SCHEDULE 14A
Information Required in Proxy Statement
Reg. ss. 240.14a-101
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)
(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Getty Petroleum Marketing Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
[Letterhead of Getty(R) Petroleum Marketing Inc.]*
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 18, 1998
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To the Stockholders of
GETTY PETROLEUM MARKETING INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Getty
Petroleum Marketing Inc. (hereinafter called the "Company" or "Getty") will be
held at 270 Park Avenue, 11th Floor, New York, New York, on June 18, 1998 at
10:45 A.M., for the following purposes:
(1) To elect a Board of five directors to hold office for the ensuing
year or until the election and qualification of their respective
successors.
(2) The adoption of an amendment to the 1997 Stock Option Plan of Getty
Petroleum Marketing Inc.
(3) The ratification of the appointment of Coopers & Lybrand L.L.P. as
independent auditors for the Company for the fiscal year ended
January 31, 1999.
(4) To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
The transfer books of the Company will not be closed, but only
stockholders of record at the close of business on April 22, 1998 are entitled
to notice of and to vote at this meeting or any adjournments thereof.
You are cordially invited to attend the meeting. Whether or not you expect
to attend, please promptly vote, sign, date and return the enclosed
proxy/instruction card in the enclosed U.S. postage-paid envelope. This will
ensure that your shares are voted in accordance with your wishes and that a
quorum will be present. Even though you have returned your proxy card, you may
withdraw your proxy at any time prior to its use and vote in person at the
meeting should you so desire.
By Order of the Board of Directors,
/s/ Samuel M. Jones
Samuel M. Jones
Vice President, General Counsel
and Corporate Secretary
Jericho, New York
April 30, 1998
* "Getty" is a registered trademark owned by Getty Realty Corp. and licensed to
the Company.
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PLEASE NOTE--IF YOU DO NOT PLAN TO ATTEND THE MEETING, IT WOULD BE APPRECIATED
IF YOU WOULD PROMPTLY SIGN AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED
ENVELOPE WHICH REQUIRES NO POSTAGE.
<PAGE>
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PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
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This Proxy Statement is furnished in connection with the solicitation of
proxies by and on behalf of the Board of Directors of Getty Petroleum Marketing
Inc. (hereinafter called the "Company" or "Getty"), to be voted at the Annual
Meeting of Stockholders to be held at 270 Park Avenue, 11th Floor, New York, New
York, on June 18, 1998 at 10:45 A.M., and at any adjournments thereof, for the
purpose of electing a Board of Directors, the adoption of an amendment to the
Company's 1997 Stock Option Plan, ratifying the appointment of independent
auditors for the Company and transacting such other business as may properly
come before the meeting.
On the April 22, 1998 record date for securities entitled to vote at the
meeting, the Company had outstanding 13,908,937 shares of Common Stock. Each
such outstanding share is entitled to one vote. In conformity with Maryland law,
shares abstaining from voting or not voted on certain matters will not be
treated as votes cast with respect to those matters, and, therefore, will not
affect the outcome of any such matter.
This Proxy Statement and form of proxy will be sent to stockholders in an
initial mailing on or about April 30, 1998. The date by which proposals of
security holders intended to be presented at the next annual meeting must be
received by the Company for inclusion in the proxy statement and form of proxy
for such meeting is December 31, 1998.
CREATION OF THE COMPANY
The Company was formed in October 1996 as a wholly-owned subsidiary of
Getty Realty Corp. (formerly known as Getty Petroleum Corp.). Effective as of
the close of business on January 31, 1997, Getty Realty Corp. transferred its
petroleum marketing business and New York Mid-Hudson Valley home heating oil
business to the Company, and on March 21, 1997, Getty Realty Corp. distributed
shares of the Company's common stock to the stockholders of Getty Realty Corp.
on a one-for-one basis. Accordingly, the Company commenced operations as a
separate, publicly traded and New York Stock Exchange listed entity on March 21,
1997, and thereafter began filing reports with the SEC as required by the
Securities Exchange Act of 1934, as amended. On June 18, 1998, the Company will
hold its first Annual Meeting of Stockholders.
All information herein provided for the period prior to March 21, 1997
pertains to Getty Petroleum Corp. and the directors and officers of the Company
when they were directors and officers of Getty Petroleum Corp.
1
<PAGE>
ELECTION OF DIRECTORS
Five directors are to be elected at the meeting for a term of one year or
until their respective successors shall be elected and qualified. The plurality
vote of the holders of a majority of the shares having voting power present in
person or represented by proxy at the meeting is necessary for the election of
the directors.
It is intended that votes will be cast pursuant to the enclosed proxy for
the election of the nominees named in the table below. In the event that any of
the nominees should become unable or unwilling to serve as a director, it is
intended that the proxy will be voted for the election of such person, if any,
as shall be designated by the Board of Directors. The names of, and certain
information with respect to, the persons nominated for election as directors are
as follows:
Name--Age
Served as Director Since (1)
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Matthew J. Chanin--43 Senior Managing Director of Prudential Capital Group
December 12, 1996 since December 1995, and prior thereto senior
investment positions with Prudential Insurance
Company of America for more than five years.
Ronald E. Hall--66 Chairman of the Board of Howell Corp. since 1996 and
December 12, 1996 prior thereto President and Chief Executive Officer
of CITGO Petroleum Corp. for more than five years.
Leo Liebowitz--70 Chairman and Chief Executive Officer of the Company.
May 1971 Director, President and Chief Executive Officer of
Getty Realty Corp. Director, President and Treasurer
of CLS General Partnership Corp.
Richard E. Montag--65 Vice President of Real Estate Development, The
December 12, 1996 Richard E. Jacobs Group, for more than five years.
Milton Safenowitz--70 Executive Vice President of Getty until his
May 1971 retirement on February 1, 1990. Director of Getty
Realty Corp. Director, Executive Vice President and
Assistant Secretary of CLS General Partnership Corp.
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(1) For the periods of service prior to December 12, 1996, references include
positions held as Directors of Getty Realty Corp. or its predecessors.
2
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
Under the rules of the SEC, a person who directly or indirectly has or
shares voting power and/or investment power with respect to a security is
considered as a beneficial owner of the security. Voting power includes the
power to vote or direct the voting of shares, and investment power includes the
power to dispose of or direct the disposition of shares.
The directors, Named Executive Officers (as defined below) and all
directors and Executive Officers of the Company as a group beneficially owned as
of January 31, 1998 the number of shares of Getty Common Stock set forth in the
table below. The table also includes all persons whom to the knowledge of the
Company beneficially own more than 5% of the outstanding shares of the Company's
Common Stock. The number of shares column includes shares as to which voting
power and/or investment power may be acquired within 60 days (such as upon
exercise of outstanding stock options) because such shares are deemed to be
beneficially owned under the SEC rules.
Shares of Percent
Common Stock of Class
Name Beneficially Owned (1)
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Matthew J. Chanin 2,669 *
Ronald E. Hall 10,856 *
Leo Liebowitz 2,475,387(2) 17.89%
c/o Getty Petroleum Marketing Inc.
