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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 9, 2000
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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GETTY PETROLEUM MARKETING INC.
(Name Of Subject Company)
GETTY PETROLEUM MARKETING INC.
(Name Of Person Filing Statement)
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COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title Of Class Of Securities)
374292 10 0
(CUSIP Number Of Class Of Securities)
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LEO LIEBOWITZ
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
GETTY PETROLEUM MARKETING INC.
125 JERICHO TURNPIKE
JERICHO, NEW YORK 11753
(516) 338-6000
(Name, Address And Telephone Number Of Person Authorized To
Receive Notice And Communications On Behalf Of Person(s) Filing Statement)
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COPY TO:
MARC D. BASSEWITZ, ESQ.
LATHAM & WATKINS
233 SOUTH WACKER DRIVE, SUITE 5800
CHICAGO, ILLINOIS 60606
(312) 876-7700
[ ] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
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ITEM 1. SUBJECT COMPANY INFORMATION.
NAME AND ADDRESS. The name of the subject company is Getty Petroleum
Marketing Inc., a corporation organized under the laws of the State of Maryland
(the "Company"), and the address of the principal executive offices of the
Company is 125 Jericho Turnpike, Jericho, New York 11753. The telephone number
of the principal executive offices of the Company is (516) 338-6000.
SECURITIES. The title of the class of equity securities to which this
statement relates is the common stock, par value $0.01 per share, of the Company
(the "Common Stock" or "Shares"). As of November 2, 2000, there were 14,002,866
shares of Common Stock outstanding.
ITEM 2. IDENTITY AND BACKGROUND OF THE FILING PERSON.
NAME AND ADDRESS. The name, business address and business telephone number
of the Company, which is the person filing this Schedule 14D-9, are set forth in
Item 1 above.
TENDER OFFER. This Schedule 14D-9 relates to the offer by Mikecon Corp., a
corporation organized under the laws of the State of Delaware ("Purchaser") and
a wholly owned subsidiary of Lukoil Americas Corporation, a corporation
organized under the laws of the State of Delaware ("Lukoil Americas"), each an
indirect wholly owned subsidiary of OAO LUKOIL, a Russian open joint stock
company ("LUKOIL"), disclosed in a Tender Offer Statement on Schedule TO, dated
November 9, 2000 (the "Schedule TO"), to purchase all of the issued and
outstanding Shares at a price of $5.00 per Share, net to the seller in cash (the
"Offer Price"), upon the terms and subject to the conditions set forth in the
offer to purchase (the "Offer to Purchase"), dated November 9, 2000, and the
related letter of transmittal (the "Letter of Transmittal," which, as may be
amended and supplemented from time to time, together with the Offer to Purchase,
constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of November 2, 2000 (the "Merger Agreement"), by and among the Company,
LUKOIL, Lukoil International GmbH, an Austrian corporation and direct, wholly
owned subsidiary of LUKOIL ("Lukoil International"), Lukoil Americas and
Purchaser, a copy of which is filed as Exhibit (e)(1) hereto and is incorporated
herein by reference. Subject to certain terms and conditions of the Merger
Agreement, Purchaser will be merged with and into the Company (the "Merger") as
soon as practicable after the consummation of the Offer, with the Company being
the surviving corporation in the Merger (the "Surviving Corporation") and
becoming a wholly owned subsidiary of Lukoil Americas.
The Schedule TO states that the address of the principal executive offices
of Lukoil Americas and Purchaser is 540 Madison Avenue, New York, New York
10022.
ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
Except as described or referred to below, there exists on the date hereof
no material agreement, arrangement or understanding and no actual or potential
conflict of interest between the Company or its affiliates and (a) the Company
or its executive officers, directors or affiliates or (b) Lukoil Americas,
Purchaser or their executive officers, directors or affiliates.
Certain contracts, agreements, arrangements and understandings between the
Company and certain of its directors, executive officers and affiliates are
described in the Company's Information Statement in the sections entitled "The
Board of Directors and Its Committees -- Report of the Compensation and Stock
Option Committee" and "Compensation." The Information Statement is attached
hereto as Annex A and incorporated herein by reference. Certain of these
contracts, agreements, arrangements and understandings will be affected by the
Merger, as described below.
In connection with the transactions contemplated by the Merger, the
following agreements were entered into: (a) the Merger Agreement; (b) Support
Agreements dated November 2, 2000 between Lukoil Americas, Purchaser and each of
Leo Liebowitz, Howard Safenowitz, Milton Cooper and certain of their affiliates
or associates (the "Principal Stockholders"); (c) a Consolidated, Amended and
Restated Master
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Lease dated November 2, 2000 between Getty Properties Corp. ("Getty
Properties"), a wholly owned subsidiary of Getty Realty Corp. ("Getty Realty"),
and the Company (the "Amended Master Lease"), (d) an Environmental Indemnity
Agreement dated November 2, 2000 between Getty Properties and the Company (the
"Environmental Indemnity Agreement"), (e) an Amended and Restated Trademark
License Agreement dated November 2, 2000 between Getty Properties and the
Company (the "Amended Trademark License Agreement") and (f) a Trademark License
Agreement dated November 2, 2000 between the Company and Getty TM Corp., a
wholly owned subsidiary of Getty Properties (the "New Trademark License
Agreement"). The Amended Master Lease will become effective two hours prior to
the initial acceptance of Shares for payment pursuant to the Offer. Each of the
documents in (d) through (f) will become effective only upon the initial
acceptance of Shares for payment pursuant to the Offer.
The Merger Agreement. The summary of the material terms of the Merger
Agreement set forth under the caption "Section 11. Purpose of the Offer; Plans
for the Company; Certain Agreements" in the Offer to Purchase is incorporated by
reference herein. The summary of the Merger Agreement contained in the Offer to
Purchase is qualified in its entirety by reference to the Merger Agreement, a
copy of which is filed as Exhibit (e)(1) hereto and is incorporated herein by
reference.
Support Agreements. The following summary is qualified in its entirety by
reference to the complete text of the form of the Support Agreements which is
filed as Exhibit (e)(2) hereto and incorporated herein by reference.
Pursuant to the Support Agreements, the Principal Stockholders have agreed,
subject to certain limitations, to tender all of their Shares, representing
approximately 40% of the issued and outstanding Shares of the Company, to
Purchaser pursuant to the Offer and vote their Shares in favor of the Merger, as
follows: (1) Leo Liebowitz, Chairman of the Board, President and Chief Executive
Officer - 2,222,882 Shares, including 871,637 Shares held in Mr. Liebowitz'
Grantor Retained Annuity Trust (a "GRAT"), 163,740 Shares held by Mr. Liebowitz'
wife, 871,637 Shares held in Mr. Liebowitz' wife's GRAT and 30,724 Shares held
by a charitable foundation; (2) Howard Safenowitz, Director - 2,349,758 Shares,
including 23,479 Shares held as custodian for three minor children, 176,118
Shares held in The Marilyn Safenowitz Irrevocable Trust, 500,000 Shares held by
the Safenowitz Family Partnership, LP and 1,534,601 Shares held by Safenowitz
Equity Partners LP; and (3) Milton Cooper - 1,038,070 Shares, including 160,000
Shares held by a charitable foundation. These stockholders have also granted an
irrevocable proxy to a certain officer of LUKOIL Americas to vote the applicable
Shares in favor of the Merger should a vote on it occur. Each Support Agreement
and each Principal Stockholder's commitment to tender their Shares terminates,
and each respective proxy is terminable, if the Merger Agreement is terminated
in accordance with its terms.
Amended Master Lease. The following summary is qualified in its entirety by
reference to the complete text of the Amended Master Lease Agreement which is
filed as Exhibit (e)(3) hereto and incorporated herein by reference.
In connection with the spinoff of the Company from Getty Petroleum Corp. to
Getty Petroleum Corp.'s stockholders in March 1997 (the "Spinoff"), Getty
Properties (the renamed Getty Petroleum Corp. after the spinoff and now a wholly
owned subsidiary of Getty Realty) and the Company entered into a Master Lease
Agreement (the "Master Lease") with respect to approximately 1,000 service
stations and convenience store properties and 10 distribution terminals and bulk
plants. The initial term of the Master Lease was 15 years (or periods ranging
from one to fifteen years with respect to approximately 400 of such properties
which were leased by Getty Properties from third parties) and generally provided
the Company with four ten-year renewal options (or with respect to such leased
properties, such shorter period as the underlying lease may provide). After the
Spinoff, Getty Properties and the Company also entered into three other master
leases with respect to 28 other sites.
On November 2, 2000, Getty Properties and the Company entered into the
Amended Master Lease, which will become effective two hours prior to the initial
acceptance of Shares for payment pursuant to the Offer. The Amended Master
Lease, which consolidates all four master leases, (1) extends the initial term
to 2015 and reduces the overall term of the Master Lease (including renewal
options) to approximately 49 years, (2) provides for an immediate 4% rent
escalation and an annual 2% escalation thereafter, (3) provides for "all
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or nothing" renewals only, requiring renewals with respect to all properties
(including service station and terminal properties) leased thereunder, (4)
clarifies the definition of closure for purposes of transferring Getty
Properties' environmental responsibilities regarding a site to the Company, (5)
provides the Company with certain rights of first offer on all properties that
Getty Properties owns in fee which Getty Properties desires to sell and first
refusal on a limited number of sold properties, (6) adds provisions to make the
master lease more financeable and (7) provides that Getty Properties will
indemnify the Company for certain pre-existing non-environmental conditions as
follows: the Company will pay the first $250,000 of such costs and expenses, the
Company and Getty Properties will share equally the next $2.75 million of such
costs and expenses, and the Company will pay all additional costs and expenses
over $3 million.
Environmental Indemnity Agreement. The following summary is qualified in
its entirety by reference to the complete text of the Environmental Indemnity
Agreement which is filed as Exhibit (e)(4) hereto and incorporated herein by
reference.
On November 2, 2000, Getty Properties and the Company entered into an
Environmental Indemnity Agreement, which will become effective only upon the
initial acceptance of Shares for payment pursuant to the Offer, providing, among
other things, that Getty Properties will indemnify the Company for certain pre-
existing environmental conditions at terminals owned by Getty Properties. Under
the agreement, the Company will pay the first $1.5 million of costs and expenses
incurred in connection with remediating any of such pre-existing terminal
conditions, the Company and Getty Properties will share equally the next $8.5
million of such costs and expenses and the Company will pay all additional costs
and expenses over $10 million.
Trademark License Agreements. The following summary is qualified in its
entirety by reference to the complete texts of the Amended Trademark License
Agreement and the New Trademark License Agreement which are filed as Exhibits
(e)(5) and (e)(6) hereto and incorporated herein by reference.
In connection with the Spinoff, Getty Properties and the Company 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 13-state territory constituting the Company's marketing
region as specified in the agreement. The term of the agreement was coextensive
with the term of the Master Lease. The Trademark License Agreement also provided
the Company with the option to enter into a nonexclusive license to use such
marks in the other states of the United States, subject to negotiation of a
market royalty.
On November 2, 2000, Getty Properties and the Company entered into the
Amended Trademark License Agreement, which will become effective only upon the
initial acceptance of Shares for payment pursuant to the Offer. Pursuant to the
Amended Trademark License Agreement, the exclusive license continues for 12 of
the 13 states provided in the Trademark License Agreement and is extended to
include use of the marks in Washington, D.C. The option to enter into a
nonexclusive license for use of the marks in other states of the United States
will terminate.
