), up to 250,000 shares of the issued and outstanding shares of the Class
A Common Stock, par value $.25 per share ("Class A Common Stock"), of the
Company in exchange for cash at the rate of $65.00 per share. If more than
250,000 shares are tendered, then the Company shall acquire 250,000 shares
tendered on a pro rata basis (with adjustments to avoid purchases of fractional
shares) according to the number of shares of Class A Common Stock tendered by
each stockholder tendering his, her or its shares in connection with the Offer.
Stockholders of the Company may elect, entirely in their own discretion, either
not to tender any shares of Class A Common Stock in response to the Offer or to
tender some or all of their shares of the Class A Common Stock. The Offer is not
conditional upon any minimum number of shares of the Class A Common Stock being
tendered.

If proration of shares tendered pursuant to the Offer is required, because
of the difficulty in determining the number of shares validly tendered
(including shares tendered by the guaranteed delivery procedure described
below), the Company does not expect that it would be able to announce the final
proration factor or to commence payment for any shares acquired pursuant to the
Offer until approximately seven NASDAQ National Market System trading days after
the Expiration Date. Preliminary results of proration will be announced by press
release as promptly as practicable after the Expiration Date. Holders of
tendered shares may obtain such preliminary information from Beacon Hill
Partners, Inc. (the "Information Agent") and may also be able to obtain such
information from their brokers.

The Offer is subject to a number of conditions which are described below
under the heading "Conditions of the Offer."

Subject to the terms and conditions of the Offer, properly tendered shares
of Class A Common Stock will be accepted for purchase on the Expiration Date.
The term "Expiration Date" shall mean 12:00 midnight, local time in New York
City, on Wednesday, August 13, 1997, unless the Company, in its sole discretion,
shall have extended the period of time for which the Offer is open, in which
event "Expiration Date" shall mean the later date and time at which the Offer,
as so extended by the Company, shall expire. See "Expiration and Extension of
the Offer" for a description of the Company's right to extend the Offer.

The Company reserves the right to terminate the Offer upon the occurrence of
any of the conditions specified under "Conditions of the Offer" below or to
amend the Offer at any time on or prior to the Expiration Date.

As of the date of this Offering Statement, there are 766,753 shares of the
Class A Common Stock issued and outstanding. The 250,000 shares of Class A
Common Stock that the Company is offering to purchase represent approximately
32.6% of the outstanding shares of Class A Common Stock. The Class A Common
Stock is traded on the NASDAQ National Market System. See "PRICE RANGE OF COMMON
STOCK" below. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE
CLASS A COMMON STOCK.

PURPOSE AND EFFECTS OF THE OFFER

As a result of prior dispositions of businesses and normal attrition, as of
June 30, 1997, of the approximately 442 participants in the Stock Bonus Plan,
approximately 326 were former employees of the Company. As of that date, the
Stock Bonus Plan owned 208,662 shares of Class A Common Stock of which
approximately 179,362 shares were allocated to accounts of former employees,
most of whom have no existing relationship with the Company. In order to allow
these persons the opportunity to liquidate their investment in the Class A
Common Stock (subject to the proration features of the Offer), the Company is

5
<PAGE>
making the Offer and has amended the Stock Bonus Plan to allow all of the
participants therein who desire to sell shares of the Class A Common Stock
allocated to their respective account to instruct the Trustee to tender such
shares and to grant all participants who, as of June 30, 1997, were former
employees of the Company a one-time election following consummation of the Offer
to withdraw all of the cash in their respective accounts. The Offer will afford
the participants in the Stock Bonus Plan (by instructing the Trustee to tender
shares of Class A Common Stock allocated to their respective accounts) and other
stockholders of the Company the opportunity to dispose of shares of Class A
Common Stock at a predetermined price without the usual costs associated with a
market sale and without any discount which otherwise might have been incurred in
a market sale on account of the historically low volume of trading of the Class
A Common Stock in the over-the-counter market.

Each share of Class A Common Stock is entitled to one vote on all matters
which could properly be brought before a stockholder vote. The Company also has
authorized a Class B Common Stock, par value $.25 per share (the "Class B Common
Stock"), of which there are 342,246 shares issued and outstanding as of the date
of this Offering Statement, and a Serial Preferred Stock, of which no shares are
issued or outstanding. Each share of the Class B Common Stock is entitled to ten
votes per share on most matters which may be brought before the stockholders of
the Company. If at any time the number of shares of Class B Common Stock
outstanding as reflected in the Company's stock transfer books falls below 10%
of the aggregate number of the then issued and outstanding shares of the Class A
Common Stock, Class B Common Stock and the Serial Preferred Stock (if any), or
if at any time the then outstanding number of the shares of Class B Common Stock
issued in the original issuance thereof is less than 35% of the total number of
such shares originally issued, then in either such event all outstanding shares
of Class B Common Stock shall be converted, automatically and without further
action, into an equal number of shares of Class A Common Stock. After such an
automatic conversion, no further shares of Class B Common Stock may be issued,
and certificates formerly representing outstanding shares of Class B Common
Stock will be deemed to represent a like number of shares of Class A Common
Stock. Additionally, the holders of Class B Common Stock may convert
voluntarily, on a one-for-one basis, their shares into shares of the Class A
Common Stock. Class B Common Stock may be transferred only to certain permitted
transferees as specified in the Company's Restated Certificate of Incorporation.
Thus, to sell shares of the Class B Common Stock, such shares must first be
converted into Class A Common Stock.

With respect to the election of directors, the holders of Class A Common
Stock, voting separately as a class, are entitled to elect 25% of the total
number of directors and, so long as the number of shares of Class B Common Stock
is not less than 12 1/2% of the total number of outstanding shares of Class A
Common Stock and Class B Common Stock, the holders of Class B Common Stock,
voting separately as a class, are entitled to elect the remaining directors. If
the number of outstanding shares of Class B Common Stock is less than such
12 1/2%, then the holders of Class A Common Stock and Class B Common Stock,
voting together as a class (the Class B Common Stock being entitled to ten votes
per share), have the right to elect the remaining directors. Because the Offer
will result in a reduction in the number of outstanding shares of Class A Common
Stock, it is less likely following consummation of the Offer that this provision
granting the holders of Class A Common Stock additional rights to vote as to the
election of directors will become operative.

As of the date of this Offering Statement, Bernard Briskin, the Chairman of
the Board, President and Chief Executive Officer of the Company ("Mr. Briskin"),
beneficially owns 169,516 shares of the Class A Common Stock, or approximately
22.1% of the shares of Class A Common Stock outstanding on that date, of which
60,341 shares are owned by the spouse of Mr. Briskin, 24,503 shares are held in
an Individual Retirement Account for the spouse of Mr. Briskin, and 46,524
shares are held in trust (of which Mr. Briskin is a trustee) for the benefit of
Mr. Briskin, his children and his mother. Mr. Briskin disclaims any beneficial
ownership of the shares of the Class A Common Stock owned by his spouse and her
Individual Retirement Account and he shares voting and investment power with
respect to the shares held in the above-described trust. Nothing herein should
be construed as an admission that Mr. Briskin is in fact

6
<PAGE>
the beneficial owner of any of such shares. As of the date of this Offering
Statement, Mr. Briskin beneficially owns 340,624 shares of the Class B Common
Stock, representing approximately 99.5% of the shares of the Class B Common
Stock outstanding as of such date.

As of June 30, 1997, an aggregate of 442 shares of Class A Common Stock, or
less than one percent of the issued and outstanding shares of Class A Common
Stock, were beneficially owned by officers and directors of the Company other
than Mr. Briskin and, as described above, 208,662 shares of Class A Common
Stock, or approximately 27.2% of the outstanding shares of Class A Common Stock
on that date, were owned by the Trustee under the Stock Bonus Plan. Any shares
acquired from officers and directors of the Company or City National Bank, as
Trustee under the Stock Bonus Plan, pursuant to the Offer will be acquired on
the same terms and conditions as all other shares. Although the Company has been
advised that Mr. Briskin will not tender any shares pursuant to the Offer, the
Company does not know whether any of the other officers, directors or affiliates
of the Company will tender any of their shares pursuant to the Offer as
described above. As described above, the Trustee under the Stock Bonus Plan will
tender shares pursuant to the Offer in accordance with instructions from
participants which the Trustee determines are proper and not in violation of
federal pension laws. If the Trustee does not receive instructions from a
participant, the Trustee will decide whether or not to tender shares in the
participant's account.

Although the Board of Directors believes that the Offer is in the best
interests of the Company, the Board recognizes that the Offer may have
disadvantageous consequences for some stockholders. Assuming that the maximum
number of shares of the Class A Common Stock are tendered and accepted, one
effect of the Offer will be to decrease the number of issued and outstanding
shares of the Class A Common Stock, thus concentrating the voting power of the
holders of the Class A Common Stock who do not tender their shares of Class A
Common Stock. Because each share of the Class B Common Stock is entitled to ten
votes per share, such tender also will further concentrate the voting power of
the holders of the Class B Common Stock, particularly that of Mr. Briskin, in
relation to the Class A Common Stock. Because of Mr. Briskin's current holdings,
it would be difficult for a third party to acquire a majority of the voting
power of the Company without his consent. As a result of such holdings, the
Company is a less attractive target for a takeover bid or a merger proposal, and
a successful proxy contest would be extremely difficult, or impossible, even if
such actions were favored by the Board of Directors and the stockholders of the
Company other than Mr. Briskin. Accordingly, stockholders may be deprived of an
opportunity to sell their shares at a premium over prevailing market prices,
since takeover bids frequently involve purchases of stock directly from
stockholders at such a premium price. Those seeking to acquire the Company
through a business combination must consult with Mr. Briskin, as the majority
holder of Class B Common Stock, in order to negotiate the terms of such a
business combination.

After the conclusion of the Offer and assuming that more than a de minimis
number of shares of the Class A Common Stock owned by other than the Stock Bonus
Plan are tendered and accepted, there may be an adverse effect on the market
price of the remaining outstanding shares of the Class A Common Stock because
the decrease in the number of outstanding shares of the Class A Common Stock
will result in further reducing the liquidity thereof. Trading volume in the
Class A Common Stock in the over-the-counter market has been relatively small
with no transactions being reported on certain days in the National Market
System of NASDAQ. Consummation of the Offer by stockholders other than the Stock
Bonus Plan will result in a reduction in the number of shares of Class A Common
Stock in the public float which may have the effect of making it more difficult
for a holder of Class A Common Stock to dispose of any significant number of
shares of Class A Common Stock in a market sale without incurring a discount
because of the reduced liquidity of the Class A Common Stock.

If the Class B Common Stock were to be automatically converted into shares
of the Class A Common Stock because such shares of Class B Common Stock
represent less than 10% of the aggregate number of the then issued and
outstanding Class A Common Stock, Class B Common Stock and Serial Preferred
Stock, if any (as described above), the voting power of the holders of Class B
Common Stock would be severely reduced. Because the Offer may result in less
shares of the Class A Common Stock being

7
<PAGE>
outstanding, there is a decreased likelihood that the Class B Common Stock will
be converted automatically. As the Class B Common Stock may be converted
voluntarily into a like number of shares of the Class A Common Stock, the
holders thereof may so convert a portion thereof (so long as the number not
converted is 35% or more of the total number of such shares originally issued)
to sell the same or to take advantage, to the extent that shares are converted,
of dividends then being paid on, or other rights then being afforded to the
holders of, the Class A Common Stock without sacrificing their ability to
control the voting power of the Company. Any conversion (without a sale of the
converted shares) would increase the pool of shares entitled to share in any
such dividends or other rights.

Stockholders who tender their shares of Class A Common Stock for cash will
no longer have an equity interest in the Company and will not share in any
future earnings or growth of the Company, in the risks associated with achieving
any such earnings and growth or in the potential to realize greater value for
their shares of the Class A Common Stock through divestitures, strategic
acquisitions or other corporate opportunities that the Company may pursue in the
future. Other than a dividend paid in 1987 in connection with a previous issuer
tender offer, the Company has not paid dividends on the Common Stock since 1970,
and the Board of Directors has no present plans to initiate a policy of regular
or other dividends. Stockholders who do not tender their shares of Class A
Common Stock for cash will obtain a proportionate increase in their ownership
interest in the Company.

The shares of Class A Common Stock purchased for cash pursuant to the Offer
will be restored to the status of authorized but unissued shares of Class A
Common Stock. Such shares may be later issued by the Company pursuant to
resolution of the Board of Directors without further stockholder action (except
as may be required by law or the rules applicable to issuers of securities
traded on the NASDAQ Stock Market). Such shares of Class A Common Stock could be
issued without stockholder approval for, among other things, acquisitions of
other businesses, the raising of additional capital for use in the Company's
business, stock dividends and the implementation of employee benefit plans. The
Company has no current plans to use the shares of Class A Common Stock it may
acquire pursuant to the Offer or any other authorized but unissued shares of
Class A Common Stock.

Under existing accounting rules, a company cannot account for the
acquisition of a business as a "pooling of interests" if the acquiring company
or the acquired business repurchased its outstanding shares during the prior two
years. The purchase of shares of Class A Common Stock pursuant to the Offer may
prevent the use of the "pooling of interests" for certain transactions involving
the Company, were they to occur within the following two years.

The Company does not believe that there is a reasonable likelihood that the
Class A Common Stock will be deregistered under Section 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or that the Company's
obligation to file periodic reports pursuant to Section 15(d) of the Exchange
Act will be suspended, as a result of the Offer. Although the Offer will result
in a reduction in the number of shares of Class A Common Stock in the public
float and, if more than approximately 190,000 shares are purchased from
stockholders other than the Trustee under the Stock Bonus Plan (pursuant to
instructions from participants or otherwise), the result may be that the Class A
Common Stock is no longer qualified for inclusion in the NASDAQ National Market
System. The Company does not believe that the Offer will result in the Class A
Common Stock no longer being authorized to be quoted in the inter-dealer
quotation system of NASDAQ.

Although the Company does not have any current plans to acquire additional
shares of Class A Common Stock, the Company may in the future purchase shares of
Class A Common Stock (in addition to those purchased pursuant to the Offer) on
the open market, in privately negotiated transactions, through tender offers or
otherwise, in such amounts, at such prices and at such times as the Company may
determine. Rule 13e-4 under the Exchange Act generally prohibits the Company and
its affiliates from purchasing any shares of Class A Common Stock, other than
pursuant to the Offer, until at least ten business days after the Expiration
Date. The Company will not purchase any additional shares of Class A

8
<PAGE>
Common Stock until at least ten business days after the Expiration Date. Any
possible future purchases by the Company will depend on many factors, including
the market price of the shares of Class A Common Stock, the Company's business
and financial position, alternative investment opportunities available to the
Company, the results of the Offer and general economic and market conditions.
Any of these possible purchases may be on the same terms as, or on terms more or
less favorable than, those of the Offer.

STOCKHOLDERS WHO WISH TO RETAIN THEIR SHARES OF CLASS A COMMON STOCK NEED DO
NOTHING IN RESPONSE TO THE OFFER.

NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO
ANY STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES OF
CLASS A COMMON STOCK. EACH STOCKHOLDER MUST MAKE HIS, HER OR ITS OWN DECISION
WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER.

FUNDING OF TENDER OFFER

If 250,000 shares of Class A Common Stock are acquired by the Company
pursuant to the Offer, the aggregate purchase price to the Company will be
$16,250,000. The Company intends to pay approximately $9,500,000 of the
aggregate purchase price for shares of Class A Common Stock being acquired
pursuant to the Offer from and out of its general funds (out of cash and cash
equivalents and the liquidation of marketable securities). The balance of the
funds will be obtained from short term bank borrowings under the Company's
revolving line of credit which bears interest at the bank's cost of funds rate
plus .8% or at the LIBOR rate plus .8%. The Company expects to repay any short
term bank borrowings from liquidation of investments and working capital.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

Set forth below is a discussion of certain federal income tax consequences
of the acquisition by the Company of shares of the Class A Common Stock for
$65.00 in cash per share pursuant to the Offer. The discussion does not purport
to address all aspects of federal taxation that may be relevant to particular
stockholders in light of their personal investment circumstances. Furthermore,
the discussion may not be applicable to certain types of stockholders subject to
special treatment under the federal income tax laws (for example, tax-exempt
organizations and nonresident alien individuals). Stockholders are advised to
consult their own tax advisers regarding the federal, state and local income and
other tax consequences of the Offer.

No gain or loss will be recognized by a stockholder who does not tender any
shares of Class A Common Stock. The tax basis and holding period of his, her or
its existing shares of the Class A Common Stock will remain unchanged.

The federal income tax consequences to a holder of Class A Common Stock who
sells all or part of his, her or its shares for cash pursuant to the Offer will
depend upon whether or not the receipt of the cash by such stockholder will be
treated as a dividend under Section 301 of the Internal Revenue Code of 1986, as
amended (the "Code"). If the receipt of the cash payment is not treated as a
dividend, then it will be treated as a sale or exchange, and gain or loss will
be recognized in an amount equal to the difference between (i) the sum of the
cash received and (ii) the tax basis of the shares of the Class A Common Stock
tendered; such gain or loss will be capital gain or loss if the Class A Common
Stock sold constitutes a capital asset in the hands of the tendering stockholder
as of the date of the sale pursuant to the Offer. Such capital gain or loss will
be long-term capital gain or loss if such stockholder held the shares for more
than one year.

9
<PAGE>
Generally, the sale pursuant to the Offer will not be treated as a dividend
if either (i) after the consummation of the sale pursuant to the Offer the
stockholder no longer owns, directly or constructively, any shares of stock in
the Company (either Class A Common Stock or Class B Common Stock); (ii) the
ratio which the voting stock of the Company owned by the stockholder, directly
or constructively, immediately after the consummation of the sale pursuant to
the Offer bears to all of the Company's voting stock at such time is less than
80% of the ratio which such voting stock of the Company owned, directly or
constructively, by the stockholder immediately before the consummation of the
sale pursuant to the Offer bears to all of the voting stock of the Company at
such time, and the stockholder's direct or constructive ownership of the Class A
Common Stock and Class B Common Stock (determined by reference to fair market
value) after and before the consummation of the sale pursuant to the Offer also
meets such 80% requirement; or (iii) the consummation of the sale pursuant to
the Offer is "not essentially equivalent to a dividend." The test described in
(ii) above requires calculations which cannot be definitively made until after
the results of the Offer are known; and the test described in (iii) requires a
favorable determination of a factual issue. Accordingly, a stockholder can only
be certain of avoiding dividend treatment if such stockholder comes within (i)
above, which requires that the stockholder not only tender all shares owned
directly by him, her or it, but also that such stockholder is not deemed to
constructively own shares directly or constructively owned by someone else that
are not tendered. The Code sets forth a very complex set of rules pursuant to
which shares owned by one person may be deemed to be constructively owned by
another person. Each stockholder is urged to consult with his, her or its own
tax adviser to determine the extent to which such rules are applicable to his,
her or its particular circumstances.

If the sale pursuant to the Offer with respect to the tendering stockholder
is taxable as a dividend, then the stockholder will be taxed on the amount
received as ordinary income up to an amount equal to such stockholder's
allocable share of the Company's (i) accumulated earnings and profits on the
date the Offer is consummated and (ii) the earnings and profits of the Company's
current taxable year computed as of the close of the taxable year of the sale
(without diminution by reason of any distributions made during the tax year and
without regard to the amount of the current earnings and profits at the time of
the exchange). Such allocable share is determined after taking into account all
other distributions to stockholders for the year which are taxable as dividends.
If the amount received exceeds the stockholder's allocable share of the current
or accumulated earnings and profits of the Company as described above, then such
excess amount will be applied to reduce such stockholder's aggregate adjusted
tax basis in his, her or its shares of Class A Common Stock tendered. The amount
received, if any, which is in excess of both the stockholder's share of the
earnings and profits and the adjusted tax basis in his, her or its shares of the
Class A Common Stock tendered will be treated as gain from the sale or exchange
of the shares, and the character of such gain will be the same as if the sale
were not treated as a dividend.

EXPIRATION AND EXTENSION OF THE OFFER

The Offer will expire at 12:00 midnight, local time in New York City, on
August 13, 1997, unless extended by the Company. During any extension of the
Offer, all shares of Class A Common Stock previously tendered pursuant to the
Offer will remain subject to the Offer (and to the withdrawal rights specified
herein) and may be accepted for purchase by the Company. The Offer may be
extended by oral or written notice from the Company to Continental Stock
Transfer & Trust Company (the "Depositary") at any time or from time to time on
or prior to the date then fixed for the expiration of the Offer. Public
announcement of any extension of the Offer will be timely made by the Company,
but unless otherwise required by law or regulation, the Company shall not have
any obligation to communicate such public announcement other than by making it
available to the Dow Jones News Service.