125 Jericho Turnpike
Jericho, NY 11753
Richard E. Montag 37,797(3) *
Milton Safenowitz 2,205,920(4) 15.94%
7124 Queenferry Cr.
Boca Raton, FL 33496
Vincent J. DeLaurentis --
Alvin A. Smith (5) 126,601(8) *
Samuel M. Jones 78,648(8) *
James R. Craig (6) 89,737(8) *
Michael K. Hantman (7) 73,496(8) *
Directors and Executive
Officers as a group (10 persons) 5,101,111 35.92%
Milton Cooper 1,056,309 7.63%
c/o Kimco Realty Corporation
3333 New Hyde Park Road, Suite 100
New Hyde Park, NY 11042
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* Total shares beneficially owned constitute less than one percent of the
outstanding shares.
(1) The percentage is determined by dividing the number of shares shown by the
aggregate number of shares outstanding and the shares which may be
acquired within 60 days.
(2) Includes 29,577 shares held in the Company's retirement plan, 195,377
shares held by wife for which beneficial ownership is disclaimed and
101,924 shares held by a charitable foundation.
(3) Includes 10,190 shares held by wife for which beneficial ownership is
disclaimed and 10,100 shares held jointly with wife.
(4) Includes 1,529,802 shares held by Irrevocable Trust for the benefit of
Milton Safenowitz, 500,000 shares held by the Safenowitz Family
Partnership and 176,118 shares held by Irrevocable Trust for the benefit
of his wife.
3
<PAGE>
(5) Effective October 31, 1997, resigned as an Executive Officer of Getty.
(6) Effective January 31, 1998, resigned as an Executive Officer of Getty.
(7) Includes 5,860 shares held in the Company's retirement plan.
(8) Gives effect to the vesting of outstanding Getty stock options held by
such individual pursuant to the Change of Control Agreements (as described
below).
DIRECTORS' MEETINGS, COMMITTEES AND EXECUTIVE OFFICERS
During the fiscal year ended January 31, 1998, four regular meetings and
one special meeting of the Board of Directors of the Company were held. Except
for one director who was absent at one meeting, each director who served as a
director of the Company during the fiscal year attended all of the meetings of
the Board of Directors of the Company and of the Committees of the Board on
which each such director served. The Board of Directors of the Company has
certain standing committees, including an Audit Committee, a Nominating
Committee and a Compensation and Stock Option Committee, the membership and
functions of which are described below.
The Audit Committee, consisting of Messrs. Montag (Chairman), Chanin and
Safenowitz, met for the first time on March 24, 1998. The Committee selects the
firm of independent public accountants which audits the consolidated financial
statements of Getty and its subsidiaries, discusses the scope and the results of
the audit with the accountants and discusses Getty's financial accounting and
reporting principles. The Committee also examines the summary reports of the
internal auditors for the Company and discusses the adequacy of Getty's
financial controls with the accountants and with management.
The Nominating Committee, consisting of Messrs. Liebowitz (Chairman),
Chanin and Hall, met for the first time on March 24, 1998. The Committee
recommends candidates to the Board for election as officers. The Committee
recommends nominees for election to the Board and reviews the role, composition
and structure of the Board and its committees. The Committee will consider
nominees recommended by stockholders upon submission in writing to the Secretary
of the Company, in accordance with the provisions of the Company's Bylaws, of
the names of such nominees, together with their qualifications for service as a
director of the Company.
The Compensation and Stock Option Committee (the "Compensation
Committee"), which met once last year, consists of Messrs. Montag (Chairman),
Hall and Safenowitz. The Compensation Committee administers Getty's Incentive
Compensation Plan, Supplemental Retirement Plan and the 1997 Stock Option Plan,
and reviews the compensation of the directors and officers of Getty.
Directors' Compensation
Directors receive annual retainer fees of $12,000, and committee and board
meeting fees of $1,000 for each meeting attended. Directors who are employees of
the Company do not receive retainers or board meeting fees. Mr. Warren G.
Wintrub, who is a director of Getty Realty Corp., and is also a director of a
subsidiary of the Company, received $4,000 for attending four board meetings of
such subsidiary.
Other Executive Officers
Other Executive Officers during all or part of fiscal 1998 included
Vincent J. DeLaurentis, age 47, President of Getty since August 1997; Alvin A.
Smith, age 60, Senior Vice President of Getty since 1985 and Chief Operating
Officer of Getty since 1994 until his resignation effective as of October 31,
1997; James R. Craig, age 46, Vice President of Getty since 1987 until his
resignation effective as of January 31, 1998; Michael K. Hantman, age 46, Vice
President of Getty since 1991 and Corporate Controller of Getty since 1985; and
Samuel M. Jones, age 61, Vice President and General Counsel of Getty since 1986
and Corporate Secretary of Getty since 1994. Management is not aware of any
family relationships between any of its directors, nominees or Executive
Officers.
4
<PAGE>
COMPENSATION
Executive Compensation
The following tables provide information about executive compensation.
SUMMARY COMPENSATION TABLE
The following tables set forth information about the compensation of the
Chief Executive Officer and each of the other four most highly compensated
Executive Officers of Getty who were Executive Officers at the end of the fiscal
year and the compensation of an Executive Officer who resigned during the fiscal
year (the "Named Executive Officers"), for services in all capacities to the
Company or Getty Petroleum Corp. and their subsidiaries during the periods
indicated. (For all periods prior to March 21, 1997, the compensation was paid
by Getty Petroleum Corp.)
<TABLE>
<CAPTION>
Annual Compensation Long Term
Fiscal Year Ended January 31 Compensation Awards
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Restricted
Other Annual Stock All Other
Salary Bonus Compensation Awards Options Compensation
Name and Principal Position Year ($) ($) ($) (1) ($) (#) ($) (2)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Leo Liebowitz 1998 144,970 116,000 19,866
Director, 1997 404,103 123,400 69,843
Chairman and Chief 1996 404,103 263,000 59,886
Executive Officer
Vincent J. DeLaurentis (3) 1998 139,615 172,500 75,000 13,121
President
Alvin A. Smith (4) 1998 408,803 -- -- 9,190
Senior Vice 1997 311,192 205,000 10,000 55,515
President and Chief 1996 301,192 205,000 15,000 45,373
Operating Officer
Samuel M. Jones 1998 183,762 137,700 20,000 34,286
Vice President, 1997 178,156 116,261 10,000 32,949
General Counsel and 1996 163,307 115,000 15,000 26,629
Corporate Secretary
James R. Craig (5) 1998 162,740 148,004 -- 8,501
Vice President 1997 158,565 125,000 10,000 31,422
1996 145,537 125,000 15,000 24,419
Michael K. Hantman 1998 124,126 137,700 20,000 27,704
Vice President and 1997 120,429 116,261 10,000 26,170
Corporate Controller 1996 115,667 110,000 15,000 21,787
</TABLE>
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(1) None of the Named Executive Officers 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 Company contributions to the defined
contribution retirement profit sharing plan, matching contributions under
the Company's 401(k) savings plan, Company contributions to the
Supplemental Retirement Plan for executives and term life insurance
premiums, as set forth in the table on the following page.
