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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For quarter ended October 31, 1997 Commission file number 1-14990
---------------- -------
GETTY PETROLEUM MARKETING INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
MARYLAND 11-3339235
- - ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
125 Jericho Turnpike, Jericho, New York 11753
- - ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(516) 338 - 6000
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
Registrant has 13,668,835 shares of Common Stock, par value $.01 per share,
outstanding as of October 31, 1997.
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<PAGE>
GETTY PETROLEUM MARKETING INC.
INDEX
Part I. FINANCIAL INFORMATION Page Number
- - ------------------------------ -----------
Item 1. Financial Statements
Consolidated Balance Sheets as of October 31, 1997 and
January 31, 1997 1
Consolidated Statements of Operations for the three and
nine months ended October 31, 1997 and 1996 2
Consolidated Statements of Cash Flows for the
nine months ended October 31, 1997 and 1996 3
Notes to Consolidated Financial Statements 4 - 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6 - 9
Part II. OTHER INFORMATION
- - ---------------------------
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 10
<PAGE>
GETTY PETROLEUM MARKETING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands except share amounts)
- - --------------------------------------------------------------------------------
October 31, January 31,
- - --------------------------------------------------------------------------------
Assets: 1997 1997
- - --------------------------------------------------------------------------------
(unaudited)
Current assets:
Cash and equivalents $9,908 $7,517
Accounts receivable, net 11,076 15,195
Inventories 26,475 15,944
Deferred income taxes 3,011 967
Prepaid expenses and other current assets 2,474 5,592
-------- --------
Total current assets 52,944 45,215
Property and equipment, at cost, less
accumulated depreciation and amortization 88,265 88,049
Other assets 2,087 2,236
-------- --------
Total assets $143,296 $135,500
======== ========
- - --------------------------------------------------------------------------------
Liabilities and Stockholders' Equity:
- - --------------------------------------------------------------------------------
Current liabilities:
Accounts payable $21,959 $24,659
Accrued expenses 10,152 6,765
Gasoline taxes payable 15,357 12,691
Income taxes payable 377 -
-------- --------
Total current liabilities 47,845 44,115
Deferred income taxes 19,808 19,632
Other, principally deposits 19,139 17,212
Stockholders' equity:
Preferred stock, par value $.01 per share;
authorized 10,000,000 shares for issuance
in series (none of which is issued) - -
Common stock, par value $.01 per share;
authorized 30,000,000 shares; issued
13,668,835 at October 31, 1997 and
1,000 at January 31, 1997 137 -
Paid-in capital 60,285 54,541
Accumulated deficit (1,072) -
Unearned ESOP stock (592,980 shares at
October 31, 1997) (2,846) -
-------- --------
Total stockholders' equity 56,504 54,541
-------- --------
Total liabilities and stockholders' equity $143,296 $135,500
======== ========
See accompanying notes.
-1-
<TABLE>
<CAPTION>
GETTY PETROLEUM MARKETING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
- - ------------------------------------------------------------------------------------------------------------------------
Three months ended October 31, Nine months ended October 31,
- - ------------------------------------------------------------------------------------------------------------------------
1997 1996 1997 1996
- - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $226,536 $208,674 $657,162 $617,168
Rental income 8,619 8,303 25,844 24,904
Other income 405 46 1,228 153
-------- -------- -------- --------
235,560 217,023 684,234 642,225
-------- -------- -------- --------
Cost of sales (excluding depreciation and amortization) 223,232 214,204 654,940 619,930
Selling, general and administrative expenses 4,217 5,110 18,255 15,403
Depreciation and amortization 3,461 3,457 10,121 10,159
Interest expense 194 93 603 352
Severance charge 1,435 - 1,435 -
Change of control charge - - 637 -
-------- -------- -------- --------
232,539 222,864 685,991 645,844
-------- -------- -------- --------
Earnings (loss) before provision (credit)
for income taxes 3,021 (5,841) (1,757) (3,619)
Provision (credit) for income taxes 1,162 (2,462) (685) (1,527)
-------- -------- -------- --------
Net earnings (loss) $1,859 ($3,379) ($1,072) ($2,092)
======== ======== ======== ========
Net earnings (loss) per share $0.14 ($0.27) ($0.08) ($0.17)
======== ======== ======== ========
Weighted average shares outstanding 13,637 12,675 13,477 12,673
======== ======== ======== ========
See accompanying notes.
