<PAGE> 1
As filed with the Securities and Exchange Commission on January 13, 1997
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10/A
Amendment No. 1
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or 12(g) of
the Securities Exchange Act of 1934
---------------------
GETTY PETROLEUM MARKETING INC.
(Exact name of registrant as specified in its charter)
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Maryland 11-3339235
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
125 Jericho Turnpike
Jericho, New York 11753
(Address of principal executive office) (Zip Code)
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Registrant's telephone number, including area code:
(516) 338-6000
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Securities to be registered pursuant to Section 12(b) of the Act:
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TITLE OF CLASS NAME OF EACH EXCHANGE ON
TO BE SO REGISTERED WHICH CLASS IS TO BE REGISTERED
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Common Stock, $.01 par value New York Stock Exchange
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Securities to be registered pursuant to Section 12(g) of the Act:
None
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<PAGE> 2
GETTY PETROLEUM MARKETING INC.
INFORMATION INCLUDED IN INFORMATION STATEMENT AND
INCORPORATED IN FORM 10 BY REFERENCE.
CROSS-REFERENCE SHEET BETWEEN INFORMATION SHEET AND
ITEMS ON FORM 10.
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ITEM
NO. ---- ITEM CAPTION LOCATION IN INFORMATION STATEMENT
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1. Business............................. "SUMMARY OF CERTAIN INFORMATION,"
"INTRODUCTION," "THE DISTRIBUTION,"
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS,"
and "BUSINESS."
2. Financial Information................ "SUMMARY OF CERTAIN INFORMATION," "SELECTED
CONSOLIDATED FINANCIAL INFORMATION," and
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
3. Properties........................... "RELATIONSHIP BETWEEN GETTY AND MARKETING AFTER
THE DISTRIBUTION -- Master Lease Agreement" and
"BUSINESS."
4. Security Ownership of Certain
Beneficial Owners and Management... "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS" and "MANAGEMENT -- Security Ownership of
Directors, Executive Officers and 5% Owners."
5. Directors and Executive Officers..... "MANAGEMENT," and "LIABILITY AND IN-
DEMNIFICATION OF OFFICERS AND DIRECTORS."
6. Executive Compensation............... "MANAGEMENT -- Director Compensation" and
"EXECUTIVE COMPENSATION."
7. Certain Relationships and Related
Transactions....................... "SUMMARY OF CERTAIN INFORMATION,"
"INTRODUCTION," "THE DISTRIBUTION," "RISK
FACTORS," "RELATIONSHIP BETWEEN GETTY AND
MARKETING AFTER THE DISTRIBUTION" and "CERTAIN
TRANSACTIONS."
8. Legal Proceedings.................... "BUSINESS -- Legal Proceedings" and "INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS."
9. Market Price of and Dividends on the
Registrant's Common Equity and
Related Stockholder Matters........ "SUMMARY OF CERTAIN INFORMATION,"
"INTRODUCTION," "THE DISTRIBUTION -- Listing and
Trading of Marketing Common Stock," "RISK
FACTORS -- No Prior Market for Marketing Common
Stock," "RISK FACTORS -- Dividend Policy,"
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS," "DIVIDEND POLICY," and "MANAGEMENT --
Security Ownership of Directors, Executive
Officers and 5% Owners."
10. Recent Sales of Unregistered
Securities......................... Not applicable.
11. Description of Registrant's
Securities to be Registered........ "DESCRIPTION OF CAPITAL STOCK."
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ITEM
NO. ---- ITEM CAPTION LOCATION IN INFORMATION STATEMENT
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12. Indemnification of Directors
and Officers....................... "LIABILITY AND INDEMNIFICATION OF DIRECTORS AND
OFFICERS."
13. Financial Statements and
Supplementary Data................. "SUMMARY OF CERTAIN INFORMATION," "RISK
FACTORS," "SELECTED CONSOLIDATED FINANCIAL
INFORMATION," "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" and "INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS."
14. Changes in and Disagreements with Ac-
countants on Accounting and
Financial Disclosure............... Not Applicable.
15. Financial Statements and Exhibits
(a) Financial Statements......... "INDEX TO CONSOLIDATED FINANCIAL STATEMENTS."
(b) Exhibits
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EXHIBIT
NO. ------- ITEM
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*2.1 Form of Reorganization and Distribution Agreement between the
Registrant and Getty Petroleum Corp.
*3.1 Articles of Incorporation of the Registrant as currently in effect.
3.2 Form of Articles of Incorporation of the Registrant, as amended, to
be in effect as of the Record Date.
3.4 By-Laws of the Registrant.
*10.1 Form of Reorganization and Distribution Agreement between the
Registrant and Getty Petroleum Corp. (filed as Exhibit 2.1).
*10.2 Form of Master Lease Agreement between the Registrant and Getty
Petroleum Corp.
*10.3 Form of Tax Sharing Agreement between the Registrant and Getty
Petroleum Corp.
*10.4 Form of Services Agreement between the Registrant and Getty Petroleum
Corp.
10.5 Form of Trademark License Agreement between Registrant and Getty
Petroleum Corp. (supercedes version previously filed)
10.6 Form of Registrant's 1997 Stock Option and Award Plan.
*10.7 Form of Registrant's Employee Stock Ownership Plan.
10.8 Form of Stock Option Reformation Agreement between the Registrant and
Getty Petroleum Corp.
10.9 Form of Registrant's Retirement and Profit Sharing Plan.
10.10 Form of Supplemental Retirement Plan for Executives of the Registrant
and Participating Subsidiaries.
22 List of Subsidiaries of the Registrant.
99.1 Consent of Prospective Director of the Registrant.
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* Previously filed.
<PAGE> 4
GETTY PETROLEUM CORP.
125 JERICHO TURNPIKE
JERICHO, NEW YORK 11753
January 31, 1997
To the Stockholders of Getty Petroleum Corp:
Getty Petroleum Corp. ("Getty") currently owns all of the outstanding
shares of common stock of Getty Petroleum Marketing Inc. ("Marketing"), which
Getty has formed to hold and operate its petroleum marketing and related
businesses. The enclosed Information Statement contains information regarding
the distribution of the common stock of Marketing to the stockholders of Getty
(the "Distribution"). If you are a holder of Getty common stock on January 31,
1997, the record date for the Distribution, you will receive one (1) share of
Marketing common stock for each share of Getty common stock you own on that
date. Holders of Getty shares on the record date will not be required to make
any payment or take any other action in order to receive Marketing shares in the
Distribution. We expect that Marketing stock certificates will be mailed
beginning on or about February 11, 1997.
The principal effect of the Distribution will be to separate Getty's real
estate business from its petroleum marketing business. After the Distribution,
each business will be conducted by a separate, publicly held corporation, and
Getty will change its name to "Getty Realty Corp."
The Board of Directors of Getty, which approved the Distribution on
December 12, 1996, believes that the Distribution will enhance stockholder
values over the long term by allowing Getty and Marketing to concentrate on
their respective businesses, allowing Marketing to establish more meaningful and
effective equity-based employee compensation packages, and providing each
company with greater flexibility in pursuing its independent business
objectives. The petroleum marketing business of Marketing and the real estate
business of Getty have distinct investment, operating and financial
characteristics. The Getty Board of Directors believes that the Distribution
will enable the investment community to analyze more effectively the investment
characteristics, performance and future prospects of each business, enhancing
the likelihood that each will achieve appropriate market recognition of its
value. The Board of Directors of Getty has unanimously approved the
Distribution.
Details of the Distribution and other important information, including a
description of the business and management of Marketing after the Distribution,
are set forth in the accompanying Information Statement, which should be
reviewed carefully by stockholders. Stockholder approval of the Distribution is
not required, and we are not soliciting your proxy.
Stockholders of Getty with inquiries related to the Distribution should
contact John J. Fitteron, Senior Vice President, Treasurer and Chief Financial
Officer of Getty, at (516) 338-6000.
Sincerely yours,
Leo Liebowitz
Chairman and Chief Executive Officer
<PAGE> 5
A REGISTRATION STATEMENT ON FORM 10 RELATING TO COMMON STOCK OF GETTY
PETROLEUM MARKETING INC. HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION BUT HAS NOT YET BECOME EFFECTIVE. INFORMATION CONTAINED HEREIN
IS SUBJECT TO COMPLETION AND AMENDMENT.
PRELIMINARY INFORMATION STATEMENT DATED JANUARY 13, 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION AND AMENDMENT
------------------------------
INFORMATION STATEMENT
------------------------------
GETTY PETROLEUM MARKETING INC.
COMMON STOCK
($.01 PAR VALUE)
This Information Statement is being furnished in connection with a special
distribution (the "Distribution") by Getty Petroleum Corp. ("Getty") of one (1)
share of common stock, $.01 par value ("Marketing Common Stock"), of Getty
Petroleum Marketing Inc. ("Marketing") for each share of Getty common stock,
$.10 par value (the "Getty Common Stock"), held of record as of the close of
business on January 31, 1997 (the "Record Date"). The Distribution will result
in 100% of the outstanding shares of Marketing Common Stock being distributed to
the holders of Getty Common Stock. On January 31, 1997 (the "Distribution
Date"), Getty will deliver all of the issued and outstanding shares of Marketing
Common Stock to American Stock Transfer and Trust Company, as distribution agent
(the "Distribution Agent"), which in turn will distribute such shares to the
holders of Getty Common Stock as of the Record Date. It is expected that
certificates representing shares of Marketing Common Stock will be mailed by the
Distribution Agent on or about February 11, 1997. See "INTRODUCTION" and "THE
DISTRIBUTION -- Manner of Effecting the Distribution." Holders of Getty Common
Stock on the Record Date will not be required to make any payment or take any
other action to receive Marketing Common Stock in the Distribution. On the
Distribution Date, Getty will change its name to Getty Realty Corp.
Marketing is a newly formed company that, at the time of the Distribution,
will own the businesses and assets of, and will be responsible for the
obligations and liabilities associated with, the petroleum marketing business
and the New York Mid-Hudson Valley home heating oil business, both of which are
currently conducted by Getty and its subsidiaries. There is no established
public trading market for Marketing Common Stock, although it is expected that a
"when-issued" trading market will develop on or about the Record Date.
Application has been made to list the Marketing Common Stock on The New York
Stock Exchange under the symbol "GPM." See "THE DISTRIBUTION -- Listing and
Trading of Marketing Common Stock."
------------------------------
NO VOTE OF STOCKHOLDERS IS REQUIRED IN CONNECTION WITH THE DISTRIBUTION.
NO PROXIES ARE BEING SOLICITED, AND YOU ARE REQUESTED
NOT TO SEND US A PROXY.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY OTHER FEDERAL OR STATE AUTHORITY, NOR HAS SUCH
COMMISSION OR OTHER AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
INFORMATION STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS INFORMATION STATEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES.
------------------------------
The date of this Information Statement is January 31, 1997
<PAGE> 6
TABLE OF CONTENTS
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PAGE
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SUMMARY OF CERTAIN INFORMATION......................................................... 1
SUMMARY CONSOLIDATED FINANCIAL INFORMATION............................................. 4
INTRODUCTION........................................................................... 5
RISK FACTORS........................................................................... 6
THE DISTRIBUTION....................................................................... 9
General.............................................................................. 9
Background and Reasons for the Distribution.......................................... 9
Future Management of Marketing....................................................... 10
Manner of Effecting the Distribution................................................. 10
Listing and Trading of Marketing Common Stock........................................ 10
Federal Income Tax Aspects of the Distribution....................................... 11
Regulatory Approvals................................................................. 11
Reasons For Furnishing the Information Statement..................................... 11
RELATIONSHIP BETWEEN GETTY AND MARKETING AFTER THE DISTRIBUTION........................ 12
Reorganization and Distribution Agreement............................................ 12
Master Lease Agreement............................................................... 13
Tax Sharing Agreement................................................................ 15
Services Agreement................................................................... 15
Trademark License Agreement.......................................................... 16
Board of Directors and Management.................................................... 16
Financing -- Credit Lines............................................................ 16
SELECTED CONSOLIDATED FINANCIAL INFORMATION............................................ 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS........................................................................... 18
DIVIDEND POLICY........................................................................ 22
BUSINESS............................................................................... 23
General.............................................................................. 23
Operating Strategy................................................................... 23
Distribution......................................................................... 24
Product Supply....................................................................... 25
Marketing............................................................................ 26
Competition.......................................................................... 26
Regulation........................................................................... 26
Personnel............................................................................ 27
Legal Proceedings.................................................................... 27
MANAGEMENT............................................................................. 28
EXECUTIVE COMPENSATION................................................................. 31
Stock Option Plans................................................................... 32
Employee Stock Ownership Plan........................................................ 33
Miscellaneous Benefit Plans.......................................................... 34
CERTAIN TRANSACTIONS................................................................... 34
DESCRIPTION OF CAPITAL STOCK........................................................... 35
LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS................................ 37
ADDITIONAL INFORMATION................................................................. 38
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS............................................. F-1
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<PAGE> 7
SUMMARY OF CERTAIN INFORMATION
This summary is qualified by the more detailed information set forth
elsewhere in this Information Statement, which should be read in its entirety.
Unless the context otherwise requires, (i) references in the Information
Statement to Getty and Marketing shall include Getty's and Marketing's
respective subsidiaries, (ii) references in this Information Statement to
Marketing prior to the Distribution Date shall refer to the petroleum marketing
business as operated by Getty, (iii) references in this Information Statement to
Getty refer to Getty Petroleum Corp. prior to the Distribution Date and to Getty
Realty Corp. on and after such date, and (iv) references to a fiscal year are to
the twelve-month period ended January 31 of such year. Certain capitalized terms
used in this summary are defined elsewhere in this Information Statement.
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Distributing Company............. Getty Petroleum Corp., a Delaware corporation ("Getty").
On the Distribution Date, Getty will change its name to
Getty Realty Corp. ("Realty").
Distributed Company.............. Getty Petroleum Marketing Inc., a Maryland corporation
("Marketing"), which on the Distribution Date will own the
petroleum marketing business and the New York Mid-Hudson
Valley home heating oil business, both previously
conducted by Getty.
The Distribution................. On the Distribution Date, all of the outstanding shares of
Marketing Common Stock will be delivered to the
Distribution Agent. On or about February 11, 1997, the
Distribution Agent will mail stock certificates
representing shares of Marketing Common Stock to holders
of record of Getty Common Stock as of the Record Date. See
"THE DISTRIBUTION -- Manner of Effecting the
Distribution."
Record Date...................... Close of business on January 31, 1997 (the "Record Date").
Distribution Date................ Close of business on January 31, 1997 (the "Distribution
Date").
Distribution Ratio............... Each Getty stockholder will receive one share of common
stock, $.01 par value, of Marketing (the "Marketing Common
Stock") for each share of common stock, $.10 par value, of
Getty (the "Getty Common Stock") owned on the Record Date.
Shares to be Distributed......... Based on the number of shares of Getty Common Stock
outstanding on December 27, 1996, approximately 12,675,000
shares of Marketing Common Stock will be issued to Getty
stockholders in the Distribution. The shares to be
distributed to Getty stockholders, together with
approximately 667,000 shares to be issued to the Getty
Petroleum Marketing Employee Stock Ownership Plan (the
"Marketing ESOP"), will constitute all of the shares of
Marketing Common Stock outstanding immediately after the
Distribution.
Distribution Agent............... American Stock Transfer and Trust Company (the
"Distribution Agent").
Fractional Share Interests....... Fractional shares will not be distributed. Any fractional
shares will be aggregated and sold in the public market by
the Distribution Agent and the aggregate cash proceeds
will be distributed ratably to those shareowners entitled
to fractional interests. See "THE DISTRIBUTION -- Manner
of Effecting the Distribution."
No Payment Required.............. Getty stockholders will not be required to make any
payment or to take any other action to receive their
portion of the Distribution. See "THE DISTRIBUTION --
Manner of Effecting the Distribution."
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Conditions to the Distribution... The Distribution is conditioned upon, among other things,
declaration of the special dividend by the Board of
Directors of Getty (the "Getty Board") and a private
letter ruling from the Internal Revenue Service (the
"IRS") in form and substance satisfactory to the Board of
Directors of Getty (the "Getty Board"). See "-- Tax
Consequences." The private letter ruling was issued by the
IRS on September 11, 1996. The Getty Board has reserved
the right to waive any conditions to the Distribution or,
even if the conditions to the Distribution are satisfied,
to abandon, defer or modify the Distribution at any time
prior to the Distribution Date. See "INTRODUCTION" and
"THE DISTRIBUTION -- Manner of Effecting the
Distribution."
Reasons for the Distribution..... The Distribution will formally separate Getty's petroleum
marketing business from its real estate business. After
the Distribution, each business will be conducted by a
separate, publicly held corporation. The Getty Board
believes that the Distribution will (i) enable the
management of each company to concentrate its attention
and financial resources on the core businesses of such
company, (ii) facilitate the adoption of a broad-based
equity compensation plan for Marketing whereby Marketing
can more efficiently and meaningfully incentivize its
employees and (iii) enhance stockholder value over the
long term by allowing the investment community to analyze
more effectively the investment characteristics,
performance and future prospects of the two distinct
business groups. The Getty Board also believes that the
Distribution will provide each company with greater
flexibility in pursuing its independent business
objectives. See "THE DISTRIBUTION -- Background and
Reasons for the Distribution."
Tax Consequences................. The Getty Board has conditioned the Distribution on
receipt of a private letter ruling from the IRS to the
effect, among other things, that receipt of shares of
Marketing Common Stock by holders of Getty Common Stock
will be tax free. On September 11, 1996, the IRS issued a
private letter ruling (the "Tax Ruling") confirming the
foregoing, as well as to confirm the treatment, for
Federal income tax purposes, of certain other matters
pertaining to the Distribution.
Trading Market................... There is currently no public market for Marketing's Common
Stock. Application has been made to list the Marketing
Common Stock on The New York Stock Exchange. See "THE
DISTRIBUTION -- Listing and Trading of Marketing Common
Stock" and "RISK FACTORS -- No Prior Market for Marketing
Common Stock."
Marketing........................ Marketing was incorporated under the laws of Maryland on
October 1, 1996. Following the Distribution Date,
Marketing will own and operate the petroleum marketing
business and the New York Mid-Hudson Valley home heating
oil business, both currently owned and operated by Getty.
See "BUSINESS."
Principal Office of Marketing.... The principal executive offices of Marketing are located
at 125 Jericho Turnpike, Jericho, New York 11753.
Board of Directors............... Getty, as the sole stockholder of Marketing, has elected
the following persons to constitute the Board of Directors
of Marketing as of the Distribution Date: Messrs. Leo
Liebowitz, Milton Safenowitz, Ronald E. Hall, Richard E.
Montag and Matthew J. Chanin. See "MANAGEMENT."
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Risk Factors..................... See "RISK FACTORS" for a discussion of factors that should
be considered in connection with the Marketing Common
Stock received in the Distribution.
Preliminary Transactions......... Prior to the Distribution, Getty intends to transfer to
Marketing the stock of certain subsidiaries engaged in the
petroleum marketing and New York Mid-Hudson Valley home
heating oil businesses (collectively, the "Transferred
Subsidiaries"), as well as certain other assets associated
with petroleum marketing operations.
Financing........................ Marketing has established facilities for letters of credit
and lines of credit. See "RELATIONSHIP BETWEEN GETTY AND
MARKETING AFTER THE DISTRIBUTION -- Financing -- Credit
Lines."
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3
<PAGE> 10
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following summary consolidated financial information of Marketing
should be read in conjunction with Marketing's historical and pro forma
consolidated financial statements and the notes thereto, included elsewhere in
this Information Statement. The following consolidated financial information
relates to the business of Marketing as it was operated as part of Getty and is
derived from the consolidated historical financial statements of Marketing. The
consolidated financial statements of Marketing are derived from the consolidated
historical financial statements of Getty and may not reflect the financial
position or results of operations that would have been obtained had Marketing
been a separate, publicly held company during such periods.
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NINE MONTHS ENDED
FISCAL YEARS ENDED JANUARY 31, OCTOBER 31,
---------------------------------------------------------- ---------------------
1992 1993 1994 1995 1996 1995 1996
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(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
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OPERATING DATA:
Revenues............................. $1,121,176 $906,656 $776,285 $753,735 $791,194 $598,249 $642,225
Net earnings (loss).................. (16,658) (7,303) 1,818 (2,434) 3,664(a) 1,701(a) (2,092)
Pro forma net earnings (loss)(b)..... 3,011(a) (2,582)
Pro forma net earnings (loss) per
share(b)(c)........................ $ 0.23(a) $ (.19)
BALANCE SHEET DATA AT END OF PERIOD:
Total assets......................... $ 131,208 $112,413 $111,515 $117,097 $124,498 $123,638 $128,879
Working capital (deficit)............ 13,208 (18,215) (16,425) (23,221) (8,723) (14,447) (17,162)
Pro forma working capital(d)......... 1,100
Stockholders' equity................. 70,813 39,811 41,991 37,061 50,311 46,809 44,027
Pro forma stockholders' equity(d).... 62,289
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(a) Includes charge of $282, or $.02 per share, from the cumulative effect of
adopting Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of."
(b) Pro forma net earnings (loss) reflect additional rent to be paid to Getty by
Marketing as provided for in the Master Lease and estimated costs Marketing
will incur in operating as a separate public company. Commencing February 1,
1997, Marketing will recognize a charge to operating results over a
five-year period relating to the Marketing ESOP and will also recognize a
charge to operations relating to certain change of control agreements. Such
charges, which are not reflected in the pro forma consolidated financial
statements, will be based on the value of the Marketing Common Stock in the
future and, as such, are not currently determinable.
(c) Pro forma net earnings (loss) per share is computed by dividing net earnings
(loss) by the weighted average number of shares of Marketing Common Stock
that would have been outstanding during the period had the Distribution
taken place as of the beginning of such period and had an additional 667,000
shares associated with the Marketing ESOP been issued.
(d) Pro forma working capital and stockholders' equity reflect a cash transfer
from Getty in an amount sufficient to provide Marketing with net working
capital of approximately $1.1 million in accordance with the Distribution
Agreement.
4
<PAGE> 11
INTRODUCTION
The Board of Directors of Getty Petroleum Corp., a Delaware corporation
("Getty"), has declared a special distribution (the "Distribution") of one share
of common stock, $.01 par value ("Marketing Common Stock"), of Getty Petroleum
Marketing Inc., a Maryland corporation ("Marketing"), for each share of Getty
common stock, $.10 par value ("Getty Common Stock"), held of record as of the
close of business on January 31, 1997 (the "Record Date"). Getty will effect the
Distribution on January 31, 1997 (the "Distribution Date") by delivering all of
the issued and outstanding shares of Marketing Common Stock to American Stock
Transfer and Trust Company, as the distribution agent (the "Distribution
Agent"), for transfer and distribution to the holders of record of Getty Common
Stock as of the Record Date. It is expected that certificates representing
shares of Marketing Common Stock will be mailed to Getty stockholders beginning
on or about February 11, 1997.
The principal effect of the Distribution will be to separate Getty's
petroleum marketing business from its real estate business. After the
Distribution, each business will be conducted by a separate, publicly held
corporation. Marketing will own and operate the petroleum marketing business and
own the New York Mid-Hudson Valley home heating oil business operated by its
subsidiary, Kingston Oil Supply Corp. ("KOSCO"), and Getty will retain and
continue to own and operate the real estate business and the Pennsylvania and
Maryland home heating oil business. See "BUSINESS." The Distribution is intended
to enhance stockholder value over the long term by allowing Getty and Marketing
to concentrate on their respective businesses, by facilitating the adoption of a
broad-based equity compensation plan for Marketing through which Marketing can
more efficiently and meaningfully incentivize its employees and by enabling the
investment community to analyze more effectively the investment characteristics,
performance and future prospects of the two distinct business groups. The
Distribution is also intended to provide each company with greater flexibility
in pursuing its independent business objectives.
For a description of risk factors in connection with the Distribution and
the related transactions described in this Information Statement, see "RISK
FACTORS."
Marketing was formed as a subsidiary of Getty on October 1, 1996. There has
been no trading market in Marketing Common Stock. However, application has been
made to list the Marketing Common Stock on The New York Stock Exchange (the
"NYSE") under the symbol "GPM," and a "when-issued" trading market is expected
to develop on or about the Record Date. See "THE DISTRIBUTION -- Listing and
Trading of Marketing Common Stock" and "RISK FACTORS -- No Prior Market for
Marketing Common Stock."
In consideration for Getty's transfer to Marketing of the petroleum
marketing business and the New York Mid-Hudson Valley home heating oil business,
Marketing issued to Getty all of the outstanding shares of Marketing Common
Stock and assumed certain obligations and liabilities relating to the
transferred businesses. See "THE DISTRIBUTION."
The Distribution does not require stockholder approval and the Getty Board
may abandon, defer or modify the Distribution prior to the Distribution Date.
Marketing stockholders will not be entitled to appraisal rights in connection
with the Distribution.
The principal executive offices of Marketing are located at 125 Jericho
Turnpike, Jericho, New York 11753; telephone number (516) 338-6000.
5
<PAGE> 12
RISK FACTORS
Stockholders should note the following risk factors, as well as the other
information contained in this Information Statement.
VOLATILITY OF MARKETING MARGINS
Marketing's earnings and cash flow from operations depend upon rental
income from dealers and the sale of refined petroleum products at marketing
margins sufficient to cover fixed and variable expenses. Marketing has no crude
oil reserves or refining capacity. Marketing has entered into agreements with
Northeast and Mid-Atlantic suppliers for the purchase of refined petroleum
products. Substantially all of Marketing's supply contracts are for a term of
one year.
Historically, petroleum prices have been subject to extreme volatility and
there have been periodic shortages followed by periods of oversupply. A large,
rapid increase in petroleum prices would adversely affect Marketing's
profitability if Marketing's sales prices were not similarly increased or if
automobile consumption of gasoline were to significantly decline. No assurance
can be given that petroleum prices will not fluctuate greatly or that petroleum
products will continue to be available from multiple sources or available at all
in times of shortage. Management believes, however, that based on its experience
during times of shortage, Marketing will continue to have the ability to acquire
petroleum products on competitive terms due in part to the large volume of its
purchases and its storage capacity at its distribution terminals.
Petroleum products are commodities whose prices depend on numerous factors
beyond Marketing's control that affect the supply of and demand for petroleum
products, such as changes in domestic and foreign economies, political affairs
and production levels, the availability of imported oil, the marketing of
competitive fuels, the extent of government regulation and expected and actual
weather conditions. The prices paid by Marketing for its products are affected
by global, national and regional factors, such as petroleum pipeline capacity,
local market conditions and competition and the level of operations of
refineries. A large, rapid increase in refined petroleum prices would adversely
affect Marketing's operating margins if the increased cost of petroleum products
could not be passed on to Marketing's customers. Although Marketing believes,
based on its experience during periods of shortage, that it will continue to
have the ability to acquire petroleum products on competitive terms due in part
to the large volume of its purchases and its substantial storage capacity at its
distribution terminals, no assurance can be given that Marketing will be able to
negotiate favorable prices for petroleum products or that adequate supplies will
be available to it during times of shortage. In recent years, prices of refined
products have fluctuated substantially. Accordingly, Marketing's earnings are
subject to substantial fluctuations, as reflected in Marketing's financial
statements. Moreover, after the Distribution, Marketing's rental expense will be
substantially higher than that of Getty prior to the Distribution, and
Marketing's post-Distribution earnings may be more volatile and lower than
Getty's pre-Distribution earnings. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and "INDEX TO CONSOLIDATED
FINANCIAL STATEMENTS."
PETROLEUM MARKETING IS A MATURE INDUSTRY
The petroleum marketing industry is a mature one, with only limited growth
in total demand for the product foreseen. Marketing expects the overall demand
for petroleum products to grow about 2% annually over the next several years,
with year to year industry volumes being impacted primarily by travel patterns.
Therefore, Marketing's ability to grow within the industry depends on its
ability to acquire new distributors, open new retail outlets, refurbish and
expand existing outlets and acquire new customers through effective marketing.
There can be no assurance that in the future Marketing will be able to (i) find
attractive acquisition candidates and acquire such candidates on economically
acceptable terms, or (ii) increase same service station sales through
refurbished or expanded service stations or through improved marketing.
ENERGY EFFICIENCY AND TECHNOLOGY TRENDS MAY AFFECT DEMAND FOR PETROLEUM PRODUCTS
Retail customers use petroleum primarily as a motor fuel, and Marketing's
sales therefore depend in part on the level of motor fuel consumption. Marketing
is not able to predict the effect that future conservation
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measures, technological advances in transportation or the use of alternative
fuels might have on Marketing's operations.
COMPETITION
Marketing believes that, based on the number of locations served, it is
currently one of the largest independent marketers of petroleum products in the
United States. Petroleum marketing is highly competitive, and Marketing competes
with a substantial number of integrated oil companies and other companies who
may have greater assets, financial resources and sales. Accordingly, Marketing's
earnings may be adversely affected by the marketing policies of such companies,
which may have greater flexibility to withstand price changes than Marketing.
COMPETITION AND VOLATILITY IN THE HOME HEATING OIL BUSINESS
The business of marketing and selling home heating oil has historically
been an intensely competitive one, due not only to the presence of other home
heating oil retailers and suppliers in the New York Mid-Hudson Valley area, but
also to the availability of other types of home heating fuels, such as natural
gas. The profitability of the home heating oil business is also subject to
fluctuations in the regional climate, as the demand for home heating oil is
generally linked to the severity of any particular winter. Furthermore, a large,
rapid increase in the cost of home heating oil prices would adversely affect
Marketing's profitability if Marketing's sales prices were not similarly
increased or if consumption of home heating oil were to significantly decline as
a result of such price increases. The price of home heating oil fluctuates
widely, and no assurances can be given with respect to consumers' continued use
of home heating oil in the New York Mid-Hudson Valley, the level of consumption
of home heating oil in this region during any given winter season, or the
ability of Marketing to negotiate favorable prices for home heating oil from its
suppliers.
REGULATION
The petroleum products industry is subject to numerous federal, state and
local laws and regulations. Although Marketing believes that the costs related
to compliance with those laws and regulations have not had and are not expected
to have a material adverse effect on the competitive or financial position of
Marketing, such costs may have a significant impact on results of operations or
liquidity for any single period.
Marketing is not a refiner and, therefore, is not subject to the Petroleum
Marketing Practices Act ("PMPA"), a federal law, with respect to its Getty(R)
branded stations. However, pursuant to Marketing's agreements with approximately
one-half of its Getty dealers and distributors, Marketing has voluntarily
extended to them coverage under PMPA. Under PMPA, Marketing complies with
certain notice requirements (generally 90 days) and extends nondiscriminatory
contracts to certain of its Getty licensed dealers and distributors, whose
franchises cannot be terminated or not renewed unless certain PMPA imposed
prerequisites are met as provided in Marketing's agreements. Although a licensed
dealer or distributor who is covered by PMPA is not required to renew his or her
franchise, because Marketing has agreed to comply with PMPA with respect to such
dealers and distributors, Marketing is required to renew the franchises of such
dealers and distributors who elect to renew. However, franchisees may be
terminated or not renewed for violating certain provisions of Marketing's
agreements as permitted under PMPA. The PMPA permitted grounds for termination
or non-renewal include, among other things, non-payment of rent, misuse of
trademark, bankruptcy, criminal misconduct, condemnation and expiration of an
underlying lease. Also, Marketing may elect to non-renew with a franchisee upon
a determination made in good faith that the franchise relationship is
uneconomical to Marketing. In such latter instance, Marketing must, in
accordance with PMPA, offer to the franchisee the right to purchase Marketing's
leasehold interest in the property at a bona fide price. Under the terms of the
Master Lease with Realty, Marketing would be required to offer to assign its
leasehold interest in the property (including all renewal options) to the
franchisee who is covered by PMPA.
In addition, Marketing's operations are governed by numerous federal, state
and local environmental laws and regulations affecting all aspects of its
operations. Among these laws are (i) requirements to dispense reformulated
gasoline in accordance with the Clean Air Act, (ii) restrictions imposed on the
amount of hydrocarbon vapors which may enter the air at Marketing's terminals
and service stations, (iii) OSHA and other laws regulating terminal employee
exposure to benzene and other hazardous materials,
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<PAGE> 14
(iv) requirements to report to governmental authorities discharges of petroleum
products into the environment and, under certain circumstances, to remediate the
soil and/or groundwater contamination pursuant to governmental order and
directive, (v) requirements to remove and replace underground storage tanks
which have exceeded governmental-mandated age limitations and (vi) the
requirement to provide a certificate of financial responsibility with respect to
claims relating to underground storage tank failures.
NO OPERATING HISTORY AS AN INDEPENDENT COMPANY
Marketing does not have an operating history as an independent public
company, and there is no assurance that it will be profitable as a stand-alone
company. For the nine months ended October 31, 1996, Marketing had a net loss of
approximately $2.1 million. The business of Marketing has historically relied on
Getty for various financial and administrative services. After the Distribution,
Marketing will maintain its own lines of credit, banking relationships and
administrative functions.
DIVIDEND POLICY
Marketing's dividend policy will be established by the Board of Directors
of Marketing (the "Marketing Board") from time to time based on the results of
operations and financial condition of Marketing and such other business
considerations as the Marketing Board considers relevant. Subject to the
foregoing, Marketing may declare and pay dividends after the Distribution,
although there can be no assurance that any dividends will be paid in the
future.
POTENTIAL CONFLICTS
The post-closing relationships between Getty and Marketing may cause the
interests of such companies to conflict. Potential sources of such conflict
include (i) Marketing's leasing of substantially all of its service station and
terminal properties from Getty pursuant to an agreement that allows Getty to
terminate Marketing's rights with respect to such properties upon the occurrence
of certain events of default, (ii) Marketing's licensing of the Getty trademark
from Getty under an agreement that terminates upon the occurrence of certain
events of default and that allows Getty to license the Getty trademark for use
by third parties on a non-exclusive basis in states in which Marketing is not
then doing business and (iii) Getty's retention of and agreement to pay for and
indemnify Marketing with respect to all scheduled pre-closing environmental
liabilities and obligations, all scheduled future upgrades (the "Upgrades")
necessary to cause underground storage tanks (such tanks, including related
piping, underground pumps, wiring and monitoring devices, the "USTs") to conform
to the 1998 federal standards for USTs (the "1998 Standards"), and all
environmental liabilities and obligations arising out of discharges with respect
to Properties (as defined below) containing USTs that have not been upgraded to
meet the 1998 Standards ("Nonupgraded USTs") that are discovered prior to the
date such USTs are upgraded to meet the 1998 Standards, with Marketing being
responsible for and indemnifying Getty with respect to all other environmental
obligations and liabilities. See "RELATIONSHIP BETWEEN GETTY AND MARKETING AFTER
THE DISTRIBUTION -- Master Lease Agreement" and "-- Trademark License
Agreement." In addition, Mr. Leo Liebowitz will serve as a director, chief
executive officer and Chairman of Marketing and as director, chief executive
officer and president of Getty, and Mr. Milton Safenowitz will also serve as a
director of Marketing and of Getty. Messrs. Liebowitz and Safenowitz will own
shares in both companies following the Distribution. In addition, all other
present directors and officers of Getty will own shares and have options to
purchase shares of both companies following the Distribution.
NO PRIOR MARKET FOR MARKETING COMMON STOCK
There has been no prior trading market for Marketing Common Stock and there
can be no assurance as to the prices at which Marketing Common Stock will trade
before or after the Distribution Date. Until Marketing Common stock is fully
distributed and an orderly market develops, the prices at which Marketing Common
Stock trades may fluctuate significantly. Prices for Marketing Common Stock will
be determined in the trading markets and may be influenced by many factors,
including the depth and liquidity of the market for Marketing Common Stock,
investor perceptions of Marketing and its business, Marketing's dividend policy,
and general economic and market conditions. See "THE DISTRIBUTION -- Listing and
Trading of Marketing Common Stock."
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<PAGE> 15
EFFECTS ON GETTY COMMON STOCK
After the Distribution, Getty Common Stock will continue to be listed on
the NYSE, and traded on certain other exchanges. As a result of the
Distribution, the trading prices of Getty Common Stock are likely to be lower
than the trading prices of Getty Common Stock immediately prior to the
Distribution. The aggregate trading prices of Getty Common Stock and Marketing
Common Stock after the Distribution may be less than, equal to or greater than
the trading prices of Getty Common Stock prior to the Distribution. In addition,
until the market has fully analyzed the operations of Getty without the
Marketing Business, the prices at which the Getty Common Stock trades may
fluctuate significantly.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
Getty has received a Tax Ruling from the IRS to the effect that, among
other things, for United States federal income tax purposes the Distribution
will be tax-free under Section 355 of the Code. See "THE DISTRIBUTION -- Federal
Income Tax Aspects of the Distribution." The continuing validity of the Tax
Ruling is subject to certain factual representations and assumptions. Marketing
is not aware of any facts or circumstances which should cause such
representations and assumptions to be untrue. The Tax Sharing Agreement (as
defined below) provides that neither Getty nor Marketing is to take any action
inconsistent with, nor fail to take any action required by, the request for the
Tax Ruling or the Tax Ruling unless required to do so by law or permitted to do
so by the prior written consent of the other party or, in certain circumstances,
a supplemental ruling. Getty and Marketing have agreed to indemnify each other
with respect to any tax liability resulting from their respective failures to
comply with such provisions. See "RELATIONSHIP BETWEEN GETTY AND MARKETING AFTER
THE DISTRIBUTION -- Tax Sharing Agreement."
THE DISTRIBUTION
GENERAL
On the Distribution Date, Getty intends to distribute all of the
outstanding shares of Marketing Common Stock to holders of record on the Record
Date of Getty Common Stock. Each holder of Getty Common Stock will receive one
share of Marketing Common Stock for each share of Getty Common Stock held on the
Record Date. Holders of Getty Common Stock on the Record Date will not be
required to make any payment or to take any other action to receive their
portion of the Distribution.
BACKGROUND AND REASONS FOR THE DISTRIBUTION
The Board of Directors of Getty has determined, for the reasons set forth
below, to separate Getty into two publicly held companies: Marketing, a newly
formed corporation which will own and operate the petroleum marketing business
and the New York Mid-Hudson Valley home heating oil business, and Getty, which
will continue to own and operate the real estate business and the home heating
oil business in Pennsylvania and Maryland.
The Distribution is intended to enhance stockholder values over the long
term and to facilitate the adoption of a broad-based equity compensation plan
for Marketing whereby Marketing can more efficiently and meaningfully
incentivize its employees. The petroleum marketing business of Marketing and the
real estate business of Getty have distinct investment, operating and financial
characteristics. Although Marketing's post-Distribution earnings may be more
volatile and may be lower than Getty's pre-Distribution earnings, the Getty
Board believes that the Distribution will enable the investment community to
analyze more effectively the investment characteristics, performance and future
prospects of each business, enhancing the likelihood that each will achieve
appropriate market recognition of its value. The Getty Board of Directors also
believes that the Distribution will allow Getty and Marketing to concentrate on
their respective businesses, allow Marketing to establish more meaningful and
effective equity-based employee compensation packages, and provide each company
with greater flexibility in pursuing its independent business objectives.
A stockholder will have the same ownership interest in both Getty and
Marketing (except for dilution caused by the issuance of Marketing Common Stock
to the Marketing ESOP) after the Distribution as he or
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<PAGE> 16
she had in Getty before the Distribution. However, as a result of the
Distribution, current stockholders and prospective investors will have the
ability to make separate investment decisions regarding each business.
The Distribution will be reflected in Getty's financial statements as a
charge against stockholders' equity. The pro forma consolidated effect on Getty
of the Distribution, if it had occurred on October 31, 1996, would have been to
reduce Getty's assets by approximately $147.1 million and stockholders' equity
by approximately $62.3 million.
FUTURE MANAGEMENT OF MARKETING
Following the Distribution, it is presently intended that Marketing's
petroleum marketing business will continue to be operated with substantially the
same operating management and personnel as at present. See "MANAGEMENT."
MANNER OF EFFECTING THE DISTRIBUTION
On the Distribution Date, all of the outstanding shares of Marketing Common
Stock will be delivered to the Distribution Agent for transfer and distribution
to the holders of record of Getty Common Stock as of the Record Date. It is
expected that certificates representing shares of Marketing Common Stock will be
mailed by the Distribution Agent to Getty stockholders beginning on or about
February 11, 1997.
The Board of Directors of Getty has reserved the right to abandon, defer or
modify the Distribution and the related transactions described in this
Information Statement at any time prior to 11:59 p.m., New York time, on the day
immediately preceding the Distribution Date.
No holder of Getty Common Stock will be required to pay any cash or other
consideration for the shares of Marketing Common Stock received in the
Distribution or surrender or exchange shares of Getty Common Stock in order to
receive Marketing Common Stock. The Distribution will not affect the number of,
or the rights attaching to, outstanding shares of Getty Common Stock. All shares
of Marketing Common Stock will be fully paid and non-assessable and the holders
of those shares will not be entitled to preemptive rights. See "DESCRIPTION OF
CAPITAL STOCK -- Common Stock."
No certificates or scrip representing fractional shares of Marketing Common
Stock will be issued to Getty stockholders as part of the Distribution. If, as a
result of the Distribution, any Getty stockholder would own fractional shares of
Marketing Common Stock, the Distribution Agent will aggregate such fractional
shares into whole shares and sell them in the open market at then prevailing
prices on behalf of such stockholders, and such stockholders will receive
instead a cash payment in the amount of their pro rata share of the sale
proceeds. Such sales are expected to be made on, or as soon as practicable
after, the Distribution Date.
LISTING AND TRADING OF MARKETING COMMON STOCK
There is not currently a public market for Marketing Common Stock. Prices
at which Marketing Common Stock may trade prior to the Distribution on a
"when-issued" basis or after the Distribution cannot be predicted. Until the
Marketing Common Stock is fully distributed and an orderly market develops, the
prices at which trading in such stock occurs may fluctuate significantly. The
prices at which Marketing Common Stock trades will be determined by the
marketplace and may be influenced by many factors, including, among others, the
depth and liquidity of the market for Marketing Common Stock, investor
perception of Marketing and the industries in which Marketing participates,
Marketing's dividend policy and general economic and market conditions. See
"RISK FACTORS -- No Prior Market for Marketing Common Stock."
Marketing has applied to list the Marketing Common Stock on The New York
Stock Exchange. Marketing initially will have approximately 3,000 stockholders
of record based upon the number of stockholders of record of Getty as of
December 27, 1996. For certain information regarding options to purchase
Marketing Common Stock that will be outstanding after the Distribution, see
"RELATIONSHIP BETWEEN MARKETING AND GETTY AFTER THE DISTRIBUTION --
Reorganization and Distribution Agreement."
Getty received a no-action letter from the Staff of the Securities and
Exchange Commission (the "Commission Staff") on December 9, 1996, confirming,
among other things, Getty's view that the
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Distribution of Marketing Common Stock does not require registration under the
Securities Act of 1933, as amended (the "Securities Act"). Based on such
no-action letter, it is Marketing's belief that Marketing Common Stock
distributed to Getty's stockholders in the Distribution will be freely
transferable, except for securities received by persons who may be deemed to be
"affiliates" of Getty within the meaning of Rule 144 of the Securities Act,
which persons may not publicly offer or sell Marketing Common Stock received in
connection with the Distribution except pursuant to a registration statement
under the Securities Act or pursuant to Rule 144 (without regard to holding
period requirements thereunder).
FEDERAL INCOME TAX ASPECTS OF THE DISTRIBUTION
On September 11, 1996, the IRS issued a ruling to Getty providing, among
other things, that the Distribution will qualify as a tax free spin-off under
Section 355 of the Internal Revenue Code of 1986, as amended (the "Code"), and
that, for Federal income tax purposes:
(1) No gain or loss will be recognized by (and no amount will be
included in the income of) a holder of Getty Common Stock upon the receipt
of Marketing Common Stock in the Distribution.
(2) The aggregate basis of the Getty Common Stock and the Marketing
Common Stock in the hands of the stockholders of Getty immediately after
the Distribution will be the same as the aggregate basis of the Getty
Common Stock held immediately before the Distribution, allocated in
proportion to the fair market value of each.
(3) Any stockholder of Getty receiving cash in lieu of fractional
Marketing Common Stock will recognize gain or loss equal to the difference
between the amount of cash received and the basis such stockholder would
have had in the fractional Marketing Common Stock.
(4) The holding period of the Marketing Common Stock received by the
stockholders of Getty will include the holding period of Getty Common Stock
with respect to which the Distribution will be made, provided that such
stockholder held the Getty Common Stock as a capital asset on the
Distribution Date.
(5) No gain or loss will be recognized by Getty upon the
Distribution.
The summary of federal income tax consequences set forth above does not
purport to cover all federal income tax consequences that may apply to all
categories of stockholders. All stockholders should consult their own tax
advisors regarding the particular federal, foreign, state and local tax
consequences of the Distribution to such stockholders.
For a description of the Tax Sharing Agreement pursuant to which Getty and
Marketing have provided for various tax matters, see "RELATIONSHIP BETWEEN
MARKETING AND GETTY AFTER THE DISTRIBUTION -- Tax Sharing Agreement."
REGULATORY APPROVALS
Marketing does not believe that any material federal or state regulatory
approvals will be necessary in connection with the Distribution other than motor
fuel and terminal licenses and permits that have been obtained or will have been
obtained prior to the Distribution or that Marketing expects to receive in due
course thereafter (and for which temporary arrangements have been made).
REASONS FOR FURNISHING THE INFORMATION STATEMENT
This Information Statement is being furnished by Getty solely to provide
information to Getty stockholders who will receive Marketing Common Stock in the
Distribution. It is not, and is not to be construed as, an inducement or
encouragement to buy or sell any securities of Getty or Marketing. The
information contained in this Information Statement is believed by Getty and
Marketing to be accurate as of the date set forth on its cover. Changes may
occur after that date, and neither Getty nor Marketing will update the
information except in the normal course of their respective public disclosure
practices.
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RELATIONSHIP BETWEEN GETTY AND MARKETING
AFTER THE DISTRIBUTION
For purposes of governing certain relationships between Getty and Marketing
after the Distribution and providing for an orderly transition, Getty and
Marketing have entered into or will enter into various agreements, including
those described below. Copies of certain of the agreements are included as
exhibits to Marketing's Registration Statement on Form 10 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), relating to the Marketing
Common Stock, and the following discussions with respect to such agreements are
qualified in their entirety by reference to the agreements as filed.
REORGANIZATION AND DISTRIBUTION AGREEMENT
Getty and Marketing have entered into a Reorganization and Distribution
Agreement (the "Distribution Agreement"), which provides for, among other
things, the principal corporate transactions required to effect the
Distribution, the transfer to Marketing of the assets of the petroleum marketing
business and the stock of the Transferred Subsidiaries, the division between
Getty and Marketing of certain liabilities and obligations, the distribution by
Getty of all outstanding shares of Marketing Common Stock to Getty stockholders
and certain other agreements governing the relationship between Getty and
Marketing after the Distribution.
Subject to certain exceptions, the Distribution Agreement provides for,
among other things, assumptions of obligations and liabilities and
cross-indemnities designed to allocate, effective as of the Distribution Date,
financial responsibility for the obligations and liabilities arising out of or
in connection with the Marketing business to Marketing and its subsidiaries, and
financial responsibility for the obligations and liabilities arising out of or
in connection with the real estate business to Getty and its subsidiaries;
provided, however, that Getty shall retain all liabilities relating to (i)
scheduled pre-closing environmental liabilities and obligations, (ii) scheduled
future Upgrades for Nonupgraded USTs, and (iii) environmental liabilities and
obligations arising out of discharges with respect to Properties containing
Nonupgraded USTs that are discovered prior to the date such USTs are upgraded to
meet the 1998 Standards. Marketing will be responsible for all other
environmental liabilities and obligations relating to USTs or otherwise. The
agreements to be executed in connection with the Distribution Agreement set
forth certain specific allocations of other liabilities between Getty and
Marketing. See "-- Tax Sharing Agreement" below.
Under the Distribution Agreement, Getty will retain all cash and equivalent
balances of Getty and its subsidiaries, as of the close of business on the
Distribution Date, except for an amount sufficient to provide Marketing with net
working capital of approximately $1.1 million, which amount will be transferred
to Marketing.
To avoid adversely affecting the intended tax consequences of the
Distribution and related transactions, the Distribution Agreement provides that,
until the second anniversary of the Distribution Date, Marketing must obtain an
opinion of counsel reasonably satisfactory to Getty or a supplemental tax ruling
before Marketing may make certain material dispositions of its assets, engage in
certain repurchases of Marketing capital stock or cease the active, independent
conduct of its business with its own employees. Marketing does not expect these
limitations to inhibit significantly its operations, growth opportunities or
ability to respond to unanticipated developments. Getty must also obtain an
opinion of counsel reasonably satisfactory to Marketing or a supplemental tax
ruling before Getty may engage in similar transactions during such period. See
"RISK FACTORS -- Certain Federal Income Tax Considerations." Getty does not
expect these limitations to inhibit significantly its operations, growth
opportunities or ability to respond to unanticipated developments.
The Distribution Agreement also provides that each of Marketing and Getty
will be granted access to certain records and information in the possession of
the other, and requires the retention by each of Marketing and Getty for a
period of ten years following the Distribution of all such information in its
possession, and thereafter requires that each party give the other prior notice
of its intention to dispose of such information. In addition, the Distribution
Agreement provides for the allocation of shared privileges with respect to
certain information (including, for example, the attorney-client privilege) and
requires each of Marketing and Getty to obtain the consent of the other prior to
waiving any shared privilege.
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The Distribution Agreement also provides for the allocation of certain
responsibilities with respect to employee compensation and benefits and labor
matters. The Distribution Agreement provides that, effective as of the
Distribution Date, Marketing will, or will cause one or more of its subsidiaries
to, assume or retain, as the case may be, all obligations and liabilities of
Getty, to the extent unpaid as of the Distribution Date, under employee benefit
plans, policies, arrangements, contracts and agreements, including collective
bargaining agreements, with respect to employees who, on or after the
Distribution Date, will be employees of Marketing or its subsidiaries. The
Distribution Agreement also provides that, effective as of the Distribution
Date, Getty will, or will cause one or more of its subsidiaries to, assume or
retain, as the case may be, all obligations and liabilities of Getty, to the
extent unpaid as of the Distribution Date, under employee benefit plans,
policies, arrangements, contracts and agreements, including collective
bargaining agreements, with respect to employees who on or after the
Distribution Date will be employees of Getty.
In addition, the Distribution Agreement provides that, immediately prior to
the Distribution, each current holder of an option to acquire shares of Getty
pursuant to Getty's 1985, 1988 or 1991 Stock Option Plans will receive, in
exchange therefor, two separately exercisable options: one to purchase shares of
Getty Common Stock (a "Getty Option") and one to purchase Marketing Common Stock
(a "Marketing Option"), each exercisable for the same number of shares and
containing terms substantially equivalent in the aggregate to those of such
holder's pre-Distribution option. The exercise price for each Getty Option and
Marketing Option will be set so as to preserve the Aggregate Spread (as defined
below) in value attributed to the options currently held by holders, such
determination to be based on the average of the closing trading prices over a
designated 10 trading-day period with respect to Getty Common Stock and
Marketing Common Stock. The "Aggregate Spread" of an option is an amount
representing the difference between the exercise price of an option and the
price of a share of Getty Common Stock immediately prior to the Distribution
multiplied by the number of shares underlying such option.
The Distribution Agreement provides that, except as otherwise set forth
therein or in any related agreement, all costs and expenses in connection with
the Distribution will be charged to the party for whose benefit the expenses are
incurred.
MASTER LEASE AGREEMENT
Getty and Marketing have entered into a Master Lease Agreement (the "Master
Lease") under which service station and convenience store properties and
terminal facilities (the "Properties") are leased or subleased by Getty as the
Lessor to Marketing as the Lessee. The Properties will be used for gasoline
sales, convenience stores, and other complementary lawful uses in conjunction
with the sale of petroleum products or convenience store items, except when the
provisions of any underlying lease are more restrictive. Marketing may sublet
any property, provided that Marketing remains fully responsible for a
sublessee's performance and, except in cases of economic abandonment (as
described below), a sublease for uses other than those described above will
require Getty's consent. Except for certain environmental and UST obligations
described below, the Master Lease will be a "triple-net" lease, with Marketing
assuming responsibility for the cost of all taxes, maintenance, repairs,
insurance and other operating expenses.
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The Properties leased or subleased by Getty to Marketing pursuant to the
Master Lease are as follows:
<TABLE>
<CAPTION>
NUMBER OF
DISTRIBUTION TERMINATION DATE UNDER
NUMBER OF TERMINALS AND THE MASTER LEASE (NOT
SERVICE STATIONS BULK PLANTS INCLUDING RENEWALS)
---------------- --------------- ------------------------
<S> <C> <C> <C>
Owned by Getty and Leased to Marketing........ 358 2 January 31, 2012
Leased by Getty from Power Test Realty Company
Limited Partnership* and
Subleased to Marketing...................... 265 5 January 31, 2012
Leased by Getty from Third Parties and
Subleased to Marketing...................... 414 3 Various dates coincident
with the termination
dates of the applicable
underlying leases, but
not later than January
31, 2012
--
-----
1,037 10
</TABLE>
- ---------------
*See "CERTAIN TRANSACTIONS."
Rent for each of the Properties has been set using the fair market value of
each such Property. In addition, rent for each Property will increase at the end
of each five-year period by the net increase in the Consumer Price Index for all
items in the Northeast Region for such five-year period, such increase not to
exceed fifteen percent (15%). Rents for all Properties are payable in advance on
the first day of the month. The initial term of the Master Lease is (i) fifteen
years with respect to Properties owned in fee by Getty and leased to Marketing
and Properties leased by Getty from Power Test Realty Company Limited
Partnership and subleased to Marketing and (ii) the length of time remaining
under underlying lease terms (which ranges from one to fifteen years under the
Master Lease) with respect to other Properties leased by Getty from other third
parties and subleased to Marketing. See "CERTAIN TRANSACTIONS." The Master Lease
terms for each category of Properties described above also include four ten-year
renewal options (or, with respect to category (ii), such shorter period as the
underlying lease may provide), which may be exercised by Marketing with two
years advance notice on an individual property basis for all Properties then
subject to the Master Lease. For the subleased Properties, Getty has agreed to
use reasonable efforts to extend the underlying lease terms upon conditions
acceptable to Marketing. In the event that Marketing desires not to renew the
sublease upon terms (including any underlying lease term extensions negotiated
by Getty) available to it, Getty may extend or renew the lease and sublease the
property to a third party after the end of Marketing's term. The Bylaws of
Marketing contain a provision requiring that the renewal of leases under the
Master Lease, including the exercise of any renewal options, must be approved by
a majority of Directors, including, for so long as Outside Directors (as defined
below) are required to constitute a majority of the Board of Directors, a
majority of such Outside Directors. See "-- Board of Directors and Management."
The Master Lease provides that if during the lease term, Marketing
determines that any of the leased premises have become uneconomic or unsuitable
for their use as a service station or convenience store and has discontinued use
of the Property or intends to discontinue use of the Property as a service
station or convenience store within one year of the date of said determination,
Marketing shall have the right to sublet the Property for any lawful use without
Getty's consent and, prior to the commencement of any such sublease term,
Marketing shall remove any USTs on the Property and thereafter perform all
requisite environmental investigations and/or remediations. Marketing shall have
the right of economic abandonment with respect to no more than ten Properties
during any fiscal year of the lease term. Marketing shall have no right of
economic abandonment for the terminal premises and the premises subject to third
party leases.
Getty may terminate Marketing's right to possession of the Properties upon
the occurrence of an event of default, including a failure of Marketing to pay
rent due under the Master Lease timely or to comply with its covenants under the
Distribution Agreement.
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Getty has agreed to deliver all Properties with active gasoline sales
licenses and permits, and to assist Marketing in the re-registration of all
licenses and permits in the name of Marketing as operator of the locations and
as owner of the underground tanks related thereto. The Master Lease provides
that Marketing may make any alterations consistent with the use of the
Properties as gasoline stations/convenience stores. Any other alterations
require Getty's consent, which will not be unreasonably withheld.
Pursuant to the Master Lease, Getty will indemnify Marketing against, and
be responsible for, all pre-closing liabilities, including environmental
remediation and other matters specifically identified on the relevant Master
Lease schedule. Marketing has agreed to indemnify Getty against, and be
responsible for, all post-closing liabilities except all scheduled pre-closing
environmental liabilities and obligations, all scheduled future Upgrades to
Nonupgraded USTs, and all environmental liabilities and obligations arising out
of discharges with respect to Properties containing Nonupgraded USTs that are
discovered prior to the date such USTs are upgraded to meet the 1998 Standards.
Getty has agreed to undertake to have all USTs in compliance with federal
underground storage tank regulations not later than December 22, 1998. In the
event that Getty fails to make the expenditures required for underground storage
tank and environmental compliance, Marketing will have the right to offset the
costs of compliance against its rental obligations under the Master Lease.
TAX SHARING AGREEMENT
Getty and Marketing have entered into a tax sharing agreement (the "Tax
Sharing Agreement") that defines the parties' rights and obligations with
respect to filing of returns, payments, deficiencies and refunds of federal,
state and other income, franchise or motor fuel taxes relating to Getty's
business for tax years prior to and including the Distribution and with respect
to certain tax attributes of Getty after the Distribution. In general, with
respect to periods ending on or before the last day of the taxable year in which
the Distribution occurs, Getty is responsible for (i) filing both consolidated
federal tax returns for the Getty affiliated group and combined or consolidated
state tax returns for any group that includes a member of the Getty affiliated
group, including in each case Marketing and its subsidiaries for the relevant
periods of time that such companies were members of the applicable group, and
(ii) paying the taxes relating to such returns (including any subsequent
adjustments resulting from the redetermination of such tax liabilities by the
applicable taxing authorities). Marketing is responsible for filing returns and
paying taxes relating to any member of the Marketing affiliated group for
periods that begin before and end after the Distribution and for periods that
begin after the Distribution. Getty and Marketing have agreed to cooperate with
each other and to share information in preparing such tax returns and in dealing
with other tax matters.
SERVICES AGREEMENT
Pursuant to the terms of the Distribution Agreement, and as a condition
precedent to the consummation of the transactions contemplated thereby, Getty
and Marketing have entered into a Services Agreement (the "Services Agreement"),
under the terms of which Getty and Marketing will share the services of certain
employees, Marketing will provide certain administrative and technical services
to Getty and Getty will provide certain limited services to Marketing. The term
of the Services Agreement is two years, except that it may be earlier terminated
in whole or in part by either party upon 120 days' notice.
The types of services to be provided pursuant to the Services Agreement by
Marketing, through its employees, include financial reporting, accounting, data
processing, tax, legal, treasury, credit, office services, insurance, human
resources, engineering and environmental. The monthly fees to be paid by Getty
for each type of service are set forth in the Services Agreement and may change
dependent upon the level of activity with respect to any service compared to the
level prior to the execution of the Services Agreement.
Getty will provide certain services on a transition basis to Marketing
pursuant to the Services Agreement, including acting as agent for Marketing with
respect to certain motor fuel licenses or permits pending their transfer to
Marketing and for collection of certain amounts via electronic funds transfer
due from Getty dealers whose distribution contracts will be transferred to
Marketing.
Marketing estimates that the net fees to be paid by Getty to Marketing for
services performed (after deducting the fees paid by Marketing to Getty for
services provided by Getty) will initially be approximately $80,000 per month,
which amount takes into account Marketing's additional costs related to
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<PAGE> 22
providing such services, and will decline as the services performed decrease.
Getty presently expects that most of such services will be provided by Marketing
for approximately one year.
TRADEMARK LICENSE AGREEMENT
Getty and Marketing have entered into a Trademark License Agreement (the
"Trademark License Agreement") providing for the license to Marketing of certain
Getty trademarks, service marks and trade names, including the name "Getty" (the
"Licensed Marks") used in connection with Marketing's business. Under the
Trademark License Agreement, Getty granted to Marketing an exclusive,
royalty-free license to use the Licensed Marks within the territory specified in
the Trademark License Agreement. Subject to the consent of Getty, which consent
is not to be unreasonably withheld, Marketing may sublicense the Licensed Marks
to retailers or wholesalers of petroleum and other related products within the
territory, including but not limited to service station retailers, jobbers and
distributors, subject to the terms of the Trademark License Agreement. The term
of the Trademark License Agreement will be 55 years. In the event that the
Master Lease terminates prior thereto, then commencing on the termination date,
the license shall become non-exclusive in all areas, including the territory
specified in the Trademark License Agreement, and Marketing shall pay to Getty a
rental fee for the use and maintenance of Getty signage and related items based
on gross revenues generated and/or gallonage sold under the Licensed Marks at a
rate customary and reasonable in the trade. Under the Trademark License
Agreement, Marketing has an option to expand the license on a non-exclusive
basis to additional states within the United States in which Marketing may
expand its marketing business. In the event that Marketing were to exercise any
option to expand the licensed territory, Marketing would be obligated to pay a
signage rental fee determined as described above.