(3) Mr. DeLaurentis was appointed as President of the Company on August 4,
1997. The Company is obligated to pay Mr. DeLaurentis not less than
$300,000 per year until August 1999, pursuant to an Employment Agreement
dated July 10, 1997.
(4) Resigned on October 31, 1997, after which date the Company is obligated to
compensate and extend benefits to Mr. Smith until October 31, 2002
pursuant to a Severance Agreement dated July 18, 1997.
(5) Resigned on January 31, 1998, after which the Company is obligated to
compensate and extend benefits to Mr. Craig until June 20, 2000 pursuant
to a Change of Control Agreement (described below).
5
<PAGE>
OTHER EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>
Fiscal Year Defined Company Supplemental Term
Ended Contribution Match Retirement Life
Name January 31 Retirement Plan 401(k) Plan Plan Insurance
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Leo Liebowitz 1998 $2,546 $ -- $17,320 $ --
1997 2,373 -- 65,246 2,224
1996 2,388 -- 55,319 2,179
Vincent DeLaurentis 1998 -- -- 11,788 1,333
Alvin A. Smith 1998 -- 4,750 -- 4,440
1997 2,373 4,750 43,552 4,440
1996 2,388 4,620 34,410 3,955
Samuel M. Jones 1998 2,546 4,750 23,070 3,920
1997 2,373 4,750 22,599 3,227
1996 2,388 4,629 17,499 2,113
James R. Craig 1998 -- 4,750 -- 3,751
1997 2,373 3,595 22,489 2,965
1996 2,388 3,486 16,668 1,877
Michael K. Hantman 1998 2,546 3,715 18,345 3,098
1997 2,373 3,596 17,573 2,628
1996 2,388 3,458 14,179 1,762
</TABLE>
In December 1994, Getty Petroleum Corp. entered into agreements
(collectively, the "Change of Control Agreements") with its non-director
officers and certain key employees, wherein Getty Petroleum Corp. agreed to make
certain payments under certain circumstances upon a "change of control" of Getty
Petroleum Corp. Under such circumstances, Getty Petroleum Corp. 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. In March 1996, Getty Petroleum Corp. amended
the Change of Control Agreements to treat a spinoff or similar transaction
involving a substantial portion of Getty Petroleum Corp.'s marketing or real
estate business or assets as a "change of control." Accordingly, a "change of
control" for purposes of the Change of Control Agreements occurred on March 21,
1997--the date when the Company was spun off to Getty Petroleum Corp.'s
stockholders. On such date the Company commenced performing Getty Petroleum
Corp.'s obligations under the Change of Control Agreements for the covered
Company officers and employees. On April 8, 1997, the Company formally confirmed
to each officer and covered employee its obligations under the Change of Control
Agreements. On March 9, 1998, the Change of Control Agreements were further
amended, so as to provide that in the event of termination of an officer or
covered employee by the Company for other than cause, or by either party
following the assignment of materially less favorable job responsibilities, then
for the 24-month period after the date of termination for officers and two key
employees, and a shorter period of time for the other covered employees, the
Company 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 three year or shorter period prior to March 21, 1997. In addition, the
Company will continue to pay not less than the foregoing guaranteed salary and
benefits to each officer and covered employee as long as he remains an employee
of the Company. 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 any other
employer during the relevant period. Mr. DeLaurentis, who has an employment
agreement, does not have a Change of Control Agreement.
6
<PAGE>
The Named Executive Officers participate in the Company's Employee Stock
Ownership Plan ("ESOP"). For the ESOP year ended December 31, 1997, each of
Messrs. Liebowitz, Jones and Hantman were allocated approximately 1,800 shares
of Common Stock. For the same period 134,259 shares were allocated to the
eligible officers and employees of the Company and its subsidiaries. There
remain 537,039 shares of Common Stock in the ESOP Trust, to be allocated to the
eligible employees during the next four ESOP plan years.
STOCK OPTIONS
The following table sets forth as to the Named Executive Officers
additional information with respect to the stock options granted during the
fiscal year ended January 31, 1998, including the potential realizable value
from the stock options assuming they are exercised at the end of the option term
and assuming 5% and 10% annual rates of stock price appreciation during the
option term.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term (1)
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% of Total
Options
Granted to
Employees in
Fiscal Year Exercise or
Options Ended Base Price Expiration
Name Granted (#) 1-31-98 ($/Share) Date 5% ($) 10% ($)
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<S> <C> <C> <C> <C> <C> <C>
Leo Liebowitz -- -- -- -- -- --
Vincent J. DeLaurentis 75,000 45.2 5.75 07/10/07 271,211 687,301
Alvin A. Smith -- -- -- -- -- --
Samuel M. Jones 20,000 12.1 5.6875 12/16/07 71,537 181,288
James R. Craig -- -- -- -- -- --
Michael K. Hantman 20,000 12.1 5.6875 12/16/07 71,537 181,288
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</TABLE>
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(1) The dollar amounts under the potential realizable value column are the
result of calculations of assumed annual compound rates of appreciation
over the ten-year life of the options in accordance with the rules of the
SEC and are not intended to forecast possible future appreciation, if any,
of the Company's Common Stock. The actual value, if any, an executive may
realize will depend on the excess of the market price of the shares over
the exercise price on the date the option is exercised. The Company did
not use an alternative formula for a grant date valuation, as the Company
is not aware of any formula which will determine with reasonable accuracy
a present value based on unknown or volatile factors. If the price of
Getty Common Stock appreciates, the aggregate value of Getty Common Stock
held by the stockholders will also increase. For example, the aggregate
market value of Getty Common Stock on January 31, 1998 was approximately
$89,069,000, based upon the market price on that date. If the share price
of Getty's Common Stock increases by 5% per year, the aggregate market
value on January 31, 2008 of the same number of shares would be
approximately $145,084,000. If the price of Getty's Common Stock increases
by 10% per year, the aggregate market value on January 31, 2008 would be
approximately $231,022,000.
7
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCALYEAR ENDOPTION VALUES
The following table provides information as to options exercised by each
of the Named Executive Officers of Getty during the fiscal year ended January
31, 1998 and the value of options held by such officers at year end measured in
terms of the closing price of Getty Common Stock on January 31, 1998.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money Options/SARs
Options at Fiscal Year End (#) at Fiscal Year End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable (1) Unexercisable (1)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Leo Liebowitz -- -- -- --
-- --
Vincent J. DeLaurentis -- -- -- --
75,000 51,563
Alvin A. Smith 64,704 274,978 123,469 755,093
-- --
Samuel M. Jones 13,036 53,992 75,115 461,939
20,000 15,000
James R.Craig 87,634 459,344 89,403 39,114
-- --
Michael K. Hantman 10,349 36,218 67,461 415,206
20,000 15,000
</TABLE>
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(1) Except for the options granted in the last fiscal year, pursuant to the
Change in Control Agreements all unexercisable options granted in prior
fiscal years held by the Named Executive Officers became exercisable on
March 21, 1997.