</TABLE>
-2-
GETTY PETROLEUM MARKETING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine months ended
October 31,
---------------------
1997 1996
---- ----
Cash flows from operating activities:
Net loss ($1,072) ($2,092)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 10,121 10,159
Deferred income taxes (1,868) 899
Stock option charge 2,820 -
Change of control charge 637 -
ESOP charge 407 -
Gain on dispositions of equipment (52) (95)
Changes in assets and liabilities:
Accounts receivable 4,119 (1,365)
Inventories (10,531) (358)
Prepaid expenses and other current assets 3,108 153
Other assets 116 385
Accounts payable, accrued expenses and
gasoline taxes payable 1,848 9,707
Income taxes payable 377 -
Other, principally deposits 1,927 622
-------- -------
Net cash provided by operating activities 11,957 18,015
-------- -------
Cash flows from investing activities:
Capital expenditures (10,316) (13,843)
Proceeds from dispositions of equipment 74 281
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Net cash used in investing activities (10,242) (13,562)
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Cash flows from financing activities:
Stock options and common stock 676 -
Net cash transferred to Getty Realty Corp. - (4,192)
-------- -------
Net cash provided by (used in) financing activities 676 (4,192)
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Net increase in cash and equivalents 2,391 261
Cash and equivalents at beginning of period 7,517 676
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Cash and equivalents at end of period $9,908 $937
======== =======
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $302 $352
Income taxes, net 806 -
See accompanying notes.
-3-
<PAGE>
GETTY PETROLEUM MARKETING INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. General:
The accompanying consolidated financial statements include the accounts of
Getty Petroleum Marketing Inc. and its wholly-owned subsidiaries (the
"Company"). The consolidated financial statements have been prepared in
conformity with generally accepted accounting principles and include amounts
that are based on management's best estimates and judgments. While all
available information has been considered, actual amounts could differ from
those estimates. The consolidated financial statements are unaudited but, in the
opinion of management, reflect all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation. These statements should be read in
conjunction with the consolidated financial statements and related notes which
appear in the Company's Annual Report on Form 10-K for the fiscal year ended
January 31, 1997.
On March 21, 1997, the Company became a separate publicly-held company upon
its spin-off from Getty Petroleum Corp., now known as Getty Realty Corp.
Stockholders of record of Getty Realty Corp. on March 21, 1997 received a tax-
free dividend of one share of the Company's common stock for each share of
common stock of Getty Realty Corp.
2. Earnings (loss) per share:
Earnings (loss) per share is computed by dividing net earnings (loss) by
the weighted average number of shares of common stock outstanding during the
period. Common stock equivalents are not included in earnings (loss) per share
computations since their effect is immaterial or anti-dilutive.
3. Employee Stock Ownership Plan:
In connection with the spin-off, the Company established a leveraged
Employee Stock Ownership Plan (the "ESOP") that purchased newly issued shares of
Common Stock equal to five percent of the then outstanding shares of the
Company. The ESOP purchased such newly-issued shares from the Company using
the proceeds of a loan made by the Company to the ESOP. The ESOP loan will be
repaid over a five-year period, and the Company will contribute annually to the
ESOP the funds required to repay such loan. The principal amount of the ESOP
loan is equal to the number of shares purchased by the ESOP (671,298) multiplied
by the purchase price per share ($4.80) or $3,222,000. It is expected that the
repayment of the ESOP loan will result in projected allocations to participants'
accounts of an aggregate of 134,260 shares of Common Stock per year, allocated
in proportion to compensation. The Company expects that the Common Stock
purchased by the ESOP will be allocated to covered employees over a five-year
period which commenced on April 1, 1997. In connection therewith, the Company
recognized a charge of $407,000 during the nine months ended October 31, 1997,
which charge is included in selling, general and administrative expenses in the
consolidated statement of operations.
-4-
<PAGE>
4. Stockholders' equity:
A summary of the changes in stockholders' equity for the nine months ended
October 31, 1997 is as follows (in thousands):
Common Paid-in Accumulated
Stock Capital Deficit ESOP Total
- - --------------------------------------------------------------------------------
Balance,
January 31, 1997 $ - $54,541 $ - $ - $54,541
Distribution of stock
in spin-off 128 (128) -
Net loss (1,072) (1,072)
Issuance of stock to ESOP 7 3,215 (3,222) -
ESOP stock committed
to be released 31 376 407
Issuance of common stock 9 9
Stock options 2 2,617 2,619
----------------------------------------------------
Balance, October 31, 1997 $137 $60,285 ($1,072) ($2,846) $56,504
====================================================
5. Severance charge:
During the quarter ended October 31, 1997, the Company recorded a
severance charge of $1,435,000 related to the resignation of the Company's
Chief Operating Officer effective October 31, 1997. The Company will make
payments of approximately $287,000 per year over the five-year term of the
severance agreement. The agreement also includes a covenant not to compete and
provides for consulting services.
-5-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations - Quarter ended October 31, 1997 compared
with quarter ended October 31, 1996
-----------------------------------
Net sales for the third fiscal quarter ended October 31, 1997 were $226.5
million as compared with $208.7 million for the same quarter last year, an
increase of 8.6%. The increase in net sales was attributable to a 4.6%
increase in average selling prices and a 3.8% increase in sales volume. The
increase in sales volume was primarily due to an increase in retail gallonage
sold of 8.4 million gallons (4.3%) to 204.3 million gallons. The average
gasoline volume per retail outlet increased by 5.5%. The Company had a gross
profit before depreciation and amortization (excluding rental and other income)
of $3.3 million for the quarter ended October 31, 1997 compared to a gross loss
of $5.5 million in the comparable period last year. The improved gross profit
of $8.8 million was principally due to higher profit margins which resulted
from sales price increases during the quarter and higher sales volumes.