BOARD OF DIRECTORS AND MANAGEMENT
Initially, the Marketing Board will consist of five directors. Following
the Distribution, Mr. Leo Liebowitz and Mr. Milton Safenowitz will serve as
directors of Marketing and will continue to serve as directors of Getty. The
Bylaws of Marketing (the "Marketing Bylaws") provide that a majority of the
entire Board of Directors may increase or decrease the number of directors,
provided that the number thereof shall never be less than the minimum number
required by Maryland General Corporation Law (the "MGCL"), nor more than
fifteen. The tenure of office of any director shall not be affected by any
increase or decrease in the number of directors. The Marketing Bylaws also
require that until the earlier of (i) such time as Mr. Leo Liebowitz, Mr. Milton
Safenowitz and Mr. Milton Cooper and their related parties collectively own less
than 15% of the voting stock of Getty or Marketing or (ii) the Master Lease
terminates or expires, a majority of the Marketing Board shall be comprised of
persons (the "Outside Directors") who are neither (x) owners of voting stock in
excess of 5% of the outstanding voting stock of Getty nor (y) directors or
officers of Getty. See "MANAGEMENT -- Security Ownership of Directors, Executive
Officers and 5% Owners." As a result, following the Distribution, three members
of the five person Marketing Board will be Outside Directors.
Although Mr. Liebowitz will serve (or continue to serve, as the case may
be) as President and Chief Executive Officer of both Marketing and Getty, it is
not currently anticipated that at the time of and subsequent to the Distribution
any other persons will serve as officers of both companies. It is anticipated
that the majority of Getty's officers and employees will become officers and
employees of Marketing, whose services will thereafter become available to Getty
pursuant to the Services Agreement. See "MANAGEMENT."
FINANCING -- CREDIT LINES
Marketing has obtained uncommitted lines of credit in an aggregate amount
of $50 million to meet its working capital needs. See "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Liquidity and
Capital Resources."
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<PAGE> 23
SELECTED CONSOLIDATED FINANCIAL INFORMATION
GETTY PETROLEUM MARKETING INC.
The following selected consolidated financial information of Marketing
should be read in conjunction with the consolidated historical and pro forma
financial statements and notes thereto included elsewhere in this Information
Statement. Selected consolidated financial information relates to the business
of Marketing as it was operated by Getty. The following selected consolidated
financial data are derived from the consolidated historical financial statements
of Marketing for the five fiscal years ended January 31, 1996 and the unaudited
consolidated historical financial statements of Marketing for the nine months
ended October 31, 1996 and 1995. In the opinion of management, the unaudited
consolidated financial statements at October 31, 1996 and 1995 reflect all
adjustments (consisting of normal recurring accruals) necessary to present
fairly the financial position and results of operations of Marketing for such
interim periods. The consolidated financial statements of Marketing are derived
from the consolidated historical financial statements of Getty and may not
reflect the financial position or results of operations that would have been
obtained had Marketing been a separate, publicly held company.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED JANUARY 31, OCTOBER 31,
------------------------------------------------------ -------------------
1992 1993 1994 1995 1996 1995 1996
---------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales................................. $1,094,316 $878,937 $747,667 $723,875 $758,887 $574,021 $617,168
Rental income............................. 24,819 27,324 28,443 29,860 32,025 23,949 24,904
Other income.............................. 2,041 395 175 -- 282 279 153
---------- -------- -------- -------- -------- -------- --------
1,121,176 906,656 776,285 753,735 791,194 598,249 642,225
---------- -------- -------- -------- -------- -------- --------
Cost of sales (excluding depreciation and
amortization)........................... 1,100,740 880,606 738,261 721,354 750,680 569,354 619,930
Selling, general and administrative
expenses................................ 33,256 25,580 23,262 22,588 20,702 15,846 15,403
Restructuring charges..................... -- -- -- 1,846 -- -- --
Interest expense.......................... 212 302 226 285 388 291 352
Depreciation and amortization............. 12,616 11,491 11,718 11,640 13,099 9,580 10,159
---------- -------- -------- -------- -------- -------- --------
1,146,824 917,979 773,467 757,713 784,869 595,071 645,844
---------- -------- -------- -------- -------- -------- --------
Earnings (loss) before provision (credit)
for income and cumulative effect of
accounting change....................... (25,648) (11,323) 2,818 (3,978) 6,325 3,178 (3,619)
Provision (credit) for income taxes....... (8,990) (4,020) 1,000 (1,544) 2,379 1,195 (1,527)
---------- -------- -------- -------- -------- -------- --------
Earnings (loss) before cumulative effect
of accounting change.................... (16,658) (7,303) 1,818 (2,434) 3,946 1,983 (2,092)
Cumulative effect of accounting
change(a)............................... -- -- -- -- (282) (282) --
---------- -------- -------- -------- -------- -------- --------
Net earnings (loss)....................... $ (16,658) $ (7,303) $ 1,818 $ (2,434) $ 3,664 $ (1,701) $ (2,092)
========== ======== ======== ======== ======== ======== ========
Pro forma net earnings (loss)(b).......... $ 3,011 $ (2,582)
======== ========
Pro forma per share data(b)(c):
Earnings (loss) before cumulative effect
of accounting change.................. $0.25 $(.19)
Cumulative effect of accounting
change(a)............................. (0.02) --
-------- --------
Net earnings (loss) per share........... $0.23 $(.19)
======== ========
Weighted average shares outstanding..... 13,315 13,340
BALANCE SHEET DATA AT END OF PERIOD:
Total assets.............................. $ 131,208 $112,413 $111,515 $117,097 $124,498 $123,638 $128,879
Working capital (deficit)................. 13,208 (18,215) (16,425) (23,221) (8,723) (14,447) (17,162)
Pro forma working capital(d).............. 1,100
Stockholders' equity...................... 70,813 39,811 41,991 37,061 50,311 46,809 44,027
Pro forma stockholders' equity(d)......... 62,289
</TABLE>
- ---------------
(a) Represents charge of $282, or $.02 per share, from the cumulative effect of
adopting Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of."
(b) Pro forma net earnings (loss) reflect additional rent to be paid to Getty
by Marketing as provided for in the Master Lease and additional costs
Marketing will incur in operating as a separate public company. Commencing
February 1, 1997, Marketing will recognize a charge to operating results
over a five-year period relating to the Marketing ESOP and will also
recognize a charge to operations relating to certain change in control
agreements. Such charges, which are not reflected in the pro forma
consolidated financial statements, will be based on the value of the
Marketing Common Stock in the future and, as such, are not currently
determinable.
(c) Pro forma per share data is computed by dividing earnings (loss) by the
weighted average number of shares of Marketing Common Stock that would have
been outstanding during the period had the Distribution taken place as of
the beginning of such period and had an additional 667,000 shares
associated with the Marketing ESOP been issued.
(d) Pro forma working capital and stockholders' equity reflect a cash transfer
from Getty in an amount sufficient to provide Marketing with net working
capital of approximately $1.1 million in accordance with the Distribution
Agreement.
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<PAGE> 24
GETTY PETROLEUM MARKETING INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The following discussion should be read in conjunction with the
consolidated financial statements of Marketing appearing elsewhere in this
Information Statement. The results set forth in the consolidated financial
statements of Marketing should not be taken as indicative of future operations.
Marketing's results of operations in future periods will reflect certain
expenses not incurred in prior periods associated with operating and reporting
as a separate, publicly held company. Such costs may include environmental
expenses which, in the historical periods, have not been allocated to Marketing
since Getty has agreed to pay for such costs and to indemnify Marketing with
respect to all scheduled pre-closing environmental liabilities and obligations,
all scheduled future Upgrades of Nonupgraded USTs, and all environmental
liabilities and obligations arising out of discharges with respect to Properties
containing Nonupgraded USTs that are discovered prior to the date such USTs are
upgraded to meet the 1998 Standards, with Marketing being responsible for and
indemnifying Getty with respect to all other environmental obligations and
liabilities. No amounts have been included for these other environmental
liabilities and obligations as they are not currently known or ascertainable.
The consolidated financial statements contained in this Information
Statement have been prepared on the basis that the assets and liabilities of the
petroleum marketing business were transferred using historical carrying values
as recorded by Getty, and Marketing's results of operations and cash flows were
derived from Marketing's historical financial statements. Assets, liabilities,
revenues and expenses were, for the most part, specifically identified as being
related to either the business of Marketing or Realty. However, Marketing's
results of operations include allocations of certain selling, general and
administrative expenses of Getty based on a number of factors, including number
of personnel, square footage of office space and utilization of data processing.
Management believes these allocations to be reasonable.
OVERVIEW AND OUTLOOK
Marketing's revenues are derived primarily from its operations in the motor
fuel marketing business. Marketing is one of the nation's largest independent
marketers of petroleum products; it distributes, markets and sells gasoline and
diesel fuel to the general public through a network of 1,574 Getty and other
branded retail outlets (also referred to as service stations) located in 12
Northeastern and Mid-Atlantic states. Approximately 30% of the service stations
also have convenience food stores. Marketing purchases its gasoline, fuel oil
and related petroleum products from a number of Northeast and Mid-Atlantic
suppliers. These products are delivered by cargo ship, barge, pipeline and truck
to Marketing's 10 storage and distribution terminals and bulk plants, all of
which are located in Marketing's distribution region. Marketing distributes and
markets its product to retail outlets through its distribution network and truck
transportation fleet of 141 vehicles. Marketing engages in activities such as
negotiating the prices and terms of the purchase of the gasoline and diesel
fuel, developing the prices, terms and methods of selling the products to
consumers and operators of motor fuel service stations, monitoring compliance by
the service station operators with Getty standards and providing marketing
services to the operators.
Marketing derives revenues from its wholesale petroleum marketing and
distribution business, which involves the sale of gasoline, fuel oil, diesel
fuel and kerosene from distribution terminals and bulk plants in truckload,
barge and pipeline quantities, as well as from its home heating oil business,
which involves the purchase, storage, transportation and sale of fuel oil,
kerosene, propane and oil burner and related services to residential and
commercial customers in the New York Mid-Hudson Valley.
The distribution of motor fuels accounted for approximately 96% of net
sales in each of the three fiscal years ended January 31, 1996. Petroleum
products are commodities whose prices depend on numerous factors beyond
Marketing's control. The prices paid by Marketing for its products are affected
by global, national and regional factors and may vary substantially over time.
From time to time, competitive market conditions may limit Marketing's ability
to pass on to its customers large, rapid changes in the price Marketing pays for
its product and accordingly, its operating margins may vary substantially.
Because Marketing's operating margins
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<PAGE> 25
may vary significantly from time to time while its rental expense and certain of
its other expenses do not, Marketing's earnings may fluctuate substantially.
RESULTS OF OPERATIONS
Nine months ended October 31, 1996 compared to nine months ended October 31,
1995
Marketing's net sales for the nine months ended October 31, 1996
were $617.2 million as compared with $574.0 million for the same period last
year. The 7.5% increase in net sales was principally due to a 5.0% increase in
average selling prices and a 30.3 million gallon or 5.6% increase in retail
gallonage sold to 570.4 million gallons, partially offset by a 13.3 million
gallon or 7.1% decrease in wholesale gallonage sold to 174.7 million gallons.
The average gasoline volume per retail outlet increased by 6.3% in the nine
month period ended October 31, 1996. Gross profit before depreciation and
amortization (excluding rental and other income) was a loss of $2.8 million for
the nine months ended October 31, 1996 compared to a profit of $4.7 million in
the comparable period last year. The $7.5 million decrease in gross profit was
principally due to lower retail product margins of approximately 1.1 cents per
gallon, a decrease in wholesale sales volumes of 13.3 million gallons and a LIFO
inventory charge of $4.0 million during the nine months ended October 31, 1996.
This decrease was partially offset by increased retail sales volumes of 30.3
million gallons and an increase in wholesale product margins of approximately
0.5 cents per gallon. The LIFO inventory charge was the result of product cost
increases of approximately 16 cents per gallon from January 31, 1996 to October
31, 1996.
Marketing's earnings 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
by Marketing as well as the price of petroleum products sold have fluctuated
widely in the past. As a result of the historic volatility of product margins
and the fact that they are affected by numerous diverse factors, it is
impossible to predict future margin levels. Marketing 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 for the nine months ended October 31, 1996 amounted to $24.9
million as compared with $23.9 million for the nine months ended October 31,
1995. The 4.0% increase was due to rent escalations provided under existing
lease agreements, lease renewals and higher rentals as a result of improvements
to the facilities.
Other income was $0.2 million for the nine months ended October 31, 1996,
which was comparable to the nine months ended October 31, 1995.
Selling, general and administrative expenses for the nine months ended
October 31, 1996 amounted to $15.4 million, which was comparable to the $15.8
million for the nine months ended October 31, 1995.
Depreciation and amortization was $10.2 million for the nine months ended
October 31, 1996 compared to $9.6 million for the nine months ended October 31,
1995. The increase was due to higher depreciation as a result of additions to
equipment and improvements to facilities.
The results for the nine months ended October 31, 1995 reflect a charge to
earnings of $0.3 million relating to assets held for disposal for the cumulative
effect of adopting at the end of that fiscal year Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
In October 1995, SFAS No. 123, "Accounting for Stock-Based Compensation"
was issued. The Statement, which becomes effective in fiscal 1997, defines a
fair value based method of accounting for employee stock options and allows
companies to continue to measure compensation cost for such options by using the
intrinsic value based method of accounting prescribed in Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25").
Marketing plans to account for its stock-based employee compensation plans under
APB No. 25 and effective with the fiscal 1997 consolidated
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<PAGE> 26
financial statements will present, in the footnotes, as required under SFAS No.
123, pro forma disclosures of net income and earnings per share as if the fair
value method had been applied.
Fiscal year ended January 31, 1996 compared to fiscal year ended January 31,
1995
Marketing's net sales for the year ended January 31, 1996 ("fiscal 1996")
were $758.9 million as compared with $723.9 million for the year ended January
31, 1995 ("fiscal 1995"). The increase in net sales was principally due to a
9.6% increase in average selling prices and a 1.9% or 13.9 million gallon
increase in retail gallonage sold to 741.7 million gallons through 6.1% fewer
outlets, partially offset by an 18.8% or 58.9 million gallon decrease in
wholesale gallonage sold (primarily bulk sales) to 254.1 million gallons. The
average gasoline volume per retail outlet increased by 9%. Gross profit was $8.2
million in fiscal 1996 compared to $2.5 million in the prior fiscal year. The
$5.7 million increase in gross profit was principally due to higher wholesale
product margins and increased retail sales volumes.
Rental income of $32.0 million in fiscal 1996 increased 7.3% over fiscal
1995 rental income of $29.9 million. The increase was due to rent escalations
provided under existing lease agreements, lease renewals and higher rentals as a
result of improvements to the facilities.
Selling, general and administrative expenses in fiscal 1996 amounted to
$20.7 million, a decrease of $1.9 million from the prior year. The decrease was
principally due to lower expenses as a result of the October 1994 restructuring.
Depreciation and amortization in fiscal 1996 amounted to $13.1 million, an
increase of $1.5 million over the prior year. The increase was due to higher
depreciation as a result of additions to equipment and improvements to
facilities. The current fiscal year also included $0.3 million of additional
depreciation relating to operating assets as a result of the adoption of SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of."
In addition to the above-mentioned $0.3 million charge to depreciation
expense for operating assets, Marketing also separately reported, for assets
held for disposal, the cumulative effect of the change in accounting principle
related to SFAS No. 121 as a charge to earnings of $0.3 million in the
consolidated statement of operations.
Fiscal year ended January 31, 1995 compared to fiscal year ended January 31,
1994
Marketing's net sales for fiscal 1995 were $723.9 million as compared with
$747.7 million in the year ended January 31, 1994 ("fiscal 1994"). The 3.2%
decrease in net sales was principally due to a 1.0% decrease in average selling
prices and an 11.9% or 42.2 million gallon decrease in wholesale gallonage sold
to 313.1 million gallons, partially offset by a 2.7% or 19.2 million gallon
increase in retail gallonage sold to 727.8 million gallons through 7.8% fewer
outlets. Gross profit was $2.5 million in fiscal 1995 compared to $9.4 million
in the prior fiscal year. The $6.9 million decrease in gross profit was
principally due to lower retail gross margins of approximately 1.7 cents per
gallon, partially offset by increased retail sales volumes.
Rental income of $29.9 million in fiscal 1995 increased 5.0% over fiscal
1994 rental income of $28.4 million. The increase was due to rent escalations
provided under existing lease agreements, lease renewals and higher rentals as a
result of improvements to the facilities.
Selling, general and administrative expenses in fiscal 1995 amounted to
$22.6 million, a decrease of $0.7 million from the prior year. The decrease
principally occurred in the fourth quarter of fiscal 1995 as a result of a
restructuring of Marketing's organization and operations in October 1994.
During fiscal 1995, pre-tax charges of $1,846,000 were recorded to provide
for severance and other costs associated with the October 1994 restructuring of
Marketing's organization and its operations. The restructuring charges included
$1,171,000 for severance and related benefits resulting from a 6% reduction in
the work force and $675,000 for other costs. Other costs include $203,000
related to cancellation of computer equipment leases, $168,000 related to
computer system modifications, $141,000 related to the reduction of office
space, $100,000 related to legal fees and $63,000 for other miscellaneous costs.
Marketing's consolidated
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balance sheets as of January 31, 1996 and 1995 included an accrual of $326,000
and $1,048,000, respectively, relating to the restructuring. The remaining
accrual of $326,000 at January 31, 1996 relates to severance and related
benefits payable through October 1999.
Depreciation and amortization was $11.6 million in fiscal 1995 which was
comparable to the amount in fiscal 1994.
LIQUIDITY AND CAPITAL RESOURCES
As of October 31, 1996, Marketing's working capital deficit amounted to
$17.2 million as compared to a deficit of $8.7 million at January 31, 1996.
Marketing's working capital deficits result from its historical practice of
transferring substantially all of its cash balances to Getty for centralized
cash management purposes. However, under the Distribution Agreement, Marketing
will receive cash balances from Getty, as of the close of business on the
Distribution Date, in an amount sufficient to provide Marketing with net working
capital of approximately $1.1 million. See Unaudited Pro Forma Consolidated
Financial Statements.
Marketing has been able to operate its business with negative working
capital, principally because most sales are for cash and payment terms have been
received from vendors and for gasoline taxes. Marketing's principal sources of
liquidity are cash flows from operations, which amounted to $18 million during
the nine months ended October 31, 1996. Management believes that cash
requirements for operations, including payments under the Master Lease Agreement
and capital expenditures, can be met by cash flows from operations, cash and
cash equivalents and credit lines. Marketing has obtained uncommitted lines of
credit with two banks in the aggregate amount of $50 million through January
1998, which may be utilized for working capital borrowings and letters of
credit. Borrowings under such lines of credit are unsecured and will bear
interest at the applicable bank's prime rate or, at Marketing's option, 1.1%
above LIBOR. Such lines of credit are subject to renewal at the discretion of
the banks. These banks have historically provided similar lines of credit to
Getty in an aggregate amount of $60 million.
During fiscal 1996, Marketing concluded agreements with a number of
Northeast suppliers, replacing the previous supply agreement with Phibro Energy
USA, Inc. which was phased out through August 31, 1995. As a result, during
fiscal 1996 cash was utilized principally for higher inventory levels and lower
product payable balances, partially offset by higher gasoline taxes payable. The
benefits of the new supply agreements included improved logistics and greater
flexibility which has become increasingly important with the introduction of
reformulated gasolines. Also contributing to higher inventory and lower accounts
receivable balances in fiscal 1996 was an increase in the number of commission
lessee accounts (for which Marketing owns the inventory at the retail outlets),
and a decrease in the number of wholesale customers (which have longer credit
terms).
Marketing and Realty have entered into a Master Lease Agreement under which
1,037 retail outlets and 10 terminal facilities will be leased or subleased by
Realty as the lessor to Marketing as the lessee. During the first year following
the Distribution, the annual rental under the Master Lease will be approximately
$56.9 million, compared to $56.1 million for the fiscal year ended January 31,
1997.
Marketing's capital expenditures for the years ended January 31, 1996, 1995
and 1994 amounted to $15.9 million, $16.8 million and $14.3 million,
respectively, which included $8.6 million, $6.5 million and $7.7 million,
respectively, for the replacement of USTs. Marketing's capital expenditures for
the nine months ended October 31, 1996 amounted to $13.8 million, which included
$7.4 million for UST replacements. Marketing's capital expenditures also include
discretionary expenditures to improve the image of the service stations, to
improve the terminal facilities and for routine replacement of service station
equipment at existing and newly acquired locations. Pursuant to the Distribution
Agreement, commencing February 1, 1997, expenditures with respect to tank
replacements required to meet the 1998 Standards will be the responsibility of
and will be paid by Getty.
ENVIRONMENTAL MATTERS
Environmental expenses are predominantly attributable to the replacement or
upgrading of USTs, which has been the responsibility of Getty. Such expenses of
Getty amounted to approximately $14.3 million,
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$11.8 million and $9.7 million for the years ended January 31, 1996, 1995 and
1994, respectively. Getty has agreed to pay all costs relating to, and to
indemnify Marketing for, all scheduled pre-closing environmental liabilities and
obligations, all scheduled future Upgrades to Nonupgraded USTs, and all
environmental liabilities and obligations arising out of discharges with respect
to Properties containing Nonupgraded USTs that are discovered prior to the date
such USTs are upgraded to meet the 1998 Standards. Marketing has agreed to
indemnify Getty and its successors from and against, among other things, all
other liabilities and obligations with respect to USTs and environmental
matters. Marketing cannot estimate its future environmental expenses because it
cannot predict the number or the magnitude of discharges or releases from its
USTs that may be discovered in the future or the cost of remediation relating
thereto. Future environmental expenses of Marketing, though not currently known
or ascertainable, are expected to be significantly lower than Getty's historical
expenses as USTs have been or will be upgraded at Getty's expense by December
22, 1998.
Marketing cannot predict what environmental legislation or regulation may
be enacted in the future or how existing laws or regulations will be
administered or interpreted with respect to products or activities to which they
have not previously been applied. Compliance with more stringent laws or
regulations as well as more vigorous enforcement policies of the regulatory
agencies or stricter interpretation of existing laws which may develop in the
future, could have an adverse effect on the financial position or operations of
Marketing and could require substantial additional expenditures for future
remediation or the installation and operation of required environmental or
pollution control systems and equipment.
DIVIDEND POLICY
The payment and amount of cash dividends on Marketing Common Stock after
the Distribution will be subject to the discretion of the Marketing Board.
Marketing's dividend policy will be reviewed by Marketing's Board of Directors
from time to time as may be appropriate and payment of dividends on Marketing
Common Stock will depend upon Marketing's financial position, capital
requirements and other factors as the Marketing Board deems relevant. Subject to
the foregoing, Marketing may declare and pay dividends after the Distribution,
although there can be no assurance that any dividends will be paid in the future
or at what level.
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BUSINESS
Getty Petroleum Marketing Inc. was incorporated in Maryland on October 1,
1996, to be the successor to the petroleum marketing and New York Mid-Hudson
Valley home heating oil businesses of Getty. Its principal executive offices are
located at 125 Jericho Turnpike, Jericho, New York 11753. Unless otherwise
indicated, references in this section to Marketing refer to the petroleum
marketing business of Getty intended to be owned and operated by Marketing after
the Distribution, and references in this section to Getty refer to Getty
Petroleum Corp. prior to the Distribution Date and Getty Realty Corp. on and
subsequent to the Distribution Date.
GENERAL
Marketing, together with its subsidiaries, is one of the nation's largest
independent marketers of petroleum products. Marketing serves retail and
wholesale customers through a distribution and marketing network of 1,574
Getty(R) and other branded retail outlets (also referred to as "service
stations") located in 12 Northeastern and Mid-Atlantic states, of which
approximately 30% have convenience food stores. Marketing stores and distributes
petroleum products from 10 distribution terminals and bulk plants. Marketing
purchases gasoline, fuel oil and related petroleum products from a number of
Northeast and Mid-Atlantic suppliers. These products are delivered by cargo
ship, barge, pipeline and truck to Marketing's distribution terminals and bulk
plants located in Marketing's marketing region. Through its truck transportation
fleet of 141 vehicles and its distribution network, Marketing markets and
distributes such products throughout its 12 state marketing region. Of the 1,574
retail outlets supplied by Marketing at October 31, 1996, approximately 65% are
held by Marketing under long-term leases or subleases with Getty and certain of
its subsidiaries. The remaining retail outlets purchase petroleum products from
Marketing under contract as licensed Getty dealers or from licensed Getty
distributors who purchase Getty products from Marketing. The distribution of
motor fuels accounted for approximately 96% of net sales in each of the three
fiscal years ended January 31, 1996. Marketing also sells on a wholesale basis
gasoline, fuel oil, diesel fuel and kerosene from distribution terminals and
bulk plants in truckload, barge and pipeline quantities and sells fuel oil,
kerosene, propane and oil burner and related services to residential, commercial
and governmental customers in New York's Mid-Hudson Valley.
Marketing and its predecessors have been in the petroleum marketing
business for over 40 years. Mr. Leo Liebowitz, Chairman and Chief Executive
Officer and a director of Marketing, and Mr. Milton Safenowitz, a director and
former executive vice president of Marketing's predecessors, entered the
petroleum marketing business in 1955 with one service station and have pursued a
strategy of expanding the business principally through acquisitions. Prior to
1985, Marketing's predecessors had expanded into five states under various brand
names, principally Power Test. On February 1, 1985, Marketing's predecessors
acquired the marketing and distribution assets of Getty Oil Company in the
Northeastern and Mid-Atlantic states from a subsidiary of Texaco Inc. The Getty
acquisition included the Getty(R) trademark and trade name and added service
stations, distribution terminals and a wholesale heating oil and middle
distillate marketing network in six states.
During the period from 1985 to 1991, Marketing's predecessors continued to
expand by acquiring numerous small regional distributors, service stations and
convenience food stores. In addition to adding locations through fee ownership
and leasing, Marketing's predecessors continued to implement its program of
adding non-petroleum products and revenue enhancing services at retail outlets
in its marketing network, particularly convenience food stores, automotive
repairs and car washes. Commencing in 1992, Marketing's predecessors implemented
a comprehensive program of evaluating retail outlets to determine the long-term
viability of certain locations as gasoline stations. Over the last five years,
this process has resulted in the divestment of non-strategic and uneconomic
retail outlets. Pursuant to the terms of the Master Lease between Getty and
Marketing, executed as part of the Distribution, Marketing will, except for
certain locations presently leased to third parties for non-Getty brand uses,
lease from Getty those retail outlets which are owned by Getty and certain of
its subsidiaries at the time of the Distribution and sublease from Getty those
retail outlets which are leased by Getty and certain of its subsidiaries at the
time of the Distribution.
OPERATING STRATEGY
Marketing's operating strategy is to market motor fuels through service
stations operated by independent Getty-licensed dealers, many of whom sublease
Marketing's service stations and convenience stores. Marketing's dealers either
buy their petroleum products from Marketing or from licensed Getty distributors
23
<PAGE> 30
who purchase Getty products from Marketing, or sell Marketing's petroleum
products and receive a commission. Marketing views each of its retail outlets as
a "profit center" and believes that independent operators, with greater
financial incentive than salaried employees, generally operate retail outlets
more economically. Moreover, the leasing and subleasing of retail outlets to
independent operators has provided Marketing with a steady and increasing source
of rental income and has enabled Marketing to reduce its direct operating costs.
Marketing directly operated two retail outlets at October 31, 1996
utilizing salaried employees. While Marketing seeks to sublease retail outlets
to independent operators, it historically retains a small number of such company
operated outlets. These outlets permit management to keep abreast of changes in
retail marketing, to assist in providing practical guidance to independent
dealers and to test new products and concepts.
Certain of the outlets have convenience food stores, automotive repair
centers and car washes. Marketing receives higher rentals from such Properties
as a result of such additional uses.
Marketing intends to expand its retail operations by purchasing or leasing
new sites, either from Getty or from third parties, and by entering into supply
agreements with third parties. Under the Master Lease and other agreements,
Getty has no obligation to procure and lease new properties to Marketing.
DISTRIBUTION
The retail outlets sell gasoline, diesel fuel and other related petroleum
products (such as motor oil and lubricants) under Marketing's brand name
"Getty(R)" or, to a limited extent, under other brand names, in the states of
Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New
Jersey, New York, Pennsylvania, Rhode Island, Vermont, and Virginia.
As of October 31, 1996, Marketing had 1,574 Getty and other branded retail
outlets as follows:
(i) 2 company operated retail outlets which are operated by salaried
employees;
(ii) 263 sublessee dealer operated retail outlets (dealers who sublease
retail outlets and purchase their petroleum products from Marketing);
(iii) 677 commission sublessee dealer operated retail outlets (dealers who
sublease retail outlets and receive a commission for sale of
Marketing's petroleum products);
(iv) 95 retail outlets operated by management contractors (dealers who
operate Marketing's retail outlets pursuant to a management contract);
(v) 111 contract dealer retail outlets (dealers who purchase their
petroleum products from Marketing or sell Marketing's petroleum
products on a commission basis but do not sublease retail outlets from
Marketing); and
(vi) 36 distributors who purchase their petroleum products from Marketing,
which distributors in turn supply the petroleum product requirements
of 426 retail outlets.
The table below summarizes the aggregate additions and deletions to the
number of retail outlets during each of the three fiscal years ended January 31,
1996 and the nine months ended October 31, 1996:
<TABLE>
<CAPTION>
RETAIL OUTLETS RETAIL OUTLETS
AT BEGINNING AT END
FISCAL YEAR OF PERIOD ADDITIONS DELETIONS OF PERIOD
- -------------------------------------------------- -------------- --------- --------- --------------
<S> <C> <C> <C> <C>
1997 (through October 31, 1996)................... 1,625 8 59 1,574
1996.............................................. 1,751 7 133 1,625
1995.............................................. 1,865 8 122 1,751
1994.............................................. 2,110 5 250 1,865
</TABLE>
Marketing generally extends three-year lease terms to its dealers, except
for new dealers, who generally receive a one-year trial lease. Such leases
generally provide for fixed rentals at competitive rates. In addition, most
leases provide for an additional rental if the dealer fails to sell certain
minimum quantities of gasoline
24
<PAGE> 31
during a month. The lessee of a retail outlet is generally responsible for
payment of utilities and for all maintenance and repairs, except for structural
and marketing equipment repairs and capital improvements, which are performed by
Marketing.
Marketing distributes its petroleum products from 10 distribution terminals
and bulk plants, two of which are controlled by Getty through fee ownership and
leased to Marketing pursuant to the terms of the Master Lease, and eight of
which are controlled by Getty on long-term net lease basis and are subleased to
Marketing pursuant to the terms of the Master Lease. These distribution
terminals and bulk plants are located in New York, New Jersey, Rhode Island,
Pennsylvania, and Connecticut, and have an aggregate storage capacity of
approximately 57 million gallons. The terminals located in East Providence,
Rhode Island and Rensselaer, New York are deep-water terminals, capable of
handling large vessels. In addition, Marketing utilizes additional terminals
pursuant to thruput and storage agreements with unrelated parties. A substantial
portion of the petroleum products are transported to retail outlets by
Marketing's truck transportation fleet subsidiary, whose drivers are compensated
in part on an incentive-based system.
On December 27, 1996, Uni-Marts, Inc. ("Uni-Marts") notified Getty that,
effective December 31, 1997, it would not renew its various leases and subleases
of approximately 100 service station properties from Getty or the existing
petroleum supply agreement between Getty and Uni-Marts with respect to such
service stations and certain additional service stations owned or operated by
Uni-Marts. Uni-Marts subsequently advised Getty by letter that it may be
interested in negotiating and entering into revised arrangements. If Getty
should discuss such matters with Uni-Marts, there can be no assurance that any
revised terms will be agreed upon. On the Distribution Date, Marketing will
become a party to the existing supply agreement and the sublessor or
sub-sublessor under the leases and subleases with Uni-Marts. In the event the
parties do not agree upon any revised arrangements prior to December 31, 1997,
Marketing believes that it will be able to re-lease the approximately 100
affected service station properties, although there can be no assurances in this
regard. The loss of motor fuel product sales to Uni-Marts pursuant to the
existing supply agreement, if not replaced, could have a material adverse effect
on Marketing's revenues, although Marketing believes such loss of product sales
would not significantly impact its operating income because the affected service
station properties should be re-leased to retail dealers resulting in higher
product margins than the current wholesale product margins obtained from
Uni-Marts.
Marketing also sells, through its KOSCO subsidiary, home heating oil,
propane (LPG) and related services directly to approximately 26,600 retail and
commercial customers in the New York Mid-Hudson Valley. In addition, Marketing
is a wholesale supplier of #2 heating oil (also known as "home heating oil") in
the Northeast, supplying heating oil to dealers who deliver to residences and
commercial accounts. Diesel fuel and kerosene are marketed both to distributors
of such products and directly by Marketing to retail outlets and consumers.
PRODUCT SUPPLY
Marketing, through its predecessors, has entered into agreements with a
number of Northeast and Mid-Atlantic suppliers for the purchase of refined
petroleum products. These agreements typically have one-year terms, and prices
under the agreements are generally based on formulas which are tied to the New
York Harbor price for the petroleum product being purchased. Marketing has no
crude oil reserves or refining capacity.
Historically, petroleum prices have been subject to extreme volatility and
there have been periodic shortages followed by periods of oversupply. No
assurance can be given that petroleum prices will not fluctuate greatly or that
petroleum products will continue to be available from multiple sources or
available at all in times of shortage. Furthermore, a large, rapid increase in
petroleum prices could adversely affect Marketing's margins and/or profitability
if Marketing's sales prices could not be increased or automobile consumption of
gasoline were to significantly decline as a result of such price increases.
Management believes, however, that, based upon its experience during times of
shortage, Marketing will continue to have the ability to acquire petroleum
products on competitive terms due in part to the large volume of its purchases
and the storage capacity at its distribution terminals.
25
<PAGE> 32
MARKETING
In order to provide efficient service to retail dealers and other
customers, Marketing is divided into four marketing regions. Marketing's
regional marketing personnel provide significant guidance, counseling and
assistance to Marketing's dealers, including advice on retail operations. The
marketing personnel also supervise the company operated retail outlets.
Marketing provides advertising and promotional support to its retail
outlets. Both radio and newspaper media are utilized, and promotional programs
are implemented on an ongoing basis.
Marketing has a co-branded Getty MasterCard, and accepts Visa, MasterCard,
Discover, Diners Club and American Express credit cards and "NYCE" and "MAC"
debit cards. In addition, Marketing has a Getty fleet fueling card and accepts
certain other fleet fueling cards, all of which have tracking programs which
provide cost control data to fleet customers.
COMPETITION
Marketing believes that, based on the number of locations served, it is
currently one of the largest independent marketers of petroleum products in the
United States. Petroleum marketing is highly competitive, and Marketing competes
with a substantial number of integrated oil companies and other companies who
may have greater assets, financial resources and sales. Accordingly, Marketing's
earnings may be adversely affected by the marketing policies of such companies,
which may have greater flexibility to withstand price changes than Marketing.
Marketing competes for new dealers and distributors primarily on the basis of
Getty brand acceptance, location, supply, price and marketing support. The
retail outlets in Marketing's marketing network compete primarily on the basis
of Getty brand acceptance, location, customer service, appearance of the retail
outlet and price.
REGULATION
The petroleum products industry is subject to numerous federal, state and
local laws and regulations. Although compliance with those laws and regulations
may have a significant impact on results of operations or liquidity for any
single period, Marketing believes that the costs related to such compliance have
not had and are not expected to have a material adverse effect on the
competitive or financial position of Marketing.
Marketing is not a refiner and, therefore, is not subject to the PMPA with
respect to its Getty branded stations. However, pursuant to Marketing's
agreements with approximately one-half of its Getty dealers and distributors,
Marketing has voluntarily extended to them coverage under PMPA. Under PMPA,
Marketing complies with certain notice requirements (generally 90 days) and
extends nondiscriminatory contracts to certain of its Getty licensed dealers and
distributors, whose franchises cannot be terminated or not renewed unless
certain PMPA imposed prerequisites are met as provided in Marketing's
agreements. Although a licensed dealer or distributor who is covered by PMPA is
not required to renew his or her franchise, because Marketing has agreed to
comply with PMPA with respect to such dealers or distributors, Marketing is
required to renew the franchises of such dealers and distributors who elect to
renew. However, franchisees may be terminated or not renewed for violating
certain provisions of Marketing's agreements as permitted under PMPA. The PMPA
permitted grounds for termination or non-renewal include, among other things,
non-payment of rent, misuse of trademark, bankruptcy, criminal misconduct,
condemnation and expiration of an underlying lease. Also, Marketing may elect to
non-renew with a franchisee upon a determination made in good faith that the
franchise relationship is uneconomical to Marketing. In such latter instance,
Marketing must, in accordance with PMPA, offer to the franchisee the right to
purchase Marketing's leasehold interest in the property at a bona fide price.
Under the terms of the Master Lease with Realty, Marketing would be required to
offer to assign its leasehold interest in the property (including all renewal
options) to the franchisee who is covered by PMPA.
In addition, Marketing's operations are governed by numerous federal, state
and local environmental laws and regulations. Among these laws are (i)
requirements to dispense reformulated gasoline in accordance with the Clean Air
Act, (ii) restrictions imposed on the amount of hydrocarbon vapors which may
enter the air at
26
<PAGE> 33
Marketing's terminals and service stations, (iii) OSHA and other laws regulating
terminal employee exposure to benzene and other hazardous materials, (iv)
requirements to report to governmental authorities discharges of petroleum
products into the environment and, under certain circumstances, to remediate the
soil and/or groundwater contamination pursuant to governmental order and
directive, (v) requirements to remove and replace underground storage tanks
which have exceeded governmental-mandated age limitations and (vi) the
requirement to provide a certificate of financial responsibility with respect to
claims relating to underground storage tank failures.
Environmental expenses are predominantly attributable to the replacement or
upgrading of USTs, which has been the responsibility of Getty. Such expenses of
Getty amounted to approximately $14.3 million, $11.8 million and $9.7 million
for the years ended January 31, 1996, 1995 and 1994, respectively. Getty has
agreed to pay all costs relating to, and to indemnify Marketing for, all
scheduled pre-closing environmental liabilities and obligations, all scheduled
future Upgrades to Nonupgraded USTs, and all environmental liabilities and
obligations arising out of discharges with respect to Properties containing
Nonupgraded USTs that are discovered prior to the date such USTs are upgraded to
meet the 1998 Standards. Marketing has agreed to indemnify Getty and its
successors from and against, among other things, all other liabilities and
obligations with respect to USTs and environmental matters. Marketing cannot
estimate its future environmental expenses because it cannot predict the number
or the magnitude of discharges or releases from its USTs that may be discovered
in the future or the cost of remediation relating thereto. Future environmental
expenses of Marketing, though not currently known or ascertainable, are expected
to be significantly lower than Getty's historical expenses, as USTs have been or
will be upgraded at Getty's expense by December 22, 1998.
Marketing believes that it is in substantial compliance with federal, state
and local provisions enacted or adopted pertaining to environmental matters.
Although Marketing is unable to predict what legislation or regulations may be
adopted in the future with respect to environmental protection and waste
disposal, existing legislation and regulations have had no material adverse
effect on its competitive position.
PERSONNEL
As of October 31, 1996, Marketing had 544 employees, of which 222
employees, consisting of truck drivers and service technicians, are represented
by Amalgamated Local Union 355. Marketing considers its relationships with its
employees and the union to be satisfactory.
LEGAL PROCEEDINGS
In 1991, the State of New York brought an action in Albany County against
KOSCO, Marketing's subsidiary, seeking reimbursement in the amount of $189,000
for clean-up costs incurred at a service station. The State is also seeking
penalties of $200,000 and interest. There has been no activity in this
proceeding in the past several years. The only other legal proceedings pending
against Marketing are certain personal injury and property damage proceedings
pending against Marketing's trucking subsidiary and against KOSCO. These
proceedings are not expected, individually or in the aggregate, to have a
material adverse effect on Marketing's financial position or results of
operations. Moreover, pursuant to the Distribution Agreement, Getty has agreed
to defend all existing proceedings and indemnify Marketing and its subsidiaries
with respect thereto. Pursuant to the Distribution Agreement, Getty will retain
liability for current proceedings relating to the pre-Distribution operation of
the business of Marketing including the aforementioned trucking subsidiary and
KOSCO. In the event any plaintiff in such a proceeding should seek to add
Marketing as a defendant, Getty will, pursuant to the Distribution Agreement,
indemnify and defend Marketing in such proceeding.
27
<PAGE> 34
MANAGEMENT
DIRECTORS
Pursuant to the Marketing Bylaws, the Board of Directors has fixed the
number of directors at five persons. Getty, as the sole stockholder of
Marketing, has elected or intends to elect the five persons named in the table
below to constitute the entire Marketing Board. Messrs. Leo Liebowitz and Milton
Safenowitz are also currently directors of Getty. The current term of each
director named below began with his election in 1996 and will expire at the next
annual meeting of the stockholders of Marketing.
Set forth below is a list of the names and ages of, and certain
biographical information concerning, the persons expected to be directors of
Marketing immediately after the Distribution, including information concerning
their principal occupations for the past five years.
<TABLE>
<CAPTION>
NAME AND AGE YEAR ELECTED PRINCIPAL OCCUPATIONS FOR PAST FIVE YEARS
- ----------------------- ------------ ------------------------------------------------------
<S> <C> <C>
Leo Liebowitz - 69 1996 President, Chief Executive Officer and Director of
Getty since 1971. Director, President and Treasurer of
CLS General Partnership Corp., the general partner of
Power Test Investors Limited Partnership.
Milton Safenowitz - 69 1996 Director of Getty since 1971 and Executive Vice
President of Getty until February 1990. Director,
Executive Vice President and Assistant Secretary of
CLS General Partnership Corp.
Ronald E. Hall - 64 1996 Chairman of the Board of Howell Corporation, a company
engaged primarily in the exploration, production,
acquisition and development of oil and gas properties,
since 1995. Formerly President and Chief Executive
Officer of CITGO Petroleum Corporation ("CITGO"), from
1985 to 1995. Director of CITGO from 1990 to 1995.
Richard E. Montag - 64 1996 Vice President - Development of the Richard E. Jacobs
Group, a regional shopping mall developer, since 1982.
Matthew J. Chanin - 42 1996 Senior Managing Director of Prudential Capital Group,
an investment unit of the Prudential Insurance
Companies of America ("Prudential") since 1995. Has
served in other executive and management positions
with Prudential for more than the past five years.
</TABLE>
COMMITTEES OF THE BOARD OF DIRECTORS
There will be three standing committees of the Board of Directors of
Marketing: the Audit Committee, the Nominating Committee and the Compensation
and Benefits Committee, each comprised of one or more directors. The members of
these committees will be appointed on or about the Distribution Date.
The primary purpose of the Audit Committee will be to (i) select the firm
of independent accountants that will audit the consolidated financial statements
of Marketing and its subsidiaries, (ii) discuss the scope and the results of the
audit with the accountants and (iii) discuss Marketing's financial accounting
and reporting principles. The Audit Committee will also examine the summary
reports of the internal auditors of Marketing and discuss the adequacy of
Marketing's financial controls with the independent accountants and with
management.
The Nominating Committee will recommend candidates to the Board for
election as officers, recommend nominees for election to the Board and review
the role, composition and structure of the Board and its committees. The
Nominating Committee will consider nominees recommended by stockholders upon
submission in writing to the Secretary of Marketing with the names of such
nominees, together with their qualifications for service as a director of
Marketing.
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<PAGE> 35
The Compensation and Benefits Committee (the "Compensation Committee") will
administer the Incentive Compensation Plan, the Supplemental Retirement Plan,
the Marketing ESOP and the Stock Option Plan, and will review the compensation
of the directors and officers of Marketing.
DIRECTOR COMPENSATION
Directors will be compensated for their services according to a standard
arrangement authorized by resolution of the Marketing Board. An annual retainer
fee of $12,000 will be paid to each director, and a committee and board meeting
fee of $1,000 will also be paid to each director for each meeting attended.
Directors who are employees of Marketing will not receive retainers or board
meeting fees.
EXECUTIVE OFFICERS
Set forth below is a list of the names and ages of all persons who will be
executive officers of Marketing immediately after the Distribution, indicating
their positions with Marketing and their principal occupations during the past
five years. Except for Mr. Liebowitz, all such persons will resign as officers
of Getty on the Distribution Date.
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATIONS FOR PAST FIVE YEARS
- ------------------------ ----------------------------------------------------------------
<S> <C>
Leo Liebowitz - 69...... Chairman, Chief Executive Officer, President and Director of
Marketing. President, Chief Executive Officer and Director of
Getty since 1971.
Alvin A. Smith - 58..... Senior Vice President and Chief Operating Officer of Marketing.
Senior Vice President and Chief Operating Officer of Getty since
1994. Mr. Smith has been a Senior Vice President of Getty since
1985 and became Chief Operating Officer in 1994. Prior thereto,
he was employed at Getty Oil Company as Wholesale Manager and
Petroleum Manager.
James R. Craig - 45..... Vice President-Marketing of Marketing. Vice President-Marketing
of Getty since 1987. He joined Getty in 1982 as a District
Manager and became Manager - Retail Sales in 1984. Prior to
joining Getty, he was a Regional Manager of Amerada Hess Corp.
Michael K. Hantman - Vice President and Corporate Controller of Marketing. Vice
45.................... President and Corporate Controller of Getty since 1991. He
joined Getty in 1985 as Corporate Controller. Prior to joining
Getty, he was a Principal at Arthur Young & Company, an
international accounting firm.
Samuel M. Jones - 60.... Vice President, Corporate Secretary and General Counsel of
Marketing. Vice President, Corporate Secretary and General
Counsel of Getty since 1994. Mr. Jones joined Getty in 1986 as
Vice President and General Counsel and assumed the additional
position of Corporate Secretary in 1994. Prior to joining Getty,
he was a Senior Attorney with Texaco Inc.
</TABLE>
SECURITY OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND 5% OWNERS
Included in the following table is the number of shares of Marketing Common
Stock to be beneficially owned (or deemed to be beneficially owned) immediately
after the Distribution by each of the persons expected to be a director of
Marketing, by each of the executive officers listed above under "MANAGEMENT --
Executive Officers," and by all of the persons expected to be directors or
executive officers of Marketing as a group, based on the number of shares of
Getty Common Stock expected to be held on the Distribution Date, and each other
person expected to own of record or beneficially more than 5% of the outstanding
Marketing Common Stock. Such number of shares includes exercisable options or
options to become exercisable within 60 days with respect to Marketing Common
Stock. On December 13, 1996, each of Messrs. Hall and Montag, in their capacity
as directors of Marketing, received options with respect to 15,000 shares of
Getty Common Stock, which options will be exercisable beginning December 13,
1997. Such options will be exchanged for options with respect to Getty Common
Stock and Marketing Common Stock immediately prior to the Distribution. See
"EXECUTIVE COMPENSATION -- Stock Option Plans."
29
<PAGE> 36
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNERS, AMOUNT AND NATURE OF PERCENT
DIRECTORS AND OFFICERS BENEFICIAL OWNERSHIP(1) OF CLASS(2)
- --------------------------------------------------------------- ----------------------- -----------
<S> <C> <C>
Leo Liebowitz.................................................. 2,478,290(3) 18.58%
Milton Safenowitz.............................................. 2,210,719(4) 16.57%
James R. Craig................................................. 87,958(5) *
Michael K. Hantman............................................. 77,955(5) *
Samuel M. Jones................................................ 91,654(5) *
Alvin A. Smith................................................. 191,295(5) 1.39%
Ronald E. Hall................................................. 0 *
Richard E. Montag.............................................. 26,762(6) *
Matthew J. Chanin.............................................. 0 *
Directors and executive officers as a group (9 persons)........ 5,214,109 37.83%
Getty Petroleum Marketing Inc. Employee Stock Ownership Plan... 667,000 5.00%
Milton Cooper.................................................. 1,059,538(7) 7.94%
</TABLE>
- ------------------
* Total shares beneficially owned constitute less than one percent of the
outstanding shares.
(1) Unless otherwise indicated, each person has sole voting and dispositive
power with respect to the shares shown.
(2) The percentage is determined by dividing the number of shares shown by the
aggregate number of shares of Marketing Common Stock expected to be
outstanding immediately after the Distribution and the shares of Marketing
Common Stock which may be acquired within 60 days.
(3) Includes 166,410 shares held in trust for children, 230,977 shares held by
his wife for which beneficial ownership is disclaimed and 30,724 shares
held by a charitable foundation.
(4) Includes 2,034,601 shares held by Irrevocable Trust for Milton Safenowitz
and 176,118 shares held by Irrevocable Trust for the benefit of his wife.
(5) Gives effect to the vesting of outstanding Getty stock options held by such
individual pursuant to certain "change of control" agreements. See
"EXECUTIVE COMPENSATION."
(6) Includes 10,190 shares held by his wife for which beneficial ownership is
disclaimed.
(7) Includes 10,311 shares held in a partnership of which he is a partner,
2,013 shares held by his wife for which beneficial ownership is disclaimed
and 160,000 shares held by a charitable foundation.
With the exception of Leo Liebowitz, whose address is care of Getty
Petroleum Corp., 125 Jericho Tpke., Jericho, New York 11753, Milton Safenowitz,
whose address is 7124 Queenferry Cr., Boca Raton, Florida 33496, Milton Cooper,
whose address is care of Kimco Realty Corporation, 3333 New Hyde Park Road,
Suite 100, New Hyde Park, New York 11042-0020, and the Getty Petroleum Marketing
Inc. Employee Stock Ownership Plan, whose address is 125 Jericho Tpke., Jericho,
New York 11753, management knows of no other person owning of record or
beneficially more than 5% of the outstanding Marketing Common Stock.
30
<PAGE> 37
EXECUTIVE COMPENSATION
The following table sets forth, as to the Chief Executive Officer and the
other four most highly compensated executive officers of Getty that will become
executive officers of Marketing immediately after the Distribution, information
concerning the compensation paid by Getty for services in all capacities to
Getty and its subsidiaries to or for the benefit of such persons during the
periods indicated.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
LONG TERM
FISCAL YEAR ENDED JANUARY 31 COMPENSATION AWARDS
----------------------------------------------------------------------------------
--------------------------------------
OTHER ANNUAL RESTRICTED ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION STOCK AWARDS OPTIONS COMPENSATION
POSITION YEAR $ $ ($)(1) ($) (#) ($)(2)
- ---------------------- ---- ------- ------- ------------ ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
LEO LIEBOWITZ......... 1996 404,103 263,000 59,886
Director, President 1995 387,228 164,500 60,713
and Chief Executive 1994 384,860 193,950 53,564
Officer
ALVIN A. SMITH........ 1996 301,192 190,700 15,000 45,373
Senior Vice President 1995 268,606 99,000 15,000 40,353
and Chief Operating 1994 261,615 107,247 5,000 35,496
Officer
SAMUEL M. JONES....... 1996 163,307 115,000 15,000 26,629
Vice President, 1995 154,646 79,000 10,000 26,616
General Counsel and 1994 146,808 87,432 5,000 21,532
Corporate Secretary
JAMES R. CRAIG........ 1996 145,537 125,000 15,000 24,419
Vice President 1995 137,843 79,000 10,000 24,260
1994 122,354 87,432 5,000 18,665
MICHAEL K. HANTMAN.... 1996 115,667 110,000 15,000 21,787
Vice President and 1995 110,274 79,000 10,000 22,458
Corporate Controller 1994 106,972 87,432 5,000 17,394
</TABLE>
- ---------------
(1) None of the Executive Officers listed received perquisites or other
personal benefits that exceeded the lesser of $50,000 or 10% of the salary
and bonus for such officer.
(2) All other compensation includes Getty's contributions to the defined
contribution retirement profit sharing plan, matching contributions under
the company's 401(k) savings plan, Getty's contributions to the
Supplemental Retirement Plan for executives and term life insurance
premiums as follows:
<TABLE>
<CAPTION>
FISCAL YEAR DEFINED COMPANY SUPPLEMENTAL
ENDED CONTRIBUTION MATCH RETIREMENT TERM LIFE
JANUARY 31 RETIREMENT PLAN 401(k) PLAN PLAN INSURANCE
----------- --------------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Leo Liebowitz......................... 1996 $ 2,388 $ -- $ 55,319 $ 2,179
1995 2,394 -- 56,140 2,179
1994 4,140 -- 47,245 2,179
Alvin A. Smith........................ 1996 2,388 4,620 34,410 3,955
1995 2,394 4,620 29,859 3,480
1994 4,140 4,481 23,395 3,480
Samuel M. Jones....................... 1996 2,388 4,629 17,499 2,113
1995 2,394 4,611 17,507 2,104
1994 3,310 4,367 11,751 2,104
James R. Craig........................ 1996 2,388 3,486 16,668 1,877
1995 2,394 3,478 16,546 1,842
1994 2,898 3,405 10,520 1,842
Michael K. Hantman.................... 1996 2,388 3,458 14,179 1,762
1995 2,394 3,422 14,915 1,727
1994 2,557 3,195 9,915 1,727
</TABLE>
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<PAGE> 38
In December 1994, Getty entered into agreements (collectively, the "Change
of Control Agreements") with its non-director officers and certain key
employees, wherein Getty agreed to make certain payments under certain
circumstances upon a "change of control" of Getty. Under such circumstances,
Getty also agreed that all Getty stock options granted to such officer or key
employee would immediately vest, and made provision to allow such individual to
exercise his or her options within three years of the "change of control" for
the officers, and a shorter period for key employees, and to preserve the
economic value of his or her options. In December 1995, Getty amended the Change
of Control Agreements to treat a spin-off or similar transaction involving a
substantial portion of Getty's marketing or real estate business or assets as a
"change of control." Accordingly, a "change of control" will, for purposes of
the Change of Control Agreements, be deemed to occur on the Distribution Date.
Marketing intends to pay those officers and key employees who become employees
of Marketing compensation at least comparable to the compensation which Getty
paid them prior to the Distribution. In the event that Marketing does not pay
comparable compensation to any such individual or any such individual does not
become an employee of either Getty or Marketing (or ceases to be an employee of
Getty or Marketing for any reason other than for cause) after the Distribution
Date, then for the 36-month period after the Distribution Date for officers, and
a shorter period of time for those certain key employees, Getty will pay to each
such individual over the applicable period an amount not less than the average
annual sum of such individual's (i) base salary, (ii) benefits under any
incentive or bonus plan and (iii) the total amount of employer contributions
(other than elective salary deferrals) made to the individual's account under
401(k) and other deferred compensation plans, based upon the requisite period
prior to the "change of control." The compensation to be paid to an officer or
key employee pursuant to a Change of Control Agreement will be reduced by the
amount of compensation, if any, such officer or key employee receives from
Marketing or from any other employer during the covered period. Marketing
intends to fully perform Getty's obligations under the Change of Control
Agreements with respect to those individuals who will become either an officer
or employee of Marketing.
STOCK OPTION PLANS
The following table sets forth as to the persons named in the Executive
Compensation Table additional information with respect to Getty stock options
granted during the fiscal year ended January 31, 1996:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% OF TOTAL OPTIONS
GRANTED TO EMPLOYEES
IN FISCAL YEAR ENDED EXERCISE OR BASE PRICE
NAME OPTIONS GRANTED 1/31/96 ($/SHARE) EXPIRATION DATE
- ----------------------------- --------------- -------------------- ---------------------- ---------------
<S> <C> <C> <C> <C>
Leo Liebowitz................ -- -- -- --
Alvin A. Smith............... 15,000 12.71% $ 13.875 12/8/05
Samuel M. Jones.............. 15,000 12.71 13.875 12/8/05
James R. Craig............... 15,000 12.71 13.875 12/8/05
Michael K. Hantman........... 15,000 12.71 13.875 12/8/05
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information as to Getty stock options
exercised by each of the named executive officers of Getty during the fiscal
year ended January 31, 1996 and the value of Getty stock options held by such
officers at year-end measured in terms of the closing price of Getty Common
Stock on
32
<PAGE> 39
January 31, 1996. No Getty stock options were exercised by the named executive
officers in the fiscal year ended January 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED OPTIONS AT FISCAL VALUE OF UNEXERCISED IN-THE-MONEY
YEAR END(#) OPTIONS/SARS AT FISCAL YEAR END($)
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE(1) UNEXERCISABLE(1)
- -------------------------------- --------------------------------------- ----------------------------------
<S> <C> <C>
Leo Liebowitz................... -- --
-- --
Alvin A. Smith.................. 143,798 $207,193
34,375 40,390
Samuel M. Jones................. 50,651 58,353
27,500 24,061
James R. Craig.................. 50,134 61,224
27,500 24,061
Michael K. Hantman.............. 40,935 49,755
26,875 22,577
</TABLE>
- -------------------------
(1) Pursuant to the Change in Control Agreements, all unexercisable options held
by the named executive officers will become exercisable on the Distribution
Date.
As described under "RELATIONSHIP BETWEEN GETTY AND MARKETING AFTER THE
DISTRIBUTION--Reorganization and Distribution Agreement," immediately prior to
the Distribution, each director, officer and key employee who is a holder of an
option to acquire shares of Getty pursuant to Getty's 1985, 1988 and 1991 Stock
Option Plans will receive, in exchange therefor, two separately exercisable
options: one to purchase shares of Getty Common Stock (a "Getty Option") and one
to purchase Marketing Common Stock (a "Marketing Option"), each exercisable for
the same number of shares and containing terms substantially equivalent in the
aggregate to those of such holder's pre-Distribution option. The exercise price
for each Getty Option and Marketing Option will be set so as to preserve the
Aggregate Spread in value attributed to the options currently held by such
directors, officers and key employees. See "RELATIONSHIP BETWEEN GETTY AND
MARKETING AFTER THE DISTRIBUTION -- Reorganization and Distribution Agreement."
EMPLOYEE STOCK OWNERSHIP PLAN
In connection with the Distribution, Marketing will establish a leveraged
Employee Stock Ownership Plan (the "Marketing ESOP") that will purchase newly
issued shares of Marketing Common Stock from Marketing equal to five percent of
the outstanding shares of Marketing. The Marketing ESOP will purchase such
newly-issued shares from Marketing using the proceeds of a loan to be made by
Marketing to the Marketing ESOP. The Marketing ESOP loan will be repaid over a
five-year period, and Marketing will contribute annually to the Marketing ESOP
the funds required to repay such loan. The principal amount of the Marketing
ESOP loan is expected to be equal to the number of shares purchased by the
Marketing ESOP (approximately 667,000) multiplied by the purchase price per
share (determined on the basis of the value of the Marketing Common Stock). It
is expected that the repayment of the Marketing ESOP loan will result in
projected allocations to participants' accounts of an aggregate of approximately
133,400 shares of Marketing Common Stock per year, allocated in proportion to
compensation. Marketing expects that the five percent of the outstanding stock
of Marketing purchased by the Marketing ESOP will be allocated to covered
employees over a five-year period. Commencing February 1, 1997, Marketing will
recognize a charge to operating results over a five-year period relating to the
Marketing ESOP. Such charge will be based on the value of the Marketing Common
Stock in the future and, as such, is not currently determinable. See Note 9 to
the consolidated financial statements.
33
<PAGE> 40
MISCELLANEOUS BENEFIT PLANS
Marketing will establish the same benefit plans which Getty presently has
in effect: The Getty Petroleum Marketing Inc. Retirement (401(k)) and Profit
Sharing Plan (the "401(k) Plan"), a medical and dental plan, a flexible spending
plan, group life and disability insurance, and, for the officers of Marketing, a
non-qualified Supplemental Retirement Plan for Executives (the "Supplemental
Plan").
Under the 401(k) Plan, Marketing will contribute to each participating
employee an amount equal to 50% of such employee's contribution but in no event
more than 3% of such employee's compensation. Any annual discretionary
contribution to the 401(k) Plan will be determined by Marketing's Board of
Directors. Under the Supplemental Plan (which is not qualified for purposes of
Section 401(a) of the Internal Revenue Code of 1986, as amended), a
participating executive may receive in his trust account an amount equal to 10%
of his compensation, reduced by the amount of any contributions allocated to
such executive under the 401(k) Plan. The amounts paid to the trustee under the
Supplemental Plan may be used to satisfy claims of general creditors in the
event of Marketing's or any of its subsidiaries' bankruptcy. The trustee shall
not cause the Supplemental Plan to be other than "unfunded" for purposes of the
Employee Retirement Income Security Act of 1974, as amended. An executive's
account shall vest in the same manner as under the 401(k) Plan and shall be paid
upon termination of employment. Under the Supplemental Plan, the Board of
Directors may, during any fiscal year, elect not to make any payment to the
account of any or all executives.
Pursuant to a long-standing arrangement, in the event of the death of Mr.
Liebowitz, benefits in an amount equal to twelve months' salary will be paid to
his estate. In the event of termination of Mr. Liebowitz's employment due to
illness or incapacity for a period of one year or longer, benefits equal to
twenty-four months' salary will be payable to Mr. Liebowitz.
CERTAIN TRANSACTIONS
THE PARTNERSHIP
In 1985, Power Test Investors Limited Partnership (the "Partnership") was
formed as a public master limited partnership and capitalized by a rights
offering to all Getty stockholders. The Partnership is the limited partner in
Power Test Realty Company Limited Partnership (the "Operating Partnership"),
which was also formed in 1985 and which purchased the Northeast and Mid-Atlantic
petroleum marketing assets of Getty Oil Company from Texaco Inc. The Operating
Partnership leased these assets to Getty on a long-term net basis.
CLS General Partnership Corp., a Delaware corporation ("CLS"), is the sole
general partner of both the Partnership and the Operating Partnership. The three
stockholders of CLS are Messrs. Liebowitz, Safenowitz and Cooper (the "Principal
Holders"), who are also directors and stockholders of Getty and stockholders of
Marketing. Messrs. Liebowitz and Safenowitz are also directors of Marketing and
Mr. Liebowitz serves as Chief Executive Officer of Getty and Marketing. See
"MANAGEMENT." As of October 31, 1996, the Principal Holders beneficially owned
an aggregate of 3,103,131 (48%) of the general and limited partnership interests
in the Partnership.