CONDITIONS OF THE OFFER

Notwithstanding any other provisions of the Offer, or any extension of the
Offer, the Company will not be obligated to accept any properly tendered shares
of Class A Common Stock and may amend or

10
<PAGE>
terminate the Offer (by oral or written notice to the Depositary and by timely
public announcement communicated, unless otherwise required by applicable law or
regulation, by delivering a press release to the Dow Jones News Service) if any
material change occurs which is likely to affect the Offer or the value or
market price of the Class A Common Stock, including, but not limited to, the
following:

(a) there shall have been threatened or instituted or there shall be
pending any action or proceeding by any government or governmental,
regulatory or administrative agency or authority or tribunal or any other
person, domestic or foreign, or before any court, authority, agency or
tribunal that (i) challenges the acquisition of shares of the Class A
Common Stock pursuant to the Offer or otherwise in any manner relates to
the Offer or (ii) in the sole judgment of the Company, could materially
and adversely affect the business, condition (financial or other),
income, operations or prospects of the Company and its subsidiaries,
taken as a whole, or otherwise materially impair in any way the
contemplated future conduct of the business of the Company or any of its
subsidiaries or materially impair the Offer's contemplated benefits to
the Company;

(b) there shall have been any action threatened, pending or taken,
or approval withheld, or any statute, rule, regulation, judgment, order
or injunction threatened, proposed, sought, promulgated, enacted,
entered, amended, enforced or deemed to be applicable to the Offer or the
Company or any of its subsidiaries, by any legislative body, court,
authority, agency or tribunal which, in the Company's sole judgment,
would or might directly or indirectly (i) make the acceptance for payment
of, or payment for, some or all of the shares of the Class A Common Stock
illegal or otherwise restrict or prohibit consummation of the Offer, (ii)
delay or restrict the ability of the Company, or render the Company
unable, to accept for payment or pay for some or all of the shares of the
Class A Common Stock tendered, (iii) materially impair the contemplated
benefits of the Offer to the Company or (iv) materially affect the
business, condition (financial or other), income, operations or prospects
of the Company and its subsidiaries, taken as a whole, or otherwise
materially impair in any way the contemplated future conduct of the
business of the Company or any of its subsidiaries;

(c) there shall occur any development in any pending action or
proceeding, which, in the sole judgment of the Company, would or might
(i) have an adverse effect on the business of the Company, (ii) prohibit,
restrict or delay consummation of the Offer or (iii) impair the
contemplated benefits of the Offer;

(d) there shall occur (i) any general suspension of, or limitation
on prices for, trading in securities, whether on the New York Stock
Exchange, or the NASDAQ National Market System or in the over-the-counter
market, or any of the foregoing (ii) any significant decrease in the
market price of the Class A Common Stock, (iii) any change in the general
political, market, economic or financial conditions in the United States
or abroad that could have a material adverse effect on the Company's
business operations, prospects or ability to obtain financing generally
or the trading in the Class A Common Stock, (iv) the declaration of a
banking moratorium or any suspension of payments in respect of banks in
the United States or any limitation on, or any event which in the sole
judgment of the Company might affect, the extension of credit by lending
institutions in the United States, (v) the commencement of a war, armed
hostilities or other international calamity directly or indirectly
involving the United States or (vi) in the case of any of the foregoing
existing at the time of commencement of the Offer, in the sole judgment
of the Company, a material acceleration or worsening thereof;

(e) there shall occur any change, or any development involving a
prospective change, which has had or may have a material adverse effect
on the business of the Company or on the Offer;

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<PAGE>
(f) there shall have occurred any decline in the Standard & Poor's
Composite 500 Stock Index (916.68 at the close of business on July 11,
1997) by an amount in excess of 15% measured from the close of business
on July 11, 1997; or

(g) (i) any person, entity or "group" (as that term is used in
Section 13(d)(3) of the Exchange Act) shall have acquired, or proposed to
acquire, beneficial ownership of more than 5% of the outstanding shares
of Class A Common Stock (other than a person, entity or group which had
publicly disclosed such ownership in a Schedule 13D or 13G (or an
amendment thereto) on file with the Securities and Exchange Commission
(the "Commission") prior to July 11, 1997), or any such person, entity or
group that prior to July 11, 1997 had filed such a Schedule with the
Commission thereafter shall have acquired or shall propose to acquire,
whether through the acquisition of stock, formation of a group, the grant
of any option or right, or otherwise, beneficial ownership of additional
shares of Class A Common Stock, (ii) any new group shall have been formed
which beneficially owns more than 5% of the outstanding shares of Class A
Common Stock or (iii) any person, entity or group shall have filed a
Notification and Report Form under the Hart-Scott-Rodino Antitrust
Improvement Act of 1976, or made a public announcement reflecting an
intent to acquire the Company or any of its subsidiaries or any of their
respective assets or securities.

The foregoing conditions are for the sole benefit of the Company and may be
waived by the Company, in whole or in part, in its sole discretion. Any
determination made by the Company concerning an event described or referred to
above will be final and binding on all parties to the Offer.

HOW TO TENDER

Whether tendering shares in whole or in part pursuant to the Offer, a
stockholder (other than a participant in the Stock Bonus Plan) may tender shares
of Class A Common Stock in either of two ways: (i) by properly completing and
signing the accompanying Letter of Transmittal or a duplicate copy thereof (all
references in this Offering Statement to the Letter of Transmittal shall be
deemed to include a duplicate copy thereof) and delivering the same, together
with the certificates representing the shares of Class A Common Stock being
tendered, to the Depositary on or prior to the Expiration Date; or (ii) by
requesting a broker, dealer, bank, trust company or other nominee to effect the
transaction.

Participants in the Stock Bonus Plan (whether or not they wish to tender
shares of Class A Common Stock allocated to their respective accounts) should so
indicate by completing, executing and returning to the Trustee the tender
election form included with the notice furnished to such participants.
PARTICIPANTS IN THE STOCK BONUS PLAN MAY NOT USE THE LETTER OF TRANSMITTAL TO
TENDER SHARES OF CLASS A COMMON STOCK ALLOCATED TO THEIR RESPECTIVE ACCOUNTS.
They must use the separate tender election form included with the notice
furnished to them. Participants in the Stock Bonus Plan are urged to read such
notice, tender election form and related materials carefully.

Shares of Class A Common Stock tendered pursuant to the Offer must be
endorsed or accompanied by stock powers or written instruments of transfer in
form satisfactory to the Company duly executed by the registered owner(s). If
shares are tendered by someone other than the registered holder thereof or by a
registered holder but such holder has requested that his, her or its check
and/or certificates representing shares of Class A Common Stock not being
tendered be mailed to or issued in the name of someone other than such
registered holder, the signature(s) thereon must be guaranteed by an Eligible
Institution (as defined below) that is also a member of a Medallion Program as
recognized by The Securities Transfer Association.

THE METHOD OF DELIVERY OF THE CLASS A COMMON STOCK AND ALL OTHER DOCUMENTS
IS AT THE SOLE ELECTION AND RISK OF THE STOCKHOLDER. IF SUCH MATERIALS ARE SENT
BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE
USED, AND THAT PROPER INSURANCE BE OBTAINED.

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<PAGE>
For the convenience of stockholders whose stock certificates are not
immediately available, tenders may be made without the concurrent deposit of
stock certificates if made through a commercial bank or trust company having an
office in the United States or a firm which is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. (an "Eligible Institution"). In such cases, the Letter of
Transmittal must be received by the Depositary prior to the Expiration Date,
must contain a guarantee from an Eligible Institution that the tendered
certificates will be deposited within three business days after the date of
receipt of the Letter of Transmittal by the Depositary and, if possible, should
list the serial numbers of the tendered certificates. If a stockholder desires
to accept the Offer and time will not permit his, her or its Letter of
Transmittal to be received by the Company or to reach the Depositary before the
Expiration Date, his, her or its tender may be effected if the Depositary has
received prior to such date a letter (whether by facsimile or otherwise), telex
or telegram from an Eligible Institution setting forth the name of the tendering
stockholder and the number of shares tendered, stating that the tender is being
made thereby and guaranteeing that within three business days after the date of
receipt of such letter, telex or telegram by the Depositary, the stock
certificates, together with the Letter of Transmittal (and any other required
documents), will be deposited with the Depositary by such Eligible Institution.
Unless certificates being tendered by either of the above-described methods are
deposited with the Depositary within the time periods set forth above
(accompanied or preceded by a properly completed Letter of Transmittal), the
Company may, at its option, reject the tender.

A tender will be deemed to have been received by the Company as of the date
on which the Depositary receives the tendering stockholder's duly signed Letter
of Transmittal, accompanied by certificates or a guarantee of delivery, or a
letter, telex or telegram (as provided above) from an Eligible Institution,
together with all other required documents, as indicated in the Letter of
Transmittal. Payment of cash for shares of Class A Common Stock tendered
pursuant to a guarantee of delivery or a letter, telex or telegram (as provided
above) by an Eligible Institution will be made only against deposit of the
original Letter of Transmittal (and any other required documents) and the
tendered certificates.

Any number of shares of Class A Common Stock of the Company may be tendered
by a stockholder. Tendering stockholders may tender fewer than all of the shares
represented by the certificates they hold, provided they appropriately indicate
that fact on the Letter of Transmittal accompanying the certificates for their
tendered shares of Class A Common Stock.

Any tendering stockholder or other payee who fails to complete fully and
sign the Substitute Form W-9 contained in the Letter of Transmittal may be
subject to required federal income tax withholding of 31% of the gross proceeds
paid to such stockholder or other payee pursuant to the Offer. See Instruction 9
to the Letter of Transmittal.

With respect to tenders of the Company's Class A Common Stock, the Company
reserves full discretion to determine whether the documentation is complete and
generally to determine all questions as to tenders, including the date of
receipt of a tender, the propriety of execution of any document, and other
questions as to the eligibility or acceptability of any tender. The Company
reserves the right to reject any tender not in proper form or to waive any
irregularities or conditions, and the Company's interpretation of the terms and
conditions of the Offer (including the instructions in the Letter of
Transmittal) will be final. None of the Company, the Depositary, the Information
Agent or any other person is or will be obligated to give notice of any defects
or irregularities in tenders and shall not incur any liability for failure to
give any such notice.

Shares shall not be deemed to have been duly tendered unless and until all
defects and irregularities have been cured or waived. Certificates for all
improperly tendered shares, as well as certificates representing the balance of
shares in excess of those tendered for exchange, will be returned (unless
irregularities and defects are timely cured or waived) without cost to the
tendering stockholder as soon as practicable after the Expiration Date.

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<PAGE>
It is a violation of Rule 14e-4 promulgated under the Exchange Act for a
person to tender shares for his or her own account unless the person so
tendering (a) has a net long position equal to or greater than the amount of (i)
the shares tendered or (ii) other securities immediately convertible into,
exercisable, or exchangeable for the amount of the shares tendered and will
acquire such shares for tender by conversion, exercise or exchange of such other
securities, and (b) will cause such shares to be delivered in accordance with
the terms of the Offer. Rule 14e-4 provides a similar restriction applicable to
the tender or guarantee of a tender on behalf of another person. The tender of
shares pursuant to any one of the procedures described above will constitute the
tendering stockholder's representation and warranty that (a) such stockholder
has a net long position in the shares being tendered within the meaning of Rule
14e-4 promulgated under the Exchange Act, and (b) the tender of such shares
complies with Rule 14e-4. The Company's acceptance for payment of shares
tendered pursuant to the Offer will constitute a binding agreement between the
Company and the tendering stockholder upon the terms and subject to the
conditions of the Offer.

TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL

The Letter of Transmittal accompanying this Offering Statement includes the
following terms and conditions, which are part of the Offer. Additional copies
of the Letter of Transmittal may be obtained from the Information Agent at the
address or the telephone number set forth on the back cover of this Offering
Statement.

Shares of Class A Common Stock must be received by the Depositary with the
Letter of Transmittal and any other required documents on or prior to 12:00
midnight, local time in New York City, on August 13, 1997, unless the Offer is
extended by the Company, or within the time periods set forth above in "How to
Tender" pursuant to a guarantee of delivery or letter (by facsimile or
otherwise), telex or telegram from an Eligible Institution. The party tendering
the shares (the "Transferor") assigns and transfers those shares to the Company
and irrevocably appoints the Company as the Transferor's attorney-in-fact to
cause the shares to be transferred. The Transferor warrants that he, she or it
has full power to tender those shares and that the Company will acquire good
title to the shares, free from all claims. All authority conferred by the
Transferor will survive the death or incapacity of the Transferor. Signature(s)
on the Letter of Transmittal will be required to be guaranteed and
endorsement(s) on the certificates being tendered will be required as set forth
above in "How to Tender." All questions as to the validity, form, eligibility
(including time of receipt and acceptances of shares of Class A Common Stock
tendered) will be determined by the Company, in its sole discretion, and such
determination will be final and binding. Unless waived by the Company,
irregularities and defects must be cured by the Expiration Date. In most
instances, the Company will pay all stock transfer taxes applicable to the
transfer and exchange of shares tendered.

WITHDRAWAL RIGHTS

All tenders may be withdrawn at any time on or prior to the Expiration Date.
To be effective, written notice of withdrawal must be timely received by the
Company, by writing to Ernest T. Klinger, Chief Financial Officer and Vice
President Finance and Administration, Arden Group, Inc., 2020 South Central
Avenue, Compton, California 90220, or by facsimile transmission to Mr. Klinger
at (310) 631-0950, or by delivering such notice to the Depositary at one of its
addresses set forth below under "Depositary." Any notice of withdrawal should
specify the person named in the Letter of Transmittal as having tendered the
number of shares of Class A Common Stock to be withdrawn and the name of the
registered holder of such shares. If the shares have been physically delivered
to the Depositary, the tendering stockholder should also submit the serial
number(s) shown on the particular certificate(s) to be withdrawn. The Depositary
will return the withdrawn shares as soon as practicable following receipt of
notice of withdrawal. All questions as to the validity, including time of
receipt, of notices of withdrawals will be

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<PAGE>
determined by the Company, in its sole discretion, and such determination will
be final and binding on all tendering stockholders.

Participants in the Stock Bonus Plan should follow the procedures for
withdrawal included in the notice furnished to such participants.

ACCEPTANCE OF TENDERS

Subject to the terms and conditions of the Offer, shares of Class A Common
Stock tendered for purchase with a properly executed Letter of Transmittal and
all other required documentation, and not withdrawn, will be accepted on the
Expiration Date for payment in cash. Once so accepted for purchase, tendered
shares of Class A Common Stock cannot be withdrawn. Delivery of the cash due
will be made by the Depositary as soon as practicable after acceptance of the
tendered shares.

Although the Company does not presently intend to modify the terms of the
Offer, if it does so, such modified terms will be available with respect to all
shares of Class A Common Stock, whether or not such shares have been tendered
prior to such modification.

The acceptance by the Company of tendered shares pursuant to any one of the
procedures set forth above in "How to Tender" will constitute an agreement
between the tendering stockholder and the Company upon the terms and subject to
the conditions of the Offer.

DEPOSITARY

Continental Stock Transfer & Trust Company has been appointed as the
Depositary for the Offer. Letters of Transmittal must be addressed and delivered
to the Depositary as follows:

<TABLE>
<S> <C> <C>
MAIL OR OVERNIGHT DELIVERY: HAND DELIVERY: FACSIMILE:
Continental Stock Transfer & Continental Stock Transfer & Continental Stock Transfer &
Trust Company Trust Company Trust Company
2 Broadway 2 Broadway New York, New York
New York, New York 10004 19th Floor (212) 509-5150
(212) 509-4000 New York, New York 10004
Extension 535
</TABLE>

Delivery to other than the above addresses will not constitute valid
delivery.

SOLICITATION OF TENDERS

No person has been authorized to give any information or to make any
representations in connection with the Offer other than those contained in this
Offering Statement. If given or made, such information or representations should
not be relied upon as having been authorized by the Company. Neither the
delivery of this Offering Statement nor any purchase made hereunder shall, under
any circumstances, create any implication that there has been no change in the
affairs of the Company since the respective dates as of which information is
given herein. This Offering Statement does not constitute an offer by the
Company or any other person to purchase, or a solicitation by the Company or any
other person of an offer to purchase, any securities other than the securities
covered by this Offering Statement, nor does it constitute an offer or
solicitation of such securities by the Company or any such other person in any
jurisdiction in which, or to any person to whom, it is unlawful to make any such
offer or solicitation. The Company does not intend to engage the services of any
broker, dealer, salesman or other person for soliciting tenders of Class A
Common Stock in connection with the Offer.

15
<PAGE>
PAYMENT OF EXPENSES

The Company has retained Beacon Hill Partners, Inc. as Information Agent in
connection with the Offer. The Information Agent may contact stockholders by
mail, telephone, telex, telegraph and personal interviews, and may request
brokers, dealers and other nominee stockholders to forward materials relating to
the Offer to the beneficial owners. The Depositary and the Information Agent
will receive reasonable and customary compensation for their services in
connection with the Offer, will be reimbursed by the Company for their
reasonable out-of-pocket expenses and may be indemnified by the Company in
connection with certain liabilities and expenses in connection with the Offer.

The Company will reimburse brokers, dealers, commercial banks, trust
companies and other custodians, nominees and fiduciaries for customary handling
and mailing expenses incurred in forwarding copies of this Offering Statement
and related documents to the beneficial owners of shares of Class A Common Stock
held in their names. The Company will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of shares of Class A
Common Stock pursuant to the Offer. No broker, dealer, commercial bank or trust
company has been authorized to act as the agent for the Company or the
Depositary for the purpose of the Offer.

RECENT TRANSACTIONS IN COMMON STOCK

No transactions in the Class A Common Stock were effected during the forty
business days preceding the date of this Offering Statement by the Company or
any subsidiary thereof, by any executive officer or director or controlling
person of any of the foregoing, or by any of their associates.

PRICE RANGE OF COMMON STOCK

The Company's Class A Common Stock is traded over-the-counter on the NASDAQ
National Market System. During the past two fiscal years and the current fiscal
year through July 11, 1997, the range of the high and low sales prices for the
Company's Class A Common Stock (not including markups, markdowns or commissions)
for each quarterly period, as reported by NASDAQ, was as follows:

<TABLE>
<CAPTION>
FISCAL 1995: HIGH LOW
- ------------------------------------------------------------------------------ ----- ---
<S> <C> <C>
First Quarter................................................................. 46 421/2
Second Quarter................................................................ 47 421/2
Third Quarter................................................................. 521/2 45
Fourth Quarter................................................................ 651/2 50
</TABLE>

<TABLE>
<CAPTION>
FISCAL 1996: HIGH LOW
- ----------------------------------------------------------------------------- ----- ---
<S> <C> <C>
First Quarter................................................................ 66 561/2
Second Quarter............................................................... 79 65
Third Quarter................................................................ 671/2 58
Fourth Quarter............................................................... 62 54
</TABLE>

<TABLE>
<CAPTION>
FISCAL 1997: HIGH LOW
- ------------------------------------------------------------------------------ ----- ---
<S> <C> <C>
First Quarter................................................................. 62 54
Second Quarter................................................................ 641/2 54
Third Quarter (through July 11, 1997)......................................... 641/2 561/2
</TABLE>

16
<PAGE>
As of July 11, 1997, there were issued and outstanding 766,753 shares of the
Class A Common Stock and 342,246 shares of the Class B Common Stock.

On July 11, 1997, there were no reported transactions for the Class A Common
Stock on the NASDAQ National Market System. On July 10, 1997, the last day prior
to July 11, 1997 that a transaction was reported, the reported closing price was
$60.75 per share. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR
SHARES OF THE CLASS A COMMON STOCK.

BUSINESS AND RECENT DEVELOPMENTS

The Company is a holding company which was incorporated under the laws of
the State of Delaware in 1977. The only operations in which the Company is
engaged are those conducted by its wholly owned subsidiary, Arden-Mayfair, Inc.
("Arden"), and Arden's wholly owned subsidiary, Gelson's Markets. Arden's
business is comprised of a food distribution business consisting of supermarkets
and related facilities operated by Gelson's Markets.

In September 1993, AMG Holdings, Inc. (then, Telautograph Corporation), an
indirect wholly owned subsidiary of the Company, sold substantially all of the
operating assets related to its communication equipment business to Danka
Industries, Inc. for cash. Disputes arose between the parties which were
resolved by arbitration decisions in April 1994 and April 1997. In July 1997,
the arbitrators determined that neither party was a prevailing party in the
proceedings and, therefore, neither were awarded costs and fees with respect to
the proceedings.

