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                                                                    EXHIBIT 10.4

                            JERRY'S FAMOUS DELI, INC.

                           Amendment and Extension of
                             Employment Agreement of
                                 Isaac 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 Isaac 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 Chief Executive Officer of the Company for a term of two years.

         B. The Company desires to continue the employment of Executive as Chief
Executive Officer, 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 $335,000 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 10.0% 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 10.0% 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 (on an after-tax basis) of borrowed
         funds, expressed as an annual percentage rate, 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 125,000 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, the
Company shall grant to Executive an additional Non-Qualified Option for 125,000
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, the Company shall grant to Executive an
additional Non-Qualified Option for 125,000 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


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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 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, (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; and (iii) the immediate grant of any stock
options which the Company has agreed to grant to Executive under Section 2
hereof, but which have not been granted as of the date of termination of
Executive's employment, whether because the date on which such Options are to be
granted has not occurred or otherwise, all of which Options shall be exercisable
at an exercise price equal to the fair market value of the common stock on the
date of grant, and which, together with all Options previously granted which
have not become exercisable, shall become exercisable immediately upon the date
of termination for a period of one year following the date of Executive's
termination. Any Options which cannot be granted under the Option Plan shall be
granted outside of the Option Plan. 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


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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 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/ Guy Starkman                       /s/ Isaac Starkman
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     Guy Starkman, Vice President           Isaac Starkman


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