The Company's financial results depend largely on retail marketing margins
and rental income from its dealers. The petroleum marketing industry has been
and continues to be volatile and highly competitive. The cost of petroleum
products purchased as well as the price of petroleum products sold have
fluctuated widely in the past. As a result of the historical volatility of
product margins and the fact that they are affected by numerous diverse
factors, it is impossible to predict future margin levels. The Company
believes that it has only been modestly affected by inflation since increased
costs are passed along to its customers to the extent permitted by competition.
Rental income was $8.6 million for the three months ended October 31,
1997, an increase of 3.8% over rental income of $8.3 million for the comparable
period last year. The increase was due about equally to rent escalations
provided under existing lease agreements, lease renewals, and higher rentals as
a result of improvements to the facilities.
Other income was $.4 million for the three months ended October 31, 1997
as compared to less than $.1 million for the quarter ended October 31, 1996.
The increase was primarily due to $.2 million of net fees received from Getty
Realty Corp. under a services agreement and $.1 million of additional
investment income.
Selling, general and administrative expenses were $4.2 million for the
three months ended October 31, 1997 as compared to $5.1 million for the quarter
ended October 31, 1996. The decrease was primarily due to the reversal of $1.2
million of stock option expense resulting from a decline in the Company's stock
price during the current quarter.
Depreciation and amortization was $3.5 million for both of the three month
periods ended October 31, 1997 and 1996.
-6-
<PAGE>
The severance charge of $1.4 million during the quarter ended October 31,
1997 related to the resignation of the Company's Chief Operating Officer
effective October 31, 1997. The Company will make payments of approximately
$287 thousand per year over the five-year term of the severance agreement.
Results of Operations - Nine months ended October 31, 1997 compared
with nine months ended October 31, 1996
---------------------------------------
Net sales for the nine months ended October 31, 1997 were $657.2 million
as compared with $617.2 million for the same period last year, an increase of
6.5%. The increase in net sales was attributable to a 5.4% increase in sales
volume and a 1.0% increase in average selling prices. The increase in sales
volume was primarily due to a 29.3 million gallon (5.1%) increase in retail
gallonage sold to 599.7 million gallons. The average gasoline volume per
retail outlet increased by 6.5%. The Company had a gross profit before
depreciation and amortization (excluding rental and other income) of $2.2
million for the nine months ended October 31, 1997 compared to a gross loss of
$2.8 million in the comparable period last year. The improvement of $5.0
million was principally due to higher profit margins and increased sales
volumes as compared with the comparable period last year.
Rental income was $25.8 million for the nine months ended October 31,
1997, an increase of 3.8% over rental income of $24.9 million for the
comparable period last year. The increase was due about equally to rent
escalations provided under existing lease agreements, lease renewals and higher
rentals as a result of improvements to the facilities.
Other income was $1.2 million for the nine months ended October 31, 1997
as compared to $.2 million for the nine months ended October 31, 1996. The
increase was primarily due to $.7 million of net fees received from Getty
Realty Corp. under a services agreement and $.3 million of additional
investment income.
Selling, general and administrative expenses were $18.3 million for the
nine months ended October 31, 1997 as compared to $15.4 million for the nine
months ended October 31, 1996. The increase was primarily due to $2.8 million
of stock option expense resulting from appreciation of the Company's stock
price during the current nine month period.
The change of control charge for the nine months ended October 31, 1997 of
$.6 million related to certain "change of control" agreements in connection
with the spin-off.
Depreciation and amortization of approximately $10.1 million was
comparable for both of the nine month periods ended October 31, 1997 and 1996.
The Company recorded a severance charge of $1.4 million during the quarter
ended October 31, 1997 as previously discussed.
-7-
Liquidity and Capital Resources
- - --------------------------------
As of October 31, 1997, working capital amounted to $5.1 million as
compared to $1.1 million as of January 31, 1997. The increase was primarily
due to working capital generated during the period from operations, partially
offset by $10.3 million of capital expenditures.
The Company's principal sources of liquidity are cash flows from
operations, which amounted to $12.0 million during the nine months ended
October 31, 1997, and its unsecured lines of credit. Management believes that
cash requirements for operations, including payments to Getty Realty Corp.
under the Master Lease and capital expenditures, can be met by cash flows from
operations, available cash and equivalents and credit lines. The Company has
uncommitted lines of credit from three banks in the aggregate amount of $60
million, which may be utilized for working capital borrowings and letters of
credit. Borrowings under such lines of credit are unsecured and bear interest
at the applicable bank's prime rate or, at the Company's option, a rate tied to
the banks' cost of funds or LIBOR plus 1.1%. Such lines of credit were unused
as of October 31, 1997.
The Company's capital expenditures for the nine months ended October 31,
1997 amounted to $10.3 million. The Company's capital expenditures include
discretionary expenditures to improve the image of the service stations, to
improve the terminal facilities and for replacement of service station
equipment. Pursuant to agreements with Getty Realty Corp. entered into in
connection with the spin-off, expenditures with respect to tank replacements
required to meet the December 22, 1998 federal environmental standards and
certain environmental liabilities and obligations are the responsibility of,
and will be paid by, Getty Realty Corp.