Marketing does not have (nor did Getty have) any ownership interest in the
Partnership, the Operating Partnership or any of its assets. Neither the
Partnership nor the Operating Partnership conducts any substantial activities
other than those related to the ownership and leasing to Getty of the former
Getty Oil Company assets, substantially all of which Marketing subleases from
Getty.
THE MASTER LEASE AND RELATED AGREEMENTS
Pursuant to the Master Lease, Marketing anticipates that it will make, on
an annual basis, net lease payments to Getty aggregating approximately $57
million commencing in fiscal 1998. See "RELATIONSHIP BETWEEN GETTY AND MARKETING
AFTER THE DISTRIBUTION -- Master Lease Agreement," and Note 4 to the
consolidated financial statements.
34
<PAGE> 41
In addition to the Master Lease, Getty and Marketing have entered into,
among other things, certain licensing, service and tax sharing agreements. See
"RELATIONSHIP BETWEEN GETTY AND MARKETING AFTER THE DISTRIBUTION."
DESCRIPTION OF CAPITAL STOCK
The following summary of the terms of the stock of Marketing does not
purport to be complete and is subject to and qualified in its entirety by
reference to the Marketing Charter (as defined herein) and the Marketing Bylaws,
copies of which have been filed as exhibits to this Registration Statement on
Form 10.
GENERAL
Marketing's authorized capital stock presently consists of 1,000 shares of
Marketing Common Stock, of which 1,000 shares are issued and outstanding and are
owned by Getty. Prior to the Distribution, Marketing's Charter will be amended
by the Marketing Board and by Getty, as sole stockholder of Marketing. Under
such amended Charter, which will be substantially in the form set forth in
Exhibit 3.2 to this Form 10 (the "Marketing Charter"), the total number of
shares of all classes of stock that Marketing will have authority to issue will
be 40,000,000, 30,000,000 of which will be shares of Marketing Common Stock and
10,000,000 of which will be shares of preferred stock, $.01 par value per share
(the "Marketing Preferred Stock"). Based on the number of shares of Getty Common
Stock outstanding at December 27, 1996, approximately 12,675,000 shares of
Marketing Common Stock, constituting approximately 42% of the then authorized
Marketing Common Stock, will be issued to Getty and distributed by Getty to its
stockholders in the Distribution. In addition, approximately 667,000 shares of
Marketing Common Stock will be issued to the Marketing ESOP at the time of the
Distribution. See "EXECUTIVE COMPENSATION -- Employee Stock Ownership Plan." All
of the shares of Marketing Common Stock issued in the Distribution and to the
Marketing ESOP will be validly issued, fully paid and non-assessable and have no
preemptive rights.
COMMON STOCK
All shares of Marketing Common Stock will be duly authorized, fully paid
and nonassessable. Subject to the preferential rights of any other shares or
series of stock, holders of shares of Marketing Common Stock are entitled to
receive dividends on such stock if, as and when authorized and declared by the
Marketing Board out of assets legally available therefor and to share ratably in
the assets of Marketing legally available for distribution to its stockholders
in the event of its liquidation, dissolution or winding up after payment of or
adequate provision for all known debts and liabilities of Marketing.
Each outstanding share of Marketing Common Stock entitles the holder to one
vote on all matters submitted to a vote of stockholders, including the election
of directors and, except as provided with respect to any other class or series
of stock, the holders of such shares will possess the exclusive voting power.
There is no cumulative voting in the election of directors, which means that the
holders of a majority of the outstanding shares of Marketing Common Stock can
elect all of the directors then standing for election and the holders of the
remaining shares will not be able to elect any directors.
Holders of shares of Marketing Common Stock have no preference, conversion,
exchange, sinking fund, redemption or appraisal rights and have no preemptive
rights to subscribe for any securities of Marketing. Shares of Marketing Common
Stock will have equal dividend, liquidation and other rights.
Under the MGCL, a Maryland corporation generally cannot dissolve, amend its
charter, merge, sell all or substantially all of its assets, engage in a share
exchange or engage in similar transactions outside the ordinary course of
business unless approved by the affirmative vote of stockholders holding at
least two thirds of the shares entitled to vote on the matter unless a lesser
percentage (but not less than a majority of all of the votes entitled to be cast
on the matter) is set forth in the corporation's charter. The Marketing Charter
provides for approval by a majority of all the votes entitled to be cast in such
situations. With respect to the phrase "all or substantially all," the words
"substantially all" are not defined in the MGCL, there are only a limited number
of cases interpreting the meaning of such words and the few cases doing so rely
heavily on the particular facts
35
<PAGE> 42
and circumstances thereof. It is therefore difficult to state with certainty
when a Maryland corporation may be required to obtain stockholder approval for a
sale of assets. There can be no assurance that, if presented with a particular
situation, a Maryland court (or a court appropriately applying Maryland law)
would find that a sale of more than 50% of the assets of a corporation was the
sale of "substantially all" of the assets of the corporation requiring
stockholder approval.
Under the MGCL, certain "business combinations" (including a merger,
consolidation, share exchange or, in certain circumstances, an asset transfer or
issuance or reclassification of equity securities) between a Maryland
corporation and any person who beneficially owns ten percent or more of the
voting power of the corporation's shares or an affiliate of the corporation who,
at any time within the two-year period prior to the date in question, was the
beneficial owner of ten percent or more of the voting power of the then
outstanding voting stock of the corporation (an "Interested Stockholder") or an
affiliate of such an Interested Stockholder are prohibited for five years after
the most recent date on which the Interested Stockholder becomes an Interested
Stockholder. Thereafter, any such business combination must be recommended by
the board of directors of such corporation and approved by the affirmative vote
of at least (a) 80% of the votes entitled to be cast by holders of outstanding
shares of voting stock of the corporation and (b) two-thirds of the votes
entitled to be cast by holders of voting stock of the corporation other than
shares held by the Interested Stockholder with whom (or with whose affiliate)
the business combination is to be effected, unless, among other conditions, the
corporation's common stockholders receive a minimum price (as defined in the
MGCL) for their shares and the consideration is received in cash or in the same
form as previously paid by the Interested Stockholder for its shares. These
provisions of the MGCL do not apply, however, to business combinations that are
approved or exempted by the board of directors of the corporation prior to the
time that the Interested Stockholder becomes an Interested Stockholder. These
provisions of the MGCL could delay, defer or prevent a transaction or a change
in control of Marketing that might involve a premium price for holders of
Marketing Common Stock or otherwise be in their best interest.
The Marketing Charter authorizes the Marketing Board to reclassify any
unissued shares of Marketing Common Stock into other classes or series of
classes of stock and to establish the number of shares in each class or series
and to set the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends or other distributions, qualifications
or terms or conditions of redemption for each such class or series.
The transfer agent and registrar for the Marketing Common Stock will be
American Stock Transfer and Trust Company.
PREFERRED STOCK
The Marketing Charter will provide that the Marketing Board is authorized
to provide for the issuance of shares of Marketing Preferred Stock, from time to
time, and to fix the designations, preferences, conversion or other rights,
voting powers, restrictions, dividends and other distributions, qualifications
or terms or conditions of redemption of such series.
POWER TO ISSUE ADDITIONAL SHARES OF COMMON STOCK AND PREFERRED STOCK
Marketing believes that the power of the Marketing Board to issue
additional authorized but unissued shares of Marketing Common Stock and
Marketing Preferred Stock and to classify or reclassify unissued shares of
Marketing capital stock and thereafter to cause Marketing to issue such
classified or reclassified shares of stock will provide Marketing with increased
flexibility in structuring possible future financings and acquisitions and in
meeting other needs which may arise. The additional classes or series, as well
as the Marketing Common Stock and Marketing Preferred Stock, will be available
for issuance without further action by Marketing's stockholders, unless such
action is required by applicable law or the rules of any stock exchange or
automated quotation system on which Marketing's securities may be listed or
traded. Although the Marketing Board has no intention at the present time of
doing so, it could authorize Marketing to issue a class or series that could,
depending upon the terms of such class or series, delay, defer or prevent
36
<PAGE> 43
a transaction or a change in control of Marketing that might involve a premium
price for holders of Marketing Common Stock or otherwise be in their best
interests.
LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
The MGCL permits a Maryland corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services or (b) active and deliberate dishonesty established by a
final judgment as being material to the cause of action. The Marketing Charter
contains such a provision which limits such liability to the maximum extent
permitted by Maryland law.
The Marketing Charter authorizes Marketing, to the maximum extent permitted
by Maryland law, to obligate itself to indemnify and to pay or reimburse
reasonable expenses in advance of final disposition of a proceeding to (a) any
present or former director or officer or (b) any individual who, while a
director of Marketing and at the request of Marketing, serves or has served
another corporation, partnership, joint venture, trust, employee benefit plan or
any other enterprise as a director, officer, partner or trustee of such
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise from and against any claim or liability to which such person may
become subject or which such person may incur by reason of his or her status as
a present or former director or officer of Marketing. The Marketing Bylaws
obligate Marketing, to the maximum extent permitted by Maryland law, to
indemnify and to pay or reimburse reasonable expenses in advance of final
disposition of a proceeding to (a) any present or former director or officer who
is made a party to the proceeding by reason of his or her service in that
capacity or (b) any individual who, while a director of Marketing and at the
request of Marketing, serves or has served another corporation, partnership,
joint venture, trust, employee benefit plan or any other enterprise as a
director, officer, partner or trustee of such corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise and who is made a
party to the proceeding by reason of his or her service in that capacity. The
Marketing Charter and Marketing Bylaws also permit Marketing to indemnify and
advance expenses to any person who served a predecessor of Marketing in any of
the capacities described above and to any employee or agent of Marketing or a
predecessor of Marketing.
The MGCL requires a corporation (unless its charter provides otherwise,
which Marketing's Charter does not) to indemnify a director or officer who has
been successful, on the merits or otherwise, in the defense of any proceeding to
which he or she is made a party by reason of his or her service in that
capacity. The MGCL permits a corporation to indemnify its present and former
directors and officers, among others, against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by them in connection with
any proceeding to which they may be made a party by reason of their service in
those or other capacities unless it is established that (a) the act or omission
of the director or officer was material to the matter giving rise to the
proceeding and (i) was committed in bad faith or (ii) was the result of active
and deliberate dishonesty, (b) the director or officer actually received an
improper personal benefit in money, property or services or (c) in the case of
any criminal proceeding, the director or officer had reasonable cause to believe
that the act or omission was unlawful. However, a Maryland corporation may not
indemnify a present or former director or officer for an adverse judgment in a
suit by or in the right of the corporation. In addition, the MGCL requires
Marketing, as a condition to advancing expenses, to obtain (a) a written
affirmation by the director or officer of his or her good faith belief that he
or she has met the standard of conduct necessary for indemnification by
Marketing as authorized by the Bylaws and (b) a written statement by or on his
or her behalf to repay the amount paid or reimbursed by Marketing if it shall
ultimately be determined that the standard of conduct was not met.
In addition, Marketing has entered or will enter into an indemnification
agreement ("Indemnification Agreement") with each of its directors. The
Indemnification Agreement provides for the prompt indemnification and
advancement of expenses, including attorneys' fees and other costs, to the
fullest extent permitted by law of a director against expenses and obligations
paid or incurred in connection with investigating, defending, being a witness or
participating in (including on appeal) any threatened, pending or completed
action, suit or
37
<PAGE> 44
proceeding related to the fact that such director is or was a director, officer,
partner, employee, agent, or fiduciary of Marketing or is or was serving at the
request of Marketing as a director, officer, partner, employee, trustee, agent
or fiduciary of another corporation, partnership, joint venture, employee
benefit plan trust or other enterprise, or by reason of anything done or not
done by a director in any such capacity.
The Indemnification Agreement also provides (i) that a director is
automatically entitled to indemnification for expenses to the extent the
director is successful in defending any indemnifiable claim whether on the
merits or otherwise, (ii) that Marketing has the burden of proving that a
director is not entitled to indemnification in any particular case and that
certain presumptions that may otherwise be drawn against a director seeking
indemnification in connection with the termination of actions or proceedings are
negated, except that the termination of an action or proceeding by conviction or
a plea of nolo contendere (or its equivalent) creates a presumption that the
director is not entitled to indemnification, (iii) a mechanism through which a
director may seek court relief in the event that the Marketing Board (or other
person or body appointed by the Marketing Board) determines that the director
would not be permitted to be indemnified under applicable law (and therefore is
not entitled to indemnification under the Indemnification Agreement), (iv) that
a director is entitled to indemnification against all expenses (including
attorneys' fees) incurred in seeking to collect an indemnification claim or
advancement of expenses from Marketing or incurred in seeking to recover under a
directors' and officers' liability insurance policy, (v) that after there has
been a change in control in Marketing, all Marketing determinations regarding a
right to indemnification, and the right to advancement of expenses, shall be
made by independent legal counsel, and (vi) that prior to a change in control of
Marketing, a director shall not be entitled to indemnification pursuant to the
Indemnification Agreement in connection with an action, suit or proceeding
initiated by the director against Marketing, or its directors or officers unless
Marketing joins in or consents to the action, suit or proceeding, except as
provided in Section 3 of the Indemnification Agreement.
Directors' rights under the Indemnification Agreement are not exclusive of
any other rights they may have under Maryland law, directors' or officers'
liability insurance, the Marketing Bylaws or otherwise. However, the
Indemnification Agreement does prevent double payment.
The Indemnification Agreement, although not requiring the maintenance of
directors' and officers' liability insurance, does require that the directors be
provided with maximum coverage reasonably economically available if there is
such a policy. Finally, the Indemnification Agreement provides that, if
Marketing pays a director pursuant to the Indemnification Agreement, Marketing
will be subrogated to the director's rights to recover from third parties.
ADDITIONAL INFORMATION
Marketing has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form 10 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") with respect to the Marketing
Common Stock described herein. This Information Statement does not contain all
of the information set forth in the Registration Statement and the exhibits and
schedules thereto. Further information may be obtained from the Registration
Statement and such exhibits and schedules. Copies of these documents may be
inspected at and obtained at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Regional
Offices of the Commission at 7 World Trade Center, Suite 1300, New York, New
York 10048 and at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Such reports and other documents may be obtained from the web site that the
Commission maintains at http://www.sec.gov. Copies of such information can also
be obtained by mail from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Application has
been made to list the Marketing Common Stock on the NYSE, subject to official
notice of issuance, under the symbol "GPM." Reports and other information
concerning Marketing Common Stock can also be inspected at the offices of the
NYSE, 20 Broad Street, New York, New York 10005.
Following the Distribution, Marketing will be required to comply with the
reporting requirements of the Exchange Act and will file annual, quarterly and
other reports with the Commission. Additionally, Marketing
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<PAGE> 45
will be subject to the proxy solicitation requirements of the Exchange Act and
will furnish annual reports containing audited financial statements to its
stockholders in connection with its annual meetings of stockholders.
No person is authorized to give any information or to make any
representations other than those contained in this Information Statement. Any
other information or representations given or made must not be relied upon as
having been authorized. This Information Statement does not constitute an offer
to sell or a solicitation of an offer to buy any securities. The delivery of
this Information Statement must not under any circumstances be construed as an
implication that there has been no change in the affairs of Marketing subsequent
to the date of this Information Statement.
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<PAGE> 46
GETTY PETROLEUM MARKETING INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS:
REPORT OF INDEPENDENT ACCOUNTANTS.................................................... F-2
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Operations for the fiscal years ended January 31, 1996,
1995 and 1994................................................................... F-3
Consolidated Balance Sheets as of January 31, 1996 and 1995....................... F-4
Consolidated Statements of Cash Flows for the fiscal years ended January 31, 1996,
1995 and 1994................................................................... F-5
Notes to Consolidated Financial Statements........................................ F-6
UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Consolidated Statements of Operations for the nine months ended October 31, 1996
and 1995......................................................................... F-14
Consolidated Balance Sheet as of October 31, 1996................................. F-15
Consolidated Statements of Cash Flows for the nine months ended October 31, 1996
and 1995......................................................................... F-16
Notes to Unaudited Consolidated Interim Financial Statements...................... F-17
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS:
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION............................... F-20
Pro Forma Consolidated Statements of Operations for the fiscal year ended January
31, 1996 and for the nine months ended October 31, 1996.......................... F-21
Notes to Unaudited Pro Forma Consolidated Statements of Operations................ F-22
Pro Forma Consolidated Balance Sheet as of October 31, 1996....................... F-23
Notes to Unaudited Pro Forma Consolidated Balance Sheet........................... F-24
</TABLE>
F-1
<PAGE> 47
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of Getty Petroleum Marketing Inc.:
We have audited the accompanying consolidated balance sheets of GETTY
PETROLEUM MARKETING INC. and SUBSIDIARIES as of January 31, 1996 and 1995, and
the related consolidated statements of operations and cash flows for each of the
three years in the period ended January 31, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Getty Petroleum
Marketing Inc. and Subsidiaries as of January 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended January 31, 1996, in conformity with generally
accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, the
Company changed its method of accounting for the impairment of long-lived assets
in fiscal 1996.
Coopers & Lybrand L.L.P.
New York, New York
November 6, 1996, except for
Notes 9 and 12, as to which
the dates are December 13, 1996
and January 13, 1997, respectively.
F-2
<PAGE> 48
GETTY PETROLEUM MARKETING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JANUARY 31,
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Net sales..................................................... $758,887 $723,875 $747,667
Rental income................................................. 32,025 29,860 28,443
Other income.................................................. 282 -- 175
-------- -------- --------
791,194 753,735 776,285
-------- -------- --------
Cost of sales (excluding depreciation and amortization)....... 750,680 721,354 738,261
Selling, general and administrative expenses.................. 20,702 22,588 23,262
Restructuring charges......................................... -- 1,846 --
Interest expense.............................................. 388 285 226
Depreciation and amortization................................. 13,099 11,640 11,718
-------- -------- --------
784,869 757,713 773,467
-------- -------- --------
Earnings (loss) before provision (credit) for income taxes and
cumulative effect of accounting change...................... 6,325 (3,978) 2,818
Provision (credit) for income taxes........................... 2,379 (1,544) 1,000
-------- -------- --------
Earnings (loss) before cumulative effect of accounting
change...................................................... 3,946 (2,434) 1,818
Cumulative effect of accounting change........................ (282) -- --
-------- -------- --------
Net earnings (loss)........................................... $ 3,664 $ (2,434) $ 1,818
======== ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 49
GETTY PETROLEUM MARKETING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
JANUARY 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents............................................... $ 676 $ 2,449
Accounts receivable, less allowance
for doubtful accounts of $1,225
in 1996 and $1,336 in 1995...................................... 12,194 14,688
Inventories........................................................ 19,917 9,985
Deferred income taxes.............................................. 2,220 2,188
Prepaid expenses and other
current assets.................................................. 2,827 2,943
-------- --------
Total current assets....................................... 37,834 32,253
Property and equipment, at cost, less
accumulated depreciation and amortization.......................... 84,116 82,227
Other assets......................................................... 2,548 2,617
-------- --------
TOTAL ASSETS............................................... $124,498 $117,097
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................... $ 23,378 $ 36,194
Accrued expenses................................................... 9,265 11,023
Gasoline taxes payable............................................. 13,914 8,257
-------- --------
Total current liabilities.................................. 46,557 55,474
Deferred income taxes................................................ 13,789 11,500
Other, principally deposits.......................................... 13,841 13,062
Commitments and contingencies (Notes 4 and 6)
Stockholders' equity................................................. 50,311 37,061
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................. $124,498 $117,097
======== ========
</TABLE>
See accompanying notes.
F-4
<PAGE> 50
GETTY PETROLEUM MARKETING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JANUARY 31,
----------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss)...................................... $ 3,664 $ (2,434) $ 1,818
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Cumulative effect of accounting change................. 282 -- --
Depreciation and amortization.......................... 13,099 11,640 11,718
Deferred income taxes.................................. 2,257 659 1,804
(Gain) loss on dispositions of property and
equipment........................................... (12) 235 79
Changes in assets and liabilities:
Accounts receivable.................................... 2,494 1,437 2,789
Inventories............................................ (9,932) (1,156) (485)
Prepaid expenses and other current assets.............. 25 (40) 725
Other assets........................................... (46) 278 198
Accounts payable, accrued expenses and
gasoline taxes payable.............................. (8,917) 8,089 (5,722)
Other, principally deposits............................ 779 1,027 866
-------- -------- --------
Net cash provided by operating activities........... 3,693 19,735 13,790
-------- -------- --------
Cash flows from investing activities:
Capital expenditures................................... (15,858) (16,787) (14,306)
Proceeds from dispositions of equipment................ 806 500 365
-------- -------- --------
Net cash used in investing activities............... (15,052) (16,287) (13,941)
-------- -------- --------
Cash flows from financing activities:
Net cash transferred from (to) Getty................... 9,586 (2,496) 362
-------- -------- --------
Net cash provided by (used in) financing
activities........................................ 9,586 (2,496) 362
-------- -------- --------
Net increase (decrease) in cash and equivalents.......... (1,773) 952 211
Cash and equivalents at beginning of year................ 2,449 1,497 1,286
-------- -------- --------
Cash and equivalents at end of year...................... $ 676 $ 2,449 $ 1,497
======== ======== ========
Supplemental disclosure of cash flow information
Cash paid during the year for interest................. $ 388 $ 285 $ 226
</TABLE>
See accompanying notes.
F-5
<PAGE> 51
GETTY PETROLEUM MARKETING INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Getty Petroleum Marketing Inc., a Maryland corporation ("Marketing"), was
formed on October 1, 1996 as a wholly-owned subsidiary of Getty Petroleum Corp.
("Getty"). Getty plans to separate its petroleum marketing business from its
real estate business at the close of business on January 31, 1997 with each
business to be conducted by a separate, publicly held corporation. In order to
effect the separation of these businesses, Getty will transfer to Marketing the
assets and liabilities of the petroleum marketing business and the New York
Mid-Hudson Valley home heating oil business previously conducted by a subsidiary
of Getty, and distribute all of the common shares of Marketing to the
stockholders of Getty (the "Distribution"). The Distribution is expected to be
at the rate of one share of common stock of Marketing (the "Marketing Common
Stock") for each share of Getty common stock for stockholders of record on
January 31, 1997. Getty will retain and continue to own and operate the real
estate business and the Pennsylvania and Maryland home heating oil business
previously conducted by another subsidiary. After the Distribution, Getty will
change its name to Getty Realty Corp. ("Realty" or "Getty").
The consolidated financial statements of Marketing contained herein have
been prepared on the basis that the assets and liabilities of the petroleum
marketing business were transferred using historical carrying values as recorded
by Getty, and Marketing's results of operations and cash flows were derived from
Getty's historical financial statements. Marketing's results of operations
include allocations of certain selling, general and administrative expenses of
Getty based on a number of factors, including number of personnel, square
footage of office space and utilization of data processing. Selling, general and
administrative expenses allocated to Marketing from Getty were $18,270,000,
$19,824,000 and $20,656,000 for the fiscal years ended 1996, 1995 and 1994,
respectively. Management believes these allocations to be reasonable. The
financial information is not necessarily indicative of the financial results
that would have occurred had Marketing been operated as a separate, stand-alone
entity during the reporting periods nor is it necessarily indicative of future
results. However, Management believes that these allocated amounts approximate
what the expense would have been on a stand-alone basis and that any additional
costs, excluding additional rent associated with the Master Lease (see Note 4),
would have been immaterial.
Getty uses a centralized approach to cash management. As a result, cash and
equivalents (other than actual cash on hand) were not allocated to Marketing in
the consolidated financial statements. However, under the Distribution Agreement
(as defined below), Marketing will receive cash balances from Getty, as of the
close of business on the date of the Distribution, in an amount sufficient to
provide Marketing with net working capital of $1.1 million.
Marketing's results of operations in future periods will reflect certain
expenses not incurred in prior periods associated with operating and reporting
as a separate, publicly held company. Such costs include environmental expenses
which, in the historical periods, have been predominantly attributable to the
replacement or upgrading of USTs (as defined below), which has been the
responsibility of Getty. Getty has agreed to pay all costs relating to, and to
indemnify Marketing for, all scheduled pre-closing environmental liabilities and
obligations, all scheduled future upgrades (the "Upgrades") necessary to cause
underground storage tanks (such tanks, including related piping, underground
pumps, wiring and monitoring devices, the "USTs") to conform to the 1998 federal
standards for USTs (the "1998 Standards"), and all environmental liabilities and
obligations arising out of discharges with respect to properties containing USTs
that have not been upgraded to meet the 1998 Standards that are discovered prior
to the date such USTs are upgraded to meet the 1998 Standards, with Marketing
being responsible for and indemnifying Getty with respect to all other
environmental obligations and liabilities. No amounts have been included for
these other environmental obligations and liabilities as they are not currently
ascertainable, since Marketing cannot predict the number or the magnitude of
discharges or releases from its USTs that may be discovered in the future or the
cost of remediation relating thereto. However, future environmental expenses of
Marketing are expected to be significantly lower than amounts recorded by Getty
($14.3 million, $11.8 million and $9.7 million for the years ended January 31,
1996, 1995 and 1994, respectively) since USTs have been or will be upgraded at
Getty's expense by December 22, 1998.
F-6
<PAGE> 52
As part of the separation of the petroleum marketing business from the real
estate business, Marketing and Realty have entered into various agreements which
address the allocation of assets and liabilities between them and govern future
relationships, including a Reorganization and Distribution Agreement (the
"Distribution Agreement"), a Master Lease Agreement, a Tax Sharing Agreement, a
Services Agreement and a Trademark License Agreement.
Getty and Marketing have entered into a Services Agreement (the "Services
Agreement"), under the terms of which Getty and Marketing will share the
services of certain employees, Marketing will provide certain administrative and
technical services to Getty and Getty will provide certain limited services to
Marketing. Marketing estimates that the net fees to be paid by Getty to
Marketing for services performed (after deducting the fees paid by Marketing to
Getty for services provided by Getty) will initially be approximately $80,000
per month, which amount takes into account Marketing's additional costs related
to providing such services, and will decline as the services performed decrease.
Getty presently expects that most of such services will be provided by Marketing
for approximately one year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation: The consolidated financial statements include the accounts
of Marketing and its wholly-owned subsidiaries. Marketing is principally engaged
in the marketing and distribution of petroleum products in 12 Northeastern and
Mid-Atlantic states. All significant intercompany accounts and transactions have
been eliminated.
Use of Estimates: The 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 results could differ from those estimates.
Cash and Equivalents: Marketing considers highly liquid investments
purchased with an original maturity of three months or less to be cash
equivalents.
Inventories: Inventories, primarily finished petroleum products, are
principally accounted for under the lower of last-in, first-out ("LIFO") cost or
market. Marketing enters into product exchange agreements with various parties
to improve its supply logistics and reduce its delivery costs. Net product
exchange positions with other companies are reflected in inventory and are
generally immaterial. Marketing may take positions in the futures market as part
of its overall purchasing strategy in order to reduce the risk associated with
price fluctuations. Gains and losses on futures contracts are included as a part
of product costs and have been immaterial for each of the three years in the
period ended January 31, 1996. As of January 31, 1996, outstanding futures
contracts were immaterial.
Property and Equipment: Expenditures for renewals and betterments are
capitalized; maintenance and repairs are charged to income when incurred. When
fixed assets are sold or retired, the cost and related accumulated depreciation
and amortization are eliminated from the respective accounts and any gain or
loss is credited or charged to income.
Depreciation and Amortization: Depreciation of fixed assets is computed on
the straight-line method based upon the estimated useful lives of the assets.
Leasehold improvements are amortized on the straight-line method over the
shorter of the term of the lease or the useful life of the related asset.
Environmental Costs: The estimated future costs for known environmental
remediation requirements are accrued when it is probable that a liability has
been incurred and the amount of remediation costs can be reasonably estimated.
Income Taxes: Deferred income taxes are provided for the effect of items
which are reported for income tax purposes in years different from that in which
they are recorded for financial statement purposes.
Revenue Recognition: Revenue is recognized from sales when product
ownership is transferred to the customer and from rentals as earned.
Accounting Changes: In fiscal 1996, Marketing adopted Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" and has
reported the cumulative effect of the change in accounting principle as an
after-tax
F-7
<PAGE> 53
charge to earnings of $282,000 in the consolidated statement of operations
relating to assets held for disposal. In addition, Marketing recorded a pre-tax
charge of $267,000 relating to operating assets, which is included in
depreciation and amortization expense.
3. INVENTORIES
As of January 31, 1996, 1995 and 1994, the carrying value of Marketing's
LIFO inventories approximated the first-in, first-out ("FIFO") method or
replacement cost.
4. LEASES
Marketing and Realty have entered into a Master Lease Agreement (the
"Master Lease") under which 1,037 retail outlets and 10 terminal facilities (the
"Properties") are leased or subleased by Realty as the lessor to Marketing as
the lessee. The Properties will be used for gasoline sales, convenience store
uses and other complementary or related lawful uses in conjunction with the sale
of petroleum products and convenience store items, except when the provisions of
any underlying lease are more restrictive. Marketing may sublet any property,
provided that Marketing remains fully responsible for a sublessee's performance
and, except in cases of economic abandonment (as described below), a sublease
for non-petroleum purposes will require Getty's consent. Except for certain
environmental obligations, and obligations pertaining to USTs, the Master Lease
will be a "triple-net" lease, with Marketing retaining responsibility for all
taxes, maintenance, repairs and insurance. For financial statement purposes,
such Master Lease has been recorded as an operating lease.
Rent for each of the Properties has been set using the fair market value of
each such Property. In addition, rent for each Property will increase at the end
of each five-year period by the net increase in the Consumer Price Index for all
items in the Northeast Region for such five-year period, such increase not to
exceed fifteen percent (15%). Rents for all Properties are payable in advance on
the first day of the month. The initial term of the Master Lease is (i) fifteen
years with respect to Properties owned in fee by Getty and leased to Marketing,
and Properties leased by Getty from Power Test Realty Company Limited
Partnership and subleased to Marketing and (ii) the length of time remaining
under underlying lease terms (which ranges from one to fifteen years under the
Master Lease) with respect to Properties leased by Getty from other third
parties and subleased to Marketing. The Master Lease terms for each category of
Properties described above also include four ten-year renewal options (or, with
respect to category (ii), such shorter period as the underlying lease may
provide), which may be exercised by Marketing with two years advance notice on
an individual property basis for all Properties then subject to the Master
Lease. For the subleased Properties, Getty has agreed to use reasonable efforts
to extend the underlying lease terms upon conditions acceptable to Marketing. In
the event that Marketing desires not to renew the sublease upon terms (including
any underlying lease term extension negotiated by Getty) available to it, Getty
may extend or renew the lease and sublease the property to a third party after
the end of Marketing's term.
The Master Lease provides that if during the lease term, Marketing
determines that any of the leased premises have become uneconomic or unsuitable
for their use as a service station or convenience store and has discontinued use
of the property or intends to discontinue use of the property as a service
station or convenience store within one year of the date of said determination,
Marketing shall have the right to sublet the property for any lawful use without
Getty's consent and, prior to the commencement of any such sublease term,
Marketing shall remove any USTs on the Property and thereafter perform all
requisite environmental investigations and/or remediations. Marketing shall have
the right of economic abandonment with respect to no more than ten properties
during any fiscal year of the lease term. Marketing shall have no right of
economic abandonment for the terminal premises and the premises subject to third
party leases.
Rent expense paid to Realty, which is included in cost of sales, amounted
to $55,130,000, $55,352,000 and $55,900,000 for the years ended January 31,
1996, 1995 and 1994, respectively. Future minimum annual
F-8
<PAGE> 54
rentals under noncancelable operating leases which have terms in excess of one
year as of January 31, 1996, payable to Realty, are as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31,
- --------------------------------------------------------------------------------
<S> <C>
1997............................................................................ $ 56,070
1998............................................................................ 56,859
1999............................................................................ 56,298
2000............................................................................ 55,651
2001............................................................................ 55,350
Thereafter...................................................................... 561,356
--------
$841,584
========
</TABLE>
Rent income received under subleases amounted to $32,025,000, $29,860,000
and $28,443,000 for the years ended January 31, 1996, 1995 and 1994,
respectively. Substantially all of these subleases have remaining terms which
range from one to three years. Although there is no assurance that these
subleases will be renewed, no significant difficulty has been experienced in
subleasing retail outlets.
5. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DEPRECIABLE
1996 1995 LIFE (YEARS)
-------- -------- ------------
<S> <C> <C> <C>
Equipment................................................ $153,005 $138,655 10 to 15
Motor vehicles........................................... 3,014 4,495 3 to 10
Furniture and fixtures................................... 1,566 1,537 10
Leasehold improvements................................... 1,197 1,158 See Note 2
-------- --------
158,782 145,845
Less, accumulated depreciation and amortization.......... 74,666 63,618
-------- --------
$ 84,116 $ 82,227
======== ========
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
The petroleum products industry is subject to numerous federal, state and
local laws and regulations. Although compliance with those laws and regulations
may have a significant impact on results of operations or liquidity for any
single period, Marketing believes that the costs related to such compliance have
not had and are not expected to have a material adverse effect on the
competitive or financial position of Marketing.
On September 16, 1996, Getty entered into an Agreement with the New York
State Department of Taxation and Finance (the "Department"), settling the
license revocation proceedings brought by the Department whereby Getty's
wholly-owned subsidiary Getty Terminals Corp.'s ("Getty Terminals") licenses and
permits for its three New York State terminals and its New York motor fuels and
diesel distributor licenses would be terminated. The revocation proceedings were
the result of the 1990 conviction of Getty Terminals for federal gasoline excise
tax evasion and conspiracy in 1985. Under the terms of the Agreement, Getty's
wholly-owned subsidiary, Kingston Oil Supply Corp. ("KOSCO") will be permitted
to assume all of the storage and distribution activities and operations now
performed by Getty Terminals in New York. KOSCO will have six months in which to
obtain new or amended licenses and permits and, upon the issuance thereof, Getty
Terminals will surrender its licenses and permits. KOSCO's Board of Directors
will consist of three persons, one of whom shall be an independent director, and
KOSCO shall provide periodic reports to the Department relating to New York tax
laws. The Agreement shall terminate on September 15, 1999. Under the terms of
the settlement, Getty and its subsidiaries are not required to pay any penalties
or fines. Prior to the Distribution, Marketing will become a party to the
Agreement. The implementation of the settlement will
F-9
<PAGE> 55
have no adverse impact on the business or financial condition of Marketing,
including the ability to sell motor fuels in New York or operate its New York
State terminals.
Marketing is subject to various legal proceedings in the ordinary course of
business. Such proceedings are not expected to have a material adverse effect on
Marketing's financial condition or results of operations. Pursuant to the
Distribution Agreement, Getty has agreed to defend all existing proceedings and
indemnify Marketing with respect thereto.
In order to minimize Marketing's exposure to credit risk associated with
financial instruments, Marketing places its temporary cash investments with high
credit quality institutions and, by policy, limits the amount invested with any
one institution other than the U.S. Government. Concentration of credit risk
with respect to trade receivables generally is limited due to the number of
customers comprising Marketing's customer base.
Marketing'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 by Marketing as well as the price of petroleum products sold
have fluctuated widely in the past. As a result of the historic volatility of
product margins and the fact that they are affected by numerous diverse factors,
it is impossible to predict future margin levels.
7. INCOME TAXES
Getty and Marketing have entered into a Tax Sharing Agreement that defines
the parties' rights and obligations with respect to filing of returns, payments,
deficiencies and refunds of federal, state and other income, franchise or motor
fuel taxes relating to Getty's business for tax years prior to and including the
Distribution and with respect to certain tax attributes of Getty after the
Distribution. In general, the Tax Sharing Agreement provides that Getty will be
responsible for all federal, state and local tax liabilities that relate to
periods (or portions thereof) ending on or prior to the Distribution. For
periods subsequent to the Distribution, Marketing will file its own tax returns.
The provision for income taxes is reflected in the consolidated financial
statements as if Marketing had been operating on a stand-alone basis.
Marketing's provision (credit) for income taxes is summarized as follows
(in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------ ------- -------
<S> <C> <C> <C>
Current...................................................... $ 122 $(2,203) $ (804)
Deferred..................................................... 2,257 659 1,804
------ ------- -------
Provision (credit) for income taxes.......................... $2,379 $(1,544) $ 1,000
====== ======= =======
</TABLE>
The tax effects of temporary differences which comprise the deferred tax
assets and liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Property and equipment............................................... $(13,889) $(11,636)
Accruals............................................................. 1,626 1,736
Inventories.......................................................... 694 588
-------- --------
Net deferred tax liabilities......................................... $(11,569) $ (9,312)
======== ========
</TABLE>
The following is a reconciliation of the expected statutory federal income
tax provision (credit) and the actual provision (credit) for income taxes (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------ ------- ------
<S> <C> <C> <C>
Expected provision (credit) at statutory federal income tax
rate........................................................ $2,214 $(1,392) $ 986
State and local income taxes, net of federal benefit.......... 183 (182) 138
Other......................................................... (18) 30 (124)
------ ------- ------
Provision (credit) for income taxes........................... $2,379 $(1,544) $1,000
====== ======= ======
</TABLE>
F-10
<PAGE> 56
8. STOCKHOLDERS' EQUITY
Marketing's authorized capital stock presently consists of 1,000 shares of
Marketing Common Stock, of which 1,000 shares are issued and outstanding and are
owned by Getty. Prior to the Distribution, Marketing's articles of incorporation
will be amended by the Marketing Board and by Getty, as sole stockholder of
Marketing. Under such amended articles, the total number of shares of all
classes of stock that Marketing will have authority to issue will be 40,000,000,
30,000,000 of which will be shares of Marketing Common Stock, $.01 par value per
share, and 10,000,000 of which will be shares of preferred stock, $.01 par value
per share. Based on the estimated number of shares of Getty Common Stock
outstanding as of the Distribution, approximately 12,675,000 shares of Marketing
Common Stock will be issued to stockholders of Getty. In addition, approximately
667,000 shares of Marketing Common Stock will be issued to the Marketing ESOP at
the time of the Distribution (See Note 9).
A summary of the changes in stockholders' equity for the three years ended
January 31, 1996 is as follows (in thousands):
<TABLE>
<S> <C>
Balance, February 1, 1993........................................................ $39,811
Net income....................................................................... 1,818
Net cash transferred from Getty.................................................. 362
-------
Balance, January 31, 1994........................................................ 41,991
Net loss......................................................................... (2,434)
Net cash transferred to Getty.................................................... (2,496)
-------
Balance, January 31, 1995........................................................ 37,061
Net income....................................................................... 3,664
Net cash transferred from Getty.................................................. 9,586
-------
Balance, January 31, 1996........................................................ $50,311
=======
</TABLE>
9. EMPLOYEE BENEFIT PLANS
Effective after the Distribution, Marketing will have a retirement and
profit sharing plan with deferred 401(k) savings plan provisions (the
"Retirement Plan") for non-union employees meeting certain service requirements
and a Supplemental Plan for executives. Under the terms of these plans, the
annual discretionary contributions to the plans are determined by the Board of
Directors. Under the Retirement Plan, employees may make voluntary contributions
and Marketing has elected to match an amount equal to 50% of such contributions
but in no event more than 3% of the employee's eligible compensation. Under the
Supplemental Plan, a participating executive may receive an amount equal to 10%
of his compensation, reduced by the amount of any contributions allocated to
such executive under the Retirement Plan. Contributions, net of forfeitures,
made by Getty under the comparable Getty retirement plan and supplemental plan
in respect of persons who will be Marketing employees approximated $569,000,
$606,000 and $622,000 for the years ended January 31, 1996, 1995 and 1994,
respectively. In addition, Marketing has contributed $346,000, $334,000 and
$283,000 to a union welfare plan for the years ended January 31, 1996, 1995 and
1994, respectively. Such amounts are included in the accompanying consolidated
statements of operations.
In connection with the Distribution, Marketing will establish a leveraged
Employee Stock Ownership Plan (the "Marketing ESOP") that will purchase newly
issued shares of Marketing Common Stock from Marketing equal to five percent of
the outstanding shares of Marketing. The Marketing ESOP will purchase such
newly-issued shares from Marketing using the proceeds of a loan to be made by
Marketing to the Marketing ESOP. The Marketing ESOP loan will be repaid over a
five-year period, and Marketing will contribute annually to the Marketing ESOP
the funds required to repay such loan. The principal amount of the Marketing
ESOP loan is expected to be equal to the number of shares purchased by the
Marketing ESOP (approximately 667,000) multiplied by the purchase price per
share (determined on the basis of the value of the Marketing Common Stock). It
is expected that the repayment of the Marketing ESOP loan will result in
projected allocations to participants' accounts of an aggregate of approximately
133,400 shares of Marketing Common Stock per year, allocated in proportion to
compensation. Marketing expects that the five percent of the outstanding stock
of Marketing purchased by the Marketing ESOP will be allocated to covered
employees over a five-year period. Commencing February 1, 1997, Marketing will
recognize a charge to operating results over a five-year period relating to the
Marketing ESOP. Such charge will be based on the value of the Marketing Common
Stock in the future and, as such, is not currently determinable.
F-11
<PAGE> 57
Immediately prior to the Distribution, each current holder of an option to
acquire shares of Getty Common Stock pursuant to Getty's 1985, 1988 and 1991
Stock Option Plans will receive, in exchange therefor, two separately
exercisable options: one to purchase shares of Getty Common Stock (a "Getty
Option") and one to purchase Marketing Common Stock (a "Marketing Option"), each
exercisable for the same number of shares and containing substantially
equivalent terms as the pre-Distribution option. The exercise price of each
Getty Option and Marketing Option (each, a "Replacement Option") will be set so
as to preserve the Aggregate Spread (as defined below) in value attributed to
the options currently held by such directors, officers and key employees. The
"Aggregate Spread" is an amount representing the difference between the exercise
price of an option and the price of a share of Getty Common Stock immediately
prior to the Distribution multiplied by the number of shares underlying such
option. Certain presently unexercisable options covering a total of 224,594
shares will become immediately exercisable at the date of the Distribution for
persons covered by certain "change of control" agreements. Accordingly,
Marketing will recognize a charge to operating results at the date of the
Distribution equal to the product of the number of such options and the
difference between their exercise price and the market price. Since the charge
will be based on the value of the Marketing Common Stock in the future, such
amount is not currently determinable.
The Marketing Stock Option Plan authorizes Marketing to grant options to
purchase shares of Marketing Common Stock. The aggregate number of shares of
Marketing Common Stock which may be made the subject of options under the
Marketing Stock Option Plan will not exceed 1,300,000 shares, subject to further
adjustment for stock dividends and stock splits, of which approximately
1,080,000 shares will be subject to issuance upon the exercise of Replacement
Options (as described above) and the balance will be available for future option
grants. Except with respect to certain of the Replacement Options, which will be
immediately exercisable, the Marketing Stock Option Plan provides that options
are exercisable starting one year from the date of grant, on a cumulative basis
at the annual rate of 25 percent of the total number of shares covered by the
option.
The following is a schedule of stock option prices and activity relating to
the Getty Petroleum Corp. Stock Option Plans for the three years ended January
31, 1996. Subsequent to the Distribution, the exercise price of each Getty
option and Marketing option will be set so as to preserve the Aggregate Spread
(as defined above) in value attributed to the options currently held by the
holders:
<TABLE>
<CAPTION>
1985 PLAN 1988 PLAN 1991 PLAN
----------------------- ----------------------- -----------------------
NUMBER GETTY STOCK NUMBER GETTY STOCK NUMBER GETTY STOCK
OF OPTION PRICE OF OPTION PRICE OF OPTION PRICE
SHARES PER SHARE SHARES PER SHARE SHARES PER SHARE
------- ------------- ------- ------------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at February 1,
1993.................... 207,159 $10.49-14.09 256,523 $11.12-18.62 214,275 $10.88-12.38
Granted................... 80,000 12.25-13.13
Exercised................. (9,833) 10.49 (2,500) 11.12 (1,250) 12.38
Cancelled................. (8,052) 10.49-14.09 (15,014) 11.12-18.62 (12,325) 10.88-12.38
------- ------------ ------- ------------ ------- ------------
Outstanding at January 31,
1994.................... 189,274 10.49-14.09 239,009 11.12-18.62 280,700 10.88-13.13
Granted................... 107,250 10.88
Exercised................. (1,245) 10.49-14.09 (250) 11.12 (125) 10.88
Cancelled................. (1,217) 14.09 (926) 17.12-18.62 (1,250) 10.88
------- ------------ ------- ------------ ------- ------------
Outstanding at January 31,
1995.................... 186,812 10.49-14.09 237,833 11.12-18.62 386,575 10.88-13.13
Granted................... 64,500 13.88 63,500 13.88
Exercised................. (2,500) 11.12 (5,500) 10.88
Cancelled................. (991) 10.49-14.09 (1,551) 11.12-18.62 (1,250) 10.88-12.38
------- ------------ ------- ------------ ------- ------------
Outstanding at January 31,
1996.................... 185,821 $10.49-14.09 298,282 $11.12-18.62 443,325 $10.88-13.88
======= ============ ======= ============ ======= ============
Exercisable at January 31,
1996.................... 185,821 $10.49-14.09 298,282* $11.12-18.62 390,997* $10.88-13.13
======= ============ ======= ============ ======= ============
Available for grant at
January 31, 1996........ -- 207 49,800
======= ======= =======
</TABLE>
- ---------------
* Includes options which become exercisable as of the date of the Distribution.
On December 13, 1996 additional options were granted for 151,400 shares with an
option price of $14.75 per share.
F-12
<PAGE> 58
10. QUARTERLY FINANCIAL DATA
The following is a summary of the quarterly results of operations for the
years ended January 31, 1996 and 1995 (unaudited as to quarterly information):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------- YEAR ENDED
FISCAL 1996: APRIL 30 JULY 31 OCTOBER 31 JANUARY 31 JANUARY 31
- ------------------------------------ -------- -------- ---------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues............................ $194,967 $187,796 $215,486 $192,945 $ 791,194
Gross profit (loss)(a).............. (1,789) 2,425 4,031 3,540 8,207
Earnings (loss) before income taxes
and cumulative effect of
accounting change................. (2,113) 1,756 3,535 3,147 6,325
Net earnings (loss)................. (1,600)(b) 1,101 2,200 1,963 3,664(b)
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------- YEAR ENDED
FISCAL 1995: APRIL 30 JULY 31 OCTOBER 31 JANUARY 31 JANUARY 31
- ------------------------------------ -------- -------- ---------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues............................ $170,136 $182,869 $198,240 $202,490 $ 753,735
Gross profit (loss)(a).............. (1,222) (8,084) 4,626 7,201 2,521
Earnings (loss) before income
taxes............................. (2,127) (8,992) 1,179 5,962 (3,978)
Net earnings (loss)................. (1,301) (5,502) 721 3,648 (2,434)
</TABLE>
- ---------------
(a) Gross profit (loss) is calculated as net sales (excluding rental and other
income) less cost of sales (excluding depreciation and amortization).
(b) Includes charge to earnings of $282 from the cumulative effect of adopting
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of."
11. RESTRUCTURING
During fiscal 1995, pre-tax charges of $1,846,000 were recorded to provide
for severance and other costs associated with restructuring Marketing's
organization and its operations. The restructuring charges included $1,171,000
for severance and related benefits resulting from a 6% reduction in the work
force, and $675,000 for other costs. Other costs include $203,000 related to
cancellation of computer equipment leases, $168,000 related to computer system
modifications, $141,000 related to the reduction of office space, $100,000
related to legal fees and $63,000 for other miscellaneous costs. Marketing's
consolidated balance sheets as of January 31, 1996 and 1995 included an accrual
of $326,000 and $1,048,000, respectively, relating to the restructuring. The
remaining accrual of $326,000 at January 31, 1996 relates to severance and
related benefits payable through October 1999.
12. SUBSEQUENT EVENT
In January 1997, Marketing obtained uncommitted lines of credit with two
banks in the aggregate amount of $50,000,000 through January 1998, which may be
utilized for working capital borrowings and letters of credit. Borrowings under
such lines of credit are unsecured and will bear interest at the applicable
bank's prime rate or, at Marketing's option, 1.1% above LIBOR.
F-13
<PAGE> 59
GETTY PETROLEUM MARKETING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED OCTOBER 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
Net sales............................................................ $617,168 $574,021
Rental income........................................................ 24,904 23,949
Other income......................................................... 153 279
-------- --------
642,225 598,249
-------- --------
Cost of sales (excluding depreciation and amortization).............. 619,930 569,354
Selling, general and administrative expenses......................... 15,403 15,846
Interest expense..................................................... 352 291
Depreciation and amortization........................................ 10,159 9,580
-------- --------
645,844 595,071
-------- --------
Earnings (loss) before provision (credit) for income taxes and
cumulative effect of accounting change............................. (3,619) 3,178
Provision (credit) for income taxes.................................. (1,527) 1,195
-------- --------
Earnings (loss) before cumulative effect of accounting change........ (2,092) 1,983
Cumulative effect of accounting change............................... -- (282)
-------- --------
Net earnings (loss).................................................. $ (2,092) $ 1,701
======== ========
</TABLE>
See accompanying notes.
F-14
<PAGE> 60
GETTY PETROLEUM MARKETING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
OCTOBER
31, 1996
--------
<S> <C>
ASSETS
Current assets:
Cash and equivalents.......................................................... $ 937
Accounts receivable, less allowance
for doubtful accounts of $1,302............................................ 13,559
Inventories................................................................... 20,275
Deferred income taxes......................................................... 1,657
Prepaid expenses and other
current assets............................................................. 2,674
--------
Total current assets.................................................. 39,102
Property and equipment, at cost, less
accumulated depreciation and amortization..................................... 87,614
Other assets.................................................................... 2,163
--------
TOTAL ASSETS.......................................................... $128,879
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................................................. $ 28,821
Accrued expenses.............................................................. 11,247
Gasoline taxes payable........................................................ 16,196
--------
Total current liabilities............................................. 56,264
Deferred income taxes........................................................... 14,125
Other, principally deposits..................................................... 14,463
Stockholders' equity............................................................ 44,027
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............................ $128,879
========
</TABLE>
See accompanying notes.
F-15
<PAGE> 61
GETTY PETROLEUM MARKETING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED
OCTOBER 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss).................................................. $ (2,092) $ 1,701
Adjustments to reconcile net earnings (loss) to net cash provided by
operating activities:
Cumulative effect of accounting change............................. -- 282
Depreciation and amortization...................................... 10,159 9,580
Deferred income taxes.............................................. 899 560
Gain on dispositions of property and equipment..................... (95) (61)
Changes in assets and liabilities:
Accounts receivable................................................ (1,365) 4,073
Inventories........................................................ (358) (8,556)
Prepaid expenses and other current assets.......................... 153 (294)
Other assets....................................................... 385 (55)
Accounts payable, accrued expenses and gasoline taxes payable...... 9,707 (4,821)
Other, principally deposits........................................ 622 598
-------- --------
Net cash provided by operating activities....................... 18,015 3,007
-------- --------
Cash flows from investing activities:
Capital expenditures............................................... (13,843) (12,753)
Proceeds from dispositions of equipment............................ 281 419
-------- --------
Net cash used in investing activities........................... (13,562) (12,334)
-------- --------
Cash flows from financing activities:
Net cash transferred from (to) Getty............................... (4,192) 8,047
-------- --------
Net cash provided by (used in) financing activities............. (4,192) 8,047
-------- --------
Net increase (decrease) in cash and equivalents...................... 261 (1,280)
Cash and equivalents at beginning of period.......................... 676 2,449
-------- --------
Cash and equivalents at end of period................................ $ 937 $ 1,169
======== ========
Supplemental disclosure of cash flow information
Cash paid during the year for interest............................. $ 352 $ 291
</TABLE>
See accompanying notes.
F-16
<PAGE> 62
GETTY PETROLEUM MARKETING INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The unaudited consolidated financial statements included herein have been
prepared by Getty Petroleum Marketing Inc. ("Marketing") on the same basis as
the audited financial statements, and include all adjustments (consisting of
normal recurring accruals) which are, in the opinion of management, necessary
for a fair presentation of the results of operations for the interim periods
ended October 31, 1996 and 1995, pursuant to the rules and regulations of the
Securities and Exchange Commission.
Marketing, a Maryland corporation, was formed on October 1, 1996 as a
wholly-owned subsidiary of Getty Petroleum Corp. ("Getty"). Getty plans to
separate its petroleum marketing business from its real estate business at the
close of business on January 31, 1997 with each business to be conducted by a
separate, publicly held corporation. In order to effect the separation of these
businesses, Getty will transfer to Marketing the assets and liabilities of the
petroleum marketing business and the New York Mid-Hudson Valley home heating oil
business previously conducted by a subsidiary of Getty, and distribute all of
the common shares of Marketing to the stockholders of Getty (the
"Distribution"). The Distribution is expected to be at the rate of one share of
common stock of Marketing (the "Marketing Common Stock") for each share of Getty
common stock (the "Getty Common Stock") for stockholders of record on January
31, 1997. Getty will retain and continue to own and operate the real estate
business and the Pennsylvania and Maryland home heating oil business previously
conducted by another subsidiary. After the Distribution, Getty will change its
name to Getty Realty Corp. ("Realty" or "Getty").
The consolidated financial statements of Marketing contained herein have
been prepared on the basis that the assets and liabilities of the petroleum
marketing business were transferred using historical carrying values as recorded
by Getty, and Marketing's results of operations and cash flows were derived from
Getty's historical financial statements. Marketing's results of operations
include allocations of certain selling, general and administrative expenses of
Getty based on a number of factors, including number of personnel, square
footage of office space and utilization of data processing. Selling, general and
administrative expenses allocated to Marketing from Getty were $13,640,000 and
$14,001,000 for the nine month periods ended October 31, 1996 and October 31,
1995, respectively. Management believes these allocations to be reasonable. The
financial information is not necessarily indicative of the financial results
that would have occurred had Marketing been operated as a separate, stand-alone
entity during the reporting period nor is it necessarily indicative of future
results. However, Management believes that these allocated amounts approximate
what the expense would have been on a stand-alone basis and that any additional
costs, excluding additional rent associated with the Master Lease, would have
been immaterial.
Getty uses a centralized approach to cash management. As a result, cash and
equivalents (other than actual cash on hand) were not allocated to Marketing in
the consolidated financial statements. However, under the Distribution
Agreement, Marketing will receive cash balances from Getty, as of the close of
business on the date of the Distribution, in an amount sufficient to provide
Marketing with net working capital of $1.1 million.
Marketing's results of operations in future periods will reflect certain
expenses associated with operating and reporting as a separate, publicly held
company which were not incurred in prior periods. Such costs include
environmental expenses which, in the historical periods, have been predominantly
attributable to the replacement or upgrading of USTs (as defined below), which
has been the responsibility of Getty. Getty has agreed to pay all costs relating
to, and to indemnify Marketing for, all scheduled pre-closing environmental
liabilities and obligations, all scheduled future upgrades necessary to cause
underground storage tanks (such tanks, including related piping, underground
pumps, wiring and monitoring devices, the "USTs") to conform to the 1998 federal
standards for USTs (the "1998 Standards"), and all environmental liabilities and
obligations arising out of discharges with respect to properties containing USTs
that have not been upgraded to meet the 1998 Standards that are discovered prior
to the date such USTs are upgraded to meet the 1998 Standards, with Marketing
being responsible for and indemnifying Getty with respect to all other
environmental obligations and liabilities. No amounts have been included for
these other environmental obligations and
F-17
<PAGE> 63
liabilities as they are not currently ascertainable, since Marketing cannot
predict the number or the magnitude of discharges or releases from its USTs that
may be discovered in the future or the cost of remediation relating thereto.
However, future environmental expenses of Marketing are expected to be
significantly lower than amounts recorded by Getty ($6.8 million and $11.2
million for the nine months ended October 31, 1996 and 1995, respectively, which
amounts were net of $6.1 million and $1.1 million for the nine months ended
October 31, 1996 and 1995, respectively, for recoveries against certain state
underground tank funds) since USTs have been or will be upgraded at Getty's
expense by December 22, 1998.
The results of operations for the interim periods ended October 31, 1996
and 1995 are not necessarily indicative of the results to be expected for the
full fiscal years.
2. ACCOUNTING CHANGE
The consolidated statement of operations for the nine months ended October
31, 1995 includes an after-tax charge to earnings of $282,000 for the cumulative
effect of adopting, at the end of that fiscal year, Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" relating to assets held for
disposal.
3. INVENTORIES
Inventories, primarily finished petroleum products, are principally
accounted for under the lower of last-in, first-out ("LIFO") cost or market. Due
to changes in product costs during the nine months ended October 31, 1996,
Marketing recorded a LIFO inventory reserve of $3,955,000, which increased cost
of sales and decreased pre-tax income by such amount. During the prior year's
comparable period, there was no LIFO inventory charge.
4. STOCKHOLDERS' EQUITY
A summary of the changes in stockholders' equity for the nine months ended
October 31, 1996 is as follows (in thousands):
<TABLE>
<S> <C>
Balance, February 1, 1996.................................. $50,311
Net loss................................................... (2,092)
Net cash transferred to Getty.............................. (4,192)
-------
Balance, October 31, 1996.................................. $44,027
=======
</TABLE>
5. EMPLOYEE BENEFIT PLANS
In connection with the Distribution, Marketing will establish a leveraged
Employee Stock Ownership Plan (the "Marketing ESOP") that will purchase newly
issued shares of Marketing Common Stock from Marketing equal to five percent of
the outstanding shares of Marketing. The Marketing ESOP will purchase such
newly-issued shares from Marketing using the proceeds of a loan to be made by
Marketing to the Marketing ESOP. The Marketing ESOP loan will be repaid over a
five-year period, and Marketing will contribute annually to the Marketing ESOP
the funds required to repay such loan. The principal amount of the Marketing
ESOP loan is expected to be equal to the number of shares purchased by the
Marketing ESOP (approximately 667,000) multiplied by the purchase price per
share (determined on the basis of the value of the Marketing common stock). It
is expected that the repayment of the Marketing ESOP loan will result in
projected allocations to participants' accounts of an aggregate of approximately
133,400 shares of Marketing Common Stock per year, allocated in proportion to
compensation. Marketing expects that the five percent of the outstanding stock
of Marketing purchased by the Marketing ESOP will be allocated to covered
employees over a five-year period. Commencing February 1, 1997, Marketing will
recognize a charge to operating results over a five-year period relating to the
Marketing ESOP. Such charge will be based on the value of the Marketing Common
Stock in the future and, as such, is not currently determinable.
Immediately prior to the Distribution, each current holder of an option to
acquire shares of Getty Common Stock pursuant to Getty's 1985, 1988 and 1991
Stock Option Plans will receive, in exchange therefor, two separately
exercisable options: one to purchase shares of Getty Common Stock (a "Getty
F-18
<PAGE> 64
Option") and one to purchase Marketing Common Stock (a "Marketing Option"), each
exercisable for the same number of shares and containing substantially
equivalent terms as the pre-Distribution option. The exercise price of each
Getty Option and Marketing Option will be set so as to preserve the Aggregate
Spread (as defined below) in value attributed to the options currently held by
such directors, officers and key employees. The "Aggregate Spread" is an amount
representing the difference between the exercise price of an option and the
price of a share of Getty Common Stock immediately prior to the Distribution
multiplied by the number of shares underlying such option. Certain presently
unexercisable options covering a total of 224,594 shares will become immediately
exercisable at the date of the Distribution for persons covered by certain
"change of control" agreements. Accordingly, Marketing will recognize a charge
to operating results at the date of the Distribution equal to the product of the
number of such options and the difference between their exercise price and the
market price. Since the charge will be based on the value of the Marketing
Common Stock in the future, such amount is not currently determinable.
F-19
<PAGE> 65
GETTY PETROLEUM MARKETING INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
Getty Petroleum Marketing Inc., a Maryland corporation ("Marketing"), was
formed on October 1, 1996 as a wholly-owned subsidiary of Getty Petroleum Corp.
("Getty"). Getty plans to separate its petroleum marketing business from its
real estate business at the close of business on January 31, 1997 with each
business to be conducted by a separate, publicly held corporation. In order to
effect the separation of these businesses, Getty will transfer to Marketing the
assets and liabilities of the petroleum marketing business and the New York
Mid-Hudson Valley home heating oil business previously conducted by a subsidiary
of Getty, and distribute all of the common shares of Marketing to the
stockholders of Getty (the "Distribution"). The Distribution is expected to be
at the rate of one share of common stock of Marketing (the "Marketing Common
Stock") for each share of Getty common stock for stockholders of record on
January 31, 1997. Getty will retain and continue to own and operate the real
estate business and the Pennsylvania and Maryland home heating oil business
previously conducted by another subsidiary. After the Distribution, Getty will
change its name to Getty Realty Corp.
The historical consolidated financial statements of Marketing reflect
periods during which Marketing did not operate as a separate, publicly held
company. The historical consolidated financial statements of Marketing contained
herein have been prepared on the basis that the assets and liabilities of the
petroleum marketing and related business were transferred using historical
carrying values as recorded by Getty and present Marketing's financial position
and results of operations as derived from Getty's historical financial
statements. Therefore, such historical consolidated financial statements may not
reflect the consolidated results of operations or financial position that would
have existed had Marketing operated as a separate, publicly held company.
The following unaudited pro forma consolidated financial statements of
Marketing contain adjustments to the historical consolidated balance sheet as of
October 31, 1996 and the historical consolidated statements of operations for
the fiscal year ended January 31, 1996 and for the nine months ended October 31,
1996 as if the Distribution had occurred on October 31, 1996 for purposes of the
pro forma consolidated balance sheet and on February 1, 1995 for purposes of the
pro forma consolidated statements of operations.
THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS ARE PROVIDED FOR
COMPARATIVE PURPOSES ONLY AND DO NOT PURPORT TO BE INDICATIVE OF THE RESULTS
WHICH ACTUALLY WOULD HAVE BEEN OBTAINED IF THE ABOVE-MENTIONED TRANSACTIONS HAD
BEEN EFFECTED ON THE DATES INDICATED OR OF THE RESULTS WHICH MAY BE OBTAINED IN
THE FUTURE. THE INFORMATION PROVIDED IN THE UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS OF MARKETING
AND THE NOTES THERETO CONTAINED ELSEWHERE IN THIS INFORMATION STATEMENT. THE
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS DO NOT CONTAIN ALL
DISCLOSURES REQUIRED BY GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
F-20
<PAGE> 66
GETTY PETROLEUM MARKETING INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY 31, 1996 NINE MONTHS ENDED OCTOBER 31, 1996
--------------------------------------- ---------------------------------------
HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- --------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales........................ $ 758,887 $ -- $758,887 $ 617,168 $ -- $617,168
Rental income.................... 32,025 -- 32,025 24,904 -- 24,904
Other income..................... 282 -- 282 153 -- 153
-------- ------- -------- -------- ----- --------
791,194 -- 791,194 642,225 -- 642,225
-------- ------- -------- -------- ----- --------
Cost of sales (excluding
depreciation and
amortization).................. 750,680 789(a) 751,469 619,930 592(a) 620,522
Selling, general and
administrative expenses........ 20,702 300(b) 21,002 15,403 225(b) 15,628
Interest expense................. 388 -- 388 352 -- 352
Depreciation and amortization.... 13,099 -- 13,099 10,159 -- 10,159
-------- ------- -------- -------- ----- --------
784,869 1,089 785,958 645,844 817 646,661
-------- ------- -------- -------- ----- --------
Income (loss) before provision
(credit) for income taxes and
cumulative effect of accounting
change......................... 6,325 (1,089) 5,236 (3,619) (817) (4,436)
Provision (credit) for income
taxes.......................... 2,379 (436)(c) 1,943 (1,527) (327)(c) (1,854)
-------- ------- -------- -------- ----- --------
Net earnings (loss) before
cumulative effect of accounting
change......................... 3,946 (653) 3,293 (2,092) (490) (2,582)
Cumulative effect of accounting
change......................... (282) -- (282) -- -- --
-------- ------- -------- -------- ----- --------
Net earnings (loss).............. $ 3,664 $ (653) $ 3,011 $ (2,092) $(490) $ (2,582)
======== ======= ======== ======== ===== ========
Per share data:
Net earnings (loss) before
cumulative effect of
accounting change............ $ 0.25 $ (0.19)
Cumulative effect of accounting
change....................... (0.02) --
-------- --------
Net earnings (loss) per
share........................ $ 0.23 $ (0.19)
======== ========
Weighted average shares
outstanding.................. 13,315 13,340
======== ========
</TABLE>
See accompanying notes to unaudited pro forma consolidated statements of
operations.
F-21
<PAGE> 67
GETTY PETROLEUM MARKETING INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
The unaudited pro forma consolidated statements of operations have been
derived from the historical financial statements of Marketing and reflect
certain pro forma adjustments as if the Distribution had been effected as of
February 1, 1995.
(a) Represents additional rent paid to Getty by Marketing as provided for
in the Master Lease Agreement between the parties.
(b) Selling, general and administrative expenses include additional
administrative costs Marketing will incur as a result of operating as a
separate, publicly held company.
(c) Represents the adjustment to the tax provision (benefit) due to the net
effect of the pro forma adjustments described above at an effective tax rate of
40%.
Getty and Marketing have entered into a Services Agreement (the "Services
Agreement"), under which Getty and Marketing will share the services of certain
employees. Marketing will provide certain administrative and technical services
to Getty and Getty will provide certain limited services to Marketing. Marketing
estimates that the net fees to be paid by Getty to Marketing for services
performed (after deducting the fees paid by Marketing to Getty for services
provided by Getty) will initially be approximately $80,000 per month, which
amount takes into account Marketing's additional costs related to providing such
services, and will decline as the services performed decrease. It is estimated
that the difference between the net fees and additional costs will not have a
material impact on Marketing's results of operations. Getty presently expects
that most of such services will be provided by Marketing for approximately one
year, and accordingly, have not been included in the unaudited pro forma
consolidated statements of operations.
In connection with the Distribution, Marketing will establish a leveraged
Employee Stock Ownership Plan (the "Marketing ESOP") that will purchase newly
issued shares of Marketing Common Stock from Marketing equal to five percent of
the outstanding shares of Marketing. Commencing February 1, 1997, Marketing will
recognize a charge to operating results relating to the Marketing ESOP over a
five-year period. Such charge will be based on the value of the Marketing Common
Stock in the future and, as such, is not currently determinable and, therefore,
is not reflected in the unaudited pro forma consolidated statements of
operations. The pro forma weighted average shares outstanding have been
increased by 667,000 to reflect the issuance of such shares.
A "change in control" will be deemed to have occurred as a result of the
Distribution pursuant to certain agreements entered into by Getty in December
1994 with its non-director officers and certain key employees. Under the
agreements, all Getty stock options granted to such officers or key employees
would immediately vest and would be exercisable for three years for such
officers and a shorter period for such key employees. The agreements made
provision to preserve the economic value of the options. Accordingly, for
certain of such options, Marketing will recognize a charge to operating results
at the Distribution Date, representing the difference between the exercise price
and the market price multiplied by the number of such options. Since the charge
will be based on the value of the Marketing Common Stock in the future, such
amount is not currently determinable and has not been included in the unaudited
pro forma consolidated statements of operations.
Marketing's results of operations in future periods will reflect certain
expenses not incurred in prior periods associated with operating and reporting
as a separate, publicly held company. Such costs include environmental expenses
which, in the historical periods, have been predominantly attributable to the
replacement or upgrading of USTs (as defined below), which has been the
responsibility of Getty. Getty has agreed to pay all costs relating to, and to
indemnify Marketing for, all scheduled pre-closing environmental liabilities and
obligations, all scheduled future upgrades (the "Upgrades") necessary to cause
underground storage tanks (such tanks, including related piping, underground
pumps, wiring and monitoring devices, the "USTs") to conform to the 1998 federal
standards for USTs (the "1998 Standards"), and all environmental liabilities and
obligations arising out of discharges with respect to properties containing USTs
that have not been upgraded to meet the 1998 Standards that are discovered prior
to the date such USTs are upgraded to meet the 1998 Standards, with Marketing
being responsible for and indemnifying Getty with respect to all other
environmental obligations and liabilities. No amounts have been included in the
unaudited pro forma consolidated financial statements for these other
environmental obligations and liabilities as they are not currently
ascertainable, since Marketing cannot predict the number or the magnitude of
discharges or releases from its USTs that may be discovered in the future or the
cost of remediation relating thereto.
F-22
<PAGE> 68
GETTY PETROLEUM MARKETING INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF OCTOBER 31, 1996
(in thousands)
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents...................................... $ 937 $ 18,262(a) $ 19,199
Accounts receivable, net.................................. 13,559 -- 13,559
Inventories............................................... 20,275 -- 20,275
Deferred income taxes..................................... 1,657 -- 1,657
Prepaid expenses and other current assets................. 2,674 -- 2,674
-------- -------- --------
Total current assets................................... 39,102 18,262 57,364
Property and equipment, net................................. 87,614 -- 87,614
Other assets................................................ 2,163 -- 2,163
-------- -------- --------
TOTAL ASSETS........................................... $ 128,879 $ 18,262 $ 147,141
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 28,821 $ -- $ 28,821
Accrued expenses.......................................... 11,247 -- 11,247
Gasoline taxes payable.................................... 16,196 -- 16,196
-------- -------- --------
Total current liabilities.............................. 56,264 -- 56,264
Deferred income taxes....................................... 14,125 -- 14,125
Other, principally deposits................................. 14,463 -- 14,463
Stockholders' equity........................................ 44,027 18,262(a) 62,289
-------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............. $ 128,879 $ 18,262 $ 147,141
======== ======== ========
</TABLE>
See accompanying notes to unaudited pro forma consolidated balance sheet.
F-23
<PAGE> 69
GETTY PETROLEUM MARKETING INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
The unaudited pro forma consolidated balance sheet has been derived from
the historical financial statements of Marketing and reflects certain pro forma
adjustments as if the Distribution had been effected as of October 31, 1996.
(a) Represents cash transfer from Getty in an amount sufficient to provide
Marketing with net working capital of approximately $1.1 million in accordance
with the Distribution Agreement.
In connection with the Distribution, Marketing will establish the Marketing
ESOP that will purchase newly issued shares of Marketing Common Stock from
Marketing equal to five percent of the outstanding shares of Marketing. In
connection therewith, Marketing common stock and paid-in capital will increase
by the fair value of such shares purchased. This increase in stockholders'
equity will be offset by an equal amount for the related note receivable from
the Marketing ESOP. As such amounts will be based on the value of the Marketing
Common Stock in the future, they are not currently determinable and, therefore,
are not reflected in the unaudited pro forma consolidated balance sheet.
F-24
<PAGE> 70
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of Getty Petroleum Marketing Inc.:
In connection with our audits of the consolidated financial statements of
Getty Petroleum Marketing Inc. and Subsidiaries as of January 31, 1996 and 1995,
and for each of the three years in the period ended January 31, 1996, which
financial statements are included in this Form 10/A, we have also audited the
financial statement schedule on page II-2.
In our opinion, the financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be included therein.
Coopers & Lybrand L.L.P.
New York, New York
November 6, 1996, except for Notes 9 and 12, as to which
the dates are December 13, 1996
and January 13, 1997, respectively.
II-1
<PAGE> 71
GETTY PETROLEUM MARKETING INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED JANUARY 31, 1996, 1995 AND 1994
(in thousands)
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING END OF
OF PERIOD ADDITIONS DEDUCTIONS PERIOD
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
1996:
Allowance for doubtful accounts*............ $1,336 $ 493 $604 $1,225
====== ==== ==== ======
1995:
Allowance for doubtful accounts*............ $1,379 $ 313 $356 $1,336
====== ==== ==== ======
1994:
Allowance for doubtful accounts*............ $1,467 $ 495 $583 $1,379
====== ==== ==== ======
</TABLE>
- -------------------------
* Relates to accounts receivable.
II-2
<PAGE> 72
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
Date: January 13, 1997
GETTY PETROLEUM MARKETING INC.
By: /s/ Leo Liebowitz
-------------------------------------
Leo Liebowitz
Chairman and Chief Executive
Officer
II-3
<PAGE> 73
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------
<C> <S>
3.2 Form of Articles of Incorporation of the Registrant, as amended, to be in effect
as of the Record Date.
3.4 By-Laws of the Registrant.
10.5 Form of Trademark License Agreement between Getty Petroleum Marketing Inc. and
Getty Petroleum Corp.
10.6 Form of Registrant's 1997 Stock Option and Award Plan.
10.8 Form of Stock Option Reformation Agreement between the Registrant and Getty
Petroleum Corp.
10.9 Form of Registrant's Retirement and Profit Sharing Plan.
10.10 Form of Supplemental Retirement Plan for Executives of the Registrant and
Participating Subsidiaries.
22. List of Subsidiaries of Registrant.
99.1 Consent of Prospective Director of the Registrant.
</TABLE>
<PAGE> 1
EXHIBIT 3.2
GETTY PETROLEUM MARKETING INC.
ARTICLES OF AMENDMENT AND RESTATEMENT
FIRST: Getty Petroleum Marketing Inc., a Maryland corporation (the
"Corporation"), desires to amend and restate its charter as currently in effect
and as hereinafter amended.
SECOND: The following provisions are all the provisions of the charter
currently in effect and as hereinafter amended:
ARTICLE I
INCORPORATOR
The undersigned, James J. Hanks, Jr., whose address is c/o Ballard Spahr
Andrews & Ingersoll, 300 East Lombard Street, Baltimore, Maryland 21202, being
at least 18 years of age, does hereby form a corporation under the general laws
of the State of Maryland.
ARTICLE II
NAME
The name of the corporation (the "Corporation") is:
Getty Petroleum Marketing Inc.
ARTICLE III
PURPOSE
The purposes for which the Corporation is formed are to engage in any
lawful act or activity for which corporations may be organized under the
general laws of the State of Maryland as now or hereafter in force.
<PAGE> 2
ARTICLE IV
PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT
The address of the principal office of the Corporation in the State of
Maryland is c/o Ballard Spahr Andrews & Ingersoll, 300 East Lombard Street,
Baltimore, Maryland 21202, Attention: James J. Hanks, Jr. The name of the
resident agent of the Corporation in the State of Maryland is James J. Hanks,
Jr., whose post address is c/o Ballard Spahr Andrews & Ingersoll, 300 East
Lombard Street, Baltimore, Maryland 21202. The resident agent is a citizen of
and resides in the State of Maryland.
ARTICLE V
PROVISIONS FOR DEFINING, LIMITING
AND REGULATING CERTAIN POWERS OF THE
CORPORATION AND OF THE STOCKHOLDERS AND DIRECTORS
Section 5.1 Number of Directors. The business and affairs of the
Corporation shall be managed under the direction of the Board of Directors. The
number of directors of the Corporation initially shall be five, which number
may be increased or decreased pursuant to the Bylaws, but shall never be less
than the minimum number required by the Maryland General Corporation Law. The
names of the directors who shall serve until the first annual meeting of
stockholders and until their successors are duly elected and qualify are:
Leo Liebowitz
Milton Safenowitz
Ronald E. Hall
Richard E. Montag
Matthew J. Chanin
-2-
<PAGE> 3
These directors may increase the number of directors and may fill any vacancy,
whether resulting from an increase in the number of directors or otherwise, on
the Board of Directors occurring before the first annual meeting of
stockholders in the manner provided in the Bylaws.
Section 5.2 Extraordinary Actions. Notwithstanding any provision of law
permitting or requiring any action to be taken or authorized by the affirmative
vote of the holders of a greater number of votes, any such action shall be
effective and valid if taken or authorized by the affirmative vote of holders
of shares entitled to cast a majority of all the votes entitled to be cast on
the matter.
Section 5.3 Authorization by Board of Stock Issuance. The Board of
Directors may authorize the issuance from time to time of shares of stock of
the Corporation of any class or series, whether now or hereafter authorized, or
securities or rights convertible into shares of its stock of any class or
series, whether now or hereafter authorized, for such consideration as the
Board Board of Directors may deem advisable (or without consideration in the
case of a stock split or stock dividend), subject to such restrictions or
limitations, if any, as may be set forth in the charter or the Bylaws.
Section 5.4 Preemptive Rights. Except as may be provided by the Board of
Directors in setting the terms of classified or reclassified shares of stock
pursuant to Section 6.4, no holder of shares of stock of the Corporation shall,
as such holder, have any preemptive right to purchase or subscribe for any
additional shares of stock of the Corporation or any other security of the
Corporation which it may issue or sell.
-3-
<PAGE> 4
Section 5.5 Indemnification. The Corporation shall have the power, to the
maximum extent permitted by Maryland law in effect from time to time, to
obligate itself to indemnify, and to pay or reimburse reasonable expenses in
advance of final disposition of a proceeding to, (a) any individual who is a
present or former director or officer of the Corporation or (b) any individual
who, while a director of the Corporation and at the request of the Corporation,
serves or has served as a director, officer, partner or trustee of another
corporation, partnership, joint venture, trust, employee benefit plan or any
other enterprise from and against any claim or liability to which such person
may become subject or which such person may incur by reason of his status as a
present or former director or officer of the Corporation. The Corporation
shall have the power, with the approval of the Board of Directors, to provide
such indemnification and advancement of expenses to a person who served a
predecessor of the Corporation in any of the capacities described in (a) or (b)
above and to any employee or agent of the Corporation or a predecessor of the
Corporation.
Section 5.6 Determinations by Board. The determination as to any of the
following matters, made in good faith by or pursuant to the direction of the
Board of Directors consistent with the charter and in the absence of actual
receipt of an improper benefit in money, property or services or active and
deliberate dishonesty established by a court, shall be final and conclusive and
shall be binding upon the Corporation and every holder of shares of its stock:
the amount of the net income of the Corporation for any period and the amount
of assets at any time legally available for the payment of dividends,
redemption of its stock or the payment of other distributions on its stock; the
amount of paid-in surplus, net assets, other surplus, annual or other net
profit, net assets in excess of capital, undivided profits or excess of profits
over
-4-
<PAGE> 5
losses on sales of assets; the amount, purpose, time of creation, increase or
decrease, alteration or cancellation of any reserves or charges and the
propriety thereof (whether or not any obligation or liability for which such
reserves or charges shall have been created shall have been paid or
discharged); the fair value, or any sale, bid or asked price to be applied in
determining the fair value, of any asset owned or held by the Corporation; and
any matters relating to the acquisition, holding and disposition of any assets
by the Corporation.
ARTICLE VI
STOCK
Section 6.1 Authorized Shares. The Corporation has authority to issue
30,000,000 shares of Common Stock, $.01 par value per share ("Common Stock"),
and 10,000,000 shares of Preferred Stock, $.01 par value per share ("Preferred
Stock"). The aggregate par value of all authorized shares of stock having par
value is $400,000.
Section 6.2 Common Stock. Each share of Common Stock shall entitle the
holder thereof to one vote. The Board of Directors may reclassify any unissued
shares of Common Stock from time to time in one or more classes or series of
stock.
Section 6.3 Preferred Stock. The Board of Directors may classify any
unissued shares of Preferred Stock and reclassify any previously classified but
unissued shares of Preferred Stock of any series from time to time, in one or
more series of stock.
Section 6.4 Classified or Reclassified Shares. Prior to issuance of
classified or reclassified shares of any class or series, the Board of
Directors by resolution shall: (a) designate that class or series to
distinguish it from all other classes and series of stock of the Corporation;
(b) specify the number of shares to be included in the class or series; (c) set
or change, subject to the
-5-
<PAGE> 6
provisions of Article VII and subject to the express terms of any class or
series of stock of the Corporation outstanding at the time, the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends or other distributions, qualifications and terms and conditions of
redemption for each class or series; and (d) cause the Corporation to file
articles supplementary with the State Department of Assessments and Taxation of
Maryland ("SDAT"). Any of the terms of any class or series of stock set or
changed pursuant to clause (c) of this Section 6.4 may be made dependent upon
facts or events ascertainable outside the charter (including determinations by
the Board of Directors or other facts or events within the control of the
Corporation) and may vary among holders thereof, provided that the manner in
which such facts, events or variations shall operate upon the terms of such
class or series of stock is clearly and expressly set forth in the articles
supplementary filed with the SDAT.
Section 6.5 Charter and Bylaws. All persons who shall acquire stock in
the Corporation shall acquire the same subject to the provisions of the charter
and the Bylaws.
ARTICLE VII
AMENDMENTS
The Corporation reserves the right from time to time to make any amendment
to its charter, now or hereafter authorized by law, including any amendment
altering the terms or contract rights, as expressly set forth in this charter,
of any shares of outstanding stock. All rights and powers conferred by the
charter on stockholders, directors and officers are granted subject to this
reservation.
-6-
<PAGE> 7
ARTICLE VIII
LIMITATION OF LIABILITY
To the maximum extent that Maryland law in effect from time to time
permits limitation of the liability of directors and officers of a corporation,
no director or officer of the Corporation shall be liable to the Corporation or
its stockholders for money damages. Neither the amendment nor repeal of this
Article IX, nor the adoption or amendment of any other provision of the charter
or Bylaws inconsistent with this Article IX, shall apply to or affect in any
respect the applicability of the preceding sentence with respect to any act or
failure to act which occurred prior to such amendment, repeal or adoption.
THIRD: The amendment to and restatement of the charter as hereinabove set
forth has been duly advised by the Board of Directors and approved by the
stockholders of the Corporation as required by law.
FOURTH: The current address of the principal office of the Corporation is
as set forth in Article IV of the foregoing amendment and restatement of the
charter.
FIFTH: The name and address of the Corporation's current resident agent
is as set forth in Article IV of the foregoing amendment and restatement of the
charter.
SIXTH: The number of directors of the Corporation and the names of those
currently in office are as set forth in Article V of the foregoing amendment
and restatement of the charter.
SEVENTH: The total number of shares of stock which the Corporation had
authority to issue immediately prior to this amendment and restatement was
1,000, all of one class, $.01 par value per share. The aggregate par value of
all shares of stock having par value was $10.00.
-7-
<PAGE> 8
EIGHTH: The total number of shares of stock which the Corporation has
authority to issue pursuant to the foregoing amendment and restatement of the
charter is 40,000,000, consisting of 30,000,000 shares of Common Stock, $.01
par value per share, and 10,000,000 shares of Preferred Stock, $.01 par value
per share. The aggregate par value of all authorized shares of stock having
par value is $400,000.
NINTH: The undersigned President acknowledges these Articles of Amendment
and Restatement to be the corporate act of the Corporation and as to all
matters or facts required to be verified under oath, the undersigned President
acknowledges that to the best of his knowledge, information and belief, these
matters and facts are true in all material respects and that this statement is
made under the penalties for perjury.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment
and Restatement to be signed in its name and on its behalf by its President and
attested to by its Secretary on this _____ day of ____________, 199_.
ATTEST: GETTY PETROLEUM MARKETING INC.
__________________________ By:_________________________(SEAL)
Secretary President
-9-
<PAGE> 1
EXHIBIT 3.4
BYLAWS
OF
GETTY PETROLEUM MARKETING INC.
Adopted December 12, 1996
<PAGE> 2
SELECTED TABLE OF CONTENTS
Article I - Offices. . . . . . . . . . . . . . . . . . . . . . . . 1
Article II - Meetings of Stockholders . . . . . . . . . . . . . . 1
Section 10 - Voting of Stock by Certain
Holders (Control Share Acquisition Statute Opt-out). . . . . . . . 3
Section 12 - Nominations and Proposals by
Stockholders (Advance Notice Provisions) . . . . . . . . . . . . . 4
Article III - Directors. . . . . . . . . . . . . . . . . . . . . . 7
Section 2(b) - Master Lease; Outside Directors. . . . . . . . 7
Section 7(b) - Voting - Approval of Majority of
Outside Directors Required . . . . . . . . . . . . . . . . . . . . 9
Article IV - Committees. . . . . . . . . . . . . . . . . . . . . .11
Article V - Officers . . . . . . . . . . . . . . . . . . . . . . .12
Article VI - Contracts, Loans, Checks and Deposits . . . . . . . .15
Article VII - Stock. . . . . . . . . . . . . . . . . . . . . . . .15
Article VIII - Accounting Year; Appointment of Auditors. . . . . .18
Article IX - Distributions . . . . . . . . . . . . . . . . . . . .18
Article X - Investment Policy. . . . . . . . . . . . . . . . . . .18
Article XI - Seal. . . . . . . . . . . . . . . . . . . . . . . . .19
Article XII - Indemnification and Advance of Expenses. . . . . . .19
Article XIII - Waiver of Notice. . . . . . . . . . . . . . . . . .20
Article XIV - Amendment of Bylaws. . . . . . . . . . . . . . . . .20
<PAGE> 3
GETTY PETROLEUM MARKETING INC.
BYLAWS
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The principal office of the Corporation
shall be located at such place or places as the Board of Directors may
designate.
Section 2. ADDITIONAL OFFICES. The Corporation may have additional
offices at such places as the Board of Directors may from time to time
determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. PLACE. All meetings of stockholders shall be held at the
principal office of the Corporation or at such other place within the United
States as shall be stated in the notice of the meeting.
Section 2. ANNUAL MEETING. An annual meeting of the stockholders for the
election of directors and the transaction of any business within the powers of
the Corporation shall be held on a date and at the time set by the Board of
Directors during the month of June in each year.
Section 3. SPECIAL MEETINGS. The president, the chairman of the board,
chief executive officer or Board of Directors may call special meetings of the
stockholders. Special meetings of stockholders shall also be called by the
secretary of the Corporation upon the written request of the holders of shares
entitled to cast not less than a majority of all the votes entitled to be cast
at such meeting. Such request shall state the purpose of such meeting and the
matters proposed to be acted on at such meeting. The secretary shall inform
such stockholders of the reasonably estimated cost of preparing and mailing
notice of the meeting and, upon payment to the Corporation by such stockholders
of such costs, the secretary shall give notice to each stockholder entitled to
notice of the meeting. Unless requested by the stockholders entitled to cast a
majority of all the votes entitled to be cast at such meeting, a special
meeting need not be called to consider any matter which is substantially the
same as a matter voted on at any special meeting of the stockholders held
during the preceding twelve months.
Section 4. NOTICE. Not less than ten nor more than 90 days
- 1 -
<PAGE> 4
before each meeting of stockholders, the secretary shall give to each
stockholder entitled to vote at such meeting and to each stockholder not
entitled to vote who is entitled to notice of the meeting written or printed
notice stating the time and place of the meeting and, in the case of a special
meeting or as otherwise may be required by any statute, the purpose for which
the meeting is called, either by mail or by presenting it to such stockholder
personally or by leaving it at his residence or usual place of business. If
mailed, such notice shall be deemed to be given when deposited in the United
States mail addressed to the stockholder at his post office address as it
appears on the records of the Corporation, with postage thereon prepaid.
Section 5. SCOPE OF NOTICE. Any business of the Corporation may be
transacted at an annual meeting of stockholders without being specifically
designated in the notice, except such business as is required by any statute to
be stated in such notice. No business shall be transacted at a special meeting
of stockholders except as specifically designated in the notice.
Section 6. ORGANIZATION. At every meeting of stockholders, the chairman
of the board, if there be one, shall conduct the meeting or, in the case of
vacancy in office or absence of the chairman of the board, one of the following
officers present shall conduct the meeting in the order stated: the vice
chairman of the board, if there be one, the president, the vice presidents in
their order of rank and seniority, or a chairman chosen by the stockholders
entitled to cast a majority of the votes which all stockholders present in
person or by proxy are entitled to cast, shall act as chairman of the meeting.
The secretary, or, in his absence, an assistant secretary, or in the absence of
both the secretary and assistant secretaries, a person appointed by the
chairman shall act as secretary of the meeting. The order of business and all
other matters of procedure at every meeting of the stockholders shall be
determined by the chairman of the meeting. The chairman of any meeting of
stockholders may prescribe such rules, regulations and procedures and take such
action as, in the discretion of such chairman, are appropriate for the proper
conduct of the meeting, including (a) maintaining order and security at the
meeting; (b) limiting attendance or participation at the meeting to
stockholders of record of the Corporation, their duly authorized and
constituted proxies or such other persons as the chairman of the meeting may
determine; (c) restricting admission to the meeting after the time fixed for
the commencement thereof; and (d) limiting the time allotted to questions or
comments by participants. Unless otherwise determined by the chairman of the
meeting, meetings of stockholders shall not be required to be held in
accordance with the rules of parliamentary procedure.
Section 7. QUORUM. At any meeting of stockholders, the presence in
person or by proxy of stockholders entitled to cast a majority of all the
(except as provided in Article XIV, Section 2) votes entitled to be cast at
such meeting shall constitute a quorum;
- 2 -
<PAGE> 5
but this section shall not affect any requirement under any statute or the
charter of the Corporation for the vote necessary for the adoption of any
measure. If, however, such quorum shall not be present at any meeting of the
stockholders, the stockholders entitled to vote at such meeting, present in
person or by proxy, shall have the power to adjourn the meeting from time to
time to a date not more than 120 days after the original record date without
notice other than announcement at the meeting. At such adjourned meeting at
which a quorum shall be present, any business may be transacted which might
have been transacted at the meeting as originally notified.
Section 8. VOTING. A plurality of all the votes cast at a meeting of
stockholders duly called and at which a quorum is present shall be sufficient
to elect a director. Each share may be voted for as many individuals as there
are directors to be elected and for whose election the share is entitled to be
voted. A majority of the votes cast at a meeting of stockholders duly called
and at which a quorum is present shall be sufficient to approve any other
matter which may properly come before the meeting, unless more than a majority
of the votes cast is required by statute or by the charter of the Corporation.
Unless otherwise provided in the charter, each outstanding share, regardless of
class, shall be entitled to one vote on each matter submitted to a vote at a
meeting of stockholders.
Section 9. PROXIES. A stockholder may cast the votes entitled to be cast
by the shares of the stock owned of record by him either in person or by proxy
executed in writing by the stockholder or by his duly authorized attorney in
fact. Such proxy shall be filed with the secretary of the Corporation before
or at the time of the meeting. No proxy shall be valid after eleven months
from the date of its execution, unless otherwise provided in the proxy.
Section 10. VOTING OF STOCK BY CERTAIN HOLDERS. Stock of the Corporation
registered in the name of a corporation, partnership, trust or other entity, if
entitled to be voted, may be voted by the president or a vice president, a
general partner or trustee thereof, as the case may be, or a proxy appointed by
any of the foregoing individuals, unless some other person who has been
appointed to vote such stock pursuant to a bylaw or a resolution of the
governing body of such corporation or other entity or agreement of the partners
of a partnership presents a certified copy of such bylaw, resolution or
agreement, in which case such person may vote such stock. Any director or other
fiduciary may vote stock registered in his name as such fiduciary, either in
person or by proxy.
Shares of stock of the Corporation directly or indirectly owned by it
shall not be voted at any meeting and shall not be counted in determining the
total number of outstanding shares entitled to be voted at any given time,
unless they are held by it in a fiduciary capacity, in which case they may be
voted and shall be counted in determining the total number of outstanding
shares at
- 3 -
<PAGE> 6
any given time.
The Board of Directors may adopt by resolution a procedure by which a
stockholder may certify in writing to the Corporation that any shares of stock
registered in the name of the stockholder are held for the account of a
specified person other than the stockholder. The resolution shall set forth
the class of stockholders who may make the certification, the purpose for which
the certification may be made, the form of certification and the information to
be contained in it; if the certification is with respect to a record date or
closing of the stock transfer books, the time after the record date or closing
of the stock transfer books within which the certification must be received by
the Corporation; and any other provisions with respect to the procedure which
the Board of Directors considers necessary or desirable. On receipt of such
certification, the person specified in the certification shall be regarded as,
for the purposes set forth in the certification, the stockholder of record of
the specified stock in place of the stockholder who makes the certification.
Notwithstanding any other provision of the charter of the Corporation or
these Bylaws, Sections 3-701 through 3-709 of the Maryland General Corporation
Law (the "MGCL") (or any successor statute) shall not apply to any acquisition
by any person of shares of stock of the Corporation. This section may be
repealed in the manner set forth in Article XIV of these Bylaws, in whole or in
part, at any time, whether before or after an acquisition of control shares (as
defined in Section 3-701 of the MGCL) and, upon such repeal, may, to the extent
provided by any successor bylaw, apply to any prior or subsequent control share
acquisition.
Section 11. INSPECTORS. At any meeting of stockholders, the chairman of
the meeting may appoint one or more persons as inspectors for such meeting.
Such inspectors shall ascertain and report the number of shares represented at
the meeting based upon their determination of the validity and effect of
proxies, count all votes, report the results and perform such other acts as are
proper to conduct the election and voting with impartiality and fairness to all
the stockholders.
Each report of an inspector shall be in writing and signed by such
inspector or by a majority of them if there is more than one inspector acting
at such meeting. If there is more than one inspector, the report of a majority
shall be the report of the inspectors. The report of the inspector or
inspectors on the number of shares represented at the meeting and the results
of the voting shall be prima facie evidence thereof.
Section 12. NOMINATIONS AND PROPOSALS BY STOCKHOLDERS
(a) Annual Meetings of Stockholders. (1) Nominations of persons for
election to the Board of Directors and the proposal of
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business to be considered by the stockholders may be made at an annual meeting
of stockholders (i) pursuant to the Corporation's notice of meeting, (ii) by or
at the direction of the Board of Directors or (iii) by any stockholder of the
Corporation who was a stockholder of record both at the time of giving of
notice provided for in this Section 12(a) and at the time of the annual
meeting, who is entitled to vote at the meeting and who complied with the
notice procedures set forth in this Section 12(a).
(2) For nominations or other business to be properly brought before an annual
meeting by a stockholder pursuant to clause (iii) of paragraph (a)(1) of this
Section 12, the stockholder must have given timely notice thereof in writing to
the secretary of the Corporation and such other business must otherwise be a
proper matter for action by stockholders. To be timely, a stockholder's notice
shall be delivered to the secretary at the principal executive offices of the
Corporation not later than the close of business on the 60th day nor earlier
than the close of business on the 90th day prior to the first anniversary of
the preceding year's annual meeting; provided, however, that in the event that
the date of the annual meeting is advanced by more than 30 days or delayed by
more than 60 days from such anniversary date or if the Corporation has not
previously held an annual meeting, notice by the stockholder to be timely must
be so delivered not earlier than the close of business on the 90th day prior to
such annual meeting and not later than the close of business on the later of
the 60th day prior to such annual meeting or the tenth day following the day on
which public announcement of the date of such meeting is first made by the
Corporation. In no event shall the public announcement of a postponement or
adjournment of an annual meeting to a later date commence a new time period for
the giving of a stockholder's notice as described above. Such stockholder's
notice shall set forth (i) as to each person whom the stockholder proposes to
nominate for election or reelection as a director all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors in an election contest, or is otherwise required, in each
case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (including such person's written consent to being
named in the proxy statement as a nominee and to serving as a director if
elected); (ii) as to any other business that the stockholder proposes to bring
before the meeting, a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at the meeting and
any material interest in such business of such stockholder and of the
beneficial owner, if any, on whose behalf the proposal is made; and (iii) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made, (x) the name and address of such
stockholder, as they appear on the Corporation's books, and of such beneficial
owner and (y) the number of shares of each class of stock of the Corporation
which are owned beneficially and of record by such stockholder and such
beneficial owner.
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(3) Notwithstanding anything in the second sentence of paragraph (a)(2) of
this Section 12 to the contrary, in the event that the number of directors to
be elected to the Board of Directors is increased and there is no public
announcement by the Corporation naming all of the nominees for director or
specifying the size of the increased Board of Directors at least 70 days prior
to the first anniversary of the preceding year's annual meeting, a
stockholder's notice required by this Section 12(a) shall also be considered
timely, but only with respect to nominees for any new positions created by such
increase, if it shall be delivered to the secretary at the principal executive
offices of the Corporation not later than the close of business on the tenth
day following the day on which such public announcement is first made by the
Corporation.
(b) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought
before the meeting pursuant to the Corporation's notice of meeting.
Nominations of persons for election to the Board of Directors may be made at a
special meeting of stockholders at which directors are to be elected (i)
pursuant to the Corporation's notice of meeting, (ii) by or at the direction of
the Board of Directors or (iii) provided that the Board of Directors has
determined that directors shall be elected at such special meeting, by any
stockholder of the Corporation who is a stockholder of record both at the time
of giving of notice provided for in this Section 12(b) and at the time of the
special meeting, who is entitled to vote at the meeting and who complied with
the notice procedures set forth in this Section 12(b). In the event the
Corporation calls a special meeting of stockholders for the purpose of electing
one or more directors to the Board of Directors, any such stockholder may
nominate a person or persons (as the case may be) for election to such position
as specified in the Corporation's notice of meeting, if the stockholder's
notice containing the information required by paragraph (a)(2) of this Section
12 shall be delivered to the secretary at the principal executive offices of
the Corporation not earlier than the close of business on the 90th day prior to
such special meeting and not later than the close of business on the later of
the 60th day prior to such special meeting or the tenth day following the day
on which public announcement is first made of the date of the special meeting
and of the nominees proposed by the Board of Directors to be elected at such
meeting. In no event shall the public announcement of a postponement or
adjournment of a special meeting to a later date commence a new time period for
the giving of a stockholder's notice as described above.
(c) General. (1) Only such persons who are nominated in accordance with
the procedures set forth in this Section 12 shall be eligible to serve as
directors and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this Section 12. The chairman of the meeting shall
have the power and duty
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to determine whether a nomination or any business proposed to be brought before
the meeting was made or proposed, as the case may be, in accordance with the
procedures set forth in this Section 12 and, if any proposed nomination or
business is not in compliance with this Section 12, to declare that such
nomination or proposal shall be disregarded.
(2) For purposes of this Section 12, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable news service or in a document publicly filed by
the Corporation with the Securities and Exchange Commission pursuant to Section
13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section 12, a
stockholder shall also comply with all applicable requirements of state law and
of the Exchange Act and the rules and regulations thereunder with respect to
the matters set forth in this Section 12. Nothing in this Section 12 shall be
deemed to affect any rights of stockholders to request inclusion of proposals
in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange
Act.
Section 13. VOTING BY BALLOT. Voting on any question or in any election
may be viva voce unless the presiding officer shall order or any stockholder
shall demand that voting be by ballot.
ARTICLE III
DIRECTORS
Section 1. GENERAL POWERS. The business and affairs of the Corporation
shall be managed under the direction of its Board of Directors.
Section 2. (a) NUMBER, TENURE AND QUALIFICATIONS. At any regular meeting
or at any special meeting called for that purpose, a majority of the entire
Board of Directors may establish, increase or decrease the number of directors,
provided that the number thereof shall never be less than the minimum number
required by the Maryland General Corporation Law, nor more than 15, and further
provided that the tenure of office of a director shall not be affected by any
decrease in the number of directors.
(b) MASTER LEASE; OUTSIDE DIRECTORS. From and after the date on which the
Master Lease Agreement, dated as of February 1, 1997, between the Corporation
and Getty Realty Corp., a Delaware corporation ("Getty") (the "Master Lease
Agreement"), becomes effective until the earlier to occur of (x) such time as
Mr. Leo Liebowitz, Mr. Milton Cooper and Mr. Milton Safenowitz and their
related parties collectively own less than 15% of the issued and
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outstanding voting stock of Getty or Marketing and (y) the termination or
expiration of the Master Lease Agreement, a majority of the directors shall at
all times consist of individuals (each an "Outside Director" and collectively,
the "Outside Directors") who neither own, individually or together with any
affiliates, greater than 5% of the outstanding voting stock (by number or by
value, whichever is more restrictive) of Getty nor are directors or officers of
Getty.
Section 3. ANNUAL AND REGULAR MEETINGS. An annual meeting of the Board
of Directors shall be held immediately after and at the same place as the
annual meeting of stockholders, no notice other than this Bylaw being
necessary. The Board of Directors may provide, by resolution, the time and
place, either within or without the State of Maryland, for the holding of
regular meetings of the Board of Directors without other notice than such
resolution.
Section 4. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by or at the request of the chairman of the board, president or
by a majority of the directors then in office. The person or persons
authorized to call special meetings of the Board of Directors may fix any
place, either within or without the State of Maryland, as the place for holding
any special meeting of the Board of Directors called by them.
Section 5. NOTICE. Notice of any special meeting of the Board of
Directors shall be delivered personally or by telephone, facsimile
transmission, United States mail or courier to each director at his business or
residence address. Notice by personal delivery, by telephone or a facsimile
transmission shall be given at least two days prior to the meeting. Notice by
mail shall be given at least five days prior to the meeting and shall be deemed
to be given when deposited in the United States mail properly addressed, with
postage thereon prepaid. Telephone notice shall be deemed to be given when the
director is personally given such notice in a telephone call to which he is a
party. Facsimile transmission notice shall be deemed to be given upon
completion of the transmission of the message to the number given to the
Corporation by the director and receipt of a completed answer-back indicating
receipt. Neither the business to be transacted at, nor the purpose of, any
annual, regular or special meeting of the Board of Directors need be stated in
the notice, unless specifically required by statute or these Bylaws.
Section 6. QUORUM. A majority of the directors shall constitute a quorum
for transaction of business at any meeting of the Board of Directors, provided
that, if less than a majority of such directors are present at said meeting, a
majority of the directors present may adjourn the meeting from time to time
without further notice.
The directors present at a meeting which has been duly called and convened
may continue to transact business until adjournment,
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notwithstanding the withdrawal of enough directors to leave less than a
quorum.
Section 7. (a) Voting - General. Except as set forth in subsection (b)
of this Section 7, the action of the majority of the directors present at a
meeting at which a quorum is present shall be the action of the Board of
Directors, unless the concurrence of a greater proportion is required for such
action by applicable statute or by the charter of the Corporation.
(b) Voting - Approval of Majority of Outside Directors Required. For so
long as a majority of the Board of Directors is required to be Outside
Directors pursuant to Article III, Section 2(b) of these Bylaws, the following
actions shall require the approval thereof at a meeting at which a quorum is
present by a majority of the entire Board of Directors and a majority of the
Outside Directors then in office:
(i) any amendment, alteration or repeal of Article III, Section 2(b) of
these Bylaws or any other action that would have the effect of reducing the
number of Outside Directors to less than a majority of the entire Board of
Directors;
(ii) any renewal (including through the exercise of renewal options
granted therein) of or under the Master Lease Agreement; and
(iii) any amendment, alteration or repeal of this Section 7(b).
Section 8. TELEPHONE MEETINGS. Directors may participate in a meeting by
means of a conference telephone or similar communications equipment if all
persons participating in the meeting can hear each other at the same time.
Participation in a meeting by these means shall constitute presence in person
at the meeting.
Section 9. INFORMAL ACTION BY DIRECTORS. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting, if a consent in writing to such action is signed by each
director and such written consent is filed with the minutes of proceedings of
the Board of Directors.
Section 10. VACANCIES. If for any reason any or all the directors cease
to be directors, such event shall not terminate the Corporation or affect these
Bylaws or the powers of the remaining directors hereunder (even if fewer than
three directors remain). Any vacancy on the Board of Directors for any cause
other than an increase in the number of directors shall be filled by a majority
of the remaining directors, although such majority is less than a quorum,
subject to the provisions of these Bylaws regarding the number of Outside
Directors. Any vacancy in the number of directors created by
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an increase in the number of directors may be filled by a majority vote of the
entire Board of Directors, subject to the provisions of these Bylaws regarding
the number of Outside Directors. Any individual so elected as director shall
hold office until the next annual meeting of stockholders and until his
successor is elected and qualifies.
Section 11. COMPENSATION. Directors shall not receive any stated salary
for their services as directors but, by resolution of the Board of Directors,
may receive fixed sums per year and/or per meeting of the Board of Directors or
any committees thereof and/or per visit to real property or other facilities
owned or leased by the Corporation and for any service or activity they
performed or engaged in as directors. Directors may be reimbursed for expenses
of attendance, if any, at each annual, regular or special meeting of the Board
of Directors or of any committee thereof and for their expenses, if any, in
connection with each property visit and any other service or activity they
performed or engaged in as directors; but nothing herein contained shall be
construed to preclude any directors from serving the Corporation in any other
capacity and receiving compensation therefor.
Section 12. LOSS OF DEPOSITS. No director shall be liable for any loss
which may occur by reason of the failure of the bank, trust company, savings
and loan association, or other institution with whom moneys or stock have been
deposited.
Section 13. SURETY BONDS. Unless required by law, no director shall be
obligated to give any bond or surety or other security for the performance of
any of his duties.
Section 14. RELIANCE. Each director, officer, employee and agent of the
Corporation shall, in the performance of his duties with respect to the
Corporation, be fully justified and protected with regard to any act or failure
to act in reliance in good faith upon the books of account or other records of
the Corporation, upon an opinion of counsel or upon reports made to the
Corporation by any of its officers or employees or by the adviser, accountants,
appraisers or other experts or consultants selected by the Board of Directors
or officers of the Corporation, regardless of whether such counsel or expert
may also be a director.
Section 15. CERTAIN RIGHTS OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS.
The directors shall have no responsibility to devote their full time to the
affairs of the Corporation. Any director or officer of the Corporation, in his
personal capacity or in a capacity as an affiliate, employee, or agent of any
other person, or otherwise, may have business interests and engage in business
activities similar to or in addition to or in competition with those of or
relating to the Corporation.
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ARTICLE IV
COMMITTEES
Section 1. NUMBER, TENURE AND QUALIFICATIONS. The Board of Directors may
appoint from among its members an Audit Committee, a Nominating Committee and a
Compensation and Benefits Committee and other committees, composed of one or
more directors, to serve at the pleasure of the Board of Directors.
Section 2. POWERS. The Board of Directors may delegate to committees
appointed under Section 1 of this Article any of the powers of the Board of
Directors, except as prohibited by law.
Section 3. MEETINGS. Notice of committee meetings shall be given in the
same manner as notice for special meetings of the Board of Directors. A
majority of the members of the committee shall constitute a quorum for the
transaction of business at any meeting of the committee. The act of a majority
of the committee members present at a meeting shall be the act of such
committee. The Board of Directors may designate a chairman of any committee,
and such chairman or any two members of any committee may fix the time and
place of its meeting unless the Board shall otherwise provide. In the absence
of any member of any such committee, the members thereof present at any
meeting, whether or not they constitute a quorum, may appoint another director
to act in the place of such absent member. Each committee shall keep minutes
of its proceedings.
Section 4. TELEPHONE MEETINGS. Members of a committee of the Board of
Directors may participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating in the meeting
can hear each other at the same time. Participation in a meeting by these
means shall constitute presence in person at the meeting.
Section 5. INFORMAL ACTION BY COMMITTEES. Any action required or
permitted to be taken at any meeting of a committee of the Board of Directors
may be taken without a meeting, if a consent in writing to such action is
signed by each member of the committee and such written consent is filed with
the minutes of proceedings of such committee.
Section 6. VACANCIES. Subject to the provisions hereof, the Board of
Directors shall have the power at any time to change the membership of any
committee, to fill all vacancies, to designate alternate members to replace any
absent or disqualified member or to dissolve any such committee.
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ARTICLE V
OFFICERS
Section 1. GENERAL PROVISIONS. The officers of the Corporation shall
include a president, a secretary and a treasurer and may include a chairman of
the board, a vice chairman of the board, one or more vice presidents, a chief
operating officer, a chief financial officer, one or more assistant secretaries
and one or more assistant treasurers. In addition, the Board of Directors may
from time to time appoint such other officers with such powers and duties as
they shall deem necessary or desirable. The officers of the Corporation shall
be elected annually by the Board of Directors at the first meeting of the Board
of Directors held after each annual meeting of stockholders, except that the
chief executive officer may appoint one or more vice presidents, assistant
secretaries and assistant treasurers. If the election of officers shall not be
held at such meeting, such election shall be held as soon thereafter as may be
convenient. Each officer shall hold office until his successor is elected and
qualifies or until his death, resignation or removal in the manner hereinafter
provided. Any two or more offices except president and vice president may be
held by the same person. In its discretion, the Board of Directors may leave
unfilled any office except that of president, treasurer and secretary.
Election of an officer or agent shall not of itself create contract rights
between the Corporation and such officer or agent.
Section 2. REMOVAL AND RESIGNATION. Any officer or agent of the
Corporation may be removed by the Board of Directors if in its judgment the
best interests of the Corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. Any officer of the Corporation may resign at any time by giving
written notice of his resignation to the Board of Directors, the chairman of
the board, the president or the secretary. Any resignation shall take effect
at any time subsequent to the time specified therein or, if the time when it
shall become effective is not specified therein, immediately upon its receipt.
The acceptance of a resignation shall not be necessary to make it effective
unless otherwise stated in the resignation. Such resignation shall be without
prejudice to the contract rights, if any, of the Corporation.
Section 3. VACANCIES. A vacancy in any office may be filled by the Board
of Directors for the balance of the term.
Section 4. CHIEF EXECUTIVE OFFICER. The Board of Directors may designate
a chief executive officer. In the absence of such designation, the chairman of
the board shall be the chief executive officer of the Corporation. The chief
executive officer shall have general responsibility for implementation of the
policies of the Corporation, as determined by the Board of Directors, and for
the
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management of the business and affairs of the Corporation.
Section 5. CHIEF OPERATING OFFICER. The Board of Directors may designate
a chief operating officer. The chief operating officer shall have the
responsibilities and duties as set forth by the Board of Directors or the chief
executive officer.
Section 6. CHIEF FINANCIAL OFFICER. The Board of Directors may designate
a chief financial officer. The chief financial officer shall have the
responsibilities and duties as set forth by the Board of Directors or the chief
executive officer.
Section 7. CHAIRMAN OF THE BOARD. The Board of Directors may designate a
chairman of the board. The chairman of the board shall preside over the
meetings of the Board of Directors and of the stockholders at which he shall be
present. The chairman of the board shall perform such other duties as may be
assigned to him or them by the Board of Directors.
Section 8. PRESIDENT. The president or chief executive officer, as the
case may be, shall in general supervise and control all of the business and
affairs of the Corporation. In the absence of a designation of a chief
operating officer by the Board of Directors, the president shall be the chief
operating officer. He may execute any deed, mortgage, bond, contract or other
instrument, except in cases where the execution thereof shall be expressly
delegated by the Board of Directors or by these Bylaws to some other officer or
agent of the Corporation or shall be required by law to be otherwise executed;
and in general shall perform all duties incident to the office of president and
such other duties as may be prescribed by the Board of Directors from time to
time.
Section 9. VICE PRESIDENTS. In the absence of the president or in the
event of a vacancy in such office, the vice president (or in the event there be
more than one vice president, the vice presidents in the order designated at
the time of their election or, in the absence of any designation, then in the
order of their election) shall perform the duties of the president and when so
acting shall have all the powers of and be subject to all the restrictions upon
the president; and shall perform such other duties as from time to time may be
assigned to him by the president or by the Board of Directors. The Board of
Directors may designate one or more vice presidents as executive vice
president, as senior vice president or as vice president for particular areas
of responsibility.
Section 10. SECRETARY. The secretary shall (a) keep the minutes of the
proceedings of the stockholders, the Board of Directors and committees of the
Board of Directors in one or more books provided for that purpose; (b) see that
all notices are duly given in accordance with the provisions of these Bylaws or
as required by law; (c) be custodian of the corporate records and of the seal
of the
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Corporation; (d) keep a register of the post office address of each stockholder
which shall be furnished to the secretary by such stockholder; (e) have general
charge of the share transfer books of the Corporation; and (f) in general
perform such other duties as from time to time may be assigned to him by the
chief executive officer, the president or by the Board of Directors.
Section 11. TREASURER. The treasurer shall have the custody of the funds
and securities of the Corporation and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. In the absence of a designation of a chief financial officer by the
Board of Directors, the treasurer shall be the chief financial officer of the
Corporation.
The treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and Board of Directors,
whenever it may so require, an account of all his transactions as treasurer and
of the financial condition of the Corporation.
If required by the Board of Directors, the treasurer shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, moneys and other property of whatever kind in his possession or under
his control belonging to the Corporation.
Section 12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
assistant secretaries and assistant treasurers, in general, shall perform such
duties as shall be assigned to them by the secretary or treasurer,
respectively, or by the president or the Board of Directors. The assistant
treasurers shall, if required by the Board of Directors, give bonds for the
faithful performance of their duties in such sums and with such surety or
sureties as shall be satisfactory to the Board of Directors.
Section 13. SALARIES. The salaries and other compensation of the officers
shall be fixed from time to time by the Board of Directors and no officer shall
be prevented from receiving such salary or other compensation by reason of the
fact that he is also a director.
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ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. CONTRACTS. The Board of Directors may authorize any officer
or agent to enter into any contract or to execute and deliver any instrument in
the name of and on behalf of the Corporation and such authority may be general
or confined to specific instances. Any agreement, deed, mortgage, lease or
other document executed by one or more of the officers or by an authorized
person shall be valid and binding upon the Board of Directors and upon the
Corporation when authorized or ratified by action of the Board of Directors.
Section 2. CHECKS AND DRAFTS. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name
of the Corporation shall be signed by such officer or agent of the Corporation
in such manner as shall from time to time be determined by the Board of
Directors.
Section 3. DEPOSITS. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Board of Directors may
designate.
ARTICLE VII
STOCK
Section 1. GENERAL. Unless the Board of Directors authorizes the issue
of some or all of the shares of any of its classes or series without
certificates, the Corporation shall comply with Sections 2 through 4 of this
Article VII. If the Board of Directors authorizes the issue of some or all of
the shares of any of its classes or series without certificates it need not
comply with such Sections with respect to any such shares but must comply with
any requirements of the MGCL and the Commercial Law Article of the Annotated
Code of Maryland regarding the issuance of shares without certificates.
Section 2. CERTIFICATES. Each stockholder shall be entitled to a
certificate or certificates which shall represent and certify the number of
shares of each class of stock held by him in the Corporation. Each certificate
shall be signed by the chief executive officer, the chairman of the board, the
president or a vice president and countersigned by the secretary or an
assistant secretary or the treasurer or an assistant treasurer and may be
sealed with the seal, if any, of the Corporation. The signatures may be either
manual or facsimile. Certificates shall be consecutively numbered; and if the
Corporation shall, from time to time, issue several classes of stock, each
class may have its own number series. A certificate is valid and may be issued
whether or not an officer who signed it is still an
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officer when it is issued. Each certificate representing shares which are
restricted as to their transferability or voting powers, which are preferred or
limited as to their dividends or as to their allocable portion of the assets
upon liquidation or which are redeemable at the option of the Corporation,
shall have a statement of such restriction, limitation, preference or
redemption provision, or a summary thereof, plainly stated on the certificate.
If the Corporation has authority to issue stock of more than one class, the
certificate shall contain on the face or back a full statement or summary of
the designations and any preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends and other distributions,
qualifications and terms and conditions of redemption of each class of stock
and, if the Corporation is authorized to issue any preferred or special class
in series, the differences in the relative rights and preferences between the
shares of each series to the extent they have been set and the authority of the
Board of Directors to set the relative rights and preferences of subsequent
series. In lieu of such statement or summary, the certificate may state that
the Corporation will furnish a full statement of such information to any
stockholder upon request and without charge. If any class of stock is
restricted by the Corporation as to transferability, the certificate shall
contain a full statement of the restriction or state that the Corporation will
furnish information about the restrictions to the stockholder on request and
without charge.
Section 3. TRANSFERS. Upon surrender to the Corporation or the transfer
agent of the Corporation of a stock certificate duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, the
Corporation shall issue a new certificate to the person entitled thereto,
cancel the old certificate and record the transaction upon its books.
The Corporation shall be entitled to treat the holder of record of any
share of stock as the holder in fact thereof and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such share or
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the State of
Maryland.
Notwithstanding the foregoing, transfers of shares of any class of stock
will be subject in all respects to the charter of the Corporation and all of
the terms and conditions contained therein.
Section 4. REPLACEMENT CERTIFICATE. Any officer designated by the Board
of Directors may direct a new certificate to be issued in place of any
certificate previously issued by the Corporation alleged to have been lost,
stolen or destroyed upon the making of an affidavit of that fact by the person
claiming the certificate to be lost, stolen or destroyed. When authorizing the
issuance of a new certificate, an officer designated by the Board of Directors
may, in his discretion and as a condition precedent to the issuance thereof,
require the
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owner of such lost, stolen or destroyed certificate or the owner's legal
representative to advertise the same in such manner as he shall require and/or
to give bond, with sufficient surety, to the Corporation to indemnify it
against any loss or claim which may arise as a result of the issuance of a new
certificate.
Section 5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The Board
of Directors may set, in advance, a record date for the purpose of determining
stockholders entitled to notice of or to vote at any meeting of stockholders or
determining stockholders entitled to receive payment of any dividend or the
allotment of any other rights, or in order to make a determination of
stockholders for any other proper purpose. Such date, in any case, shall not
be prior to the close of business on the day the record date is fixed and shall
be not more than 90 days and, in the case of a meeting of stockholders, not
less than ten days, before the date on which the meeting or particular action
requiring such determination of stockholders of record is to be held or taken.
In lieu of fixing a record date, the Board of Directors may provide that
the stock transfer books shall be closed for a stated period but not longer
than 20 days. If the stock transfer books are closed for the purpose of
determining stockholders entitled to notice of or to vote at a meeting of
stockholders, such books shall be closed for at least ten days before the date
of such meeting.
If no record date is fixed and the stock transfer books are not closed for
the determination of stockholders, (a) the record date for the determination of
stockholders entitled to notice of or to vote at a meeting of stockholders
shall be at the close of business on the day on which the notice of meeting is
mailed or the 30th day before the meeting, whichever is the closer date to the
meeting; and (b) the record date for the determination of stockholders entitled
to receive payment of a dividend or an allotment of any other rights shall be
the close of business on the day on which the resolution of the directors,
declaring the dividend or allotment of rights, is adopted.
When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this section, such determination
shall apply to any adjournment thereof, except when (i) the determination has
been made through the closing of the transfer books and the stated period of
closing has expired or (ii) the meeting is adjourned to a date more than 120
days after the record date fixed for the original meeting, in either of which
case a new record date shall be determined as set forth herein.
Section 6. STOCK LEDGER. The Corporation shall maintain at its principal
office or at the office of its counsel, accountants or transfer agent, an
original or duplicate share ledger containing the name and address of each
stockholder and the number of shares of each class held by such stockholder.
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<PAGE> 20
Section 7. FRACTIONAL STOCK; ISSUANCE OF UNITS. The Board of Directors
may issue fractional stock or provide for the issuance of scrip, all on such
terms and under such conditions as they may determine. Notwithstanding any
other provision of the charter or these Bylaws, the Board of Directors may
issue units consisting of different securities of the Corporation. Any
security issued in a unit shall have the same characteristics as any identical
securities issued by the Corporation, except that the Board of Directors may
provide that for a specified period securities of the Corporation issued in
such unit may be transferred on the books of the Corporation only in such unit.
ARTICLE VIII
ACCOUNTING YEAR; APPOINTMENT OF AUDITORS
The Board of Directors shall have the power, from time to time, to (i) fix
the fiscal year of the Corporation by a duly adopted resolution and (ii)
appoint, or to authorize officers of the corporation to appoint, certified
public accountants to prepare audited financial statements of the Corporation.
ARTICLE IX
DISTRIBUTIONS
Section 1. AUTHORIZATION. Dividends and other distributions upon the
stock of the Corporation may be authorized and declared by the Board of
Directors, subject to the provisions of law and the charter of the
Corporation. Dividends and other distributions may be paid in cash, property
or stock of the Corporation or its subsidiaries, subject to the provisions of
law and the charter.
Section 2. CONTINGENCIES. Before payment of any dividends or other
distributions, there may be set aside out of any assets of the Corporation
available for dividends or other distributions such sum or sums as the Board of
Directors may from time to time, in its absolute discretion, think proper as a
reserve fund for contingencies, for equalizing dividends or other
distributions, for repairing or maintaining any property of the Corporation or
for such other purpose as the Board of Directors shall determine to be in the
best interest of the Corporation, and the Board of Directors may modify or
abolish any such reserve in the manner in which it was created.
ARTICLE X
INVESTMENT POLICY
Subject to the provisions of the charter of the Corporation, the Board of
Directors may from time to time adopt, amend, revise or terminate any policy or
policies with respect to investments by the
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<PAGE> 21
Corporation as it shall deem appropriate in its sole discretion.
ARTICLE XI
SEAL
Section 1. SEAL. The Board of Directors may authorize the adoption of a
seal by the Corporation. The seal shall contain the name of the Corporation
and the year of its incorporation and the words "Maryland." The Board of
Directors may authorize one or more duplicate seals and provide for the custody
thereof.
Section 2. AFFIXING SEAL. Whenever the Corporation is permitted or
required to affix its seal to a document, it shall be sufficient to meet the
requirements of any law, rule or regulation relating to a seal to place the
word "(SEAL)" adjacent to the signature of the person authorized to execute the
document on behalf
of the Corporation.
ARTICLE XII
INDEMNIFICATION AND ADVANCE OF EXPENSES
To the maximum extent permitted by Maryland law in effect from time to
time, the Corporation shall indemnify and, without requiring a preliminary
determination of the ultimate entitlement to indemnification, shall pay or
reimburse reasonable expenses in advance of final disposition of a proceeding
to (a) any individual who is a present or former director or officer of the
Corporation and who is made a party to the proceeding by reason of his service
in that capacity or (b) any individual who, while a director of the Corporation
and at the request of the Corporation, serves or has served another
corporation, partnership, joint venture, trust, employee benefit plan or any
other enterprise as a director, officer, partner or trustee of such
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise and who is made a party to the proceeding by reason of his service
in that capacity. The Corporation may, with the approval of its Board of
Directors, provide such indemnification and advance for expenses to a person
who served a predecessor of the Corporation in any of the capacities described
in (a) or (b) above and to any employee or agent of the Corporation or a
predecessor of the Corporation.
Neither the amendment nor repeal of this Article, nor the adoption or
amendment of any other provision of the Bylaws or charter of the Corporation
inconsistent with this Article, shall apply to or affect in any respect the
applicability of the preceding paragraph with respect to any act or failure to
act which occurred prior to such amendment, repeal or adoption.
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<PAGE> 22
ARTICLE XIII
WAIVER OF NOTICE
Whenever any notice is required to be given pursuant to the charter of the
Corporation or these Bylaws or pursuant to applicable law, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice. Neither the business to be transacted at nor the
purpose of any meeting need be set forth in the waiver of notice, unless
specifically required by statute. The attendance of any person at any meeting
shall constitute a waiver of notice of such meeting, except where such person
attends a meeting for the express purpose of objecting to the transaction of
any business on the ground that the meeting is not lawfully called or convened.
ARTICLE XIV
AMENDMENT OF BYLAWS
Section 1. BY DIRECTORS. Subject to the requirements of Article III,
Section 7(b) of these Bylaws, the Board of Directors shall have the exclusive
power to alter, amend or repeal Article III, Section 2(b) and Article III,
Section 7(b) and the concurrent power to adopt, alter or repeal any other
provision of these Bylaws and to make new Bylaws.