Based on preliminary unaudited information, the increases in sales and gross
profit which the Company reported for the first quarter of fiscal 1997 as
compared to the first quarter of fiscal 1996 have continued in the first two
months of the second quarter of fiscal 1997 as compared to the comparable period
of fiscal 1996. The Company believes that this trend of increased sales and
gross profits has continued for the balance of the second quarter and will be
reflected in operating income for the second quarter of fiscal 1997. No
assurances can be given that this trend will continue for the remainder of the
fiscal year. The foregoing statements are forward looking statements and involve
risks and uncertainties that could cause actual results to differ materially
from these forward looking statements. Factors which could cause actual results
to differ materially include, but may not be limited to, a downturn in the gross
profit of the Company for the third month of the Company's second quarter and
adjustments made to the preliminary unaudited information for the first two
months in closing the books of the Company at the end of the second quarter.

SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION

The following selected financial data for each of the thirteen weeks ended
March 29, 1997 and March 30, 1996 (unaudited) are derived from the unaudited
consolidated financial statements of Arden Group, Inc. and subsidiaries set
forth in the Company's Quarterly Report on Form 10-Q for the quarter ended March
29, 1997. In the opinion of management, all adjustments considered necessary for
a fair statement of the results for the periods, which consisted only of normal
recurring accruals, have been made. Results for the thirteen weeks are not
necessarily indicative of the results for the entire year. The following
selected financial data for each of the years ended December 28, 1996 and
December 30, 1995 were derived from the audited consolidated financial
statements of Arden Group, Inc. and subsidiaries included in the Company's
Annual Report on Form 10-K for the year ended December 28, 1996. The data should
be read in conjunction with, and is qualified in its entirety by reference to,
such audited

17
<PAGE>
consolidated financial statements and their related notes. The foregoing reports
may be obtained from the Commission or the Company in the manner specified under
"AVAILABLE INFORMATION" below.

<TABLE>
<CAPTION>
UNAUDITED THIRTEEN WEEKS
----------------------------
MARCH 29, MARCH 30, FIFTY TWO FIFTY TWO
1997 1996 WEEKS 1996 WEEKS 1995
------------- ------------- ----------- -----------
(IN THOUSANDS EXCEPT RATIOS AND PER SHARE DATA)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales................................................. $ 64,961 $ 60,616 $ 252,019 $ 242,962
Income from continuing operations, net of income
taxes............................................... $ 1,785 $ 134 $ 3,979 $ 7,111
Loss from discontinued operations, net of tax
benefits............................................ (2,695) (456)
Net Income (Loss)..................................... $ (910) $ 134 $ 3,523 $ 7,111
Net income (loss) per common share outstanding:
Income from continuing operations................... $ 1.61 $ 0.12 $ 3.57 $ 5.47
Loss from discontinued operations................... (2.43) (0.41)
------------- ------------- ----------- -----------
Net income (loss)..................................... $ (0.82) $ 0.12 $ 3.16 $ 5.47
Weighted average shares outstanding................... 1,108,999 1,133,141 1,115,227 1,299,002
Ratio of earnings from continuing operations to fixed
charges(1).......................................... 3.34 1.19 2.27 3.33

BALANCE SHEET DATA (AT PERIOD END):
Total assets.......................................... $ 91,661 $ 87,156 $ 91,248 $ 89,478
Cash and marketable securities........................ 29,301 25,648 26,829 30,262
Working capital....................................... 21,934 22,552 23,142 28,706
Total indebtedness.................................... 36,918 33,568 35,511 35,651
Stockholders' equity.................................. 54,743 53,588 55,737 53,827
Book value per common share........................... $ 49.36 $ 47.47 $ 50.26 $ 47.43
</TABLE>

NOTES TO SUMMARY HISTORICAL
CONSOLIDATED FINANCIAL INFORMATION

(1) The ratios of earnings from continuing operations to fixed charges were
computed by dividing earnings from continuing operations before fixed
charges and income taxes by the fixed charges. Earnings consist of income
from continuing operations net of income taxes, to which has been added
fixed charges and income taxes. Fixed charges consist of interest expense
and minimum rent expense on noncancellable leases.

SUMMARY UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION

The following summary unaudited consolidated pro forma financial information
gives effect to the purchase of 250,000 shares of Class A Common Stock pursuant
to the Offer, based on certain assumptions described in the Notes to Summary
Unaudited Consolidated Pro Forma Financial Information. The pro forma income
statement data gives effect to the purchase of shares of Class A Common Stock
pursuant to the Offer as if it had occurred on December 29, 1996 and December
31, 1995. The summary unaudited consolidated pro forma financial information
should be read in conjunction with the summary consolidated historical financial
information and does not purport to be indicative of the financial position of
the Company, the results that would actually have been obtained had the purchase
of the shares of Class A

18
<PAGE>
Common Stock pursuant to the Offer been completed at the dates indicated or the
results that may be obtained in the future.

<TABLE>
<CAPTION>
THIRTEEN WEEKS MARCH 29, 1997 FIFTY-TWO WEEKS 1996
------------------------------ ------------------------------
PRO FORMA PRO FORMA
ASSUMING 250,000 ASSUMING 250,000
UNAUDITED SHARES ARE SHARES ARE
HISTORICAL ACQUIRED HISTORICAL ACQUIRED
---------- ------------------ ---------- ------------------
(IN THOUSANDS EXCEPT RATIOS AND PER SHARE DATA)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales.......................................... $ 64,961 $ 64,961 $ 252,019 $ 252,019
Income from continuing operations, net of
income taxes................................. $ 1,785 $ 1,713 $ 3,979 $ 3,591
Loss from discontinued operations, net of tax
benefits..................................... (2,695) (2,695) (456) (456)
Net Income (Loss).............................. $ (910) $ (982) $ 3,523 $ 3,135
Net income (loss) per common share outstanding:
Income from continuing operations............ $ 1.61 $ 1.99 $ 3.57 $ 4.15
Income (Loss) from discontinued operations... (2.43) (3.14) (0.41) (0.53)
---------- ---------- ---------- ----------
Net income (loss)............................ $ (0.82) $ (1.15) $ 3.16 $ 3.62
Weighted average shares outstanding............ 1,108,999 858,999 1,115,227 865,227
Ratio of earnings from continuing operations to
fixed charges (3)............................ 3.34 3.04 2.27 2.05

BALANCE SHEET DATA (AT PERIOD END):
Total assets................................... $ 91,661 $ 81,750 $ 91,248 $ 80,822
Cash and marketable securities................. 29,301 19,390 26,829 16,403
Working capital................................ 21,934 5,512 23,142 6,404
Total indebtedness............................. 36,918 43,429 35,511 41,823
Stockholders' equity........................... 54,743 38,321 55,737 38,999
Book value per common share.................... $ 49.36 $ 44.61 $ 50.26 $ 45.40
</TABLE>

NOTES TO SUMMARY UNAUDITED
CONSOLIDATED PRO FORMA FINANCIAL INFORMATION

(1) The information assumes that 250,000 shares of Class A Common Stock are
purchased at $65.00 per share with the purchase being financed out of
working capital and short term bank borrowings. Such acquisitions were
assumed to have occurred at the beginning of the periods presented. The
pro forma Income and Net income amounts reflect a reduction in the
amount of interest income earned on an amount equal to the aggregate
cash required to make such acquisitions. There can be no assurance that
the Company will purchase, pursuant to the Offer, 250,000 shares of
Class A Common Stock.

(2) Estimated expenses directly related to the Offer are charged against
additional paid-in capital.

(3) The ratios of earnings from continuing operations to fixed charges were
computed by dividing earnings from continuing operations before fixed
charges and income taxes by the fixed charges. Earnings consist of
income from continuing operations net of income taxes, to which has been
added fixed charges and income taxes. Fixed charges consist of interest
expense and minimum rent expense on noncancellable leases.

19
<PAGE>
AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Exchange Act
and, in accordance therewith, files reports, proxy statements and other
information with the Commission relating to the Company's business and financial
condition. Pursuant to the regulations adopted by the Commission under the
Exchange Act, the Company has also filed with the Commission a Schedule 13E-4
Issuer Tender Offer Statement, furnishing certain additional information with
respect to the Offer. Such material may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549; and at its regional offices located at
Kluczynski Federal Building, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and 7 World Trade Center, Suite 1300, New York, New York 10048.
Copies of such material may also be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Company's Schedule 13E-4 may not be available at the
Commission's regional offices.

Detailed information regarding the Company is available in the Company's
Annual Report on Form 10-K for the fiscal year ended December 28, 1996, in the
Company's Quarterly Report on Form 10-Q for the quarter ended March 29, 1997 and
in the Company's Current Report on Form 8-K dated April 4, 1997 which were filed
with the Commission pursuant to Section 13 of the Exchange Act, and in its
definitive proxy materials for the Annual Meeting of Stockholders held on June
25, 1997, filed with the Commission pursuant to Section 14 of the Exchange Act.
The Company will provide without charge to each person to whom this Offering
Statement is delivered, upon request of any such person, a copy of any or all of
the foregoing documents (not including, however, the exhibits to such
documents). Written or telephone requests should be directed to Ernest T.
Klinger, Chief Financial Officer and Vice President Finance and Administration,
Arden Group, Inc., 2020 South Central Avenue, Compton, California 90220 ((310)
638-2842) (facsimile number (310) 631-0950).

MISCELLANEOUS

The Offer is not being made to, nor will the Company accept, tenders from
owners of shares of Class A Common Stock in any jurisdiction in which the Offer
or its acceptance would not be in compliance with the laws of such jurisdiction.
The Company is not aware of any jurisdiction where the making of the Offer or
the tender of shares of Class A Common Stock would not be in compliance with
applicable law. If the Company becomes aware of any jurisdiction where the
making of the Offer or the tender of shares of Class A Common Stock is not in
compliance with any applicable law, the Company will make a good faith effort to
comply with such law. If, after such good faith effort, the Company cannot
comply with such law, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of shares of Class A Common Stock
residing in such jurisdiction. In any jurisdiction in which the securities, blue
sky or other laws require the Offer to be made by a licensed broker or dealer,
the Offer will be deemed to be made on the Company's behalf by one or more
registered brokers or dealers licensed under the laws of such jurisdiction.

ARDEN GROUP, INC.

July 17, 1997

20
<PAGE>
Any questions or requests for assistance may be directed to the Information
Agent at the telephone number and address listed below. Requests for additional
copies of this Offering Statement, the Letter of Transmittal or other tender
offer materials may be directed to the Information Agent and such copies will be
furnished promptly at the Company's expense. Stockholders may also contact their
local broker, dealer, commercial bank or trust company for assistance concerning
the Offer.

INFORMATION AGENT:

Beacon Hill Partners, Inc.
90 Broad Street
New York, New York 10004
Attention: John G. Grau

For telephone inquiries:

(800) 854-9486

<PAGE>
LETTER OF TRANSMITTAL

TO ACCOMPANY SHARES OF CLASS A COMMON STOCK OF
ARDEN GROUP, INC.

TENDERED PURSUANT TO THE OFFERING STATEMENT
DATED JULY 17, 1997
(PLEASE READ THE INSTRUCTIONS CAREFULLY)

IMPORTANT: THIS LETTER OF TRANSMITTAL IS TO BE COMPLETED ONLY BY THOSE
STOCKHOLDERS WHO ARE TENDERING SHARES OF CLASS A COMMON STOCK IN RESPONSE TO THE
OFFER. PARTICIPANTS IN THE STOCK BONUS PLAN WHO WISH TO TENDER SHARES OF CLASS A
COMMON STOCK ALLOCATED TO THEIR ACCOUNT MAY NOT USE THIS LETTER OF TRANSMITTAL
TO TENDER SUCH SHARES BUT INSTEAD MUST USE THE ELECTION FORM INCLUDED WITH THE
NOTICE FURNISHED TO THEM. STOCKHOLDERS (OTHER THAN PARTICIPANTS IN THE STOCK
BONUS PLAN) WISHING TO RETAIN THE SHARES PRESENTLY HELD BY THEM NEED NOT DO
ANYTHING IN RESPONSE TO THE OFFER.

This Letter of Transmittal (or a facsimile hereof) and all other documents
and instruments required hereby should be sent or delivered to the Depositary at
one of the addresses set forth below. Tenders must be received by the Depositary
prior to 12:00 midnight, local time in New York City, on August 13, 1997, unless
the Offer is extended. All capitalized terms used but not otherwise defined
herein shall have the meaning therefor set forth in the Offering Statement.

<TABLE>
<S> <C> <C>
BY MAIL OR OVERNIGHT HAND DELIVERY: BY FACSIMILE:
DELIVERY: Continental Stock Transfer & Continental Stock Transfer &
Continental Stock Transfer & Trust Company Trust Company
Trust Company 2 Broadway New York, New York
2 Broadway 19th Floor (212) 509-5150
New York, New York 10004 New York, New York 10004
(212) 509-4000, extension 535
</TABLE>

Gentlemen:

Pursuant to the terms and subject to the conditions of the Offer of Arden
Group, Inc. (the "Company") to holders of its Class A Common Stock, par value
$.25 per share (the "Class A Common Stock"), as set forth in the Offering
Statement dated July 17, 1997 (the "Offering Statement") and this Letter of
Transmittal (which together constitute the "Offer"), receipt of which are hereby
acknowledged, the signer of this Letter of Transmittal (the "Signer") hereby
accepts the Offer and tenders that number of shares of Class A Common Stock
listed in this Letter of Transmittal for cash at the rate of $65.00 for each and
every share tendered.

The Signer understands that if more than 250,000 shares are tendered in the
Offer, then the Company shall purchase 250,000 shares on a pro rata basis among
all stockholders tendering shares in the Offer according to the number of shares
of Class A Common Stock tendered by each.

Subject to the terms and conditions set forth in the Offering Statement and
in this Letter of Transmittal, the Signer hereby sells, assigns and transfers to
the Company all of the shares of Class A Common Stock that are being tendered
hereby and that are accepted by the Company for purchase and hereby irrevocably
constitutes and appoints the Company the true and lawful agent and
attorney-in-fact of the Signer with respect to such shares, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to cause the shares of Class A Common Stock tendered
and accepted to be transferred on the books of the Company and to exercise all
rights and privileges of ownership with respect thereto.
<PAGE>
The Signer hereby represents that the Signer has full power and authority to
tender, exchange, sell, assign and transfer the shares tendered hereby and that
the Company will acquire absolute and unencumbered title thereto, free and clear
of all liens, restrictions, charges and encumbrances and not subject to any
adverse claim when the same are accepted by the Company. The Signer will, upon
request, execute and deliver any additional documents deemed by the Company to
be necessary or desirable to complete the sale, assignment and transfer of the
shares tendered hereby.

All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the Signer and any obligation of the Signer hereunder
shall be binding upon the heirs, personal representatives, successors and
assigns of the Signer.

The Signer understands that tenders of shares pursuant to any one of the
procedures described in the Offer and in the instructions hereto will constitute
Signer's acceptance of the terms and conditions of the Offer, including the
Signer's representation and warranty that (i) the Signer has a net long position
in the shares being tendered within the meaning of Rule 14e-4 promulgated under
the Securities Exchange Act of 1934, as amended, and (ii) the tender of such
shares complies with Rule 14e-4. The Company's acceptance for payment of shares
tendered pursuant to the Offer will constitute a binding agreement between the
Signer and the Company upon the terms and subject to the conditions of the
Offer.

The Signer recognizes that under certain circumstances set forth in the
Offering Statement, the Company may not be required to acquire any of the shares
tendered hereby. In such event, the Signer understands that a certificate for
any shares not acquired will be returned to the Signer at the address shown in
the Letter of Transmittal unless otherwise indicated in the box entitled
"Special Delivery Instructions."

IMPORTANT. THIS LETTER OF TRANSMITTAL MUST BE SIGNED BY EACH STOCKHOLDER
TENDERING SHARES OF CLASS A COMMON STOCK IN RESPONSE TO THE OFFER. SIGNATURE
GUARANTEES MAY BE REQUIRED FOR CERTAIN TENDERS OF CLASS A COMMON STOCK UNDER THE
OFFER. SEE INSTRUCTIONS 1 AND 5.

2
<PAGE>

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
AND ELECTION TO TENDER IN OFFER
CERTIFICATE(S) TENDERED:
(ATTACH ADDITIONAL LIST IF NECESSARY)
-------------------------------------------------------------------------------------------
COLUMN 1 COLUMN 2 COLUMN 3 COLUMN 4
- --------------------------------------------- -------------- -------------- --------------
TOTAL NUMBER
OF TOTAL NUMBER
SHARES OF
REPRESENTED SHARES
NAME AND ADDRESS OF CERTIFICATE BY TENDERED
REGISTERED HOLDER NUMBER(S) CERTIFICATE(S) IN OFFER
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
(PLEASE PRINT NAME AND ADDRESS)

----------------------------------------------

- ---------------------------------------------------------------------------------------------

Signature guarantees may be required. See Instructions 1 and 5.
THE ONLY SHARES OF CLASS A COMMON STOCK WHICH SHALL BE DEEMED TENDERED
IN THE OFFER ARE THOSE SHARES DESCRIBED IN COLUMN 4 ABOVE.
--------------------------------------------
</TABLE>

3
<PAGE>
- -------------------------------------------

COMPLETE IF APPLICABLE.

/ / Check here if this Letter of Transmittal and stock certificate(s) are
being delivered pursuant to a letter, telex, telegram or Letter of
Transmittal delivered prior to the date hereof.

/ / Check here if stock certificate(s) for the shares tendered by this
Letter of Transmittal are not being transmitted herewith, in which case
the box marked "Guarantee of Delivery" must be completed.

- -------------------------------------------
- -------------------------------------------

SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 7 AND 8)

(To be completed ONLY if check or certificate(s) for shares of Class A
Common Stock not tendered are to be sent to someone other than the Signer or
to the Signer at an address other than that shown under "Description of
Shares Tendered and Election to Tender in Offer".)

Mail check/certificates

(circle as appropriate) to:

Name: ______________________________________________________________________
(PLEASE PRINT)

Address: ___________________________________________________________________

____________________________________________________________________________

____________________________________________________________________________
(INCLUDE ZIP CODE)

__________________________________________________________________________
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
- -----------------------------------------------------

4
<PAGE>
- ------------------------------------------------------

GUARANTEE OF DELIVERY
(TO BE USED ONLY IF CERTIFICATE(S)
IS NOT TRANSMITTED HEREWITH)
(SEE INSTRUCTION 2)

THE UNDERSIGNED

------ A member of a registered national securities exchange or the National
Association of Securities Dealers, Inc.
------ A commercial bank, savings and loan or trust company having an office
in the United States
guarantees to deliver to the Depositary certificate(s) for the shares of
Class A Common Stock tendered by this Letter of Transmittal in proper form
for transfer within three business days after the date of receipt of this
Letter of Transmittal.

------------------------------------------
(FIRM--PLEASE PRINT)

------------------------------------------------------
ADDRESS (INCLUDING AREA CODE AND PHONE NO.)

------------------------------------------------------
(AUTHORIZED SIGNATURE AND TITLE) (DATE)

- ------------------------------------------------------
- ------------------------------------------------------

SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 7 AND 8)

(To be completed ONLY if check or certificate(s) for shares of Class A
Common Stock not tendered are to be issued in the name of someone other than
the Signer.)

Issue check/certificates
(circle as appropriate) to:

Name: ______________________________________________________________________
(PLEASE PRINT)

Address: ___________________________________________________________________

____________________________________________________________________________

____________________________________________________________________________
(INCLUDE ZIP CODE)

__________________________________________________________________________
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)

- -----------------------------------------------------

5
<PAGE>
- --------------------------------------------------------------------------------

IMPORTANT. SIGN HERE.
(NOTE: SIGNATURE(S) MUST BE GUARANTEED
IF REQUIRED BY INSTRUCTIONS 1 OR 5)

----------------------------------------------------------------------------
----------------------------------------------------------------------------
SIGNATURE(S) OF OWNER(S)

Dated:
-------------------------------------

(Must be signed by registered holder(s) exactly as name(s) appear(s) on
stock certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificate(s) and documents
transmitted herewith.If signature is by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, please set forth full title and see
Instruction 5.)

Name(s) ____________________________________________________________________
____________________________________________________________________________
(PLEASE PRINT)

Capacity ___________________________________________________________________

Address ____________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(INCLUDE ZIP CODE)

Area Code and Telephone No. ________________________________________________

Tax Identification or Social Security Number _______________________________

(ALSO COMPLETE FORM W-9)
GUARANTEE OF SIGNATURES(S)
(SEE INSTRUCTIONS 1 AND 5)

Authorized Signature _______________________________________________________

Name of Firm _______________________________________________________________

Dated: _____________________________________________________________________

- --------------------------------------------------------------------------------

6
<PAGE>
INSTRUCTIONS
(FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER)

1. Guarantee of Signatures. Signatures on Letters of Transmittal (or
facsimiles thereof) must be guaranteed by an Eligible Institution that is also a
member of a Medallion Program as recognized by The Securities Transfer
Association in cases where shares are tendered in the Offer by someone other
than the registered holder(s) of the tendered shares or by a registered holder
of shares who has completed either the box entitled "Special Issuance
Instructions" or the box entitled "Special Delivery Instructions" on the Letter
of Transmittal.