On November 2, 2000, Getty TM Corp. and the Company entered into the New
Trademark License Agreement, which will become effective only upon the initial
acceptance of Shares for payment pursuant to the Offer. In order to effectuate
the New Trademark License Agreement, Getty Properties intends to transfer its
ownership rights relating to use of the marks outside of the 12-state territory
and Washington, D.C. to Getty TM Corp. Pursuant to the New Trademark License
Agreement, the Company is granted an exclusive royalty-free license for West
Virginia and a nonexclusive license for the remaining 37 states outside of the
existing 13-state marketing area at a gallonage-based royalty rate which begins
at 35 basis points per gallon of petroleum product sold and declines as the
number of gallons sold annually increases.
Treatment of Stock Options. The Merger Agreement provides that each
outstanding option to purchase Shares, whether or not vested or exercisable as
of the consummation of the Offer, will be cancelled. In consideration thereof,
upon the consummation of the Offer, Purchaser will pay in cash an amount equal
to the excess, if any, of $5.00 over the exercise price per share of such
option, multiplied by the number of Shares subject to such option. The aggregate
cash value (measured by calculating the difference between $5.00 per
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Share and the weighted average exercise price) for all "in-the-money"
outstanding options held by the Company's directors and executive officers is
approximately $604,000.
Allocation of ESOP Shares. Upon consummation of the Offer or Merger, as
applicable:
- Purchaser will pay the Company's Employee Stock Ownership Plan (the
"ESOP") trust in cash an amount equal to $5.00 per Share times the number
of such Shares; and
- the interests of each participant in the ESOP with respect to allocated
shares as of that date will become fully vested.
On or before the effective date of the Merger, any proceeds from the Offer
related to unallocated Shares will be used to the maximum extent possible to
repay the Company's loan to the ESOP trust. As of the effective date of the
Merger, the Company will forgive any remaining balance outstanding under the
ESOP loan.
Arrangements with Executive Officers and Directors. Certain contracts,
agreements, arrangements and understandings between the Company and its
executive officers and directors are described in the attached Information
Statement under the heading "Compensation -- Other Executive Compensation."
Employee Benefits. The Merger Agreement provides that, following the
effective date of the Merger through December 31, 2001, Purchaser will, or will
cause the Surviving Corporation to, provide all of the employees, as a group, of
the Surviving Corporation and its subsidiaries with employee benefit plans as
are substantially equivalent, in the aggregate, to those currently provided by
the Company's current employee benefits plans. In addition, for each year for
which a payment would have been due by the ESOP trust to the Company but for the
prepayment of the ESOP loan described above, the Purchaser will cause the
Surviving Corporation to make a special profit sharing contribution to the
Company's Retirement and Profit Sharing Plan equal to the amount of such
payment.
Indemnification; Directors' and Officers' Insurance. The Merger Agreement
provides that all rights to indemnification existing in favor of the present or
former officers and directors of the Company or any of its subsidiaries
(collectively, the "Indemnified Parties") as provided in the certificate of
incorporation, by-laws or other similar governing documents of the Company or
any of its subsidiaries, or in other agreements between an Indemnified Party and
the Company or any of its subsidiaries, will survive the Merger and will
continue in effect for six years after the consummation of the Merger.
The Merger Agreement also provides that prior to the acceptance for payment
of Shares pursuant to the Offer, the Company will purchase policies of
directors' and officers' liability insurance and statutory liability insurance
(a) providing at least the same coverage and amounts and containing terms and
conditions which are, in the aggregate, materially no less advantageous to the
insured as those policies currently maintained by the Company on the date of the
Merger Agreement, (b) which will not result in any gaps or lapses in coverage
with respect to matters occurring prior to the date on which the Shares are
accepted for payment pursuant to the Offer, (c) providing coverage for a six (6)
year period after the effective time of the Merger with respect to claims
arising from acts, facts, errors, omissions or events that occurred on or before
the date on which the Shares are accepted for payment pursuant to the Offer, and
(d) so long as the premium to be paid by the Company for such policies does not
exceed 200% of the premium paid for the 12-month period ending February 21,
2001; provided that if such policies cannot be obtained at such cost, the
Company will obtain as much of such policies as can be so obtained at a cost
equal to 200% of the premium paid for the 12-month period ending February 21,
2001.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
SOLICITATION OR RECOMMENDATION. The Company's Board of Directors (the
"Board"), at a special meeting held on November 2, 2000, by the unanimous vote
of the directors, and following review by the Company Special Committee of those
aspects of the transactions that involved Getty Realty:
- determined that each of the Merger Agreement, the Offer and the Merger
are fair to and in the best interests of the Company's stockholders;
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- approved the Merger Agreement and the transactions contemplated thereby,
including the Offer and the Merger; and
- declared the Merger Agreement advisable.
The Board recommends that the Company's stockholders accept the Offer,
tender their Shares pursuant to the Offer and approve the Merger.
A copy of the Company's letter to its stockholders, dated as of November 9,
2000, is filed as Exhibit (a)(1)(D) hereto and is incorporated herein by
reference.
REASONS.
Background. Since the Company was spun off to stockholders in early 1997,
its stock price has fluctuated widely. In early 1999, the Company's senior
management and the Board believed that the Company's stock price did not reflect
the true value of its business and accordingly decided to begin exploring
strategic options for the Company. At that time, the scope of such strategic
options was not focused on a sale of the Company. Rather, the Company sought the
assistance of ING Barings LLC ("ING Barings"), a financial advisor with whom
members of the Board were familiar, to begin contacting third parties that could
be potentially interested in pursuing an investment in or a business combination
with the Company. ING Barings contacted several companies, some of which met
with senior management of the Company. No formal indications of interest
resulted. Among other companies, LUKOIL, a company headquartered in Russia,
indicated that it was not interested in investing in or pursuing a business
combination with the Company at that time.
On June 16, 1999, Lukoil USA Inc., a wholly owned indirect subsidiary of
LUKOIL ("Lukoil USA"), contacted the Company by letter and indicated that, as
the Russian financial crisis had begun to settle, Lukoil USA was now prepared to
indicate its interest in pursuing a controlling investment in or an acquisition
of the Company at a premium to Company's market capitalization, subject to due
diligence. On June 17, 1999, ING Barings presented to the Board, at its regular
quarterly meeting, a summary of potential strategic options for the Company.
After discussions among the Board regarding such options, the Board determined
to have ING Barings solicit proposals for potential financial investors in the
Company. In addition, after careful consideration by the Board and senior
management, the Company decided to pursue discussions with Lukoil USA relating
to an investment in the Company by LUKOIL. The Company and Lukoil USA entered
into a Confidentiality Agreement on July 7, 1999, after which Lukoil USA began a
preliminary business diligence review and held preliminary discussions with the
Company's management. During late July and early August 1999, representatives of
Lukoil USA and the Company discussed the possible terms of an investment in or
business combination transaction with the Company.
On August 16, 1999, at the Company's request, ING Barings began
distributing a confidential information memorandum containing general
information about the Company, including the Company's business, management,
strategy and growth initiatives and historical and projected financial
information, to selected prospective investors.
On August 17 and 18, 1999, the Board held special meetings to continue
discussing strategic options for the Company. With the assistance of ING
Barings, the Board discussed Lukoil USA's proposals and concluded that the
indicated prices and terms of such proposals were insufficient for an
acquisition of all or a controlling interest in the Company. The Board also
considered the fact that it had been advised by Getty Properties that, as the
Company's lessor under the Master Lease, it would seek financial guarantees from
Lukoil USA's parent entity or a third party letter of credit if Lukoil USA were
to acquire a controlling interest in or all of the Company. The Board determined
to have Leo Liebowitz, its Chief Executive Officer and Chairman of the Board,
contact Lukoil USA and communicate that the Company would only be interested in
pursuing a business combination which would result in a majority ownership
position for Lukoil USA if Lukoil USA substantially increased its bid. At the
August 17 and 18 meeting, the Board also initially discussed with legal counsel
the potential desirability of creating a special committee of directors
uninterested in Getty Realty and its subsidiaries, as a potential investment or
business combination may present issues as to which the interests of the Company
and of Getty Realty and its subsidiaries may conflict.
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Mr. Liebowitz subsequently had discussions with representatives of Lukoil
USA in which he expressed the Board's positions. The parties agreed to meet, and
on August 26, 1999, the Company's senior management and its financial and legal
advisors met with representatives of Lukoil USA (including its financial and
legal advisors) to discuss a potential business transaction. Lukoil USA again
expressed that its only interest was in becoming a majority owner of the
Company. After much discussion, the parties were unable to come to an agreement
on price or deal structure. In October 1999, representatives of ING Barings,
Lukoil USA and the Company's legal advisors held further discussions but were
unable to find any basis for agreement.
As a result of the August 16, 1999 confidential information memorandum
distribution, the Company continued discussions with several potential investors
in the Company, two of which performed a limited due diligence review of the
Company's financial matters and business operations. None of those discussions
resulted in formal proposals.
During these discussions with potential investors, the Company also
continued to explore strategic growth opportunities through acquisitions.
Discussions with these companies also included the potential for such parties to
acquire the Company. On October 18, 1999, representatives of the Company met
with representatives of an interested party ("Interested Party A") to
preliminarily discuss whether a transaction could be agreed on between the
Company and Interested Party A. The Company presented a preliminary proposal to
acquire or to be acquired by Interested Party A in a stock-for-stock merger. The
Company, however, ultimately elected in early 2000 not to make a final offer to
acquire Interested Party A given its financial performance and the fact that the
Company's acquisition of Interested Party A would constitute a change of control
under the indenture governing substantial indebtedness of Interested Party A. A
change in control would permit the holders of that indebtedness to demand
repayment of their outstanding debt obligations of Interested Party A.
During the last week of March 2000, the Company was approached by another
interested party ("Interested Party B") that was interested in using the
Company's trade name on certain of its retail stores. While the Board concluded
that the Company should not license its trade name in light of its strategic
option process, the Board directed management to discuss with Interested Party B
a potential acquisition of the Company. Following discussions in the following
days, Interested Party B indicated that it was not interested in pursuing such a
transaction.
On March 22, 2000, the Board met with ING Barings during its regular
quarterly meeting to discuss the current status of its strategic activities. ING
Barings presented a summary of the companies which had expressed an interest in
engaging in a business combination with the Company and the status of
discussions with each company. ING Barings also presented strategic alternatives
for such a business combination, including contacting a few selected potential
purchasers, presenting information about the Company to a larger group of
potential purchasers or publicly announcing the Company's intention to pursue
strategic alternatives. In light of these presentations and the Company's
relatively low stock price, the Board determined that the Company should begin
pursuing a potential sale of the Company.
The Company entered into an agreement with ING Barings on April 5, 2000
engaging ING Barings on an exclusive basis to render financial advisory and
investment banking services to the Company in connection with the possible sale
or merger, tender offer or similar transaction involving all or a substantial
portion of the business, assets or stock of the Company. On the same day, the
Company issued a press release announcing the retention of ING Barings and its
intention to pursue strategic alternatives for the Company.
On April 11, 2000, the Company received a written expression of interest
and purchase proposal, subject to diligence review, from an interested party
("Interested Party C") for a cash purchase of all of the Company's common stock.
On April 13, 2000, the Company and Interested Party C entered into a
confidentiality agreement and Interested Party C commenced its due diligence
review.