Section 2. BY STOCKHOLDERS. Subject to the requirements of Article II,
Section 12 of these Bylaws, the stockholders of the Corporation shall have
concurrent power to adopt, alter or repeal any provision of these Bylaws
(except for Article III, Section 2(b) and Article III, Section 7(b)) and to
make new Bylaws.
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<PAGE> 1
EXHIBIT 10.5
TRADEMARK LICENSE AGREEMENT
THIS LICENSE AGREEMENT, effective as of the _______ day of _____, 1997, is
entered into by and between: Getty Realty Corp. (hereinafter called "REALTY"),
a corporation organized and existing under the laws of the State of Delaware,
located at 125 Jericho Turnpike, Jericho, New York 11753 and Getty Petroleum
Marketing Inc. (hereinafter called "MARKETING"), a corporation organized and
existing under the laws of the State of Maryland, located at 125 Jericho
Turnpike, Jericho, New York 11753.
WHEREAS, REALTY is the owner of certain trademarks, service marks and
trade names that have been utilized in, among other businesses, the motor fuel
marketing business; WHEREAS, REALTY has subleased various motor fuel outlet
properties to MARKETING under certain net lease agreements (hereinafter
collectively called, the "Master Lease");
WHEREAS, REALTY seeks to license certain trademarks, service marks and
trade names to MARKETING for use in its marketing business;
WHEREAS, MARKETING wishes to license those trademarks, service marks and
trade names from REALTY for use in its marketing business on those terms;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises hereinafter set forth, the parties agree as follows:
1. DEFINITIONS
A. "Licensed Marks" shall mean the trademarks, service marks or trade
names listed on Schedule A attached hereto.
<PAGE> 2
B. "Licensed Territory" shall mean the following states of the United
States: Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut,
New York, New Jersey, Pennsylvania, Delaware, Maryland and Virginia, plus any
additional states added to the Licensed Territory pursuant to the Grant of
Option(s) to MARKETING described in Paragraph 15, below.
C. "Marketing Business" shall mean: (i) the purchase, storage,
distribution, marketing, and sale of gasoline, diesel fuel and other related
products at wholesale and through terminals and a retail service station
network; (ii) the operation of convenience stores; and (iii) the purchase,
storage, transportation and sale of home heating oil to residential and
commercial customers in mid-Hudson Valley, New York. By way of example,
"Marketing Business" does not include the home heating oil business previously
carried on by the Aero Oil Company or the real estate business previously
carried on by Getty Petroleum Corp., both of which are currently being carried
on by REALTY.
2. GRANT OF LICENSE A. Subject to the terms and conditions set out
herein, REALTY grants to MARKETING an exclusive, payment-free, license to use
the Licensed Marks in the Licensed Territory in connection with its Marketing
Business. MARKETING may incorporate its business under the name "Getty
Petroleum Marketing Inc." MARKETING accepts the license subject to the terms and
conditions of this License Agreement.
B. Subject to the consent of REALTY, which consent shall not be
unreasonably withheld, MARKETING may sublicense the Licensed Marks to retailers
or wholesalers of petroleum and other related products and operators of
convenience stores, including but not limited to service station retailers,
jobbers and distributors, but only subject
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<PAGE> 3
to the terms and conditions of this License Agreement all of which shall be
equally binding on the sublicensees. In determining the reasonableness of a
refusal to consent to a sublicense, the parties shall be guided by the
following considerations: (i) the parties shall not knowingly take any action
which would materially tarnish the image or cause a material adverse impact on
the value of the Licensed Marks; and (ii) the parties shall not permit the
indiscriminate proliferation of sublicensees which would cause the Licensed
Marks to lose significance as a source of origin. In connection with any
sublicense granted hereunder, the sublicensee shall be required to agree in
writing to be bound by and comply with all the terms and conditions of this
License Agreement. REALTY hereby consents to the sublicenses of the Licensed
Marks set out in Schedule B hereto and authorizes MARKETING to make amendments
and revisions in those sublicenses that are not of a material nature.
3. OWNERSHIP OF MARKS
MARKETING acknowledges REALTY's ownership of the Licensed Marks.
MARKETING agrees that it will do nothing inconsistent with such ownership and
that all use of the Licensed Marks by MARKETING shall inure to the benefit of,
and be on behalf of, REALTY. MARKETING agrees that nothing in this License
Agreement shall give MARKETING any right, title or interest in the Licensed
Marks other than the right to use the Licensed Marks in accordance with this
License Agreement. MARKETING agrees that it will not attack the title of
REALTY to the Licensed Marks or attack the validity of this License Agreement.
4. QUALITY STANDARDS
MARKETING agrees that the nature and quality of all services rendered by
MARKETING in connection with the Licensed Marks; all goods sold by MARKETING
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under the Licensed Marks; and all related advertising, promotional and other
related uses of the Licensed Marks by MARKETING shall conform to reasonable
standards set by and be under the control of REALTY. MARKETING agrees that the
quality of all such services, goods, and advertising and promotional materials
associated with the Licensed Marks shall be of the same high-level quality as
previously associated with the Licensed Marks. MARKETING further agrees that
the quality of all such services, goods, and advertising, promotional and other
related uses of the Licensed Marks shall conform with the standards,
specifications, and instructions as established by REALTY or such subsequent
standards, specifications, or instructions reasonably comparable thereto
promulgated by MARKETING subject to the approval of REALTY, such approval not
to be unreasonably withheld. Without limiting the foregoing, MARKETING agrees
to comply with the standards, specifications, and instructions set out in
Schedule C hereto, as may be modified from time to time in accordance with this
paragraph. If MARKETING intends to use the Licensed Marks on a new product
within the ambit of a particular registration it shall request approval for
such new product from REALTY at least thirty (30) days prior to initiating such
new product use, and such approval shall not be unreasonably withheld by
REALTY. REALTY shall provide MARKETING with notice of approval or
non-approval, as the case may be, within thirty (30) days of the receipt of the
notice with respect to MARKETING's intended new product.
5. QUALITY MAINTENANCE
MARKETING agrees to cooperate with REALTY in facilitating REALTY's control
of the nature and quality of goods, services and related uses associated with
the
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<PAGE> 5
Licensed Marks, to permit reasonable inspection of MARKETING's operations,
and to supply REALTY with specimens of all uses of the Licensed Marks upon
request. MARKETING shall comply with all applicable laws and regulations and
will obtain all appropriate government approvals pertaining to the sale,
distribution and advertising of goods and services covered by this License
Agreement. REALTY shall have the right to enter and inspect service stations
of MARKETING that use the Licensed Marks. REALTY shall have the right to
receive from MARKETING, upon request and without charge, a reasonable number of
samples of products sold by MARKETING as well as labels, promotional materials,
advertising materials, sales materials and related materials using any of the
Licensed Marks.
6. FORM OF USE
MARKETING agrees to use the Licensed Marks only in the form, manner and
trade dress and with appropriate legends as prescribed from time to time by
REALTY, and not to use any other trademark, trade name, trade dress, or service
mark in combination with any of the Licensed Marks without prior written
approval of REALTY. REALTY hereby approves of the use of the Licensed Marks
used in combination with other trademarks, trade names, trade dress, or service
marks set out in Schedule D hereto. MARKETING shall submit to REALTY for prior
approval, all new or revised labels which are a material departure from those
presently used at least sixty (60) days prior to initiating use of a revised
or new label. REALTY's approval shall not be unreasonably withheld. REALTY
shall provide MARKETING with notice of approval or non-approval, as the case
may be, within
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<PAGE> 6
thirty (30) days of the receipt of the notice with respect to MARKETING's
intended new or revised label.
7. TRADEMARK NOTICES
MARKETING will utilize on its products bearing the Licensed Marks,
packaging and advertising, whatever lawful notice is reasonably requested in
writing by REALTY in order to protect the Licensed Marks and properly designate
REALTY's legal ownership thereof. Without limiting the foregoing, MARKETING
agrees to utilize, where commercially practicable, a notice sufficient to
indicate that the utilized Licensed Mark is a registered trademark of Getty
Realty Corp. If REALTY does not request a particular trademark notice,
MARKETING shall utilize such notice as in the opinion of its counsel is
appropriate in order to protect the Licensed Marks and properly designate
REALTY's legal ownership thereof and the fact of registration thereof.
However, MARKETING shall advise REALTY of such intended notice, and make any
changes thereto reasonably requested by REALTY.
8. APPROVALS/PROTECTION OF THE LICENSED MARKS
In discharging their respective rights and obligations with respect to
Paragraphs 4, 5, 6, or 7 above, the parties shall be guided by the following
consideration: The parties shall not knowingly take any action which would
materially tarnish the image or cause a material adverse impact on the value of
the Licensed Marks including, without limitation, the indiscriminate
proliferation of uses of the Licensed Marks which would cause any of the
Licensed Marks to lose significance as a source of origin. If there is any
dispute as to either party's obligations with respect to Paragraphs 4, 5, 6, or
7 above, or the application thereof, the parties shall promptly consult to
resolve the matter. If the parties
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cannot resolve the matter, the dispute shall be submitted to arbitration in
accordance with paragraph 16 below and the arbitrator in that case shall be
guided by the same considerations described above in this Paragraph 8.
9. CONFLICTING TRADEMARKS
MARKETING will not at any time adopt or use, without REALTY's prior
written consent, any word, mark, or designation which is similar or likely to
be confused with any of the Licensed Marks.
10. FUTURE DOCUMENTS, RECORDING
AND TRADEMARK MAINTENANCE
A. The parties agree to cooperate in the execution and delivery, from
time to time, throughout the term of this License Agreement, of any documents
that may be reasonably required or desirable to effectuate and carry out the
purpose and intent of this License Agreement. Such documents shall include
instruments required to file, renew, protect, perfect and/or maintain the
Licensed Marks and REALTY's ownership therein, or to provide for the granting
of any license hereunder. Without limiting the generality of the foregoing,
REALTY shall enter MARKETING or its local designee or cause MARKETING or its
local designee to be entered as a registered user of the Licensed Marks
wherever necessary or desirable, and MARKETING and/or its local designee shall,
upon written request, execute such registered user agreements.
B. Except as provided in Paragraph 11 B below with respect to infringement
of the Licensed Marks by third parties, REALTY shall take such action as is
reasonably required or desirable to obtain and maintain appropriate protection
of the Licensed Marks applicable to MARKETING's business. Except as provided
in Paragraph 11 B below with respect to infringement of the Licensed Marks by
third parties, REALTY shall bear the
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<PAGE> 8
full cost of all trademark filings, renewals, registered user entries and
actions to protect, perfect or maintain the Licensed Marks applicable to the
Marketing Business, including the attorney's and local agent's fees, taxes,
government filing and other fees.
11. INFRINGEMENT AND OTHER ACTIONS
A. The parties shall promptly notify each other of any claim that is
asserted, and of any action or proceeding that is threatened or commenced, in
which a third party (i) challenges MARKETING's right to use any of the Licensed
Marks, or (ii) alleges that any Licensed Mark infringes the trademark or trade
name rights of such third party, or (iii) in which the revocation, cancellation
or declaration of invalidity of any of the Licensed Marks is sought. REALTY
and MARKETING shall consult with respect to each such claim, action, or
proceeding, the assertion of counterclaims thereto and the settlement thereof
and shall jointly defend, in the name of REALTY and/or in the name of
MARKETING, each such action or proceeding that is commenced. If an action or
proceeding brought by a third party concerns the registrations and/or products
of both REALTY and MARKETING, both REALTY and MARKETING shall be responsible
for their pro rata share of legal expenses incurred in defending such action or
proceeding, said pro rata share to be determined by the proportion of products
and/or registrations at issue in the third party action or proceeding. If
there is a disagreement as to the appropriate pro rata share of legal expenses
to be borne by each party, the matter shall be submitted to arbitration in
accordance with paragraph 16 below. If the claim or action concerns only
products and/or registrations of MARKETING, MARKETING shall bear all legal
expenses incurred in defending such actions and proceedings and bear all
damages and costs, if any, recovered by the third party.
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<PAGE> 9
B. REALTY and MARKETING will each undertake commercially reasonable efforts
to learn of any unauthorized uses of the Licensed Marks. Promptly upon
receiving notice or knowledge thereof, the parties shall notify each other of
any infringement or other violation by a third party of any of the Licensed
Marks. REALTY and MARKETING shall consult with respect to any such infringement,
and any action or proceeding, including opposition and cancellation actions,
that may be brought against such infringement. REALTY shall exercise its
discretion with respect to taking appropriate action including the bringing of
actions at REALTY's expense in the name of REALTY and/or MARKETING, but shall
not be obligated to take any action or institute any proceedings. If such
action or proceeding is commenced by REALTY, it shall promptly notify MARKETING
and MARKETING shall cooperate, including the defense of counterclaims, and
REALTY shall bear the expenses of MARKETING except for fees charged by any
attorneys retained solely by MARKETING in connection with such cooperation.
MARKETING shall be given an opportunity to participate with counsel of its
choice bearing its own legal and other costs.
In the event that REALTY determines not to commence such action or
proceeding at its expense, it shall promptly notify MARKETING. MARKETING may
then, at its expense, initiate such action or proceedings in its capacity as a
licensee of such Licensed Marks, provided however, that MARKETING must obtain
the prior written approval of REALTY regarding commencement of such action, such
consent not to be unreasonably withheld. The foregoing notwithstanding, in the
event of any unauthorized use of the Licensed Marks by one of MARKETING'S
sublicensees, MARKETING shall undertake efforts to cause the unauthorized use to
stop. In the event those efforts are
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<PAGE> 10
unsuccessful, MARKETING shall, at its expense, initiate such action or
proceedings in its capacity as a licensee of such Licensed Marks with respect to
such unauthorized use. REALTY shall cooperate with MARKETING in any such
proceeding or action, including the defense of any counterclaims, and MARKETING
shall bear the expenses of REALTY, except for fees charged by any attorneys
retained solely by REALTY in connection with such cooperation. REALTY may, if
not a party, join in, with counsel of its own choice, bearing its own legal and
other costs. The party bringing any action or proceeding under this
sub-paragraph (B) shall keep the other party informed of the proceedings and
give the other party an opportunity to participate in any settlements, but the
final decision whether to settle the action or proceeding shall be made by the
party bringing the action or proceeding, subject to the approval of REALTY (if
not a party), such approval not to be unreasonably withheld. If within ten (10)
business days or such shorter time period as shall be reasonably practicable
under the circumstances REALTY does not approve a proposed settlement
recommended by MARKETING in good faith, REALTY shall be deemed to have taken
over responsibility for the action or proceeding, including subsequent legal
fees, awards against REALTY or MARKETING and expenses relating thereto. No
settlement by either party shall bind the other to make any payment or suffer
any loss of existing or future rights without such other party's consent, which
shall not be unreasonably withheld. Any recovery in such action or proceeding
shall be applied first to reimburse the party or parties for its or their legal
expenses in maintaining such action or proceeding. The excess shall belong to
the party maintaining the action or proceeding at the time such recovery is
awarded. If the action is brought jointly and the recovery is not sufficient to
reimburse REALTY and MARKETING
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<PAGE> 11
for their legal expenses in such action, the unreimbursed portion of such legal
expenses shall be borne equally by each party.
12. TERM
This License Agreement shall continue in force and effect until
February 1, 2052 unless sooner terminated as provided for herein. Except as
provided in Paragraph 15 hereof, the license shall remain exclusive and
payment-free for so long as the Master Lease entered into between the parties
hereto of even date is in effect. In the event that the Master Lease
terminates prior to February 1, 2052, then this license shall, commencing on
the date that the Master Lease terminates, become: a) non-exclusive in all
areas, including the Licensed Territory; and b) a payment-bearing license
pursuant to which MARKETING shall pay to REALTY a rental fee for the use and
maintenance of Getty signage and related items based on the gross revenues
generated and/or gallonage sold under the Licensed Marks at a rate that is
reasonable and customary in the trade to be agreed in writing between the
parties. In the event that the parties are unable to agree to the rental fee,
the dispute shall be submitted to arbitration in accordance with Paragraph 16
below.
13. TERMINATION AND BREACH
This License Agreement shall be terminated: a) in the event of any
affirmative act of insolvency by MARKETING; or b) upon the appointment of any
receiver or trustee to take possession of the properties of MARKETING. REALTY
shall have the right to terminate this License Agreement either a) upon a
material default by MARKETING under the Master Lease which is not cured within
the cure periods specified therein; or b) upon a material default by MARKETING
with respect to its obligations under the Reorganization and Distribution
Agreement between the parties of even date which is not
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<PAGE> 12
Rcured within the cure periods specified therein. In the event of any other
breach or threatened breach of this License Agreement, notice shall be given
and the parties shall promptly consult in good faith to cure such breach, with
the party at fault being given an adequate period of time to remedy the matter.
If such breach is not cured within sixty (60) days of the notice, the matter
may be submitted to arbitration in accordance with paragraph 16 below, which
may include a determination whether a material breach has occurred and/or been
cured. In the event the arbitrator determines that a material breach has
occurred, the arbitrator shall not be authorized to terminate this License
Agreement (except in the case of a material breach by MARKETING which creates a
substantial likelihood of loss of rights in the Licensed Marks) but shall be
authorized to issue any other order or award any other relief deemed
appropriate, including, without limitation, injunctive relief.
In the event of a material breach by MARKETING which creates a substantial
likelihood of loss of rights in the Licensed Marks, the arbitrator shall be
authorized to issue any order awarding any relief deemed appropriate,
including, without limitation, injunctive relief, and further providing that in
the event MARKETING fails to comply with the relief ordered within a specified
period of time, the license shall be terminated.
14. EFFECT OF TERMINATION
Upon termination of this License Agreement, MARKETING agrees: a) to
immediately discontinue all use of the Licensed Marks and any term confusingly
similar thereto, and to delete the same from its corporate or business name; b)
to cooperate with REALTY or its appointed agent to apply to the appropriate
authorities to cancel any recording of this License Agreement from all
government records; c) to destroy all printed materials and signs bearing any
of the Licensed Marks; d) that all rights in the Licensed
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Marks and the good will connected therewith shall remain the property of
REALTY; and (e) to cause all sub-licenses to terminate and all sublicensees to
immediately discontinue all use of the Licensed Marks and any term confusingly
similar thereto, and to delete the same from their respective business names,
if applicable.
15. GRANT OF OPTION(S)
In addition to the rights and obligations described above, and
subject to the terms and conditions set out herein, REALTY hereby grants to
MARKETING an option(s) that may be exercised at any time and from time-to-time
during the term hereof to expand the above-defined Licensed Territory to
include any other state of the United States in which MARKETING conducts its
Marketing Business. In the event that MARKETING exercises its option(s) to
expand the Licensed Territory to any additional states, all of the terms and
conditions of this License Agreement shall apply to such additional states,
except as follows: a) the licenses for the additional states shall be for
durations to be mutually agreed upon between the parties hereto but in no event
shorter than the term of the license granted within the Licensed Territories;
b) the license will be non-exclusive within those additional states; and c)
MARKETING will pay to REALTY a rental fee for the use and maintenance of Getty
signage and related items sales within those states based on the gross revenues
generated and/or gallonage sold under the Licensed Marks. These additional
terms will be agreed to in writing between the parties. In the event the
parties are unable to agree to these terms, then any dispute shall be submitted
to arbitration in accordance with Paragraph 16 below.
16. ARBITRATION
Any controversy or claim arising out of, or relating to this License
Agreement or its interpretation, performance or nonperformance or any breach
thereof, which the parties
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are unable to resolve between themselves, shall first be submitted to a single
arbitrator who shall be knowledgeable in marketing and trademark matters. The
arbitrator shall be mutually appointed by the parties, and shall not be bound
by rules of the American Arbitration Association, but shall adopt such
procedures as shall appear appropriate to expedite decision making, in order
that disputes may be resolved within commercially reasonable time periods. If
the parties cannot agree on the selection of the arbitrator, the arbitrator
shall be selected by The American Arbitration Association. Each party shall
bear its own costs in any such proceeding. The decision of the arbitrator
shall be final and binding upon the parties and may be enforced in any court of
competent jurisdiction.
17. GENERAL PROVISIONS
A. Assignability: This license may be assigned by either party to the
successor in interest or assignee of substantially all of its business or
assets, or the surviving party of any merger or consolidation to which it is a
party provided that the assignee of any assignment assumes all the assignor's
obligations hereunder. Apart from any assignment permissible under the
preceding sentences of this paragraph 17.1, MARKETING may not otherwise assign
the license granted herein or the obligations undertaken herein without the
prior written consent of REALTY, which consent shall not be unreasonably
withheld.
B. Notices: Any notice, approval, consent or other communication required
or permitted hereunder shall be in writing and shall be given by personal
delivery or telecopy, with acknowledgement of receipt, or by prepaid registered
mail, return receipt requested, addressed to the party at its address first
above written, to the attention of its General Counsel, or to any other address
that either party may subsequently designate, by notice in accordance with this
paragraph. Notices and other communications hereunder shall be
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deemed effective one (1) day after dispatch if personally delivered or
telecopied, and three (3) days after dispatch, if posted, subject to proof of
delivery.
C. Waiver: The waiver by any party of a breach or default of any
provision of this License Agreement by the other party shall not constitute a
waiver by such party of any succeeding breach of the same or other provision;
nor shall any delay or omission on the part of either party to exercise or
avail itself of any right, power or privilege that it has or may have
hereunder, operate as a waiver of any such right, power or privilege by such
party.
D. Governing Law: This License Agreement shall be governed by, subject
to and construed under the laws of the State of New York.
E. Unenforceability: In the event that any term, clause or provision of
this License Agreement shall be construed to be or adjudged invalid, void or
unenforceable, such term, clause or provision shall be construed as severed
from this License Agreement, and the remaining terms, clauses and provisions
shall remain in effect.
F. Association: The parties, by this License Agreement, do not intend to
create a partnership, principal/agent, master/servant, franchisor/franchisee,
or joint venture relationship, and nothing in this License Agreement shall be
construed as creating such a relationship between the parties. The parties
agree that this License Agreement does not create any franchise relationship
between them that is subject to the provisions of the Petroleum Marketing
Practices Act or any similar state or local government law.
G. Counterparts: This License Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all such
counterparts together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this License Agreement
to be executed as of the day and year first above written.
GETTY REALTY CORP.
By:_______________________
Title:____________________
Date:_____________________
GETTY PETROLEUM MARKETING INC.
By:_______________________
Title:____________________
Date:_____________________
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EXHIBIT 10.6
1997 STOCK OPTION PLAN OF
GETTY PETROLEUM MARKETING INC.
GETTY PETROLEUM MARKETING INC., a corporation organized under the laws
of the State of Maryland (the "Company"), by resolution of its Board of
Directors adopted the 1997 Stock Option Plan of Getty Petroleum Marketing Inc.
(the "Plan") on December 12, 1996, effective as of January 31, 1997. The
purposes of this Plan are as follows:
(1) To further the growth, development and financial success of
the Company by providing additional incentives to certain of its officers,
directors and key employees who have been or will be given responsibility for
the management or administration of the Company's business affairs, by
assisting them to become owners of capital stock of the Company and thus to
benefit directly from its growth, development and financial success.
(2) To enable the Company to obtain and retain the services of the
type of professional, technical and managerial employees and officers and
directors considered essential to the long-range success of the Company by
providing and offering them an opportunity to become owners of capital stock of
the Company under Options, including Options in the case of officers and key
employees that are intended to qualify as "incentive stock options" under
Section 422 of the Internal Revenue Code of 1986, as amended.
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Plan, they shall have
the meaning specified below unless the context clearly indicates to the
contrary. The masculine pronoun shall include the feminine and neuter and the
neuter and the singular shall include the plural, where the context so
indicates.
SECTION 1.1 - AWARD LIMIT
"Award Limit" shall mean ________________ shares of the Company's $.01
par value common stock.
SECTION 1.2 -- BOARD
"Board" shall mean the Board of Directors of the Company.
SECTION 1.3 -- CODE
"Code" shall mean the Internal Revenue Code of 1986, as amended.
SECTION 1.4 - COMMITTEE
"Committee" shall mean the Stock Option Committee of the Board,
appointed as provided in Section 6.1.
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SECTION 1.5 - COMPANY
"Company" shall mean Getty Petroleum Marketing Inc. In addition,
"Company" shall mean any corporation assuming, or issuing new employee stock
options in substitution for, Incentive Stock Options, outstanding under the
Plan, in a transaction to which Section 424(a) of the Code applies.
SECTION 1.6 - DIRECTOR
"Director" shall mean a member of the Board.
SECTION 1.7 - EMPLOYEE
"Employee" shall mean any employee (as defined in accordance with the
Regulations and Revenue Rulings then applicable under Section 3401(c) of the
Code) of the Company, or of any corporation which is then a Parent Corporation
or a Subsidiary, whether such employee is so employed at the time this Plan is
adopted or becomes so employed subsequent to the adoption of this Plan.
SECTION 1.8 - EXCHANGE ACT
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
SECTION 1.9 - INCENTIVE STOCK OPTION
"Incentive Stock Option" shall mean an Option which qualifies under
Section 422 of the Code and which is designated as an Incentive Stock Option by
the Committee.
SECTION 1.10 - INDEPENDENT DIRECTOR
"Independent Director" shall mean a member of the Board who is not an
Employee of the Company.
SECTION 1.11 - NON-QUALIFIED OPTION
"Non-Qualified Option" shall mean an Option which is not an Incentive
Stock Option and which is designated as a Non-Qualified Option by the
Committee.
SECTION 1.12 - OFFICER
"Officer" shall mean an officer of the Company as defined in Rule
16a-1(f) under the Exchange Act, as such Rule may be amended in the future.
SECTION 1.13 - OPTION
"Option" shall mean an option to purchase capital stock of the
Company, granted under the Plan. "Options" includes both Incentive Stock
Options and Non-Qualified Options.
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SECTION 1.14 - OPTIONEE
"Optionee" shall mean an Officer, Director or Employee to whom an
Option is granted under the Plan.
SECTION 1.15 - PARENT CORPORATION
"Parent Corporation" shall mean any corporation in an unbroken chain
of corporations ending with the Company if each of the corporations other than
the Company then owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
SECTION 1.16 - PLAN
"Plan" shall mean this 1997 Stock Option Plan of Getty Petroleum
Marketing Inc.
SECTION 1.17 - RULE 16B-3
"Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange
Act, as such Rule may be amended in the future.
SECTION 1.18 - SECRETARY
"Secretary" shall mean the Secretary of the Company.
SECTION 1.19 - SECURITIES ACT
"Securities Act" shall mean the Securities Act of 1933, as amended.
SECTION 1.20 - SUBSIDIARY
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
SECTION 1.21 - TERMINATION OF EMPLOYMENT
"Termination of Employment" shall mean the time when service by the
Optionee as an Employee of (or as a Director of) the Company, a Parent
Corporation or a Subsidiary is terminated for any reason, with or without
cause, including, but not by way of limitation, a termination by resignation,
discharge, death or retirement, but excluding terminations where there is a
simultaneous reemployment by (or commencement of service as a Director of) the
Company, a Parent Corporation or a Subsidiary. The Committee, in its absolute
discretion, shall determine the effect of all other matters and questions
relating to Termination of Employment, including, but not by way of limitation,
the question of whether a Termination of Employment resulted from a discharge
for good cause, and all questions of whether particular leaves of absence
constitute Terminations of Employment; provided, however, that, with respect to
Incentive Stock Options, a leave of absence shall constitute a Termination of
Employment if,
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and to the extent that, such leave of absence interrupts employment for the
purposes of Section 422(a)(2) of the Code and the then applicable Regulations
and Revenue Rulings under said Section.
ARTICLE II
SHARES SUBJECT TO PLAN
SECTION 2.1 -- SHARES SUBJECT TO PLAN
(a) The shares of stock subject to Options shall be shares of the
Company's $.01 par value Common Stock. The aggregate number of such shares
which may be issued upon exercise of Options shall not exceed _______________.
(b) The maximum number of shares which may be subject to Options
granted under the Plan to any individual in any fiscal year shall not exceed
the Award Limit. To the extent required by Section 162(m) of the Code, shares
subject to Options which are canceled continue to be counted against the Award
Limit and if, after grant of an Option, the price of shares subject to such
Option is reduced, the transaction is treated as a cancellation of the Option
and a grant of a new Option and both the Option deemed to be canceled and the
Option deemed to be granted are counted against the Award Limit.
SECTION 2.2 -- UNEXERCISED OPTIONS
If any Option expires or is canceled without having been fully
exercised, the number of shares subject to such Option but as to which such
Option was not exercised prior to its expiration or cancellation may again be
optioned hereunder, subject to the limitations of Section 2.1.
SECTION 2.3 -- CHANGES IN COMPANY'S SHARES
In the event that the outstanding shares of Common Stock of the
Company are hereafter changed into or exchanged for a different number or kind
of shares or other securities of the Company, or of another corporation by
reason of reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, stock dividend or combination of shares,
appropriate adjustments shall be made by the Committee in the number and kind
of shares for the purchase of which Options may be granted, including
adjustments of the limitations in Section 2.1 on the maximum number and kind of
shares which may be issued on exercise of Options.
ARTICLE III
GRANTING OF OPTIONS
SECTION 3.1 -- ELIGIBILITY
Any Director, Officer or key Employee of the Company or of any
corporation which is then a Parent Corporation or a Subsidiary shall be
eligible to be granted Options, except as provided in Section 3.2.
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SECTION 3.2 -- QUALIFICATION OF INCENTIVE STOCK OPTIONS
No Incentive Stock Option shall be granted unless such Option, when
granted, qualifies as an "incentive stock option" under Section 422 of the
Code. No Incentive Stock Option shall be granted to any person who is not an
Employee.
SECTION 3.3 -- GRANTING OF OPTIONS
(a) The Committee shall from time to time, in its absolute
discretion, and subject to the applicable limitations of this Plan:
(i) Determine which Directors, Officers or key Employees
should be granted Options; and
(ii) Subject to the Award Limit, determine the number of
shares to be subject to such Options granted to such selected recipients; and
(iii) Determine whether such Options are to be Incentive
Stock Options or Non-Qualified Options and whether such Options are to qualify
as performance-based compensation as described in Section 162(m)(4)(C) of
the Code; and
(iv) Determine the terms and conditions of such Options,
consistent with the Plan; provided, however, that the terms and conditions of
Options intended to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code shall include, but not be limited to, such
terms and conditions as may be necessary to meet the applicable provisions of
Section 162(m) of the Code.
(b) Upon the selection of a person to be granted an Option, the
Committee shall instruct the Secretary to issue such Option and may impose such
conditions on the grant of such Option as it deems appropriate. Without
limiting the generality of the preceding sentence, the Committee may, in its
discretion and on such terms as it deems appropriate, require as a condition on
the grant of an Option to any person that such person surrender for
cancellation some or all of the unexercised Options which have been previously
granted to him. An Option, the grant of which is conditioned upon such
surrender, may have an Option price lower (or higher) than the Option price of
the surrendered Option, may cover the same (or a lesser or greater) number of
shares as the surrendered Option, may contain such other terms as the Committee
deems appropriate and shall be exercisable in accordance with its terms,
without regard to the number of shares, price, Option period or any other term
or condition of the surrendered Option.
ARTICLE IV
TERMS OF OPTIONS
SECTION 4.1 -- OPTION AGREEMENT
Each Option shall be evidenced by a written Stock Option Agreement,
which shall be executed by the Optionee and an authorized officer of the
Company and which shall contain such terms and conditions as the Committee
shall determine, consistent with the Plan. Stock Option Agreements evidencing
Options intended to qualify as performance-based compensation as described in
Section
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162(m)(4)(C) of the Code shall contain such terms and conditions as may be
necessary to meet the applicable provisions of Section 162(m) of the Code.
Stock Option Agreements evidencing Incentive Stock Options shall contain such
terms and conditions as may be necessary to meet the applicable provisions of
Section 422 of the Code.
SECTION 4.2 -- OPTION PRICE
(a) The price per share of the shares subject to each Option shall
be set by the Committee; provided, however, that the price per share shall not
be less than 100% of the fair market value of such shares on the date such
Option is granted; provided, further, that, in the case of an Incentive Stock
Option, the price per share shall not be less than 110% of the fair market
value of such shares on the date such Option is granted in the case of an
individual then owning (within the meaning of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of stock of the
Company, any Subsidiary or any Parent Corporation.
(b) For purposes of the Plan, the fair market value of a share of
the Company's stock as of a given date shall be: (i) the closing price of a
share of the Company's stock on the principal exchange on which shares of the
Company's stock are then trading, if any, on such date, or, if shares were not
traded on such date, then on the next preceding trading day during which a sale
occurred; or (ii) if such stock is not traded on an exchange but is quoted on
NASDAQ or a successor quotation system, (1) the last sales price (if the stock
is then listed as a National Market Issue under the NASD National Market
System) or (2) the mean between the closing representative bid and asked prices
(in all other cases) for the stock on such date as reported by NASDAQ or such
successor quotation system; or (iii) if such stock is not publicly traded on an
exchange and not quoted on NASDAQ or a successor quotation system, the mean
between the closing bid and asked prices for the stock, on such date, as
determined in good faith by the Committee; or (iv) if the Company's stock is
not publicly traded, the fair market value established by the Committee acting
in good faith.
SECTION 4.3 -- COMMENCEMENT OF EXERCISABILITY AND LIMITATIONS ON EXERCISE
(a) Except as the Committee may otherwise provide, no Option may
be exercised in whole or in part during the first year after such Option is
granted.
(b) Subject to the provisions of Sections 4.3(a), 4.3(c), 4.3(d)
and 7.3, Options shall become exercisable at such times and in such
installments (which may be cumulative) as the Committee shall provide in the
terms of each individual Option; provided, however, that by a resolution
adopted after an Option is granted the Committee may, on such terms and
conditions as it may determine to be appropriate and subject to Sections
4.3(a), 4.3(c), 4.3(d) and 7.3, accelerate the time at which such Option or any
portion thereof may be exercised.
(c) No portion of an Option which is unexercisable at Termination
of Employment shall thereafter become exercisable.
(d) Notwithstanding any other provision of this Plan, in the case
of an Incentive Stock Option, the aggregate fair market value (determined at
the time the Incentive Stock Option is granted) of the shares of the Company's
stock with respect to which "incentive stock options" (within the meaning of
Section 422 of the Code) are exercisable for the first time by the Optionee
during any calendar year (under the Plan and all other Incentive Stock Option
plans of the Company, any Subsidiary and any Parent Corporation) shall not
exceed $100,000.
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SECTION 4.4 -- EXPIRATION OF OPTIONS
(a) No Option may be exercised to any extent by anyone after the
first to occur of the following events:
(i) The expiration of ten years from the date the Option
was granted; or
(ii) With respect to an Incentive Stock Option in the case
of an Optionee owning (within the meaning of Section 424(d) of the
Code), at the time the Incentive Stock Option was granted, more than
10% of the total combined voting power of all classes of stock of the
Company, any Subsidiary or any Parent Corporation, the expiration of
five years from the date the Incentive Stock Option was granted; or
(iii) Except in the case of any Optionee who is disabled
(within the meaning of Section 22(e)(3) of the Code), the expiration
of three months from the date of the Optionee's Termination of
Employment for any reason other than such Optionee's death unless the
Optionee dies within said three-month period; or
(iv) In the case of an Optionee who is disabled (within
the meaning of Section 22(e)(3) of the Code), the expiration of one
year from the date of the Optionee's Termination of Employment for any
reason other than such Optionee's death unless the Optionee dies
within said one-year period; or
(v) The expiration of one year from the date of the
Optionee's death.
(b) Subject to the provisions of Section 4.4(a), the Committee
shall provide, in the terms of each individual Option, when such Option expires
and becomes unexercisable; and (without limiting the generality of the
foregoing) the Committee may provide in the terms of individual Options that
said Options expire immediately upon a Termination of Employment for any
reason.
SECTION 4.5 -- CONSIDERATION
In consideration of the granting of an Option, the Optionee shall
agree, in the written Stock Option Agreement, to remain in the employ (or to
serve as a Director in the case of Directors) of the Company, a Parent
Corporation or a Subsidiary for a period of at least one year after the Option
is granted. Nothing in this Plan or in any Stock Option Agreement hereunder
shall confer upon any Optionee any right to continue in the employ (or to serve
as a Director in the case of Directors) of the Company, any Parent Corporation
or any Subsidiary or shall interfere with or restrict in any way the rights of
the Company, its Parent Corporations and its Subsidiaries, which are hereby
expressly reserved, to discharge (in the case of Directors, for the applicable
corporation or its shareholders to terminate the service as Director of) any
Optionee at any time for any reason whatsoever, with or without cause.
SECTION 4.6 -- ADJUSTMENTS IN OUTSTANDING OPTIONS
(a) In the event that the outstanding shares of the stock subject
to Options are changed into or exchanged for a different number or kind of
shares of the Company or other securities of the Company by reason of merger,
consolidation, recapitalization, reclassification, stock split-up, stock
dividend or combination of shares, the Committee shall make an appropriate and
equitable adjustment in the number and kind of shares as to which all
outstanding Options, or portions thereof then unexercised, shall be
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exercisable, to the end that after such event the Optionee's proportionate
interest shall be maintained as before the occurrence of such event. Such
adjustment in an outstanding Option shall be made without change in the total
price applicable to the Option or the unexercised portion of the Option (except
for any change in the aggregate price resulting from rounding-off of share
quantities or prices) and with any necessary corresponding adjustment in Option
price per share; provided, however, that, in the case of Incentive Stock
Options, each such adjustment shall be made in such manner as not to constitute
a "modification" within the meaning of Section 424(h)(3) of the Code]. Any
such adjustment made by the Committee shall be final and binding upon all
Optionees, the Company and all other interested persons.
(b) In the event the Company is merged or consolidated with
another corporation and the Company is not the surviving corporation, or in the
event the property or stock of the Company is acquired by another corporation,
or in the event of a separation, reorganization, spin-off or liquidation of the
Company or any business unit thereof, the Committee or the Board of Directors
(or any committee thereof to which appropriate authority has been delegated) of
any other corporation assuming the obligations of the Company hereunder, shall
either:
(i) make appropriate provision for the protection of any
outstanding Options by the substitution on an equitable basis of
appropriate stock of the Company, and/or of the merged, consolidated
or otherwise reorganized corporation or corporations which will be
issuable in respect to the shares of common stock of the Company,
provided only that the excess of the aggregate fair market value of
the shares subject to such Options immediately after such substitution
or substitutions over the purchase price thereof is not more than the
excess of the aggregate fair market value of the shares subject to
such Options immediately before such substitution over the purchase
price thereof, and provided that the new Option or the assumption of
the old Option does not give any Optionee additional benefits which
the Optionee did not have under the old Option; or
(ii) upon written notice to the Employee provide that the
Option must be exercised within sixty (60) days after the date of such
notice or it will be terminated, provided that the Committee may, at
its discretion, waive the exercise period.
Any adjustment of an Incentive Stock Option under this paragraph shall be made
in such a manner so as not to constitute a "modification" within the meaning of
Section 424(h)(3) of the Code.
(c) With respect to Options intended to qualify as Incentive Stock
Options or as performance-based compensation under Section 162(m) of the Code,
no adjustments or action described in this Section 4.6 or in any other
provision of the Plan shall be authorized to the extent that such adjustment or
action would cause the Plan to violate Section 422(b)(1) of the Code or would
cause such Option to fail to so qualify under Section 162(m) of the Code,
respectively, or any successor provisions thereto. Furthermore, no such
adjustment or action shall be authorized to the extent such adjustment or
action would result in short-swing profits liability under Section 16 or
violate the exemptive conditions of Rule 16b-3 unless the Committee (or the
Board, in the case of Options granted to Independent Directors) determines that
the Option or other award is not to comply with such exemptive conditions. The
number of share subject to any Option, right or award shall always be rounded
to the next whole number.
SECTION 4.7 -- MERGER, CONSOLIDATION, ACQUISITION, LIQUIDATION OR DISSOLUTION
Notwithstanding the provisions of Section 4.6, in its absolute
discretion, and on such terms and conditions as it deems appropriate, the
Committee may provide by the terms of any Option that such
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Option cannot be exercised after the merger or consolidation of the Company
with or into another corporation, the acquisition by another corporation or
person of all or substantially all of the Company's assets or 80% or more of
the Company's then outstanding voting stock or the liquidation or dissolution
of the Company; and if the Committee so provides, it may, in its absolute
discretion and on such terms and conditions as it deems appropriate, also
provide, either by the terms of such Option or by a resolution adopted prior to
the occurrence of such merger, consolidation, acquisition, liquidation or
dissolution, that, for some period of time prior to such event, such Option
shall be exercisable as to all shares covered thereby, notwithstanding anything
to the contrary in Section 4.3(a), Section 4.3(b) and/or any installment
provisions of such Option, but subject to Section 4.3(d).
ARTICLE V
EXERCISE OF OPTIONS
SECTION 5.1 -- PERSON ELIGIBLE TO EXERCISE
During the lifetime of the Optionee, only he may exercise an Option
(or any portion thereof) granted to him. After the death of the Optionee, any
exercisable portion of an Option may, prior to the time when such portion
becomes unexercisable under the Plan or the applicable Stock Option Agreement,
be exercised by his personal representative or by any person empowered to do so
under the deceased Optionee's will or under the then applicable laws of descent
and distribution.
SECTION 5.2 -- PARTIAL EXERCISE
At any time and from time to time prior to the time when any
exercisable Option or exercisable portion thereof becomes unexercisable under
the Plan or the applicable Stock Option Agreement, such Option or portion
thereof may be exercised in whole or in part; provided, however, that the
Company shall not be required to issue fractional shares and the Committee may,
by the terms of the Option, require any partial exercise to be with respect to
a specified minimum number of shares.
SECTION 5.3 -- MANNER OF EXERCISE
An exercisable Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary or his office of all of the
following prior to the time when such Option or such portion becomes
unexercisable under the Plan or the applicable Stock Option Agreement:
(a) Notice in writing signed by the Optionee or other person then
entitled to exercise such Option or portion, stating that such Option or
portion is exercised, such notice complying with all applicable rules
established by the Committee; and
(b) (i) Full payment (in cash or by check) for the shares
with respect to which such Option or portion is thereby exercised; or
(ii) With the consent of the Committee, shares of the
Company's Common Stock owned by the Optionee duly endorsed for
transfer to the Company with a fair market value (as determinable
under Section 4.2(b)) on the date of delivery equal to the aggregate
Option price of the shares with respect to which such Option or
portion is thereby exercised; or
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(iii) With the consent of the Committee, a full recourse
promissory note bearing interest (at least such rate as shall then
preclude the imputation of interest under the Code or any successor
provision) and payable upon such terms as may be prescribed by the
Committee. The Committee may also prescribe the form of such note and
the security to be given for such note. No Option may, however, be
exercised by delivery of a promissory note or by a loan from the
Company when or where such loan or other extension of credit is
prohibited by law; or
(iv) With the consent of the Committee, any combination of
the consideration provided in the foregoing subsections (i), (ii), and
(iii); and
(c) The payment to the Company (or other employer corporation) of
all amounts which it is required to withhold under federal, state or local law
in connection with the exercise of the Option; with the consent of the
Committee, and subject to the requirements of Rule 16b-3, shares of the
Company's Common Stock owned by the Optionee duly endorsed for transfer, or
issuable to the Optionee upon exercise of the Option, valued in accordance with
Section 4.2(b) at the date of Option exercise, may be used to make all or part
of such payment; and
(d) Such representations and documents as the Committee, in its
absolute discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act and any other federal or state
securities laws or regulations. The Committee may, in its absolute discretion,
also take whatever additional actions it deems appropriate to effect such
compliance including, without limitation, placing legends on share certificates
and issuing stop-transfer orders to transfer agents and registrars; and
(e) In the event that the Option or portion thereof shall be
exercised pursuant to Section 5.1 by any person or persons other than the
Optionee, appropriate proof of the right of such person or persons to exercise
the Option or portion thereof.
SECTION 5.4 -- CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES
The shares of stock issuable and deliverable upon the exercise of an
Option, or any portion, thereof, may be either previously authorized but
unissued shares or issued shares which have then been reacquired by the
Company. The Company shall not be required to issue or deliver any certificate
or certificates for shares of stock purchased upon the exercise of any Option
or portion thereof prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges
on which such class of stock is then listed; and
(b) The completion of any registration or other qualification of
such shares under any state or federal law or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental regulatory
body, which the Committee shall, in its absolute discretion, deem necessary or
advisable; and
(c) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable; and
(d) The payment to the Company (or other employer corporation) of
all amounts which it is required to withhold under federal, state or local law
in connection with the exercise of the Option; and
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(e) The lapse of such reasonable period of time following the
exercise of the Option as the Committee may establish from time to time for
reasons of administrative convenience.
SECTION 5.5 -- RIGHTS AS SHAREHOLDERS
The holders of Options shall not be, nor have any of the rights or
privileges of, shareholders of the Company in respect of any shares purchasable
upon the exercise of any part of an Option unless and until certificates
representing such shares have been issued by the Company to such holders.
SECTION 5.6 -- TRANSFER RESTRICTIONS
With respect to Options granted prior to November 1, 1996, no shares
acquired upon exercise of any Option by any Director or Officer may be sold,
assigned, pledged, encumbered or otherwise transferred until at least six
months have elapsed from (but excluding) the date that such Option was granted,
unless otherwise approved in writing by the Committee. The Committee, in its
absolute discretion, may impose such other restrictions on the transferability
of the shares purchasable upon the exercise of an Option as it deems
appropriate. Any such other restriction shall be set forth in the respective
Stock Option Agreement and may be referred to on the certificates evidencing
such shares. The Committee may require the Optionee to give the Company prompt
notice of any disposition of shares of stock, acquired by exercise of an
Incentive Stock Option, within two years from the date of granting such Option
or one year after the transfer of such shares to such Optionee. The Committee
may direct that the certificates evidencing shares acquired by exercise of an
Incentive Stock Option refer to such requirement to give prompt notice of
disposition.
ARTICLE VI
ADMINISTRATION
SECTION 6.1 -- STOCK OPTION COMMITTEE
The Stock Option Committee (or another committee or a subcommittee of
the Board assuming the functions of the Committee under this Plan) shall
consist solely of two or more Directors appointed by and holding office at the
pleasure of the Board, each of whom is both a "non-employee director" as
defined by Rule 16b-3 and an "outside director" for purposes of Section 162(m)
of the Code. Appointment of Committee members shall be effective upon
acceptance of appointment. Committee members may resign at any time by
delivering written notice to the Board. Vacancies in the Committee shall be
filled by the Board.
SECTION 6.2 -- DUTIES AND POWERS OF COMMITTEE
It shall be the duty of the Committee to conduct the general
administration of the Plan in accordance with its provisions. The Committee
shall have the power to interpret the Plan and the Options and to adopt such
rules for the administration, interpretation and application of the Plan as are
consistent therewith and to interpret, amend or revoke any such rules. Any
such interpretations and rules in regard to Incentive Stock Options shall be
consistent with the basic purpose of the Plan to grant "incentive stock
options" within the meaning of Section 422 of the Code. In its absolute
discretion, the Board may at any time and from time to time exercise any and
all rights and duties of the Committee under the Plan, except with respect to
matters which under Rule 16b-3 or Section 162(m) of the Code, or any
regulations or rules issued thereunder, are required to be determined in the
sole discretion of the Committee.
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SECTION 6.3 -- MAJORITY RULE
The Committee shall act by a majority of its members in office. The
Committee may act either by vote at a meeting or by a memorandum or other
written instrument signed by a majority of the Committee.
SECTION 6.4 -- COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS
Members of the Committee shall receive such compensation for their
services as members as may be determined by the Board. All expenses and
liabilities incurred by members of the Committee in connection with the
administration of the Plan shall be borne by the Company. The Committee may,
with the approval of the Board, employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Committee, the Company and its
Officers and Directors shall be entitled to rely upon the advice, opinions or
valuations of any such persons. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be final and binding
upon all Optionees, the Company and all other interested persons. No member of
the Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or the Options, and
all members of the Committee shall be fully protected by the Company in respect
to any such action, determination or interpretation.
ARTICLE VII
OTHER PROVISIONS
SECTION 7.1 -- OPTIONS NOT TRANSFERABLE
No Option or interest or right therein or part thereof shall be liable
for the debts, contracts or engagements of the Optionee or his successors in
interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether such
disposition be voluntary or involuntary or by operation of law by judgment,
levy, attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null and
void and of no effect; provided, however, that nothing in this Section 7.1
shall prevent transfers by will or by the applicable laws of descent and
distribution.
SECTION 7.2 -- AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
The Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Board or the
Committee. However, without approval of the Company's shareholders given
within 12 months before or after the action by the Board or the Committee, no
action of the Board or the Committee may, except as provided in Section 2.3,
increase any limit imposed in Section 2.1 on the maximum number of shares which
may be issued on exercise of Options, materially modify the eligibility
requirements of Section 3.1, reduce the minimum Option price requirements of
Section 4.2(a), extend the limit imposed in this Section 7.2 on the period
during which Options may be granted or amend or modify the Plan in a manner
requiring shareholder approval under Rule 16b-3. None of the amendment,
suspension or termination of the Plan shall, without the consent of the holder
of the Option, impair any rights or obligations under any Option theretofore
granted. No Option may be granted during any period of suspension nor after
termination of the Plan, and in no event may any Option be granted under this
Plan after the first to occur of the following events:
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(a) The expiration of ten years from the date the Plan is adopted
by the Board; or
(b) The expiration of ten years from the date the Plan is approved
by the Company's shareholders under Section 7.3.
SECTION 7.3 -- APPROVAL OF PLAN BY SHAREHOLDERS
This Plan will be submitted for the approval of the Company's
shareholders within 12 months after the date of the Board's initial adoption of
the Plan. Options may be granted prior to such shareholder approval; provided,
however, that such Options shall not be exercisable prior to the time when the
Plan is approved by the shareholders; provided, further, that if such approval
has not been obtained at the end of said 12-month period, all Options
previously granted under the Plan shall thereupon be cancelled and become null
and void. The Company shall take such actions with respect to the Plan as may
be necessary to satisfy the requirements of Rule 16b-3(b), or any comparable
rule adopted thereunder then in effect.
SECTION 7.4 - LIMITATIONS APPLICABLE TO SECTION 16 PERSONS
AND PERFORMANCE-BASED COMPENSATION
Notwithstanding any other provision of this Plan, this Plan, and any
Option granted to any individual who is then subject to Section 16 of the
Exchange Act, shall be subject to any additional limitations set forth in any
applicable exemptive rule under Section 16 of the Exchange Act (including any
amendment to Rule 16b-3 of the Exchange Act) that are requirements for the
application of such exemptive rule. To the extent permitted by applicable law,
the Plan, and Options granted hereunder shall be deemed amended to the extent
necessary to conform to such applicable exemptive rule. Furthermore,
notwithstanding any other provision of this Plan, any Option intended to
qualify as performance-based compensation as described in Section 162(m)(4)(C)
of the Code shall be subject to any additional limitations set forth in Section
162(m) of the Code (including any amendment to Section 162(m) of the Code) or
any regulations or rulings issued thereunder that are requirements for
qualification as performance-based compensation as described in Section
162(m)(4)(C) of the Code, and this Plan shall be deemed amended to the extent
necessary to conform to such requirements.
SECTION 7.5 -- EFFECT OF PLAN UPON OTHER OPTION AND COMPENSATION PLANS
The adoption of this Plan shall not affect any other option,
compensation or incentive plans in effect for the Company, any Parent
Corporation or any Subsidiary. Nothing in this Plan shall be construed to
limit the right of the Company, any Parent Corporation or any Subsidiary (a) to
establish any other forms of incentives or compensation for Officers, Directors
or Employees of the Company, any Parent Corporation or any Subsidiary or (b) to
grant or assume options otherwise than under this Plan in connection with any
proper corporate purpose, including, but not by way of limitation, the grant or
assumption of options in connection with the acquisition by purchase, lease,
merger, consolidation or otherwise, of the business, stock or assets of any
corporation, firm or association.
SECTION 7.6 -- TITLES
Titles are provided herein for convenience only and are not to serve
as a basis for interpretation or construction of the Plan.
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<PAGE> 14
SECTION 7.7 -- CONFORMITY TO SECURITIES LAWS
The Plan is intended to conform to the extent necessary with all
provisions of the Securities Act and the Exchange Act and any and all
regulations and rules promulgated by the Securities and Exchange Commission
thereunder, including without limitation Rule 16b-3. Notwithstanding anything
herein to the contrary, the Plan shall be administered, and Options shall be
granted and may be exercised, only in such a manner as to conform to such laws,
rules and regulations. To the extent permitted by applicable law, the Plan and
Options granted hereunder shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.
* * * *
I hereby certify that the foregoing Plan was duly adopted by
the Board of Directors of Getty Petroleum Marketing Inc. on _________, 199_.
Executed on this _____ day of __________, 199_.
_______________________________________
Secretary
* * * *
I hereby certify that the foregoing Plan was duly approved by
the shareholders of Getty Petroleum Marketing Inc. on ____________, 199__.
Executed on this _____ day of ___________, 199__.
_______________________________________
Secretary
14
<PAGE> 1
EXHIBIT 10.8
STOCK OPTION REFORMATION AGREEMENT
THIS STOCK OPTION REFORMATION AGREEMENT ("Agreement") is made
and entered into as of January ____, 1997, by and between GETTY PETROLEUM
MARKETING INC., a Maryland corporation ("Marketing"), and GETTY PETROLEUM
CORP., a Delaware corporation ("Getty", after the Distribution, to be known as
Getty Realty Corp. ("Realty")).
RECITALS
WHEREAS, Getty intends to pay a special dividend to the
shareholders of Getty Stock of one share of Marketing Stock for each share of
Getty Stock, consisting of all outstanding shares of Marketing Stock (the
"Distribution"); and
WHEREAS, in connection with said special dividend, Getty and
Marketing have entered into a Reorganization and Distribution Agreement (the
"Distribution Agreement") dated as of January 31, 1997; and
WHEREAS, pursuant to the Distribution Agreement Getty and
Marketing have agreed to enter into an agreement reforming certain stock
options pursuant to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, and other valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Getty and Marketing agree as follows:
ARTICLE I
DEFINITIONS
Wherever the following terms are used in this Agreement, the
following terms shall have the meanings specified below unless the context
clearly indicates to the contrary.
Section 1.1 - Conversion Award
An award of Options to reflect the effect of the Distribution
on Getty Options held on the Cut-off Date in accordance with Article II.
Section 1.2 - Cut-off Date
The date immediately preceding the Distribution Date.
Section 1.3 - Distribution Date
The date on which the Distribution occurs.
<PAGE> 2
Section 1.4 - Getty Closing Stock Price
The New York Stock Exchange closing price per share for the
common stock, par value $.10 per share, of Getty on the Distribution Date,
trading regular way, with a due bill for the special dividend of Marketing
Stock to be made in connection with the Distribution.
Section 1.5 - Getty Option
An option to acquire Getty Stock issued pursuant to any of the
Option Plans.
Section 1.6 - Getty Stock
The common stock, par value $.10 per share, of Getty on or
prior to the Distribution Date.
Section 1.7 - ISO Conversion Ratio
The ISO Conversion Ratio with respect to the reformation of a
Getty Option into an option to purchase Realty Stock is equal to the ratio of:
(a) the excess of the Getty Closing Stock Price
over the exercise price of the Getty Option, to
(b) the excess of the Post-Conversion Price of
the Realty Stock over the exercise price of the option with respect
thereto (as determined pursuant to Section 2.2).
Section 1.8 - Marketing Exercise Ratio
The ratio of (a) the Post-Conversion Price of Marketing Stock
to (b) the sum of the Post-Conversion Price of Marketing Stock and the Post
Conversion Price of Realty Stock.
Section 1.9 - Marketing Option
An option to acquire Marketing Stock issued pursuant to a
Conversion Award.
Section 1.10 - Marketing Stock
The common stock, par value $.01 per share, of Marketing.
Section 1.11 - Marketing Subsidiary
Any subsidiary of Marketing as defined in the Distribution
Agreement at the time of the Distribution.
2
<PAGE> 3
Section 1.12 - Option
A Marketing Option, Getty Option or a Realty Option.
Section 1.13 - Option Plans
Certain stock option plans, and agreements entered into
thereunder, maintained by Getty prior to the Distribution Date for employees
and directors of Getty, including the Getty Petroleum Corp. 1985 Stock Option
Plan, the 1988 Stock Option Plan of Getty Petroleum Corp. and the 1991 Stock
Option Plan of Getty Petroleum Corp.
Section 1.14 - Post-Conversion Price
The average, determined separately for each of Marketing Stock
and Realty Stock, of the closing New York Stock Exchange prices thereof for the
ten consecutive trading days commencing with the first day on or after the
Distribution Date during which Marketing Stock is traded ("First Ten Trading
Days"), as reported in the Wall Street Journal. If, for any reason, Realty
Stock (or Getty Stock, if Getty's name is not changed) is not traded on the New
York Stock Exchange on an "ex dividend" basis with respect to the Distribution
on any day during the First Ten Trading Days, then the Post Conversion Price
for Realty Stock on such day shall be equal to the closing New York Stock
Exchange price of Realty Stock (or Getty Stock, if Getty's name is not
changed), on such day, less the closing New York Stock Exchange price of
Marketing Stock on such day, as reported in the Wall Street Journal.
Section 1.15 - Realty Exercise Ratio
The ratio of (a) the Post-Conversion Price of Realty Stock to
(b) the sum of the Post-Conversion Price of Realty Stock and the Post
Conversion Price of Marketing Stock.
Section 1.16 - Realty Option
An option to acquire Realty Stock, issued pursuant to a
Conversion Award.
Section 1.17 - Realty Stock
The common stock, par value $.10 per share, of Realty after
the Distribution Date.
Section 1.18 - Service Credit
The period taken into account under any Option Plan for
purposes of determining length of service to satisfy any eligibility, vesting,
benefit accrual or similar requirements under such Option Plan.
3
<PAGE> 4
Section 1.19 - Stock
Marketing Stock, Getty Stock or Realty Stock.
Section 1.20 - Subsidiary
Any corporation, a majority of whose capital stock with voting
power, under ordinary circumstances, to elect directors is, at the date of
determination, directly or indirectly owned by any person as to which a
determination of subsidiary status is to be made, including a Marketing
Subsidiary.
ARTICLE II
STOCK OPTION REFORMATION
Section 2.1 - Substitution of Stock Options
(a) On the Distribution Date, each nonqualified Getty
Option shall be reformed as one Realty Option and one Marketing Option each,
except as described below, with terms identical to those of the Getty Option,
except with respect to the exercise price which shall be adjusted as provided
in Section 2.2.
(b) On the Distribution Date, each Getty Option awarded
as an incentive stock option pursuant to Section 422 of the Internal Revenue
Code of 1986 ("Incentive Stock Option") shall be reformed as a number of whole
or fractional Incentive Stock Options with respect to Realty Stock equal to the
ISO Conversion Ratio ("Realty ISOs"), with terms identical to those of the
Getty Option, except with respect to the exercise price which shall be adjusted
as provided in Section 2.2. Any Realty ISOs not exercised within three months
following the Distribution Date shall thereupon automatically convert into the
number of nonqualified Options equal to the number of Getty Options from which
they were converted pursuant to the preceding sentence and each such
nonqualified Option shall thereupon be reformed as one Realty Option and one
Marketing Option, as described in Section 2.1(a).
Section 2.2 - Exercise Prices of New Options
The exercise price of each such Realty Option shall be equal
to the product of the exercise price of the applicable Getty Option and the
Realty Exercise Ratio. The exercise price of each such Marketing Option shall
be equal to the product of the exercise price of the applicable Getty Option
and the Marketing Exercise Ratio.
Section 2.3 - Service Credits
In connection with the Distribution and for purposes of
determining Service Credits under any Option Plan, Realty and Marketing shall
credit each of their respective employees and directors with such employee's or
director's Service Credit as reflected in the Getty payroll system records as
of the Cut-off date. Such Service Credit shall continue to be
4
<PAGE> 5
maintained as described herein for as long as the employee or director does not
terminate employment (or in the case of a director, does not cease providing
services as a director).
Section 2.4 - Effect of Post-Distribution Transfer on Conversion Awards
Conversion Awards shall be administered with respect to any
provisions relating to continuing employment requirements to give Service
Credit for service with the party employing the grantee as of the Distribution
Date. Solely with respect to such Conversion Awards (and not with respect to
new awards made after the Cut-off Date), for purposes of determining whether a
termination of employment has occurred under the terms of any provision
requiring continued employment, termination of employment through January 31,
1998 shall not be deemed to occur if an employee leaves the service of one
party hereto to immediately begin employment with the other party; the business
operation or business unit from which such employee terminates employment shall
promptly notify the administrator of the Option Plan of each party of the
occurrence of any termination subject to the provisions of this Section 2.4.
Whichever party is the new employer shall inform the former employer of any
termination of employment of such transferred employee. Any termination of
employment other than as described in this Section 2.4 shall be treated by
applying the applicable provisions of the Option Plan relating to terminations
of employment without the modifications described in this Section 2.4.
Section 2.5 - Written Statement
Within 30 days after the Distribution Date, the Secretary of
Realty (or any officer of Realty to whom appropriate authority has been
delegated) shall provide each holder of a Getty Option with a written statement
containing a general description of this Agreement and specifically listing the
exercise price of such option holder's Realty Option and Marketing Option.
ARTICLE III
MISCELLANEOUS
Section 3.1 - Relationship of Parties
Nothing in this Agreement shall be deemed or construed by the
parties or any third party as creating the relationship of principal and agent,
partnership or joint venture between the parties, it being understood and
agreed that no provision contained herein, and no act of the parties, shall be
deemed to create any relationship between the parties other than the
relationship set forth herein.