2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. In order to
participate in the Offer and receive cash, a stockholder must properly complete
and duly execute (with signatures guaranteed if required by Instruction 1 or 5)
the Letter of Transmittal (or a duplicate copy thereof) and mail or deliver it,
together with the certificate(s) representing the shares of Class A Common Stock
to be tendered and any other required documents, to the Depositary. The
Depositary must receive the foregoing documents and instruments prior to the
Expiration Date of the Offer as defined in the Offering Statement (the
"Expiration Date").

Stockholders whose certificates are not immediately available may validly
tender shares if (a) the certificates representing the shares of Class A Common
Stock to be exchanged have been deposited with a commercial bank, savings and
loan or trust company having an office in the United States or a firm which is a
member of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. (an "Eligible Institution"), (b) a
properly completed and duly executed Letter of Transmittal (or a duplicate copy
thereof), with the box under the caption "Guarantee of Delivery" properly
completed and duly executed by such Eligible Institution, has been received by
the Depositary prior to the Expiration Date, and (c) the Depositary, in fact,
receives such certificates and any other required documents in proper form for
transfer within three business days after the date on which the Letter of
Transmittal (or copy) is received by the Depositary.

If a stockholder cannot deliver certificate(s) and all other required
documents to the Depositary prior to the Expiration Date, such stockholder may
validly tender shares if (a) a properly completed and duly executed Letter of
Transmittal (or a duplicate copy thereof), accompanied by the certificate(s)
representing the shares of Class A Common Stock to be tendered and any other
required documents, in proper form for transfer, has been deposited prior to the
Expiration Date with an Eligible Institution, (b) the Depositary has received
from such Eligible Institution, prior to the Expiration Date, a letter (whether
by facsimile or otherwise), telex or telegram setting forth the name of the
tendering stockholder, the number of shares tendered, the name in which the
shares are registered and the certificate number(s) of the certificate(s)
tendered and guaranteeing delivery of such Letter of Transmittal (or copy), such
certificate(s) and any other required documents (in which case, subject to
subsequent compliance with clause (c) below, the shares to which the letter (or
facsimile thereof), telex or telegram relates shall be deemed properly tendered
as of the date of receipt of the letter, telex or telegram) and (c) the
Depositary, in fact receives such Letter of Transmittal (or copy), such
certificate(s) and such other required documents within three business days
after the date on which the letter (or facsimile thereof), telex or telegram is
received by the Depositary.

All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of shares of Class A Common Stock tendered will be
determined by the Company, in its sole discretion, and such determinations will
be final and binding. The Company reserves the right to reject any and all
tenders determined by it not to be in proper form or the acceptance for exchange
of which may, in the opinion of the Company's counsel, be unlawful. The
Company's interpretation of the terms and conditions of the Offer (including the
Letter of Transmittal and Instructions thereto) will also be final and binding.
The Company reserves the right (without any obligation to do so) to waive any
irregularities or defects in any tender. Unless waived by the Company,
irregularities and defects must be cured prior to the Expiration

7
<PAGE>
Date. The Company and the Depositary are not under any duty to give notification
of any irregularities or defects and shall not incur any liability for failure
to give any such notification. Tenders will not be deemed to have been made
until such irregularities or defects have been cured or waived. Any tender
(including the Letter of Transmittal and stock certificates) that is not
properly completed and executed, and as to which irregularities or defects are
not cured or waived, will be returned by the Depositary to the tendering
stockholder as soon as practicable.

The method of delivery of certificate(s) for Class A Common Stock and all
other documents is at the sole election and risk of each stockholder. If
delivery is by mail, it is recommended that registered mail, return receipt
requested, be used, and that proper insurance be obtained.

No alternative, conditional or contingent tenders will be accepted. All
tendering stockholders, by execution of this Letter of Transmittal, waive any
rights to receive any notice of the acceptance of their tender.

3. INADEQUATE SPACE. If the space provided herein is inadequate for
listing of stock certificates, the certificate numbers and the numbers of shares
may be listed on a separate schedule attached hereto.

4. PARTIAL TENDERS. If fewer than all the shares evidenced by any
certificate submitted are to be tendered, fill in the number of shares which are
to be tendered in Column 4 of the box entitled "Description of Shares Tendered
and Election to Tender in Offer." New certificate(s) for the remainder of the
shares which are evidenced by your old certificate(s) will be sent to you,
unless otherwise provided in the appropriate box on the Letter of Transmittal,
as soon as practicable after the tender has been accepted. The only shares of
Class A Common Stock which shall be deemed tendered in the Offer are those
shares listed in Column 4 of the box entitled "Description of Shares Tendered
and Election to Tender in Offer."

5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the
certificate(s) tendered hereby, the signature must correspond exactly with the
name(s) as written on the face of the certificate(s) without alteration,
enlargement or any change whatsoever.

If any certificates tendered hereby are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.

If any tendered shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.

If shares are tendered in the Offer by someone other than the registered
holder, or the check in payment for tendered shares, or the certificate
representing the balance of any shares of Class A Common Stock not tendered or
accepted, is to be delivered to an address different from that appearing on the
Company's stock transfer books or to someone other than the Signer, the tendered
certificate(s) must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name or names of the registered owner or
owners appear on the certificate(s) or by his, her or its or their qualified
legal representatives, and the signatures on such certificate(s) or stock
powers, and on this Letter of Transmittal, must be guaranteed as described in
Instruction 1.

If this Letter of Transmittal or any certificate(s) or stock powers are
signed by trustees, executors, administrators, guardians or others acting in a
fiduciary capacity, in cases where such fiduciaries are not named as such on the
certificate(s), attorneys-in-fact, officers of corporation or others acting in a
representative capacity, such persons should so indicate when signing, and
proper evidence satisfactory to the Company of their authority so to act must be
submitted.

6. DELIVERY OF CHECK. Delivery of a check will be made as soon as
practicable after acceptance by the Company of shares of Class A Common Stock
tendered. Any check(s) will be issued in the name of the registered owner(s) of
the Class A Common Stock and mailed to him or her or them, unless otherwise

8
<PAGE>
provided in the appropriate box in this Letter of Transmittal. In the case of
tenders by telegram, telex, facsimile or letter of guarantee, any check(s) will
not be delivered until the Letters of Transmittal, the certificate(s)
representing tendered shares relating to such guarantees and all other required
documents have been received by the Depositary.

7. STOCK TRANSFER TAXES. The Company will pay all stock transfer taxes, if
any, applicable to the transfer and sale to it of shares tendered and accepted
pursuant to the Offer. If, however, the issuance of a check is to be made in the
name of any person other than the registered holder, the amount of any stock
transfer taxes (whether imposed on the registered holder or such person) payable
on account of the transfer will be billed directly to the person(s) signing this
Letter of Transmittal, and such amount must be paid to the Company or the
Depositary (or the transferee must establish to the satisfaction of the Company
that such taxes have been paid or need not be paid) before a check will be
issued.

Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter of
Transmittal.

8. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for the
purchase price of any shares of Class A Common Stock purchased is to be issued
in the name of, and/or any shares of Class A Common Stock not tendered or not
purchased are to be returned to, a person other than the person(s) signing this
Letter of Transmittal or if the check and/or any certificates for Class A Common
Stock not tendered or not purchased are to be mailed to someone other than the
person(s) signing this Letter of Transmittal or to an address other than that
shown above in the box captioned "Description of Shares Tendered and Election to
Tender in Offer," then the boxes captioned "Special Issuance Instructions"
and/or "Special Delivery Instructions" on this Letter of Transmittal should be
completed.

9. SUBSTITUTE FORM W-9. A stockholder tendering in the Offer is required
to provide the Depositary with a correct Taxpayer Identification Number ("TIN")
on Substitute Form W-9, which is provided under "IMPORTANT TAX INFORMATION"
below, and to indicate that the stockholder is not subject to backup withholding
by signing the Substitute Form W-9. If the tendering stockholder is subject to
backup withholding, then item (2) of Part 2 of the Substitute Form W-9 should be
crossed out as therein instructed. Failure to provide the information on the
form may subject the tendering stockholder to a 31% federal income tax
withholding on the cash received in payment for shares of the Class A Common
Stock. The box in Part 3 of the form may be checked if the tendering stockholder
has not been issued a TIN and has applied for a number or intends to apply for a
number in the near future. If the box in Part 3 is checked and the Depositary is
not provided with a TIN by the time of payment, the Depositary will withhold 31%
on all payments made prior to the time a TIN is provided to the Depositary.
Foreign stockholders should communicate with the Company or the Depositary
regarding applicable tax certification procedures.

10. REQUESTS FOR ADDITIONAL COPIES. Questions and requests for additional
copies of the Offering Statement and this Letter of Transmittal may be obtained
from the Information Agent at the address or telephone number therefor set forth
on the back cover of the Offering Statement.

IMPORTANT TAX INFORMATION

Under federal income tax law, a stockholder whose tendered shares of Class A
Common Stock are accepted for purchase is required to provide the Depositary
with his, her or its correct taxpayer identification number ("TIN") on
Substitute Form W-9 below and to certify that the TIN provided on Substitute
Form W-9 is correct (or that such stockholder is awaiting a TIN). If such
stockholder is an individual, the TIN is his or her social security number. If
the Depositary is not provided with the correct TIN, the Internal Revenue
Service may subject the stockholder or other payee to a $50 penalty. In
addition, payments that are made to such stockholder or other payee with respect
to Class A Common Stock purchased pursuant to the Offer may be subject to 31%
backup withholding.

9
<PAGE>
A stockholder who does not have a TIN may check the box in Part 3 of the
Substitute Form W-9 if the stockholder has applied for a number or intends to
apply for a number in the near future. A stockholder who checks the box in Part
3 in lieu of furnishing his or her TIN should furnish the Depositary with his or
her TIN as soon as it is received. If the box in Part 3 is checked and the
Depositary is not provided with a TIN by the time of payment, the Depositary
will withhold 31% on all payments made prior to the time a TIN is provided the
Depositary.

Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to backup withholding. In order for a
foreign individual to qualify as an exempt recipient, that stockholder must
submit a statement, signed under penalties of perjury, attesting to that
individual's exempt status (Form W-8). Forms for such statements can be obtained
from the Depositary. Stockholders are urged to consult their own tax advisors to
determine whether they are exempt from these backup withholding and reporting
requirements. See also the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional instructions.

If backup withholding applies, the Depositary is required to withhold 31% of
the gross proceeds payable to the stockholder pursuant to the Offer. Backup
withholding is not an additional tax. Rather, the tax liability of persons
subject to backup withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund may be obtained.

The stockholder is required to give the Depositary the social security
number or employer identification number of the record owner of the tendered
shares. If such shares are registered in more than one name or not registered in
the name of the actual owner, consult the enclosed Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9 for additional
guidelines on which number to report.

<TABLE>
<C> <S> <C>
- -----------------------------------------------------------------------------------------
Part 1--PLEASE Social Security Number
PROVIDE YOUR TIN IN OR ------------------------
THE BOX AT RIGHT AND Employer Identification Number
CERTIFY BY SIGNING
AND DATED BELOW
SUBSTITUTE
FORM W-9
-------------------------------------------------------
Department of the Treasury Part 2--Certification--Under penalties of perjury, I
Internal Revenue Service certify that:
(1) The number shown on this form is my correct
Taxpayer Identification Number AND

(2) I am not subject to backup withholding either
because I have not been notified by the Internal
Revenue Service (IRS) that I am subject to backup
withholding as a result of failure to report all
interest or dividends, or the IRS has notified me that
I am no longer subject to backup withholding.
-------------------------------------------------------
Part 3--Awaiting TIN ---
- -----------------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS--You must cross item (2) above if you have been notified by
the IRS that you are subject to backup withholding because of underreporting interest or
dividends on your tax return. However, if after being notified by the IRS that you were
subject to backup withholding you received another notification from the IRS that you
are no longer subject to backup withholding, do not cross out item (2).

SIGNATURE -------------------------------------------------------- DATE
--------------------
- -----------------------------------------------------------------------------------------
</TABLE>

NOTE: FAILURE TO COMPLETE AND RETURN SUBSTITUTE FORM W-9 MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE OR TO BE MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.

10
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9

GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER. A
Social Security number ("SSN") has nine digits separated by two hyphens: I.E.
000-00-0000. An employer identification number has nine digits separated by only
one hyphen: E.I. 00-0000000. The table below will help determine the number to
give the payor.

<TABLE>
<CAPTION>
- ------------------------------------------------------------- -------------------------------------------------------------

GIVE THE GIVE THE EMPLOYER
SOCIAL SECURITY IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF-- FOR THIS TYPE OF ACCOUNT: NUMBER OF--
<C> <S> <C> <C> <C> <C>
- ------------------------------------------------------------- -------------------------------------------------------------
</TABLE>

<TABLE>
<C> <S> <C>
1. An individual's account The individual

2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, the first
individual on the
account(1)

3. Husband wife (joint The actual owner of the
account) account or, if joint
funds, either person (1)

4. Custodian account of a The minor (2)
minor (Uniform Gift to
Minors Act)

5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the
minor(1)

6. Account in the name of The ward, minor, or
guardian or committee incompetent person(3)
for a designated ward,
minor, or incompetent
person

7. a. The mutual revocable The grantor-trustee(1)
savings trust
account (grantor is
also trustee)

b. So-called trust The actual owner(1)
account that is not a
legal or valid trust
under State law

8. Sole proprietorship The owner(4)
account

9. A valid trust, estate, The legal entity(5)
or pension trust

10. Corporate account The corporation

11. Association, club, The organization
religious, charitable,
educational, or other
tax exempt organization
account

12. Partnership account held The partnership
in the name of the
business

13. A broker or registered The broker or nominee
nominee

14. Account with the The public entity
Department of
Agriculture in the name
of a public entity (such
as a State or local
government, school
district, or prison)
that receives
agricultural program
payments
</TABLE>

- --------------------------------------------------------------------------------

(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has an SSN, that person's number must be
furnished.

(2) Circle the minor's name and furnish the minor's SSN.

(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's SSN.

(4) You must show your individual name but you may also enter your business or
"doing business as" name. You may use either your SSN or the employer
identification number (if you have one).

(5) List first and circle the name of the valid trust, estate, or pension trust.
(Do not furnish the TIN of the personal representative or trustee unless the
legal entity is not designated in the account title.)

NOTE: IF NO NAME IS CIRCLED WHEN THERE IS MORE THAN ONE NAME, THE NUMBER WILL
BE CONSIDERED TO BE THAT OF THE FIRST NAME LISTED.
<PAGE>
OBTAINING A NUMBER

If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
businesses and all other entities), from a local office of the Social Security
Administration or Internal Revenue Service and apply for a number.

PAYEES EXEMPT FROM BACKUP WITHHOLDING

Payees specifically exempted from backup withholding on ALL payments include the
following:

- - An organization exempt from tax under section 501(a), or an individual
retirement plan ('IRA'), or a custodial account under 403(b)(7), if the
account satisfies the requirements of section 401(f)(2).
- - The United States or any of its agencies or instrumentalities.
- - A state, the District of Columbia, a possession of the United States, or any
of their political subdivisions or instrumentalities.
- - A foreign government or any of its political subdivisions, agencies, or
instrumentalities.
- - An international organization or any of its agencies or instrumentalities.

Payees that may be exempt from backup withholding include the following:

- - A corporation.
- - A financial institution.
- - A dealer in securities or commodities required to register in the United
States, the District of Columbia, or a possession of the United States.
- - A real estate investment trust.
- - A common trust fund operated by a bank under section 584(a).
- - A trust exempt from tax under Section 664 or described in Section 4947.
- - An entity registered at all times during the tax year under the Investment
Company Act of 1940.
- - A foreign central bank of issue.
- - A middleman known in the investment community as a nominee or who is listed in
the most recent publication of the American Society of Corporate Secretaries,
Inc., Nominee List.
- - A futures commission merchant registered with the Commodity Futures Trading
Commission.

EXEMPT PAYEES DESCRIBED ABOVE SHOULD FILE FORM W-9 TO AVOID POSSIBLE ERRONEOUS
BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYOR, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYOR. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.

PAYMENTS THAT MAY BE EXEMPT FROM BACKUP WITHHOLDING
Payments of DIVIDENDS AND PATRONAGE DIVIDENDS not generally subject to backup
withholding include the following:

- - Payments to nonresident aliens subject to with-holding under section 1441.
- - Payments to partnerships not engaged in a trade or business in the United
States and that have at least one nonresident partner.
- - Payments of patronage dividends not paid in money.
- - Payments made by certain foreign organizations.
- - Section 404(k) payments made by an ESOP.

Payments of INTEREST not generally subject to backup withholding include the
following:

- - Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid in
the course of the payor's trade or business and you have not provided your
correct taxpayer identification number to the payor.
- - Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- - Payments described in section 6049(b)(5) to nonresident aliens.
- - Payments on tax-free covenant bonds under section 1451.
- - Payments made by certain foreign organizations.
- - Mortgage interest paid by you.
Other types of payments that are not generally subject to backup withholding
include the following:

- - Wages
- - Distributions from a pension, annuity, profit-sharing or stock bonus plan, or
an IRA.
- - Distributions from an owner-employee plan.
- - Certain surrenders of life insurance contracts.
- - Gambling winnings, if withholding is required under section 3402(q). However,
if withholding is not required under section 3402(q), backup withholding
applies of you fail to furnish a TIN.
- - Real estate transactions reportable under section 6045.
PRIVACY ACT NOTICE-- Section 6109 of the Internal Revenue Code requires you to
give your correct TIN to persons who must file information returns with the IRS
to report interest, dividends, and certain other income paid to you, mortgage
interest you paid, the acquisition or abandonment of secured property,
cancellation of debt, or contributions you made to an IRA. The IRS uses the
numbers for identification purposes and to help verify the accuracy of your tax
return. The IRS may also provide this information to the Department of Justice
for civil and criminal litigation and to cities, states, and the District of
Columbia to carry out their tax laws.

You must provide your TIN whether or not you are required to file a tax return.
Payors must generally withhold 31% of taxable interest, dividend, and certain
other payments to a payee who does not give a TIN to a payor. Certain penalties
may also apply.

PENALTIES

(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.-- If you fail
to furnish your correct taxpayer identification number to a requester, you are
subject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.-- If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.-- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
(4) MISUSE OF TINS.-- If the requester discloses or uses TINs in violation of
Federal law, the requester may be subject to civil and criminal penalties.

FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.

<PAGE>
A

ARDEN GROUP, INC. July 17, 1997

To Our Stockholders:

Arden Group, Inc. (the "Company") is offering to acquire up to an aggregate
of 250,000 shares of its Class A Common Stock for cash at the rate of $65.00 per
share (the "Offer"). If more than 250,000 shares of Class A Common Stock are
tendered pursuant to the Offer, the Company will acquire 250,000 shares tendered
on a pro rata basis from each stockholder tendering in the Offer (with
adjustments to avoid purchases of fractional shares) based on the number of
shares tendered by each stockholder. The Offer is not conditional upon any
minimum number of shares being tendered.

The Offer, including the purposes, effects, conditions, tax consequences and
advantages and disadvantages thereof and certain information concerning the
Company, are explained in the enclosed Offering Statement, Letter of Transmittal
and the Company's Form 10-Q for the fiscal quarter ended March 29, 1997.

Each stockholder of the Company may elect, in its, his or her sole
discretion, not to tender any shares or to tender some or all of its, his or her
shares.

The Offer has relative advantages and disadvantages and those advantages and
disadvantages may vary from stockholder to stockholder. As a consequence, each
stockholder is urged to examine carefully the enclosed Offering Statement,
Letter of Transmittal and Form 10-Q before making a decision with respect to the
Offer.

If you decide not to participate in the Offer, you do not need to take any
action.

If you decide to participate in the Offer, the instructions on how to tender
shares are explained in detail in the enclosed materials.

I have informed the Company that I do not intend to tender any shares in the
Offer. The Company does not know whether any of the other officers, directors or
affiliates of the Company will tender shares in the Offer. However, the trustee
of the Company's Stock Bonus Plan, which plan is a stockholder of the Company,
may tender shares allocated to the accounts of plan participants in accordance
with instructions from plan participants. Neither the Company nor its Board of
Directors makes any recommendation to any stockholder as to whether to tender or
to refrain from tendering all or any shares in the Offer.

