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                                                                    EXHIBIT 10.5

                            JERRY'S FAMOUS DELI, INC.

                           Amendment and Extension of
                             Employment Agreement of
                                  Guy Starkman


         THIS AMENDMENT AND EXTENSION OF EMPLOYMENT AGREEMENT (the "Amendment")
is made as of July 1, 1997, by and between Jerry's Famous Deli, Inc., a
California corporation (the "Company") and Guy Starkman ("Executive"), with
reference to the following:

         A. The Company and Executive entered an Employment Agreement (the
"Agreement") as of June 1, 1995, pursuant to which the Company agreed to employ
Executive as Vice President and Director of Operations of the Company for a term
of three years.

         B. The Company desires to continue the employment of Executive as Vice
President and Director of Operations, and Executive desires to continue his
employment with the Company, upon the terms described in this Amendment.

         NOW, THEREFORE, the parties hereto hereby agree as follows:

         1. Term. The term of Executive's employment is hereby extended until
December 31, 2000 (the "Term"). The Term may be extended by mutual agreement of
the parties for successive one year terms.

         2. Base Salary. Section 5.1 of the Employment Agreement is hereby
amended by the addition of the following sentence:

         "Effective as of October 1, 1997, Executive's Base Salary shall be
         reduced to $112,500 per year, payable in accordance with the Company's
         general payroll procedures."

         3. Bonus. Section 5.2 of the Employment Agreement is hereby amended by
the addition of the following provisions:

         "The bonus earned by Executive based on EBITDA shall be effective
         through June 30, 1997, and the Company shall make a final determination
         of the amount earned by Executive for the six months ended June 30,
         1997 based upon the annualized growth of the Company's EBITDA as
         determined by the Company's unaudited financial statements for the six
         months periods ended June 30, 1997, as reported in the Company's
         Quarterly Report on Form 10-Q. The bonus amount


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         based upon this formula shall be payable by the Company following
         receipt by the Company of the report of its independent public
         accountants on the financial statements of the Company for the year
         ended December 31, 1997. Effective as of July 1, 1997, Executive shall
         waive the bonus amounts earned for all periods after June 30, 1997, and
         lieu of such bonus shall receive an annual bonus equal to 2.0% of the
         Net After-tax Profits of the Company (as defined below) for the six
         month period from July 1, 1997 through December 31, 1997, and 2.0% of
         the annual Net After-tax Profits of the Company for each year after
         1997 during the term of this Agreement. Executive shall receive
         quarterly installment payments of the bonus during the applicable year
         for which the bonus is earned, determined by annualizing the quarterly
         Net After-tax Profits of the Company for each of the first three
         quarters of the year. In the event that the quarterly payments of bonus
         installments results in an overpayment to Executive based on the Annual
         Net After-tax Profits of the Company, as determined by the Company in
         its annual audited financial statements, the excess amount shall be
         deducted from future payments owed to Executive. As used herein, the
         Company's "Net After-tax Profits" shall be calculated in accordance
         with generally accepted accounting principles, except that: (1) the
         amount of the bonus earned under this Agreement shall be excluded from
         the calculation of expenses; (2) the amount of any after-tax net
         interest income earned on the unexpended portion of the net proceeds of
         any future offering of securities by the Company (the "Net Proceeds")
         will be excluded from the calculation of income; and (3) as the Net
         Proceeds are expended by the Company, the amount of Net After-tax
         Profits shall be reduced annually by an amount equal to the product of:
         (i) the amount of Net Proceeds expended by the Company; times (ii) the
         Company's average annual cost of borrowed funds for the preceding
         calendar year divided by 365; times (iii) the number of days beginning
         on the later of: (x) the date on which the business in which the Net
         Proceeds are invested becomes operational (such as the opening date of
         a new restaurant or the re-opening date of an existing restaurant which
         is closed for refurbishment) or (y) January 1 of the applicable year.