On April 18, 2000, Mr. Liebowitz met again with representatives of Lukoil
USA at Lukoil USA's offices to discuss a potential purchase of the Company by
Lukoil USA. No specific terms were discussed. However, the parties agreed to
have their respective financial and legal advisors meet to discuss the potential
structure of such a transaction. On April 20, 2000, representatives of the
companies and their respective legal advisors met
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telephonically to discuss whether Lukoil USA would provide credit support
(including potentially parent company guarantees and/or a letter of credit
covering the lease payments) under the Master Lease. While no transaction
structure or price was discussed, Lukoil USA agreed to consider providing some
form of credit support.
On April 21, 2000, ING Barings, at the Company's request, distributed a
revised confidential information memorandum describing the Company, its business
and certain financial information to prospective purchasers of the Company. The
confidential information memorandum also included a summary of the Master Lease.
The Company expected that potential purchasers may wish to revise certain terms
of the Master Lease, and the Board recognized that Getty Realty would have to
become involved in the sale process to the extent that Master Lease revisions
were requested.
On April 24, 2000, representatives of the Company met with representatives
of Lukoil USA to discuss Lukoil USA's interest in purchasing the Company, and
then met with its financial and legal advisors. On April 28, 2000, the Company
received from Lukoil USA a written preliminary non-binding offer to acquire the
Company at a price of $3.50-$4.00 per Share, subject to due diligence, which set
forth certain terms and conditions of the offer, including Lukoil USA's ability
to negotiate changes to certain terms of the Master Lease. On April 28, 2000,
the closing price of the Company's common stock was $3.375 per Share.
From April through late July 2000, the Company and its financial and legal
advisors continued its discussions with Interested Party C regarding its
proposed purchase of the Company. Interested Party C proposed, among other
items, substantial changes to the Master Lease, financing contingencies and
alternatively a purchase of both the Company and Getty Realty. Despite repeated
discussions between the Company and Interested Party C, the parties were unable
to agree upon a deal structure, terms of the agreement or price.
On May 12, 2000, the Company received a written expression of interest in
acquiring the Company from United Refining Company ("United"), subject to
diligence review and financing arrangements. During June and July, 2000, the
Company met periodically with United to discuss the terms and conditions of a
purchase and United conducted a limited due diligence review of the Company
pursuant to a confidentiality agreement United entered with the Company.
The Company continued its discussions with Lukoil USA, and on June 6, 2000,
ING Barings and the Company presented to Lukoil USA and its financial and legal
advisors a management presentation. On June 7, 2000, ING Barings and the Company
gave Lukoil USA and its financial advisors a tour of several of the Company's
service stations and one of its petroleum terminals. Lukoil USA and its
financial and legal advisors also began a due diligence review of the
information contained in the Company's data room. The Company and Lukoil USA
also discussed certain diligence issues, including Lukoil USA's requested
environmental review of the Company's leased properties, and other terms of the
purchase proposal.
On June 8, 2000, the Company received a written expression of interest from
another interested party ("Interested Party D"). The proposal was highly
conditional and was not accompanied by any financing commitments. After
discussing the terms of the proposal, management of the Company and the Board
informally determined not to pursue a transaction with Interested Party D.
On June 14 and 15, 2000, during a regular quarterly meeting of the Board,
the Board discussed with ING Barings and the Company's legal advisors the status
of its exploration of strategic alternatives and discussions with interested
parties, including Lukoil USA. The Board was advised that Lukoil USA had
increased its indicated offer price to $4.25 to $4.50 per Share, and after
consultation with ING Barings the Board determined to continue discussions with
Lukoil USA. Following consultation with the Company's legal counsel, the Board
also determined that, in view of possible conflicts of interest between the
Company and Getty Realty regarding certain aspects of a potential transaction,
in particular Lukoil USA's requests for revisions to the Master Lease, it was
advisable to form a special committee of the Board comprised of directors who
were not officers or directors of Getty Realty. At the June 14, 2000 meeting,
the Board resolved to form a special committee (the "Company Special
Committee"), consisting of Mr. Matthew Chanin, Mr. Ronald Hall, Mr. Richard
Montag and Mr. Howard Silverman, to review the aspects of any proposed
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transaction which would involve Getty Realty or one or more of the Principal
Stockholders, including the negotiation of amendments to the Master Lease, and
to permit the Company Special Committee to retain special outside counsel.
On June 19, 2000, representatives of Lukoil USA expressed to
representatives of ING Barings Lukoil USA's desire for an agreement with the
Company whereby the Company would agree to forego discussions with other
companies regarding the sale of the Company during Lukoil USA's more extensive
diligence review of the Company, including real estate and environmental
diligence, for a period of 60-90 days. Lukoil USA also requested that the
Company reimburse Lukoil USA for its expenses relating to its diligence and pay
Lukoil USA a fee under certain circumstances, including upon consummation of a
transaction with another prospective purchaser within a specified time period.
The Board held a special telephonic meeting on the afternoon of June 19, 2000 to
discuss whether to consider an exclusive arrangement as well as other terms of
the proposal. The Board asked Lukoil USA, through ING Barings, for an estimate
of the due diligence expenses it would incur. On June 20, 2000, Lukoil USA
supplied the Company with an estimate of due diligence expenses.
On June 28, 2000, the Company Special Committee met with its special
counsel to clarify its role in negotiations with potential acquirors. The
Company Special Committee requested that it be advised with respect to all
aspects of any transaction as to which the Company's and Getty Realty's
interests may conflict, and, in response to a request by the Company Special
Committee, Getty Realty arranged to have separate legal counsel to represent it
in the negotiation of the Amended Master Lease.
During early July 2000, the Board and representatives of senior management
met with ING Barings and the Company's legal advisors to discuss a proposed
exclusivity arrangement between the Company and Lukoil USA and the provisions
regarding expense reimbursement and other terms of Lukoil USA's proposal.
Several discussions were held between senior management (along with its
financial and legal advisors) and Lukoil USA and its financial and legal
advisors concerning the terms of the proposal. Given that the terms of a
purchase by Lukoil USA of the Company would include revisions to the Master
Lease and certain other agreements with Getty Realty, the Board, following
consultation with the Company's legal advisors, determined that prior to signing
any exclusivity agreement with Lukoil USA the Company should obtain from Getty
Realty some indication that Lukoil USA's requested revisions to the Master Lease
could be accomplished. Accordingly, the Board arranged for Mr. Philip Coviello
and Mr. Warren Wintrub, two members of the Getty Realty Board (the "Realty
Special Committee"), to discuss such issues with representatives of Lukoil USA.
Those discussions were commenced on July 21, 2000 and continued on August 2,
2000.
Concurrently, the Company and its advisors continued to discuss the terms
of an exclusivity arrangement with Lukoil USA, including the terms and structure
of a possible transaction.
Following a series of discussions between representatives of the Company
and representatives of Lukoil USA and their respective advisors on August 3,
2000, the Board met by telephone on August 4, 2000. Mr. Liebowitz informed the
Board that Lukoil USA had now proposed a two-step transaction at a cash price of
$5.00 per Share. He then reviewed the status of negotiations regarding certain
other terms and conditions of Lukoil USA's offer, including the requested Master
Lease amendments and the exclusivity arrangement. After discussion, the Board
determined that management should attempt to negotiate certain changes to the
proposed terms of the exclusivity arrangement, now memorialized in the Letter
Agreement described below. During the meeting, ING Barings also advised the
Board of discussions with other interested parties.
On August 8, 2000, after further negotiations, the Company and Lukoil USA
entered into the Letter Agreement providing that, for the period of Lukoil USA's
diligence review of the Company (45 days with an additional period of up to 45
days under certain circumstances), the Company would not engage in discussions
concerning an acquisition proposal with any third party other than with certain
identified acquirors with whom the Company had previously had discussions or
with others if necessary for the Board to comply with duties under applicable
law. The Letter Agreement provided for payment by the Company of a fee to Lukoil
USA of $3 million and reimbursement of Lukoil USA's reasonable documented
out-of-pocket diligence expenses up
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to a maximum of $1.5 million under certain circumstances. The Company and Getty
Realty entered into a letter agreement also dated August 8, 2000 regarding the
proposed revisions to the Master Lease.
After execution of the Letter Agreement, Lukoil USA began an extensive due
diligence review of the Company's operations, including financial information,
business operations, contracts and other items. The Company provided to Lukoil
USA environmental reports in its possession from consultants concerning over 400
of its retail sites, and Lukoil USA retained a consultant to conduct
environmental reviews of the balance of the Company's retail properties and its
terminals. Lukoil USA's representatives were also given access to all of the
Company's and Getty Properties' files concerning the leased retail sites and
terminals. On August 14, 2000, the Company's legal advisors gave to Lukoil USA a
draft of a merger agreement, and from September through November 2, 2000
representatives of the Company, representatives of Lukoil USA and their
respective legal and financial advisors negotiated the terms of the agreement.
On September 22, 2000, pursuant to the Letter Agreement, Lukoil USA extended the
exclusivity period for an additional 45 days.
From August 8 to November 2, 2000, the Company continued to engage in
discussions, as permitted by the terms of the Letter Agreement, with other
potential purchasers of the Company. One such potential purchaser conducted an
extensive due diligence review of the Company; however none of the companies
submitted to the Company a further written expression of interest prior to
November 2, 2000. United and its potential financing source conducted due
diligence regarding the Company for approximately 10 days beginning September
20, 2000. On October 19, 2000, representatives of ING Barings were advised by
representatives of United that it had procured a commitment letter from its
potential financing source. On October 20, 2000, the Company's financial advisor
provided to United a draft of a merger agreement. Despite several discussions
with representatives of United and its financial advisor, United did not provide
a written proposal to the Company nor did it provide the Company or its
representatives with a copy of its financing commitment letter or respond to the
merger agreement draft prior to the execution of the Merger Agreement between
the Company and Lukoil USA.
During October 2000, representatives of the Company conducted extensive
negotiations with representatives of Lukoil USA regarding the merger agreement,
and along with representatives of Getty Properties, the Amended Master Lease and
related documents. The Boards of the Company and Getty Realty were apprised of
all material developments during this time.
On October 30, 2000, the Company Special Committee held a meeting at which
its members reviewed the status of the terms of the Offer, the Merger and the
Merger Agreement as such terms related to Getty Realty or one or more of the
Principal Stockholders. Immediately following the Company Special Committee
meeting, the Board held a special meeting at which all directors were present in
person or by telephone. The Company Special Committee recommended to the Board
to approve those aspects of the Offer, the Merger and the Merger Agreement which
involved Getty Realty or one or more Principal Stockholders. The Board also
received and participated in a presentation by its legal advisors concerning the
Board's statutory obligations in considering the proposed transaction. The terms
of the proposed transaction were reviewed with the Company's management and the
Board received and participated in a presentation by its legal advisors with
respect to the terms of the proposed transaction. The Board also received and
participated in a presentation by ING Barings with respect to the financial
terms of the proposed transaction. At the conclusion of its presentation,
representatives of ING Barings delivered the oral opinion of ING Barings to the
Board that, as of such date, the offer price of $5.00 per Share in cash proposed
to be received in the Offer and the Merger by the stockholders of the Company
pursuant to the Merger Agreement was fair, from a financial point of view, to
the Company's stockholders.
Negotiations then continued among the parties. On November 1, 2000, the
Board was provided a further update on the status of these discussions. Also on
November 1, 2000, the Board of Getty Realty approved the terms of the Amended
Master Lease and related documents, subject to successful negotiation of certain
issues which were resolved during the next day.