Stock Option Plans
The Company's 1997 Stock Option Plan (the "Stock Option Plan"), which has
been approved by the Company's stockholders, authorizes the grant to directors,
officers and other key employees of the Company and its subsidiaries of
long-term incentive share awards in the form of options ("Options") to purchase
shares of the Company's Common Stock. The Stock Option Plan is administered by a
committee of three members of the Company's Board of Directors (the
"Compensation Committee"). The maximum number of shares which may be issued upon
the exercise of outstanding Options under the Stock Option Plan is 1,300,000 and
is subject to further adjustments for stock dividends and stock splits. As of
April 22, 1998, 782,550 shares of Common Stock were issuable upon the exercise
of options then outstanding under the Stock Option Plan. No grants may be made
under the Stock Option Plan after March 2007.
The recipients, terms (including price and exercise period) and type of
Option to be granted under the Stock Option Plan is determined by the
Compensation Committee; however, the Option price per share under the Stock
Option Plan generally must be at least equal to the fair market value of a share
of the Company's Common Stock (110% of such amount in the case of Incentive
Stock Options granted to any individual who owns stock representing more than
10% of the voting power of the Company's Common Stock) on the date the Option is
granted. Subject to certain limitations, Options granted under the Stock Option
Plan may be either Incentive Stock Options (within the meaning of Section 422(b)
of the Internal Revenue Code) or Non-Qualified Stock Options. With certain
limited exceptions, Options may not be exercised for a period of 12 months
following the grant of the Option and are exercisable in installments as are
specified in the Stock Option Plan or the terms of each Option. The exercise
period of an Option may not extend more than 10 years following its grant.
8
<PAGE>
The number of remaining shares available for grant under the Stock Option
Plan as of April 22, 1998 is 42,421.
The Board of Directors is seeking stockholder approval of, and recommends
that the stockholders approve, an amendment to the Stock Plan which would
increase the number of shares subject to options under the Stock Option Plan
from 1,300,000 to 2,000,000. See "PROPOSAL TO AMEND THE COMPANY'S 1997 STOCK
OPTION PLAN."
Retirement Plans
The Company has a retirement profit-sharing plan with Deferred 401(k)
Savings Plan Provisions (the "Retirement Plan") for employees meeting certain
service requirements. Under the terms of the Retirement Plan, the annual
discretionary contribution portion of the Retirement Plan is determined by the
Board of Directors. For the 401(k) portion of the Retirement Plan, the Board of
Directors has elected to contribute to the Retirement Plan for each
participating employee an amount equal to 50% of such employee's contribution to
the plan but in no event more than 3% of such employee's compensation.
The Company also has a Supplemental Retirement Plan for Executives (the
"Supplemental Plan"). Under the Supplemental Plan, which is not qualified for
purposes of Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), 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 Retirement Plan. The amounts paid to the
trustee under the Supplemental Plan may be used to satisfy claims of general
creditors in the event of the Company'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 Retirement
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.
Compensation Committee Interlocks and Insider Participation
As previously noted, the current members of the Compensation Committee are
Messrs. Montag, Safenowitz (a former Executive Vice President of Getty Petroleum
Corp.) and Hall. Until June 19, 1997, Mr. Liebowitz also served on the
Compensation Committee. Mr. Safenowitz and Liebowitz are also principal
stockholders of Getty Realty Corp. with Messrs. Liebowitz and Safenowitz also
serving as directors of Getty Realty Corp. Mr. Liebowitz serves as President and
Chief Executive Officer of Getty Realty Corp. and is a member of the Nominating
Committee of the board of directors of Getty Realty Corp. The Company has
certain lease, service, licensing and tax sharing arrangements with Getty Realty
Corp. and in the last fiscal year the Company received from Getty Realty Corp.
the net amount of $960,000 for management services rendered.
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REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
To Our Stockholders:
This report addresses the Company's compensation policies with respect to
the compensation of the Chief Executive Officer and the other Executive Officers
during fiscal 1998. The Compensation and Stock Option Committee (the
"Compensation Committee") is responsible for setting and administering the
policies which govern the Incentive Compensation Plan, the Retirement Plan, the
Supplemental Retirement Plan, the Stock Option Plans and base salary
compensation and for determining amounts payable thereunder.
Compensation of the Company's Executive Officers (with the exception of
the Chief Executive Officer) is recommended by the Chief Executive Officer to
the Compensation Committee of the Board of Directors, is discussed, reviewed and
approved by the full Board, as is the compensation of the Chief Executive
Officer. The Company's philosophy is that under its total compensation program
the Chief Executive Officer and other executives should: (1) have a greater
portion of compensation at risk than other employees and (2) have a significant
portion of their compensation tied directly to the performance of the business.
To assist it in performing its duties, in 1993 the Compensation Committee
of Getty Petroleum Corp. retained and met with independent compensation
consultants. Said consultants were retained to perform market surveys and
recommend appropriate salary ranges for each officer position. The Compensation
Committee then established competitive salary levels for each Executive Officer.
The salary of the President and Chief Executive Officer was evaluated and
compared with other Chief Executive Officers of similar companies. The Company
follows the guidelines established by the consultants and the Compensation
Committee.
Base Salary
The base salary program is designed to provide each individual with a
salary competitive with salaries paid for similar positions in similar
companies. Besides being able to attract and retain capable people, the Company
will endeavor to ensure that each individual's compensation will be based on the
person's ability, effort and achievement. At the commencement of the Company's
operations in March 1997, the Board of Directors determined that, inasmuch as
Mr. Liebowitz was devoting a substantial amount of his time to Getty Realty
Corp. and the Company intended to retain a new President, Mr. Liebowitz's
compensation would be substantially reduced. In August 1997 Mr. DeLaurentis was
elected President of the Company and Mr. Liebowitz assumed the position of
Chairman.
Annual Incentive Awards
Annual Incentive Awards are provided under the Getty Incentive
Compensation Plan ("ICP"). The purpose of the ICP is to promote the achievement
of the Company's targeted business objectives by providing competitive
incentives to those employees who can impact the Company's performance. The
total amount of cash available for annual ICP awards is approved by the Board of
Directors after evaluating a combination of criteria, and achievement of
specific goals. Awards are based on a combination of Company performance,
business unit performance, and individual performance based on specific
objectives.
The Compensation Committee determined that the incentive compensation of
the Chief Executive Officer and other Executive Officers (shown under the
caption "Bonuses" in the Summary Compensation Table) should be 115% of the
targeted amount each Executive Officer could have received under the ICP for the
fiscal year ended January 31, 1998.