Very truly yours,

Bernard Briskin
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE OFFICER

<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 MARCH 29, 1997

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 March 29, 1997 was:

766,753 of Class A common stock
342,246 of Class B common stock

<PAGE>

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
BALANCE SHEETS
(In Thousands)

A S S E T S

March 29, December 28,
1997 1996
------------ ------------
Current assets:

Cash and cash equivalents $ 5,734 $ 5,473
Marketable securities 23,567 21,356
Accounts and notes receivable, net 7,956 6,629
Inventories 9,790 10,728
Prepaid and other 1,398 3,102
------------ ------------
Total current assets 48,445 47,288

Notes receivable 75 82

Property for resale or sublease 1,433 1,440

Property, plant and equipment, at cost, less
accumulated depreciation and amortization
of $26,670 and $25,667, respectively 39,353 39,875

Other assets 2,355 2,563
------------ ------------

Total assets $91,661 $91,248
------------ ------------
------------ ------------

See Notes to Financial Statements

<PAGE>

PART I. FINANCIAL INFORMATION, Continued

ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
BALANCE SHEETS
(In Thousands)

LIABILITIES AND STOCKHOLDERS' EQUITY

March 29, December 28,
1997 1996
------------ ------------

Current liabilities:

Accounts payable, trade $ 13,694 $11,357
Other current liabilities 11,831 11,816
Current portion of long-term debt 986 973
------------ ------------
Total current liabilities 26,511 24,146

Long-term debt, including obligations
under capital leases of $3,523 and
$3,578, respectively 6,425 6,663

Deferred income taxes 1,694 2,160

Other liabilities 2,288 2,542
------------ ------------
Total liabilities 36,918 35,511
------------ ------------

Commitments and contingent liabilities

Stockholders' equity:

Class A common stock 276 276
Class B common stock 86 86
Capital surplus 5,617 5,617
Notes receivable from officer/director (295) (369)
Unrealized loss on available-for-sale
securities (158)
Retained earnings 52,970 53,880
------------ ------------
58,496 59,490

Less: treasury stock, at cost 3,753 3,753
------------ ------------
Total stockholders' equity 54,743 55,737
------------ ------------
Total liabilities and
stockholders' equity $91,661 $91,248
------------ ------------
------------ ------------

See Notes to Financial Statements

<PAGE>

PART I. FINANCIAL INFORMATION, Continued

ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share and Other Data)

Thirteen Weeks Ended
March 29, March 30,
1997 1996
--------------- --------------

Sales $64,961 $60,616

Cost of sales 39,414 36,970
------------ -----------
Gross profit 25,547 23,646
Delivery, selling, general and
administrative expenses 22,815 23,073
------------ -----------
Operating income 2,732 573
Interest, dividend and other income
(expense), net 399 379
Net unrealized loss on trading securities (201) (713)
------------ -----------
Income from continuing operations
before income taxes 2,930 239
Income tax provision 1,145 105
------------ -----------
Income from continuing operations,
net of income taxes 1,785 134

Loss from discontinued operations, net of
income tax benefits of $1,577 (2,695)
------------ -----------
Net income (loss) $ (910) $ 134
------------ -----------
------------ -----------

Net income (loss) per common share:
Income from continuing operations $1.61 $ .12
Loss from discontinued operations (2.43)
------------ -----------
Net income (loss) $ (.82) $ .12
------------ -----------
------------ -----------
Weighted average common shares outstanding 1,108,999 1,133,141
------------ -----------
------------ -----------

See Notes to Financial Statements

<PAGE>

PART I. FINANCIAL INFORMATION, Continued

ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
STATEMENTS OF CASH FLOWS
(In Thousands)

Thirteen Weeks Ended
March 29, March 30,
1997 1996
------------ ------------
Cash flows from operating activities:
Cash received from customers $65,440 $61,589
Cash paid to suppliers and employees (62,018) (61,689)
Investment in trading securities (1,211) (1,938)
Interest and dividends received 392 404
Interest paid (151) (172)
Income taxes (paid)/refund 5 (250)
------------ ------------
Net cash provided by (used in)
operating activities 2,457 (2,056)
------------ ------------

Cash flows from investing activities:
Transfer to discontinued operations (207)
Capital expenditures (784) (8,127)
Property in escrow 2,664
Purchases of marketable securities (2,636)
Sales of marketable securities 1,380
Proceeds from the sale of property, plant and
equipment, liquor licenses and leasehold
interests 146 2,239
Payments received on notes from the sale of
property, plant and equipment and liquor
licenses 56 1
------------ ------------
Net cash provided by (used in)
investing activities (2,045) (3,223)
------------ ------------

Cash flows from financing activities:
Purchase and retirement of stock (373)
Principal payments under capital lease
obligations (50) (91)
Principal payments on long-term debt (175) (187)
Payment of loan from officer/director 74
------------ ------------
Net cash used in financing activities (151) (651)
------------ ------------

Net increase (decrease) in cash 261 (5,930)

Cash at beginning of year 5,473 10,102
------------ ------------
Cash at end of quarter $5,734 $4,172
------------ ------------
------------ ------------

See Notes to Financial Statements

<PAGE>

PART I. FINANCIAL INFORMATION, Continued

ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
STATEMENTS OF CASH FLOWS
(In Thousands)

RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:

Thirteen Weeks Ended
March 29, March 30,
1997 1996
------------ ------------

Net income (loss) $ (910) $ 134

Adjustments to reconcile net income to net
cash provided by operating activities:
Loss from discontinued operations 2,695
Depreciation and amortization 1,233 1,060
Unrealized loss on trading securities 201 713
Provision for losses on accounts and
notes receivable 30 33
Net gain from sale of property, plant
and equipment, liquor licenses and early
lease terminations (58) (566)
Gain on sale of marketable securities (221) (91)

Change in assets and liabilities net of effects from noncash
investing and financing activities:

(Increase) decrease in assets:
Marketable securities (1,198) (1,938)
Accounts and notes receivable 1,732 878
Inventories 938 (125)
Prepaid expenses (46) (303)
Other assets 200 (46)

Increase (decrease) in liabilities:
Accounts payable and other current
liabilities (1,524) (1,568)
Deferred income taxes (361) (223)
Other liabilities (254) (14)
------------ ------------
Net cash provided by (used in) operating
activities $2,457 $(2,056)
------------ ------------
------------ ------------

See Notes to Financial Statements

<PAGE>

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 for a fair presentation.

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. Intercompany balances and transactions are eliminated. The
Company operates exclusively in the supermarket business.

The accompanying consolidated financial statements for the three months
ended March 29, 1997 and March 30, 1996 have been prepared in accordance
with generally accepted accounting principles ("GAAP"). These financial
statements have not been audited by independent public accountants but
include all adjustments, consisting of normal, recurring accruals, which in
the opinion of management of the Company, are necessary for a fair
presentation of the financial position and the results of operations for
the periods presented. The accompanying consolidated balance sheet as of
December 28, 1996 has been derived from audited financial statements, but
does not include all disclosures required by GAAP. The results of
operations for the three months ended March 29, 1997 are not necessarily
indicative of the results to be expected for the full year ending January
3, 1998.

Certain prior year amounts have been reclassified to conform to current
year presentation.

2. MARKETABLE SECURITIES:

Management determines the appropriate classification of its investments in
marketable securities at the time of purchase and reevaluates such
determination at each balance sheet date. Securities that are bought and
held principally for the purpose of selling them in the near term are
classified as trading securities and unrealized holding gains and losses are
included in earnings. Debt securities for which the Company does not have
the intent or ability to hold to maturity and equity securities are
classified as available-for-sale. Available-for-sale securities are carried
at fair value, with the unrealized gains and losses, net of tax, reported as
a separate component of shareholders' equity.

<PAGE>

PART I. FINANCIAL INFORMATION, Continued

NOTES TO FINANCIAL STATEMENTS, Continued

<TABLE>
<CAPTION>
Unrealized Market
Cost Gain (Loss) Value
---- ----------- ------
(in thousands)
<S> <C> <C> <C>
As of March 28, 1997:
Trading securities:
Fixed income securities $ 8,598 $ (247) $ 8,351
Mortgage-backed government securities 1,111 (26) 1,085
Collateralized mortgage obligations 365 (7) 358
------- -------- -------
10,074 (280) 9,794
Available-for-sale securities:
Mutual funds 13,632 (90) 13,542
Equity securities 832 (601) 231
------- -------- -------
14,464 (691) 13,773
------- -------- -------
Total $24,538 $ (971) $23,567
------- -------- -------
------- -------- -------
As of December 28, 1996:
Trading securities:
Mutual funds $10,997 $ 35 $11,032
Fixed income securities 7,707 (662) 7,045
Equity securities 1,413 114 1,527
Mortgage-backed government securities 1,419 7 1,426
Collateralized mortgage obligations 328 (2) 326
------- -------- -------
Total $21,864 $ (508) $21,356
------- -------- -------
------- -------- -------
</TABLE>

3. ARBITRATION AWARD:

On March 28, 1997, the Company received notice of a decision rendered in the
arbitration proceedings relating to the sale in 1993 of its communication
equipment business to Danka Business Systems PLC. The arbitrators upheld
Arden's claim for approximately $2,200,000 and awarded Danka on its
counterclaims approximately $4,065,000. As a result of this decision, the
Company paid Danka approximately $1,865,000 in April 1997.

As the result of an earlier arbitration, Arden was awarded, in April 1994,
$1,750,000. No income or expenses related to that award and no expenses
related to the just completed arbitration were recognized in the 1994 and
1995 statements of operations of Arden. In 1996, arbitration costs which
exceeded the first arbitration award were expensed as discontinued
operations.

The above arbitration decisions, the associated expenses and the resulting
adjustments to the purchase price for the transaction resulted in the Company
recognizing a loss, net of taxes, from discontinued operations of
approximately $2,695,000 in the first quarter of fiscal 1997.

<PAGE>

PART I. FINANCIAL INFORMATION, Continued

NOTES TO FINANCIAL STATEMENTS, Continued

The award of attorneys fees and costs incurred in both arbitrations is
subject to further arbitration proceedings. The Company does not believe
adjustments resulting from this arbitration will have a material adverse
impact on its financial position.

4. EARNINGS PER SHARE:

Net income per share is based on the weighted average number of common
shares outstanding during the period.

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share."
SFAS No. 128 supersedes and simplifies the existing computational
guidelines under Accounting Principles Board Opinion No. 15, "Earnings Per
Share." It is effective for financial statements issued for periods ending
after December 15, 1997. Among other changes, SFAS No. 128 eliminates the
presentation of primary EPS and replaces it with basic EPS for which common
stock equivalents are not considered in the computation. It also revises
the computation of diluted EPS. It is not expected that the adoption of
SFAS No. 128 will have a material impact on the earnings per share results
reported by the Company under the Company's current capital structure.

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 1997, the Company had a net loss of ($910,000)
compared to net income of $134,000 during the first quarter of 1996. As
described below, included in 1997 was a $2,695,000 loss from discontinued
operations. Pretax income from continuing operations was $2,930,000 for the
first quarter of 1997 compared to pretax income of $239,000 for the first
quarter of 1996.

During the first quarter of 1997, the Company's operating income was $2,732,000
compared to operating income of $573,000 during the first quarter of 1996.

Sales from the Company's 12 supermarkets in the greater Los Angeles area were
$64,961,000 in the first quarter of 1997, an increase of 7.2% from the first
quarter of 1996, when sales were $60,616,000. Chain wide same store sales for
stores opened the entire quarter increased 5.3% in the first quarter of 1997
compared to the prior year, even though sales of certain stores have been
negatively impacted by competitors opening new stores. The increase in same
store sales is due to a number of factors including a more robust economy in
Southern California, the effect of product pricing decisions, the positive
impact of store remodel activity and the timing of Easter which fell in the
first quarter of 1997 but in the second

<PAGE>

PART I. FINANCIAL INFORMATION, Continued

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, Continued

quarter of 1996. The Calabasas store, opened in February 1996, has experienced
higher sales and better expense controls in 1997 compared to the same period in
1996.

The Company's gross profit from supermarket operations as a percentage of sales
was 39.3% in the first quarter of 1997 compared to 39.0% in the same period of
1996. Union wage and benefit increases are taken into consideration on product
pricing decisions. The sales mix in 1997 favored higher gross margin
categories.

Delivery, selling, general and administrative ("DSG&A") expenses for supermarket
operations as a percentage of sales were 35.1% in the first quarter of 1997
compared to 38.1% the first quarter of 1996. DSG&A activity in 1997 reflects an
improvement in labor efficiency at the stores, improved purchasing methods of
store services and supplies and lower workers' compensation costs. The higher
expense in 1996 is due, in part, to preopening expense, promotional costs and
higher than expected operating costs associated with the Gelson's market in
Calabasas which opened in February 1996. Additionally, in 1996, certain costs
relating to the sublease of the former AMG Holdings headquarters facility were
expensed. Included in 1996 DSG&A is a gain of $584,000 relating to the property
sale of a former Mayfair market.

Interest and dividend income was $375,000 in the first quarter of 1997 compared
to $487,000 for the same period in 1996 due to decreased levels of investments
and a decrease in earnings rates.

Interest expense was $172,000 in the first quarter of 1997 compared to $188,000
in the first quarter of 1996.

Other income (expense) includes realized gains on the sale of marketable
securities of $208,000 and $91,000 in the first quarters of 1997 and 1996,
respectively.

In the first quarter of 1997, the market value of the Company's holdings in
trading securities decreased. Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS
115") requires that unrealized holding gains and losses for trading securities
shall be included in the determination of net income. As a result, net
unrealized losses of $201,000 related to marketable securities occurred in the
first quarter of 1997 compared to net unrealized losses of $713,000 in the first
quarter of 1996. Unrealized losses in the first quarter of 1997 on securities
deemed to be available for sale were $158,000 (net of income tax benefits of
$105,000) and were recorded as a separate component of shareholders' equity.
See Footnote 2 of Notes to Financial Statements.

The loss on discontinued operations of $2,695,000 (net of income tax benefits of
$1,577,000) resulted from a decision in an arbitration proceeding relating to
the sale in 1993 of the Company's communication equipment business and is
reflected on the financial statements as an adjustment to the purchase price.
See Footnote 3 of Notes to Financial Statements.

<PAGE>

PART I. FINANCIAL INFORMATION, Continued

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, Continued

CAPITAL EXPENDITURES/LIQUIDITY

In 1996, the Company purchased a site for a potential Gelson's Market in Santa
Barbara, California. The Company has leased the Santa Barbara property on a
short term lease (18 months) to maximize its return on the property on an
interim basis while it analyzes its ultimate use. In 1995, the Company entered
into long-term leases to open two new Gelson's markets. The Northridge site is
expected to open in 1997. The opening of Gelson's markets on each of these
sites is subject to, among other things, the Company's due diligence, receipt of
necessary governmental approvals and the developers fulfilling certain
conditions.

The Company plans to utilize cash-on-hand (including marketable securities) and
cash flow from operations to fund capital expenditures in 1997. Additionally,
the Company has a term loan line of credit totaling $10,000,000 to finance store
fixtures and equipment. At the end of the first quarter of 1997 the outstanding
balance from the 1995 borrowing on the line was $2,062,500.

The Company also has two revolving lines of credit totaling $12,000,000. There
were no borrowings or outstanding balances against either of the revolving lines
during the first quarter of 1997.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

<PAGE>

PART II. OTHER INFORMATION

ITEMS 1. THROUGH 5.

Not applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

Exhibit 27 - Financial Data Schedules

(b) Reports on Form 8-K:

The Company filed a Form 8-K on April 4, 1997. The Form 8-K reported under
Item 5 "Other Events," disclosing the decision rendered in the arbitration
proceedings between the Company and Danka Business Systems PLC ("Danka")
relating to the sale in 1993 of the communication equipment business of the
Company to Danka.

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 12, 1997 ERNEST T. KLINGER
------------------------ ------------------------------
Ernest T. Klinger
Vice President Finance and Administration
and Chief Financial Officer
(Authorized Signatory)

<PAGE>
OFFER TO PURCHASE FOR CASH
250,000 SHARES OF CLASS A COMMON STOCK
OF
ARDEN GROUP, INC.
AT
$65.00 PER SHARE

THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS
WILL EXPIRE AT 12:00 MIDNIGHT, LOCAL TIME IN NEW YORK CITY,
ON AUGUST 13, 1997, UNLESS THE OFFER IS EXTENDED.

To Brokers, Dealers, Commercial Banks,

Trust Companies and Other Nominees:

We have been appointed by Arden Group, Inc., a Delaware corporation (the
"Company"), to act as Information Agent in connection with the Company's offer
to purchase up to 250,000 shares of Class A Common Stock, par value $.25 per
share (the "Class A Common Stock"), at a price of $65.00 per share, net to the
seller in cash without interest thereon, upon the terms and subject to the
conditions set forth in the Offering Statement, dated July 17, 1997 (the
"Offering Statement"), and in the related Letter of Transmittal (which together
constitute the "Offer") enclosed herewith. Holders of shares of Class A Common
Stock whose certificates for such shares (the "Share Certificates") are not
immediately available or who cannot deliver their Share Certificates and all
other required documents to Continental Stock Transfer & Trust Company (the
"Depositary") prior to the Expiration Date (as defined in the Offering
Statement), must tender their shares of Class A Common Stock according to the
guaranteed delivery procedures set forth in the Offering Statement and Letter of
Transmittal.

Please furnish copies of the enclosed materials to those of your clients for
whose accounts you hold shares of Class A Common Stock registered in your name
or in the name of your nominee.

The Offer is subject to the terms and conditions contained in the Offering
Statement. See the Offering Statement.

Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:

1. The Offering Statement, dated July 17, 1997.

2. Letter of Transmittal to tender shares of Class A Common Stock for your
use and for the information of your clients. Facsimile copies of the Letter of
Transmittal may be used to tender shares of Class A Common Stock.

3. A form of letter which may be sent to your clients for whose accounts you
hold shares of Class A Common Stock registered in your name or in the name of
your nominee, with space provided for obtaining such clients' instructions with
regard to the Offer.

4. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.

5. A return envelope addressed to the Depositary.
<PAGE>
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER, PRORATION PERIOD AND
WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, LOCAL TIME IN NEW YORK CITY, ON
WEDNESDAY, AUGUST 13, 1997 UNLESS THE OFFER IS EXTENDED.

In order to take advantage of the Offer, (i) a duly executed and properly
completed Letter of Transmittal and any required signature guarantees, or other
required documents should be sent to the Depositary, and (ii) Share Certificates
representing the tendered shares of Class A Common Stock should be delivered to
the Depositary, all in accordance with the instructions set forth in the Letter
of Transmittal and the Offering Statement.

If holders of shares of Class A Common Stock wish to tender, but it is
impracticable for them to forward their Share Certificates or other required
documents on or prior to the Expiration Date, a tender may be effected by
following the guaranteed delivery procedures specified in the Offering Statement
and Letter of Transmittal.

The Company will not pay any commissions or fees to any broker, dealer or
other person (other than the Depositary and the Information Agent, as described
in the Offering Statement) for soliciting tenders of shares of Class A Common
Stock pursuant to the Offer. The Company will, however, upon request, reimburse
you for customary clerical and mailing expenses incurred by you in forwarding
any of the enclosed materials to your clients. The Company will pay or cause to
be paid any stock transfer taxes payable on the transfer of shares of Class A
Common Stock to it, except as otherwise provided in Instruction 7 of the Letter
of Transmittal.

Any inquiries you may have with respect to the Offer should be addressed to,
and additional copies of the enclosed material may be obtained from, the
Information Agent at its address and telephone number set forth on the back
cover of the Offering Statement.

Very truly yours,

Beacon Hill Partners, Inc.

NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE COMPANY, THE DEPOSITARY OR THE INFORMATION
AGENT, OR ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO
MAKE ANY STATEMENT OR USE ANY DOCUMENT ON BEHALF OF THEM IN CONNECTION WITH THE
OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.

<PAGE>
OFFER TO PURCHASE FOR CASH
250,000 SHARES OF CLASS A COMMON STOCK
OF
ARDEN GROUP, INC.
AT
$65.00 PER SHARE

THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS
WILL EXPIRE AT 12:00 MIDNIGHT, LOCAL TIME IN NEW YORK CITY,
ON AUGUST 13, 1997, UNLESS THE OFFER IS EXTENDED.

To Our Clients:

Enclosed for your consideration are the Offering Statement, dated July 17,
1997 (the "Offering Statement"), and the related Letter of Transmittal (which
together constitute the "Offer") relating to the offer by Arden Group, Inc., a
Delaware corporation (the "Company"), to purchase up to 250,000 shares of Class
A Common Stock, par value $.25 per share (the "Class A Common Stock"), of the
Company at a price of $65.00 per share, net to the seller in cash without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer. Holders of shares of Class A Common Stock whose certificates for such
shares (the "Share Certificates") are not immediately available or who cannot
deliver their Share Certificates and all other required documents to the
Depositary (as defined below) prior to the Expiration Date (as defined in the
Offering Statement), must tender their shares of Class A Common Stock according
to the guaranteed delivery procedures set forth in the Offering Statement and
Letter of Transmittal.