On November 2, 2000, the Board held a special meeting at which all
directors were present in person or by telephone. At this meeting, the Board
considered the final terms of the Offer, the Merger and the Merger Agreement.
The Company's legal advisors summarized the final terms of the proposed
transaction. ING
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Barings reconfirmed its oral opinion (which was subsequently delivered in
writing) that, as of such date, the offer price was fair, from a financial point
of view, to the Company's stockholders. After such discussions, the Board by the
unanimous vote of the directors (1) determined that each of the Merger
Agreement, the Offer and the Merger are fair to and in the best interests of the
Company's stockholders; (2) approved the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger; (3) declared the
Merger Agreement advisable; and (4) recommended that the Company's stockholders
accept the Offer, tender their Shares pursuant to the Offer and approve the
Merger.
Following the approval by the Board on November 2, 2000 Mr. Liebowitz
executed the Merger Agreement and delivered it to Lukoil Americas, and Mr. Ralif
Safin, First Vice President of LUKOIL, executed the Merger Agreement on behalf
of LUKOIL and Lukoil International and Mr. Vadim Gluzman, President of Lukoil
Americas and Mikecon Corp., simultaneously delivered an executed copy of the
Merger Agreement to the Company. Each Principal Stockholder executed a Support
Agreement and delivered it to Lukoil Americas, and Mr. Gluzman simultaneously
delivered an executed copy of each Support Agreement to the respective Principal
Stockholder. Getty Properties and the Company executed the Amended Master Lease
and the Environmental Indemnity Agreement; Getty Properties and the Company
executed the Amended Trademark License Agreement; and Getty TM Corp. and the
Company executed the New Trademark License Agreement, each to be effective
generally prior to the initial acceptance of Shares for payment pursuant to the
Offer. The Offer and Merger were publicly announced on November 2, 2000.
Reasons for the Board's Conclusions. In reaching the determination
described above, the Board considered a number of factors including, without
limitation, the following:
- The Company's financial condition, results of operations and business and
strategic objectives, as well as the risks involved in achieving those
objectives;
- Current conditions and trends in the petroleum industry in general and
the gasoline marketing business in particular, and the effect of those
conditions and trends on the Company;
- The significant competition and consolidation in the industry and market
in which the Company operates, the relative size of other participants in
the industry and the available capital and resources of these other
participants as compared to the Company;
- The Company's status as an independent marketer of petroleum products,
without refining capacity, while many of the Company's competitors are
vertically integrated oil companies.
- The current prospects for appreciation of the Company's valuation given
the Company's relatively small market capitalization;
- A review of the possible alternatives to the transactions contemplated by
the Merger Agreement, including the possibilities of securing a
significant investment in the Company to augment its equity
capitalization, continuing to operate the Company as an independent
entity, a strategic acquisition of another company, a strategic merger
with another company in the same industry and a sale or partial sale of
the Company through a merger or by other means, and, in respect of each
alternative, the timing and the likelihood of actually accomplishing the
alternative;
- The results of the efforts undertaken by the Company's management and ING
Barings to solicit indications of interest in making an investment in or
the possible acquisition of the Company from third parties other than
Purchaser, including the receipt or solicitation of an indication of
interest from approximately 67 entities;
- The financial and valuation analyses presented to the Board by ING
Barings, including market prices and financial data relating to other
companies engaged in businesses considered comparable to the Company and
the prices and premiums paid in recent selected acquisitions of companies
engaged in businesses considered comparable to those of the Company;
- The oral opinion of ING Barings, which was later confirmed in a written
opinion, dated November 2, 2000, to the effect that, as of the date of
the opinion, the consideration to be received in the tender offer
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and the merger by the Company's stockholders pursuant to the Merger
Agreement is fair, from a financial point of view, to such stockholders.
The full text of ING Barings' written opinion, which sets forth the
procedures followed, the limitations of the review undertaken and the
assumptions made by ING Barings in rendering the opinion, is attached as
Annex B hereto and incorporated herein by reference. STOCKHOLDERS ARE
URGED TO READ THE OPINION CAREFULLY AND IN ITS ENTIRETY;
- The terms and conditions of the Merger Agreement, including, without
limitation, that the terms of the Merger Agreement will not prevent other
third parties from making proposals to the Company after the execution of
the Merger Agreement, will not prevent the Board from providing
information to and engaging in negotiations with other third parties that
make proposals that (A) a majority of the Board reasonably determines in
good faith (after consultation with ING Barings) that taking such action
would be reasonably likely to lead to the delivery to the Company of a
proposal that is superior to Purchaser's proposal and (B) a majority of
the Board determines in good faith (after consultation with legal
counsel) that it is necessary to take such actions in order to comply
with its fiduciary duties under applicable law, and will permit the
Company, subject to the non-solicitation provisions and the payment of
the termination fee and expense reimbursement discussed under the caption
"Section 11. Purpose of the Offer; Plans for the Company; Certain
Agreements," in the Offer to Purchase to enter into a transaction with
another third party that a majority of the Board determines in good faith
(after consultation with ING Barings) to be superior to the Company and
its stockholders (in their capacity as stockholders) from a financial
point of view (taking into account, among other things, all legal,
financial, regulatory and other aspects of the proposal and identity of
the offeror) as compared to Purchaser's proposal, and which is reasonably
capable of being consummated if the Board reasonably determines in good
faith (after consultation with legal counsel) that it is necessary to
terminate the Merger Agreement and into an agreement to effect the
superior proposal in order to comply with its statutory duties under
applicable law;
- The likelihood that the Merger would be consummated, including LUKOIL's
experience, reputation, financial condition and support and Lukoil USA's
ability to reach an agreement with Getty Properties on certain terms and
conditions of the Master Lease and other documents, as well as the risks
to the Company if the Merger were not consummated;
- The Board's belief that any potential acquiror would desire to reach
agreement with Getty Properties to modify certain provisions of the
Master Lease, and that while agreement had been reached with Lukoil USA,
there could be no assurance that Getty Properties could reach agreement
with any other potential acquirors;
- The structure of the transaction, which provides for all cash
consideration, is not subject to any financing contingency and is
designed, among other things, to result in the holders of the Shares
receiving, at the earliest practicable time, the consideration paid in
the Offer;
- The Company Special Committee's review of the aspects of the Merger which
involved Getty Realty or one or more of the Principal Stockholders,
including the amendments to the Master Lease, and its recommendation to
approve such aspects of the Merger;
- The approval of the transaction by the Principal Stockholders holding 40%
of the issued and outstanding Shares of the Company, as evidenced by the
execution of their respective Support Agreements;
- The Principal Stockholders' obligations under the Support Agreements
terminate upon termination of the Merger Agreement.
- The Company publicly disclosed seven months before the Merger Agreement
was signed that the Company was considering strategic alternatives and,
in the period since the public announcement in April 2000, Lukoil USA
made the most attractive offer;
- The relationship of the Offer price to the historical market prices for
the Shares and to the Company's per Share book value, including the fact
that the Offer represents a 122% premium over the closing
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price of Shares on April 4, 2000, the day before the public announcement
of the Company's intention to pursue strategic alternatives, and a 45%
premium over the closing price of Shares on November 2, 2000; and
- The potential availability to the Company's stockholders of dissenters'
rights in the Merger under applicable law.
In view of the wide variety of factors considered in connection with its
evaluation of the Offer and the Merger, the Board did not find it practicable
to, and did not, quantify or otherwise attempt to assign relative weights to the
specific factors considered in reaching its respective determinations.
INTENT TO TENDER. To the best of the Company's knowledge, all of its
executive officers, directors and affiliates currently intend to tender all
Shares which are held of record or beneficially owned by such persons pursuant
to the Offer, other than Shares, if any, held by such persons which, if
tendered, could cause such person to incur liability under the provisions of
Section 16(b) of the Securities Exchange Act of 1934, as amended.
The Principal Stockholders have entered into the Support Agreements. See
Item 3.
ITEM 5. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED.
ING Barings was engaged to advise the Company in connection with a possible
acquisition of the Company and to undertake an analysis to enable ING Barings to
provide an opinion to the Board for its consideration as to the fairness to the
Company's stockholders, from a financial point of view, of the consideration to
be received by the Company's stockholders in such a transaction. Pursuant to the
terms of their engagement, the Company has agreed to pay ING Barings a fee of
$900,000.
The Company also has agreed to reimburse ING Barings for reasonable
expenses and to indemnify ING Barings and related parties against certain
liabilities, including liabilities under the federal securities laws, arising
out of their engagement. In the ordinary course of business, ING Barings and its
affiliates may actively trade or hold the securities of the Company, Getty
Realty and affiliates of Purchaser for their own accounts or for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities. ING Barings has previously rendered and continues to render
certain investment banking and financial advisory services to the Company and to
Getty Realty and has received customary fees for the rendering of such services.
Neither the Company nor any person acting on its behalf has employed,
retained or compensated any other person to make solicitations or
recommendations to stockholders on its behalf concerning the Offer or the
Merger.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
No transactions in the Shares have been effected during the past 60 days by
the Company or, to the best of the Company's knowledge, by any executive
officer, director, affiliate or subsidiary of the Company, other than a transfer
of 1,534,601 Shares from Safenowitz Partners LP to Safenowitz Equity Partners
LP, each of which is an affiliate of Howard Safenowitz, a director of the
Company.
ITEM 7. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.
SUBJECT COMPANY NEGOTIATIONS. Prior to entering into the Merger Agreement,
the Company had contacts and negotiations with other entities (including United)
that had expressed interest in the Company. Upon execution of the Merger
Agreement, the Company ceased contacts with such other entities.
On November 6, 2000, the Board received an unsolicited written proposal
from a newly formed subsidiary of United ("United Sub"), regarding its interest
in acquiring all of the outstanding common stock of the Company. The proposal
indicated that United Sub was willing and fully prepared to acquire, for $5.75
per Share, all of the outstanding Shares. The proposal further indicated that,
subject to review of any material differences between the draft merger agreement
delivered to United on October 20, 2000 and the terms set
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forth in the Merger Agreement, and subject to the termination of the Merger
Agreement in accordance with its terms, United Sub would be willing to enter
into a merger agreement with the Company containing substantially the same terms
as set forth in the Merger Agreement. In addition, the proposal stated that
United Sub had received a commitment letter from a financial institution in
respect of such a transaction. United Sub's proposal stated that it was subject
to certain other conditions, including completion of Phase I environmental due
diligence and a confirmatory final audit of current assets and liabilities of
the Company.
The Board held a special meeting on the evening of November 6, 2000 at
which the Board determined, after consultation with its legal and financial
advisors, that the proposal from United Sub could result in United Sub making a
Superior Company Proposal. At that meeting, the Board authorized and directed
the officers of the Company, together with its legal and financial advisors, and
subject to compliance with the terms of the Merger Agreement, to seek
clarification of various aspects of the United Sub proposal, particularly with
respect to its conditions, and to furnish information with respect to the
Company and participate in discussions or negotiations with United Sub regarding
its proposal. In accordance with the Merger Agreement, the Company provided
Lukoil Americas with notice of the Company's receipt of United Sub's proposal
and the Board's actions at the November 6 special meeting.
