SMART & FINAL EMPLOYEES OFFERED NEW STOCK CHOICE

LOS ANGELES -- Smart & Final here said last week it is offering its employees the opportunity to exchange certain stock options that are no longer valuable for shares of restricted stock in an effort to incentivize employees to stay with the company and work harder.

he purpose for which they were originally intended because their exercise prices are significantly above the current market price for [the company's] common stock. These 'underwater' options have limited effectiveness in providing meaningful performance incentives and employment retention to many option holders.

"By exchanging the options for shares of restricted stock, we believe the performance incentive and employee retention factors will be improved and thereby increase overall stockholder value."

According to the filing, the offer is limited to holders of stock options with exercise prices of $14 or more per share -- well above the level at which the stock has been performing, which ranged from a low of $5.75 per share to a high of $8.56 during 2000 and from a low of $8.125 per share to a high of $10.55 during the first quarter of 2001, through Feb. 23.

The exchange will be made at less than a one-to-one ratio, with participants receiving fewer shares of restricted stock than the number of stock options they currently own.

The filing said some members of executive management and the board of directors have elected to participate in the exchange program, though neither the company nor the board is making any recommendation on employee participation.