<PAGE>
 
[Logo of Wells Fargo Bank]


September 18, 1997


Smart & Final, Inc.
4700 South Boyle Avenue
Los Angeles, CA   90058

Attention:  Richard Phegley, Treasurer

Dear Richard:

I am pleased to advise you that Wells Fargo Bank, N.A. ("WFB") has approved for
use by Smart & Final, Inc. an uncommitted short term money market facility in
the principal amount of up to fifty million dollars ($50,000,000), subject to
the following terms and conditions:

BORROWER:          Smart & Final, Inc. ("BORROWER")
                                       ------------
 
PRINCIPAL AMOUNT:  Up to fifty million dollars ($50,000,000). Advances under
                   this facility shall be made in multiples of five million
                   dollars ($1,000,000) up to an aggregate of $50,000,000.00
                   outstanding at any one time. WFB shall not have any
                   commitment or obligation to make any advances and each
                   advance will be made only in WFB's sole discretion.
                   
INTEREST RATE:     A fixed rate of interest as quoted by WFB on the date of each
                   advance.
 
TERM OF ADVANCE:   As mutually agreed by WFB and ("BORROWER") at the time
                                                 ------------            
                   of each advance provided that no advance shall have a term
                   exceeding ninety (90) days and no advance shall mature after
                   December 17, 1998. Principal and interest of each advance
                   shall be payable at the maturity of each advance. WFB shall
                   have the option of assigning or selling participations in any
                   advances.
 
PURPOSE:           For working capital requirements.
 
EFFECTIVE DATE:    September 18, 1997.
 
TERMINATION DATE:  At any time upon written notice by either ("BORROWER")
                                                              -----------
                   or WFB, provided, however, that such termination shall not
                   affect any advance outstanding at the time of termination. In
                   any event, this line of credit will expire no later than
                   September 17, 1998.
<PAGE>
 
September 18, 1997
Page 2

DOCUMENTATION:     1.  Note as enclosed.
 
                   2.  Supporting documentation, including Board Resolution,
                       Certificate of Incumbency and Authorized Signatures.
 
OTHER TERMS:       1.  Continued maintenance of a financial conditional
                       satisfactory to WFB.

                   2.  Provision in a timely manner to WFB of quarterly
                       unaudited financial statements and an audited fiscal 
                       year-end report certified by a nationally recognized
                       accounting firm. Provision of 10Q and 10K reports as
                       available.

WIRE INSTRUCTIONS: WFB will wire monies to the following instructions only. Any
                   changes must by communicated to WFB in writing and signed by
                   an authorized signer.
 
                   Bank Name           :  Wells Fargo Bank, N.A.
                   ABA Number          :  121000248
                   Credit To           :  Smart & Final, Inc.
                   Account Number      :  4159-391218

COMMITMENT FEE:    It is understood that this facility does not constitute a
                   commitment by WFB to lend at any time and that any advance
                   hereunder shall be at WFB's sole discretion. Accordingly, no
                   commitment fee will be payable to WFB.

GOVERNING LAW:     This letter is governed by and construed under the laws of
                   the State of California.

ARBITRATION:       1.  Arbitration.  Upon the demand of any party, any Dispute 
                       -----------  
                       shall be resolved by binding arbitration (except as set
                       forth in paragraph 5 below) in accordance with the terms
                       of this letter. A "Dispute" shall mean any action,
                       dispute, claim or controversy of any kind, whether in
                       contract or tort, statutory or common law, legal or
                       equitable, now existing or hereafter arising under or in
                       connection with, or in any way pertaining to, this letter
                       or the enclosed note, or any past, present or future
                       extensions of credit and other activities, transactions
                       or obligations of any kind related directly or indirectly
                       to this letter or the enclosed note, including without
                       limitation, any of the foregoing arising in connection
                       with the exercise of any self-help, ancillary or other
                       remedies pursuant to this letter or the enclosed note.
                       Any party may by summary proceedings bring an action in
                       court to compel arbitration of a Dispute. Any party who
                       fails or refuses to submit to arbitration following a
                       lawful demand by any other party shall bear all costs and
                       expenses incurred by such other party in compelling
                       arbitration of any Dispute.
<PAGE>
 