Except as described in the immediately preceding paragraphs, no discussions
are underway or are being undertaken by the Company or any of its subsidiaries,
or any other person in response to the Offer that relate to or would result in a
tender offer or other acquisition of the Company or (1) any extraordinary
transaction, such as a merger, reorganization or liquidation, involving the
Company or any of its subsidiaries, (2) any purchase, sale or transfer of a
material amount of assets of the Company or any of its subsidiaries or (3) any
material change in the present dividend rate or policy, or indebtedness or
capitalization of the Company. Except as described in the immediately preceding
paragraphs, there is no transaction, board resolution, agreement in principle or
signed contract entered into by the Company or any of its subsidiaries, or any
other person in response to the Offer that relates to or would result in a
tender offer or other acquisition of the Company or (1) any extraordinary
transaction, such as a merger, reorganization or liquidation, involving the
Company or any of its subsidiaries, (2) any purchase, sale or transfer of a
material amount of assets of the Company or any of its subsidiaries or (3) any
material change in the present dividend rate or policy, or indebtedness or
capitalization of the Company.
ITEM 8. ADDITIONAL INFORMATION.
OTHER MATERIAL INFORMATION.
Section 14(f) Information Statement. The Information Statement attached as
Annex A hereto is being furnished in connection with the possible designation by
Purchaser, pursuant to the Merger Agreement, of certain persons to be appointed
to the Company's Board other than at a meeting of the Company's stockholders.
Maryland General Corporation Law.
-- Appraisal Rights. No appraisal rights are available under the
Maryland General Corporation Law ("MGCL") in connection with the Offer.
Additionally, no appraisal rights are available under the MGCL in connection
with the Merger provided that the Shares continue to be listed on the New York
Stock Exchange (1) as of the date of the Notice of Merger in the event that
Purchaser holds 90% or more of the Company's outstanding voting stock or (2) as
of the record date for determining stockholders entitled to vote on the Merger
in the event that a meeting of the Company's stockholders is required to approve
the Merger.
In the event that the Shares are delisted from the New York Stock Exchange
and are not relisted on any other national securities exchange or designated as
a national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. as of the record date for
determining stockholders entitled to vote on the Merger, the Company's
stockholders will be entitled to appraisal rights under the MGCL in connection
with the Merger. The preservation and exercise of appraisal rights are
conditioned on strict adherence to the applicable provisions of the MGCL. Each
Company stockholder desiring to exercise appraisal rights should refer to Title
3, Subtitle 2, of the MGCL for a complete statement
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of the rights of an objecting stockholder and the steps which must be followed
in exercising those rights. The following summary of the rights of objecting
stockholders does not purport to be a complete statement of the procedures to be
followed by Company stockholders desiring to exercise their appraisal rights.
Under the MGCL, if a Company stockholder is entitled to demand and receive
payment of the fair value of its Shares instead of receiving the cash
consideration per Share, and wants to receive fair value for its Shares, the
stockholder must:
- within 30 days after giving the Notice of Merger in the case of a merger
when the purchaser owns 90% of the Shares, or before or at the special
meeting of the Company stockholders at which the Merger will be
considered, file with the Company a written objection to the Merger;
- not vote in favor of the Merger; and
- make written demand on the Company within 20 days after the Articles of
Merger evidencing the Merger (the "Articles of Merger") have been
accepted for record by the State Department of Assessments and Taxation
of Maryland (the "SDAT").
Any stockholder who fails to comply with the requirements described above
will be bound by the terms of the Merger.
The Company is required to promptly notify each objecting stockholder in
writing of the date of acceptance of the Articles of Merger for record by the
SDAT, and may send a written offer to each objecting stockholder to pay for its
Shares at what the Company considers to be the fair value of the Shares. Within
50 days after the SDAT accepts the Articles of Merger for record, either the
Company or any objecting stockholder who has not received payment for its Shares
may petition a court of equity in the appropriate county in Maryland for an
appraisal to determine the fair value of the Shares.
The Company does not presently intend to file an appraisal petition and
stockholders seeking to exercise appraisal rights should not assume that the
Company will either file such a petition or initiate any negotiations with
respect to the fair value of any Shares. Accordingly, stockholders who desire to
have their Shares appraised should initiate any petitions necessary for the
perfection of their appraisal rights within the time periods and in the manner
prescribed in the MGCL.
If the court finds that an objecting stockholder is entitled to an
appraisal of its Shares, the court is required to appoint three disinterested
appraisers to determine the fair value of the Shares on terms and conditions the
court determines proper. The appraisers must, within 60 days after appointment
(or such longer period as the court may direct), file with the court and mail to
each party to the proceeding their report stating their conclusion as to the
fair value of the Shares.
"Fair value" is determined as of the close of business on the day of the
stockholders' vote on the Merger or as of the close of business on the day the
Notice of Merger is given in the case of a merger when a purchaser owns 90% of
the Shares and may not include any appreciation or depreciation which directly
or indirectly results from the Merger or from its proposal.
Within 15 days after the filing of the report, any party may object to such
report and request a hearing on it. The court must, upon motion of any party,
enter an order either confirming, modifying or rejecting such report and, if
confirmed or modified, enter judgment for the appraised value of the Shares. If
the appraisers' report is rejected, the court may determine the fair value of
the Shares of the objecting stockholders or may remit the proceeding to the same
or other appraisers. Any judgment entered pursuant to a court proceeding shall
include interest from the date of the special meeting of the Company
stockholders. Costs of the proceeding shall be determined by the court and may
be assessed against the Company or, under certain circumstances, the objecting
stockholder, or both.
At any time after the filing of a petition for appraisal, the court may
require objecting stockholders to submit their certificates evidencing the
Shares to the clerk of the court for notation of the pendency of the appraisal
proceeding.
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A stockholder demanding payment for Shares has no right to receive any
dividends or distributions payable to stockholders of record after the close of
business on the date of the stockholders' vote on the Merger or on the date the
Notice of Merger is given in the case of a merger when a purchaser owns 90% of
the Shares, and shall cease to have any rights as a Company stockholder with
respect to such Shares except the right to receive payment of the fair value
thereof.
-- Control Share Acquisitions. The MGCL provides that "control shares"
of a Maryland corporation acquired in a "control share acquisition" have no
voting rights except to the extent approved by a vote of two-thirds of the votes
entitled to be cast on the matter, excluding shares of stock owned by the
acquiror, by officers or by directors who are employees of the corporation.
"Control Shares" are voting shares of stock which, if aggregated with all other
such shares of stock previously acquired by the acquiror or in respect of which
the acquiror is able to exercise or direct the exercise of voting power (except
solely by virtue of a revocable proxy), would entitle the acquiror to exercise
voting power in electing directors within one of the following ranges of voting
power: (1) one-tenth or more but less than one-third, (2) one-third or more but
less than a majority, or (3) a majority or more of all voting power. Control
shares do not include shares the acquiring person is then entitled to vote as a
result of having previously obtained stockholder approval. A "control share
acquisition" means the acquisition of control shares, subject to certain
exceptions.
A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses),
may compel the board of directors of the corporation to call a special meeting
of stockholders to be held within 50 days of demand to consider the voting
rights of the shares. If no request for a meeting is made, the corporation may
itself present the question at any stockholders meeting.
If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute, then,
subject to certain conditions and limitations, the corporation may redeem any or
all of the control shares (except those for which voting rights have previously
been approved) for fair value determined, without regard to the absence of
voting rights for the control shares, as of the date of the last control share
acquisition by the acquiror or of any meeting of stockholders at which the
voting rights of such shares are considered and not approved. If voting rights
for control shares are approved at a stockholders meeting and the acquiror
becomes entitled to vote a majority of the shares entitled to vote, all other
stockholders may exercise appraisal rights. The fair value of the shares as
determined for purposes of such appraisal rights may not be less than the
highest price per share paid by the acquiror in the control share acquisition.
The control share acquisition statute does not apply to the Merger because
the Company has opted out of such statute pursuant to the Company's bylaws.
-- Business Combinations. Under Maryland law, "business combinations"
between a Maryland corporation and an interested stockholder or an affiliate of
an interested stockholder are prohibited for five years after the most recent
date on which the interested stockholder becomes an interested stockholder.
These business combinations include a merger, consolidation, share exchange, or,
in circumstances specified in the statute, an asset transfer or issuance or
reclassification of equity securities. An "interested stockholder" is defined
as:
- any person who beneficially owns ten percent or more of the voting power
of the corporation's shares after the date on which the corporation had
100 or more beneficial owners of its stock; or
- an affiliate or associate of the corporation who, at any time within the
two-year period prior to the date in question and after the date on which
the corporation had 100 or more beneficial owners of its stock, was the
beneficial owner of ten percent or more of the voting power of the then
outstanding voting stock of the corporation.
A person is not an interested stockholder under the statute if the board of
directors approved in advance the transaction by which he otherwise would have
become an interested stockholder.
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After the five-year prohibition, any business combination between the
Maryland corporation and an interested stockholder generally must be recommended
by the board of directors of the corporation and approved by the affirmative
vote of at least:
- eighty percent of the votes entitled to be cast by holders of outstanding
shares of voting stock of the corporation; and
- 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
or held by an affiliate or associate of the interested stockholder.
These super-majority vote requirements do not apply if the corporation's
common stockholders receive a minimum price, as defined under Maryland law, for
their shares in the form of cash or other consideration in the same form as
previously paid by the interested stockholder for its shares.
The statute permits various exemptions from its provisions, including
business combinations that are exempted by the board of directors prior to the
time that the interested stockholder becomes an interested stockholder.
The Board has (1) approved and exempted the Merger from the business
combination provisions of the MGCL and (2) exempted any business combination
between the Company and any person who becomes an interested stockholder of the
Company as a result of the Offer or the Merger from the provisions of the MGCL.
United States Antitrust Compliance. Under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") and the rules that have
been promulgated thereunder by the Federal Trade Commission (the "FTC"), certain
acquisition transactions may not be consummated unless certain information has
been furnished to the Antitrust Division of the Department of Justice (the
"Antitrust Division") and the FTC and certain waiting period requirements have
been satisfied. The purchase of Shares pursuant to the Offer is subject to such
requirements.
Pursuant to the requirements of the HSR Act, Purchaser filed a Notification
and Report Form with respect to the Offer and Merger with the Antitrust Division
and the FTC on November 6, 2000. The initial waiting period applicable to the
purchase of Shares pursuant to the Offer will expire at 11:59 p.m., New York
City time, on November 21, 2000, which is the fifteenth calendar day following
filing of the Notification and Report Form by Purchaser. However, prior to such
time, the Antitrust Division or the FTC may extend the waiting period by
requesting additional information or documentary material relevant to the Offer
from Purchaser. If such a request is made, the waiting period will be extended
until 11:59 p.m., New York City time, on the tenth day after substantial
compliance by Purchaser with such request. Only one extension of the waiting
period pursuant to a request for additional information or documentary material
is authorized by the rules promulgated under the HSR Act. Thereafter, such
waiting period can be extended only by court order or by consent of Purchaser.
The Antitrust Division and the FTC scrutinize the legality under the
antitrust laws of transactions such as the acquisition of Shares by Purchaser
pursuant to the Offer. At any time before or after the consummation of any such
transactions, the Antitrust Division or the FTC could take such action under the
antitrust laws of the United States as it deems necessary or desirable in the
public interest, including seeking to enjoin the purchase of Shares pursuant to
the Offer or seeking divestiture of the Shares so acquired or divestiture of
substantial assets of Lukoil Americas or the Company. Under certain
circumstances, Lukoil Americas may not be required to proceed with the Offer if
divestiture of substantial assets of Lukoil Americas or the Company would
materially harm the business of such entities. Private parties (including
individual States) may also bring legal actions under the antitrust laws of the
United States. Purchaser does not believe that the consummation of the Offer
would violate any applicable antitrust laws. However, there can be no assurance
that a challenge to the Offer on antitrust grounds will not be made, or if such
a challenge is made, what the result will be.