Section 3.2 - Access to Information; Cooperation
Realty and Marketing and their authorized agents will be given
reasonable access to and may take copies of all information relating to the
subjects of this Agreement (to the extent permitted by federal and state
confidentiality laws) in the custody of the other
5
<PAGE> 6
party, including any agent, contractor, subcontractor, agent or any other
person or entity under contract of such party. The parties will provide one
another with such information within the scope of this Agreement as is
reasonably necessary to administer each party's Option Plans. The parties will
cooperate with each other to minimize the disruption caused by any such access
and providing of information.
Section 3.3 - Assignment
Neither party shall, without prior written consent of the
other, have the right to assign any rights or delegate any obligations under
this Agreement.
Section 3.4 - Headings
The headings used in this Agreement are inserted only for the
purpose of convenience and reference, and in no way define or limit the scope
or intent of any provision or part hereof.
Section 3.5 - Severability of Provisions
Neither Realty nor Marketing intend to violate statutory or
common law by executing this Agreement. If any section, sentence, paragraph,
clause or combination of provisions in this Agreement is in violation of any
law, such sections, sentences, paragraphs, clauses or combinations shall be
inoperative and the remainder of this Agreement shall remain in full force and
effect and shall be binding upon the parties.
Section 3.6 - Parties Bound
This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing herein, expressed or implied, shall be construed to give any other
person any legal or equitable rights hereunder.
Section 3.7 - Notices
All notices, consents, approvals and other communications
given or made pursuant hereto shall be in writing and shall be deemed to have
been duly given when delivered personally or by overnight courier or three days
after being mailed by registered or certified mail (postage prepaid, return
receipt requested) to the named representatives of the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice, except that notices of changes of address shall be effective upon
receipt):
(i) if to Realty
Getty Realty Corp.
125 Jericho Turnpike
Jericho, New York 11753
Attention: __________________
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(ii) if to Marketing
Getty Petroleum Marketing Inc.
125 Jericho Turnpike
Jericho, New York 11753
Attention: __________________
Section 3.8 - Further Action
Realty and Marketing each shall cooperate in good faith and
take such steps and execute such papers as may be reasonably requested by the
other party to implement the terms and provisions of this Agreement.
Section 3.9 - Waiver
Realty and Marketing each agree that the waiver of any default
under any term or condition of this Agreement shall not constitute a waiver of
any subsequent default or nullify the effectiveness of that term or condition.
Section 3.10 - Governing Law
All controversies and disputes arising out of or under this
Agreement shall be determined pursuant to the laws of the state of New York,
regardless of the laws that might be applied under applicable principals of
conflicts of laws.
Section 3.11 - Entire Agreement
This Agreement and the Distribution Agreement constitute the
entire understanding between the parties hereto, and supersede all prior
written or oral communications, relating to the subject matter covered by said
agreements. To the extent that this Agreement or the Distribution Agreement
are inconsistent with (i) the change-in-control agreements dated December 9,
1994 and amended on March 7, 1996, made by Getty in favor of certain officers
and employees of Getty (the "Change-in-Control Agreements"), or (ii) the option
agreements made by Getty pursuant to the Option Plans in favor of certain
officers and key employees of Getty to whom stock options were granted (the
"Option Agreements"), the terms and provisions of this Agreement or the
Distribution Agreement will control; provided, however, that neither this
Agreement nor the Distribution Agreement shall limit the applicability of any
supplemental terms or provisions (including, e.g., any vesting provisions)
contained in the Change-in-Control Agreements or the Option Agreements which
are not inconsistent with this Agreement or the Distribution Agreement.
No amendment, modification, extension or failure to enforce
any condition of this Agreement by either party shall be deemed a waiver of its
rights herein. This agreement shall not be amended except by a writing
executed by the parties.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
GETTY PETROLEUM CORP.,
a Delaware corporation
By: __________________________
Its: __________________________
GETTY PETROLEUM MARKETING INC.,
a Maryland Corporation
By: __________________________
Its: __________________________
8
<PAGE> 1
EXHIBIT 10.9
GETTY PETROLEUM MARKETING INC. RETIREMENT AND PROFIT SHARING PLAN
AND ALL SUPPORTING FORMS HAVE BEEN PRODUCED FOR
MARKLEY ACTUARIAL SERVICES, INC.
Copyright 1995 Corbel
All Rights Reserved
<PAGE> 2
GETTY PETROLEUM MARKETING INC. RETIREMENT AND PROFIT SHARING PLAN
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
DEFINITIONS
ARTICLE II
TOP HEAVY AND ADMINISTRATION
<S> <C> <C>
2.1 TOP HEAVY PLAN REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.2 DETERMINATION OF TOP HEAVY STATUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.7 RECORDS AND REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.8 APPOINTMENT OF ADVISERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.9 INFORMATION FROM EMPLOYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.10 PAYMENT OF EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.11 MAJORITY ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.12 CLAIMS PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.13 CLAIMS REVIEW PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.2 APPLICATION FOR PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.3 EFFECTIVE DATE OF PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.4 DETERMINATION OF ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.5 TERMINATION OF ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.6 OMISSION OF ELIGIBLE EMPLOYEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
i
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<TABLE>
<S> <C> <C>
3.7 INCLUSION OF INELIGIBLE EMPLOYEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.8 ELECTION NOT TO PARTICIPATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.2 PARTICIPANT'S SALARY REDUCTION ELECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.3 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.4 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS . . . . . . . . . . . . . . . . . . . . . . . 34
4.5 ACTUAL DEFERRAL PERCENTAGE TESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.7 ACTUAL CONTRIBUTION PERCENTAGE TESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
4.8 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS . . . . . . . . . . . . . . . . . . . . . . . . 47
4.9 MAXIMUM ANNUAL ADDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
4.10 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
4.11 TRANSFERS FROM QUALIFIED PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
4.12 DIRECTED INVESTMENT ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE V
VALUATIONS
5.1 VALUATION OF THE TRUST FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5.2 METHOD OF VALUATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
</TABLE>
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<TABLE>
<S> <C> <C>
6.2 DETERMINATION OF BENEFITS UPON DEATH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
6.3 DISABILITY RETIREMENT BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
6.4 DETERMINATION OF BENEFITS UPON TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
6.5 DISTRIBUTION OF BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.6 DISTRIBUTION OF BENEFITS UPON DEATH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
6.7 TIME OF SEGREGATION OR DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.8 DISTRIBUTION FOR MINOR BENEFICIARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.10 ADVANCE DISTRIBUTION FOR HARDSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
6.11 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . 74
6.12 DIRECT ROLLOVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
ARTICLE VII
AMENDMENT, TERMINATION, MERGERS AND LOANS
7.1 AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
7.2 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
7.3 MERGER OR CONSOLIDATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
7.4 LOANS TO PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
ARTICLE VIII
MISCELLANEOUS
8.1 PARTICIPANT'S RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
8.2 ALIENATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
8.3 CONSTRUCTION OF PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
8.4 GENDER AND NUMBER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
8.5 LEGAL ACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
8.6 PROHIBITION AGAINST DIVERSION OF FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
8.7 BONDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
</TABLE>
iii
<PAGE> 6
<TABLE>
<S> <C> <C>
8.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
8.9 INSURER'S PROTECTIVE CLAUSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
8.10 RECEIPT AND RELEASE FOR PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
8.11 ACTION BY THE EMPLOYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
8.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY . . . . . . . . . . . . . . . . . . . . . . . . 83
8.13 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
8.14 APPROVAL BY INTERNAL REVENUE SERVICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
8.15 UNIFORMITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
</TABLE>
iv
<PAGE> 7
GETTY PETROLEUM MARKETING INC. RETIREMENT AND PROFIT SHARING PLAN
THIS PLAN, hereby adopted this ___________________ day of
_________________________, 19____, by Getty Petroleum Marketing Inc. (herein
referred to as the "Employer").
W I T N E S S E T H:
WHEREAS, the Employer desires to recognize the contribution
made to its successful operation by its employees and to reward such
contribution by means of a 401(k) Profit Sharing Plan for those employees who
shall qualify as Participants hereunder;
NOW, THEREFORE, effective February 1, 1997, (hereinafter
called the "Effective Date"), the Employer hereby establishes a Profit Sharing
Plan (the "Plan") for the exclusive benefit of the Participants and their
Beneficiaries, on the following terms:
ARTICLE I
DEFINITIONS
1.1 "Act" means the Employee Retirement Income Security Act of
1974, as it may be amended from time to time.
1.2 "Administrator" means the person or entity designated by the
Employer pursuant to Section 2.4 to administer the Plan on behalf of the
Employer.
1.3 "Affiliated Employer" means any corporation which is a member
of a controlled group of corporations (as defined in Code Section 414(b)) which
includes the Employer; any trade or business (whether or not incorporated)
which is under common control (as defined in Code Section 414(c)) with the
Employer; any organization (whether or not incorporated) which is a member of
an affiliated service group (as defined in Code Section 414(m)) which includes
the Employer; and any other entity required to be aggregated with the Employer
pursuant to Regulations under Code Section 414(o).
1.4 "Aggregate Account" means, with respect to each Participant,
the value of all accounts maintained on behalf of a Participant, whether
attributable to Employer or Employee contributions, subject to the provisions
of Section 2.2.
1.5 "Anniversary Date" means December 31.
1.6 "Beneficiary" means the person to whom the share of a deceased
Participant's total account is payable, subject to the restrictions of Sections
6.2 and 6.6.
1.7 "Code" means the Internal Revenue Code of 1986, as amended or
replaced from time to time.
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<PAGE> 8
1.8 "Compensation" with respect to any Participant means such
Participant's wages as defined in Code Section 3401(a) and all other payments
of compensation by the Employer (in the course of the Employer's trade or
business) for a Plan Year for which the Employer is required to furnish the
Participant a written statement under Code Sections 6041(d), 6051(a)(3) and
6052. Compensation must be determined without regard to any rules under Code
Section 3401(a) that limit the remuneration included in wages based on the
nature or location of the employment or the services performed (such as the
exception for agricultural labor in Code Section 3401(a)(2)).
For purposes of this Section, the determination of
Compensation shall be made by:
(a) including amounts which are contributed by
the Employer pursuant to a salary reduction agreement and
which are not includible in the gross income of the
Participant under Code Sections 125, 402(e)(3), 402(h)(1)(B),
403(b) or 457, and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions.
For a Participant's initial year of participation,
Compensation shall be recognized for the entire Plan Year.
Compensation in excess of $200,000 shall be disregarded. Such
amount shall be adjusted at the same time and in such manner as permitted under
Code Section 415(d), except that the dollar increase in effect on January 1 of
any calendar year shall be effective for the Plan Year beginning with or within
such calendar year and the first adjustment to the $200,000 limitation shall be
effective on January 1, 1990. For any short Plan Year the Compensation limit
shall be an amount equal to the Compensation limit for the calendar year in
which the Plan Year begins multiplied by the ratio obtained by dividing the
number of full months in the short Plan Year by twelve (12). In applying this
limitation, the family group of a Highly Compensated Participant who is subject
to the Family Member aggregation rules of Code Section 414(q)(6) because such
Participant is either a "five percent owner" of the Employer or one of the ten
(10) Highly Compensated Employees paid the greatest "415 Compensation" during
the year, shall be treated as a single Participant, except that for this
purpose Family Members shall include only the affected Participant's spouse and
any lineal descendants who have not attained age nineteen (19) before the close
of the year. If, as a result of the application of such rules the adjusted
$200,000 limitation is exceeded, then the limitation shall be prorated among
the affected Family Members in proportion to each such Family Member's
Compensation prior to the application of this limitation, or the limitation
shall be adjusted in accordance with any other method permitted by Regulation.
However, for purposes of Section 4.4(b), the preceding sentence shall not apply
in determining the portion of
2
<PAGE> 9
the Compensation of a Participant which is below Excess Compensation.
In addition to other applicable limitations set forth in the
Plan, and notwithstanding any other provision of the Plan to the contrary, for
Plan Years beginning on or after January 1, 1994, the annual Compensation of
each Employee taken into account under the Plan shall not exceed the OBRA '93
annual compensation limit. The OBRA '93 annual compensation limit is $150,000,
as adjusted by the Commissioner for increases in the cost of living in
accordance with Code Section 401(a)(17)(B). The cost of living adjustment in
effect for a calendar year applies to any period, not exceeding 12 months, over
which Compensation is determined (determination period) beginning in such
calendar year. If a determination period consists of fewer than 12 months, the
OBRA '93 annual compensation limit will be multiplied by a fraction, the
numerator of which is the number of months in the determination period, and the
denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any
reference in this Plan to the limitation under Code Section 401(a)(17) shall
mean the OBRA '93 annual compensation limit set forth in this provision.
If Compensation for any prior determination period is taken
into account in determining an Employee's benefits accruing in the current Plan
Year, the Compensation for that prior determination period is subject to the
OBRA '93 annual compensation limit in effect for that prior determination
period. For this purpose, for determination periods beginning before the first
day of the first Plan Year beginning on or after January 1, 1994, the OBRA '93
annual compensation limit is $150,000.
If, as a result of such rules, the maximum "annual addition"
limit of Section 4.9(a) would be exceeded for one or more of the affected
Family Members, the prorated Compensation of all affected Family Members shall
be adjusted to avoid or reduce any excess. The prorated Compensation of any
affected Family Member whose allocation would exceed the limit shall be
adjusted downward to the level needed to provide an allocation equal to such
limit. The prorated Compensation of affected Family Members not affected by
such limit shall then be adjusted upward on a pro rata basis not to exceed each
such affected Family Member's Compensation as determined prior to application
of the Family Member rule. The resulting allocation shall not exceed such
individual's maximum "annual addition" limit. If, after these adjustments, an
"excess amount" still results, such "excess amount" shall be disposed of in the
manner described in Section 4.10(a) pro rata among all affected Family Members.
1.9 "Contract" or "Policy" means any life insurance policy,
retirement income or annuity policy, or annuity contract (group or individual)
issued pursuant to the terms of the Plan.
3
<PAGE> 10
1.10 "Deferred Compensation" with respect to any Participant means
the amount of the Participant's total Compensation which has been contributed
to the Plan in accordance with the Participant's deferral election pursuant to
Section 4.2 excluding any such amounts distributed as excess "annual additions"
pursuant to Section 4.10(a).
1.11 "Early Retirement Date" means the first day of the month
(prior to the Normal Retirement Date) coinciding with or following the date on
which a Participant or Former Participant attains age 55 and has completed at
least 6 Years of Service with the Employer (Early Retirement Age). A
Participant shall become fully Vested upon satisfying this requirement if still
employed at his Early Retirement Age.
A Former Participant who terminates employment after
satisfying the service requirement for Early Retirement and who thereafter
reaches the age requirement contained herein shall be entitled to receive his
benefits under this Plan.
1.12 "Elective Contribution" means the Employer's contributions to
the Plan of Deferred Compensation excluding any such amounts distributed as
excess "annual additions" pursuant to Section 4.10(a). In addition, any
Employer Qualified Non-Elective Contribution made pursuant to Section 4.6 shall
be considered an Elective Contribution for purposes of the Plan. Any such
contributions deemed to be Elective Contributions shall be subject to the
requirements of Sections 4.2(b) and 4.2(c) and shall further be required to
satisfy the discrimination requirements of Regulation 1.401(k)-1(b)(5), the
provisions of which are specifically incorporated herein by reference.
1.13 "Eligible Employee" means any Employee.
Employees whose employment is governed by the terms of a
collective bargaining agreement between Employee representatives (within the
meaning of Code Section 7701(a)(46)) and the Employer under which retirement
benefits were the subject of good faith bargaining between the parties will not
be eligible to participate in this Plan unless such agreement expressly
provides for coverage in this Plan or two percent or more of the Employees of
the Employer who are covered pursuant to that agreement are professionals as
defined in Regulation 1.410(b)-9.
Employees of Affiliated Employers shall not be eligible to
participate in this Plan unless such Affiliated Employers have specifically
adopted this Plan in writing.
1.14 "Employee" means any person who is employed by the Employer or
Affiliated Employer, but excludes any person who is an independent contractor.
Employee shall include Leased Employees within the meaning of Code Sections
414(n)(2) and 414(o)(2) unless such Leased Employees are covered by a plan
described in Code Section 414(n)(5) and such Leased Employees do
4
<PAGE> 11
not constitute more than 20% of the recipient's non-highly compensated work
force.
1.15 "Employer" means Getty Petroleum Marketing Inc. and any
successor which shall maintain this Plan; and any predecessor which has
maintained this Plan. The Employer is a corporation, with principal offices in
the State of New York.
1.16 "Excess Aggregate Contributions" means, with respect to any
Plan Year, the excess of the aggregate amount of the Employer matching
contributions made pursuant to Section 4.1(b) and any qualified non-elective
contributions or elective deferrals taken into account pursuant to Section
4.7(c) on behalf of Highly Compensated Participants for such Plan Year, over
the maximum amount of such contributions permitted under the limitations of
Section 4.7(a).
1.17 "Excess Compensation" with respect to any Participant means
the Participant's Compensation which is in excess of the Taxable Wage Base. For
any short year, the Taxable Wage Base shall be reduced by a fraction, the
numerator of which is the number of full months in the short year and the
denominator of which is twelve (12).
1.18 "Excess Contributions" means, with respect to a Plan Year, the
excess of Elective Contributions made on behalf of Highly Compensated
Participants for the Plan Year over the maximum amount of such contributions
permitted under Section 4.5(a). Excess Contributions shall be treated as an
"annual addition" pursuant to Section 4.9(b).
1.19 "Excess Deferred Compensation" means, with respect to any
taxable year of a Participant, the excess of the aggregate amount of such
Participant's Deferred Compensation and the elective deferrals pursuant to
Section 4.2(f) actually made on behalf of such Participant for such taxable
year, over the dollar limitation provided for in Code Section 402(g), which is
incorporated herein by reference. Excess Deferred Compensation shall be treated
as an "annual addition" pursuant to Section 4.9(b) when contributed to the Plan
unless distributed to the affected Participant not later than the first April
15th following the close of the Participant's taxable year. Additionally, for
purposes of Sections 2.2 and 4.4(g), Excess Deferred Compensation shall
continue to be treated as Employer contributions even if distributed pursuant
to Section 4.2(f). However, Excess Deferred Compensation of Non-Highly
Compensated Participants is not taken into account for purposes of Section
4.5(a) to the extent such Excess Deferred Compensation occurs pursuant to
Section 4.2(d).
1.20 "Family Member" means, with respect to an affected
Participant, such Participant's spouse and such Participant's lineal
descendants and ascendants and their spouses, all as described in Code Section
414(q)(6)(B).
5
<PAGE> 12
1.21 "Fiduciary" means any person who (a) exercises any
discretionary authority or discretionary control respecting management of the
Plan or exercises any authority or control respecting management or disposition
of its assets, (b) renders investment advice for a fee or other compensation,
direct or indirect, with respect to any monies or other property of the Plan or
has any authority or responsibility to do so, or (c) has any discretionary
authority or discretionary responsibility in the administration of the Plan,
including, but not limited to, the Trustee, the Employer and its representative
body, and the Administrator.
1.22 "Fiscal Year" means the Employer's accounting year of 12
months commencing on February 1st of each year and ending the following January
31st.
1.23 "Forfeiture" means that portion of a Participant's Account
that is not Vested, and occurs on the earlier of:
(a) the distribution of the entire Vested portion
of a Terminated Participant's Account, or
(b) the last day of the Plan Year in which the
Participant incurs five (5) consecutive 1-Year Breaks in
Service.
Furthermore, for purposes of paragraph (a) above, in the case
of a Terminated Participant whose Vested benefit is zero, such Terminated
Participant shall be deemed to have received a distribution of his Vested
benefit upon his termination of employment. Restoration of such amounts shall
occur pursuant to Section 6.4(e)(2). In addition, the term Forfeiture shall
also include amounts deemed to be Forfeitures pursuant to any other provision
of this Plan.
1.24 "Former Participant" means a person who has been a
Participant, but who has ceased to be a Participant for any reason.
1.25 "415 Compensation" with respect to any Participant means such
Participant's wages as defined in Code Section 3401(a) and all other payments
of compensation by the Employer (in the course of the Employer's trade or
business) for a Plan Year for which the Employer is required to furnish the
Participant a written statement under Code Sections 6041(d), 6051(a)(3) and
6052. "415 Compensation" must be determined without regard to any rules under
Code Section 3401(a) that limit the remuneration included in wages based on the
nature or location of the employment or the services performed (such as the
exception for agricultural labor in Code Section 3401(a)(2)).
1.26 "414(s) Compensation" with respect to any Participant means
such Participant's "415 Compensation" paid during a Plan Year. The amount of
"414(s) Compensation" with respect to any
6
<PAGE> 13
Participant shall include "414(s) Compensation" for the entire twelve (12)
month period ending on the last day of such Plan Year.
For purposes of this Section, the determination of "414(s)
Compensation" shall be made by including amounts which are contributed by the
Employer pursuant to a salary reduction agreement and which are not includible
in the gross income of the Participant under Code Sections 125, 402(e)(3),
402(h)(1)(B), 403(b) or 457, and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions.
"414(s) Compensation" in excess of $200,000 shall be
disregarded. Such amount shall be adjusted at the same time and in such manner
as permitted under Code Section 415(d), except that the dollar increase in
effect on January 1 of any calendar year shall be effective for the Plan Year
beginning with or within such calendar year and the first adjustment to the
$200,000 limitation shall be effective on January 1, 1990. For any short Plan
Year the "414(s) Compensation" limit shall be an amount equal to the "414(s)
Compensation" limit for the calendar year in which the Plan Year begins
multiplied by the ratio obtained by dividing the number of full months in the
short Plan Year by twelve (12). In applying this limitation, the family group
of a Highly Compensated Participant who is subject to the Family Member
aggregation rules of Code Section 414(q)(6) because such Participant is either
a "five percent owner" of the Employer or one of the ten (10) Highly
Compensated Employees paid the greatest "415 Compensation" during the year,
shall be treated as a single Participant, except that for this purpose Family
Members shall include only the affected Participant's spouse and any lineal
descendants who have not attained age nineteen (19) before the close of the
year.
In addition to other applicable limitations set forth in the
Plan, and notwithstanding any other provision of the Plan to the contrary, for
Plan Years beginning on or after January 1, 1994, the annual Compensation of
each Employee taken into account under the Plan shall not exceed the OBRA '93
annual compensation limit. The OBRA '93 annual compensation limit is $150,000,
as adjusted by the Commissioner for increases in the cost of living in
accordance with Code Section 401(a)(17)(B). The cost of living adjustment in
effect for a calendar year applies to any period, not exceeding 12 months, over
which Compensation is determined (determination period) beginning in such
calendar year. If a determination period consists of fewer than 12 months, the
OBRA '93 annual compensation limit will be multiplied by a fraction, the
numerator of which is the number of months in the determination period, and the
denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any
reference in this Plan to the limitation under Code Section 401(a)(17) shall
mean the OBRA '93 annual compensation limit set forth in this provision.
7
<PAGE> 14
If Compensation for any prior determination period is taken
into account in determining an Employee's benefits accruing in the current Plan
Year, the Compensation for that prior determination period is subject to the
OBRA '93 annual compensation limit in effect for that prior determination
period. For this purpose, for determination periods beginning before the first
day of the first Plan Year beginning on or after January 1, 1994, the OBRA '93
annual compensation limit is $150,000.
1.27 "Highly Compensated Employee" means an Employee described in
Code Section 414(q) and the Regulations thereunder, and generally means an
Employee who performed services for the Employer during the "determination
year" and is in one or more of the following groups:
(a) Employees who at any time during the
"determination year" or "look-back year" were "five percent
owners" as defined in Section 1.33(c).
(b) Employees who received "415 Compensation"
during the "look-back year" from the Employer in excess of
$75,000.
(c) Employees who received "415 Compensation"
during the "look-back year" from the Employer in excess of
$50,000 and were in the Top Paid Group of Employees for the
Plan Year.
(d) Employees who during the "look-back year"
were officers of the Employer (as that term is defined within
the meaning of the Regulations under Code Section 416) and
received "415 Compensation" during the "look-back year" from
the Employer greater than 50 percent of the limit in effect
under Code Section 415(b)(1)(A) for any such Plan Year. The
number of officers shall be limited to the lesser of (i) 50
employees; or (ii) the greater of 3 employees or 10 percent of
all employees. For the purpose of determining the number of
officers, Employees described in Section 1.59(a), (b), (c) and
(d) shall be excluded, but such Employees shall still be
considered for the purpose of identifying the particular
Employees who are officers. If the Employer does not have at
least one officer whose annual "415 Compensation" is in excess
of 50 percent of the Code Section 415(b)(1)(A) limit, then the
highest paid officer of the Employer will be treated as a
Highly Compensated Employee.
(e) Employees who are in the group consisting of
the 100 Employees paid the greatest "415 Compensation" during
the "determination year" and are also described in (b), (c) or
(d) above when these paragraphs are modified to substitute
"determination year" for "look-back year."
8
<PAGE> 15
The "determination year" shall be the Plan Year for which
testing is being performed, and the "look-back year" shall be the immediately
preceding twelve-month period.
For purposes of this Section, the determination of "415
Compensation" shall be made by including amounts which are contributed by the
Employer pursuant to a salary reduction agreement and which are not includible
in the gross income of the Participant under Code Sections 125, 402(e)(3),
402(h)(1)(B), 403(b) or 457, and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions. Additionally, the
dollar threshold amounts specified in (b) and (c) above shall be adjusted at
such time and in such manner as is provided in Regulations. In the case of such
an adjustment, the dollar limits which shall be applied are those for the
calendar year in which the "determination year" or "look-back year" begins.
In determining who is a Highly Compensated Employee, Employees
who are non-resident aliens and who received no earned income (within the
meaning of Code Section 911(d)(2)) from the Employer constituting United States
source income within the meaning of Code Section 861(a)(3) shall not be treated
as Employees. Additionally, all Affiliated Employers shall be taken into
account as a single employer and Leased Employees within the meaning of Code
Sections 414(n)(2) and 414(o)(2) shall be considered Employees unless such
Leased Employees are covered by a plan described in Code Section 414(n)(5) and
are not covered in any qualified plan maintained by the Employer. The exclusion
of Leased Employees for this purpose shall be applied on a uniform and
consistent basis for all of the Employer's retirement plans. Highly Compensated
Former Employees shall be treated as Highly Compensated Employees without
regard to whether they performed services during the "determination year."
1.28 "Highly Compensated Former Employee" means a former Employee
who had a separation year prior to the "determination year" and was a Highly
Compensated Employee in the year of separation from service or in any
"determination year" after attaining age 55. Notwithstanding the foregoing, an
Employee who separated from service prior to 1987 will be treated as a Highly
Compensated Former Employee only if during the separation year (or year
preceding the separation year) or any year after the Employee attains age 55
(or the last year ending before the Employee's 55th birthday), the Employee
either received "415 Compensation" in excess of $50,000 or was a "five percent
owner." For purposes of this Section, "determination year," "415 Compensation"
and "five percent owner" shall be determined in accordance with Section 1.27.
Highly Compensated Former Employees shall be treated as Highly Compensated
Employees. The method set forth in this Section for determining who is a
"Highly Compensated Former Employee" shall be applied on a uniform and
consistent basis for all purposes for which the Code Section 414(q) definition
is applicable.
9
<PAGE> 16
1.29 "Highly Compensated Participant" means any Highly Compensated
Employee who is eligible to participate in the Plan.
1.30 "Hour of Service" means (1) each hour for which an Employee is
directly or indirectly compensated or entitled to compensation by the Employer
for the performance of duties during the applicable computation period; (2)
each hour for which an Employee is directly or indirectly compensated or
entitled to compensation by the Employer (irrespective of whether the
employment relationship has terminated) for reasons other than performance of
duties (such as vacation, holidays, sickness, jury duty, disability, lay-off,
military duty or leave of absence) during the applicable computation period;
(3) each hour for which back pay is awarded or agreed to by the Employer
without regard to mitigation of damages. These hours will be credited to the
Employee for the computation period or periods to which the award or agreement
pertains rather than the computation period in which the award, agreement or
payment is made. The same Hours of Service shall not be credited both under (1)
or (2), as the case may be, and under (3).
1.31 "Income" means the income or losses allocable to "excess
amounts" which shall equal the allocable gain or loss for the "applicable
computation period". The income allocable to "excess amounts" for the
"applicable computation period" is determined by multiplying the income for the
"applicable computation period" by a fraction. The numerator of the fraction is
the "excess amount" for the "applicable computation period." The denominator of
the fraction is the total "account balance" attributable to "Employer
contributions" as of the end of the "applicable computation period", reduced by
the gain allocable to such total amount for the "applicable computation period"
and increased by the loss allocable to such total amount for the "applicable
computation period". The provisions of this Section shall be applied:
(a) For purposes of Section 4.2(f), by substituting:
(1) "Excess Deferred Compensation" for "excess amounts";
(2) "taxable year of the Participant" for "applicable
computation period";
(3) "Deferred Compensation" for "Employer contributions"; and
(4) "Participant's Elective Account" for "account balance."
(b) For purposes of Section 4.6(a), by substituting:
10
<PAGE> 17
(1) "Excess Contributions" for "excess amounts";
(2) "Plan Year" for "applicable computation period";
(3) "Elective Contributions" for "Employer
contributions"; and
(4) "Participant's Elective Account" for "account
balance."
(c) For purposes of Section 4.8(a), by substituting:
(1) "Excess Aggregate Contributions" for "excess
amounts;"
(2) "Plan Year" for "applicable computation period;"
(3) "Employer matching contributions made pursuant to
Section 4.1(b) and any qualified non-elective
contributions or elective deferrals taken into account
pursuant to Section 4.7(c)" for "Employer contributions;"
and
(4) "Participant's Account" for "account balance."
Income allocable to any distribution of Excess Deferred
Compensation on or before the last day of the taxable year of the Participant
shall be calculated from the first day of the taxable year of the Participant
to the date on which the distribution is made pursuant to either the
"fractional method" or the "safe harbor method." Under such "safe harbor
method," allocable Income for such period shall be deemed to equal ten percent
(10%) of the Income allocable to such Excess Deferred Compensation multiplied
by the number of calendar months in such period. For purposes of determining
the number of calendar months in such period, a distribution occurring on or
before the fifteenth day of the month shall be treated as having been made on
the last day of the preceding month and a distribution occurring after such
fifteenth day shall be treated as having been made on the first day of the next
subsequent month.
1.32 "Investment Manager" means an entity that (a) has the power to
manage, acquire, or dispose of Plan assets and (b) acknowledges fiduciary
responsibility to the Plan in writing. Such entity must be a person, firm, or
corporation registered as an investment adviser under the Investment Advisers
Act of 1940, a bank, or an insurance company.
1.33 "Key Employee" means an Employee as defined in Code Section
416(i) and the Regulations thereunder. Generally, any
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<PAGE> 18
Employee or former Employee (as well as each of his Beneficiaries) is
considered a Key Employee if he, at any time during the Plan Year that contains
the "Determination Date" or any of the preceding four (4) Plan Years, has been
included in one of the following categories:
(a) an officer of the Employer (as that term is
defined within the meaning of the Regulations under Code
Section 416) having annual "415 Compensation" greater than 50
percent of the amount in effect under Code Section
415(b)(1)(A) for any such Plan Year.
(b) one of the ten employees having annual "415
Compensation" from the Employer for a Plan Year greater than
the dollar limitation in effect under Code Section
415(c)(1)(A) for the calendar year in which such Plan Year
ends and owning (or considered as owning within the meaning of
Code Section 318) both more than one-half percent interest and
the largest interests in the Employer.
(c) a "five percent owner" of the Employer. "Five
percent owner" means any person who owns (or is considered as
owning within the meaning of Code Section 318) more than five
percent (5%) of the outstanding stock of the Employer or stock
possessing more than five percent (5%) of the total combined
voting power of all stock of the Employer or, in the case of
an unincorporated business, any person who owns more than five
percent (5%) of the capital or profits interest in the
Employer. In determining percentage ownership hereunder,
employers that would otherwise be aggregated under Code
Sections 414(b), (c), (m) and (o) shall be treated as separate
employers.
(d) a "one percent owner" of the Employer having
an annual "415 Compensation" from the Employer of more than
$150,000. "One percent owner" means any person who owns (or is
considered as owning within the meaning of Code Section 318)
more than one percent (1%) of the outstanding stock of the
Employer or stock possessing more than one percent (1%) of the
total combined voting power of all stock of the Employer or,
in the case of an unincorporated business, any person who owns
more than one percent (1%) of the capital or profits interest
in the Employer. In determining percentage ownership
hereunder, employers that would otherwise be aggregated under
Code Sections 414(b), (c), (m) and (o) shall be treated as
separate employers. However, in determining whether an
individual has "415 Compensation" of more than $150,000, "415
Compensation" from each employer required to be aggregated
under Code Sections 414(b), (c), (m) and (o) shall be taken
into account.
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For purposes of this Section, the determination of "415
Compensation" shall be made by including amounts which are contributed by the
Employer pursuant to a salary reduction agreement and which are not includible
in the gross income of the Participant under Code Sections 125, 402(e)(3),
402(h)(1)(B), 403(b) or 457, and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions.
1.34 "Late Retirement Date" means the first day of the month
coinciding with or next following a Participant's actual Retirement Date after
having reached his Normal Retirement Date.
1.35 "Leased Employee" means any person (other than an Employee of
the recipient) who pursuant to an agreement between the recipient and any other
person ("leasing organization") has performed services for the recipient (or
for the recipient and related persons determined in accordance with Code
Section 414(n)(6)) on a substantially full time basis for a period of at least
one year, and such services are of a type historically performed by employees
in the business field of the recipient employer. Contributions or benefits
provided a Leased Employee by the leasing organization which are attributable
to services performed for the recipient employer shall be treated as provided
by the recipient employer. A Leased Employee shall not be considered an
Employee of the recipient:
(a) if such employee is covered by a money
purchase pension plan providing:
(1) a non-integrated employer contribution rate
of at least 10% of compensation, as defined in Code
Section 415(c)(3), but including amounts which are
contributed by the Employer pursuant to a salary
reduction agreement and which are not includible in
the gross income of the Participant under Code
Sections 125, 402(e)(3), 402(h)(1)(B), 403(b) or 457,
and Employee contributions described in Code Section
414(h)(2) that are treated as Employer contributions.
(2) immediate participation; and
(3) full and immediate vesting; and
(b) if Leased Employees do not constitute more
than 20% of the recipient's non-highly compensated work force.
1.36 "Month of Service" means a calendar month during any part of
which an Employee completed an Hour of Service. Except, however, a Participant
shall be credited with a Month of Service for each month during the 12 month
computation period in which he has not incurred a 1-Year Break in Service.
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1.37 "Non-Elective Contribution" means the Employer's contributions
to the Plan excluding, however, contributions made pursuant to the
Participant's deferral election provided for in Section 4.2 and any Qualified
Non-Elective Contribution.
1.38 "Non-Highly Compensated Participant" means any Participant who
is neither a Highly Compensated Employee nor a Family Member.
1.39 "Non-Key Employee" means any Employee or former Employee (and
his Beneficiaries) who is not a Key Employee.
1.40 "Normal Retirement Age" means the Participant's 65 birthday,
or his 5th anniversary of joining the Plan, if later. A Participant shall
become fully Vested in his Participant's Account upon attaining his Normal
Retirement Age.
1.41 "Normal Retirement Date" means the first day of the month
coinciding with or next following the Participant's Normal Retirement Age.
1.42 "1-Year Break in Service" means the applicable computation
period of 12 consecutive months during which an Employee fails to accrue a
Month of Service. Further, solely for the purpose of determining whether a
Participant has incurred a 1-Year Break in Service, Hours of Service shall be
recognized for "authorized leaves of absence" and "maternity and paternity
leaves of absence." Years of Service and 1-Year Breaks in Service shall be
measured on the same computation period.
An Employee shall not be deemed to have incurred a 1-Year
Break in Service if he completes an Hour of Service within 12 months following
the last day of the month during which his employment terminated.
"Authorized leave of absence" means an unpaid, temporary
cessation from active employment with the Employer pursuant to an established
nondiscriminatory policy, whether occasioned by illness, military service, or
any other reason.
A "maternity or paternity leave of absence" means, for Plan
Years beginning after December 31, 1984, an absence from work for any period by
reason of the Employee's pregnancy, birth of the Employee's child, placement of
a child with the Employee in connection with the adoption of such child, or any
absence for the purpose of caring for such child for a period immediately
following such birth or placement. For this purpose, Hours of Service shall be
credited for the computation period in which the absence from work begins, only
if credit therefore is necessary to prevent the Employee from incurring a
1-Year Break in Service, or, in any other case, in the immediately following
computation period.
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1.43 "Participant" means any Eligible Employee who participates in
the Plan as provided in Sections 3.2 and 3.3, and has not for any reason become
ineligible to participate further in the Plan.
1.44 "Participant's Account" means the account established and
maintained by the Administrator for each Participant with respect to his total
interest in the Plan and Trust resulting from the Employer's Non-Elective
Contributions.
A separate accounting shall be maintained with respect to that
portion of the Participant's Account attributable to Employer matching
contributions made pursuant to Section 4.1(b) and Employer discretionary
contributions made pursuant to Section 4.1(c).
1.45 "Participant's Combined Account" means the total aggregate
amount of each Participant's Elective Account and Participant's Account.
1.46 "Participant's Elective Account" means the account established
and maintained by the Administrator for each Participant with respect to his
total interest in the Plan and Trust resulting from the Employer's Elective
Contributions. A separate accounting shall be maintained with respect to that
portion of the Participant's Elective Account attributable to Elective
Contributions pursuant to Section 4.2 and any Employer Qualified Non-Elective
Contributions.
1.47 "Plan" means this instrument, including all amendments
thereto.
1.48 "Plan Year" means the Plan's accounting year of twelve (12)
months commencing on January 1st of each year and ending the following December
31st. There will be a short Plan Year for the period February 1, 1997 to
December 31, 1997. For the short Plan Year, any Hours or Service requirement
of the Plan will be reduced by 1/12th.
1.49 "Pre-Retirement Survivor Annuity" is an immediate annuity for
the life of the Participant's spouse the payments under which must be equal to
the amount of benefit which can be purchased with the accounts of a Participant
used to provide the death benefit under the Plan.
1.50 "Qualified Non-Elective Contribution" means the Employer's
contributions to the Plan that are made pursuant to Section 4.6. Such
contributions shall be considered an Elective Contribution for the purposes of
the Plan and used to satisfy the "Actual Deferral Percentage" tests.
In addition, the Employer's contributions to the Plan that are
made pursuant to Section 4.8(h) which are used to satisfy the "Actual
Contribution Percentage" tests shall be
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<PAGE> 22
considered Qualified Non-Elective Contributions and be subject to the
provisions of Sections 4.2(b) and 4.2(c).
1.51 "Regulation" means the Income Tax Regulations as promulgated
by the Secretary of the Treasury or his delegate, and as amended from time to
time.
1.52 "Retired Participant" means a person who has been a
Participant, but who has become entitled to retirement benefits under the Plan.
1.53 "Retirement Date" means the date as of which a Participant
retires whether such retirement occurs on a Participant's Normal Retirement
Date, Early or Late Retirement Date (see Section 6.1).
1.54 "Super Top Heavy Plan" means a plan described in Section
2.2(b).
1.55 "Taxable Wage Base" means, with respect to any Plan Year, the
contribution and benefit base in effect under Section 230 of the Social
Security Act at the beginning of the Plan Year.
1.56 "Terminated Participant" means a person who has been a
Participant, but whose employment has been terminated other than by death or
retirement.
1.57 "Top Heavy Plan" means a plan described in Section 2.2(a).
1.58 "Top Heavy Plan Year" means a Plan Year during which the Plan
is a Top Heavy Plan.
1.59 "Top Paid Group" means the top 20 percent of Employees who
performed services for the Employer during the applicable year, ranked
according to the amount of "415 Compensation" (determined for this purpose in
accordance with Section 1.27) received from the Employer during such year. All
Affiliated Employers shall be taken into account as a single employer, and
Leased Employees within the meaning of Code Sections 414(n)(2) and 414(o)(2)
shall be considered Employees unless such Leased Employees are covered by a
plan described in Code Section 414(n)(5) and are not covered in any qualified
plan maintained by the Employer. Employees who are non-resident aliens and who
received no earned income (within the meaning of Code Section 911(d)(2)) from
the Employer constituting United States source income within the meaning of
Code Section 861(a)(3) shall not be treated as Employees. Additionally, for the
purpose of determining the number of active Employees in any year, the
following additional Employees shall also be excluded; however, such Employees
shall still be considered for the purpose of identifying the particular
Employees in the Top Paid Group:
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<PAGE> 23
(a) Employees with less than six (6) months of
service;
(b) Employees who normally work less than 17 1/2
hours per week;
(c) Employees who normally work less than six (6)
months during a year; and
(d) Employees who have not yet attained age 21.
In addition, if 90 percent or more of the Employees of the
Employer are covered under agreements the Secretary of Labor finds to be
collective bargaining agreements between Employee representatives and the
Employer, and the Plan covers only Employees who are not covered under such
agreements, then Employees covered by such agreements shall be excluded from
both the total number of active Employees as well as from the identification of
particular Employees in the Top Paid Group.
The foregoing exclusions set forth in this Section shall be
applied on a uniform and consistent basis for all purposes for which the Code
Section 414(q) definition is applicable.
1.60 "Trustee" means the person or entity named as trustee herein
or in any separate trust forming a part of this Plan, and any successors.
1.61 "Trust Fund" means the assets of the Plan and Trust as the
same shall exist from time to time.
1.62 "Vested" means the nonforfeitable portion of any account
maintained on behalf of a Participant.
1.63 "Year of Service" means twelve (12) consecutive Months of
Service.
For vesting purposes, the computation period shall be the
Plan Year.
For all other purposes, the computation period shall be the
Plan Year.
Years of Service with Getty Petroleum Corp. and any Affiliated
Employer shall be recognized.
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ARTICLE II
TOP HEAVY AND ADMINISTRATION
2.1 TOP HEAVY PLAN REQUIREMENTS
For any Top Heavy Plan Year, the Plan shall provide the
special vesting requirements of Code Section 416(b) pursuant to Section 6.4 of
the Plan and the special minimum allocation requirements of Code Section 416(c)
pursuant to Section 4.4 of the Plan.
2.2 DETERMINATION OF TOP HEAVY STATUS
(a) This Plan shall be a Top Heavy Plan for any
Plan Year in which, as of the Determination Date, (1) the
Present Value of Accrued Benefits of Key Employees and (2) the
sum of the Aggregate Accounts of Key Employees under this Plan
and all plans of an Aggregation Group, exceeds sixty percent
(60%) of the Present Value of Accrued Benefits and the
Aggregate Accounts of all Key and Non-Key Employees under this
Plan and all plans of an Aggregation Group.
If any Participant is a Non-Key Employee
for any Plan Year, but such Participant was a Key Employee for
any prior Plan Year, such Participant's Present Value of
Accrued Benefit and/or Aggregate Account balance shall not be
taken into account for purposes of determining whether this
Plan is a Top Heavy or Super Top Heavy Plan (or whether any
Aggregation Group which includes this Plan is a Top Heavy
Group). In addition, if a Participant or Former Participant
has not performed any services for any Employer maintaining
the Plan at any time during the five year period ending on the
Determination Date, any accrued benefit for such Participant
or Former Participant shall not be taken into account for the
purposes of determining whether this Plan is a Top Heavy or
Super Top Heavy Plan.
(b) This Plan shall be a Super Top Heavy Plan
for any Plan Year in which, as of the Determination Date, (1)
the Present Value of Accrued Benefits of Key Employees and (2)
the sum of the Aggregate Accounts of Key Employees under this
Plan and all plans of an Aggregation Group, exceeds ninety
percent (90%) of the Present Value of Accrued Benefits and the
Aggregate Accounts of all Key and Non-Key Employees under this
Plan and all plans of an Aggregation Group.
(c) Aggregate Account: A Participant's
Aggregate Account as of the Determination Date is the sum of:
(1) his Participant's Combined Account balance
as of the most recent valuation occurring within
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<PAGE> 25
a twelve (12) month period ending on the
Determination Date;
(2) an adjustment for any contributions due as
of the Determination Date. Such adjustment shall be
the amount of any contributions actually made after
the valuation date but due on or before the
Determination Date, except for the first Plan Year
when such adjustment shall also reflect the amount
of any contributions made after the Determination
Date that are allocated as of a date in that first
Plan Year.
(3) any Plan distributions made within the Plan
Year that includes the Determination Date or within
the four (4) preceding Plan Years. However, in the
case of distributions made after the valuation date
and prior to the Determination Date, such
distributions are not included as distributions for
top heavy purposes to the extent that such
distributions are already included in the
Participant's Aggregate Account balance as of the
valuation date. Notwithstanding anything herein to
the contrary, all distributions, including
distributions made prior to January 1, 1984, and
distributions under a terminated plan which if it
had not been terminated would have been required to
be included in an Aggregation Group, will be
counted. Further, distributions from the Plan
(including the cash value of life insurance
policies) of a Participant's account balance because
of death shall be treated as a distribution for the
purposes of this paragraph.
(4) any Employee contributions, whether
voluntary or mandatory. However, amounts
attributable to tax deductible qualified voluntary
employee contributions shall not be considered to be
a part of the Participant's Aggregate Account
balance.
(5) with respect to unrelated rollovers and
plan-to-plan transfers (ones which are both
initiated by the Employee and made from a plan
maintained by one employer to a plan maintained by
another employer), if this Plan provides the
rollovers or plan-to-plan transfers, it shall always
consider such rollovers or plan-to-plan transfers as
a distribution for the purposes of this Section. If
this Plan is the plan accepting such rollovers or
plan-to-plan transfers, it shall not consider such
rollovers or plan-to-plan
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<PAGE> 26
transfers as part of the Participant's Aggregate
Account balance.
(6) with respect to related rollovers and
plan-to-plan transfers (ones either not initiated by
the Employee or made to a plan maintained by the
same employer), if this Plan provides the rollover
or plan-to-plan transfer, it shall not be counted as
a distribution for purposes of this Section. If this
Plan is the plan accepting such rollover or
plan-to-plan transfer, it shall consider such
rollover or plan-to-plan transfer as part of the
Participant's Aggregate Account balance,
irrespective of the date on which such rollover or
plan-to-plan transfer is accepted.
(7) For the purposes of determining whether two
employers are to be treated as the same employer in
(5) and (6) above, all employers aggregated under
Code Section 414(b), (c), (m) and (o) are treated as
the same employer.
(d) "Aggregation Group" means either a Required
Aggregation Group or a Permissive Aggregation Group as
hereinafter determined.
(1) Required Aggregation Group: In determining
a Required Aggregation Group hereunder, each plan of
the Employer in which a Key Employee is a
participant in the Plan Year containing the
Determination Date or any of the four preceding Plan
Years, and each other plan of the Employer which
enables any plan in which a Key Employee
participates to meet the requirements of Code
Sections 401(a)(4) or 410, will be required to be
aggregated. Such group shall be known as a Required
Aggregation Group.
In the case of a Required Aggregation Group, each
plan in the group will be considered a Top Heavy
Plan if the Required Aggregation Group is a Top
Heavy Group. No plan in the Required Aggregation
Group will be considered a Top Heavy Plan if the
Required Aggregation Group is not a Top Heavy Group.
(2) Permissive Aggregation Group: The Employer
may also include any other plan not required to be
included in the Required Aggregation Group, provided
the resulting group, taken as a whole, would
continue to satisfy the provisions of Code Sections
401(a)(4) and 410. Such group shall be known as a
Permissive Aggregation Group.
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<PAGE> 27
In the case of a Permissive Aggregation Group, only
a plan that is part of the Required Aggregation
Group will be considered a Top Heavy Plan if the
Permissive Aggregation Group is a Top Heavy Group.
No plan in the Permissive Aggregation Group will be
considered a Top Heavy Plan if the Permissive
Aggregation Group is not a Top Heavy Group.
(3) Only those plans of the Employer in which
the Determination Dates fall within the same
calendar year shall be aggregated in order to
determine whether such plans are Top Heavy Plans.
(4) An Aggregation Group shall include any
terminated plan of the Employer if it was maintained
within the last five (5) years ending on the
Determination Date.
(e) "Determination Date" means (a) the last day
of the preceding Plan Year, or (b) in the case of the first
Plan Year, the last day of such Plan Year.
(f) Present Value of Accrued Benefit: In the
case of a defined benefit plan, the Present Value of Accrued
Benefit for a Participant other than a Key Employee, shall be
as determined using the single accrual method used for all
plans of the Employer and Affiliated Employers, or if no such
single method exists, using a method which results in benefits
accruing not more rapidly than the slowest accrual rate
permitted under Code Section 411(b)(1)(C). The determination
of the Present Value of Accrued Benefit shall be determined as
of the most recent valuation date that falls within or ends
with the 12-month period ending on the Determination Date
except as provided in Code Section 416 and the Regulations
thereunder for the first and second plan years of a defined
benefit plan.
(g) "Top Heavy Group" means an Aggregation
Group in which, as of the Determination Date, the sum of:
(1) the Present Value of Accrued Benefits of
Key Employees under all defined benefit plans
included in the group, and
(2) the Aggregate Accounts of Key Employees
under all defined contribution plans included in the
group,
exceeds sixty percent (60%) of a similar
sum determined for all Participants.
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2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER
(a) The Employer shall be empowered to appoint
and remove the Trustee and the Administrator from time to time
as it deems necessary for the proper administration of the
Plan to assure that the Plan is being operated for the
exclusive benefit of the Participants and their Beneficiaries
in accordance with the terms of the Plan, the Code, and the
Act.
(b) The Employer shall establish a "funding
policy and method," i.e., it shall determine whether the Plan
has a short run need for liquidity (e.g., to pay benefits) or
whether liquidity is a long run goal and investment growth
(and stability of same) is a more current need, or shall
appoint a qualified person to do so. The Employer or its
delegate shall communicate such needs and goals to the
Trustee, who shall coordinate such Plan needs with its
investment policy. The communication of such a "funding policy
and method" shall not, however, constitute a directive to the
Trustee as to investment of the Trust Funds. Such "funding
policy and method" shall be consistent with the objectives of
this Plan and with the requirements of Title I of the Act.
(c) The Employer shall periodically review the
performance of any Fiduciary or other person to whom duties
have been delegated or allocated by it under the provisions of
this Plan or pursuant to procedures established hereunder.
This requirement may be satisfied by formal periodic review by
the Employer or by a qualified person specifically designated
by the Employer, through day-to-day conduct and evaluation, or
through other appropriate ways.
2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY
The Employer shall appoint one or more Administrators. Any
person, including, but not limited to, the Employees of the Employer, shall be
eligible to serve as an Administrator. Any person so appointed shall signify
his acceptance by filing written acceptance with the Employer. An Administrator
may resign by delivering his written resignation to the Employer or be removed
by the Employer by delivery of written notice of removal, to take effect at a
date specified therein, or upon delivery to the Administrator if no date is
specified.
The Employer, upon the resignation or removal of an
Administrator, shall promptly designate in writing a successor to this
position. If the Employer does not appoint an Administrator, the Employer will
function as the Administrator.
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<PAGE> 29
2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES
If more than one person is appointed as Administrator, the
responsibilities of each Administrator may be specified by the Employer and
accepted in writing by each Administrator. In the event that no such delegation
is made by the Employer, the Administrators may allocate the responsibilities
among themselves, in which event the Administrators shall notify the Employer
and the Trustee in writing of such action and specify the responsibilities of
each Administrator. The Trustee thereafter shall accept and rely upon any
documents executed by the appropriate Administrator until such time as the
Employer or the Administrators file with the Trustee a written revocation of
such designation.
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR
The primary responsibility of the Administrator is to
administer the Plan for the exclusive benefit of the Participants and their
Beneficiaries, subject to the specific terms of the Plan. The Administrator
shall administer the Plan in accordance with its terms and shall have the power
and discretion to construe the terms of the Plan and to determine all questions
arising in connection with the administration, interpretation, and application
of the Plan. Any such determination by the Administrator shall be conclusive
and binding upon all persons. The Administrator may establish procedures,
correct any defect, supply any information, or reconcile any inconsistency in
such manner and to such extent as shall be deemed necessary or advisable to
carry out the purpose of the Plan; provided, however, that any procedure,
discretionary act, interpretation or construction shall be done in a
nondiscriminatory manner based upon uniform principles consistently applied and
shall be consistent with the intent that the Plan shall continue to be deemed a
qualified plan under the terms of Code Section 401(a), and shall comply with
the terms of the Act and all regulations issued pursuant thereto. The
Administrator shall have all powers necessary or appropriate to accomplish his
duties under this Plan.
The Administrator shall be charged with the duties of the
general administration of the Plan, including, but not limited to, the
following:
(a) the discretion to determine all questions
relating to the eligibility of Employees to participate or
remain a Participant hereunder and to receive benefits under
the Plan;
(b) to compute, certify, and direct the Trustee
with respect to the amount and the kind of benefits to which
any Participant shall be entitled hereunder;
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<PAGE> 30
(c) to authorize and direct the Trustee with
respect to all nondiscretionary or otherwise directed
disbursements from the Trust;
(d) to maintain all necessary records for the
administration of the Plan;
(e) to interpret the provisions of the Plan and
to make and publish such rules for regulation of the Plan as
are consistent with the terms hereof;
(f) to determine the size and type of any
Contract to be purchased from any insurer, and to designate
the insurer from which such Contract shall be purchased;
(g) to compute and certify to the Employer and
to the Trustee from time to time the sums of money necessary
or desirable to be contributed to the Plan;
(h) to consult with the Employer and the
Trustee regarding the short and long-term liquidity needs of
the Plan in order that the Trustee can exercise any investment
discretion in a manner designed to accomplish specific
objectives;
(i) to prepare and distribute to Employees a
procedure for notifying Participants and Beneficiaries of
their rights to elect joint and survivor annuities and
Pre-Retirement Survivor Annuities as required by the Act and
Regulations thereunder;
(j) to prepare and implement a procedure to
notify Eligible Employees that they may elect to have a
portion of their Compensation deferred or paid to them in
cash;
(k) to assist any Participant regarding his
rights, benefits, or elections available under the Plan.
2.7 RECORDS AND REPORTS
The Administrator shall keep a record of all actions taken and
shall keep all other books of account, records, and other data that may be
necessary for proper administration of the Plan and shall be responsible for
supplying all information and reports to the Internal Revenue Service,
Department of Labor, Participants, Beneficiaries and others as required by law.
24
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2.8 APPOINTMENT OF ADVISERS
The Administrator, or the Trustee with the consent of the
Administrator, may appoint counsel, specialists, advisers, and other persons as
the Administrator or the Trustee deems necessary or desirable in connection
with the administration of this Plan.
2.9 INFORMATION FROM EMPLOYER
To enable the Administrator to perform his functions, the
Employer shall supply full and timely information to the Administrator on all
matters relating to the Compensation of all Participants, their Hours of
Service, their Years of Service, their retirement, death, disability, or
termination of employment, and such other pertinent facts as the Administrator
may require; and the Administrator shall advise the Trustee of such of the
foregoing facts as may be pertinent to the Trustee's duties under the Plan. The
Administrator may rely upon such information as is supplied by the Employer and
shall have no duty or responsibility to verify such information.
2.10 PAYMENT OF EXPENSES
All expenses of administration may be paid out of the Trust
Fund unless paid by the Employer. Such expenses shall include any expenses
incident to the functioning of the Administrator, including, but not limited
to, fees of accountants, counsel, and other specialists and their agents, and
other costs of administering the Plan. Until paid, the expenses shall
constitute a liability of the Trust Fund. However, the Employer may reimburse
the Trust Fund for any administration expense incurred.
2.11 MAJORITY ACTIONS
Except where there has been an allocation and delegation of
administrative authority pursuant to Section 2.5, if there shall be more than
one Administrator, they shall act by a majority of their number, but may
authorize one or more of them to sign all papers on their behalf.
2.12 CLAIMS PROCEDURE
Claims for benefits under the Plan may be filed in writing
with the Administrator. Written notice of the disposition of a claim shall be
furnished to the claimant within 90 days after the application is filed. In the
event the claim is denied, the reasons for the denial shall be specifically set
forth in the notice in language calculated to be understood by the claimant,
pertinent provisions of the Plan shall be cited, and, where appropriate, an
explanation as to how the claimant can perfect the claim will be provided. In
addition, the claimant shall be
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furnished with an explanation of the Plan's claims review procedure.
2.13 CLAIMS REVIEW PROCEDURE
Any Employee, former Employee, or Beneficiary of either, who
has been denied a benefit by a decision of the Administrator pursuant to
Section 2.12 shall be entitled to request the Administrator to give further
consideration to his claim by filing with the Administrator (on a form which
may be obtained from the Administrator) a request for a hearing. Such request,
together with a written statement of the reasons why the claimant believes his
claim should be allowed, shall be filed with the Administrator no later than 60
days after receipt of the written notification provided for in Section 2.12.
The Administrator shall then conduct a hearing within the next 60 days, at
which the claimant may be represented by an attorney or any other
representative of his choosing and at which the claimant shall have an
opportunity to submit written and oral evidence and arguments in support of his
claim. At the hearing (or prior thereto upon 5 business days written notice to
the Administrator) the claimant or his representative shall have an opportunity
to review all documents in the possession of the Administrator which are
pertinent to the claim at issue and its disallowance. Either the claimant or
the Administrator may cause a court reporter to attend the hearing and record
the proceedings. In such event, a complete written transcript of the
proceedings shall be furnished to both parties by the court reporter. The full
expense of any such court reporter and such transcripts shall be borne by the
party causing the court reporter to attend the hearing. A final decision as to
the allowance of the claim shall be made by the Administrator within 60 days of
receipt of the appeal (unless there has been an extension of 60 days due to
special circumstances, provided the delay and the special circumstances
occasioning it are communicated to the claimant within the 60 day period). Such
communication shall be written in a manner calculated to be understood by the
claimant and shall include specific reasons for the decision and specific
references to the pertinent Plan provisions on which the decision is based.
ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY
Any Eligible Employee who has completed one (1) Year of
Service and has attained age 21 shall be eligible to participate hereunder as
of the date he has satisfied such requirements. Effective September 30, 1996,
any Eligible Employee who has completed six (6) Months of Service and has
attained age 21 shall be eligible to participate in the salary reduction
election and related matching contribution, but the one (1) Year of Service
requirement will continue to apply to determine participation for
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<PAGE> 33
the Employer's Non-Elective Contribution. However, any Employee who was a
Participant in the Plan prior to the effective date of this amendment and
restatement shall continue to participate in the Plan. The Employer shall give
each prospective Eligible Employee written notice of his eligibility to
participate in the Plan prior to the close of the Plan Year in which he first
becomes an Eligible Employee.
3.2 APPLICATION FOR PARTICIPATION
In order to become a Participant hereunder, each Eligible
Employee shall make application to the Employer for participation in the Plan
and agree to the terms hereof. Upon the acceptance of any benefits under this
Plan, such Employee shall automatically be deemed to have made application and
shall be bound by the terms and conditions of the Plan and all amendments
hereto.
3.3 EFFECTIVE DATE OF PARTICIPATION
An Eligible Employee shall become a Participant effective as
of the first day of the calendar quarter coinciding with or next following the
date on which such Employee met the eligibility requirements of Section 3.1,
provided said Employee was still employed as of such date (or if not employed
on such date, as of the date of rehire if a 1-Year Break in Service has not
occurred).
In the event an Employee who is not a member of an eligible
class of Employees becomes a member of an eligible class, such Employee will
participate immediately if such Employee has satisfied the minimum age and
service requirements and would have otherwise previously become a Participant.
3.4 DETERMINATION OF ELIGIBILITY
The Administrator shall determine the eligibility of each
Employee for participation in the Plan based upon information furnished by the
Employer. Such determination shall be conclusive and binding upon all persons,
as long as the same is made pursuant to the Plan and the Act. Such
determination shall be subject to review per Section 2.13.
3.5 TERMINATION OF ELIGIBILITY
(a) In the event a Participant shall go from a
classification of an Eligible Employee to an ineligible
Employee, such Former Participant shall continue to vest in
his interest in the Plan for each Year of Service completed
while a noneligible Employee, until such time as his
Participant's Account shall be forfeited or distributed
pursuant to the terms of the Plan. Additionally, his interest
in the Plan shall continue to share in the earnings of the
Trust Fund.
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<PAGE> 34
(b) In the event a Participant is no longer a
member of an eligible class of Employees and becomes
ineligible to participate but has not incurred a 1-Year Break
in Service, such Employee will participate immediately upon
returning to an eligible class of Employees. If such
Participant incurs a 1-Year Break in Service, eligibility will
be determined under the break in service rules of the Plan.
3.6 OMISSION OF ELIGIBLE EMPLOYEE
If, in any Plan Year, any Employee who should be included as a
Participant in the Plan is erroneously omitted and discovery of such omission
is not made until after a contribution by his Employer for the year has been
made, the Employer shall make a subsequent contribution with respect to the
omitted Employee in the amount which the said Employer would have contributed
with respect to him had he not been omitted. Such contribution shall be made
regardless of whether or not it is deductible in whole or in part in any
taxable year under applicable provisions of the Code.