September 18, 1997
Page 3             

                   2.  Governing Rules.  Arbitration proceedings shall be 
                       ---------------                       
                       administered by the American Arbitration Association
                       ("AAA") or such other administrator as the parties shall
                       mutually agree upon in accordance with the AAA Commercial
                       Arbitration Rules. All Disputes submitted to arbitration
                       shall be resolved in accordance with the Federal
                       Arbitration Act (Title 9 of the United States Code),
                       notwithstanding any conflicting choice of law provision
                       in this letter or the enclosed note. The arbitration
                       shall be conducted at a location in California selected
                       by the AAA or other administrator. If there is any
                       inconsistency between the terms hereof and any such
                       rules, the terms and procedures set forth herein shall
                       control. All statutes of limitation applicable to any
                       Dispute shall apply to any arbitration proceeding. All
                       discovery activities shall be expressly limited to
                       matters directly relevant to the Dispute being
                       arbitrated. Judgment upon any award rendered in an
                       arbitration may be entered in any court having
                       jurisdiction; provided however, that nothing contained
                       herein shall be deemed to be a waiver by any party that
                       is a bank of the protections afforded to it under 12
                       U.S.C. (S)91 or any similar applicable state law.

                   3.  No Waiver; Provisional Remedies, Self-Help and 
                       -----------------------------------------------
                       Foreclosure.  No provision hereof shall limit the right 
                       -----------      
                       of any party to exercise self-help remedies such as
                       setoff, foreclosure against or sale of any real or
                       personal property collateral or security, or to obtain
                       provisional or ancillary remedies, including without
                       limitation injunctive relief, sequestration, attachment,
                       garnishment or the appointment of a receiver, from a
                       court of competent jurisdiction before, after or during
                       the pendency of any arbitration or other proceeding. The
                       exercise of any such remedy shall not waive the right of
                       any party to compel arbitration hereunder.

                   4.  Arbitrator Qualifications and Powers; Awards.  
                       -------------------------------------------- 
                       Arbitrators must be active members of the California
                       State Bar or retired judges of the state or federal
                       judiciary of California, with expertise in the
                       substantive law applicable to the subject matter of the
                       Dispute. Arbitrators are empowered to resolve Disputes by
                       summary rulings in response to motions filed prior to the
                       final arbitration hearing. Arbitrators (i) shall resolve
                       all Disputes in accordance with the substantive law of
                       the state of California, (ii) may grant any remedy or
                       relief that a court of the state of California could
                       order or grant within the scope hereof and such ancillary
                       relief as is necessary to make effective any award, and
                       (iii) shall have the power to award recovery of all costs
                       and fees, to impose sanctions and to take such other
                       actions as they deem necessary to the same extent a judge
                       could pursuant to the Federal Rules of Civil Procedure,
                       the California Rules of Civil Procedure or other
                       applicable law. Any Dispute in which the amount in
                       controversy is $5,000,000 or less shall be decided by a
                       single arbitrator who shall not render an award of
                       greater than $5,000,000 (including damages, costs, fees
                       and expenses). By submission to a single arbitrator, each
                       party expressly waives any right or claim to recover more
                       than $5,000,000. Any Dispute in which the amount in
                       controversy exceeds $5,000,000 shall 
<PAGE>
 
September 18, 1997
Page 4

                       be decided by majority vote of a panel of three
                       arbitrators; provided however, that all three arbitrators
                       must actively participate in all hearings and
                       deliberations.

                   5.  Judicial Review.  Notwithstanding anything herein to the
                       ---------------                                         
                       contrary, in any arbitration in which the amount in
                       controversy exceeds $25,000,000, the arbitrators shall be
                       required to make specific, written findings of fact and
                       conclusions of law. In such arbitrations (i) the
                       arbitrators shall not have the power to make any award
                       which is not supported by substantial evidence or which
                       is based on legal error, (ii) an award shall not be
                       binding upon the parties unless the findings of fact are
                       supported by substantial evidence and the conclusions of
                       law are not erroneous under the substantive law of the
                       state of California, and (iii) the parties shall have in
                       addition to the grounds referred to in the Federal
                       Arbitration Act for vacating, modifying or correcting an
                       award the right to judicial review of (A) whether the
                       findings of fact rendered by the arbitrators are
                       supported by substantial evidence, and (B) whether the
                       conclusions of law are erroneous under the substantive
                       law of the state of California. Judgment confirming an
                       award in such a proceeding may be entered only if a court
                       determines the award is supported by substantial evidence
                       and not based on legal error under the substantive law of
                       the state of California.

                   6.  Miscellaneous.  To the maximum extent practicable, the 
                       -------------
                       AAA, the arbitrators and the parties shall take all
                       action required to conclude any arbitration proceeding
                       within 180 days of the filing of the Dispute with the
                       AAA. No arbitrator or other party to an arbitration
                       proceeding may disclose the existence, content or results
                       thereof, except for disclosures of information by a party
                       required in the ordinary course of its business, by
                       applicable law or regulation, or to the extent necessary
                       to exercise any judicial review rights set forth herein.
                       If more than one agreement for arbitration by or between
                       the parties potentially applies to a Dispute, the
                       arbitration provision most directly related to this
                       letter or the enclosed note or the subject matter of the
                       Dispute shall control. This arbitration provision shall
                       survive termination, amendment or expiration of this
                       letter or the enclosed note and any relationship between
                       the parties.