16
<PAGE> 18
Legal Representation of the Company and Getty Realty. Both the Company and
Getty Realty have retained the law firm of Latham & Watkins with respect to
certain aspects of the transactions described in this document. Latham & Watkins
has sought and obtained from the Company and Getty Realty the appropriate
waivers of potential conflicts of interests. Latham & Watkins has also
established and enforced a customary ethical wall to ensure that no confidential
information belonging to one party will be disclosed to or used for the benefit
of the other party. Philip E. Coviello, a director of Getty Realty, is a partner
of Latham & Watkins.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C>
(a)(1)(A) Offer to Purchase dated November 9, 2000 ("Offer to
Purchase") (incorporated herein by reference to Exhibit
(a)(1)(i) to Schedule TO filed by Purchaser with respect to
the Company on November 9, 2000 ("Schedule TO")).
(a)(1)(B) Letter of Transmittal (incorporated herein by reference to
Exhibit (a)(1)(ii) to Schedule TO).
(a)(1)(C) Information Statement Pursuant to Section 14(f) of the
Securities Exchange Act of 1934 and Rule 14f-1 thereunder
(incorporated by reference herein and attached hereto as
Annex A).
(a)(1)(D) Letter to Stockholders of the Company dated November 9, 2000
(incorporated by reference herein and attached hereto as
Annex C).
(a)(1)(E) Fairness Opinion of ING Barings LLC dated November 2, 2000
(incorporated by reference herein and attached hereto as
Annex B).
(a)(5) Text of Press Release dated November 2, 2000.
(e)(1) Agreement and Plan of Merger, dated as of November 2, 2000,
by and among LUKOIL, Lukoil International, Lukoil Americas,
Purchaser and the Company.
(e)(2) Form of Support Agreement, dated November 2, 2000, between
Lukoil Americas, Purchaser and each of Leo Liebowitz, Howard
Safenowitz, Milton Cooper and certain of their affiliates or
associates.
(e)(3) Consolidated, Amended and Restated Master Lease, dated
November 2, 2000, between Getty Properties and the Company.
(e)(4) Environmental Indemnity Agreement dated November 2, 2000,
between Getty Properties and the Company.
(e)(5) Amended and Restated Trademark License Agreement, dated
November 2, 2000, between Getty Properties and the Company.
(e)(6) Trademark License Agreement, dated November 2, 2000, between
Getty TM Corp. and the Company.
</TABLE>
17
<PAGE> 19
SIGNATURE
After due inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
Dated: November 9, 2000
GETTY PETROLEUM MARKETING INC.
By: /s/ LEO LIEBOWITZ
------------------------------------
Leo Liebowitz
Chairman and Chief Executive Officer
18
<PAGE> 20
ANNEX A
GETTY PETROLEUM MARKETING INC.
125 JERICHO TURNPIKE
JERICHO, NEW YORK 11753
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about November 9, 2000, as
part of the Company's Solicitation/Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9"). Capitalized terms used and not otherwise defined herein
shall have the meaning ascribed to them in the Schedule 14D-9. You are receiving
this Information Statement in connection with the possible election of persons
designated by Purchaser to at least a majority of the seats on the Board. The
Merger Agreement requires the Company, after the purchase by Purchaser pursuant
to the Offer of such number of Shares representing not less than a majority of
the outstanding Shares on a fully diluted basis, to cause Purchaser's designees
(the "Designees") to be elected to at least a majority of the seats on the Board
as set forth below. This Information Statement is required by Section 14(f) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule
14f-1 thereunder. You are urged to read this Information Statement carefully.
However, you are not required to take any action.
Pursuant to the Merger Agreement, on November 9, 2000, Lukoil Americas and
Purchaser commenced the Offer. The Offer is scheduled to expire on December 8,
2000.
The information contained in this Information Statement (including
information listed in Schedule I to the Offer to Purchase) concerning LUKOIL,
Lukoil International, Lukoil Americas, Purchaser and the Designees has been
furnished to the Company by Lukoil Americas and Purchaser, and the Company
assumes no responsibility for the accuracy or completeness of such information.
VOTING SECURITIES
The common stock of the Company, par value $0.01 per share (the "Shares"),
is the only class of voting securities of the Company outstanding. Each Share
has one vote. As of November 2, 2000, there were 14,002,866 Shares outstanding.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth the beneficial ownership of Shares based on
beneficial ownership as of November 1, 2000, of (1) each person who is a
beneficial owner of more than five percent (5%) of the Shares, (2) each director
of the Company, (3) the Named Executive Officers (as such term is defined below
under the caption "Summary Compensation Table"), and (4) all directors and
executive officers as a group. The "Shares of Common Stock Beneficially Owned"
column includes Shares as to which voting power and/or investment power may be
acquired within sixty (60) days (such as upon exercise of outstanding stock
options) because such Shares are deemed to be beneficially owned under the rules
of the Securities and Exchange Commission.
A-1
<PAGE> 21
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK PERCENT OF
NAME BENEFICIALLY OWNED CLASS (1)
---- ---------------------- ----------
<S> <C> <C>
Matthew J. Chanin (2)....................................... 17,140 *
Director
Ronald E. Hall (3).......................................... 14,125 *
Director
Leo Liebowitz (4)........................................... 2,236,491 15.97
Director, Chairman and Chief Executive Officer
c/o Getty Petroleum Marketing Inc.
125 Jericho Turnpike
Jericho, New York 11753
Richard E. Montag (5)....................................... 40,887 *
Director
Howard Safenowitz (6)....................................... 2,371,281 16.92
Director
c/o Getty Petroleum Marketing Inc.
125 Jericho Turnpike
Jericho, New York 11753
Howard Silverman (7)........................................ 39,400 *
Director
Vincent J. DeLaurentis (8).................................. 92,581 *
President and Chief Operating Officer
A.R. Charnes (9)............................................ 54,877 *
Vice President of Marketing
Michael K. Hantman (10)..................................... 88,202 *
Vice President and Corporate Controller
Samuel M. Jones (11)........................................ 89,456 *
Vice President, General Counsel and Secretary
Directors and Executive Officers as a group (10 persons).... 5,044,440 36.02
Milton Cooper............................................... 1,038,070 7.41
c/o Kimco Realty Corporation
3333 New Hyde Park Road
Suite 100
New Hyde Park, New York 11042
Safenowitz Equity Partners LP (12).......................... 1,534,601 10.63
c/o Howard Safenowitz, President
Safenowitz Family Corp., General Partner
c/o Getty Petroleum Marketing Inc.
125 Jericho Turnpike
Jericho, New York 11753
Dimensional Fund Advisors Inc. (13)......................... 967,906 6.93
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
</TABLE>
-------------------------
* 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 each such
person may acquire within 60 days.
(2) Includes 7,500 Shares subject to options that are presently exercisable or
will become exercisable within 60 days.
(3) Includes 7,500 Shares subject to options that are presently exercisable or
will become exercisable within 60 days.
A-2
<PAGE> 22
(4) Includes 5,551 Shares held in the ESOP, 8,258 Shares held in the Company's
and Getty Realty's retirement plans, 871,637 Shares held in Mr. Liebowitz's
GRAT, 163,740 Shares held by Mr. Liebowitz' wife and 871,637 Shares held in
Mr. Liebowitz' wife's GRAT, each as to which he disclaims beneficial
ownership, and 30,724 Shares held by a charitable foundation.
(5) Includes 10,190 Shares held by Mr. Montag's wife as to which he disclaims
beneficial ownership, 10,100 Shares held jointly with his wife and 7,500
Shares subject to options that are presently exercisable or will become
exercisable within 60 days.
(6) Includes 23,479 Shares held as custodian for three minor children, 11,523
Shares held by Mr. Safenowitz' wife as to which he disclaims beneficial
ownership, 176,118 Shares in The Marilyn Safenowitz Irrevocable Trust of
which he is Co-Trustee and as to which he disclaims beneficial ownership,
500,000 Shares held by the Safenowitz Family Partnership, LP and 1,534,601
Shares held by Safenowitz Equity Partners LP (collectively, the "Limited
Partnerships") and 10,000 Shares subject to options that are presently
exercisable or will become exercisable within 60 days. Mr. Safenowitz is
the President of Safenowitz Family Corp., the General Partner of the
Limited Partnerships, and he disclaims beneficial ownership of the Shares
held by the Limited Partnerships except to the extent of his pecuniary
interest therein.
(7) Includes 23,400 Shares held by his wife as to which he disclaims beneficial
ownership and 10,000 Shares subject to options that are presently
exercisable or will become exercisable within 60 days.
(8) Includes 1,607 Shares held by Mr. DeLaurentis' wife as to which he
disclaims beneficial ownership, 2,865 Shares held in the ESOP, 8,069 Shares
held in the Company's Deferred 401(k) Savings Plan Provisions (the "401(k)
Plan"), and 75,000 Shares subject to options that are presently exercisable
or will become exercisable within 60 days.
(9) Includes 5,435 Shares held in the ESOP, 25,734 Shares held in the 401(k)
Plan, and 22,500 Shares subject to options that are presently exercisable
or will become exercisable within 60 days.
(10) Includes 5,698 Shares held in the ESOP, 6,658 Shares held in the 401(k)
Plan, and 72,500 Shares subject to options that are presently exercisable
or will become exercisable within 60 days.
(11) Includes 5,698 Shares held in the ESOP, and 76,500 Shares subject to
options that are presently exercisable or will become exercisable within 60
days.
(12) These Shares are also included in the total number of Shares attributable
to Howard Safenowitz as set forth in the table above and further described
in Note 6.
(13) Based on a copy of an Amendment to Schedule 13G filed with the SEC and
received by the Company on February 11, 2000. The Company has not attempted
to independently verify the accuracy of the statements set forth in such
Schedule.
CHANGE IN CONTROL
The consummation of the Offer and the Merger pursuant to the terms of the
Merger Agreement mentioned herein would result in a change in control of the
Company.
DIRECTORS AND EXECUTIVE OFFICERS
GENERAL
The Board is currently comprised of six members. Pursuant to the Company's
Bylaws (the "Bylaws"), directors are elected annually. All directors of the
Company hold office until the election and qualification of their successors.
DESIGNEES
Pursuant to the Merger Agreement, promptly upon the acceptance for payment
of, and payment by Purchaser in accordance with the Offer for, Shares
representing not less than a majority of the outstanding
A-3
<PAGE> 23
Shares pursuant to the Offer, Purchaser is entitled to designate the number of
members of the Board such that its percentage of designees on the Board equals
the percentage of Shares it beneficially owns (rounded up to the nearest whole
number); provided, however, that until the effective date of the Merger, there
shall be at least two directors of the Company who are directors of the Company
as of November 2, 2000 and are Independent, as defined in the Merger Agreement.
Upon the request of Purchaser, the Company shall promptly either increase the
size of the Board or use its reasonable best efforts to secure the resignations
of such number of its incumbent directors as is necessary to enable the
Designees to be so elected to the Board.
Purchaser has informed the Company that it will choose the Designees from
the directors and executive officers of Lukoil Americas and Purchaser listed in
Schedule I to the Offer to Purchase. Lukoil Americas and Purchaser have informed
the Company that each of the directors and executive officers listed in Schedule
I has consented to act as a director, if so designated. The information on such
Schedule I is incorporated herein by reference. The business address of Lukoil
Americas and Purchaser is 540 Madison Avenue, New York, New York 10055.