Termination of Uni-Marts Agreements
- - -----------------------------------
The termination of the leases and supply contract with Uni-Marts, Inc.
will occur on or about December 31, 1997. It is anticipated that a substantial
number of the 109 properties currently leased to Uni-Marts will be leased, on
an individual basis, to new operators. Except for approximately 5 locations
which will be operated by the Company, those locations that are not leased will
be temporarily operated by the Company until such time as new operators are in
place. Approximately 10 locations may be closed and efforts will be made to
dispose of them.
As a result of the termination of the supply contract pursuant to which
the Company supplies an additional 190 Uni-Marts controlled locations, the
Company's sales of petroleum products will be reduced by approximately 88
million gallons per annum, or about 8% of the Company's total annual volume.
Product sales to Uni-Marts have been on a lower margin, wholesale basis, and
the loss of sales volume will be substantially offset by higher retail margin
sales at the Getty-controlled locations.
-8-
<PAGE>
The Company has agreed to purchase the Uni-Marts equipment at the Getty
locations for fair market value of approximately $4 million. Most of the
equipment purchased from Uni-Marts will either be sold to, or included in the
rental rates charged to, new operators.
The Company does not believe that the loss of the Uni-Marts leases and
supply contract will have a material adverse effect on the financial condition
of the Company.
-9-
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Designation of Exhibit
in this Quarterly Report
on Form 10-Q Description of Exhibit
------------------------ ---------------------------------------
10.13 General Release and Severance Agreement
between Alvin A. Smith and Getty
Petroleum Marketing Inc.
27 Financial Data Schedule
(b) Reports on Form 8-K:
None
SIGNATURES
-----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GETTY PETROLEUM MARKETING INC.
---------------------------------
(Registrant)
Dated: December 11, 1997 BY: /s/ Michael K. Hantman
---------------------------
(Signature)
MICHAEL K. HANTMAN
Vice President and
Corporate Controller
(Principal Financial and
Accounting Officer)
Dated: December 11, 1997 BY: /s/ Leo Liebowitz
---------------------------
(Signature)
LEO LIEBOWITZ
Chairman and Chief Executive Officer
-10-
<PAGE.
GENERAL RELEASE AND SEVERANCE AGREEMENT
---------------------------------------
This General Release and Severance Agreement (hereafter "Agreement") is
hereby entered into between Alvin A. Smith ("Executive"), and Getty Petroleum
Marketing Inc., a Maryland corporation ("Employer").
WHEREAS, Executive is, or prior to the execution of this Agreement has
been, an employee of Employer;
WHEREAS, Executive and Employer now desire to terminate this employment
relationship and fully and finally to resolve all matters between them;
THEREFORE, in exchange for the good and valuable consideration set forth
herein, the adequacy of which is specifically acknowledged, Executive and
Employer ("the parties") hereby agree as follows:
1. Termination of Employment. Executive hereby irrevocably agrees to
resign his employment with Employer, effective November 1, 1997 (the
"Effective Date of Retirement").
2. Salary and Benefit Continuation.
a. For a period of five years from the Effective Date of
Retirement (such period the "Continuation Period"), Employer shall make
severance payments to Executive at the annual rate of $286,998.91. Such
payments will be made in installments in accordance with Employer's then
applicable payroll practices for senior executives, and shall be reduced for
applicable withholding. Should the Executive die during the Continuation
Period, Employer shall continue making such payments for the remainder of such
period to such primary or contingent beneficiaries as Executive shall have
designated in writing to the Employer, referring to this Section of this
Agreement, or, in the event no such designation shall be in effect at the
Executive's death, to the Executive's spouse at the time of his death, or in
the event no spouse shall survive him, to the Executive's estate.
b. During the Continuation Period Employer shall also continue to
provide at its expense coverage for Executive and his family under Employer's
health, dental and life insurance plans then in effect for its senior
executives as set forth in the Change of Control Agreement (as hereinafter
defined). Notwithstanding the foregoing, if as of the Effective Date of
Retirement or at any time thereafter during the Continuation Period, Employer
cannot represent to Executive that such plans are non-discriminatory within
the meaning of Section 105(h) of the Internal Revenue Code of 1986, as
amended, then Employer shall provide such coverage to the Executive and his
family through the purchase by Employer of individual insured plans as set
forth in the Change of Control Agreement. Should the Executive die during the
Continuation Period, Employer shall continue to provide such medical and
dental coverage for the remainder of such period to Executive's spouse at the
date of his death. The Continuation Period shall be co-extensive with, and
shall fully discharge Employer's obligations to provide, any period of
"continuation coverage" to which Executive (or any of his dependents or
beneficiaries) may be entitled pursuant to Section 4980B of the Internal
Revenue Code of 1986, as amended. To the extent provided by law or the terms
of the applicable employee benefit plans, Executive will be offered the
opportunity at the end of the Continuation Period to convert his group
benefits to individual coverage, at his expense, at non-group rates, if such
coverage is available.