If the above terms and conditions are acceptable to you, please indicate by
signing and returning the enclosed copy of this letter and the original note.
<PAGE>
 
September 18, 1997
Page 5

We sincerely appreciate the opportunity to provide you with this competitive
source of short-term funding and look forward to your active use of this
facility.


WELLS FARGO BANK, N. A.


/s/ Kathleen Barnes
-------------------
Name        Kathleen Barnes
            Vice President
--------------------------------
Title



Accepted By:

SMART & FINAL, INC.


/s/ Richard Phegley
-------------------------------------------
Name     Richard Phegley
         Vice President and Treasurer
-------------------------------------------
Title

Enclosures
<PAGE>
 
                                      NOTE
                                      ----

$50,000,000                                                   September 18, 1997


   For value received, the undersigned, Smart & Final, Inc. ("Borrower"), hereby
promises to pay to the order of WELLS FARGO BANK, N. A. ("WFB"), in United
States dollars and in immediately available funds at 707 Wilshire Boulevard, Los
Angeles, California, the principal sum of fifty million dollars ($50,000,000) or
so much thereof as may be outstanding hereunder, whichever is less, together
with interest from the date of each advance on the daily unpaid principal
balance of said advance. Each advance hereunder shall be repaid on the date
mutually agreed by Borrower and WFB at the time of making such advance, together
with interest thereon at the rate per annum mutually agreed by Borrower and WFB
at the time of making of such advance, provided that all principal and interest
outstanding on December 17, 1998 shall be due and payable on such date.

   WFB shall not be obligated to make any advance hereunder and any advances
will be made solely in WFB's discretion.

   Interest on each advance hereunder shall be computed on the basis of a year
of 360 days for the actual number of days elapsed. Any amount of principal not
paid when due hereunder shall thereafter bear interest at a rate per annum equal
to 1% in excess of the rate announced within WFB from time to time as its "Prime
Rate." Interest not paid when due shall thereafter bear like interest as the
principal.

   In the event any advance hereunder is prepaid prior to the maturity date
agreed upon for that advance, the Borrower shall reimburse WFB on demand for any
loss incurred by WFB as a result of such prepayment, including any loss of
income resulting from WFB's reinvestment or reemployment of the amount prepaid
at a rate which is less than the interest rate agreed upon for such advance.

   WFB is authorized to record on the schedule attached to and made a part of
this Note (a) the date, amount, maturity date and rate of interest agreed upon
by WFB and Borrower with respect to each advance and (b) all payments received
by WFB hereunder. Such schedule shall be prima facie evidence of the matters so
                                         ----- -----                       
recorded, provided that WFB's failure to make any such entries shall not affect
Borrower's obligations hereunder.

   This Note is referred to in, and is entitled to the benefits of, that certain
letter agreement between WFB and the Borrower of even date herewith.

   Borrower hereby waives diligence, presentment, demand, protest and notice of
any kind whatsoever. Borrower promises to pay costs of collection and reasonable
attorneys' fees if default is made in the payment of this Note.

   In the event of nonpayment when due of principal of or interest on this Note,
the whole amount of principal and interest shall, at the option of the holder of
this Note, become immediately due and payable.
<PAGE>
 
   Advances under this Note may be requested, and the interest rate quoted by
WFB agreed to, by any authorized officer of the undersigned. The undersigned
hereby authorizes WFB to rely upon the telephonic or written instruction of any
person identifying himself or herself as an authorized officer of the
undersigned without any obligation on the part of WFB to confirm the identity or
authority of such persons.

   This Note shall be governed by and construed under the laws of the State of
California.

   IN WITNESS WHEREOF, the undersigned has caused this Note to be executed by
its officer or officers thereunto duly authorized and directed by appropriate
corporate authority.

                              SMART & FINAL, INC.


                              /s/ Richard Phegley
                              -------------------
                              Name
                              Vice President & Treasurer
                              --------------------------
                              Title


                                       2
<PAGE>
 
                   SCHEDULE TO NOTE OF (SMART & FINAL, INC.)
                   -----------------------------------------
                            DATED (SEPTEMBER 1, 1997)
                            -------------------------
 
                 
         Principal   Maturity   Principal  Interest   Paid     
Date of  Amount of    Date of    Amount     Amount  Through  Principal  Notation
Advance   Advance     Advance     Paid       Paid     Date    Balance    Made By
-------   -------     -------     ----       ----     ----    -------    -------
 




   
   
   
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