It is expected that the Designees may assume office at any time following
the purchase by Purchaser pursuant to the Offer of such number of Shares
representing not less than a majority of the outstanding Shares, which purchase
cannot be earlier than December 8, 2000, and that upon assuming office, the
Designees will thereafter constitute at least a majority of the Board.
DIRECTORS OF THE COMPANY
Set forth below, for each director of the Company, is information regarding
their age as of November 7, 2000, position(s) with the Company, the period they
have served as a director, any family relationship with any other director or
executive officer of the Company, the directorships currently held by them in
corporations whose shares are publicly registered and their principal
occupations and employment during the past five years.
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR SINCE
---- --- -------- --------------
<S> <C> <C> <C>
Matthew J. Chanin.................. 46 Senior Managing Director of December 1996
Prudential Capital Group since
December 1995. Prior thereto, Mr.
Chanin held senior investment
positions with Prudential Insurance
Company of America for more than
five years.
Ronald E. Hall..................... 68 Director and former Chairman of the December 1996
Board of Howell Corp. since 1996.
Prior thereto, Mr. Hall was
President and Chief Executive
Officer of CITGO Petroleum Corp.
for more than five years.
Leo Liebowitz...................... 73 Chairman and Chief Executive May 1971
Officer of the Company. President
and Chief Executive Officer of
Getty Realty.
Richard E. Montag.................. 68 Real Estate Investment Consultant. December 1996
Formerly Vice President of Real
Estate Development, The Richard E.
Jacobs Group, for more than five
years until 1998.
</TABLE>
A-4
<PAGE> 24
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR SINCE
---- --- -------- --------------
<S> <C> <C> <C>
Howard Safenowitz.................. 41 Vice President, Business Affairs, December 1998
Walt Disney Pictures and
Television, and prior thereto an
attorney for Walt Disney Company
for more than five years. Director
of Getty Realty since December
1998.
Howard Silverman................... 65 Co-Chairman, First Capital June 1999
Ventures. Formerly Chairman,
President and Chief Executive
Officer of Gruntal & Co., L.L.C.
for more than five years until
1995.
</TABLE>
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below, for each officer of the Company, is information regarding
their age as of November 7, 2000, position(s) with the Company, the period they
have served as an officer and any family relationship with any other director or
executive officer of the Company.
<TABLE>
<CAPTION>
OFFICER
NAME AGE POSITION SINCE
---- --- -------- -------
<S> <C> <C> <C>
Leo Liebowitz.......................... 73 Chairman of the Board, Chief Executive 1997
Officer and Director.
Vincent J. DeLaurentis................. 49 President and Chief Operating Officer. 1997
A.R. Charnes........................... 56 Vice President of Marketing. 1998
Michael K. Hantman..................... 48 Vice President and Corporate 1997
Controller.
Samuel M. Jones........................ 63 Vice President, Corporate Secretary and 1997
General Counsel.
</TABLE>
Mr. Liebowitz has been Chairman and Chief Executive Officer and a director
of the Company since March 21, 1997, the date of the Spinoff. He is also a
President and Chief Executive Officer and a director of Getty Realty, which
positions he has held since 1971. He is also a director of the Regional Banking
Advisory Board of Chase Banking Corp.
Mr. DeLaurentis joined the Company as President in August 1997 and assumed
the additional position of Chief Operating Officer in June 1998. Prior thereto,
Mr. DeLaurentis had been President of Interactive Marketing Ventures, a
Safeguard Scientifics partnership company. Until 1996, he was the Vice President
and General Manager of Sunoco's Northeast Marketing Region for Sun Company, Inc.
During his eight years there, he served in various management roles including
Vice President of Marketing, A plus Franchise Manager and Division Manager. His
prior experience was with Atlantic Refining and Marketing and ARCO.
Mr. Charnes has been Vice President of Marketing of the Company since
September 1998. Prior thereto, he was General Manager of Marketing since
February 1998. He joined Getty Realty in 1988 as a Regional Manager and
continued in this capacity for the Company effective with the March 21, 1997
Spinoff. Prior to joining Getty Realty, he held various management positions
with Marathon Oil Company, which he joined in 1966.
Mr. Hantman has been Vice President and Corporate Controller of the Company
since March 21, 1997, the date of the Spinoff. Prior thereto, he was Vice
President and Corporate Controller of Getty Realty. He joined Getty Realty in
1985 as Corporate Controller. Prior to joining Getty Realty, he was a Principal
of Arthur Young & Company, an international accounting firm.
Mr. Jones has been Vice President, Corporate Secretary and General Counsel
of the Company since March 21, 1997, the date of the Spinoff. Prior thereto, he
was Vice President, Corporate Secretary and
A-5
<PAGE> 25
General Counsel of Getty Realty. He joined Getty Realty in 1986 as Vice
President and General Counsel and assumed the additional position of corporate
secretary in 1994. Prior to joining Getty Realty, he was a Senior Attorney with
Texaco Inc.
Management is not aware of any family relationships among any of the
executive officers.
CERTAIN TRANSACTIONS
As a result of the Spinoff, Mr. Liebowitz beneficially owns approximately
the same percentage of the outstanding common stock of Getty Realty
(approximately 17%) 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." Mr. Liebowitz serves as a director of
Getty Realty and is Getty Realty's President and Chief Executive Officer. Mr.
Howard Safenowitz and members of his family, together with the two Limited
Partnerships, in the aggregate beneficially own approximately 17% of the common
stock of Getty Realty. Mr. Safenowitz is also a director of Getty Realty. On
November 2, 2000, Mr. Liebowitz, Mr. Safenowitz, one other stockholder and
certain of their affiliates each entered into a Support Agreement with LUKOIL
Americas and Purchaser, as described in Item 3 of the Schedule 14D-9.
In connection with the Spinoff, Getty Properties and the Company entered
into a Reorganization and Distribution Agreement (the "Distribution Agreement")
which provided for customary division of liabilities arising after the Spinoff
and mutual indemnification of Getty Properties and the Company by the other with
respect to post-Spinoff liabilities of one party which are the responsibility of
the other party pursuant to the Distribution Agreement. Since the date of the
Distribution Agreement and the Spinoff, Getty Properties (and its parent
corporation, Getty Realty) and the Company have been named as parties in various
legal actions for which they have rights of indemnification under the
Distribution Agreement.
In connection with the Spinoff, Getty Properties, as lessor, and the
Company, as lessee, entered into the Master Lease with respect to approximately
1,000 service station and convenience store properties and 10 distribution
terminals and bulk plants. The initial term of the Master Lease was 15 years (or
periods ranging from one to fifteen years with respect to approximately 400
properties leased by Getty Properties from third parties), and generally
provided 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, together with those other master leases entered into by Getty
Properties and the Company after the Spinoff, were consolidated, amended and
restated on November 2, 2000 as described in Item 3 of the Schedule 14D-9. For
the fiscal year ended on January 31, 2000, the Company paid net lease payments
to Getty Properties aggregating approximately $56.4 million, and the Company
estimates that it will pay approximately $56.0 million to Getty Properties in
the current fiscal year.
In connection with the Spinoff, Getty Properties and the Company entered
into a Services Agreement (the "Services Agreement"), under which the Company
provides certain administrative and technical services to Getty Properties and
Getty Properties provides certain services to the Company. The Services
Agreement, which was amended in June 1999, is terminable in whole or in part
either by the Company or by Getty Properties on 30 days' notice. The net fees
paid by Getty Properties during the fiscal year ended on January 31, 2000 to the
Company under the Services Agreement were $749,000, and Getty Properties has
paid approximately $53,000 per month to the Company in the current fiscal year.
The Company presently expects that many of these services will continue to be
provided for the remainder of the current fiscal year.
In addition, at the time of the Spinoff, Getty Properties and the Company
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
Trademark License Agreement was amended and restated and a new Trademark License
Agreement was entered into by Getty TM Corp. and the Company on November 2,
2000, as described in Item 3 of the Schedule 14D-9.
A-6
<PAGE> 26
Getty Properties and the Company also entered into a Tax Sharing Agreement
at the time of the Spinoff 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 our business
for tax years prior to and including March 21, 1997 and with respect to certain
tax attributes of the Company after that date.
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, the Company'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 Company's Common
Stock. Copies of these reports are required to be furnished to us. Based on our
review of Forms 3 and 4 received by us during fiscal 2000 and of Forms 5
received by us with respect to fiscal 2000, we believe that during fiscal 2000
all of our executive officers and directors complied with the Section 16(a)
requirements.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
MEETINGS
During the fiscal year ended January 31, 2000, the Board held four regular
meetings and four special meetings. Each director who served as a director
during the fiscal year attended all of the meetings of the Board and of the
Committees of the Board on which the director served.
COMMITTEES
The Board has 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, Hall
and Silverman, met one time last fiscal year. The Committee selects the firm of
independent public accountants which audits the consolidated financial
statements of the Company and its subsidiaries, discusses the scope and the
results of the audit with the accountants and discusses the Company's financial
accounting and reporting principles. The Committee also examines the summary
reports of the internal auditor and discusses the adequacy of the Company's
financial controls with the accountants and with management.
The Nominating Committee, consisting of Messrs. Liebowitz (Chairman),
Chanin, Hall and Safenowitz, met three times last fiscal year. 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
with the names of such nominees, together with their qualifications for service
as a director.
The Compensation and Stock Option Committee (the "Compensation Committee"),
which met once last fiscal year, consists of Messrs. Montag (Chairman), Hall,
Safenowitz and Silverman. The Compensation Committee administers the Incentive
Compensation Plan, the Supplemental Retirement Plan for Executives (the
"Supplemental Retirement Plan") and 1997 Stock Option Plan, and reviews the
compensation of the directors and officers.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Montag (Chairman), Hall,
Safenowitz and Silverman. Mr. Safenowitz, a director of Getty Realty and major
shareholder of both the Company and Getty Realty, serves on the Compensation
Committee.
A-7
<PAGE> 27
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
To Our Stockholders:
This report addresses our compensation policies with respect to the
compensation of the Chief Executive Officer and the other executive officers
during fiscal 2000. The Compensation and Stock Option Committee (the
"Compensation Committee") is responsible for setting the policies which govern
base salary compensation, the Incentive Compensation Plan, the 401(k) Plan, the
Supplemental Retirement Plan, and the Stock Option Plan and for determining
amounts payable under these Plans.
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, and is discussed, reviewed and approved by
the full Board. The compensation of the Chief Executive Officer is also
discussed, reviewed and approved by the full Board. 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.
BASE SALARY
The base salary program is designed to provide each employee with a salary
competitive with salaries paid for similar positions in similar companies.
Besides being able to attract and retain capable people, we will endeavor to
ensure that each employee's compensation will be based on the person's ability,
effort and achievement. In December 1999, consistent with the practice of the
prior few years, all executive officers received a small increase in base
salary.
ANNUAL INCENTIVE AWARDS
Annual Incentive Awards are provided under the Company's Incentive
Compensation Plan ("ICP"). The purpose of the ICP, which is a key component of
our total compensation package, 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 after it evaluates a
combination of criteria, and the Company achieves 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 the other Executive Officers (shown under the
caption "Bonuses" in the Summary Compensation Table) should be 125% of the
targeted amount each executive officer could have received under the ICP for the
fiscal year ended January 31, 2000.
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 Marketing 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
our future success. During the fiscal year, options were awarded to four
officers and certain key employees and certain directors. Mr. Liebowitz, who has
not participated in the Stock Option Plan, did not receive any option grants
during the fiscal year.
