This excerpt taken from the ARDNA 10-K filed Mar 13, 2007.
Audit Committee and Financial Expert
The Board of Directors has an Audit Committee comprised of three outside directors. During 2006, the following individuals served as members of the Audit Committee:
Steven Romick, Chairman
John G. Danhakl (from August 17, 2006)
Robert A. Davidow
Steven C. Gordon (through June 28, 2006)
As a result of Steven C. Gordons decision not to stand for reelection as a Director at the Annual Meeting of Stockholders held on June 28, 2006, a vacancy was created on the Audit Committee. On August 17, 2006, the Board of Directors of the Company elected John G. Danhakl to fill the vacancy. Effective February 28, 2007, Mr. Danhakl resigned from the Audit Committee and the Board of Directors elected M. Mark Albert to replace him.
The Companys Board of Directors has determined that at least one person serving on the Audit Committee is an audit committee financial expert as defined under Item 401(h) of Regulation S-K. Steven Romick, the Chairman of the Audit Committee, is independent as defined under applicable SEC and the NASDAQ Stock Market (NASDAQ) rules and the Board of Directors determined he was an audit committee financial expert.
Code of Ethics and Business Conduct
The Company has adopted a Code of Ethics and Business Conduct applicable to all officers, management and employees. The Code of Ethics and Business Conduct includes a Supplementary Code of Ethics for Financial Professionals which is applicable to the chief executive officer, chief financial officer, principal accounting officer or controller and individuals performing similar functions. A copy of the Code of Ethics and Business Conduct may be obtained, without charge, upon written request to the Assistant Secretary, Arden Group, Inc., P.O. Box 512256, Los Angeles, California 90051-0256.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires that directors and executive officers of the Company, as well as persons holding more than ten percent (10%) of a registered class of the Companys equity securities, file with the SEC initial reports of the ownership and reports of changes of ownership of Class A and other equity securities of the Company. Based solely on review of copies of such reports furnished to the Company and written representations that no other reports were required to be filed during the fiscal year ended December 30, 2006, all Section 16(a) filing requirements applicable to the Companys executive officers, directors and greater than ten percent (10%) beneficial owners were complied with during such fiscal year.
Compensation Discussion and Analysis
The Companys Compensation Objectives
The Companys general objective in setting executive compensation is to meet industry standards of base compensation, while providing an incentive program as part of the overall compensation package to reward named executive officers and other executives who have made a contribution to the Company in the applicable period; to recognize, when applicable, the Companys financial performance in bonus or other incentive type payments; to reward those named executive officers and others who have performed up to and beyond the Companys expectations for them; and to attract new executives who have the self-assurance of good job performance to recognize that a part of their overall compensation will be in a discretionary bonus structure.
Elements of the Companys Compensation Program for Executives
The Companys compensation packages for its named executives include elements of (1) a base salary; (2) a discretionary or formula bonus; (3) a Company contribution to the employees account in the Arden Group, Inc. 401(k) Retirement Savings Plan (401(k) Plan); (4) a medical benefits program; (5) possible participation in the Companys SARs program; and (6) other minor benefits.
Reasons for Including Each Element of Executive Compensation
It is the Companys philosophy to reward its named executives at a level commensurate with executives at other companies in the upscale supermarket industry in Southern California including a significant portion of performance-based compensation. All executives other than the Companys Chief Executive Officer (CEO) are employed on an at-will basis. The CEO is the only executive with an employment agreement as described below.
The Company currently has no stock options outstanding and does not presently plan on granting stock options. Instead, it provides incentive to certain named executive officers and other executives with participation in the Companys SARs program. Typically, the Companys CEO or certain other executives will periodically make a request for the Company to consider awarding SARs to certain employees. The request(s) are typically brought before the Board of Directors to consider. In awarding SARs units, the Board takes into account the balance between the executives base salary level, past bonuses and the more long-term nature of the SARs program. Overall, the Company believes that the majority of the compensation package should be in current compensation, but that there should be a meaningful level of longer term rewards, such as contributions to the 401(k) Plan and the SARs program. Each case is discussed on a case by case, individual basis. Also taken into account are the executives performance, the Companys performance and any other SARs units the particular executive in question may have. SARs issued to date entitle the holder to receive upon exercise thereof the excess of the fair market value of a share of Class A on the date of exercise over the fair market value of such share on the date granted. The SARs vest 25% each year beginning at the end of the first year and expire five years from the date of grant. The CEO has never participated in the SARs program.
Named Executive Officers Compensation
Bernard Briskin, Chairman of the Board of Directors, President and CEO of the Company has an employment agreement (Employment Agreement) with the Company dating back to 1988. The term of the Employment Agreement currently expires on January 1, 2009 and is automatically extended for successive periods of one fiscal year unless either the Company and its subsidiaries, which are parties to the Employment Agreement, or Mr. Briskin gives notice of termination no less than fifteen months and no more than eighteen months prior to the date upon which the then current term of the Employment Agreement will expire.
The Employment Agreement presently provides for 2007 base compensation of $647,282 which is adjusted each year based on the increase in the Consumer Price Index, subject to a maximum annual increase of 4%, together with incentive formula based compensation predicated upon the Companys pre-tax profits. In addition, it provides for participation in the Companys medical plan, the use of a Company-owned car and an annual uninsured medical expense reimbursement
of up to $200,000 for Mr. Briskin and his immediately family. In 2006, Mr. Briskins overall compensation was $2,082,516 which included a base salary of $635,837 and incentive formula based compensation of $1,398,088. Accordingly, 67% of Mr. Briskins overall compensation is primarily incentive based. Mr. Briskins Employment Agreement provides that at such time as his base salary and bonus cease to accrue under the Employment Agreement for any reason other than his breach of the Employment Agreement or termination of his employment for cause, the Company will thereafter pay him on a monthly basis in arrears, as long as he lives, an amount per annum equal to 25% of his average base salary and bonus earned in the last three full fiscal years prior to the cessation of his employment. The Company would also continue to provide Mr. Briskin during his lifetime with health insurance benefits and an automobile allowance equivalent to that which the Company then grants to its senior executives and an annual uninsured medical expense reimbursement of up to $200,000 for Mr. Briskin and his immediate family. At each time that modifications were made to Mr. Briskins Employment Agreement, the Company carefully evaluated the effects of Internal Revenue Code Section 162(m). The terms of the Employment Agreement were subject to review during the 2003 fiscal year by the Compensation Committee of the Board of Directors. During the review, discussions took place between Mr. Briskin and the Committee concerning amendments to certain provisions of the Employment Agreement, but no amendments have yet been effected.
The Companys other named executive officer, Ms. Laura J. Neumann, received total compensation of $182,740 in 2006, consisting of a base salary of $136,620, a bonus of $25,000 and other benefits amounting to $21,120. In addition, Ms. Neumann presently holds 1,750 units of SARs which were awarded to her in 2003. No additional units were awarded to her in 2006 and she exercised SARs covering 875 units in 2006. Based on the price of the Companys Class A on December 30, 2006, Ms. Neumann had equity in her unexercised vested SARs units of $58,459.
How Amounts and Formulas are Determined by the Company
Toward the end of each year, the Companys CEO and certain executives recommend to the Compensation Committee bonuses for each named executive officer (other than the CEO of the Company who is the only executive with an employment agreement) and other executives for the year then being completed and salaries for each for the upcoming year. Those recommendations are then reviewed by the Compensation Committee of the Companys Board of Directors. In reviewing and finalizing bonuses and salary adjustments, the CEO and the Compensation Committee review individual performance and results, as well as the performance of the Company overall.