3. Accrued Vacation and Sick Pay. On the Effective Date of Retirement,
Employer will pay Executive for his accrued but unused vacation and sick days.
4. Additional Benefits. Employer shall pay or cause to be paid to
Executive all of his benefits accrued under Employer's 401(k) plan and
Supplemental Deferred Compensation program as of the Effective Date of
Retirement. Except as described in Sections 2 and 5 hereof all other
compensation, benefits or perquisites shall cease upon the Effective Date of
Retirement.
5. Stock Options. Any existing right of Executive with respect to
options to purchase stock of Employer or any predecessor (including any right
to tax gross-up upon exercise), shall continue in accordance with its terms
following the Effective Date of Retirement except that Executive shall be
treated as an employee of the Employer thereunder until the earlier of the
expiration of the Continuation Period or the date of his death.
Notwithstanding the foregoing, if the terms of this Section 5 shall conflict
with the option plan or the grant letters, then Employer and any predecessor
shall enter into a contractual option which provides Executive with equivalent
benefits.
6. Benefits through Effective Date of Retirement. Employer shall make
all payments and contributions required under the terms of Employer's
applicable employee benefit plans to be made on Executive's behalf prior to
the Effective Date of Retirement. To the extent permitted under the terms of
applicable employee benefit plans, Employer has paid and will continue to pay,
for periods up to and including the Effective Date of Retirement, any life and
disability insurance premiums pertaining to Executive which would be necessary
to maintain such coverage for Executive as Employer provides to otherwise
similarly-situated employees. However, Employer makes no representation that
such coverage will be available to Executive for periods while he is or has
not been actively employed.
7. No Other Payments. Executive understands and agrees that Employer's
obligations hereunder are in full satisfaction of any obligations it may have
to Executive pursuant to any other agreements with him including, without
limitation, the "change of control" Agreement dated December 9, 1994 and
amended March 7, 1996, to which Getty Petroleum Corp. and Executive are
parties, and the letter agreement dated April 8, 1997, to which Executive and
Employer are parties (collectively, the "Change of Control Agreement") and
therefore that Employer shall make no other payments to Executive, and shall
have no other obligations to Executive except as described in this Agreement.
8. Consultation After Effective Date of Retirement. Executive agrees
that following his Effective Date of Retirement he will continue to make
himself available for reasonable part-time consultation relating to contract
negotiations, union matters and other business of the Company with Employer
and Employer's agents and employees. Such consultation (a) may also include
Executive's making himself reasonably available for interviews by Employer's
counsel, depositions, and/or court appearances upon Employer's request and (b)
except as described in subsection (a) shall neither exceed ten hours per week
nor 10 weeks per year nor require Executive's time during regular business
hours in conflict with any activities of Executive. In no event shall such
consultation obligation require Executive to change his place of principal
residence. Executive will not perform any services for Employer except as
explicitly and specifically authorized by Employer, and will not enter the
premises of Employer or communicate with government agencies, labor unions,
adverse parties in actual or potential litigation, suppliers, service
providers, customers, or employees of Employer regarding Employer's business
or Executive's employment status without the express written authorization of
Employer. Employer agrees that it will reimburse Executive for reasonable
expenses, such as telephone, travel, lodging, and meal expenses, incurred by
Executive at Employer's request or with Employer's approval, consistent with
Employer's generally applicable policies for employee expenses. Executive
agrees that he will notify Employer of all pertinent facts if he is contacted
by any government agency with reference to Employer's business, or by any
person contemplating or maintaining any claim or legal action against
Employer, or by any agent or attorney of such person. No claimed breach of
this Section 8 by Executive will provide Employer with a basis for suspending
the payments referred to in Section 2 hereof; provided, however, that Employer
hereby expressly reserves all other rights relating to enforcement of this
Section 8 as set forth in Section 16.
9. Release of Claims by Employer. Employer agrees hereby forever to
release, discharge, and covenant not to sue Executive, from any and all
claims, debts, demands, accounts, judgments, rights, causes of action,
equitable relief, damages, costs, charges, complaints, obligations, promises,
agreements, controversies, suits, expenses, compensation, responsibility and
liability of every kind and character whatsoever (including attorneys' fees
and costs), whether in law or equity, known or unknown, asserted or
unasserted, suspected or unsuspected (collectively, "Claims"), which Employer
has or may have had against Executive based on any events or circumstances
arising or occurring on or prior to the Effective Date of Retirement including
without limitation any and all claims arising out of Executive's employment
with Employer or the termination thereof provided, however, notwithstanding
anything to the contrary set forth herein, that this Release shall not extend
to any obligation assumed under this Agreement by Executive.
