EXHIBIT 10.25

 

SEVERANCE AND CONSULTING

SERVICES AGREEMENT

 

This Severance and Consulting Services Agreement (“Agreement”) between Smart &
Final Inc. and its subsidiaries and affiliates (collectively “S&F”) and Dennis
L. Chiavelli (“Chiavelli”), is made with reference to the following facts and
objectives:

 

WHEREAS,

 

1. Chiavelli has been employed by S&F and related entities since December 1985
in a variety of executive officer capacities; and,

 

2. Chiavelli has announced his intention to retire from active service and
resign from all executive officer and director positions with S&F; and,

 

3. S&F desires to retain the benefit of Chiavelli’s expertise and to secure
Chiavelli’s continued assistance in the orderly transition of his former duties
and responsibilities; and,

 

4. It is in the best interest of S&F to secure continued access to Chiavelli’s
services, following his retirement from active executive management, as may be
desirable on a consulting basis;

 

NOW, THEREFORE, the parties agree as follows, in consideration of the mutual
promises and representations contained herein:

 

5. In recognition of Chiavelli’s contributions to executive transition during
2002 and achievement of certain performance objectives, Chiavelli has received
an incentive compensation payment for fiscal 2002 (“2002 Bonus”) of $177,840.00.
S&F and Chiavelli agree that no additional Bonus payments are due for fiscal
2002.

 

6. Chiavelli shall resign from all executive officer and director positions with
S&F as of July 1, 2003 (“the Effective Date”).

 

7. Until the Effective Date, Chiavelli shall continue to receive his regular
salary, benefits and perquisites (collectively his “Base Pay”) at the rate and
in the customary manner existing prior to the Effective Date. In recognition of
his service during 2003 prior to the Effective Date, Chiavelli shall receive an
incentive compensation payment for fiscal 2003 (“2003 Bonus”) of $88,920.00,
payable prior to March 31, 2004. At Chiavelli’s option, this sum may be deferred
and converted into an actuarially equivalent increase in

 

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retirement benefits as provided in Paragraph 16 below. S&F and Chiavelli agree
that no additional Bonus payments are due for fiscal 2003. For his service after
the Effective Date, Chiavelli will no longer be eligible to earn annual
incentive compensation.

 

8. When paid to Chiavelli, the 2002 Bonus and 2003 Bonus shall be subject to
income and payroll tax withholding consistent with S&F’s general policy for
incentive payments.

 

9. As soon as administratively practicable after the Effective Date, Chiavelli
shall receive payment of all accrued but unused vacation through that date.
After the Effective Date, Chiavelli shall not be eligible to accrue any paid
vacation or other compensable personal time.

 

10. Beginning on the Effective Date, and continuing for 24 months thereafter
(“the Consulting Period”), Chiavelli agrees, as provided below, to perform
consulting services for S&F and to not compete with S&F. During the Consulting
Period, Chiavelli shall receive compensation equal to his Base Pay as set forth
above (except for Annual Incentive Compensation) without material adjustment or
modification; provided, however, that in the event any benefit or perquisite
offered to any other executive officer is increased during the Consulting
Period, Chiavelli shall receive the benefit of such increase as well. In no case
shall the Base Pay be reduced during the Consulting Period. Payment during the
Consulting Period shall occur consistent with the Company’s standard payroll
practices and will continue in the event Chiavelli is incapacitated or dies
during the Consulting Period.

 

11. During the Consulting Period, Chiavelli shall continue to be eligible to
participate in the Supplemental Deferred Compensation Plan (“SDCP”) and the
Supplemental Executive Retirement Plan (“SERP”), with the status of an active
employee of S&F.

 

12. During the Consulting Period, Chiavelli shall remain reasonably available
for consultation electronically, by telephone and/or written correspondence. It
is expressly understood that while Chiavelli may be away from his residence for
extended periods, he will endeavor to remain available by telephone and
electronic means. Unless otherwise agreed by Chiavelli, the maximum consulting
services required in one calendar month shall be ten (10) hours. In the event
during the Consulting Period that Chiavelli’s services are requested for a
specific project, Chiavelli shall be entitled to a per diem in an amount to be
mutually agreed upon between him and the Company based upon the duration and
complexity of the specific work assignment.