We are the holder of record of shares of Class A Common Stock held by us for
your account. A tender of such shares can be made only by us as the holder of
record and pursuant to your instructions. The Letter of Transmittal is furnished
to you for your information only and cannot be used by you to tender shares of
Class A Common Stock held by us for your account.

Accordingly, we request instructions as to whether you wish to have us
tender on your behalf any or all shares of Class A Common Stock held by us for
your account pursuant to the terms and conditions set forth in the Offer.

Please note the following:

1. The tender price is $65.00 per share of Class A Common Stock net to you
in cash without interest thereon, upon the terms and subject to the conditions
set forth in the Offer.

2. The Offer is being made for 250,000 shares of Class A Common Stock.

3. The Offer is subject to the terms and conditions contained in the
Offering Statement. See the Offering Statement.

4. Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 7 of the Letter of
Transmittal, stock transfer taxes on the purchase of shares of Class A Common
Stock by the Company pursuant to the Offer.

5. The Offer and withdrawal rights will expire at 12:00 midnight, local time
in New York City, on Wednesday, August 13, 1997, unless the Offer is extended.

6. Notwithstanding any other provisions of the Offer, payment for shares of
Class A Common Stock accepted for payment pursuant to the Offer will in all
cases be made only after timely receipt by Continental Stock Transfer & Trust
Company (the "Depositary") of (a) certificates for such shares of Class A Common
Stock pursuant to the procedures set forth in the Offering Statement, (b) the
Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, with any required signature guarantees, and (c) any other documents
required by the Letter of Transmittal. Accordingly, payment may not be made to
all tendering stockholders at the same time depending upon when Share
Certificates are actually received by the Depositary.
<PAGE>
If you wish to have us tender any or all of the shares of Class A Common
Stock held by us for your account, please so instruct us by completing,
executing, detaching and returning to us the instruction form set forth on the
next page of this letter. If you authorize the tender of your shares of Class A
Common Stock, all such shares will be tendered unless otherwise specified on the
next page of this letter. An envelope to return your instructions to us is
enclosed. Your instructions should be forwarded to us in ample time to permit us
to submit a tender on your behalf prior to the expiration of the Offer.

The Offer is not being made (nor will tenders be accepted from or on behalf
of) holders of shares of Class A Common Stock residing in any jurisdiction in
which the making of the Offer or the acceptance thereof would not be in
compliance with the securities, blue sky or other laws of such jurisdiction.
However, the Company may, in its discretion, take such action as it may deem
necessary to make the Offer in any jurisdiction and extend the Offer to holders
of shares of Class A Common Stock in such jurisdiction.

In any jurisdiction where the securities, blue sky or other laws require the
Offer to be made by a licensed broker or dealer, the Offer will be deemed to be
made on behalf of the Company by one or more registered brokers or dealers that
are licensed under the laws of such jurisdiction.
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFERING STATEMENT TO PURCHASE
FOR CASH 250,000 SHARES OF CLASS A COMMON STOCK
OF
ARDEN GROUP, INC.

The undersigned acknowledge(s) receipt of your letter and the enclosed
Offering Statement dated July 17, 1997 and the related Letter of Transmittal in
connection with the offer by Arden Group, Inc., a Delaware corporation (the
"Company"), to purchase up to 250,000 shares of Class A Common Stock, par value
$.25 per share (the "Class A Common Stock"), of the Company at $65.00 per share
in cash.

This will instruct you to tender to the Company the number of shares of
Class A Common Stock indicated below (or if no number is indicated below, all
shares of Class A Common Stock) which are held by you for the account of the
undersigned, upon the terms and subject to the conditions set forth in the
Offer.
Number of shares of

Class A Common Stock to Be Tendered:

Date:

SIGN HERE

Signature(s)
- -------------------------------------------------------------------------------

(Print Name(s))
- ----------------------------------------------------------------------------

(Print Address(es))
- -------------------------------------------------------------------------

(Area Code and
Telephone Number(s))
- ----------------------------------------------------------------------

(Taxpayer Identification or
Social Security Number(s))
- ------------------------------------------------------------------

<PAGE>
TENDER ELECTION NOTICE
FOR EMPLOYEES IN THE
ARDEN GROUP, INC. STOCK BONUS PLAN

Arden Group, Inc. (the "Company") is pleased to announce that it has (1)
offered to buy up to 250,000 shares of the Class A Common Stock of the Company
and (2) amended the Arden Group, Inc. Stock Bonus Plan (the "Plan") and related
Trust to permit all participants in the Plan to decide whether to tender the
shares held under the Plan for their account. This Notice explains your right to
tender or not tender these shares held in your Plan account ("Account").

The Company has offered to buy, upon the terms and conditions set forth in
the enclosed Offering Statement, up to 250,000 shares of the Class A Common
Stock of the Company at a rate of $65.00 per share (the "Offer"). All
participants may direct City National Bank (the "Plan Trustee") as to whether or
not to tender the shares of Class A Common Stock held in their Accounts. If you
own any shares of Class A Common Stock directly (other than in the Plan), you
should follow the instructions in the Offering Statement to tender or not tender
those shares.

Attached to this Notice is a Tender Election Form. IT IS CRITICAL THAT THE
PLAN TRUSTEE RECEIVE YOUR COMPLETED TENDER ELECTION FORMS BY THE CLOSE OF
BUSINESS ON AUGUST 6, 1997. If the Plan Trustee does not RECEIVE your completed
election forms at the address specified on that form by that time, the Plan
Trustee will decide whether or not to tender the shares in your Account.

You should also know that the Company has amended the Plan to provide that
former employees who terminated employment on or before June 30, 1997 may elect
to receive a cash distribution of the cash portion of their Account from the
Plan (a "Special Cash Distribution"). These distributions are not available to
employees who terminate employment after June 30, 1997.

For your information, we have enclosed a copy of your 1996 Plan Year Account
statement. Please note that due to minor reallocations since December 31, 1996,
the number of shares currently in your Account may be slightly different than
the number shown on your statement and your Account statement does not reflect
earnings subsequent to December 31, 1996.

WHAT IS THE OFFER?

The Company has offered to purchase up to 250,000 shares of the issued and
outstanding shares of Class A Common Stock for cash at the rate of $65.00 per
share. The terms of the Offer are described in detail in the Offering Statement.
The Offer applies to all of the existing shareholders of the Company, including
the Plan.

As described in the Offering Statement, if more than 250,000 shares of Class
A Common Stock are tendered in the Offer, then the Company will only acquire
250,000 shares on a pro rata basis according to the number of shares tendered by
each stockholder. For example, assume you tender all 300 shares in your Account
and that a total of 300,000 shares are tendered in the Offer. In this case, the
Company will only buy 250,000 shares, prorating the shares tendered by each
person. Accordingly, the Company will only buy 250 of the 300 shares allocated
to your Account. Shortly after the Offer is completed, the Company intends to
notify employees who tendered shares as to the percentage of tendered shares
that were sold.

At the current time, there are approximately 766,753 shares that may be
tendered pursuant to the Offer. Of these, approximately 208,662 shares are held
by the Plan; approximately 29,300 shares are allocated to the Accounts of active
employees and approximately 179,362 shares are allocated to the Accounts of
former employees. Bernard Briskin, Chairman of the Board, President and Chief
Executive Officer of the Company, has advised the Company that he will not
tender any shares pursuant to the Offer.

The Company has amended the Plan and Trust documents so that former and
active employees who have Account balances in the Plan may direct the Plan
Trustee whether or not to tender the shares held in their Accounts. Under the
terms of this amendment, you are responsible for deciding whether or not the
shares held in your Account will be tendered. Accordingly, you are a "Named
Fiduciary" for this purpose.
<PAGE>
Under federal pension law, the Plan Trustee must follow your directions unless
they are not proper or they are contrary to federal pension laws (for example,
imprudent).

You should determine whether you wish to direct the Plan Trustee to tender
shares in response to the Offer and, if so, whether you wish to tender some or
all of your shares of Class A Common Stock held in your Account. You should
carefully review the terms of this Notice, the Offering Statement and the other
documents accompanying this package in order to make this decision.

Neither the Company, the Plan Committee nor the Plan Trustee are making any
recommendation as to whether you should or should not tender the shares
allocated to your Account. This decision is to be made by you in your sole
discretion.

WHAT HAPPENS TO MY ACCOUNT AFTER THE OFFER?

Under the terms of the Plan and related Trust document, Plan assets are to
be invested solely in securities issued by the Company. If the Plan has any
cash, whether due to a cash contribution from the Company or the sale of
securities of the Company (including the proceeds from the Offer), the Plan
Trustee may invest the funds in securities issued or guaranteed by the United
States, interest-bearing savings accounts, money market or cash management
accounts (collectively "Cash-Like Investments"), until the Plan Trustee decides
and is able to purchase additional securities of the Company. As of the present
time, approximately 45% of the Plan's assets are held in Cash-Like Investments.

If you instruct the Plan Trustee not to tender any shares (and the Plan
Trustee determines that your instructions are proper and not in violation of
federal pension laws), the amount of Cash-Like Investments and the number of
shares of Class A Common Stock held in your Account will not change as a result
of the Offer.

If you instruct the Plan Trustee to tender some or all of the shares in your
Account (and the Plan Trustee determines that your instructions are proper and
not in violation of federal pension laws), the total number of shares of Class A
Common Stock allocated to your Account will decrease. In addition, the amount of
cash in your Account will be increased by the proceeds from the shares that are
sold. The proceeds from the Offer will be invested in Cash-Like Investments,
until the Trustee decides to purchase additional securities of the Company.
PLEASE BE AWARE THAT IF YOU TENDER SHARES AND THE PROCEEDS ARE ULTIMATELY
REINVESTED IN SHARES, THE NET EFFECT OF THE TENDER AND THE REINVESTMENT MAY
RESULT IN AN INCREASE OR DECREASE IN THE NUMBER OF SHARES HELD IN YOUR ACCOUNT.
IF, WHEN THE PROCEEDS ARE INVESTED, THE REINVESTMENT PURCHASE PRICE IS HIGHER
THAN THE TENDER PRICE, THIS WILL RESULT IN A DECREASE IN THE NUMBER OF SHARES
CREDITED TO YOUR ACCOUNT. IF THE REINVESTMENT PRICE IS LOWER THAN THE TENDER
PRICE, THIS WILL RESULT IN AN INCREASE IN THE NUMBER OF SHARES CREDITED TO YOUR
ACCOUNT.

Whether or not you tender shares, the Plan Trustee will still have the
authority to invest the Cash-Like Investments held in the Plan in securities of
the Company in the future or to sell securities of the Company in response to
the Offer or in the future.

The amounts, if any, held in your Account after completion of the Offer will
remain in the Plan. Under the terms of the Plan, you are not eligible for a
distribution while you are an employee. You will be eligible to receive these
when you attain age 65 (unless you are still employed), die or become disabled.

HOW DO I TENDER THE SHARES IN MY ACCOUNT?

In order to direct the Plan Trustee to tender some or all of the shares in
your Account, you should complete and sign the attached Tender Election Form
accompanying this package. You should specify whether you are tendering all of
the shares or only a portion of the shares held in your Account. If you tender
less than all of the shares, you should indicate the percentage of shares that
you are tendering.

2
<PAGE>
You should return the Tender Election Form to the Plan Trustee at the
address set forth in the form. THE TENDER ELECTION FORM MUST BE RECEIVED NO
LATER THAN THE CLOSE OF BUSINESS ON AUGUST 6, 1997. Questions regarding how to
tender and requests for information or additional copies of the Offering
Statement or of other documents should be directed to the Plan Trustee at the
address and telephone number set forth in the Tender Election Form.

The Plan Trustee will determine the aggregate number of shares elected to be
tendered by all active and former employees and tender them on behalf of the
Plan.

WHAT IF I DON'T WANT TO TENDER MY SHARES?

If you do not want to tender any shares held in your Account, you should
complete and sign the attached Tender Election Form and indicate that you did
not wish to tender any shares. You should return this Tender Election Form to
the Plan Trustee at the address set forth in the Tender Election Form. THE
TENDER ELECTION FORM MUST BE RECEIVED NO LATER THAN THE CLOSE OF BUSINESS ON
AUGUST 6, 1997.

If you do not return a Tender Election Form, the Plan Trustee will determine
whether to tender or not to tender all or some of the shares held in your
Account. Thus, failure to return a completed Tender Election Form may result in
some or all of the shares held in your Account being tendered, as the Plan
Trustee determines.

WHAT HAPPENS IF I DON'T RETURN A TENDER ELECTION FORM?

If you do not return a Tender Election Form, the Plan Trustee will determine
whether to tender or not tender all or some of the shares held in your Account.

WHAT IF I CHANGE MY MIND?

ANY PERSON WHO COMPLETES A TENDER ELECTION FORM MAY CHANGE HIS OR HER
ELECTION AT ANY TIME PRIOR TO THE CLOSE OF BUSINESS ON AUGUST 6, 1997 BY TIMELY
DELIVERING A WRITTEN NOTICE OF WITHDRAWAL TO THE PLAN TRUSTEE, CITY NATIONAL
BANK, ATTENTION: PAUL SINNOTT, 400 NORTH ROXBURY DRIVE, SUITE 600, BEVERLY
HILLS, CALIFORNIA 90210, ALONG WITH A REVISED ELECTION SPECIFYING THE PERCENTAGE
OF SHARES YOU WISH TO HAVE THE PLAN TRUSTEE TENDER ON YOUR BEHALF.

WILL I BE TAXED IF I TENDER MY SHARES?

Because the shares of Class A Common Stock held in your Account are owned by
the Plan, there will be no tax imposed on either you or the Plan if you sell
your shares to the Company. The provisions in the Offering Statement entitled
"Certain Federal Income Tax Consequences" will not apply to you or to the Plan.

However, your decision to tender or not tender shares may have a potentially
negative impact on the taxation of your distribution from the Plan. You should
carefully read the enclosed NOTICE OF IRS TAX WITHHOLDING REQUIREMENTS and you
should consult with your individual tax adviser to understand the tax
consequences of these actions.

THERE ARE CERTAIN FAVORABLE TAX RULES APPLICABLE TO STOCK
DISTRIBUTIONS.These rules are described on page 5 of the attached Notice of IRS
Tax Withholding Requirements (see "Employer Stock or Securities"). Specifically,
if you receive a lump sum distribution of your Account and the distribution
includes shares, any net unrealized appreciation (the difference between the
shares' fair market value on the date of distribution and the Plan's cost basis)
in the shares is not taxable to you until you sell the shares. Thus, if you
tender the shares, any net unrealized appreciation in the shares that are sold
will be lost and the cost of the shares in your Account will be recalculated to
reflect current market prices.

3
<PAGE>
WHAT IS THE SPECIAL CASH DISTRIBUTION?

The Offer is being made to provide former employees with a mechanism to
receive a Plan distribution. Accordingly, the Company amended the Plan to allow
former employees who terminated employment on or before June 30, 1997 to elect
to receive a Special Cash Distribution. These Special Cash Distributions will
probably be made in late September or early October. Any shares of Class A
Common Stock held in the Accounts of former employees after completion of the
Offer will not be distributed as part of the Special Cash Distribution.

The amount of the Special Cash Distribution (for each former employee that
elects one) will be the sum of (1) the amount of cash and Cash-Like Investments
held in his or her Account as of December 31, 1996 (adjusted for gains and
losses through August 31, 1997) and (2) the amount of cash allocated to his or
her Account in exchange for the Class A Common Stock sold in the Offer.

Special Cash Distributions are not available to active employees.
Accordingly, you may not elect one. Please note that the election of Special
Cash Distributions by former employees will not affect the allocation of Class A
Common Stock or Cash-Like Investments in your Account.

WHAT ELSE SHOULD YOU CONSIDER?

Enclosed with this Notice is a copy of the Offering Statement, which
includes, among other things, information regarding the Company's business,
certain financial statements of the Company and the range of high and low sales
prices of the Class A Common Stock for each quarterly period during fiscal years
1995 and 1996 and through July 11, 1997. You should read this material carefully
in deciding whether to tender your shares.

For additional information, please contact George A. Ruth, Arden Group,
Inc., (310) 638-2842.

<TABLE>
<CAPTION>
<S> <C>
Enclosures: Copy of 1996 Plan Year Account Statement
Tender Election Form
Notice of IRS Tax Withholding Requirements
Offering Statement, dated July 17, 1997
Quarterly Report on Form 10-Q for the quarter ended
March 29, 1997
</TABLE>

4
<PAGE>
ARDEN GROUP, INC. STOCK BONUS PLAN
TENDER ELECTION FORM

Arden Group, Inc. (the "Company") has recently offered to purchase up to
250,000 shares of its Class A Common Stock for cash at the rate of $65.00 for
each and every share tendered. The offer is subject to the terms and conditions
of the Offering Statement, dated July 17, 1997 (the "Offering Statement") and
the Notice regarding tender elections (which together constitute the "Offer").
Please read these two documents and the Notice of IRS Tax Withholding
Requirements before you complete this Form. Then COMPLETE THIS FORM TO DIRECT
WHETHER YOU WANT TO DIRECT THE TRUSTEE OF THE ARDEN GROUP, INC. STOCK BONUS PLAN
(THE "PLAN") TO TENDER THE SHARES OF CLASS A COMMON STOCK HELD IN YOUR ACCOUNT
UNDER THE PLAN PURSUANT TO THE OFFER.

In order to complete this form, complete the Participant Information,
complete Box A (to tender all of your shares), Box B (to tender some, but not
all, of your shares) OR Box C (to tender no shares) below, AND sign and date the
form and return it to City National Bank, attention Paul Sinnott, 400 North
Roxbury Drive, Suite 600, Beverly Hills CA 90210. THE FORM MUST BE RECEIVED AT
THE ADDRESS ABOVE NO LATER THAN THE CLOSE OF BUSINESS ON AUGUST 6, 1997 IN ORDER
TO BE VALID.

IF YOU DO NOT RETURN THIS FORM, THE PLAN TRUSTEE WILL DECIDE WHETHER OR NOT
TO TENDER SHARES IN YOUR ACCOUNT. YOU MUST COMPLETE THIS FORM AND CHECK BOX C IN
ORDER TO ELECT NOT TO TENDER ANY SHARES.

PARTICIPANT INFORMATION

Your Name ______________________________________________________________

Social Security Number ____________________________ Phone
Number (___)____________________________________________________________

Address ________________________________________________________________

CHECK A, B OR C BELOW:

(A) ____ As a Named Fiduciary of my Account, I hereby direct the Plan Trustee to
TENDER ALL OF THE SHARES of Class A Common Stock held in my Account under the
Plan in accordance with the terms of the Offer.

(B) ____ As a Named Fiduciary of my Account, I hereby direct the Plan Trustee to
TENDER % (please specify the percentage) of the shares of Class A Common
Stock held in my Account under the Plan in accordance with the terms of the
Offer. I understand that the number of shares held in my Account may be slightly
different than the number shown in the December 31, 1996 Plan statement.

(C) ____ As a Named Fiduciary of my Account, I hereby direct the Plan Trustee
NOT TO TENDER ANY SHARES of Class A Common Stock held in my Account under the
Plan.

PARTICIPANT SIGNATURE

I have received and read the Notice regarding tender elections, Offering
Statement and the Notice of IRS Tax Withholding Requirements. I agree to the
terms and conditions in those materials. I understand that if more than 250,000
shares are tendered in the Offer, the Company shall purchase 250,000 shares on a
pro rata basis among all stockholders tendering shares according to the number
of shares tendered by each.

_____________________________________ ____________________________________

Participant Signature Date
<PAGE>

NOTICE OF IRS TAX WITHHOLDING REQUIREMENTS

This notice contains important tax information you will need before you decide
how to receive your benefits from the Arden Group, Inc. Stock Bonus Plan. It
does not address state income taxes , only federal taxes.

SUMMARY

A payment from the Plan that is eligible for "rollover" can be taken in two
ways. You may have all or any portion of your payment either 1) PAID IN A
"DIRECT ROLLOVER," (unless the payment is less than $200) or 2) PAID TO YOU. A
rollover is a payment of your Plan benefits to your individual retirement
arrangement (IRA) or to another employer plan. This choice will affect the tax
you owe.

If you choose a DIRECT ROLLOVER

- Your payment will not be taxed in the current year and no income tax
will be withheld.

- Your payment will be made directly to your IRA or, if you choose, to
another employer plan that accepts your rollover.

- Your payment will be taxed later when you take it out of the IRA or
the employer plan.

If you choose to have your Plan benefits PAID TO YOU

- You will receive only 80% of the payment, because the Plan
administrator is required to withhold 20% of the payment and send it
to the IRS as income tax withholding to be credited against your
taxes.

- Your payment will be taxed in the current year unless you roll it
over. You may be able to use special tax rules that could reduce the
tax you owe. However, if you receive the payment before age 59-1/2,
you also may have to pay an additional 10% tax.