10. General Release of Claims by Executive. Executive agrees for
Executive, Executive's spouse and child or children (if any), Executive's
heirs, beneficiaries, devisees, executors, administrators, attorneys, personal
representatives, successors and assigns, hereby forever to release, discharge,
and covenant not to sue Employer, Employer's past, present, or future parents,
affiliated, related, and/or subsidiary entities, and all of their past and
present directors, shareholders, officers, general or limited partners,
employees, agents, and attorneys, and agents and representatives of such
entities, and employee benefit plans in which Executive is or has been a
participant by virtue of his employment with Employer (or any of such
entities), from any and all claims, debts, demands, accounts, judgments,
rights, causes of action, equitable relief, damages, costs, charges,
complaints, obligations, promises, agreements, controversies, suits, expenses,
compensation, responsibility and liability of every kind and character
whatsoever (including attorneys' fees and costs), whether in law or equity,
known or unknown, asserted or unasserted, suspected or unsuspected, which
Executive has or may have had against such entities based on any events or
circumstances arising or occurring prior to the Effective Date of Retirement
arising directly or indirectly out of, relating to, or in any other way
involving in any manner whatsoever, (a) Executive's employment with the
Employer or the termination thereof or (b) the Executive's status at any time
as a holder of any securities of the Employer or any predecessor, and any and
all claims arising under federal, state, or local laws relating to employment
or securities, including without limitation claims of wrongful discharge,
breach of express or implied contract, fraud, misrepresentation, defamation,
or liability in tort, claims of any kind that may be brought in any court or
administrative agency, any claims arising under Title VII of the Civil Rights
Act of 1964, the Age Discrimination in Employment Act, the Americans with
Disabilities Act, the Fair Labor Standards Act, the Employee Retirement Income
Security Act, the Family and Medical Leave Act, the Securities Act of 1933,
the Securities Exchange Act of 1934 and similar state or local statutes,
ordinances, and regulations, provided, however, notwithstanding anything to
the contrary set forth herein, that this General Release shall not extend to
(x) benefit claims under employee pension benefit plans in which Executive is
a participant by virtue of his employment with Employer (or any of such
entities) or to benefit claims under employee welfare benefit plans for
occurrences (e.g., medical care, death, or onset of disability) arising after
the execution of this Agreement by Executive, and (y) any obligation assumed
under this Agreement by Employer.
Notwithstanding the foregoing, Executive shall continue to be indemnified
by Employer and any predecessor in accordance with the indemnification
provisions in effect on the Effective Date of Retirement including, without
limitation, the advancement of legal fees, in respect to all claims by third
parties that may be made at any time in the future against Executive relating
to his employment with Employer and any predecessor.
11. Release of Age Discrimination Claims; Periods for Review and
Reconsideration.
a. Executive understands that this Agreement includes a release of
claims arising under the Age Discrimination in Employment Act (ADEA).
Executive understands and warrants that he has been given a period of twenty-
one (21) days to review and consider this Agreement. Executive is hereby
advised to consult with an attorney prior to executing the Agreement. By his
signature below, Executive warrants that he has had the opportunity to do so
and to be fully and fairly advised by that legal counsel as to the terms of
the Agreement. Executive further warrants that he understands that he may use
as much or all of his 21-day period as he wishes before signing, and warrants
that he has done so.
b. Executive further warrants that he understands that he has
seven (7) days after signing this Agreement to revoke the Agreement by notice
in writing to Leo Liebowitz, Getty Petroleum Marketing Inc., 125 Jericho
Turnpike, Jericho, NY 11753. This Agreement shall be binding, effective, and
enforceable upon both parties upon the expiration of this seven-day revocation
period without Mr. Liebowitz having received such revocation, but not before
such time.
12. Trade Secrets.
a. Except as required pursuant to legal process, Executive shall
maintain in confidence and shall not directly, indirectly or otherwise, use,
disseminate, disclose or publish, or use for his benefit or the benefit of any
person, firm, corporation or other entity any confidential or proprietary
information or trade secrets of or relating to Employer (or which Employer has
a right to use), including, without limitation, information with respect to
Employer's operations, processes, products, inventions, business practices,
finances, principals, vendors, suppliers, customers, potential customers,
marketing methods, costs, prices, contractual relationships, regulatory
status, compensation paid to employees or other terms of employment, or
deliver to any person, firm, corporation or other entity any document, record,
notebook, computer program or similar repository of or containing any such
confidential or proprietary information or trade secrets. The parties hereby
stipulate and agree that as between them the foregoing matters are important,
material and confidential proprietary information and trade secrets and affect
the successful conduct of the businesses of Employer (and any successor or
assignee of Employer).
b. Within 30 days following the Effective Date of Retirement,
Executive will deliver to Employer all correspondence, drawings, manuals,
letters, notes, notebooks, reports, programs, plans, proposals, financial
documents, or any other documents concerning Employer's customers, business
plans, marketing strategies, products or processes and/or which contain
proprietary information or trade secrets.