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Stock Options
Stock options are granted to encourage and facilitate personal stock
ownership by the directors, executives and certain other key employees and thus
strengthen their personal commitment to Getty and provide a longer term
perspective to their managerial responsibilities. The stock option portion of
the compensation program directly links the executive's interests with those of
the stockholders. The Compensation Committee's policy is to grant stock option
awards based on individual performance and the potential to contribute to the
future success of the Company. In December 1997 options were awarded to two
Executive Officers and certain key employees and directors. Mr. Liebowitz, who
has not heretofore participated in the Stock Option Plan, did not receive any
option grants during the fiscal year.
On January 28, 1998, the Board of Directors approved a stock option
replacement program, whereby existing non-qualified stock options, which contain
a gross up provision for the payment of federal income and applicable state
income taxes, became fully vested and option holders were afforded the
opportunity to effect a cash-less stock option exercise by surrendering a
sufficient number of options to pay the exercise price for the balance of shares
under a stock option grant. Those who elected to participate received the full
tax gross up on the shares purchased and received replacement options to acquire
additional shares without a tax gross up provision at an exercise price equal to
the then current market price. The Board deemed it in the best interests of the
Company to offer the option replacement program so as to reduce the number of
stock options outstanding which have the tax gross up feature, the existence of
which requires a charge or credit to the Company's earnings based on the change
in the market price of the Company's Common Stock. In order to fully implement
the stock option replacement program, it is necessary to have more shares of
Common Stock authorized for grant. Accordingly, the Compensation Committee
recommended to the Board of Directors that the 1997 Stock Option Plan be amended
so as to (i) authorize an additional 700,000 shares for grant, 229,489 of which
will be used to fully implement the stock option replacement program, and (ii)
permit the issuance of replacement options to former directors, officers and
employees of Getty Petroleum Corp. who presently serve in the same capacities
with Getty Realty Corp.
The Compensation Committee believes that the three components described
above provide compensation that is competitive with that offered by other
corporations, and effectively links executive and stockholder interest through
varied plans that are structured to coincide with the long term vision of Getty.
In 1993, the Internal Revenue Code was amended to add Section 162(m)
denying the federal income tax deduction by publicly held corporations of
compensation in excess of $1 million paid to certain executives and highly
compensated officers during one taxable year. It is the Company's policy to take
this rule into account in setting the compensation of its affected executives.
In addition to salaries and bonuses, compensation income recognized upon the
exercise of stock options may represent compensation subject to the Section
162(m) limitation. Although it is possible that in some future year, some
portion of the compensation paid to a Company executive will not be tax
deductible under Section 162(m), the Compensation Committee believes that
portions of the affected executive's total compensation that are performance
based are excepted from application of Section 162(m). Deductibility will also
depend upon the amount of any bonus paid as an ICP award, upon the market price
of the Company's shares on the date stock options are exercised, and the number
of options exercised by an executive in any one taxable year.
The report of the Compensation Committee shall not be deemed incorporated
by reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933, as amended (the
"Securities Act") or under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), except to the extent that the Company specifically incorporates
this information by reference, and shall not otherwise be deemed filed under
such Acts.
April 30, 1998 Compensation and Stock Option Committee:
Richard E. Montag (Chairman)
Ronald E. Hall
Milton Safenowitz
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CERTAIN TRANSACTIONS
Getty Realty Corp.
As a result of the spinoff, Messrs. Liebowitz and Safenowitz each
beneficially owns approximately the same percentage of the outstanding common
stock of Getty Realty Corp. as he owns of the Company's common stock, without
giving effect to the issuance of 5% of the Company's common stock to the ESOP.
See "Beneficial Ownership of Common Stock." Messrs. Liebowitz and Safenowitz
also serve as directors of Getty Realty Corp., and Mr. Liebowitz serves as Getty
Realty Corp.'s President and Chief Executive Officer.
In connection with the spinoff, Getty Realty Corp., as lessor, and the
Company, as lessee, entered into a Master Lease Agreement (the "Master Lease")
with respect to approximately 1,000 service station and convenience store
properties and 10 distribution terminals and bulk plants owned or leased by
Getty Realty Corp. The initial term of the Master Lease is 15 years (or periods
ranging from one to fifteen years with respect to approximately 400 properties
leased by Getty Realty Corp. from third parties), and generally provides the
Company with four ten-year renewal options (or with respect to such leased
properties, such shorter period as the underlying lease may provide). The Master
Lease is a "triple-net" lease, so the Company is responsible for the cost of all
taxes, maintenance, repair, insurance and other operating expenses. Rent for
each of the properties was set using the fair market value of each such
property, assuming certain environmental conditions for which Getty Realty Corp.
is responsible. For the past fiscal year (commencing on March 21, 1997), the
Company paid net lease payments to Getty Realty Corp. aggregating approximately
$57 million, and estimates that it will pay $56.5 million to Getty Realty Corp.
in the current fiscal year.
The Company and Getty Realty Corp. also entered into a Services Agreement
(the "Services Agreement"), under which the Company provides certain
administrative and technical services to Getty Realty Corp. and Getty Realty
Corp. provides certain limited services to the Company. The Services Agreement
expires in March 1999, except that it may be earlier terminated in whole or in
part by either party upon 120 days' notice. The net fees paid by Getty Realty
Corp. during the past fiscal year to the Company under the Services Agreement
was $960,000. The Company presently expects that most of such services will
continue to be provided by the Company for the remainder of the current fiscal
year.
In addition, the Company and Getty Realty Corp. entered into a Trademark
License Agreement providing for an exclusive, royalty-free license to the
Company of certain Getty(R) trademarks, service marks and trade names (including
the name "Getty") used in connection with the Company's business, within the
territory specified in the Agreement. The term of the Agreement is 55 years, but
in the event that the Master Lease terminates prior thereto, the license will
become non-exclusive and the Company will pay to Getty Realty Corp. certain
customary signage rental and royalty fees.
In connection with the spinoff, the Company and Getty Realty Corp. also
entered into a Tax Sharing Agreement that defined 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 Realty Corp.'s business for tax years prior to and including
the spinoff and with respect to certain tax attributes of Getty Realty Corp.
after the spinoff.
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STOCK PERFORMANCE GRAPH
COMPARATIVE TOTAL RETURNS
FROM APRIL 1, 1997 THROUGH JANUARY 31, 1998*
Getty (GPM), S&P 500, Peer Group
Set forth below is a line graph comparing the percentage change in the
cumulative total shareholder return on the Company's Common Stock against the
cumulative total return of the Standard & Poor's 500 Stock Index and a peer
group for the period from April 1, 1997 through January 31, 1998. The Company
commenced trading as a public company on the New York Stock Exchange on April 1,
1997 and prior thereto had no ascertainable market value.
[GRAPHIC OMITTED]
4/1/97 1998
-------------------------------------------------------
Getty $100.00 $133.76
Standard & Poor's 500 $100.00 $131.44
Peer Group $100.00 $126.73
-------------------------------------------------------
Assumes $100 invested at the open of trading 4/1/97 in Getty common stock,
Standard & Poor's 500, and Peer Group.