- You can roll over the payment to your IRA or to another employer plan
that accepts your rollover within 60 days of receiving the payment.
The amount rolled over will not be taxed until you take it out of the
IRA or employer plan.

- If you want to roll over 100% of the payment to an IRA or an employer
plan, you must find other money to replace the 20% that was withheld.
If you roll over only the 80% that you received, you will be taxed on
the 20% that was withheld and that is not rolled over.

MORE INFORMATION

I. PAYMENTS THAT CAN AND CANNOT BE ROLLED OVER PAGE 2
II. DIRECT ROLLOVER PAGE 2
III. PAYMENT PAID TO YOU PAGE 3
IV. SURVIVING SPOUSES, ALTERNATE PAYEES, AND OTHER BENEFICIARIES PAGE 5

1
<PAGE>

I. PAYMENTS THAT CAN AND CANNOT BE ROLLED OVER

Payments from the Plan may be "eligible rollover distributions." This means
that they can be rolled over to an IRA or to another employer plan that accepts
rollovers. Your Plan administrator should be able to tell you what portion of
your payment is an eligible rollover distribution. The following type of
payment CANNOT be rolled over:

REQUIRED MINIMUM PAYMENTS. Beginning in the year you reach age 70-1/2, a
certain portion of your payment cannot be rolled over because it is a "required
minimum payment" that must be paid to you.

II. DIRECT ROLLOVER

Unless the payment is less than $200, you can choose a direct rollover of all or
any portion of your payment that is an "eligible rollover distribution," as
described above. In a direct rollover, the eligible rollover distribution is
paid directly from the Plan to an IRA or another employer plan that accepts
rollovers. If you choose a direct rollover, you are not taxed on a payment
until you later take it out of the IRA or the employer plan.

DIRECT ROLLOVER TO AN IRA. You can open an IRA to receive the direct rollover.
(The term "IRA," as used in this notice, includes individual retirement accounts
and individual retirement annuities.) If you choose to have your payment made
directly to an IRA, contact an IRA sponsor (usually a financial institution) to
find out how to have your payment made in a direct rollover to an IRA at that
institution. If you are unsure of how to invest your money, you can temporarily
establish an IRA to receive the payment. However, in choosing an IRA, you may
wish to consider whether the IRA you choose will allow you to move all or part
of your payment to another IRA at a later date, without penalties or other
limitations. See IRS Publication 590, INDIVIDUAL RETIREMENT ARRANGEMENTS, for
more information on IRAs (including limits on how often you can rollover between
IRAs).

DIRECT ROLLOVER TO A PLAN. If you are employed by a new employer that has a
plan, and you want a direct rollover to that plan, ask the administrator of that
plan whether it will accept your rollover. If your new employer's plan does not
accept a rollover, you can choose a direct rollover to an IRA.

2
<PAGE>

III. PAYMENT PAID TO YOU

If you have the payment over $200 made to you, it is subject to 20% income tax
withholding. The payment is taxed in the year you receive it unless, within 60
days, you roll it over to an IRA or another plan that accepts rollovers. If you
do not roll it over, special tax rules may apply.

INCOME TAX WITHHOLDING:

MANDATORY WITHHOLDING. If any portion of the payment to you is an eligible
rollover distribution, the Plan is required by law to withhold 20% of that
amount. This amount is sent to the IRS as income tax withholding. For
example, if your eligible rollover distribution is $10,000, only $8,000
will be paid to you because the Plan must withhold $2,000 as income tax.
However, when you prepare your income tax return for the year, you will
report the full $10,000 as a payment from the Plan. You will report the
$2,000 as tax withheld, and it will be credited against any income tax you
owe for the year.

VOLUNTARY WITHHOLDING. If any portion of your payment is not an eligible
rollover distribution but is taxable, the mandatory withholding rules
described above do not apply. In this case, you may elect not to have
withholding apply to that portion. To elect out of withholding, ask the
Plan administrator for the election from and related information.

SIXTY-DAY ROLLOVER OPTION. If you have an eligible rollover distribution
paid to you (even if it is less than $200), you can still decide to roll
over all or part of it to an IRA or another employer plan that accepts
rollovers. If you decide to roll it over, YOU MUST MAKE THE ROLLOVER
WITHIN 60 DAYS AFTER YOU RECEIVE THE PAYMENT. The portion of your payment
that is rolled over will not be taxed until you take it out of the IRA or
the employer plan.

You can roll over up to 100% of the eligible rollover distribution,
including an amount equal to the 20% that was withheld. If you choose to roll
over 100%, you must find other money within the 60-day period to contribute to
the IRA or the employer plan to replace the 20% that was withheld. On the other
hand, if you roll over only the 80% that you received, you will be taxed on the
20% that was withheld.

EXAMPLE: Your eligible rollover distribution is $10,000, and you choose to
have it paid to you. You will receive the $8,000, and $2,000 will be sent
to the IRS as income tax withholding. Within 60 days after receiving the
$8,000, you may roll over the entire $10,000 to an IRA or employer plan.
To do this, you roll over the $8,000 you received from the Plan, and you
will have to find $2,000 from other sources (your savings, a loan, etc.).
In this case, the entire $10,000 is not taxed until you take it out of the
IRA or employer plan. If you roll over the entire $10,000, when you file
your income tax return you may get a refund of the $2,000 withheld.

3
<PAGE>

If, on the other hand, you roll over only $8,000, the $2,000 you did not
roll over is taxed in the year it was withheld. When you file your income
tax return you may get a refund of part of the $2,000 withheld. (However,
any refund is likely to be larger if you roll over the entire $10,000.)

ADDITIONAL 10% TAX IF YOU ARE UNDER AGE 59-1/2. If you receive a payment
before you reach age 59-1/2 and you do not roll it over, then, in addition to
the regular income tax, you may have to pay an extra tax equal to 10% of the
taxable portion of the payment. The additional 10% tax does not apply to your
payment if it is (1) paid to you because you separate from service with your
employer during or after the year you reach age 55, (2) paid because you retire
due to disability, (3) paid to you as equal (or almost equal) payments over your
life or life expectancy (or your and your beneficiary's lives or life
expectancies), or (4) used to pay certain medical expenses. See IRS Form 5329
for more information on the additional 10% tax.

SPECIAL TAX TREATMENT. If your eligible rollover distribution is not
rolled over, it will be taxed in the year you receive it. However, if it
qualifies as a "lump sum distribution," it may be eligible for special tax
treatment. A lump sum distribution is a payment, within one year, of your
entire balance under the Plan (and certain other similar plans of the employer)
that is payable to you because you have reached age 59-1/2 or have separated
from service with your employer (or, in the case of a self-employed individual,
because you have reached age 59-1/2 or have separated from service with your
employer (or, in the case of a self-employed individual, because you have
reached age 59-1/2 or have become disabled). For a payment to qualify as a lump
sum distribution, you must have been a participant in the Plan for at least 5
years. The special tax treatment for lump sum distributions is described below.

FIVE-YEAR AVERAGING. If you receive a lump sum distribution after you are
age 59-1/2, you may be able to make a one-time election to figure the tax
on the payment by using "5-year averaging." Five-year averaging often
reduces the tax you owe because it treats the payment much as if it were
paid over 5 years. This rule does not apply after 1999.

TEN-YEAR AVERAGING IF YOU WERE BORN BEFORE JANUARY 1, 1936. If you receive
a lump sum distribution and you were born before January 1, 1936, you can
make a one-time election to figure the tax on the payment by using "10-year
averaging" (using 1986 tax rates) instead of 5-year averaging (using
current tax rates). Like the 5-year averaging rules, 10-year averaging
often reduces the tax you owe.

CAPITAL GAIN TREATMENT IF YOU WERE BORN BEFORE JANUARY 1, 1936. In
addition, if you receive a lump sum distribution and you were born before
January 1, 1936, you may elect to have the part of your payment that is
attributable to your pre-1974 participation in the Plan (if any) taxed as
long-term capital gain at a rate of 20%.

There are other limits on the special tax treatment for lump sum
distributions. For example, you can generally elect this special tax treatment
only once in your lifetime, and the election applies to all lump sum

4
<PAGE>

distributions that you receive in the same year. If you have previously rolled
over a payment from the Plan (or certain other similar plans of the employer),
you cannot use this special tax treatment for later payments from the Plan. If
you roll over your payment to an IRA, you will not be able to use this special
tax treatment for later payments from the IRA. Also, if you roll over only a
portion of your payment to an IRA, this special tax treatment is not available
for the rest of the payment. Additional restrictions are described in IRS Form
4972, which has more information on lump sum distributions and how you elect the
special tax treatment.

EMPLOYER STOCK OR SECURITIES. There is a special rule for a payment from
the Plan that includes employer stock (or other employer securities). To use
this special rule, 1) the payment must qualify as a lump sum distribution, as
described above (or would qualify except that you do not yet have 5 years of
participation in the Plan), or 2) the employer stock included in the payment
must be attributable to "after-tax" employee contributions, if any. Under this
special rule, you may have the option of not paying tax on the "net unrealized
appreciation" of the stock until you sell the stock. Net unrealized
appreciation generally is the increase in the value of the employer stock while
it was held by the Plan. For example, if employer stock was contributed to your
Plan account when the stock was worth $1,000 but the stock was worth $1,200 when
you receive it, you would not have to pay tax on the $200 increase in value
until you later sold the stock.

You may instead elect not to have the special rule apply to the net
unrealized appreciation. In this case, your net unrealized appreciation will be
taxed in the year you receive the stock, unless you roll over the stock. The
stock (including any net unrealized appreciation) can be rolled over to an IRA
or another employer plan either in a direct rollover or a rollover that you make
yourself.

If you receive employer stock in a payment that qualifies as a lump sum
distribution, the special tax treatment for lump sum distributions described
above (such as 5-year averaging) also may apply. See IRS Form 4972 for
additional information on these rules.

IV. SURVIVING SPOUSES, ALTERNATE PAYEES, AND OTHER BENEFICIARIES

In general, the rules summarized above that apply to payments to employees also
apply to payments to surviving spouses of employees and to spouses or former
spouses who are "alternate payees." You are an alternate payee if your interest
in the Plan results from a "qualified domestic relations order." which is an
order issued by a court, usually in connection with a divorce or legal
separation. some of the rules summarized above also apply to a decreased
employee's beneficiary who is not a spouse. However, there are some exceptions
for payments to surviving spouses, alternate payees, and other beneficiaries
that should be mentioned.

5
<PAGE>

If you are a surviving spouse, you may choose to have an eligible rollover
distribution paid in a direct rollover to an IRA or paid to you. If you have
the payment paid to you, you can keep it or roll it over yourself to an IRA but
you cannot roll it over to an employer plan. If you are an alternate payee, you
have the same choices as the employee. Thus, you can have the payment paid as
a direct rollover or paid to you. If you have it paid to you, you can keep it
or roll it over yourself to an IRA or to another employer plan that accepts
rollovers. If you are a beneficiary other than the surviving spouse, you CANNOT
choose a direct rollover, and you CANNOT roll over the payment yourself.

If you are a surviving spouse, an alternate payee, or other beneficiary,
your payment is not subject to the additional 10% tax described in section III
above, even if you are younger than age 59-1/2.

If you are a surviving spouse, an alternate payee, or another beneficiary,
you may be able to use the special tax treatment for lump sum distributions and
the special rule for payments that include employer stock, as described in
section III above. If you receive a payment because of the employee's death,
you may be able to treat the payment as a lump sum distribution if the employee
met the appropriate age requirements, whether or not the employee had 5 years of
participation in the plan.

HOW TO OBTAIN ADDITIONAL INFORMATION

This notice summarizes only the federal (not state or local) tax rules that
might apply to your payment. The rules described above are complex and contain
many conditions and exceptions that are not included in this notice. Therefore,
you may want to consult with a professional tax advisor BEFORE you take a
payment of your benefits from the Plan. Also, you can find more specific
information on the tax treatment of payments from qualified retirement plans in
IRS Publication 575, PENSION AND ANNUITY INCOME, and IRS Publication 590,
INDIVIDUAL RETIREMENT ARRANGEMENTS. These publications are available from your
local IRS office or by calling 1-800-TAX-FORMS.

<PAGE>
TENDER AND DISTRIBUTION ELECTION NOTICE
FOR
FORMER EMPLOYEES
IN THE
ARDEN GROUP, INC. STOCK BONUS PLAN

Many former employees who participated in the Arden Group, Inc. Stock Bonus
Plan (the "Plan") have requested a distribution from the Plan. In order to help
former employees, Arden Group, Inc. (the "Company") is pleased to announce that
it has (1) offered to buy up to 250,000 shares of the Class A Common Stock of
the Company, (2) amended the Plan and related Trust (the "Trust") to permit all
participants in the Plan to decide whether to tender the shares held under the
Plan for their account and (3) amended the Plan to permit former employees to
receive a distribution of the cash portion of their account from the Plan. This
Notice explains your right to tender or not tender these shares held in your
Plan account ("Account") and to elect a cash distribution.

First, the Company has offered to buy, upon the terms and conditions set
forth in the enclosed Offering Statement, up to 250,000 shares of the Class A
Common Stock of the Company at a rate of $65.00 per share (the "Offer"). The
Company has amended the Plan and Trust to provide that all participants may
direct City National Bank (the "Plan Trustee") as to whether or not to tender
the shares of Class A Common Stock held in their Accounts. If you own any shares
of Class A Common Stock directly (other than in the Plan), you should follow the
instructions in the Offering Statement to tender or not tender those shares.

Second, the Company has amended the Plan to provide that former employees
who terminated employment on or before June 30, 1997 may elect to receive a cash
distribution of the cash portion of their Account from the Plan (a "Special Cash
Distribution"). Special Cash Distributions will probably be made in late
September or early October. Any Class A Common Stock held in your Account after
completion of the Offer will not be distributed.

As described below, if more than 250,000 shares of Class A Common Stock are
tendered in the Offer, all of the shares that are tendered will not be sold. In
this case, even former employees who tender all of their shares and elect a
Special Cash Distribution will not receive a distribution of their entire
Account balance. Any Class A Common Stock held in your Account will not be
distributed.

Attached to this Notice is a Distribution Election Form (and other related
tax forms). IT IS CRITICAL THAT THE PLAN ADMINISTRATOR RECEIVE YOUR COMPLETED
DISTRIBUTION ELECTION FORMS BY THE CLOSE OF BUSINESS ON SEPTEMBER 3, 1997. If
the Plan Administrator does not RECEIVE your completed election forms at the
address specified on those forms by that time, you will not be eligible to
receive a Special Cash Distribution.

WHAT ARE MY CHOICES?

You need to make three decisions. First, you should decide whether to tender
none, some or all of the shares of Class A Common Stock held in your Account.
Second, whether or not you tender shares, you should decide whether you want a
Special Cash Distribution. Finally, if you take a Special Cash Distribution, you
should decide whether to roll it over into another plan or individual retirement
account. More information is provided below.
<PAGE>
WHAT IS THE OFFER?

As described in the Offering Statement, if more than 250,000 shares of Class
A Common Stock are tendered in the Offer, then the Company will only acquire
250,000 shares on a pro rata basis according to the number of shares tendered by
each stockholder. For example, assume you tender all 300 shares and that a total
of 300,000 shares are tendered in the Offer. In this case, the Company will only
buy 250,000 shares, prorating the shares tendered by each person. Accordingly,
the Company will only buy 250 of the 300 shares allocated to your Account.
Shortly after the Offer is completed, the Company intends to notify former
employees who tendered shares as to the percentage of tendered shares that were
sold.

The Company has amended the Plan and Trust documents so that former and
active employees who have Account balances in the Plan may direct the Plan
Trustee whether or not to tender the shares held in their Accounts. Under the
terms of this amendment, you are responsible for deciding whether or not the
shares held in your Account will be tendered. Accordingly, you are a "Named
Fiduciary" for this purpose. Under federal pension law, the Plan Trustee must
follow your directions unless they are not proper or they are contrary to
federal pension law (for example, imprudent).

WHAT HAPPENS TO MY ACCOUNT AFTER THE OFFER?

Under the terms of the Plan and related Trust document, Plan assets are to
be invested solely in securities issued by the Company. If the Plan has any
cash, whether due to a cash contribution from the Company or the sale of
securities of the Company (including the proceeds from the Offer), the Plan
Trustee may invest the funds in securities issued or guaranteed by the United
States, interest-bearing savings accounts, money market or cash management
accounts (collectively "Cash-Like Investments"), until the Plan Trustee decides
and is able to purchase additional Arden securities. At the present time,
approximately 45% of the Plan's assets are held in Cash-Like Investments.

If you instruct the Plan Trustee not to tender any shares (and the Plan
Trustee determines your instructions are proper and not in violation of federal
pension laws), the amount of Cash-Like Investments and the number of shares of
Class A Common Stock held in your Account will not change as a result of the
Offer. If you also elect a Special Cash Distribution, you will receive a
distribution equal to the value of the Cash-Like Investments in your Account;
the Class A Common Stock will remain in your Account.

If you instruct the Plan Trustee to tender some or all of the shares in your
Account (and the Plan Trustee determines your instructions are proper and not in
violation of federal pension laws), the total number of shares of Class A Common
Stock allocated to your Account will decrease. In addition, the amount of cash
in your Account will be increased by the proceeds from the shares that are sold.
If you elect a Special Cash Distribution, you will receive a distribution equal
to the value of the cash proceeds and other Cash-Like Investments in your
Account; any Class A Common Stock remaining in your Account after the Offer will
not be distributed. If you don't elect a Special Cash Distribution, the proceeds
from the Offer will be invested in Cash-Like Investments, until the Trustee
decides to purchase additional securities

2
<PAGE>
of the Company. PLEASE BE AWARE THAT IF YOU TENDER SHARES AND DO NOT ELECT A
SPECIAL CASH DISTRIBUTION AND THE PROCEEDS ARE ULTIMATELY REINVESTED IN SHARES,
THE NET EFFECT OF THE TENDER AND THE REINVESTMENT MAY RESULT IN AN INCREASE OR
DECREASE IN THE NUMBER OF SHARES HELD IN YOUR ACCOUNT. IF, WHEN THE PROCEEDS ARE
INVESTED, THE REINVESTMENT PURCHASE PRICE IS HIGHER THAN THE TENDER PRICE, THIS
WILL RESULT IN A DECREASE IN THE NUMBER OF SHARES CREDITED TO YOUR ACCOUNT. IF
THE REINVESTMENT PRICE IS LOWER THAN THE TENDER PRICE, THIS WILL RESULT IN AN
INCREASE IN THE NUMBER OF SHARES CREDITED TO YOUR ACCOUNT.

The amounts, if any, held in your Account after completion of the Offer and
payment of the Special Cash Distribution will remain in the Plan. Under the
terms of the Plan, you will be eligible to receive these when you attain age 65,
die or become disabled.

HOW DO I TENDER THE SHARES IN MY ACCOUNT?

You should return the Tender Election Form to the Plan Trustee at the
address set forth in the form. THE TENDER ELECTION FORM MUST BE RECEIVED NO
LATER THAN THE CLOSE OF BUSINESS ON AUGUST 6, 1997. Questions regarding how to
tender and requests for information or additional copies of the Offering
Statement or of other documents should be directed to the Plan Trustee at the
address and telephone number set forth in the Tender Election Form.

The Plan Trustee will determine the aggregate number of shares elected to be
tendered by all active and former employees and tender them on behalf of the
Plan.

WHAT IF I DON'T WANT TO TENDER MY SHARES?

If you do not return a Tender Election Form, the Plan Trustee will determine
whether to tender or not tender all or some of the shares held in your Account.
Thus, failure to return a completed Tender Election Form may result in some or
all of the shares held in your Account being tendered, as the Plan Trustee
determines.

WHAT HAPPENS IF I DON'T RETURN A TENDER ELECTION FORM?

If you do not return a Tender Election Form, the Plan Trustee will determine
whether to tender or not tender all or some of the shares held in your Account.

WHAT IF I CHANGE MY MIND?

3
<PAGE>
WILL I BE TAXED IF I TENDER MY SHARES?

However, your decision to tender or not tender shares may have a potentially
negative impact on the taxation of your distribution from the Plan. You should
carefully read the remainder of this Notice (see "Will I Be Taxed?") and the
NOTICE OF IRS TAX WITHHOLDING REQUIREMENTS and you should consult with your
individual tax advisor to understand the tax consequences of these actions. You
should review these documents even if you do not want a cash distribution.

THERE ARE CERTAIN FAVORABLE TAX RULES APPLICABLE TO STOCK DISTRIBUTIONS.
THESE RULES ARE DESCRIBED BELOW (SEE "WILL I BE TAXED?") AND ON PAGE 5 OF THE
ATTACHED NOTICE OF IRS TAX WITHHOLDING REQUIREMENTS (SEE "EMPLOYER STOCK OR
SECURITIES"). IF YOU TENDER SHARES, YOU MAY LOSE SOME OR ALL OF THE ADVANTAGES
PROVIDED BY THESE RULES.