13. Non-Competition.
a. Executive shall not, at any time during the Continuation
Period, without the prior written consent of the Board of Directors of
Employer, directly or indirectly engage in, or have any interest in, or manage
or operate any person, firm, corporation, partnership or business (whether as
director, officer, employee, agent, representative, partner, security holder,
consultant or otherwise) that engages in the retail or wholesale sale of
branded gasoline or branded diesel oil in any of the states of Connecticut,
Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York,
Pennsylvania, Rhode Island, Vermont or Virginia; provided, however, that
Executive shall be permitted to acquire a stock interest in such a corporation
provided such stock is publicly traded and the stock so acquired is not more
than one percent of the outstanding shares of such corporation and provided
further that such restrictions shall not apply to ownership or operation of up
to twenty-five retail gasoline stations.
b. Executive shall not at any time within the Continuation Period
(i) directly or indirectly, by or for himself, or as the agent of another, or
through others as an agent, in any way solicit or induce, or attempt to
solicit or induce, any employee, officer, representative, consultant, or other
agent of Employer whether such person is presently employed by Employer or may
hereinafter be so employed, to leave Employer's employ or otherwise interfere
with the employment relationship between any such person and Employer; and
(ii) directly or indirectly, by or for himself, or as the agent of another, or
through others as an agent, in any way solicit, or attempt to divert, take
away or call on (on behalf of a competitor of Employer) any customers or
potential customers of Employer or any of their respective successors and
assigns.
14. Confidentiality. Executive agrees not to disclose the financial
terms of this Agreement to any person, agency, institution, company, or other
entity unless Employer agrees to such disclosure in advance and in writing,
provided that Executive may, without such permission, disclose that Executive
retired from his employment and make such disclosures as are required by
courts or government agencies or appropriate jurisdiction or otherwise by law,
including disclosures to taxing agencies, and disclose the terms of this
agreement to his attorney(s), accountant(s), tax advisor(s), and other
professional service provider(s), as reasonably necessary, and to his spouse
and immediate family. However, to the extent Executive discloses information
about the financial terms of this Agreement, Executive agrees to instruct such
person(s) that the financial terms of this Agreement are strictly confidential
and are not to be revealed to anyone else except as required by law, and
Executive guarantees that such person(s) shall make no further disclosure of
such information and accepts responsibility for any such disclosure as such
person(s) may make as though the disclosure were made directly by Executive.
Employer agrees that it will respect the confidentiality of this Agreement by
not disclosing its terms, existence, or negotiation to any person not employed
by Employer or one of its present or future parents, subsidiaries, or
affiliates, provided that Employer may disclose such information to any bona
fide potential purchaser of all or any part of its business and may disclose
that Executive resigned from his employment and make such disclosures as are
required by courts or government agencies of appropriate jurisdiction or
otherwise by law, including disclosures to taxing agencies, and disclose the
terms of this agreement to their attorney(s), accountant(s), tax advisor(s),
or other professional service provider(s), as reasonably necessary. The
obligations of each the parties pursuant to the provisions of this Section 14
shall continue in force until the earlier of (a) the tenth anniversary of the
Effective Date of Retirement or (b) the filing of a copy of this Agreement
with, or the disclosure of the material terms of this Agreement to, the
Securities and Exchange Commission, pursuant to its rules.
15. Non-Disparagement. Each of the parties agrees that it will not
disparage or denigrate to any person any aspect of his or its past
relationship with the other, nor the character of the other or the other's
agents, representatives, predecessors, products, or operating methods, whether
past, present, or future, and whether or not based on or with reference to
their past relationship; provided, however, that this paragraph shall have no
application to any evidence or testimony requested of either party hereto by
any court or government agency. In the event any government agency or any of
Employer's present or future labor unions, adverse parties in actual or
potential litigation, suppliers, service providers, employees or customers
initiate communications with Executive, Executive agrees that he will inform
any such persons, consistent with this paragraph, of his change in status and
direct such persons to an appropriate office or current employee of Employer.
16. Condition on Certain Obligations of the Employer. Each of the
parties agrees that the other party hereto is likely to suffer adverse
financial and/or employee relations consequences in the event either of the
above confidentiality or non-disparagement provisions is breached and that
each party's agreement to each such provision is a material portion of the
consideration received by the other party hereunder. Each of the parties
therefore agrees that in the event of such breach, the other party shall have
all rights and remedies under law or equity including, without limitation, the
right upon discovery of such breach to obtain an injunction against any
further breaches. This paragraph is not intended to limit any other remedies,
in damages or otherwise, that may be available to either party for such
breach.
17. Taxes. To the extent any taxes may be due on the payments to
Executive provided in this Agreement beyond any withheld by Employer,
Executive agrees to pay them himself and to indemnify and hold Employer and
other entities released by Executive herein harmless for any tax claims or
penalties resulting from such payments. Executive further agrees to provide
any and all information pertaining to Executive upon request as reasonably
necessary for Employer and other entities released herein to comply with
applicable tax laws. This provision shall not affect any tax gross-up
obligation of Employer or any predecessor upon Executive's exercise of stock
options.
18. Mitigation. Executive shall be under no obligation to obtain any
new employment during the Continuation Period and any compensation earned by
Executive during such period shall not reduce any obligation of Employer or
any predecessor hereunder.