*Cumulative total return assumes reinvestment of dividends.
The Company has chosen, as its Peer Group, the following companies: Crown
Central Petroleum Corp., Dairy Mart Convenience Stores, Inc., E-Z Serve Corp.
and FFP Marketing Inc. The Company has chosen the aforementioned companies as
its Peer Group because a substantial segment of each of their businesses is
petroleum marketing and distribution.
The Stock Performance Graph shall not be deemed incorporated by reference
by any general statement incorporating by reference this Proxy Statement into
any filing under the Securities Act or under the Exchange Act, except to the
extent that the Company specifically incorporates this graph by reference, and
shall not otherwise be deemed filed under such Acts.
There can be no assurance that the Company's stock performance will
continue into the future with the same or similar trends depicted in the graph
above. The Company will not make or endorse any predictions as to future stock
performance.
13
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PROPOSAL TO AMEND THE COMPANY'S 1997 STOCK OPTION PLAN
Amendment
The Board of Directors proposes that the 1997 Stock Option Plan (the
"Plan") be amended to increase the number of shares of Common Stock available
for the grant of Options under the Plan from 1,300,000 to 2,000,000 and to
permit the grant of stock options to former directors, officers and employees of
Getty Petroleum Corp. who presently serve as directors, officers and employees
of Getty Realty Corp. A description of the Plan and the proposed amendment is
set forth below and is qualified by reference to the full text of the proposed
amendment which is set forth as Exhibit A to this Proxy Statement and the full
text of the Plan, a copy of which was filed with the SEC as Exhibit 10.6 to the
Company's Registration statement on Form 10/A; File No. 0001-14990.
In December 1996, the Company's sole stockholder approved the Plan. As of
April 22, 1998, the Plan had available a maximum of 42,421 shares remaining for
issuance upon the exercise of stock options thereunder.
On January 28, 1998 the Board of Directors approved a stock option
replacement program, whereby existing non-qualified stock options, which
contained a gross up provision for the payment of federal income and applicable
state income taxes became fully vested and option holders were afforded the
opportunity to effect a cash-less stock option exercise by surrendering a
sufficient number of options to pay the exercise price for the balance of shares
under a stock option grant. Those who elected to participate received the full
tax gross up on the shares purchased and received replacement options to acquire
additional shares without any tax gross up provision with an exercise price at
the then current market price. The Board deemed it in the best interests of the
Company to offer the option replacement program so as to reduce the number of
stock options outstanding which have the tax gross up feature, the existence of
which requires a charge or credit to the Company's earnings based on the change
in the market price of the Company's Common Stock.
Twenty-three option holders elected to participate in the stock option
replacement program, resulting in the grant of replacement options in the
aggregate amount of 229,489 shares. Inasmuch as the number of replacement
options shares exceeds the number of shares available for grant in the Plan, the
Board authorized the amendment of the Plan to permit the issuance of an
additional 700,000 shares. The replacement options granted are conditioned on
the stockholders' approval of the increase and, if approval is not obtained, the
replacement options will be null and void. Furthermore, 75,399 shares subject to
option grants are held by option holders who were directors, officers or
employees of Getty Petroleum Corp. before the spinoff and are now directors,
officers and employees of Getty Realty Corp. The Amendment would permit the
issuance of replacement options to such persons.
The Board of Directors believes that it is in the Company's interest that
stock options continue to comprise a meaningful part of compensation for
officers and employees and that the authorization of additional shares under the
Plan is therefore desirable. Accordingly, the Board of Directors has voted,
subject to stockholders approval, to increase the number of shares available for
option under the Plan by an additional 700,000 shares.
Description
The Plan authorizes the grant to directors, officers and other key
employees of the Company and its subsidiaries of long-term incentive share
awards in the form of options to purchase shares of the Company's Common Stock;
no grants may be made under the Plan after March 21, 2007. All of the directors
and officers and approximately 25 key employees are eligible to receive grants.
The Plan is administered by a committee of three members of the Company's Board
of Directors (the "Compensation Committee"). The purpose of the Plan is to
benefit the Company by giving directors, officers and other key employees of the
Company and its subsidiaries a greater personal interest in the success of the
enterprise.
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Options which qualify as Incentive Stock Options under Section 422(b) of
the Internal Revenue Code of 1986, as amended (the "Code"), as well as Options
which do not qualify for such treatment, may be granted by the Compensation
Committee under the Plan. The Option price per share will in most instances be
at least the fair market value of a share of the Company's Common Stock at the
time the Option is granted, except that the Option price per share for any
Incentive Stock Option granted to any individual who owns stock representing
more than 10% of the voting power of the Company's Common Stock must be at least
110% of the fair market value of the Company's Common Stock at the time such
Incentive Stock Option is granted. However, the Compensation Committee may grant
Non-Qualified Stock Options at a price which is less than the then current
market value of the Company's Common Stock. The maximum number of shares that
may be granted in any fiscal year to any person may not exceed 250,000. Shares
purchased upon exercise of an Option must be paid for in full at the time of
exercise in cash or, if the Compensation Committee so permits, in whole or in
part in shares of the Company's Common Stock valued at their fair market value
at the date of exercise or by the execution by an optionee of a promissory note
for all or a portion of the exercise price on such terms and conditions as the
Compensation Committee may impose. With certain limited exceptions, no Option
granted under the Plan will be exercisable unless, at the time of such exercise,
the optionee is a director or officer of, or in employment with, the Company or
a subsidiary following the grant of such Option. An Option shall become
exercisable at such times and in such installments as the Committee shall
provide in the terms of each individual option. Such installments may be
cumulative. The expiration date of an Option and the manner in which such Option
shall be exercised are determined by the Compensation Committee. With limited
exceptions, no shares acquired upon exercise of any Option by any director or
officer may be sold, assigned or otherwise transferred until at least six months
have elapsed from the date that such Option was granted.
The Compensation Committee may permit the voluntary surrender of all or a
portion of any option granted under the Plan to be conditioned upon the granting
to the recipient of a new Option for the same or a different number of shares as
the Option surrendered, or may require surrender of all or a portion of any
Option granted under the Plan as a condition precedent to a grant of a new
Option to such recipient. Such new Option will be exercisable at the price,
during the period, and in accordance with any other terms or conditions
specified by the Compensation Committee at the time the new Option is granted,
all determined in accordance with the provisions of the Plan without regard to
the price, period of exercise, or any other terms or conditions of the Option
surrendered. Shares subject to outstanding Options that are surrendered will,
upon surrender, no longer be charged against the maximum number of shares
available under the Plan. Such surrender may be desirable if the market value of
the Company's Common Stock has fallen below the exercise price of the
outstanding Options. Through such surrender recipients would be provided with
the new Options at current market values, thereby restoring the incentive nature
of such Options.