WHAT IS THE SPECIAL CASH DISTRIBUTION?

Former employees who terminated employment on or before June 30, 1997 may
elect to receive a Special Cash Distribution. These Special Cash Distributions
will probably be made in late September or early October. Any shares of Class A
Common Stock held in your Account after completion of the Offer will not be
distributed as part of the Special Cash Distribution.

If you elect a Special Cash Distribution, you will receive a check equal to
the sum of the amount of cash and cash equivalents in your Account on August 31,
1997. Please note that the amount of the Special Cash Distribution (if you elect
one) will be the sum of (1) the amount of cash and Cash-Like Investments held in
your Account as of December 31, 1996 (adjusted for gains and losses through
August 31, 1997) and (2) the amount of cash allocated to your Account in
exchange for the Class A Common Stock sold in the Offer.

Any shares of Class A Common Stock remaining in your Account after the offer
will not be distributed as part of the Special Cash Distribution. As to these
shares, the Plan currently does not permit a distribution until you attain age
65, die or become disabled. At that time or after the end of that plan year, you
will receive a distribution in a combination of stock of the Company and cash.

Stock distributions are not available under this special distribution
election. In addition, your election must be for the entire cash portion of your
Account; you cannot elect to receive a distribution of only part of the cash
portion of your Account. Neither the Company, the Plan Committee nor the Plan
Trustee is making any recommendation as to whether you should or should not take
a Special Cash Distribution. This decision is to be made by you in your sole
discretion.

IF I TENDER ALL MY SHARES AND ELECT A SPECIAL CASH DISTRIBUTION, WILL I HAVE
ANYTHING LEFT IN MY ACCOUNT AFTERWARDS?

This depends on the total number of shares of Class A Common Stock tendered
by the Plan and all other stockholders as part of the Offer. If the total number
of shares tendered is 250,000 or less, all of your shares tendered will be
exchanged for cash. In this case, after the Special Cash Distribution you will
no longer have any interest in the Plan or in any shares of the Class A Common
Stock held in the Plan.

If the total number of shares of Class A Common Stock tendered in the Offer
is more than 250,000, then the number of shares sold by each person (including
you) in the Offer will be prorated according to the number of shares tendered by
that person and it will not be possible to sell all of the shares held in your
Account in the Offer. In this case, some shares will remain in your Account
after the Special Cash

4
<PAGE>
Distribution. Your right to a distribution of these shares will be governed by
the terms of the Plan without regard to the Special Cash Distribution. The Plan
does not currently permit a distribution of the shares until you attain age 65,
die or become disabled. At that time or after the end of that plan year, you
will receive a distribution of any stock and cash held in your Account at that
time.

At this time, it is impossible to predict whether or not you will have any
shares remaining in your Account after consummation of the Offer. (However,
shortly after the Offer is completed, the Company intends to notify former
employees who elected to tender shares as to the percentage of tendered shares
that were sold.) This depends on the total number of shares tendered by all
stockholders, including the Plan. These shares would remain in your Account
until such time that you attain age 65, die or become disabled.

WHAT IF I DON'T ELECT A SPECIAL CASH DISTRIBUTION?

First, you should reread the portion of this Notice entitled "What Happens
To My Account After The Offer?" This describes how your Account will be
invested.

Second, whether or not you tender any shares, the Special Cash Distributions
made to other former employees will not affect the allocation of Class A Common
Stock and Cash-Like Investments in your Account.

Finally, your rights will continue to be governed by the other provisions of
the Plan; the Plan currently does not permit a distribution until you attain age
65, die or become disabled. At that time or after the end of that plan year, you
will receive a distribution of all of the stock of the Company and/or cash
allocated in your Account.

CAN I ROLL A SPECIAL CASH DISTRIBUTION OVER?

If you elect to receive a Special Cash Distribution, you have the option of
having it paid in cash directly to you or transferred to another pension or
profit sharing plan (if the other plan accepts rollovers) or to an individual
retirement plan ("IRA"). YOU MUST COMPLETE THE ROLLOVER ELECTION FORM TO HAVE
YOUR ACCOUNT TRANSFERRED TO ANOTHER PLAN OR IRA. IF YOU DO NOT COMPLETE THE
ROLLOVER ELECTION FORM, IT WILL BE PAID IN CASH DIRECTLY TO YOU AND WILL BE
SUBJECT TO 20% FEDERAL WITHHOLDING TAXES.

WILL I BE TAXED?

In order to decide whether (1) to tender some or all of the shares allocated
to your Account, (2) to take a Special Cash Distribution and (3) to roll over
the Special Cash Distribution (assuming you elect one), you should carefully
read the enclosed NOTICE OF IRS TAX WITHHOLDING REQUIREMENTS to understand the
tax consequences of these actions. You are also urged to consult your own tax
advisor.

IF YOU ELECT A SPECIAL CASH DISTRIBUTION AT THIS TIME, CERTAIN FAVORABLE
RULES APPLICABLE TO STOCK DISTRIBUTIONS WILL NOT APPLY. These rules are
described on page 5 of the attached Notice of IRS Tax Withholding Requirements
(see "Employer Stock or Securities"). Specifically, if you receive a lump sum
distribution of your Account and the distribution includes shares, any net
unrealized appreciation (the difference between the shares' fair market value on
the date of distribution and the Plan's cost basis) in the shares is not taxable
to you until you sell the shares. This rule will not apply if you receive a
Special Cash Distribution. Similarly, if you tender the shares and do not elect
the distribution, any net unrealized

5
<PAGE>
appreciation in the shares that are sold will be lost and the cost of the shares
in your Account will be recalculated to reflect current market prices.

IF YOU ELECT TO TAKE A SPECIAL CASH DISTRIBUTION, YOU COULD BE SUBJECT TO
SUBSTANTIAL INCOME TAXES, EXCISE TAXES AND PENALTIES IF YOUR ACCOUNT IS NOT
DIRECTLY TRANSFERRED TO ANOTHER PLAN OR IRA OR IF YOU DO NOT ROLL OVER AN AMOUNT
EQUAL TO THE VALUE OF THE ACCOUNT TO ANOTHER PLAN OR IRA WITHIN 60 DAYS OF THE
SPECIAL CASH DISTRIBUTION.

IF YOU DO NOT RECEIVE A DISTRIBUTION OF YOUR ENTIRE ACCOUNT BALANCE BECAUSE
SHARES REMAIN IN YOUR ACCOUNT AFTER THE OFFER, THEN CERTAIN SPECIAL LUMP SUM
AVERAGING RULES THAT MAY OTHERWISE APPLY IF YOU ARE 59 1/2 OR OLDER WILL NOT BE
AVAILABLE TO YOU. These rules are described on pages 4 and 5 of the attached
Notice of IRS Tax Withholding Requirements (see "Special Tax Treatment").

The various tax consequences of the options available to you are complex.
Different tax consequences will apply depending on whether or not you elect to
tender the shares in your Account, whether or not you elect to take a Special
Cash Distribution, whether you receive a distribution of your entire Account and
whether you roll over your Special Cash Distribution (if you take one). Because
each person's individual circumstances are quite different, the Company cannot
offer specific tax advice to you and strongly urges you to consult with your tax
advisor with regard to your specific circumstances.

HOW DO I ELECT A SPECIAL CASH DISTRIBUTION?

If you want to elect a Special Cash Distribution, please complete the
enclosed Distribution Election Form and Rollover Election Form, and return both
completed forms to the Plan Administrator. In addition, if the Company's records
show you live in California, you will also receive a California Withholding
Election Statement which you must complete and return to the Company. (If you
did not receive a form, but wish to have California tax withholding, please
contact the Company for a California Withholding Election Statement.) All
completed forms must be received (at the address specified on those forms) by
the Plan Administrator no later than the close of business on September 3, 1997
in order to be valid. Any forms received after the close of business on
September 3, 1997 will not be accepted and, in that event, you will not receive
a Special Cash Distribution.

If you elect to take a Special Cash Distribution, the amount of the Special
Cash Distribution will be paid in cash to you or rolled over to another plan or
an IRA, as you so direct, as soon as possible after September 3, 1997. They will
probably be made in late September or early October.

The Company reserves full discretion to determine whether the required
documentation of any former employee is complete and timely received and other
issues regarding the eligibility and acceptability of any election.

ANY PERSON WHO ELECTS TO TAKE A SPECIAL CASH DISTRIBUTION MAY WITHDRAW HIS
OR HER ELECTION AT ANY TIME PRIOR TO THE CLOSE OF BUSINESS ON SEPTEMBER 3, 1997
BY TIMELY DELIVERING A WRITTEN NOTICE OF WITHDRAWAL TO THE COMPANY, ATTENTION
ERNEST T. KLINGER, VICE PRESIDENT FINANCE AND ADMINISTRATION AND CHIEF FINANCIAL
OFFICER, ARDEN GROUP, INC., 2020 SOUTH CENTRAL AVENUE, COMPTON, CALIFORNIA
90220. IF YOU WITHDRAW YOUR ELECTION, YOU WILL NOT RECEIVE A SPECIAL CASH
DISTRIBUTION FROM THE PLAN PURSUANT TO THE ONE-TIME ELECTION DESCRIBED IN THIS
NOTICE.

HOW DO YOU ELECT NOT TO TAKE A SPECIAL CASH DISTRIBUTION?

If you do not want to receive a Special Cash Distribution, you do not need
to complete a Distribution Election form. FAILURE TO RETURN THE FORMS WILL MEAN
YOU WILL NOT RECEIVE A SPECIAL CASH DISTRIBUTION AT THIS TIME.

6
<PAGE>
WHAT ELSE SHOULD YOU CONSIDER?

For additional information, please contact George A. Ruth, Arden Group,
Inc., (310) 638-2842.

<TABLE>
<S> <C>
Enclosures: Copy of 1996 Plan Year Account Statement
Tender Election Form
Distribution Election Form
Rollover Election Form
California Withholding Election Statement
(California addressees only)
Notice of IRS Tax Withholding Requirements
Offering Statement, dated July 17, 1997
Quarterly Report on Form 10-Q for the quarter ended
March 29, 1997
</TABLE>

7
<PAGE>
ARDEN GROUP, INC. STOCK BONUS PLAN
TENDER ELECTION FORM

IF YOU DO NOT RETURN THIS FORM, THE PLAN TRUSTEE WILL DECIDE WHETHER OR NOT
TO TENDER SHARES IN YOUR ACCOUNT. YOU MUST COMPLETE THIS FORM AND CHECK BOX C IN
ORDER TO ELECT NOT TO TENDER ANY SHARES.

PARTICIPANT INFORMATION

Your Name ______________________________________________________________

Social Security Number ____________________________ Phone
Number (___)____________________________________________________________

Address ________________________________________________________________

CHECK A, B OR C BELOW:

(C) ____ As a Named Fiduciary of my Account, I hereby direct the Plan Trustee
NOT TO TENDER ANY SHARES of Class A Common Stock held in my Account under the
Plan.

PARTICIPANT SIGNATURE

_____________________________________ ____________________________________

Participant Signature Date
<PAGE>
ARDEN GROUP, INC. STOCK BONUS PLAN
DISTRIBUTION ELECTION FORM
FOR
FORMER EMPLOYEES

Please read the Tender and Distribution Election Notice for Former Employees
and the Notice of IRS Tax Withholding Requirements before you complete this
Form. Then COMPLETE THIS FORM TO ELECT WHETHER YOU WANT A SPECIAL CASH
DISTRIBUTION (A DISTRIBUTION OF THE ENTIRE CASH PORTION OF YOUR ACCOUNT BALANCE)
FROM THE ARDEN GROUP, INC. STOCK BONUS PLAN AT THIS TIME.

If you want a distribution, complete the Participant Information, check Box
A below, and sign and date the form and return it to Plan Administrator, Arden
Group, Inc. Stock Bonus Plan, P.O. Box 2256, Los Angeles, CA 90051-2256. THE
FORM MUST BE RECEIVED BY THE PLAN AT THE ADDRESS ABOVE NO LATER THAN THE CLOSE
OF BUSINESS ON SEPTEMBER 3, 1997 IN ORDER TO BE VALID.

If you do not want to receive a distribution at this time, either (1)
complete the Participant Information and check Box B below and return the Form
to the address above, or (2) do not return the Form.

PARTICIPANT INFORMATION

Your Name __________________________________________________________________

Social Security Number ______________________________ Phone Number (___)____

Address ____________________________________________________________________

CHECK A OR B BELOW:
(A) ______ I HEREBY REQUEST A DISTRIBUTION OF THE ENTIRE CASH PORTION OF MY
ACCOUNT BALANCE IN CASH in accordance with the Tender and Distribution Election
Notice for Former Employees. I understand the Plan does not require me to take a
distribution at this time. I also understand that any shares of Class A Common
Stock in my Plan Account after completion of the Company's recent tender offer
will not be distributed. These shares, if any, will not be distributed until I
attain age 65, die or become disabled.
(B) ______ I DO NOT WANT TO RECEIVE A DISTRIBUTION AT THIS TIME. I understand
that, under current Plan rules, I will not be entitled to receive a distribution
until I attain age 65, die or become disabled.

PARTICIPANT SIGNATURE

I have received and read the Tender and Distribution Election Notice for
Former Employees in the Plan, as well as the Notice of IRS Tax Withholding
Requirements. I agree to the terms and conditions in the Tender and Distribution
Election Notice for Former Employees.

<TABLE>
<S> <C>
- ----------------------------------------------------------- --------------------------
Participant Signature Date
</TABLE>
<PAGE>

NOTICE OF IRS TAX WITHHOLDING REQUIREMENTS

SUMMARY

If you choose a DIRECT ROLLOVER

- Your payment will not be taxed in the current year and no income tax
will be withheld.

- Your payment will be made directly to your IRA or, if you choose, to
another employer plan that accepts your rollover.

- Your payment will be taxed later when you take it out of the IRA or
the employer plan.

If you choose to have your Plan benefits PAID TO YOU

MORE INFORMATION

I. PAYMENTS THAT CAN AND CANNOT BE ROLLED OVER PAGE 2
II. DIRECT ROLLOVER PAGE 2
III. PAYMENT PAID TO YOU PAGE 3
IV. SURVIVING SPOUSES, ALTERNATE PAYEES, AND OTHER BENEFICIARIES PAGE 5

1
<PAGE>

I. PAYMENTS THAT CAN AND CANNOT BE ROLLED OVER

REQUIRED MINIMUM PAYMENTS. Beginning in the year you reach age 70-1/2, a
certain portion of your payment cannot be rolled over because it is a "required
minimum payment" that must be paid to you.

II. DIRECT ROLLOVER

2
<PAGE>

III. PAYMENT PAID TO YOU

INCOME TAX WITHHOLDING:

3
<PAGE>

4
<PAGE>

IV. SURVIVING SPOUSES, ALTERNATE PAYEES, AND OTHER BENEFICIARIES

5
<PAGE>

If you are a surviving spouse, an alternate payee, or other beneficiary,
your payment is not subject to the additional 10% tax described in section III
above, even if you are younger than age 59-1/2.

HOW TO OBTAIN ADDITIONAL INFORMATION

<PAGE>

ARDEN GROUP, INC. STOCK BONUS PLAN
ROLLOVER ELECTION FORM

Please complete this form to advise us whether you wish to make a direct
rollover of your distribution. Complete participant information and indicate
your election by completing section A or B. Sign, date and return this form to
Plan Administrator, Arden Group, Inc. Stock Bonus Plan, P. O. Box 2256, Los
Angeles, CA 90051-2256.

PARTICIPANT INFORMATION:

Your Name:____________________________________________________________

Social Security Number:________________ Phone Number: (_____)________

Address:______________________________________________________________

CHECK A OR B BELOW:

- --------------------------------------------------------------------------------
(A) ___ I elect NOT to make a direct rollover of the taxable portion of my
distribution. Make the distribution directly to me. I understand the
distribution is subject to 20% Federal Tax Withholding.
- --------------------------------------------------------------------------------

- -------------------------------------------------------------------------------
(B) ___ I elect to make a direct rollover of the taxable portion of my
distribution to the following:
___ Another qualified plan. (I have contacted the sponsor/plan
administrator of this plan who is aware that the rollover is
being made.)
___ An IRA. (I have opened an IRA as noted below.)

PAY THIS DIRECT ROLLOVER AS FOLLOWS (choose one):
___ Transfer the funds directly to the receiving plan noted below.
___ Send the check to me for delivery to the receiving plan.

RECEIVING PLAN INFORMATION:

I certify that the receiving plan, identified below, is qualified
under IRC Section 401(a) or an IRA.

Name of receiving plan or IRA ___________________________________

Account Number___________________________________________________

Address of receiving plan or financial institution.

_________________________________________________________________

Other information that will enable the rollover to be identified by
the receiving plan.

_________________________________________________________________

The Plan Administrator may rely on the above information in making
this direct rollover.
- --------------------------------------------------------------------------------

I have read the Notice of IRS Tax Withholding Requirements.

___________________________________ _________________________
Participant Signature Date

97-0025 (6/2/97)

<PAGE>

ARDEN GROUP, INC. STOCK BONUS PLAN
FORMER PARTICIPANT - WITHHOLDING ELECTION STATEMENT

USE THIS FORM TO ELECT WHETHER OR NOT TO HAVE CALIFORNIA STATE INCOME TAX
WITHHELD FROM YOUR DISTRIBUTION

------------------------------------------------------------------------
CHECK BOX

CALIFORNIA INCOME TAX WITHHOLDING ELECTION
CHECK APPROPRIATE BOX

Any distribution from the Stock Bonus Plan (except a direct rollover)
will be subject to California income tax withholding (if a California
resident) unless you elect not to have California income tax
withholding apply. Even if you elect not to have tax withheld, you
will be liable for the payment of state income tax on the taxable
portion of your distribution.

If you elect not to have withholding apply of if you do not have
enough income tax withheld from your distribution, you may be
responsible for payment of estimated tax, and you may incur penalties
under the estimated tax rules if your withholding and estimated tax
payments are not sufficient.

/ / I do not want to have California income tax withheld from my
distribution.

/ / I want to have California income tax withheld from my distribution.
------------------------------------------------------------------------

Please (1) indicate your withholding election by checking the appropriate box
above; (2) name, address, and Social Security number below; (3) sign and date
this Withholding Statement; and (4) return this statement to the Plan
Administrator.

- ---------------------------------- -----------------------------------
Name (please print) Social Security Number

- -----------------------------------------------------------------------------
Address

- ---------------------------------- -----------------------------------
Signature Date

discstm3(5/28/97)

<PAGE>
ARDEN GROUP, INC.

CONTACT: Ernest T. Klinger
Vice President & CFO FULL NATIONAL and
TELEPHONE: 310/638-2842 FULL ANALYST WIRE
NASDAQ/NMS-ARDNA

FOR IMMEDIATE RELEASE

LOS ANGELES, CA July 17, 1997 - Arden Group, Inc. today announced a self
tender for up to 250,000 shares of its Class A Common Stock for cash at the rate
of $65.00 per share. The offer will commence on July 17, 1997 and expire at
12:00 midnight, local time in New York City, on August 13, 1997, unless the
offer is extended. The offer is not conditional upon any minimum number of
shares being tendered.

The Company announced that based on preliminary unaudited information, the
increases in sales and gross profit which the Company reported for the first
quarter of fiscal 1997 as compared to the first quarter of fiscal 1996 have
continued in the first two months of the second quarter of fiscal 1997 as
compared to the comparable period of fiscal 1996. The Company believes that
this trend of increased sales and gross profits has continued for the balance of
the second quarter and will be reflected in operating income for the second
quarter of fiscal 1997. No assurances can be given that this trend will
continue for the remainder of the fiscal year. The foregoing statements are
forward looking statements and involve risks and uncertainties that could cause
actual results to differ materially from these forward looking statements.
Factors which could cause actual results to differ materially include, but may
not be limited to, a downturn in the gross profit of the Company for the third
month of the Company's second quarter and adjustments made to the preliminary
unaudited information for the first two months in closing the books of the
Company at the end of the second quarter.

Post Office Box 2256, Los Angeles, California 90051, (310)638-2842
2020 South Central Avenue, Compton, California 90220, FAX: (310)631-0950

<PAGE>
ARDEN GROUP, INC.

The Company further announced that in July 1997, the arbitrators in the
recently completed arbitration proceedings arising out of the sale in 1993 of
the Company's communication equipment business to Danka Industries, Inc.
determined that neither party was a prevailing party in the proceedings and,
therefore, neither were awarded costs and fees with respect to the proceedings.

Arden Group, Inc. currently operates 12 Gelson's and Mayfair supermarkets
in Southern California.

Post Office Box 2256, Los Angeles, California 90051, (310)638-2842
2020 South Central Avenue, Compton, California 90220, FAX: (310)631-0950