 

13. During the Consulting Period, Chiavelli shall have use of a cellular
telephone and personal computer together with Internet access at S&F expense.
Should Chiavelli’s services be required at S&F’s Commerce, California office or
any other location, the Company agrees to provide reasonable notice of such
request and if such request cannot be reasonably accommodated by Chiavelli, he
may decline such request without prejudice to any right to payment for any sums
due herein. Chiavelli’s expenses reasonably incurred in

 

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the performance of his assigned duties during the Consulting Period, including
but not limited to travel and lodging expenses, shall be promptly reimbursed by
S&F.

 

14. During the Consulting Period, Chiavelli will not, without prior consent of
the Chief Executive Officer of S&F, directly or indirectly render any material
services to any other person, business, or entity that is in a materially
competitive position with S&F or its businesses (as described in the Company’s
Reports on Form 10-K and 10-Q for the Consulting Period). In the event that the
Chief Executive Officer does not grant such consent, Chiavelli shall have the
right to appeal such decision to the Compensation Committee of the Board of
Directors, whose majority decision shall be binding upon all parties. This
provision shall in no way limit Chiavelli’s right to provide services for
compensation or otherwise to persons or firms that do not compete with the
Company.

 

15. It is the express intention of the parties that Chiavelli shall retire from
S&F as of July 1, 2005 (“Retirement Date”). Chiavelli shall be fully vested in
the SERP and other retirement benefits, including retiree medical benefits, as
of that date.

 

16. Chiavelli’s benefit payable under the SERP, prior to offset for payments
made under the Smart & Final Pension Plan as provided for in Section 1.29 of the
SERP, shall be $203,000.00 annually without regard to the formula terms of the
SERP. This amount may be increased at Chiavelli’s option by the deferral and
conversion of the 2003 Bonus referenced in Paragraph 7 above, on an actuarially
equivalent basis using the factors as provided in Section 1.1 of the SERP.

 

17. Unless sooner vested, the Company shall cause all of Chiavelli’s stock
options, restricted stock and other equity benefits (collectively “Equity
Benefits”) to fully vest on the Retirement Date. As measured from the Retirement
Date, stock options will remain exercisable for the shorter of (a) their
remaining term or (b) a three-year period thereafter. Until the Retirement Date,
Chiavelli will receive the benefit of any modifications or adjustments to any
such Equity Benefits offered generally to other executive officers of the
Company, but is expressly understood that he will not be eligible to participate
in any new equity benefits which may be granted subsequent to December 31, 2002.

 

18. The consulting services listed hereunder may be assigned by Chiavelli to a
professional service organization in which he owns a controlling interest,
provided that the consulting services will be performed by Chiavelli personally.
Notwithstanding any such assignment, Chiavelli agrees that a failure of a
professional service organization to perform such services shall have the same
legal effect as if Chiavelli had failed to personally perform such service.

 

19. During the Consulting Period, and for a period of one year thereafter,
Chiavelli agrees to retain in confidence any and all material trade secrets,
confidential information or other data, which is not readily available to the
public. Following this period Chiavelli shall return to S&F any remaining
material non-public information.

 

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20. This Agreement shall supercede and replace any prior agreements, whether
written or oral or other, regarding the subject matter herein in whole or in
part.

 

21. This Agreement, and any disputes arising hereunder, shall be governed and
interpreted according to California law. Any disputes shall be resolved through
binding arbitration according to the rules of the American Arbitration
Association in Los Angeles with the prevailing party entitled to costs and
reasonable attorneys’ fees.

 

22. Except as required by any federal or state statute, discovery request or
lawful subpoena, the parties agree to maintain in confidence, the fact of,
subject matter and terms of this agreement, provided however, that either party
may disclose the financial terms to an accountant, accounting firm or financial
planning or services firm for purposes of tax or estate planning.

 

SMART & FINAL INC       DENNIS L. CHIAVELLI

/s/    Ross E. Roeder

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/s/    Dennis L. Chiavelli

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By: Ross E. Roeder

Title: Chairman & CEO

 

5/14/03

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5/14/03

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Date

     

Date