3.7 INCLUSION OF INELIGIBLE EMPLOYEE
If, in any Plan Year, any person who should not have been
included as a Participant in the Plan is erroneously included and discovery of
such incorrect inclusion is not made until after a contribution for the year
has been made, the Employer shall not be entitled to recover the contribution
made with respect to the ineligible person regardless of whether or not a
deduction is allowable with respect to such contribution. In such event, the
amount contributed with respect to the ineligible person shall constitute a
Forfeiture (except for Deferred Compensation which shall be distributed to the
ineligible person) for the Plan Year in which the discovery is made.
3.8 ELECTION NOT TO PARTICIPATE
An Employee may, subject to the approval of the Employer,
elect voluntarily not to participate in the Plan. The election not to
participate must be communicated to the Employer, in writing, at least thirty
(30) days before the beginning of a Plan Year.
ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION
For each Plan Year, the Employer shall contribute to the Plan:
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<PAGE> 35
(a) The amount of the total salary reduction
elections of all Participants made pursuant to Section 4.2(a),
which amount shall be deemed an Employer's Elective
Contribution.
(b) On behalf of each Participant who is
eligible to share in matching contributions for the Plan Year,
a discretionary matching contribution equal to a percentage of
each such Participant's Deferred Compensation, the exact
percentage to be determined each year by the Employer, which
amount shall be deemed an Employer's Non-Elective
Contribution.
Except, however, in applying the matching
percentage specified above, only salary reductions, excluding
bonus reductions, up to 6% of compensation (excluding bonus)
per pay period shall be considered.
(c) A discretionary amount, which amount shall
be deemed an Employer's Non-Elective Contribution.
(d) Notwithstanding the foregoing, however, the
Employer's contributions for any Plan Year shall not exceed
the maximum amount allowable as a deduction to the Employer
under the provisions of Code Section 404. All contributions by
the Employer shall be made in cash or in such property as is
acceptable to the Trustee.
(e) Except, however, to the extent necessary to
provide the top heavy minimum allocations, the Employer shall
make a contribution even if it exceeds the amount which is
deductible under Code Section 404.
4.2 PARTICIPANT'S SALARY REDUCTION ELECTION
(a) Each Participant may elect to defer his
Compensation which would have been received in the Plan Year,
but for the deferral election, by up to 15%. A deferral
election (or modification of an earlier election) may not be
made with respect to Compensation which is currently available
on or before the date the Participant executed such election
or, if later, the latest of the date the Employer adopts this
cash or deferred arrangement, or the date such arrangement
first became effective. A special election will be permitted
for an annual bonus, if applicable.
The amount by which Compensation is reduced
shall be that Participant's Deferred Compensation and be
treated as an Employer Elective Contribution and allocated to
that Participant's Elective Account.
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<PAGE> 36
(b) The balance in each Participant's Elective
Account shall be fully Vested at all times and shall not be
subject to Forfeiture for any reason.
(c) Amounts held in the Participant's Elective
Account may not be distributable earlier than:
(1) a Participant's termination of employment
or death;
(2) a Participant's attainment of age 59 1/2;
(3) the termination of the Plan without the
establishment or existence of a "successor plan," as
that term is described in Regulation
1.401(k)-1(d)(3);
(4) the date of disposition by the Employer to
an entity that is not an Affiliated Employer of
substantially all of the assets (within the meaning
of Code Section 409(d)(2)) used in a trade or
business of such corporation if such corporation
continues to maintain this Plan after the
disposition with respect to a Participant who
continues employment with the corporation acquiring
such assets;
(5) the date of disposition by the Employer or
an Affiliated Employer who maintains the Plan of its
interest in a subsidiary (within the meaning of Code
Section 409(d)(3)) to an entity which is not an
Affiliated Employer but only with respect to a
Participant who continues employment with such
subsidiary; or
(6) the proven financial hardship of a
Participant, subject to the limitations of Section
6.10.
(d) For each Plan Year, a Participant's
Deferred Compensation made under this Plan and all other
plans, contracts or arrangements of the Employer maintaining
this Plan shall not exceed, during any taxable year of the
Participant, the limitation imposed by Code Section 402(g), as
in effect at the beginning of such taxable year. If such
dollar limitation is exceeded, a Participant will be deemed to
have notified the Administrator of such excess amount which
shall be distributed in a manner consistent with Section
4.2(f). The dollar limitation shall be adjusted annually
pursuant to the method provided in Code Section 415(d) in
accordance with Regulations.
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<PAGE> 37
(e) In the event a Participant has received a
hardship distribution from his Participant's Elective Account
pursuant to Section 6.10 or pursuant to Regulation
1.401(k)-1(d)(2)(iv)(B) from any other plan maintained by the
Employer, then such Participant shall not be permitted to
elect to have Deferred Compensation contributed to the Plan on
his behalf for a period of twelve (12) months following the
receipt of the distribution. Furthermore, the dollar
limitation under Code Section 402(g) shall be reduced, with
respect to the Participant's taxable year following the
taxable year in which the hardship distribution was made, by
the amount of such Participant's Deferred Compensation, if
any, pursuant to this Plan (and any other plan maintained by
the Employer) for the taxable year of the hardship
distribution.
(f) If a Participant's Deferred Compensation
under this Plan together with any elective deferrals (as
defined in Regulation 1.402(g)-1(b)) under another qualified
cash or deferred arrangement (as defined in Code Section
401(k)), a simplified employee pension (as defined in Code
Section 408(k)), a salary reduction arrangement (within the
meaning of Code Section 3121(a)(5)(D)), a deferred
compensation plan under Code Section 457, or a trust described
in Code Section 501(c)(18) cumulatively exceed the limitation
imposed by Code Section 402(g) (as adjusted annually in
accordance with the method provided in Code Section 415(d)
pursuant to Regulations) for such Participant's taxable year,
the Participant may, not later than March 1 following the
close of the Participant's taxable year, notify the
Administrator in writing of such excess and request that his
Deferred Compensation under this Plan be reduced by an amount
specified by the Participant. In such event, the Administrator
may direct the Trustee to distribute such excess amount (and
any Income allocable to such excess amount) to the Participant
not later than the first April 15th following the close of the
Participant's taxable year. Any distribution of less than the
entire amount of Excess Deferred Compensation and Income shall
be treated as a pro rata distribution of Excess Deferred
Compensation and Income. The amount distributed shall not
exceed the Participant's Deferred Compensation under the Plan
for the taxable year. Any distribution on or before the last
day of the Participant's taxable year must satisfy each of the
following conditions:
(1) the distribution must be made after the
date on which the Plan received the Excess Deferred
Compensation;
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(2) the Participant shall designate the
distribution as Excess Deferred Compensation; and
(3) the Plan must designate the distribution as
a distribution of Excess Deferred Compensation.
Any distribution made pursuant to this
Section 4.2(f) shall be made first from unmatched Deferred
Compensation and, thereafter, simultaneously from Deferred
Compensation which is matched and matching contributions which
relate to such Deferred Compensation. However, any such
matching contributions which are not Vested shall be forfeited
in lieu of being distributed.
(g) Notwithstanding Section 4.2(f) above, a
Participant's Excess Deferred Compensation shall be reduced,
but not below zero, by any distribution of Excess
Contributions pursuant to Section 4.6(a) for the Plan Year
beginning with or within the taxable year of the Participant.
(h) At Normal Retirement Date, or such other
date when the Participant shall be entitled to receive
benefits, the fair market value of the Participant's Elective
Account shall be used to provide additional benefits to the
Participant or his Beneficiary.
(i) All amounts allocated to a Participant's
Elective Account may be treated as a Directed Investment
Account pursuant to Section 4.12.
(j) Employer Elective Contributions made
pursuant to this Section may be segregated into a separate
account for each Participant in a federally insured savings
account, certificate of deposit in a bank or savings and loan
association, money market certificate, or other short-term
debt security acceptable to the Trustee until such time as the
allocations pursuant to Section 4.4 have been made.
(k) The Employer and the Administrator shall
implement the salary reduction elections provided for herein
in accordance with the following:
(1) A Participant may commence making elective
deferrals to the Plan only after first satisfying
the eligibility and participation requirements
specified in Article III. However, the Participant
must make his initial salary deferral election
within a reasonable time, not to exceed thirty (30)
days, after entering the Plan pursuant to Section
3.3. If the Participant fails to make an initial
salary deferral election
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<PAGE> 39
within such time, then such Participant may thereafter make an
election in accordance with the rules governing modifications. The
Participant shall make such an election by entering into a written
salary reduction agreement with the Employer and filing such
agreement with the Administrator. Such election shall initially be
effective beginning with the pay period following the acceptance of
the salary reduction agreement by the Administrator, shall not have
retroactive effect and shall remain in force until revoked.
(2) A Participant may modify a prior election
during the Plan Year and concurrently make a new
election within a reasonable time before the first
pay period of each month, when such modification is
to be effective. Any modification shall not have
retroactive effect and shall remain in force until
revoked.
(3) A Participant may elect to prospectively
revoke his salary reduction agreement in its
entirety at any time during the Plan Year. Such
revocation shall become effective as of the
beginning of the first pay period coincident with or
next following the expiration of the notice period.
Furthermore, the termination of the Participant's
employment, or the cessation of participation for
any reason, shall be deemed to revoke any salary
reduction agreement then in effect, effective
immediately following the close of the pay period
within which such termination or cessation occurs.
4.3 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION
The Employer shall generally pay to the Trustee its
contribution to the Plan for each Plan Year within the time prescribed by law,
including extensions of time, for the filing of the Employer's federal income
tax return for the Fiscal Year.
However, Employer Elective Contributions accumulated through
payroll deductions shall be paid to the Trustee as of the earliest date on
which such contributions can reasonably be segregated from the Employer's
general assets, but in any event within ninety (90) days from the date on which
such amounts would otherwise have been payable to the Participant in cash. The
provisions of Department of Labor regulations 2510.3-102 are incorporated
herein by reference. Furthermore, any additional Employer contributions which
are allocable to the Participant's Elective Account for a Plan Year shall be
paid to the Plan no
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<PAGE> 40
later than the twelve-month period immediately following the close of such Plan
Year.
4.4 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS
(a) The Administrator shall establish and
maintain an account in the name of each Participant to which
the Administrator shall credit as of each Anniversary Date all
amounts allocated to each such Participant as set forth
herein.
(b) The Employer shall provide the
Administrator with all information required by the
Administrator to make a proper allocation of the Employer's
contributions for each Plan Year. Within a reasonable period
of time after the date of receipt by the Administrator of such
information, the Administrator shall allocate such
contribution as follows:
(1) With respect to the Employer's Elective
Contribution made pursuant to Section 4.1(a), to
each Participant's Elective Account in an amount
equal to each such Participant's Deferred
Compensation for the year.
(2) With respect to the Employer's Non-Elective
Contribution made pursuant to Section 4.1(b), to
each Participant's Account in accordance with
Section 4.1(b).
Any Participant actively employed during the Plan
Year shall be eligible to share in the matching
contribution for the Plan Year.
(3) With respect to the Employer's Non-Elective
Contribution made pursuant to Section 4.1(c), in the
following manner:
(i) A dollar amount equal to 5.7%
of the sum of each Participant's total
Compensation plus Excess Compensation shall
be allocated to each Participant's Account.
If the Employer does not contribute such
amount for all Participants, each
Participant will be allocated a share of
the contribution in the same proportion
that his total Compensation plus his total
Excess Compensation for the Plan Year bears
to the total Compensation plus the total
Excess Compensation of all Participants for
that year.
(ii) The balance of the Employer's
Non-Elective Contribution over the amount
allocated above, if any, shall be allocated
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<PAGE> 41
to each Participant's Account in the same
proportion that his total Compensation for
the Plan Year bears to the total
Compensation of all Participants for such
year.
Only Participants who have completed a Year of
Service with 1,000 Hours during the Plan Year and
are actively employed on the last day of the Plan
Year shall be eligible to share in the discretionary
contribution for the year.
(c) As of each Anniversary Date any amounts
which became Forfeitures since the last Anniversary Date shall
first be made available to reinstate previously forfeited
account balances of Former Participants, if any, in accordance
with Section 6.4(e)(2). The remaining Forfeitures, if any,
shall be used to pay expenses of the Plan described in Section
2.10 and the remaining amount, if any to reduce the
contribution of the Employer hereunder for the Plan Year in
which such Forfeitures occur in the following manner:
(1) Forfeitures attributable to Employer
matching contributions made pursuant to Section
4.1(b) shall be used to reduce the Employer's
contribution for the Plan Year in which such
Forfeitures occur.
(2) Forfeitures attributable to Employer
discretionary contributions made pursuant to Section
4.1(c) shall be used to reduce the Employer's
contribution for the Plan Year in which such
Forfeitures occur.
(d) For any Top Heavy Plan Year, Non-Key
Employees not otherwise eligible to share in the allocation of
contributions as provided above, shall receive the minimum
allocation provided for in Section 4.4(g) if eligible pursuant
to the provisions of Section 4.4(i).
(e) Participants who are not actively employed
on the last day of the Plan Year due to Retirement (Early,
Normal or Late) or death shall share in the allocation of
contributions for that Plan Year only if otherwise eligible in
accordance with this Section.
(f) As of each Anniversary Date or other
valuation date, before the current valuation period allocation
of Employer contributions and after allocation of Forfeitures,
any earnings or losses (net appreciation or net depreciation)
of the Trust Fund
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<PAGE> 42
shall be allocated in the same proportion that each
Participant's and Former Participant's nonsegregated accounts
bear to the total of all Participants' and Former
Participants' nonsegregated accounts as of such date.
Participants' transfers from other
qualified plans deposited in the general Trust Fund shall
share in any earnings and losses (net appreciation or net
depreciation) of the Trust Fund in the same manner provided
above. Each segregated account maintained on behalf of a
Participant shall be credited or charged with its separate
earnings and losses.
(g) Minimum Allocations Required for Top Heavy
Plan Years: Notwithstanding the foregoing, for any Top Heavy
Plan Year, the sum of the Employer's contributions allocated
to the Participant's Combined Account of each Non-Key Employee
shall be equal to at least three percent (3%) of such Non-Key
Employee's "415 Compensation" (reduced by contributions and
forfeitures, if any, allocated to each Non-Key Employee in any
defined contribution plan included with this plan in a
Required Aggregation Group). However, if (1) the sum of the
Employer's contributions allocated to the Participant's
Combined Account of each Key Employee for such Top Heavy Plan
Year is less than three percent (3%) of each Key Employee's
"415 Compensation" and (2) this Plan is not required to be
included in an Aggregation Group to enable a defined benefit
plan to meet the requirements of Code Section 401(a)(4) or
410, the sum of the Employer's contributions allocated to the
Participant's Combined Account of each Non-Key Employee shall
be equal to the largest percentage allocated to the
Participant's Combined Account of any Key Employee. However,
in determining whether a Non-Key Employee has received the
required minimum allocation, such Non-Key Employee's Deferred
Compensation and matching contributions needed to satisfy the
"Actual Contribution Percentage" tests pursuant to Section
4.7(a) shall not be taken into account.
However, no such minimum allocation shall
be required in this Plan for any Non-Key Employee who
participates in another defined contribution plan subject to
Code Section 412 providing such benefits included with this
Plan in a Required Aggregation Group.
(h) For purposes of the minimum allocations set
forth above, the percentage allocated to the Participant's
Combined Account of any Key Employee shall be equal to the
ratio of the sum of the
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<PAGE> 43
Employer's contributions allocated on behalf of such
Key Employee divided by the "415 Compensation" for such Key
Employee.
(i) For any Top Heavy Plan Year, the minimum
allocations set forth above shall be allocated to the
Participant's Combined Account of all Non-Key Employees who
are Participants and who are employed by the Employer on the
last day of the Plan Year, including Non-Key Employees who
have (1) failed to complete a Year of Service; and (2)
declined to make mandatory contributions (if required) or, in
the case of a cash or deferred arrangement, elective
contributions to the Plan.
(j) For the purposes of this Section, "415
Compensation" shall be limited to $200,000. Such amount shall
be adjusted at the same time and in the same manner as
permitted under Code Section 415(d), except that the dollar
increase in effect on January 1 of any calendar year shall be
effective for the Plan Year beginning with or within such
calendar year and the first adjustment to the $200,000
limitation shall be effective on January 1, 1990. For any
short Plan Year the "415 Compensation" limit shall be an
amount equal to the "415 Compensation" limit for the calendar
year in which the Plan Year begins multiplied by the ratio
obtained by dividing the number of full months in the short
Plan Year by twelve (12).
In addition to other applicable limitations
set forth in the Plan, and notwithstanding any other provision
of the Plan to the contrary, for Plan Years beginning on or
after January 1, 1994, the annual Compensation of each
Employee taken into account under the Plan shall not exceed
the OBRA '93 annual compensation limit. The OBRA '93 annual
compensation limit is $150,000, as adjusted by the
Commissioner for increases in the cost of living in accordance
with Code Section 401(a)(17)(B). The cost of living adjustment
in effect for a calendar year applies to any period, not
exceeding 12 months, over which Compensation is determined
(determination period) beginning in such calendar year. If a
determination period consists of fewer than 12 months, the
OBRA '93 annual compensation limit will be multiplied by a
fraction, the numerator of which is the number of months in
the determination period, and the denominator of which is 12.
For Plan Years beginning on or after
January 1, 1994, any reference in this Plan to the limitation
under Code Section 401(a)(17) shall mean the OBRA '93 annual
compensation limit set forth in this provision.
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<PAGE> 44
If Compensation for any prior determination
period is taken into account in determining an Employee's
benefits accruing in the current Plan Year, the Compensation
for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior
determination period. For this purpose, for determination
periods beginning before the first day of the first Plan Year
beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
(k) Notwithstanding anything herein to the
contrary, Participants who terminated employment for any
reason during the Plan Year shall share in the salary
reduction contributions made by the Employer for the year of
termination without regard to the Hours of Service credited.
(l) If a Former Participant is reemployed after
five (5) consecutive 1-Year Breaks in Service, then separate
accounts shall be maintained as follows:
(1) one account for nonforfeitable benefits
attributable to pre-break service; and
(2) one account representing his status in the
Plan attributable to post-break service.
(m) Notwithstanding anything to the contrary,
if this is a Plan that would otherwise fail to meet the
requirements of Code Sections 401(a)(26), 410(b)(1) or
410(b)(2)(A)(i) and the Regulations thereunder because
Employer contributions would not be allocated to a sufficient
number or percentage of Participants for a Plan Year, then the
following rules shall apply:
(1) The group of Participants eligible to share
in the Employer's contribution for the Plan Year
shall be expanded to include the minimum number of
Participants who would not otherwise be eligible as
are necessary to satisfy the applicable test
specified above. The specific Participants who shall
become eligible under the terms of this paragraph
shall be those who are actively employed on the last
day of the Plan Year and, when compared to similarly
situated Participants, have completed the greatest
number of Hours of Service in the Plan Year.
(2) If after application of paragraph (1)
above, the applicable test is still not satisfied,
then the group of Participants eligible to share in
the Employer's contribution for the Plan Year shall
be further expanded to include the minimum
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<PAGE> 45
number of Participants who are not actively employed
on the last day of the Plan Year as are
necessary to satisfy the applicable test. The
specific Participants who shall become eligible to
share shall be those Participants, when compared to
similarly situated Participants, who have completed
the greatest number of Hours of Service in the Plan
Year before terminating employment.
(3) Nothing in this Section shall permit the
reduction of a Participant's accrued benefit.
Therefore any amounts that have previously been
allocated to Participants may not be reallocated to
satisfy these requirements. In such event, the
Employer shall make an additional contribution equal
to the amount such affected Participants would have
received had they been included in the allocations,
even if it exceeds the amount which would be
deductible under Code Section 404. Any adjustment to
the allocations pursuant to this paragraph shall be
considered a retroactive amendment adopted by the
last day of the Plan Year.
(4) Notwithstanding the foregoing, for any Top
Heavy Plan Year beginning after December 31, 1992,
if the portion of the Plan which is not a Code
Section 401(k) or 401(m) plan would fail to satisfy
Code Section 410(b) if the coverage tests were
applied by treating those Participants whose only
allocation (under such portion of the Plan) would
otherwise be provided under the top heavy formula as
if they were not currently benefiting under the
Plan, then, for purposes of this Section 4.4(m),
such Participants shall be treated as not benefiting
and shall therefore be eligible to be included in
the expanded class of Participants who will share in
the allocation provided under the Plan's non top
heavy formula.
4.5 ACTUAL DEFERRAL PERCENTAGE TESTS
(a) Maximum Annual Allocation: For each Plan
Year, the annual allocation derived from Employer Elective
Contributions to a Participant's Elective Account shall
satisfy one of the following tests:
(1) The "Actual Deferral Percentage" for the
Highly Compensated Participant group shall not be
more than the "Actual Deferral Percentage" of the
Non-Highly Compensated Participant group multiplied
by 1.25, or
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(2) The excess of the "Actual Deferral
Percentage" for the Highly Compensated Participant
group over the "Actual Deferral Percentage" for the
Non-Highly Compensated Participant group shall not
be more than two percentage points. Additionally,
the "Actual Deferral Percentage" for the Highly
Compensated Participant group shall not exceed the
"Actual Deferral Percentage" for the Non-Highly
Compensated Participant group multiplied by 2. The
provisions of Code Section 401(k)(3) and Regulation
1.401(k)-1(b) are incorporated herein by reference.
However, in order to prevent the multiple use of the
alternative method described in (2) above and in
Code Section 401(m)(9)(A), any Highly Compensated
Participant eligible to make elective deferrals
pursuant to Section 4.2 and to make Employee
contributions or to receive matching contributions
under this Plan or under any other plan maintained
by the Employer or an Affiliated Employer shall have
his actual contribution ratio reduced pursuant to
Regulation 1.401(m)-2, the provisions of which are
incorporated herein by reference.
(b) For the purposes of this Section "Actual
Deferral Percentage" means, with respect to the Highly
Compensated Participant group and Non-Highly Compensated
Participant group for a Plan Year, the average of the ratios,
calculated separately for each Participant in such group, of
the amount of Employer Elective Contributions allocated to
each Participant's Elective Account for such Plan Year, to
such Participant's "414(s) Compensation" for such Plan Year.
The actual deferral ratio for each Participant and the "Actual
Deferral Percentage" for each group shall be calculated to the
nearest one-hundredth of one percent. Employer Elective
Contributions allocated to each Non-Highly Compensated
Participant's Elective Account shall be reduced by Excess
Deferred Compensation to the extent such excess amounts are
made under this Plan or any other plan maintained by the
Employer.
(c) For the purpose of determining the actual
deferral ratio of a Highly Compensated Employee who is subject
to the Family Member aggregation rules of Code Section
414(q)(6) because such Participant is either a "five percent
owner" of the Employer or one of the ten (10) Highly
Compensated Employees paid the greatest "415 Compensation"
during the year, the following shall apply:
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<PAGE> 47
(1) The combined actual deferral ratio for the
family group (which shall be treated as one Highly
Compensated Participant) shall be determined by
aggregating Employer Elective Contributions and
"414(s) Compensation" of all eligible Family Members
(including Highly Compensated Participants).
However, in applying the $200,000 limit to "414(s)
Compensation," Family Members shall include only the
affected Employee's spouse and any lineal
descendants who have not attained age 19 before the
close of the Plan Year.
(2) The Employer Elective Contributions and
"414(s) Compensation" of all Family Members shall be
disregarded for purposes of determining the "Actual
Deferral Percentage" of the Non-Highly Compensated
Participant group except to the extent taken into
account in paragraph (1) above.
(3) If a Participant is required to be
aggregated as a member of more than one family group
in a plan, all Participants who are members of those
family groups that include the Participant are
aggregated as one family group in accordance with
paragraphs (1) and (2) above.
(d) For the purposes of Sections 4.5(a) and
4.6, a Highly Compensated Participant and a Non-Highly
Compensated Participant shall include any Employee eligible to
make a deferral election pursuant to Section 4.2, whether or
not such deferral election was made or suspended pursuant to
Section 4.2.
(e) For the purposes of this Section and Code
Sections 401(a)(4), 410(b) and 401(k), if two or more plans
which include cash or deferred arrangements are considered one
plan for the purposes of Code Section 401(a)(4) or 410(b)
(other than Code Section 410(b)(2)(A)(ii)), the cash or
deferred arrangements included in such plans shall be treated
as one arrangement. In addition, two or more cash or deferred
arrangements may be considered as a single arrangement for
purposes of determining whether or not such arrangements
satisfy Code Sections 401(a)(4), 410(b) and 401(k). In such a
case, the cash or deferred arrangements included in such plans
and the plans including such arrangements shall be treated as
one arrangement and as one plan for purposes of this Section
and Code Sections 401(a)(4), 410(b) and 401(k). Plans may be
aggregated under this paragraph (e) only if they have the same
plan year.
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<PAGE> 48
Notwithstanding the above, an employee
stock ownership plan described in Code Section 4975(e)(7) or
409 may not be combined with this Plan for purposes of
determining whether the employee stock ownership plan or this
Plan satisfies this Section and Code Sections 401(a)(4),
410(b) and 401(k).
(f) For the purposes of this Section, if a
Highly Compensated Participant is a Participant under two or
more cash or deferred arrangements (other than a cash or
deferred arrangement which is part of an employee stock
ownership plan as defined in Code Section 4975(e)(7) or 409)
of the Employer or an Affiliated Employer, all such cash or
deferred arrangements shall be treated as one cash or deferred
arrangement for the purpose of determining the actual deferral
ratio with respect to such Highly Compensated Participant.
However, if the cash or deferred arrangements have different
plan years, this paragraph shall be applied by treating all
cash or deferred arrangements ending with or within the same
calendar year as a single arrangement.
4.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS
In the event that the initial allocations of the Employer's
Elective Contributions made pursuant to Section 4.4 do not satisfy one of the
tests set forth in Section 4.5(a), the Administrator shall adjust Excess
Contributions pursuant to the options set forth below:
(a) On or before the fifteenth day of the third
month following the end of each Plan Year, the Highly
Compensated Participant having the highest actual deferral
ratio shall have his portion of Excess Contributions
distributed to him until one of the tests set forth in Section
4.5(a) is satisfied, or until his actual deferral ratio equals
the actual deferral ratio of the Highly Compensated
Participant having the second highest actual deferral ratio.
This process shall continue until one of the tests set forth
in Section 4.5(a) is satisfied. For each Highly Compensated
Participant, the amount of Excess Contributions is equal to
the Elective Contributions on behalf of such Highly
Compensated Participant (determined prior to the application
of this paragraph) minus the amount determined by multiplying
the Highly Compensated Participant's actual deferral ratio
(determined after application of this paragraph) by his
"414(s) Compensation." However, in determining the amount of
Excess Contributions to be distributed with respect to an
affected Highly Compensated Participant as determined herein,
such amount shall be reduced by any Excess Deferred
Compensation previously distributed to
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<PAGE> 49
such affected Highly Compensated Participant for his taxable year
ending with or within such Plan Year.
(1) With respect to the distribution of Excess
Contributions pursuant to (a) above, such
distribution:
(i) may be postponed but not later
than the close of the Plan Year following
the Plan Year to which they are allocable;
(ii) shall be made first from
unmatched Deferred Compensation and,
thereafter, simultaneously from Deferred
Compensation which is matched and matching
contributions which relate to such Deferred
Compensation. However, any such matching
contributions which are not Vested shall be
forfeited in lieu of being distributed;
(iii) shall be adjusted for Income;
and
(iv) shall be designated by the
Employer as a distribution of Excess
Contributions (and Income).
(2) Any distribution of less than the entire
amount of Excess Contributions shall be treated as a
pro rata distribution of Excess Contributions and
Income.
(3) The determination and correction of Excess
Contributions of a Highly Compensated Participant
whose actual deferral ratio is determined under the
family aggregation rules shall be accomplished by
reducing the actual deferral ratio as required
herein, and the Excess Contributions for the family
unit shall then be allocated among the Family
Members in proportion to the Elective Contributions
of each Family Member that were combined to
determine the group actual deferral ratio.
(b) Within twelve (12) months after the end of
the Plan Year, the Employer may make a special Qualified
Non-Elective Contribution on behalf of Non-Highly Compensated
Participants in an amount sufficient to satisfy one of the
tests set forth in Section 4.5(a). Such contribution shall be
allocated to the Participant's Elective Account of each
Non-Highly Compensated Participant in the same proportion that
each Non-Highly Compensated Participant's Compensation for the
year bears to the total Compensation of all Non-Highly
Compensated Participants.
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<PAGE> 50
(c) If during a Plan Year the projected
aggregate amount of Elective Contributions to be allocated to
all Highly Compensated Participants under this Plan would, by
virtue of the tests set forth in Section 4.5(a), cause the
Plan to fail such tests, then the Administrator may
automatically reduce proportionately or in the order provided
in Section 4.6(a) each affected Highly Compensated
Participant's deferral election made pursuant to Section 4.2
by an amount necessary to satisfy one of the tests set forth
in Section 4.5(a).
4.7 ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) The "Actual Contribution Percentage" for
the Highly Compensated Participant group shall not exceed the
greater of:
(1) 125 percent of such percentage for the
Non-Highly Compensated Participant group; or
(2) the lesser of 200 percent of such
percentage for the Non-Highly Compensated
Participant group, or such percentage for the
Non-Highly Compensated Participant group plus 2
percentage points. However, to prevent the multiple
use of the alternative method described in this
paragraph and Code Section 401(m)(9)(A), any Highly
Compensated Participant eligible to make elective
deferrals pursuant to Section 4.2 or any other cash
or deferred arrangement maintained by the Employer
or an Affiliated Employer and to make Employee
contributions or to receive matching contributions
under this Plan or under any other plan maintained
by the Employer or an Affiliated Employer shall have
his actual contribution ratio reduced pursuant to
Regulation 1.401(m)-2. The provisions of Code
Section 401(m) and Regulations 1.401(m)-1(b) and
1.401(m)-2 are incorporated herein by reference.
(b) For the purposes of this Section and
Section 4.8, "Actual Contribution Percentage" for a Plan Year
means, with respect to the Highly Compensated Participant
group and Non-Highly Compensated Participant group, the
average of the ratios (calculated separately for each
Participant in each group) of:
(1) the sum of Employer matching contributions
made pursuant to Section 4.1(b) on behalf of each
such Participant for such Plan Year; to
44
<PAGE> 51
(2) the Participant's "414(s) Compensation"
for such Plan Year.
(c) For purposes of determining the "Actual
Contribution Percentage" and the amount of Excess Aggregate
Contributions pursuant to Section 4.8(d), only Employer
matching contributions (excluding Employer matching
contributions forfeited or distributed pursuant to Sections
4.2(f) and 4.6(a)(1) or forfeited pursuant to Section 4.8(a))
contributed to the Plan prior to the end of the succeeding
Plan Year shall be considered. In addition, the Administrator
may elect to take into account, with respect to Employees
eligible to have Employer matching contributions pursuant to
Section 4.1(b) allocated to their accounts, elective deferrals
(as defined in Regulation 1.402(g)-1(b)) and qualified
non-elective contributions (as defined in Code Section
401(m)(4)(C)) contributed to any plan maintained by the
Employer. Such elective deferrals and qualified non-elective
contributions shall be treated as Employer matching
contributions subject to Regulation 1.401(m)-1(b)(5) which is
incorporated herein by reference. However, the Plan Year must
be the same as the plan year of the plan to which the elective
deferrals and the qualified non-elective contributions are
made.
(d) For the purpose of determining the actual
contribution ratio of a Highly Compensated Employee who is
subject to the Family Member aggregation rules of Code Section
414(q)(6) because such Employee is either a "five percent
owner" of the Employer or one of the ten (10) Highly
Compensated Employees paid the greatest "415 Compensation"
during the year, the following shall apply:
(1) The combined actual contribution ratio for
the family group (which shall be treated as one
Highly Compensated Participant) shall be determined
by aggregating Employer matching contributions made
pursuant to Section 4.1(b) and "414(s) Compensation"
of all eligible Family Members (including Highly
Compensated Participants). However, in applying the
$200,000 limit to "414(s) Compensation", Family
Members shall include only the affected Employee's
spouse and any lineal descendants who have not
attained age 19 before the close of the Plan Year.
(2) The Employer matching contributions made
pursuant to Section 4.1(b) and "414(s) Compensation"
of all Family Members shall be disregarded for
purposes of determining the "Actual Contribution
Percentage" of the
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<PAGE> 52
Non-Highly Compensated Participant group except
to the extent taken into account in paragraph (1)
above.
(3) If a Participant is required to be
aggregated as a member of more than one family group
in a plan, all Participants who are members of those
family groups that include the Participant are
aggregated as one family group in accordance with
paragraphs (1) and (2) above.
(e) For purposes of this Section and Code
Sections 401(a)(4), 410(b) and 401(m), if two or more plans of
the Employer to which matching contributions, Employee
contributions, or both, are made are treated as one plan for
purposes of Code Sections 401(a)(4) or 410(b) (other than the
average benefits test under Code Section 410(b)(2)(A)(ii)),
such plans shall be treated as one plan. In addition, two or
more plans of the Employer to which matching contributions,
Employee contributions, or both, are made may be considered as
a single plan for purposes of determining whether or not such
plans satisfy Code Sections 401(a)(4), 410(b) and 401(m). In
such a case, the aggregated plans must satisfy this Section
and Code Sections 401(a)(4), 410(b) and 401(m) as though such
aggregated plans were a single plan. Plans may be aggregated
under this paragraph (e) only if they have the same plan year.
Notwithstanding the above, an employee
stock ownership plan described in Code Section 4975(e)(7) or
409 may not be aggregated with this Plan for purposes of
determining whether the employee stock ownership plan or this
Plan satisfies this Section and Code Sections 401(a)(4),
410(b) and 401(m).
(f) If a Highly Compensated Participant is a
Participant under two or more plans (other than an employee
stock ownership plan as defined in Code Section 4975(e)(7) or
409) which are maintained by the Employer or an Affiliated
Employer to which matching contributions, Employee
contributions, or both, are made, all such contributions on
behalf of such Highly Compensated Participant shall be
aggregated for purposes of determining such Highly Compensated
Participant's actual contribution ratio. However, if the plans
have different plan years, this paragraph shall be applied by
treating all plans ending with or within the same calendar
year as a single plan.
(g) For purposes of Sections 4.7(a) and 4.8, a
Highly Compensated Participant and Non-Highly Compensated
Participant shall include any Employee eligible to have
Employer matching contributions
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<PAGE> 53
pursuant to Section 4.1(b) (whether or not a deferral
election was made or suspended pursuant to Section 4.2(e))
allocated to his account for the Plan Year.
4.8 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) In the event that the "Actual Contribution
Percentage" for the Highly Compensated Participant group
exceeds the "Actual Contribution Percentage" for the
Non-Highly Compensated Participant group pursuant to Section
4.7(a), the Administrator (on or before the fifteenth day of
the third month following the end of the Plan Year, but in no
event later than the close of the following Plan Year) shall
direct the Trustee to distribute to the Highly Compensated
Participant having the highest actual contribution ratio, his
Vested portion of Excess Aggregate Contributions (and Income
allocable to such contributions) and, if forfeitable, forfeit
such non-Vested Excess Aggregate Contributions attributable to
Employer matching contributions (and Income allocable to such
forfeitures) until either one of the tests set forth in
Section 4.7(a) is satisfied, or until his actual contribution
ratio equals the actual contribution ratio of the Highly
Compensated Participant having the second highest actual
contribution ratio. This process shall continue until one of
the tests set forth in Section 4.7(a) is satisfied.
If the correction of Excess Aggregate
Contributions attributable to Employer matching contributions
is not in proportion to the Vested and non-Vested portion of
such contributions, then the Vested portion of the
Participant's Account attributable to Employer matching
contributions after the correction shall be subject to Section
6.5(h).
(b) Any distribution and/or forfeiture of less
than the entire amount of Excess Aggregate Contributions (and
Income) shall be treated as a pro rata distribution and/or
forfeiture of Excess Aggregate Contributions and Income.
Distribution of Excess Aggregate Contributions shall be
designated by the Employer as a distribution of Excess
Aggregate Contributions (and Income). Forfeitures of Excess
Aggregate Contributions shall be treated in accordance with
Section 4.4.
(c) Excess Aggregate Contributions, including
forfeited matching contributions, shall be treated as Employer
contributions for purposes of Code Sections 404 and 415 even
if distributed from the Plan.
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<PAGE> 54
Forfeited matching contributions that are
reallocated to Participants' Accounts for the Plan Year in
which the forfeiture occurs shall be treated as an "annual
addition" pursuant to Section 4.9(b) for the Participants to
whose Accounts they are reallocated and for the Participants
from whose Accounts they are forfeited.
(d) For each Highly Compensated Participant,
the amount of Excess Aggregate Contributions is equal to the
Employer matching contributions made pursuant to Section
4.1(b) and any qualified non-elective contributions or
elective deferrals taken into account pursuant to Section
4.7(c) on behalf of the Highly Compensated Participant
(determined prior to the application of this paragraph) minus
the amount determined by multiplying the Highly Compensated
Participant's actual contribution ratio (determined after
application of this paragraph) by his "414(s) Compensation."
The actual contribution ratio must be rounded to the nearest
one-hundredth of one percent. In no case shall the amount of
Excess Aggregate Contribution with respect to any Highly
Compensated Participant exceed the amount of Employer matching
contributions made pursuant to Section 4.1(b) and any
qualified non-elective contributions or elective deferrals
taken into account pursuant to Section 4.7(c) on behalf of
such Highly Compensated Participant for such Plan Year.
(e) The determination of the amount of Excess
Aggregate Contributions with respect to any Plan Year shall be
made after first determining the Excess Contributions, if any,
to be treated as voluntary Employee contributions due to
recharacterization for the plan year of any other qualified
cash or deferred arrangement (as defined in Code Section
401(k)) maintained by the Employer that ends with or within
the Plan Year.
(f) If the determination and correction of
Excess Aggregate Contributions of a Highly Compensated
Participant whose actual contribution ratio is determined
under the family aggregation rules, then the actual
contribution ratio shall be reduced and the Excess Aggregate
Contributions for the family unit shall be allocated among the
Family Members in proportion to the sum of Employer matching
contributions made pursuant to Section 4.1(b) and any
qualified non-elective contributions or elective deferrals
taken into account pursuant to Section 4.7(c) of each Family
Member that were combined to determine the group actual
contribution ratio.
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<PAGE> 55
(g) If during a Plan Year the projected
aggregate amount of Employer matching contributions to be
allocated to all Highly Compensated Participants under this
Plan would, by virtue of the tests set forth in Section
4.7(a), cause the Plan to fail such tests, then the
Administrator may automatically reduce proportionately or in
the order provided in Section 4.8(a) each affected Highly
Compensated Participant's projected share of such
contributions by an amount necessary to satisfy one of the
tests set forth in Section 4.7(a).
(h) Notwithstanding the above, within twelve
(12) months after the end of the Plan Year, the Employer may
make a special Qualified Non-Elective Contribution on behalf
of Non-Highly Compensated Participants in an amount sufficient
to satisfy one of the tests set forth in Section 4.7(a). Such
contribution shall be allocated to the Participant's Elective
Account of each Non-Highly Compensated Participant in the same
proportion that each Non-Highly Compensated Participant's
Compensation for the year bears to the total Compensation of
all Non-Highly Compensated Participants. A separate accounting
shall be maintained for the purpose of excluding such
contributions from the "Actual Deferral Percentage" tests
pursuant to Section 4.5(a).
4.9 MAXIMUM ANNUAL ADDITIONS
(a) Notwithstanding the foregoing, the maximum
"annual additions" credited to a Participant's accounts for
any "limitation year" shall equal the lesser of: (1) $30,000
(or, if greater, one-fourth of the dollar limitation in effect
under Code Section 415(b)(1)(A)) or (2) twenty-five percent
(25%) of the Participant's "415 Compensation" for such
"limitation year." For any short "limitation year," the dollar
limitation in (1) above shall be reduced by a fraction, the
numerator of which is the number of full months in the short
"limitation year" and the denominator of which is twelve (12).
(b) For purposes of applying the limitations of
Code Section 415, "annual additions" means the sum credited to
a Participant's accounts for any "limitation year" of (1)
Employer contributions, (2) Employee contributions, (3)
forfeitures, (4) amounts allocated, after March 31, 1984, to
an individual medical account, as defined in Code Section
415(l)(2) which is part of a pension or annuity plan
maintained by the Employer and (5) amounts derived from
contributions paid or accrued after December 31, 1985, in
taxable years ending after such date, which are
49
<PAGE> 56
attributable to post-retirement medical benefits allocated to
the separate account of a key employee (as defined in Code
Section 419A(d)(3)) under a welfare benefit plan (as defined
in Code Section 419(e)) maintained by the Employer. Except,
however, the "415 Compensation" percentage limitation referred
to in paragraph (a)(2) above shall not apply to: (1) any
contribution for medical benefits (within the meaning of Code
Section 419A(f)(2)) after separation from service which
is otherwise treated as an "annual addition," or (2) any
amount otherwise treated as an "annual addition" under Code
Section 415(l)(1).
(c) For purposes of applying the limitations of
Code Section 415, the transfer of funds from one qualified
plan to another is not an "annual addition." In addition, the
following are not Employee contributions for the purposes of
Section 4.9(b)(2): (1) rollover contributions (as defined in
Code Sections 402(a)(5), 403(a)(4), 403(b)(8) and 408(d)(3));
(2) repayments of loans made to a Participant from the Plan;
(3) repayments of distributions received by an Employee
pursuant to Code Section 411(a)(7)(B) (cash-outs); (4)
repayments of distributions received by an Employee pursuant
to Code Section 411(a)(3)(D) (mandatory contributions); and
(5) Employee contributions to a simplified employee pension
excludable from gross income under Code Section 408(k)(6).
(d) For purposes of applying the limitations of
Code Section 415, the "limitation year" shall be the Plan
Year.
(e) The dollar limitation under Code Section
415(b)(1)(A) stated in paragraph (a)(1) above shall be
adjusted annually as provided in Code Section 415(d) pursuant
to the Regulations. The adjusted limitation is effective as of
January 1st of each calendar year and is applicable to
"limitation years" ending with or within that calendar year.
(f) For the purpose of this Section, all
qualified defined benefit plans (whether terminated or not)
ever maintained by the Employer shall be treated as one
defined benefit plan, and all qualified defined contribution
plans (whether terminated or not) ever maintained by the
Employer shall be treated as one defined contribution plan.
(g) For the purpose of this Section, if the
Employer is a member of a controlled group of corporations,
trades or businesses under common control (as defined by Code
Section 1563(a) or Code Section
50
<PAGE> 57
414(b) and (c) as modified by Code Section 415(h)), is
a member of an affiliated service group (as defined by Code
Section 414(m)), or is a member of a group of entities
required to be aggregated pursuant to Regulations under Code
Section 414(o), all Employees of such Employers shall be
considered to be employed by a single Employer.
(h) For the purpose of this Section, if this
Plan is a Code Section 413(c) plan, all Employers of a
Participant who maintain this Plan will be considered to be a
single Employer.
(i)(1) If a Participant participates in more than
one defined contribution plan maintained by the Employer which
have different Anniversary Dates, the maximum "annual
additions" under this Plan shall equal the maximum "annual
additions" for the "limitation year" minus any "annual
additions" previously credited to such Participant's accounts
during the "limitation year."
(2) If a Participant participates in both a
defined contribution plan subject to Code Section
412 and a defined contribution plan not subject to
Code Section 412 maintained by the Employer which
have the same Anniversary Date, "annual additions"
will be credited to the Participant's accounts under
the defined contribution plan subject to Code
Section 412 prior to crediting "annual additions" to
the Participant's accounts under the defined
contribution plan not subject to Code Section 412.
(3) If a Participant participates in more than
one defined contribution plan not subject to Code
Section 412 maintained by the Employer which have
the same Anniversary Date, the maximum "annual
additions" under this Plan shall equal the product
of (A) the maximum "annual additions" for the
"limitation year" minus any "annual additions"
previously credited under subparagraphs (1) or (2)
above, multiplied by (B) a fraction (i) the
numerator of which is the "annual additions" which
would be credited to such Participant's accounts
under this Plan without regard to the limitations of
Code Section 415 and (ii) the denominator of which
is such "annual additions" for all plans described
in this subparagraph.
(j) If an Employee is (or has been) a
Participant in one or more defined benefit plans and one or
more defined contribution plans maintained by
51
<PAGE> 58
the Employer, the sum of the defined benefit plan
fraction and the defined contribution plan fraction for any
"limitation year" may not exceed 1.0.
(k) The defined benefit plan fraction for any
"limitation year" is a fraction, the numerator of which is the
sum of the Participant's projected annual benefits under all
the defined benefit plans (whether or not terminated)
maintained by the Employer, and the denominator of which is
the lesser of 125 percent of the dollar limitation determined
for the "limitation year" under Code Sections 415(b) and (d)
or 140 percent of the highest average compensation, including
any adjustments under Code Section 415(b).
Notwithstanding the above, if the
Participant was a Participant as of the first day of the first
"limitation year" beginning after December 31, 1986, in one or
more defined benefit plans maintained by the Employer which
were in existence on May 6, 1986, the denominator of this
fraction will not be less than 125 percent of the sum of the
annual benefits under such plans which the Participant had
accrued as of the close of the last "limitation year"
beginning before January 1, 1987, disregarding any changes in
the terms and conditions of the plan after May 5, 1986. The
preceding sentence applies only if the defined benefit plans
individually and in the aggregate satisfied the requirements
of Code Section 415 for all "limitation years" beginning
before January 1, 1987.
(l) The defined contribution plan fraction for
any "limitation year" is a fraction, the numerator of which is
the sum of the annual additions to the Participant's Account
under all the defined contribution plans (whether or not
terminated) maintained by the Employer for the current and all
prior "limitation years" (including the annual additions
attributable to the Participant's nondeductible Employee
contributions to all defined benefit plans, whether or not
terminated, maintained by the Employer, and the annual
additions attributable to all welfare benefit funds, as
defined in Code Section 419(e), and individual medical
accounts, as defined in Code Section 415(l)(2), maintained by
the Employer), and the denominator of which is the sum of the
maximum aggregate amounts for the current and all prior
"limitation years" of service with the Employer (regardless of
whether a defined contribution plan was maintained by the
Employer). The maximum aggregate amount in any "limitation
year" is the lesser of 125 percent of the dollar limitation
determined under Code Sections 415(b) and (d) in effect under
Code Section
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<PAGE> 59
415(c)(1)(A) or 35 percent of the Participant's
Compensation for such year.
If the Employee was a Participant as of the
end of the first day of the first "limitation year" beginning
after December 31, 1986, in one or more defined contribution
plans maintained by the Employer which were in existence on
May 6, 1986, the numerator of this fraction will be adjusted
if the sum of this fraction and the defined benefit fraction
would otherwise exceed 1.0 under the terms of this Plan. Under
the adjustment, an amount equal to the product of (1) the
excess of the sum of the fractions over 1.0 times (2) the
denominator of this fraction, will be permanently subtracted
from the numerator of this fraction. The adjustment is
calculated using the fractions as they would be computed as of
the end of the last "limitation year" beginning before January
1, 1987, and disregarding any changes in the terms and
conditions of the Plan made after May 5, 1986, but using the
Code Section 415 limitation applicable to the first
"limitation year" beginning on or after January 1, 1987. The
annual addition for any "limitation year" beginning before
January 1, 1987 shall not be recomputed to treat all Employee
contributions as annual additions.
(m) Notwithstanding the foregoing, for any
"limitation year" in which the Plan is a Top Heavy Plan, 100
percent shall be substituted for 125 percent in Sections
4.9(k) and 4.9(l) unless the extra minimum allocation is being
provided pursuant to Section 4.4. However, for any "limitation
year" in which the Plan is a Super Top Heavy Plan, 100 percent
shall be substituted for 125 percent in any event.
(n) Notwithstanding anything contained in this
Section to the contrary, the limitations, adjustments and
other requirements prescribed in this Section shall at all
times comply with the provisions of Code Section 415 and the
Regulations thereunder, the terms of which are specifically
incorporated herein by reference.
4.10 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS
(a) If, as a result of a reasonable error in
estimating a Participant's Compensation, a reasonable error in
determining the amount of elective deferrals (within the
meaning of Code Section 402(g)(3)) that may be made with
respect to any Participant under the limits of Section 4.9 or
other facts and circumstances to which Regulation
1.415-6(b)(6) shall be applicable, the "annual additions"
under this Plan would cause the maximum "annual additions" to
be exceeded for any
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Participant, the Administrator shall (1) distribute any
elective deferrals (within the meaning of Code Section
402(g)(3)) or return any voluntary Employee contributions
credited for the "limitation year" to the extent that the
return would reduce the "excess amount" in the Participant's
accounts (2) hold any "excess amount" remaining after the
return of any elective deferrals or voluntary Employee
contributions in a "Section 415 suspense account" (3) use the
"Section 415 suspense account" in the next "limitation year"
(and succeeding "limitation years" if necessary) to reduce
Employer contributions for that Participant if that
Participant is covered by the Plan as of the end of the
"limitation year," or if the Participant is not so covered,
allocate and reallocate the "Section 415 suspense account" in
the next "limitation year" (and succeeding "limitation years"
if necessary) to all Participants in the Plan before any
Employer or Employee contributions which would constitute
"annual additions" are made to the Plan for such "limitation
year" (4) reduce Employer contributions to the Plan for such
"limitation year" by the amount of the "Section 415 suspense
account" allocated and reallocated during such "limitation
year."
(b) For purposes of this Article, "excess
amount" for any Participant for a "limitation year" shall mean
the excess, if any, of (1) the "annual additions" which would
be credited to his account under the terms of the Plan without
regard to the limitations of Code Section 415 over (2) the
maximum "annual additions" determined pursuant to Section 4.9.
(c) For purposes of this Section, "Section 415
suspense account" shall mean an unallocated account equal to
the sum of "excess amounts" for all Participants in the Plan
during the "limitation year." The "Section 415 suspense
account" shall not share in any earnings or losses of the
Trust Fund.
4.11 TRANSFERS FROM QUALIFIED PLANS
(a) With the consent of the Administrator,
amounts may be transferred from other qualified plans by
Participants, provided that the trust from which such funds
are transferred permits the transfer to be made and the
transfer will not jeopardize the tax exempt status of the Plan
or Trust or create adverse tax consequences for the Employer.
The amounts transferred shall be set up in a separate account
herein referred to as a "Participant's Rollover Account." Such
account shall be fully Vested at all times and shall not be
subject to Forfeiture for any reason.
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(b) Amounts in a Participant's Rollover Account
shall be held by the Trustee pursuant to the provisions of
this Plan and may not be withdrawn by, or distributed to the
Participant, in whole or in part, except as provided in
paragraphs (c) and (d) of this Section.
(c) Except as permitted by Regulations
(including Regulation 1.411(d)-4), amounts attributable to
elective contributions (as defined in Regulation
1.401(k)-1(g)(3)), including amounts treated as elective
contributions, which are transferred from another qualified
plan in a plan-to-plan transfer shall be subject to the
distribution limitations provided for in Regulation
1.401(k)-1(d). In no event may the distribution be less than
$500.
(d) At Normal Retirement Date, or such other
date when the Participant or his Beneficiary shall be entitled
to receive benefits, the fair market value of the
Participant's Rollover Account shall be used to provide
additional benefits to the Participant or his Beneficiary. Any
distributions of amounts held in a Participant's Rollover
Account shall be made in a manner which is consistent with and
satisfies the provisions of Section 6.5, including, but not
limited to, all notice and consent requirements of Code
Sections 417 and 411(a)(11) and the Regulations thereunder.
Furthermore, such amounts shall be considered as part of a
Participant's benefit in determining whether an involuntary
cash-out of benefits without Participant consent may be made.
(e) The Administrator may direct that employee
transfers made after a valuation date be segregated into a
separate account for each Participant in a federally insured
savings account, certificate of deposit in a bank or savings
and loan association, money market certificate, or other short
term debt security acceptable to the Trustee until such time
as the allocations pursuant to this Plan have been made, at
which time they may remain segregated or be invested as part
of the general Trust Fund, to be determined by the
Administrator.
(f) All amounts allocated to a Participant's
Rollover Account may be treated as a Directed Investment
Account pursuant to Section 4.12.
(g) For purposes of this Section, the term
"qualified plan" shall mean any tax qualified plan under Code
Section 401(a). The term "amounts transferred from other
qualified plans" shall mean: (i) amounts transferred to this
Plan directly from
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another qualified plan; (ii) distributions from another
qualified plan which are eligible rollover distributions and
which are either transferred by the Employee to this Plan
within sixty (60) days following his receipt thereof or are
transferred pursuant to a direct rollover; (iii) amounts
transferred to this Plan from a conduit individual retirement
account provided that the conduit individual retirement
account has no assets other than assets which (A) were
previously distributed to the Employee by another qualified
plan as a lump-sum distribution (B) were eligible for
tax-free rollover to a qualified plan and (C) were deposited
in such conduit individual retirement account within sixty
(60) days of receipt thereof and other than earnings on said
assets; and (iv) amounts distributed to the Employee from a
conduit individual retirement account meeting the requirements
of clause (iii) above, and transferred by the Employee to
this Plan within sixty (60) days of his receipt thereof from
such conduit individual retirement account.
(h) Prior to accepting any transfers to which
this Section applies, the Administrator may require the
Employee to establish that the amounts to be transferred to
this Plan meet the requirements of this Section and may also
require the Employee to provide an opinion of counsel
satisfactory to the Employer that the amounts to be
transferred meet the requirements of this Section.
(i) Notwithstanding anything herein to the
contrary, a transfer directly to this Plan from another
qualified plan (or a transaction having the effect of such a
transfer) shall only be permitted if it will not result in the
elimination or reduction of any "Section 411(d)(6) protected
benefit" as described in Section 7.1.
4.12 DIRECTED INVESTMENT ACCOUNT
(a) The Administrator, in his sole discretion,
may determine that all Participants be permitted to direct the
Trustee as to the investment of all or a portion of the
interest in any one or more of their individual account
balances. If such authorization is given, Participants may,
subject to a procedure established by the Administrator and
applied in a uniform nondiscriminatory manner, direct the
Trustee in writing to invest any portion of their account in
specific assets, specific funds or other investments permitted
under the Plan and the directed investment procedure. That
portion of the account of any Participant so directing will
thereupon be considered a
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Directed Investment Account, which shall not share in Trust
Fund earnings.
(b) A separate Directed Investment Account
shall be established for each Participant who has directed an
investment. Transfers between the Participant's regular
account and his Directed Investment Account shall be charged
and credited as the case may be to each account. The Directed
Investment Account shall not share in Trust Fund earnings, but
it shall be charged or credited as appropriate with the net
earnings, gains, losses and expenses as well as any
appreciation or depreciation in market value during each Plan
Year attributable to such account.
ARTICLE V
VALUATIONS
5.1 VALUATION OF THE TRUST FUND
The Administrator shall direct the Trustee, as of each
Anniversary Date, and at such other date or dates deemed necessary by the
Administrator, herein called "valuation date," to determine the net worth of
the assets comprising the Trust Fund as it exists on the "valuation date." In
determining such net worth, the Trustee shall value the assets comprising the
Trust Fund at their fair market value as of the "valuation date" and shall
deduct all expenses for which the Trustee has not yet obtained reimbursement
from the Employer or the Trust Fund.
5.2 METHOD OF VALUATION
In determining the fair market value of securities held in the
Trust Fund which are listed on a registered stock exchange, the Administrator
shall direct the Trustee to value the same at the prices they were last traded
on such exchange preceding the close of business on the "valuation date." If
such securities were not traded on the "valuation date," or if the exchange on
which they are traded was not open for business on the "valuation date," then
the securities shall be valued at the prices at which they were last traded
prior to the "valuation date." Any unlisted security held in the Trust Fund
shall be valued at its bid price next preceding the close of business on the
"valuation date," which bid price shall be obtained from a registered broker or
an investment banker. In determining the fair market value of assets other than
securities for which trading or bid prices can be obtained, the Trustee may
appraise such assets itself, or in its discretion, employ one or more
appraisers for that purpose and rely on the values established by such
appraiser or appraisers.
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ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT
Every Participant may terminate his employment with the
Employer and retire for the purposes hereof on his Normal Retirement Date or
Early Retirement Date. However, a Participant may postpone the termination of
his employment with the Employer to a later date, in which event the
participation of such Participant in the Plan, including the right to receive
allocations pursuant to Section 4.4, shall continue until his Late Retirement
Date. Upon a Participant's Retirement Date, or as soon thereafter as is
practicable, the Trustee shall distribute all amounts credited to such
Participant's Combined Account in accordance with Section 6.5.
6.2 DETERMINATION OF BENEFITS UPON DEATH
(a) Upon the death of a Participant before his
Retirement Date or other termination of his employment, all
amounts credited to such Participant's Combined Account shall
become fully Vested. The Administrator shall direct the
Trustee, in accordance with the provisions of Sections 6.6 and
6.7, to distribute the value of the deceased Participant's
accounts to the Participant's Beneficiary.
(b) Upon the death of a Former Participant, the
Administrator shall direct the Trustee, in accordance with the
provisions of Sections 6.6 and 6.7, to distribute any
remaining Vested amounts credited to the accounts of a
deceased Former Participant to such Former Participant's
Beneficiary.
(c) Any security interest held by the Plan by
reason of an outstanding loan to the Participant or Former
Participant shall be taken into account in determining the
amount of the Pre-Retirement Survivor Annuity.
(d) The Administrator may require such proper
proof of death and such evidence of the right of any person to
receive payment of the value of the account of a deceased
Participant or Former Participant as the Administrator may
deem desirable. The Administrator's determination of death and
of the right of any person to receive payment shall be
conclusive.
(e) Unless otherwise elected in the manner
prescribed in Section 6.6, the Beneficiary of the death
benefit shall be the Participant's spouse, who shall receive
such benefit in the form of a Pre-Retirement Survivor Annuity
pursuant to Section 6.6. Except,
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however, the Participant may designate a Beneficiary
other than his spouse if:
(1) the Participant and his spouse have validly
waived the Pre-Retirement Survivor Annuity in the
manner prescribed in Section 6.6, and the spouse has
waived his or her right to be the Participant's
Beneficiary, or
(2) the Participant is legally separated or has
been abandoned (within the meaning of local law) and
the Participant has a court order to such effect
(and there is no "qualified domestic relations
order" as defined in Code Section 414(p) which
provides otherwise), or
(3) the Participant has no spouse, or
(4) the spouse cannot be located.
In such event, the designation of a
Beneficiary shall be made on a form satisfactory to the
Administrator. A Participant may at any time revoke his
designation of a Beneficiary or change his Beneficiary by
filing written notice of such revocation or change with the
Administrator. However, the Participant's spouse must again
consent in writing to any change in Beneficiary unless the
original consent acknowledged that the spouse had the right to
limit consent only to a specific Beneficiary and that the
spouse voluntarily elected to relinquish such right. In the
event no valid designation of Beneficiary exists at the time
of the Participant's death, the death benefit shall be payable
to his estate.
6.3 DISABILITY RETIREMENT BENEFITS
No disability benefits, other than those payable upon
termination of employment, are provided in this Plan.
6.4 DETERMINATION OF BENEFITS UPON TERMINATION
(a) On or before the Anniversary Date
coinciding with or subsequent to the termination of a
Participant's employment for any reason other than death or
retirement, the Administrator may direct the Trustee to
segregate the amount of the Vested portion of such Terminated
Participant's Combined Account and invest the aggregate amount
thereof in a separate, federally insured savings account,
certificate of deposit, common or collective trust fund of a
bank or a deferred annuity. In the event the Vested portion of
a Participant's Combined Account is not segregated, the amount
shall remain in a separate account for the
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Terminated Participant and share in allocations
pursuant to Section 4.4 until such time as a distribution is
made to the Terminated Participant.
Distribution of the funds due to a
Terminated Participant shall be made on the occurrence of an
event which would result in the distribution had the
Terminated Participant remained in the employ of the Employer
(upon the Participant's death, Early or Normal Retirement).
However, at the election of the Participant, the Administrator
shall direct the Trustee to cause the entire Vested portion of
the Terminated Participant's Combined Account to be payable to
such Terminated Participant. Any distribution under this
paragraph shall be made in a manner which is consistent with
and satisfies the provisions of Section 6.5, including, but
not limited to, all notice and consent requirements of Code
Sections 417 and 411(a)(11) and the Regulations thereunder.
If the value of a Terminated Participant's
Vested benefit derived from Employer and Employee
contributions does not exceed $3,500 and has never exceeded
$3,500 at the time of any prior distribution, the
Administrator shall direct the Trustee to cause the entire
Vested benefit to be paid to such Participant in a single lump
sum.
For purposes of this Section 6.4, if the
value of a Terminated Participant's Vested benefit is zero,
the Terminated Participant shall be deemed to have received a
distribution of such Vested benefit.
(b) The Vested portion of any Participant's
Account shall be a percentage of the total amount credited to
his Participant's Account determined on the basis of the
Participant's number of Years of Service according to the
following schedule:
<TABLE>
<CAPTION>
Vesting Schedule
Years of Service Percentage
<S> <C>
Less than 2 0 %
2 20 %
3 40 %
4 60 %
5 80 %
6 100 %
</TABLE>
(c) Notwithstanding the vesting schedule above,
upon the complete discontinuance of the Employer's
contributions to the Plan or upon any full or partial
termination of the Plan, all amounts credited to the account
of any affected Participant shall become 100%
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Vested and shall not thereafter be subject to Forfeiture.