         4. Options. On July 1, 1997, the Stock Option Committee approved the
grant to Executive of a Non-Qualified Option for 25,000 shares of Common Stock
of the Company under the Company's 1995 Amended and Restated Stock Option Plan
(the "Option Plan"), at an exercise price of $2.50 per share (110% of the fair
market value of the common stock on June 30, 1997.) On January 2, 1998,
Executive shall receive an additional Non-Qualified Option for 25,000 shares of
Common Stock of the Company under the Option Plan, at an exercise price equal to
101% of the fair market value of the Common Stock on the date of grant, and on
January 2, 1999, Executive shall receive an additional Non-Qualified Option for
25,000 shares of Common Stock of the Company under the Option Plan, at an
exercise price equal to 101% of the fair market value of the Common Stock on the
date of such grant. All of such options shall have a term of ten years, and
shall be exercisable at any time during the term beginning six months after the
date of grant. Executive shall have the unconditional right to exercise such
Options using one of the cashless exercise methods provided for in the Option
Plan. In the event the Agreement is terminated by the Company for any reason
except for the


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occurrence of any of the events specified in Sections 8.1(i), (ii) or (iii) of
the Agreement, any Options which the Company has committed to grant under this
paragraph which have not been granted for any reason, including that the date
for grant of the Options has not yet occurred, shall be immediately granted upon
the date of termination at an exercise price equal to the fair market value of
the common stock on the date of grant. Any Options which cannot be granted under
the Option Plan shall be granted outside of the Option Plan. All of such
Options, together with all Options previously granted which have not become
exercisable, shall become exercisable immediately upon the date of termination
for a period of three months following the date of Executive's termination,
including upon a termination of employment by Executive or the Company within
one year following the occurrence of a "Corporate Change," as defined in
Paragraph 5 hereof.

         5. Change in Control Payment. In the event of a termination of
Executive's employment, whether by Executive or the Company, at any time within
one year following the occurrence of a "Corporate Change" (as defined herein),
Executive shall receive a lump sum payment equal to the sum of (i) his full
annual Base Salary for the remaining term of the Agreement, as provided in this
Amendment and (ii) an amount equal to the higher of the annual Bonus
compensation earned by Executive for the last completed fiscal year or the
annualized Bonus compensation that would be earned by Executive based upon the
annualized net earnings of the Company from the beginning of the current year
through the last completed month of the current year. For purposes of this
Section 5, a "Corporate Change" shall be deemed to have occurred upon the
occurrence of any one (or more) of the following events: (a) a transaction in
which the Company ceases to be an independent publicly owned corporation that is
required to file quarterly and annual reports under the Securities Exchange Act
of 1934, (b) a sale or other disposition of all or substantially all of the
assets, or a majority of the outstanding capital stock, of the Company
(including but not limited to the assets or stock of the Company's subsidiaries
that results in all or substantially all of the assets or stock of the Company
on a consolidated basis being sold), (c) as a result of, or in connection with,
any cash tender offer, exchange offer, merger or other business combination,
sale of assets, or contested election for the Board, or combination of the
foregoing, persons who were directors of the Company just prior to such event(s)
shall cease to constitute a majority of the Board (d) any person, including a
group as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended, becomes the beneficial owner of shares of the Company with respect to
which twenty percent (20%) or more of the total number of votes for the election
of the Board may be cast, (e) the Company's stockholders cause a change in the
majority of the members of the Board within a twelve (12) month period,
provided, however, that the election of one or more new directors shall not be
deemed to be a change in the membership of the Board if the nomination of the
newly elected directors was approved by the vote of three-fourths of the
directors then still in office who were directors at the beginning of such
twelve (12) month period, or (f) a tender offer or exchange offer is made for
shares of the Company's common stock (other than one made by the Company) and
shares of common stock are acquired thereunder.

         6. Continuation of Other Terms of Agreement. Except as provided herein,
all other terms and conditions of the Agreement shall continue in full force
during the Term


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provided in this Amendment, and the general terms specified in Sections 10 and
11 of the Agreement shall apply to this Amendment.

         IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.


JERRY'S FAMOUS DELI, INC.,              Executive:
a California corporation


By:   /s/ Isaac Starkman                /s/ Guy Starkman
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     Isaac Starkman,                    Guy Starkman
     Chief Executive Officer


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