The aggregate number of shares of the Company's Common Stock which may be
made the subject of Options pursuant to the Plan shall not exceed 1,300,000
shares (2,000,000 shares if the proposed amendment is adopted) of which options
with respect to 410,389 shares have been granted. The aggregate fair market
value of stock (determined at the time of grant) for which an optionee may
exercise Incentive Stock Options for the first time during any calendar year may
not exceed $100,000. The Plan provides that the Compensation Committee may make
equitable adjustments in the terms of Options and the maximum number of shares
available under the Plan in the event of certain corporate events, such as
reorganizations, mergers or recapitalizations. The Plan may be amended by the
Board of Directors at any time, provided that, without the approval of the
holders of a majority of the Company's Common Stock, no amendment may be made
which (i) increases the maximum number of shares available under the Plan, (ii)
changes the class of directors, officers or employees eligible to receive
Options under the Plan, (iii) reduces the minimum purchase price of such
Options, or (iv) materially increases the benefits accruing to participants
under the Plan. The closing price of the Company's Common Stock on the New York
Stock Exchange on January 31, 1998 was $6.4375.
15
<PAGE>
Federal Income Tax Consequences
The following discussion is a general summary of the material U.S. federal
income tax consequences to U.S. participants in the 1997 Stock Option Plan, and
is intended for general information only. The discussion is based on the Code,
regulations thereunder, rulings and decisions now in effect, all of which are
subject to change. Alternative minimum tax and state and local income taxes are
not discussed, and may vary depending on individual circumstances and from
locality to locality. Depending on the interaction of Section 83(a) of the Code
with the provisions of the Rule 16b-3 under the Exchange Act which apply to the
1997 Stock Option Plan at the time of the grant of options, the tax consequences
to persons subject to Section 16 of the Exchange Act may be different from the
general consequences described below.
Section 162(m). Under Section 162(m) of the Code, income tax deductions of
publicly-traded companies may be limited to the extent total annual compensation
(including base salary, annual bonus, stock option exercises and non-qualified
benefits) paid for certain executive officers exceeds $1 million (less the
amount of any "excess parachute payments" as defined in Section 280G of the
Code) in any one year. However, under Section 162(m), the deduction limit does
not apply to certain "qualified performance-based compensation" established by
an independent compensation committee which is adequately disclosed to, and
approved by, stockholders. In particular, stock options will satisfy the
performance-based exception if the awards are made by a qualifying compensation
committee under a plan that has been approved by the company's stockholders, if
the plan states the maximum number of shares that can be granted to any
particular employee within a specified period and if the compensation is based
solely on an increase in the stock price after the grant date (i.e. the option
exercise price is equal to or greater than the fair market value of the stock
subject to the award on the grant date).
Nonqualified Stock Options ("NQSOs"). For federal income tax purposes, the
recipient of NQSOs granted under the 1997 Stock Option Plan will not have
taxable income upon the grant of the option, nor will the Company then be
entitled to any deduction. Generally, upon exercise of NQSOs the optionee will
realize ordinary income, in an amount equal to the difference between the option
exercise price and the fair market value of the stock at the date of exercise.
Subject to the deductibility limits of Section 162(m), upon exercise of a NQSO
by an employee of the Company or any of its subsidiaries, the Company will be
entitled to a deduction in an amount equal to such difference. An optionee's
basis for the stock for purposes of determining his gain or loss on his
subsequent disposition of the shares generally will be the fair market value of
the stock on the date of exercise of the NQSO.
The tax consequence resulting from the exercise of a NQSO through delivery
of already-owned Company shares are not completely certain. In published
rulings, the IRS has taken the position that, (i) to the extent an equivalent
value of shares is acquired, the optionee will recognize no gain, (ii) the
employee's basis in the stock acquired upon such exercise is equal to the
employee's basis in the surrendered shares, (iii) any additional shares acquired
upon such exercise are compensation to the employee taxable under the rules
described above and (iv) the employee's basis in any such additional shares is
their then-fair market value.
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<PAGE>
Incentive Stock Options ("ISOs"). There is no taxable income to an
optionee when an ISO is granted to him or when that option is exercised;
provided, however, that upon exercise the optionee's alternative minimum taxable
income will generally include an amount equal to the difference between the
option exercise price and the fair market value at the time of exercise. Gain
realized by an optionee upon sale of stock issued on exercise of an ISO is
taxable at capital gains rates, and no tax deduction is available to the
Company, unless the optionee disposes of the shares within two years after the
date of grant of the option or within one year of the date the shares were
transferred to the optionee. In such event, the difference between the option
exercise price and the fair market value of the shares on the date of the
option's exercise will be taxed at ordinary income rates, and, subject to the
deductibility limits of Section 162(m), the Company will be entitled to a
deduction to the extent the employee must recognize ordinary income. An ISO
exercised more than three months after an optionee's retirement from employment,
other than by reason of death or disability, will be taxed as a NQSO, with the
optionee deemed to have received income upon such exercise taxable at ordinary
income rates. Subject to the deductibility limits of Section 162(m), the Company
will be entitled to a tax deduction equal to the ordinary income, if any,
realized by the optionee.
The tax consequences resulting from the exercise of an ISO through
delivery of already-owned shares of Common stock are not completely certain. In
published rulings and proposed regulations, the IRS has taken the position that
generally the employee will recognize no income upon such stock-for-stock
exercise, that, to the extent an equivalent number of shares is acquired, the
employee's basis in the shares acquired upon such exercise is equal to the
employee's basis in the surrendered shares increased by any compensation income
recognized by the employee, that the employee's basis in any additional shares
acquired upon such exercise is zero and that any sale or other disposition of
the acquired shares within the one-or-two-year period described above will be
viewed first as a disposition of the shares with the lowest basis.
Accounting Treatment
Generally, the Company's reported earnings will not be affected by the
grant of Options or the exercise of Options, except in the case where Options
are issued for less than fair market value at the date of grant. Such grants,
however, may impact the calculation of diluted earnings per share, by virtue of
being deemed to have been exercised under certain circumstances.
Approval of Amendment
The affirmative vote of a majority of the votes cast at the meeting by the
holders of the Company's Common Stock is required for approval of the proposed
amendment of the Plan to increase the shares of Common Stock available for the
grant of Options from 1,300,000 to 2,000,000.
The Board of Directors recommends a vote "FOR" the proposed amendment of
the 1997 Stock Option Plan.
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RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Pursuant to the direction of the Board of Directors, on March 24, 1998 the
Audit Committee appointed the firm of Coopers & Lybrand L.L.P., subject to
ratification by the stockholders at the Annual Meeting, to audit the accounts of
the Company with respect to its operations for the fiscal year ending January
31, 1999 and to perform such other services as may be required. Should this firm
of auditors be unable to perform these services for any reason, the Board of
Directors will appoint other independent auditors to perform these services.
Representatives of the firm of Coopers & Lybrand L.L.P., the Company's
principal auditors for the most recently completed fiscal year, are expected to
be present at the Annual Meeting, will have the opportunity to make a statement
if they desire to do so, and will be available to respond to appropriate
questions from stockholders.