19. Severability. Except as otherwise specified below, should any
portion of this Agreement be found void or unenforceable for any reason by a
court of competent jurisdiction, the court should attempt to limit or
otherwise modify such provision so as to make it enforceable, and if such
portion cannot be modified to be enforceable, the unenforceable portion shall
be deemed severed from the remaining portions of this Agreement, which shall
otherwise remain in full force and effect. If any portion of this Agreement
is so found to be void or unenforceable for any reason in regard to any one or
more persons, entities, or subject matters, such portion shall remain in full
force and effect with respect to all other persons, entities, and subject
matters. This paragraph shall not operate, however, to sever Executive's
obligation to provide a full and binding release to all entities intended to
be released above from Executive's entitlement to cash payments hereunder from
Employer. In the event Executive should in the future contend that
Executive's release of claims is for any reason void, imperfect, or
incomplete, Executive may not pursue any claim against Employer (or any other
party intended to be released herein) to establish the invalidity of the
release or premised (in whole or in part) on the invalidity of the release
before or without repaying to Employer the full amount of such cash payments
he has received, less the reasonable value of services actually provided
pursuant to this Agreement, and applicable statutes of limitations shall be
deemed to run in regard to Executive's claims without regard to the parties'
entry into this Agreement. The preceding sentence shall not operate to limit
the scope or effect of Executive's covenant not to sue.
20. Conditions of Validity. This Agreement shall not be deemed valid,
binding or effective unless and until (1) both parties have signed, (2)
Executive's signature is notarized, and (3) both parties have executed the
Agreement within a single thirty (30) day period.
21. Understanding and Authority. The parties understand and agree that
all terms of this Agreement are contractual and are not a mere recital, and
represent and warrant that they are competent to covenant and agree as herein
provided.
22. Due Authorization. Employer and Getty Realty Corp. ("Getty Realty")
represent to Executive that each has all requisite authority and authorization
to enter into this Agreement, and that the execution, delivery and performance
of this Agreement has been duly authorized by all necessary corporate action
and will not conflict with any obligation of either such companies under law,
agreement or otherwise.
23. Governing Law. This Agreement will be governed, construed,
interpreted and enforced in accordance with the substantive laws of the State
of New York.
24. Binding on Successors. This Agreement will be binding upon and
inure to the benefit of Employer, Executive, Getty Realty and their respective
successors, assigns, personnel and legal representatives, executors,
administrators, heirs, distributees, devisees, and legatees, as applicable.
25. Legal Fees. Employer will pay all reasonable legal fees not in
excess of $5,000 incurred by Executive pursuant to the negotiation of this
Agreement.
Executive understands, agrees and represents that the covenants made
herein and the releases herein executed may substantially affect his rights
and liabilities and agrees that the covenants and releases provided herein are
in Executive's best interest. Executive represents and warrants that in
negotiating and executing this Agreement Executive has had an adequate
opportunity to consult with competent legal counsel of his choosing concerning
the meaning and effect of each term and provision hereof, and that there are
no representations, promises, or agreements between Employer and Executive
other than those expressly set forth in writing herein.
The parties have carefully read this Agreement in its entirety; fully
understand and agree to its terms and provisions; and intend and agree that it
is final and binding on all parties.
[signature pages follow]
IN WITNESS WHEREOF, and intending to be legally bound, the parties have
executed the foregoing on the dates shown below.
/s/ Alvin A. Smith July 18, 1997
- - -------------------------------------------- ------------------------
Alvin A. Smith Date
GETTY PETROLEUM MARKETING INC.
By: /s/ Leo Liebowitz July 18, 1997
---------------------------------------- ------------------------
Leo Liebowitz Date
Title: President and Chief Executive Officer
Getty Realty hereby guarantees the full performance of the obligations of
Employer hereunder. Employee may enforce this guarantee directly against
Getty Realty if Employer fails to perform any of its obligations under this
Agreement for five or more days after Executive notifies Employer of such
failure.
GETTY REALTY CORP.
By /s/ Leo Liebowitz July 18, 1997
------------------------------------------- ----------------------
Leo Liebowitz Date
Title: President and Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF GETTY PETROLEUM MARKETING INC. AND
SUBSIDIARIES AS OF OCTOBER 31, 1997 AND FOR THE NINE MONTHS THEN ENDED AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL
STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> OCT-31-1997
<CASH> 9,908
<SECURITIES> 0
<RECEIVABLES> 12,617
<ALLOWANCES> 1,541
<INVENTORY> 26,475
<CURRENT-ASSETS> 52,944
<PP&E> 180,706
<DEPRECIATION> 92,441
<TOTAL-ASSETS> 143,296
<CURRENT-LIABILITIES> 47,845
<BONDS> 0
<COMMON> 137
0
0
<OTHER-SE> 56,367
<TOTAL-LIABILITY-AND-EQUITY> 143,296
<SALES> 657,162
<TOTAL-REVENUES> 684,234
<CGS> 654,940
<TOTAL-COSTS> 665,061
<OTHER-EXPENSES> 2,072
<LOSS-PROVISION> 324
<INTEREST-EXPENSE> 603
<INCOME-PRETAX> (1,757)
<INCOME-TAX> (685)
<INCOME-CONTINUING> (1,072)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,072)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