(d) The computation of a Participant's
nonforfeitable percentage of his interest in the Plan shall
not be reduced as the result of any direct or indirect
amendment to this Plan. For this purpose, the Plan shall be
treated as having been amended if the Plan provides for an
automatic change in vesting due to a change in top heavy
status. In the event that the Plan is amended to change or
modify any vesting schedule, a Participant with at least three
(3) Years of Service as of the expiration date of the election
period may elect to have his nonforfeitable percentage
computed under the Plan without regard to such amendment. If a
Participant fails to make such election, then such Participant
shall be subject to the new vesting schedule. The
Participant's election period shall commence on the adoption
date of the amendment and shall end 60 days after the latest
of:
(1) the adoption date of the amendment,
(2) the effective date of the amendment, or
(3) the date the Participant receives written
notice of the amendment from the Employer or
Administrator.
(e)(1) If any Former Participant shall be
reemployed by the Employer before a 1-Year Break in Service
occurs, he shall continue to participate in the Plan in the
same manner as if such termination had not occurred.
(2) If any Former Participant shall be
reemployed by the Employer before five (5)
consecutive 1-Year Breaks in Service, and such
Former Participant had received, or was deemed to
have received, a distribution of his entire Vested
interest prior to his reemployment, his forfeited
account shall be reinstated only if he repays the
full amount distributed to him before the earlier of
five (5) years after the first date on which the
Participant is subsequently reemployed by the
Employer or the close of the first period of five
(5) consecutive 1-Year Breaks in Service commencing
after the distribution, or in the event of a deemed
distribution, upon the reemployment of such Former
Participant. In the event the Former Participant
does repay the full amount distributed to him, or in
the event of a deemed distribution, the
undistributed portion of the
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Participant's Account must be restored in full,
unadjusted by any gains or losses occurring
subsequent to the Anniversary Date or other
valuation date coinciding with or preceding his
termination. The source for such reinstatement shall
first be any Forfeitures occurring during the year.
If such source is insufficient, then the Employer
shall contribute an amount which is sufficient to
restore any such forfeited Accounts provided,
however, that if a discretionary contribution is
made for such year pursuant to Section 4.1(c), such
contribution shall first be applied to restore any
such Accounts and the remainder shall be allocated
in accordance with Section 4.4.
(3) If any Former Participant is reemployed
after a 1-Year Break in Service has occurred, Years
of Service shall include Years of Service prior to
his 1-Year Break in Service subject to the following
rules:
(i) If a Former Participant has a
1-Year Break in Service, his pre-break and
post-break service shall be used for
computing Years of Service for eligibility
and for vesting purposes only after he has
been employed for one (1) Year of Service
following the date of his reemployment with
the Employer;
(ii) Any Former Participant who
under the Plan does not have a
nonforfeitable right to any interest in the
Plan resulting from Employer contributions
shall lose credits otherwise allowable
under (i) above if his consecutive 1-Year
Breaks in Service equal or exceed the
greater of (A) five (5) or (B) the
aggregate number of his pre-break Years of
Service;
(iii) After five (5) consecutive
1-Year Breaks in Service, a Former
Participant's Vested Account balance
attributable to pre-break service shall not
be increased as a result of post-break
service;
(iv) If a Former Participant who has
not had his Years of Service before a
1-Year Break in Service disregarded
pursuant to (ii) above completes one (1)
Year of Service for eligibility purposes
following his reemployment with the
Employer, he shall
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<PAGE> 69
participate in the Plan retroactively from
his date of reemployment;
(v) If a Former Participant who has
not had his Years of Service before a
1-Year Break in Service disregarded
pursuant to (ii) above completes a Year of
Service (a 1-Year Break in Service
previously occurred, but employment had not
terminated), he shall participate in the
Plan retroactively from the first day of
the Plan Year during which he completes one
(1) Year of Service.
6.5 DISTRIBUTION OF BENEFITS
(a)(1) Unless otherwise elected as provided below,
a Participant who is married on the "annuity starting date"
and who does not die before the "annuity starting date" shall
receive the value of all of his benefits in the form of a
joint and survivor annuity. The joint and survivor annuity is
an annuity that commences immediately and shall be equal in
value to a single life annuity. Such joint and survivor
benefits following the Participant's death shall continue to
the spouse during the spouse's lifetime at a rate equal to 50%
of the rate at which such benefits were payable to the
Participant. This joint and 50% survivor annuity shall be
considered the designated qualified joint and survivor annuity
and automatic form of payment for the purposes of this Plan.
However, the Participant may elect to receive a smaller
annuity benefit with continuation of payments to the spouse at
a rate of seventy-five percent (75%) or one hundred percent
(100%) of the rate payable to a Participant during his
lifetime, which alternative joint and survivor annuity shall
be equal in value to the automatic joint and 50% survivor
annuity. An unmarried Participant shall receive the value of
his benefit in the form of a life annuity. Such unmarried
Participant, however, may elect in writing to waive the life
annuity. The election must comply with the provisions of this
Section as if it were an election to waive the joint and
survivor annuity by a married Participant, but without the
spousal consent requirement. The Participant may elect to have
any annuity provided for in this Section distributed upon the
attainment of the "earliest retirement age" under the Plan.
The "earliest retirement age" is the earliest date on which,
under the Plan, the Participant could elect to receive
retirement benefits.
(2) Any election to waive the joint and
survivor annuity must be made by the Participant in
writing during the election period and be
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<PAGE> 70
consented to by the Participant's spouse. If
the spouse is legally incompetent to give consent,
the spouse's legal guardian, even if such guardian
is the Participant, may give consent. Such election
shall designate a Beneficiary (or a form of
benefits) that may not be changed without spousal
consent (unless the consent of the spouse expressly
permits designations by the Participant without the
requirement of further consent by the spouse). Such
spouse's consent shall be irrevocable and must
acknowledge the effect of such election and be
witnessed by a Plan representative or a notary
public. Such consent shall not be required if it is
established to the satisfaction of the Administrator
that the required consent cannot be obtained because
there is no spouse, the spouse cannot be located, or
other circumstances that may be prescribed by
Regulations. The election made by the Participant
and consented to by his spouse may be revoked by the
Participant in writing without the consent of the
spouse at any time during the election period. The
number of revocations shall not be limited. Any new
election must comply with the requirements of this
paragraph. A former spouse's waiver shall not be
binding on a new spouse.
(3) The election period to waive the joint and
survivor annuity shall be the 90 day period ending
on the "annuity starting date."
(4) For purposes of this Section, the "annuity
starting date" means the first day of the first
period for which an amount is paid as an annuity,
or, in the case of a benefit not payable in the form
of an annuity, the first day on which all events
have occurred which entitle the Participant to such
benefit.
(5) With regard to the election, the
Administrator shall provide to the Participant no
less than 30 days and no more than 90 days before
the "annuity starting date" a written explanation
of:
(i) the terms and conditions of the
joint and survivor annuity, and
(ii) the Participant's right to
make, and the effect of, an election to
waive the joint and survivor annuity, and
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<PAGE> 71
(iii) the right of the Participant's
spouse to consent to any election to waive
the joint and survivor annuity, and
(iv) the right of the Participant to
revoke such election, and the effect of
such revocation.
(b) In the event a married Participant duly
elects pursuant to paragraph (a)(2) above not to receive his
benefit in the form of a joint and survivor annuity, or if
such Participant is not married, in the form of a life
annuity, the Administrator, pursuant to the election of the
Participant, shall direct the Trustee to distribute to a
Participant or his Beneficiary any amount to which he is
entitled under the Plan in one or more of the following
methods:
(1) One lump-sum payment in cash;
(2) Payments over a period certain in monthly,
quarterly, semiannual, or annual cash installments.
In order to provide such installment payments, the
Administrator may (A) segregate the aggregate amount
thereof in a separate, federally insured savings
account, certificate of deposit in a bank or savings
and loan association, money market certificate or
other liquid short-term security or (B) purchase a
nontransferable annuity contract for a term certain
(with no life contingencies) providing for such
payment. The period over which such payment is to be
made shall not extend beyond the Participant's life
expectancy (or the life expectancy of the
Participant and his designated Beneficiary).
(3) Purchase of or providing an annuity.
However, such annuity may not be in any form that
will provide for payments over a period extending
beyond either the life of the Participant (or the
lives of the Participant and his designated
Beneficiary) or the life expectancy of the
Participant (or the life expectancy of the
Participant and his designated Beneficiary).
(c) The present value of a Participant's joint
and survivor annuity derived from Employer and Employee
contributions may not be paid without his written consent if
the value exceeds, or has ever exceeded, $3,500 at the time of
any prior distribution. Further, the spouse of a Participant
must consent in writing to any immediate distribution. If the
value of the Participant's benefit derived from Employer and
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<PAGE> 72
Employee contributions does not exceed $3,500 and has
never exceeded $3,500 at the time of any prior distribution,
the Administrator may immediately distribute such benefit
without such Participant's consent. No distribution may be
made under the preceding sentence after the "annuity starting
date" unless the Participant and his spouse consent in writing
to such distribution. Any written consent required under this
paragraph must be obtained not more than 90 days before
commencement of the distribution and shall be made in a manner
consistent with Section 6.5(a)(2).
(d) Any distribution to a Participant who has a
benefit which exceeds, or has ever exceeded, $3,500 at the
time of any prior distribution shall require such
Participant's consent if such distribution commences prior to
the later of his Normal Retirement Age or age 62. With regard
to this required consent:
(1) No consent shall be valid unless the
Participant has received a general description of
the material features and an explanation of the
relative values of the optional forms of benefit
available under the Plan that would satisfy the
notice requirements of Code Section 417.
(2) The Participant must be informed of his
right to defer receipt of the distribution. If a
Participant fails to consent, it shall be deemed an
election to defer the commencement of payment of any
benefit. However, any election to defer the receipt
of benefits shall not apply with respect to
distributions which are required under Section
6.5(e).
(3) Notice of the rights specified under this
paragraph shall be provided no less than 30 days and
no more than 90 days before the "annuity starting
date".
(4) Written consent of the Participant to the
distribution must not be made before the Participant
receives the notice and must not be made more than
90 days before the "annuity starting date".
(5) No consent shall be valid if a significant
detriment is imposed under the Plan on any
Participant who does not consent to the
distribution.
(e) Notwithstanding any provision in the Plan
to the contrary, the distribution of a Participant's
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benefits, whether under the Plan or through the
purchase of an annuity contract, shall be made in accordance
with the following requirements and shall otherwise comply
with Code Section 401(a)(9) and the Regulations thereunder
(including Regulation 1.401(a)(9)-2), the provisions of which
are incorporated herein by reference:
(1) A Participant's benefits shall be
distributed to him not later than April 1st of the
calendar year following the later of (i) the
calendar year in which the Participant attains age
70 1/2 or (ii) the calendar year in which the
Participant retires, provided, however, that this
clause (ii) shall not apply in the case of a
Participant who is a "five (5) percent owner" at any
time during the five (5) Plan Year period ending in
the calendar year in which he attains age 70 1/2 or,
in the case of a Participant who becomes a "five (5)
percent owner" during any subsequent Plan Year,
clause (ii) shall no longer apply and the required
beginning date shall be the April 1st of the
calendar year following the calendar year in which
such subsequent Plan Year ends. Alternatively,
distributions to a Participant must begin no later
than the applicable April 1st as determined under
the preceding sentence and must be made over the
life of the Participant (or the lives of the
Participant and the Participant's designated
Beneficiary) or the life expectancy of the
Participant (or the life expectancies of the
Participant and his designated Beneficiary) in
accordance with Regulations. Notwithstanding the
foregoing, clause (ii) above shall not apply to any
Participant unless the Participant had attained age
70 1/2 before January 1, 1988 and was not a "five
(5) percent owner" at any time during the Plan Year
ending with or within the calendar year in which the
Participant attained age 66 1/2 or any subsequent
Plan Year.
(2) Distributions to a Participant and his
Beneficiaries shall only be made in accordance with
the incidental death benefit requirements of Code
Section 401(a)(9)(G) and the Regulations thereunder.
(f) For purposes of this Section, the life
expectancy of a Participant and a Participant's spouse (other
than in the case of a life annuity) shall not be redetermined
in accordance with Code Section 401(a)(9)(D). Life expectancy
and joint and last
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survivor expectancy shall be computed using the return multiples in
Tables V and VI of Regulation 1.72-9.
(g) All annuity Contracts under this Plan shall
be non-transferable when distributed. Furthermore, the terms
of any annuity Contract purchased and distributed to a
Participant or spouse shall comply with all of the
requirements of the Plan.
(h) If a distribution is made at a time when a
Participant is not fully Vested in his Participant's Account
(employment has not terminated) and the Participant may
increase the Vested percentage in such account:
(1) a separate account shall be established for
the Participant's interest in the Plan as of the
time of the distribution; and
(2) at any relevant time, the Participant's
Vested portion of the separate account shall be
equal to an amount ("X") determined by the formula:
X equals P(AB plus (R x D)) - (R x D)
For purposes of applying the formula: P is the
Vested percentage at the relevant time, AB is the
account balance at the relevant time, D is the
amount of distribution, and R is the ratio of the
account balance at the relevant time to the account
balance after distribution.
6.6 DISTRIBUTION OF BENEFITS UPON DEATH
(a) Unless otherwise elected as provided below,
a Vested Participant who dies before the annuity starting date
and who has a surviving spouse shall have his death benefit
paid to his surviving spouse in the form of a Pre-Retirement
Survivor Annuity. The Participant's spouse may direct that
payment of the Pre-Retirement Survivor Annuity commence within
a reasonable period after the Participant's death. If the
spouse does not so direct, payment of such benefit will
commence at the time the Participant would have attained the
later of his Normal Retirement Age or age 62. However, the
spouse may elect a later commencement date. Any distribution
to the Participant's spouse shall be subject to the rules
specified in Section 6.6(g).
(b) Any election to waive the Pre-Retirement
Survivor Annuity before the Participant's death must be made
by the Participant in writing during the election
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period and shall require the spouse's irrevocable consent in the same
manner provided for in Section 6.5(a)(2). Further, the spouse's
consent must acknowledge the specific nonspouse Beneficiary.
Notwithstanding the foregoing, the nonspouse Beneficiary need not be
acknowledged, provided the consent of the spouse acknowledges that
the spouse has the right to limit consent only to a specific
Beneficiary and that the spouse voluntarily elects to relinquish such
right.
(c) The election period to waive the
Pre-Retirement Survivor Annuity shall begin on the first day
of the Plan Year in which the Participant attains age 35 and
end on the date of the Participant's death. An earlier waiver
(with spousal consent) may be made provided a written
explanation of the Pre-Retirement Survivor Annuity is given to
the Participant and such waiver becomes invalid at the
beginning of the Plan Year in which the Participant turns age
35. In the event a Vested Participant separates from service
prior to the beginning of the election period, the election
period shall begin on the date of such separation from
service.
(d) With regard to the election, the
Administrator shall provide each Participant within the
applicable period, with respect to such Participant (and
consistent with Regulations), a written explanation of the
Pre-Retirement Survivor Annuity containing comparable
information to that required pursuant to Section 6.5(a)(5).
For the purposes of this paragraph, the term "applicable
period" means, with respect to a Participant, whichever of the
following periods ends last:
(1) The period beginning with the first day of
the Plan Year in which the Participant attains age
32 and ending with the close of the Plan Year
preceding the Plan Year in which the Participant
attains age 35;
(2) A reasonable period after the individual
becomes a Participant;
(3) A reasonable period ending after the Plan
no longer fully subsidizes the cost of the
Pre-Retirement Survivor Annuity with respect to the
Participant;
(4) A reasonable period ending after Code
Section 401(a)(11) applies to the Participant; or
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(5) A reasonable period after separation from
service in the case of a Participant who separates
before attaining age 35. For this purpose, the
Administrator must provide the explanation beginning
one year before the separation from service and
ending one year after such separation. If such a
Participant thereafter returns to employment with
the Employer, the applicable period for such
Participant shall be redetermined.
For purposes of applying this Section
6.6(d), a reasonable period ending after the enumerated events
described in paragraphs (2), (3) and (4) is the end of the two
year period beginning one year prior to the date the
applicable event occurs, and ending one year after that date.
(e) If the present value of the Pre-Retirement
Survivor Annuity derived from Employer and Employee
contributions does not exceed $3,500 and has never exceeded
$3,500 at the time of any prior distribution, the
Administrator shall direct the immediate distribution of such
amount to the Participant's spouse. No distribution may be
made under the preceding sentence after the annuity starting
date unless the spouse consents in writing. If the value
exceeds, or has ever exceeded, $3,500 at the time of any prior
distribution, an immediate distribution of the entire amount
may be made to the surviving spouse, provided such surviving
spouse consents in writing to such distribution. Any written
consent required under this paragraph must be obtained not
more than 90 days before commencement of the distribution and
shall be made in a manner consistent with Section 6.5(a)(2).
(f)(1) In the event the death benefit is not paid
in the form of a Pre-Retirement Survivor Annuity, it shall be
paid to the Participant's Beneficiary by either of the
following methods, as elected by the Participant (or if no
election has been made prior to the Participant's death, by
his Beneficiary), subject to the rules specified in Section
6.6(g):
(i) One lump-sum payment in cash;
(ii) Payment in monthly, quarterly,
semi-annual, or annual cash installments
over a period to be determined by the
Participant or his Beneficiary. After
periodic installments commence, the
Beneficiary shall have the right to direct
the Trustee to reduce the period over which
such periodic installments shall be made,
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and the Trustee shall adjust the cash amount of
such periodic installments accordingly.
(2) In the event the death benefit payable
pursuant to Section 6.2 is payable in installments,
then, upon the death of the Participant, the
Administrator may direct the Trustee to segregate
the death benefit into a separate account, and the
Trustee shall invest such segregated account
separately, and the funds accumulated in such
account shall be used for the payment of the
installments.
(g) Notwithstanding any provision in the Plan
to the contrary, distributions upon the death of a Participant
shall be made in accordance with the following requirements
and shall otherwise comply with Code Section 401(a)(9) and the
Regulations thereunder. If it is determined pursuant to
Regulations that the distribution of a Participant's interest
has begun and the Participant dies before his entire interest
has been distributed to him, the remaining portion of such
interest shall be distributed at least as rapidly as under the
method of distribution selected pursuant to Section 6.5 as of
his date of death. If a Participant dies before he has begun
to receive any distributions of his interest under the Plan or
before distributions are deemed to have begun pursuant to
Regulations, then his death benefit shall be distributed to
his Beneficiaries by December 31st of the calendar year in
which the fifth anniversary of his date of death occurs.
However, the 5-year distribution
requirement of the preceding paragraph shall not apply to any
portion of the deceased Participant's interest which is
payable to or for the benefit of a designated Beneficiary. In
such event, such portion shall be distributed over the life of
such designated Beneficiary (or over a period not extending
beyond the life expectancy of such designated Beneficiary)
provided such distribution begins not later than December 31st
of the calendar year immediately following the calendar year
in which the Participant died. However, in the event the
Participant's spouse (determined as of the date of the
Participant's death) is his Beneficiary, the requirement that
distributions commence within one year of a Participant's
death shall not apply. In lieu thereof, distributions must
commence on or before the later of: (1) December 31st of the
calendar year immediately following the calendar year in which
the Participant died; or (2) December 31st of the calendar
year in which the Participant would have attained age 70 1/2.
If the surviving spouse dies
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before distributions to such spouse begin, then the 5-year
distribution requirement of this Section shall apply as if the
spouse was the Participant.
(h) For purposes of this Section, the life
expectancy of a Participant and a Participant's spouse (other
than in the case of a life annuity) shall not be redetermined
in accordance with Code Section 401(a)(9)(D). Life expectancy
and joint and last survivor expectancy shall be computed using
the return multiples in Tables V and VI of Regulation 1.72-9.
6.7 TIME OF SEGREGATION OR DISTRIBUTION
Except as limited by Sections 6.5 and 6.6, whenever the
Trustee is to make a distribution or to commence a series of payments on or as
of an Anniversary Date, the distribution may be made or begun on such date or
as soon thereafter as is practicable. However, unless a Former Participant
elects in writing to defer the receipt of benefits (such election may not
result in a death benefit that is more than incidental), the payment of
benefits shall begin not later than the 60th day after the close of the Plan
Year in which the latest of the following events occurs: (a) the date on which
the Participant attains the earlier of age 65 or the Normal Retirement Age
specified herein; (b) the 10th anniversary of the year in which the Participant
commenced participation in the Plan; or (c) the date the Participant terminates
his service with the Employer.
6.8 DISTRIBUTION FOR MINOR BENEFICIARY
In the event a distribution is to be made to a minor, then the
Administrator may direct that such distribution be paid to the legal guardian,
or if none, to a parent of such Beneficiary or a responsible adult with whom
the Beneficiary maintains his residence, or to the custodian for such
Beneficiary under the Uniform Gift to Minors Act or Gift to Minors Act, if such
is permitted by the laws of the state in which said Beneficiary resides. Such a
payment to the legal guardian, custodian or parent of a minor Beneficiary shall
fully discharge the Trustee, Employer, and Plan from further liability on
account thereof.
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN
In the event that all, or any portion, of the distribution
payable to a Participant or his Beneficiary hereunder shall, at the later of
the Participant's attainment of age 62 or his Normal Retirement Age, remain
unpaid solely by reason of the inability of the Administrator, after sending a
registered letter, return receipt requested, to the last known address, and
after further diligent effort, to ascertain the whereabouts of such Participant
or his Beneficiary, the amount so distributable shall be treated as a
Forfeiture pursuant to the
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Plan. In the event a Participant or Beneficiary is located subsequent to his
benefit being reallocated, such benefit shall be restored.
6.10 ADVANCE DISTRIBUTION FOR HARDSHIP
(a) The Administrator, at the election of the
Participant, shall direct the Trustee to distribute to any
Participant in any one Plan Year up to the lesser of 100% of
his Participant's Elective Account valued as of the last
Anniversary Date or other valuation date or the amount
necessary to satisfy the immediate and heavy financial need of
the Participant. Any distribution made pursuant to this
Section shall be deemed to be made as of the first day of the
Plan Year or, if later, the valuation date immediately
preceding the date of distribution, and the Participant's
Elective Account shall be reduced accordingly. Withdrawal
under this Section shall be authorized only if the
distribution is on account of:
(1) Expenses for medical care described in Code
Section 213(d) previously incurred by the
Participant, his spouse, or any of his dependents
(as defined in Code Section 152) or necessary for
these persons to obtain medical care;
(2) The costs directly related to the purchase
of a principal residence for the Participant
(excluding mortgage payments);
(3) Payment of tuition and related educational
fees for the next twelve (12) months of
post-secondary education for the Participant, his
spouse, children, or dependents; or
(4) Payments necessary to prevent the eviction
of the Participant from his principal residence or
foreclosure on the mortgage of the Participant's
principal residence.
(b) No distribution shall be made pursuant to
this Section unless the Administrator, based upon the
Participant's representation and such other facts as are known
to the Administrator, determines that all of the following
conditions are satisfied:
(1) The distribution is not in excess of the
amount of the immediate and heavy financial need of
the Participant. The amount of the immediate and
heavy financial need may include any amounts
necessary to pay any federal, state, or local income
taxes or penalties reasonably anticipated to result
from the distribution;
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(2) The Participant has obtained all
distributions, other than hardship distributions,
and all nontaxable (at the time of the loan) loans
currently available under all plans maintained by
the Employer;
(3) The Plan, and all other plans maintained by
the Employer, provide that the Participant's
elective deferrals and voluntary Employee
contributions will be suspended for at least twelve
(12) months after receipt of the hardship
distribution or, the Participant, pursuant to a
legally enforceable agreement, will suspend his
elective deferrals and voluntary Employee
contributions to the Plan and all other plans
maintained by the Employer for at least twelve (12)
months after receipt of the hardship distribution;
and
(4) The Plan, and all other plans maintained by
the Employer, provide that the Participant may not
make elective deferrals for the Participant's
taxable year immediately following the taxable year
of the hardship distribution in excess of the
applicable limit under Code Section 402(g) for such
next taxable year less the amount of such
Participant's elective deferrals for the taxable
year of the hardship distribution.
(c) Notwithstanding the above, distributions
from the Participant's Elective Account pursuant to this
Section shall be limited solely to the Participant's total
Deferred Compensation as of the date of distribution, reduced
by the amount of any previous distributions pursuant to this
Section. In no event may the withdrawal be less than $500.
(d) Any distribution made pursuant to this
Section shall be made in a manner which is consistent with and
satisfies the provisions of Section 6.5, including, but not
limited to, all notice and consent requirements of Code
Sections 417 and 411(a)(11) and the Regulations thereunder.
6.11 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION
All rights and benefits, including elections, provided to a
Participant in this Plan shall be subject to the rights afforded to any
"alternate payee" under a "qualified domestic relations order." Furthermore, a
distribution to an "alternate payee" shall be permitted if such distribution is
authorized by a "qualified domestic relations order," even if the affected
Participant has not separated from service and has not reached the "earliest
retirement age" under the Plan. For the purposes of
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this Section, "alternate payee," "qualified domestic relations order" and
"earliest retirement age" shall have the meaning set forth under Code Section
414(p).
6.12 DIRECT ROLLOVER
(a) Notwithstanding any provision of the Plan
to the contrary that would otherwise limit a distributee's
election under this Section, a distributee may elect, at the
time and in the manner prescribed by the Plan Administrator,
to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the
distributee in a direct rollover.
(b) For purposes of this Section the
following definitions shall apply:
(1) An eligible rollover distribution is any
distribution of all or any portion of the balance to
the credit of the distributee, except that an
eligible rollover distribution does not include: any
distribution that is one of a series of
substantially equal periodic payments (not less
frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives
(or joint life expectancies) of the distributee and
the distributee's designated beneficiary, or for a
specified period of ten years or more; any
distribution to the extent such distribution is
required under Code Section 401(a)(9); and the
portion of any distribution that is not includible
in gross income (determined without regard to the
exclusion for net unrealized appreciation with
respect to employer securities).
(2) An eligible retirement plan is an
individual retirement account described in Code
Section 408(a), an individual retirement annuity
described in Code Section 408(b), an annuity plan
described in Code Section 403(a), or a qualified
trust described in Code Section 401(a), that accepts
the distributee's eligible rollover distribution.
However, in the case of an eligible rollover
distribution to the surviving spouse, an eligible
retirement plan is an individual retirement account
or individual retirement annuity.
(3) A distributee includes an Employee or
former Employee. In addition, the Employee's or
former Employee's surviving spouse and the
Employee's or former Employee's spouse or former
spouse who is
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the alternate payee under a qualified domestic
relations order, as defined in Code Section 414(p),
are distributees with regard to the interest of the
spouse or former spouse.
(4) A direct rollover is a payment by the plan
to the eligible retirement plan specified by the
distributee.
ARTICLE VII
AMENDMENT, TERMINATION, MERGERS AND LOANS
7.1 AMENDMENT
(a) The Employer shall have the right at any
time to amend the Plan, subject to the limitations of this
Section. Any such amendment shall be adopted by formal action
of the Employer's board of directors and executed by an
officer authorized to act on behalf of the Employer. However,
any amendment which affects the rights, duties or
responsibilities of the Trustee and Administrator may only be
made with the Trustee's and Administrator's written consent.
Any such amendment shall become effective as provided therein
upon its execution. The Trustee shall not be required to
execute any such amendment unless the Trust provisions
contained herein are a part of the Plan and the amendment
affects the duties of the Trustee hereunder.
(b) No amendment to the Plan shall be effective
if it authorizes or permits any part of the Trust Fund (other
than such part as is required to pay taxes and administration
expenses) to be used for or diverted to any purpose other than
for the exclusive benefit of the Participants or their
Beneficiaries or estates; or causes any reduction in the
amount credited to the account of any Participant; or causes
or permits any portion of the Trust Fund to revert to or
become property of the Employer.
(c) Except as permitted by Regulations, no Plan
amendment or transaction having the effect of a Plan amendment
(such as a merger, plan transfer or similar transaction) shall
be effective to the extent it eliminates or reduces any
"Section 411(d)(6) protected benefit" or adds or modifies
conditions relating to "Section 411(d)(6) protected benefits"
the result of which is a further restriction on such benefit
unless such protected benefits are preserved with respect to
benefits accrued as of the later of the adoption date or
effective date of the amendment. "Section 411(d)(6) protected
benefits" are benefits described in Code Section 411(d)(6)(A),
early retirement benefits and
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retirement-type subsidies, and optional forms of benefit.
7.2 TERMINATION
(a) The Employer shall have the right at any
time to terminate the Plan by delivering to the Trustee and
Administrator written notice of such termination. Upon any
full or partial termination, all amounts credited to the
affected Participants' Combined Accounts shall become 100%
Vested as provided in Section 6.4 and shall not thereafter be
subject to forfeiture, and all unallocated amounts shall be
allocated to the accounts of all Participants in accordance
with the provisions hereof.
(b) Upon the full termination of the Plan, the
Employer shall direct the distribution of the assets of the
Trust Fund to Participants in a manner which is consistent
with and satisfies the provisions of Section 6.5.
Distributions to a Participant shall be made in cash or
through the purchase of irrevocable nontransferable deferred
commitments from an insurer. Except as permitted by
Regulations, the termination of the Plan shall not result in
the reduction of "Section 411(d)(6) protected benefits" in
accordance with Section 7.1(c).
7.3 MERGER OR CONSOLIDATION
This Plan may be merged or consolidated with, or its assets
and/or liabilities may be transferred to any other plan and trust only if the
benefits which would be received by a Participant of this Plan, in the event of
a termination of the plan immediately after such transfer, merger or
consolidation, are at least equal to the benefits the Participant would have
received if the Plan had terminated immediately before the transfer, merger or
consolidation, and such transfer, merger or consolidation does not otherwise
result in the elimination or reduction of any "Section 411(d)(6) protected
benefits" in accordance with Section 7.1(c).
7.4 LOANS TO PARTICIPANTS
(a) The Trustee may, in the Trustee's
discretion, make loans to Participants and Beneficiaries under
the following circumstances: (1) loans shall be made available
to all Participants and Beneficiaries on a reasonably
equivalent basis; (2) loans shall not be made available to
Highly Compensated Employees in an amount greater than the
amount made available to other Participants and Beneficiaries;
(3) loans shall bear a reasonable rate of interest; (4) loans
shall be adequately secured; and
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(5) shall provide for repayment over a reasonable period of
time.
(b) Loans made pursuant to this Section (when
added to the outstanding balance of all other loans made by
the Plan to the Participant) shall be limited to the lesser
of:
(1) $50,000 reduced by the excess (if any) of
the highest outstanding balance of loans from the
Plan to the Participant during the one year period
ending on the day before the date on which such loan
is made, over the outstanding balance of loans from
the Plan to the Participant on the date on which
such loan was made, or
(2) one-half (1/2) of the present value of the
non-forfeitable accrued benefit of the Participant
under the Plan.
(c) Loans shall provide for level amortization
with payments to be made not less frequently than each pay
period over a period not to exceed five (5) years. However,
loans used to acquire any dwelling unit which, within a
reasonable time, is to be used (determined at the time the
loan is made) as a principal residence of the Participant
shall provide for periodic repayment over a reasonable period
of time that may exceed five (5) years. Notwithstanding the
foregoing, loans made prior to January 1, 1987 which are used
to acquire, construct, reconstruct or substantially
rehabilitate any dwelling unit which, within a reasonable
period of time is to be used (determined at the time the loan
is made) as a principal residence of the Participant or a
member of his family (within the meaning of Code Section
267(c)(4)) may provide for periodic repayment over a
reasonable period of time that may exceed five (5) years.
Additionally, loans made prior to January 1, 1987, may provide
for periodic payments which are made less frequently than each
pay period and which do not necessarily result in level
amortization.
(d) Any loan made pursuant to this Section
where the Vested interest of the Participant is used to secure
such loan shall require the written consent of the
Participant's spouse in a manner consistent with Section
6.5(a). Such written consent must be obtained within the
90-day period prior to the date the loan is made. However, no
spousal consent shall be required under this paragraph if the
total accrued benefit subject to the security is not in excess
of $3,500.
(e) Any loans granted or renewed shall be made
pursuant to a Participant loan program. Such loan
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program shall be established in writing and must include, but need
not be limited to, the following:
(1) the identity of the person or positions
authorized to administer the Participant loan
program;
(2) a procedure for applying for loans;
(3) the basis on which loans will be approved or denied;
(4) limitations, if any, on the types and amounts of
loans offered;
(5) the procedure under the program for determining a
reasonable rate of interest;
(6) the types of collateral which may secure a Participant
loan; and
(7) the events constituting default and the steps that
will be taken to preserve Plan assets.
Such Participant loan program shall be
contained in a separate written document which, when properly
executed, is hereby incorporated by reference and made a part
of the Plan. Furthermore, such Participant loan program may
be modified or amended in writing from time to time without
the necessity of amending this Section.
ARTICLE VIII
MISCELLANEOUS
8.1 PARTICIPANT'S RIGHTS
This Plan shall not be deemed to constitute a contract between
the Employer and any Participant or to be a consideration or an inducement for
the employment of any Participant or Employee. Nothing contained in this Plan
shall be deemed to give any Participant or Employee the right to be retained in
the service of the Employer or to interfere with the right of the Employer to
discharge any Participant or Employee at any time regardless of the effect
which such discharge shall have upon him as a Participant of this Plan.
8.2 ALIENATION
(a) Subject to the exceptions provided below,
no benefit which shall be payable out of the Trust Fund to any
person (including a Participant or his Beneficiary) shall be
subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge,
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encumbrance, or charge, and any attempt to anticipate,
alienate, sell, transfer, assign, pledge, encumber, or charge
the same shall be void; and no such benefit shall in any
manner be liable for, or subject to, the debts, contracts,
liabilities, engagements, or torts of any such person, nor
shall it be subject to attachment or legal process for or
against such person, and the same shall not be recognized by
the Trustee, except to such extent as may be required by law.
(b) This provision shall not apply to the
extent a Participant or Beneficiary is indebted to the Plan,
as a result of a loan from the Plan. At the time a
distribution is to be made to or for a Participant's or
Beneficiary's benefit, such proportion of the amount
distributed as shall equal such loan indebtedness shall be
paid by the Trustee to the Trustee or the Administrator, at
the direction of the Administrator, to apply against or
discharge such loan indebtedness. Prior to making a payment,
however, the Participant or Beneficiary must be given written
notice by the Administrator that such loan indebtedness is to
be so paid in whole or part from his Participant's Combined
Account. If the Participant or Beneficiary does not agree that
the loan indebtedness is a valid claim against his Vested
Participant's Combined Account, he shall be entitled to a
review of the validity of the claim in accordance with
procedures provided in Sections 2.12 and 2.13.
(c) This provision shall not apply to a
"qualified domestic relations order" defined in Code Section
414(p), and those other domestic relations orders permitted to
be so treated by the Administrator under the provisions of the
Retirement Equity Act of 1984. The Administrator shall
establish a written procedure to determine the qualified
status of domestic relations orders and to administer
distributions under such qualified orders. Further, to the
extent provided under a "qualified domestic relations order,"
a former spouse of a Participant shall be treated as the
spouse or surviving spouse for all purposes under the Plan.
8.3 CONSTRUCTION OF PLAN
This Plan shall be construed and enforced according to the Act
and the laws of the State of New York, other than its laws respecting choice of
law, to the extent not preempted by the Act.
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8.4 GENDER AND NUMBER
Wherever any words are used herein in the masculine, feminine
or neuter gender, they shall be construed as though they were also used in
another gender in all cases where they would so apply, and whenever any words
are used herein in the singular or plural form, they shall be construed as
though they were also used in the other form in all cases where they would so
apply.
8.5 LEGAL ACTION
In the event any claim, suit, or proceeding is brought
regarding the Trust and/or Plan established hereunder to which the Trustee or
the Administrator may be a party, and such claim, suit, or proceeding is
resolved in favor of the Trustee or Administrator, they shall be entitled to be
reimbursed from the Trust Fund for any and all costs, attorney's fees, and
other expenses pertaining thereto incurred by them for which they shall have
become liable.
8.6 PROHIBITION AGAINST DIVERSION OF FUNDS
(a) Except as provided below and otherwise
specifically permitted by law, it shall be impossible by
operation of the Plan or of the Trust, by termination of
either, by power of revocation or amendment, by the happening
of any contingency, by collateral arrangement or by any other
means, for any part of the corpus or income of any trust fund
maintained pursuant to the Plan or any funds contributed
thereto to be used for, or diverted to, purposes other than
the exclusive benefit of Participants, Retired Participants,
or their Beneficiaries.
(b) In the event the Employer shall make an
excessive contribution under a mistake of fact pursuant to Act
Section 403(c)(2)(A), the Employer may demand repayment of
such excessive contribution at any time within one (1) year
following the time of payment and the Trustees shall return
such amount to the Employer within the one (1) year period.
Earnings of the Plan attributable to the excess contributions
may not be returned to the Employer but any losses
attributable thereto must reduce the amount so returned.
8.7 BONDING
Every Fiduciary, except a bank or an insurance company, unless
exempted by the Act and regulations thereunder, shall be bonded in an amount
not less than 10% of the amount of the funds such Fiduciary handles; provided,
however, that the minimum bond shall be $1,000 and the maximum bond, $500,000.
The amount of funds handled shall be determined at the beginning of each Plan
81
<PAGE> 88
Year by the amount of funds handled by such person, group, or class to be
covered and their predecessors, if any, during the preceding Plan Year, or if
there is no preceding Plan Year, then by the amount of the funds to be handled
during the then current year. The bond shall provide protection to the Plan
against any loss by reason of acts of fraud or dishonesty by the Fiduciary
alone or in connivance with others. The surety shall be a corporate surety
company (as such term is used in Act Section 412(a)(2)), and the bond shall be
in a form approved by the Secretary of Labor. Notwithstanding anything in the
Plan to the contrary, the cost of such bonds shall be an expense of and may, at
the election of the Administrator, be paid from the Trust Fund or by the
Employer.
8.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE
Neither the Employer nor the Trustee, nor their successors,
shall be responsible for the validity of any Contract issued hereunder or for
the failure on the part of the insurer to make payments provided by any such
Contract, or for the action of any person which may delay payment or render a
Contract null and void or unenforceable in whole or in part.
8.9 INSURER'S PROTECTIVE CLAUSE
Any insurer who shall issue Contracts hereunder shall not have
any responsibility for the validity of this Plan or for the tax or legal
aspects of this Plan. The insurer shall be protected and held harmless in
acting in accordance with any written direction of the Trustee, and shall have
no duty to see to the application of any funds paid to the Trustee, nor be
required to question any actions directed by the Trustee. Regardless of any
provision of this Plan, the insurer shall not be required to take or permit any
action or allow any benefit or privilege contrary to the terms of any Contract
which it issues hereunder, or the rules of the insurer.
8.10 RECEIPT AND RELEASE FOR PAYMENTS
Any payment to any Participant, his legal representative,
Beneficiary, or to any guardian or committee appointed for such Participant or
Beneficiary in accordance with the provisions of the Plan, shall, to the extent
thereof, be in full satisfaction of all claims hereunder against the Trustee
and the Employer, either of whom may require such Participant, legal
representative, Beneficiary, guardian or committee, as a condition precedent to
such payment, to execute a receipt and release thereof in such form as shall be
determined by the Trustee or Employer.
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<PAGE> 89
8.11 ACTION BY THE EMPLOYER
Whenever the Employer under the terms of the Plan is permitted
or required to do or perform any act or matter or thing, it shall be done and
performed by a person duly authorized by its legally constituted authority.
8.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY
The "named Fiduciaries" of this Plan are (1) the Employer, (2)
the Administrator and (3) the Trustee. The named Fiduciaries shall have only
those specific powers, duties, responsibilities, and obligations as are
specifically given them under the Plan. In general, the Employer shall have the
sole responsibility for making the contributions provided for under Section
4.1; and shall have the sole authority to appoint and remove the Trustee and
the Administrator; to formulate the Plan's "funding policy and method"; and to
amend or terminate, in whole or in part, the Plan. The Administrator shall have
the sole responsibility for the administration of the Plan, which
responsibility is specifically described in the Plan. The Trustee shall have
the sole responsibility of management of the assets held under the Trust,
except those assets, the management of which has been assigned to an Investment
Manager, who shall be solely responsible for the management of the assets
assigned to it, all as specifically provided in the Plan. Each named Fiduciary
warrants that any directions given, information furnished, or action taken by
it shall be in accordance with the provisions of the Plan, authorizing or
providing for such direction, information or action. Furthermore, each named
Fiduciary may rely upon any such direction, information or action of another
named Fiduciary as being proper under the Plan, and is not required under the
Plan to inquire into the propriety of any such direction, information or
action. It is intended under the Plan that each named Fiduciary shall be
responsible for the proper exercise of its own powers, duties, responsibilities
and obligations under the Plan. No named Fiduciary shall guarantee the Trust
Fund in any manner against investment loss or depreciation in asset value. Any
person or group may serve in more than one Fiduciary capacity. In the
furtherance of their responsibilities hereunder, the "named Fiduciaries" shall
be empowered to interpret the Plan and Trust and to resolve ambiguities,
inconsistencies and omissions, which findings shall be binding, final and
conclusive.
8.13 HEADINGS
The headings and subheadings of this Plan have been inserted
for convenience of reference and are to be ignored in any construction of the
provisions hereof.
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<PAGE> 90
8.14 APPROVAL BY INTERNAL REVENUE SERVICE
(a) Notwithstanding anything herein to the
contrary, contributions to this Plan are conditioned upon the
initial qualification of the Plan under Code Section 401. If
the Plan receives an adverse determination with respect to its
initial qualification, then the Plan may return such
contributions to the Employer within one year after such
determination, provided the application for the determination
is made by the time prescribed by law for filing the
Employer's return for the taxable year in which the Plan was
adopted, or such later date as the Secretary of the Treasury
may prescribe.
(b) Notwithstanding any provisions to the
contrary, except Sections 3.6, 3.7, and 4.1(e), any
contribution by the Employer to the Trust Fund is conditioned
upon the deductibility of the contribution by the Employer
under the Code and, to the extent any such deduction is
disallowed, the Employer may, within one (1) year following
the disallowance of the deduction, demand repayment of such
disallowed contribution and the Trustee shall return such
contribution within one (1) year following the disallowance.
Earnings of the Plan attributable to the excess contribution
may not be returned to the Employer, but any losses
attributable thereto must reduce the amount so returned.
8.15 UNIFORMITY
All provisions of this Plan shall be interpreted and applied
in a uniform, nondiscriminatory manner. In the event of any conflict between
the terms of this Plan and any Contract purchased hereunder, the Plan
provisions shall control.
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<PAGE> 91
IN WITNESS WHEREOF, this Plan has been executed the day and
year first above written.
Signed, sealed, and delivered
in the presence of:
Getty Petroleum Marketing Inc.
______________________________ By__________________________
EMPLOYER
______________________________
WITNESSES AS TO EMPLOYER
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<PAGE> 92
DEAR CORBEL CLIENT:
Enclosed is the package you ordered. This package includes IRS Forms 5307 (Rev
3/96) and 5300 (Rev 1/96). Although we are providing both tax submission forms,
only one form (the 5307 OR the 5300) must be submitted.
Form 5307 will be used for most plan submissions under Corbel's Volume
Submitter Program. This will entitle you to pay a reduced User Fee. However,
the 5300 is being made available to you for submission if the plan will NOT
qualify under the Volume Submitter Program. Generally, this will occur if
special language changes are so substantial that the IRS will not accept the
plan under the Volume Submitter Program.
There are two sheets enclosed entitled "Form 5307 Submission Instructions" and
"Form 5300 Submission Instructions" which you should review and follow
carefully. It's especially important to pay close attention to the 5307/5300
and other tax forms since there is information not available in our files which
you or the employer must complete.
Finally, you may only submit Form 5307 or Form 5300 if the employer or the
employer's representative includes IRS Schedule Q, Nondiscrimination
Requirements (Schedule Q enclosed). In addition to Schedule Q, you must also
include various demonstrations pursuant to Schedule Q. Corbel has provided
demonstrations 2, 4 and 9.
Remember, submit either Form 5307 or Form 5300, but not both.
Thanks for the opportunity to serve you.
CORBEL
<PAGE> 93
CERTIFICATE OF CORPORATE RESOLUTION
The undersigned Secretary of Getty Petroleum Marketing Inc.
(the Corporation) hereby certifies that the following resolutions were duly
adopted by the board of directors of the Corporation on ______________________,
and that such resolutions have not been modified or rescinded as of the date
hereof:
RESOLVED, that the form of Profit Sharing Plan effective
February 1, 1997, presented to this meeting is hereby approved and adopted and
that the proper officers of the Corporation are hereby authorized and directed
to execute and deliver to the Trustee of the Plan one or more counterparts of
the Plan.
RESOLVED, that for purposes of the limitations on
contributions and benefits under the Plan, prescribed by Section 415 of the
Internal Revenue Code, the "limitation year" shall be the Plan Year.
RESOLVED, that not later than the due date (including
extensions hereof) of the Corporation's federal income tax return for each of
its fiscal years hereafter, the Corporation shall contribute to the Plan for
each such fiscal year such amount as shall be determined by the board of
directors of the Corporation and that the Treasurer of the Corporation is
authorized and directed to pay such contribution to the Trustee of the Plan in
cash or property and to designate to the Trustee the year for which such
contribution is made.
RESOLVED, that the proper officers of the Corporation shall
act as soon as possible to notify the employees of the Corporation of the
adoption of the Profit Sharing Plan by delivering to each employee a copy of
the summary description of the Plan in the form of the Summary Plan Description
presented to this meeting, which form is hereby approved.
<PAGE> 94
The undersigned further certifies that attached hereto as
Exhibits A, B and C, respectively, are true copies of Getty Petroleum Marketing
Inc. Retirement and Profit Sharing Plan, Summary Plan Description and Funding
Policy and Method approved and adopted in the foregoing resolutions.
__________________________________
Secretary
Date: ____________________________
<PAGE> 95
GETTY PETROLEUM MARKETING INC. RETIREMENT AND PROFIT SHARING PLAN
FUNDING POLICY AND METHOD
A pension benefit plan (as defined in the Employee Retirement
Income Security Act of 1974) has been adopted by the company for the purpose of
rewarding long and loyal service to the company by providing to employees
additional financial security at retirement. Incidental benefits are provided
in the case of disability, death or other termination of employment.
Since the principal purpose of the plan is to provide benefits
at normal retirement age, the principal goal of the investment of the funds in
the plan should be both security and long-term stability with moderate growth
commensurate with the anticipated retirement dates of participants.
Investments, other than "fixed dollar" investments, should be included among
the plan's investments to prevent erosion by inflation. However, investments
should be sufficiently liquid to enable the plan, on short notice, to make some
distributions in the event of the death or disability of a participant.
<PAGE> 1
EXHIBIT 10.10
SUPPLEMENTAL RETIREMENT PLAN
FOR EXECUTIVES OF
GETTY PETROLEUM MARKETING INC.
AND PARTICIPATING SUBSIDIARIES
February 1, 1997
<PAGE> 2
SUPPLEMENTAL RETIREMENT PLAN
FOR EXECUTIVES OF
GETTY PETROLEUM MARKETING INC.
AND PARTICIPATING SUBSIDIARIES
<TABLE>
<S> <C> <C>
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Article 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Article 2. Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Article 3. Contributions and Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Article 4. Payment of Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Article 5. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Article 6. Amendment and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
<PAGE> 3
INTRODUCTION
This Supplemental Retirement Plan for Executives of Getty Petroleum Marketing
Inc. and Participating Subsidiaries has been authorized by the Board of
Directors of Getty Petroleum Marketing Inc. to be applicable effective on and
after February 1, 1997. This Plan is intended to promote extraordinary
contributions by eligible executives by providing such executives with
supplemental retirement benefits. The Plan is unfunded and is maintained by
Getty Petroleum Marketing Inc. and its participating subsidiaries primarily for
the purpose of providing deferred compensation for a select group of management
and highly compensated employees. The Plan reads as hereinafter set forth.
2
<PAGE> 4
SUPPLEMENTAL RETIREMENT PLAN
FOR EXECUTIVES OF
GETTY PETROLEUM MARKETING INC.
AND PARTICIPATING SUBSIDIARIES
Article 1. Definitions
1.01 "Account" shall mean a Member's account in the Trust which
shall consist of all amounts credited to a Member under
Section 3.01, adjusted for any earnings or losses on those
amounts pursuant to Section 3.05 and after payment of any
expenses as provided by the provisions of the Trust.
1.02 "Affiliated Company" shall mean any company, corporation or
business directly or indirectly controlled by the Company,
whether or not such company, corporation or business
participates in the Plan.
1.03 "Beneficiary" shall mean the beneficiary designated by a
Member pursuant to Section 4.03.
1.04 "Code" shall mean the Internal Revenue Code of 1986 as it may
be amended.
1.05 "Committee" shall mean the individuals appointed by the
Company under Section 5.06 to administer the Plan.
1.06 "Company" shall mean Getty Petroleum Marketing Inc. or any
successor by merger, purchase or otherwise, with respect to
its employees.
1.07 "Company Contributions" shall mean the amount of contributions
credited to a Member under Section 3.01.
3
<PAGE> 5
1.08 "Compensation" shall mean the total remuneration (including
restricted stock or other forms of remuneration but excluding
any amounts paid by the Company or an Affiliated Company to
reimburse the employee for any federal, state or local income
taxes due on, or withheld from, the employee's remuneration)
paid to a Member for services rendered to a Participating
Company, determined prior to any pre-tax contributions under a
"qualified cash or deferred arrangement" or a "cafeteria plan"
as defined in Sections 401(K) and 125, respectively, of the
Code.
1.09 "Effective Date" shall mean February 1, 1997.
1.10 "Member" shall mean an employee of a Participating Company for
whom a Company Contribution has been made under the Plan.
1.11 "Participating Company" shall mean the Company and any
Affiliated Company which the Company designates for
participation in the Plan in accordance with Section 5.06(b).
1.12 "Plan" shall mean this Supplemental Plan for Executives of
Getty Petroleum Marketing Inc. and Participating Subsidiaries.
1.13 "Plan Year" shall mean the calendar year starting on February
1, 1997 and each succeeding calendar year.
1.14 "Retirement Plan" shall mean the Getty Petroleum Marketing
Inc. Retirement (401(K)); and Profit Sharing Plan.
1.15 "Trust" shall mean the grantor trust established under
Section 3.07.
1.16 "Valuation Date" shall mean the last business day of each
calendar quarter following the Effective Date.
4
<PAGE> 6
Article 2. Participation
2.01 Participation
(a) Only officers and other senior management employees
of the Participating Companies shall be eligible to
have a Company Contribution made to the Plan on their
behalf. Each Plan Year the Committee, in its sole
discretion, shall select those officers and other
senior management employees of the Participation
Companies for whom a Company Contribution shall be
made for that Plan Year or for the immediately
preceding Plan Year. An employee who receives a
Company Contribution shall be a Member and shall
remain a Member until he receives the full balance of
his Account in accordance with Article 4. Employees
shall be notified of their Membership in the Plan as
soon as practicable after the Committee has made its
selection.
(b) The Committee is not under any obligation to select
an officer or other person as an employee for whom a
Company Contribution shall be made for a Plan Year
solely because he had a Company Contribution made on
his behalf in a prior Plan Year.
2.02 Other Information
As a condition of participation in this Plan, a Member may be
required by the Committee to provide such information as the
Committee may deem necessary to properly administer the Plan.
5
<PAGE> 7
Article 3. Contributions and Funding
3.01 Amount of Contributions
For any Plan beginning on or after February 1, 1997, each
Participating Company shall made a contribution to the Trust
for each of its employees selected by the Committee under
Section 2.01 for that Plan Year. The amount of a
Participating Company's contribution on behalf of such an
employee for a Plan Year shall be equal to ten percent of the
Compensation the employee received in that Plan Year, reduced
by the amount of any "Retirement Plan Contributions" allocated
to the employees on account of that Plan Year. For purposes
of this Section 3.01, "Retirement Plan Contributions" shall
mean all contributions, other than elective deferrals as
defined in Section 4.02(g)(3) of the Code, made by the Company
or an Affiliated Company under the Retirement Plan as it may
be amended, or under any successor thereto, or made pursuant
to the provisions of any other plan, qualified under Section
401(a) of the Code, maintained by the Company or an Affiliated
Company.
3.02 Crediting to Accounts
The Company Contributions made by a Participating Company on
behalf of a Member for any Plan Year shall be paid to the
Trust as soon as practicable after the end of the Plan Year in
which the employee is selected by the Committee and shall be
credited to the Member's Account as of the First Valuation
Date coincident with or immediately following the date they
are paid to the Trust.
6
<PAGE> 8
3.03 Vesting of Account
The member shall vest in his Account at the same rate at which
such account would have vested under the Retirement Plan had
the Account been maintained under the Retirement Plan. In the
event the Member ceases to be employed by the Company or an
Affiliated Company prior to vesting in all or any part of the
Company Contributions credited on his behalf, such Company
Contributions shall be forfeited and shall not be restored in
the event the Member is subsequently reemployed by the Company
or an Affiliated Company. Any amounts forfeited under this
Section 3.03 Plan shall be returned to the Participating
Company which had employed the forfeiting Member as soon as
practicable after the end of the Plan Year in which the
forfeiture occurs or, in the alternative, credited towards any
contributions the Participating Company may be required to
make under Section 3.01 for the next Plan Year.
3.04 Investment of Accounts
(a) The Committee shall direct the investment of the
Accounts as it, in its sole discretion, shall
determine; provided, however, that the Committee
shall act for the exclusive purpose of providing
benefits for Members and Beneficiaries and with the
care, skill, prudence and diligence under the
circumstances then prevailing that a prudent person,
acting in a like capacity and familiar with such
matters, would use in the conduct of an enterprise of
a like character and with like aims.
7
<PAGE> 9
(b) Notwithstanding anything to the contrary in this
Plan, the Committee may use the assets of the Trust
allocated to employees of a Participating Company to
satisfy claims of the Participating Company's general
creditors in the event of the Participating Company's
bankruptcy or insolvency.
3.05 Valuation of Trust
(a) The Committee shall cause the Trust to be valued on
the last Valuation Date in each Plan Year and on such
other Valuation Dates as it deems advisable. Each
time the Trust is valued, there shall be allocated to
the Accounts of each Member his proportionate share
of the increase or decrease in the fair market value
of the Trust's assets.
(b) Whenever an event requires a determination of the
value of a Member's Account, the value shall be
computed as of the Valuation Date coincident with or
next following the date of determination.
3.06 Individual Accounts
The Committee shall maintain, or cause to be maintained,
records showing the individual balances of each Member's
Account. At least once a year, each Member shall be furnished
with a statement setting forth the value of his Account.
3.07 Establishment of a Trust
(a) The Company shall establish a grantor trust for the
benefit of Members participating in the Plan. The
assets of the Trust will be held separate and apart
from the funds of the Participating Companies, and
shall be
8
<PAGE> 10
used exclusively for the purposes set forth in the
Plan and the applicable trust agreement, subject to
the following conditions:
(i) the creation of the Trust shall not cause the
Plan to be other than "unfunded" for purposes
of Title I of the Employee Retirement Income
Security Act of 1974;
(ii) the Participating Companies shall be treated
as "grantors" of the Trust for purposes of
Section 677 of the Code; and
(iii) the trust agreement shall provide that its
assets may be used to satisfy claims of the
Participating Companies' general creditors,
and the rights of such general creditors are
enforceable by them under federal and state
law.
9
<PAGE> 11
Article 4. Payment of Benefits
4.01 Commencement of Benefits
(a) A Member shall be entitled to receive payment of his
vested Account upon his termination of employment
with the Company or an Affiliated Company for any
reason. Payment shall be made in a single cash sum
as soon as practicable following the Member's
termination of employment with the Company or the
Affiliated Company.
(b) No portion of a Member's Account may be withdrawn
prior to the Member's termination of employment with
the Company or an Affiliated Company.
4.02 Payment on Death
A Member's vested Account shall be payable to his Beneficiary
as soon as practicable after the Valuation Date coincident
with or next following the Member's death. The vested Account
shall be paid in cash in a single sum.
4.03 Designation of Beneficiary
Each Member shall file with the Committee a written
designation of one or more persons or trusts as the
designation of one or more persons or trusts as the
Beneficiary who shall be entitled to receive the amount, if
any, payable under the Plan upon his death pursuant to Section
4.02. A Member may, from time to time, revoke or change his
Beneficiary designation without the consent of any prior
Beneficiary by filing a new designation with the Committee.
The last such designation received by the Committee shall be
controlling; provided, however, that no designation, or change
or revocation thereof, shall be
10
<PAGE> 12
effective unless received by the Committee prior to the
Member's death, and in no event shall it be effective as
of a date prior to such receipt. If no such Beneficiary
designation is in effect at the time of a Member's death, or
if no designated Beneficiary survives the Member, the Member's
estate shall be deemed to have been designated his Beneficiary
and shall receive the payment of the amount, if any, payable
under the Plan upon his death.
11
<PAGE> 13
Article 5. General Provisions
5.01 Benefits Are Unsecured
All amounts payable in accordance with this Plan shall
constitute a general unsecured obligation of the Participating
Companies. Such amounts shall be paid out of the general
assets of the Participating Companies, to the extent not paid
by the Trust.
5.02 No Contract of Employment
The establishment of the Plan shall not be construed as
conferring any legal rights upon any person for a continuation
of employment, nor shall it interfere with the rights of the
Company or an Affiliated Company to discharge any employee and
to treat him without regard to the effect which such treatment
might have upon him as a Member of the Plan.
5.03 Facility of Payment
In the event that the Committee shall find that a Member is
unable to care for his affairs because of illness or accident,
the Committee may direct that any benefit payment due him,
unless claim shall have been made therefore by a duly
appointed legal representative, be paid to his spouse, a
child, a parent or other blood relative, or to a person with
whom he resides, and any such payment so made shall be a
complete discharge of the liabilities of the Plan therefor.
5.04 Withholding Taxes
All payments under this Plan shall be net of an amount
sufficient to satisfy any federal, state or local withholding
tax requirements.
12
<PAGE> 14
5.05 Nonalienation
Subject to any applicable law, no benefit under the Plan shall
be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge, and any
attempt so to do shall be void, nor shall any such benefit be
in any manner liable for or subject to garnishment,
attachment, execution or levy, or liable for or subject to the
debts, contracts, liabilities, engagements or torts of the
Member or his Beneficiary.
5.06 Administration
(a) The Plan shall be administered by an administrative
committee of at least two officers or employees
appointed by the Company. The Committee shall
interpret the Plan, establish regulations to further
the purposes of the Plan and take any other action
necessary to the proper operation of the Plan.
(b) The Company, in its sole discretion and upon such
terms as it may prescribe, may permit any Affiliated
Company to participate in the Plan.
(c) Prior to paying any benefit under this Plan, the
Committee may require the Member or Beneficiary to
provide such information or material as the
Committee, in its sole discretion, shall deem
necessary for it to make any determination it may be
required to make under this Plan. The Committee may
withhold payment of any benefit under this Plan until
it receives all such information and material and is
reasonably satisfied of its correctness and
genuineness.
13
<PAGE> 15
(d) The Committee shall provide adequate notice in
writing to any Member, former or Beneficiary whose
claim for benefits under this Plan has been denied,
setting forth the specific reasons for such denial.
A reasonable opportunity shall be afforded to any
such Member, former Member or Beneficiary for a full
and fair review by the Committee of its decision
denying the claim. The Committee's decision on any
such review shall be final and binding on the Member,
former Member or Beneficiary and all other interested
persons.
(e) All acts and decisions of the Committee shall be
final and binding upon all Members, former Members,
Beneficiaries and employees of the Company or an
Affiliated Company.
5.07 Administrative Expenses
All expenses of administering the Plan and the Trust shall be
paid by the Participating Companies.
5.08 Construction
(a) The Plan is intended to constitute an unfunded
deferred compensation arrangements for a select group
of management or highly compensated personnel and all
rights hereunder shall be governed by and construed
in accordance with this intention and with the laws
of the State of New York.
(b) The masculine pronoun shall mean the facsimile
wherever appropriate.
(c) The captions inserted in this Plan are inserted as
a matter of convenience and shall not affect
the construction of the Plan.
14
<PAGE> 16
Article 6. Amendment and Termination
6.01 Right to Terminate
The Company, by action of its Board of Directors, may, in its
sole discretion, terminate this Plan at any time. In the
event the Plan is terminated, each member and Beneficiary
shall be fully vested in his Account and shall receive a
single sum cash payment equal to the balance of his Account.
The single sum payment shall be made as soon as practicable
following the date the Plan is terminated and shall be in lieu
of any other benefit which may be payable to a Member or
Beneficiary under this Plan.
6.02 Right to Amend
The Company, by action of its action of Directors, may, at any
time and in its sole discretion, modify or amend this Plan or
the Trust in any way, including, without limitation,
increasing or decreasing the rate of Company Contributions
made pursuant to Section 3.01. However, no modification or
amendment of the Plan shall adversely affect the right of any
Member to receive the benefits granted under the Plan in
respect of such Member as of the date of modification or
amendment.
15
<PAGE> 1
EXHIBIT 22
LIST OF SUBSIDIARIES OF
GETTY PETROLEUM MARKETING INC.
<TABLE>
<CAPTION>
NAME STATE OF INCORPORATION
- ---- ----------------------
<S> <C>
Getty Terminals Corp. New York
PT Petro Corp. New York
Kingston Oil Supply Corp. New York
Gasway, Inc. New York
</TABLE>
<PAGE> 1
EXHIBIT 99.1
I hereby consent to being named as a director in the Form 10/A filed
by Getty Petroleum Marketing Inc. with the Securities and Exchange Commission on
January 13, 1997.
/s/ Matthew J. Chanin
-------------------------------
Matthew J. Chanin
Dated: January 13, 1997