The Board of Directors recommends a vote "FOR" the proposal to ratify the
selection of Coopers & Lybrand L.L.P. as the Company's independent public
auditors for the fiscal year ending January 31, 1999.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Pursuant to Section 16(a) of the Securities Exchange Act and the rules
issued thereunder, Getty's Executive Officers and directors are required to file
with the Securities and Exchange Commission and the New York Stock Exchange
reports of ownership and changes in ownership of the Common Stock. Copies of
such reports are required to be furnished to Getty. Based on its review of Form
4's received by it during fiscal 1998 and of Form 5's received by it with
respect to fiscal 1998, Getty believes that during fiscal 1998 all of its
Executive Officers and directors complied with the Section 16(a) requirements.
OTHER MATTERS
Management does not know of any matters, other than those referred to
above, to be presented at the meeting for action by the stockholders. However,
if any other matters are properly brought before the meeting, or any adjournment
or adjournments thereof, it is intended that votes will be cast pursuant to the
proxies with respect to such matters in accordance with the best judgment of the
persons acting under the proxies.
The proxy may be revoked at any time prior to its exercise. Brokerage
houses and other custodians will be requested to forward solicitation material
to beneficial owners of stock held of record by such persons. The Company will
reimburse brokerage houses, banks and custodians for their out-of-pocket
expenses in forwarding proxy material to the beneficial owners. The cost of this
solicitation, which will be effected by mail, will be borne by the Company.
April 30, 1998 By Order of the Board of Directors,
/s/ Samuel M. Jones
Samuel M. Jones
Vice President, General Counsel
and Corporate Secretary
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EXHIBIT A
FIRST AMENDMENT TO THE 1997 STOCK OPTION PLAN OF
GETTY PETROLEUM MARKETING INC.
Getty Petroleum Marketing Inc. (the "Company"), a corporation organized
under the laws of the State of Maryland, by resolution of its Board of Directors
(the "Board") adopted the 1997 Stock Option Plan of Getty Petroleum Marketing
Inc. (the "Plan") on December 12, 1996, effective as of January 31, 1997.
The Company entered into that certain Stock Option Reformation Agreement
by and between the Company and Getty Petroleum Corp., a Delaware corporation
(which after March 31, 1997 became known as Getty Realty Corp.), effective as of
March 21, 1997 which provided, in part, that in connection with the spin-off of
the Company from Getty Petroleum Corp. each then outstanding option to purchase
Getty Petroleum Corp. common stock would be reformed as one option exercisable
with respect to Getty Realty Corp. common stock and one option exercisable with
respect to Company common stock.
On January 28, 1998, the Board approved a stock option replacement program
(the "Option Replacement Program"), whereby individuals who held certain options
exercisable with respect to shares of the Company's common stock under the Plan
that contained a tax gross-up feature were permitted to exercise such options in
exchange for the grant of replacement options exercisable with respect to shares
of the Company's common stock under the Plan that do not contain such a tax
gross-up feature.
In order to effectuate the Option Replacement Program and to amend the
Plan in certain other respects, this Amendment to the Plan has been adopted by a
resolution of the Board of Directors of the Company on January 28, 1998,
effective as of such date. This Amendment to the Plan, together with the Plan,
constitutes the entire Plan as amended to date.
1. The recitals are amended by adding a new paragraph (3) to the end thereof
to read in its entirety as follows:
"(3)To permit certain grants of Options to former officers,
directors and employees of Getty Petroleum Corp., a Delaware corporation
("Getty Petroleum") who were granted Options in connection with the
spin-off of the Company from Getty Petroleum, effective March 21, 1997
(the "Spin-off"), and who presently serve as officers, directors and
employees of Getty Realty Corp., a Maryland corporation ("Getty Realty").
2. Section 1.15 of the Plan is amended by adding the following new sentence
to the end thereof:
"Unless otherwise specifically stated, the term, "Optionee" shall
also include any Realty Optionee."
3. The following new Sections 1.18 and 1.19 are added to the Plan and current
Sections 1.18 through 1.22 are redesignated as Sections 1.20 through 1.24,
respectively.
"Section 1.18--Realty Individual
"Realty Individual" shall mean any former officer, director or
employee of Getty Petroleum who was granted Options in connection with the
Spin-off and who presently serves as an officer, director or employee of
Getty Realty."
"Section 1.19--Realty Optionee
"Realty Optionee" shall mean any Realty Individual who is granted an
Option under the Plan."
4. Section 1.24 (after giving effect to the renumbering of the Sections
described in paragraph 3 above) is amended by adding the following
parenthetical after the word "Optionee" in the first sentence thereof
"(other than a Realty Optionee)" and by deleting the period at the end of
the first sentence therein and replacing it with the following proviso:
"; provided, however, that with respect to any Realty Optionee,
`Termination of Employment' shall mean the time when service by any such
Realty Optionee as an employee of (or as a director of) Getty
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Realty (or any parent corporation or subsidiary corporation of Getty
Realty as defined in Code Sections 424(e) and 424(f), respectively) 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 services as director of) Getty Realty
(or any parent corporation or subsidiary corporation of Getty Realty as
defined in Code Sections 424(e) and 424(f), respectively)."
5. The second sentence of Section 2.1(a) is amended to read in its entirety
as follows:
"The aggregate number of such shares which may be issued upon
exercise of Options shall not exceed 2,000,000."
6. Section 3.1 is amended by adding the following sentence to the end
thereof:
"In addition, any Realty Individual shall be eligible to be granted
Options, except as provided in Section 3.2."
7. Section 3.3(a)(i) is amended to read in its entirety as follows:
"(i) Determine which Directors, Officers, key Employees or Realty
Individuals should be granted Options; and"
8. Section 4.5 is amended by adding the following parenthetical after the
word "Optionee" in the first sentence thereof "(other than a Realty
Optionee)" and by adding the following sentence to the end thereof:
"In consideration of the granting of an Option to a Realty Optionee,
the Realty Optionee shall agree, in the written Stock Option Agreement,
that prior to such grant the Realty Optionee shall have exercised some or
all Options previously granted to such Realty Optionee, or to provide such
other consideration determined by the Committee to be sufficient and
appropriate and which is set forth in the written Stock Option Agreement."
9. Section 4.6(b)(ii) is amended by replacing the word "Employee" with the
word "Optionee."
******
Executed at Jericho, New York, this _______ day of __________, 1998.
GETTY PETROLEUM MARKETING, INC.
By:
--------------------------------------
Officer
I hereby certify that the foregoing Amendment was duly adopted by the
Board of Directors of Getty Petroleum Marketing Inc. on January 28, 1998.
Executed on this _______ day of ______________, 1998.
By:
--------------------------------------
Secretary
I hereby certify that the foregoing Amendment was duly adopted by the
stockholders of Getty Petroleum Marketing Inc. on ______________, 1998.
Executed on this _______ day of ______________, 1998.
By:
--------------------------------------
Secretary
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