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 interests through
varied plans that are structured to coincide with the long term vision of Getty
Marketing.
A-8
<PAGE> 28
Section 162(m) of the Internal Revenue Code denies 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 a fiscal year.
It is our policy to take this rule into account in setting the compensation of
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 any given
year, some portion of the compensation paid to an 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 Shares on the date stock options are exercised, and the number of options
exercised by an executive in any fiscal year.
The report of the Compensation Committee should not be deemed incorporated
by reference by any general statement incorporating by reference this
Information Statement into any filing under the Securities Act or under the
Exchange Act, except to the extent that the Company specifically incorporates
this information by reference, and should not otherwise be deemed filed under
such Acts.
Compensation and Stock Option
Committee:
Richard E. Montag (Chairman)
Ronald E. Hall
Howard Safenowitz
Howard Silverman
A-9
<PAGE> 29
COMPENSATION
DIRECTORS' COMPENSATION
Directors receive annual retainer fees of $12,000, and committee and board
meeting fees of $1,000 for each meeting attended, except for telephonic meetings
for which the fee is $500 and except for the Chairman of the Audit Committee who
receives $1,500 for each committee meeting and $750 for each telephonic
committee meeting. 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 and was until September 1999 also a director of a subsidiary of the
Company, received $3,000 for attending three board meetings of the subsidiary.
In December 1999, all of the members of the Board, except for Mr.
Liebowitz, received stock option grants.
OTHER EXECUTIVE OFFICERS
Other executive officers during all or part of fiscal 2000 included Vincent
J. DeLaurentis, age 49, President of Getty Marketing since August 1997, and
Chief Operating Officer of the Company since June 1998; A.R. Charnes, age 56,
Vice President-Marketing since September 1998, General Manager of Marketing
since February 1998, and a regional marketing manager of Getty since 1989*;
Michael K. Hantman, age 48, Vice President of Getty since 1991 and Corporate
Controller of Getty since 1985; and Samuel M. Jones, age 63, Vice President and
General Counsel of Getty since 1986 and Corporate Secretary of Getty since 1994.
Management is not aware of any family relationships among any of its directors
or Executive Officers.
-------------------------
* For the period prior to March 21, 1997, the date Getty Petroleum Marketing
Inc. was spun-off to the stockholders of Getty Petroleum Corp., all references
to "Getty" are to Getty Petroleum Corp., which after the Spinoff changed its
name to Getty Realty Corp. and then Getty Properties Corp.
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 the Company (the "Named Executive Officers") for services
in all capacities to the Company and its subsidiaries (prior to March 21, 1997,
Getty Petroleum Corp.) during the periods indicated. None of the Named Executive
Officers received perquisites or other personal benefits that exceeded the
lesser of $50,000 or 10% of the officer's salary and bonus.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------
FISCAL YEAR ANNUAL COMPENSATION SECURITIES ALL OTHER
ENDED -------------------------- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION JANUARY 31, SALARY ($) BONUS ($)(1) OPTIONS (#) ($)(2)
--------------------------- ----------- ---------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Leo Liebowitz....................... 2000 107,644 133,939 -- 14,740
Director, Chairman and 1999 104,521 40,000 -- 22,028
Chief Executive Officer 1998 144,970 116,000 -- 19,866
Vincent J. DeLaurentis.............. 2000 321,308 412,000 50,000 47,391
President and Chief 1999 319,308 100,000 25,000 54,225
Operating Officer 1998 139,615 172,500 75,000 13,121
A.R. Charnes........................ 2000 140,556 180,250 20,000 20,233
Vice President-Marketing 1999 129,750 35,000 2,500 18,700
1998 101,915 37,500 5,000 5,935
Michael K. Hantman.................. 2000 131,823 158,801 10,000 27,410
Vice President and 1999 127,925 98,623 10,000 30,613
Corporate Controller 1998 124,126 137,700 20,000 27,704
</TABLE>
A-10
<PAGE> 30
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------
FISCAL YEAR ANNUAL COMPENSATION SECURITIES ALL OTHER
ENDED -------------------------- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION JANUARY 31, SALARY ($) BONUS ($)(1) OPTIONS (#) ($)(2)
--------------------------- ----------- ---------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Samuel M. Jones..................... 2000 194,985 158,801 10,000 33,884
Vice President 1999 189,267 93,978 10,000 37,381
General Counsel and 1998 183,762 137,700 20,000 34,286
Corporate Secretary
</TABLE>
-------------------------
(1) Represents compensation paid pursuant to the Company's Incentive
Compensation Plan, discussed on page A-8.
(2) All other compensation includes contributions by the Company to the defined
contribution retirement profit sharing plan, matching contributions under
the 401(k) Plan, contributions by the Company to the Supplemental Retirement
Plan and term life insurance premiums, all as set forth in the table below.
ALL OTHER COMPENSATION
<TABLE>
<CAPTION>
FISCAL YEAR DEFINED COMPANY
ENDED CONTRIBUTION MATCH SUPPLEMENTAL TERM LIFE
NAME JANUARY 31, RETIREMENT PLAN 401(K) PLAN RETIREMENT PLAN INSURANCE
---- ----------- --------------- ----------- --------------- ---------
<S> <C> <C> <C> <C> <C>
Leo Liebowitz..................... 2000 $2,222 $ -- $12,518 $ --
1999 2,516 -- 19,512 --
1998 2,546 -- 17,320 --
Vincent J. DeLaurentis............ 2000 2,474 4,800 35,389 4,728
1999 2,516 4,800 42,345 4,564
1998 -- -- 11,788 1,333
A.R. Charnes...................... 2000 2,474 4,207 11,185 2,367
1999 2,516 3,807 10,405 1,972
1998 2,023 3,054 -- 858
Michael K. Hantman................ 2000 2,474 3,945 17,154 3,837
1999 2,516 3,829 20,765 3,503
1998 2,546 3,715 18,345 3,098
Samuel M. Jones................... 2000 2,474 4,800 21,925 4,685
1999 2,516 4,800 25,737 4,328
1998 2,546 4,750 23,070 3,920
</TABLE>
OTHER EXECUTIVE COMPENSATION
In December 1994, Getty Petroleum Corp. entered into agreements
(collectively, the "Change of Control Agreements") with its non-director
officers and certain key employees, in which Getty Petroleum Corp. agreed to
make payments under certain circumstances upon a "change of control" of Getty
Petroleum Corp. and also agreed that all stock options granted to such officer
or key employee would immediately vest. 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 the Company was spun off to Getty Petroleum Corp.'s
stockholders. On that date, the Company began performing Getty Petroleum Corp.'s
obligations under the Change of Control Agreements for the covered officers and
employees of the Company. On April 8, 1997, the Company formally confirmed to
each officer and covered employee its obligations under the Change of Control
Agreements, including his/her minimum guaranteed annual compensation (the
"Guaranteed Salary"). On March 9, 1998, the Company amended the Change of
Control Agreements to provide that in the event of termination of an officer or
covered employee by the Company other than for cause, or by either party
following the assignment of materially less favorable job responsibilities, for
the 24-month period after the date of termination for officers and two key
employees, and 12 months for the other covered employees, the
A-11
<PAGE> 31
Company will pay to each such individual over the applicable period an amount
not less than the average annual sum of the individual's (i) base salary, (ii)
benefits under any incentive or bonus plan and (iii) total amount of employer
contributions (other than elective salary deferrals) made to the individual's
account under the Company's 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 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, the officer or key employee receives from any other employer during the
relevant period.
Mr. DeLaurentis' rights in the event of a change of control are set forth
in an employment agreement dated July 10, 1997 and amended and restated on April
8, 1999. Under the agreement, at the time of a change in control all of Mr.
DeLaurentis' stock options will fully vest, and if he is terminated or if his
responsibilities are diminished, he will be entitled to receive as compensation
$450,000 per year for two years following the change of control, together with
customary benefits extended to the Company's executives. This agreement provides
that Mr. DeLaurentis' initial base salary was $300,000 per year, which
subsequently was increased by the Board to $330,000 per year. The agreement,
which was to initially expire on August 3, 1999, has twice been extended for
additional 12 month terms and will thereafter be extended for additional 12
month terms unless it is terminated by the Board not later than 90 days before
the commencement of any subsequent 12 month term.
The Named Executive Officers participate in the ESOP. For the ESOP year
ended December 31, 1999, 141,001 Shares were awarded to the eligible Named
Executive Officers and employees of the Company and its subsidiaries. There
remain 268,521 Shares in the ESOP trust, to be allocated to the eligible
employees during the next two ESOP plan years. The following table sets forth
the ESOP Shares allocated to the Named Executive Officers:
ALLOCATION OF ESOP SHARES
<TABLE>
<CAPTION>
# SHARES ALLOCATED TOTAL SHARES % SHARES
NAME ON DECEMBER 31, 1999 ALLOCATED VESTED
---- -------------------- ------------ --------
<S> <C> <C> <C>
Leo Liebowitz......................................... 1,711 5,551 40
Vincent J. DeLaurentis................................ 1,858 2,865 20
A.R. Charnes.......................................... 1,858 5,435 40
Michael K. Hantman.................................... 1,858 5,698 40
Samuel M. Jones....................................... 1,858 5,698 40
</TABLE>
STOCK OPTIONS
The following table sets forth additional information with respect to the
stock options granted to the Named Executive Officers during the fiscal year
ended January 31, 2000, including the potential realizable value from the stock
options, assuming that 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.
A-12
<PAGE> 32
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE AT
------------------------------ ASSUMED ANNUAL RATES OF
% OF TOTAL OPTIONS STOCK PRICE APPRECIATION FOR
OPTIONS GRANTED TO EMPLOYEES EXERCISE OR OPTION TERM(1)
GRANTED IN FISCAL YEAR ENDED BASE PRICE EXPIRATION ------------------------------
NAME (#) JANUARY 31, 2000 ($/SHARE) DATE 5% ($) 10% ($)
---- ------- -------------------- ----------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Leo Liebowitz.......... -- -- -- -- -- --
Vincent J.
DeLaurentis.......... 50,000 45.0 2.78 12/16/09 87,463 221,650
A.R. Charnes........... 20,000 18.0 2.78 12/16/09 34,985 88,660
Michael K. Hantman..... 10,000 9.0 2.75 12/16/09 17,295 43,828
Samuel M. Jones........ 10,000 9.0 2.75 12/16/09 17,295 43,828
</TABLE>
-------------------------
(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
Securities and Exchange Commission 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. We did not use an alternative formula for a grant date valuation,
as we are not aware of any formula which will determine with reasonable
accuracy a present value based on unknown or volatile factors. If the price
of the Company's common stock appreciates, the value of the Company's common
stock held by our stockholders will also increase. For example, the market
value of the Company's common stock on January 31, 2000 was approximately
$34,902,245, based upon the market price on that date. If the Share price of
the Company's common stock increases by 5% per year, the market value on
January 31, 2010 of the same number of Shares would be approximately
$56,852,000. If the price of the Company's common stock increases by 10% per
year, the market value on January 31, 2010 would be approximately
$90,527,429.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table provides information as to the value of stock options
held by each of the Named Executive Officers at January 31, 2000 measured in
terms of the closing price of the Company's common stock on January 31, 2000. No
options were exercised by the Named Executive Officers during the fiscal year
ended January 31, 2000.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF IN-THE-MONEY
UNEXERCISED OPTIONS AT OPTIONS AT FISCAL
SHARES ACQUIRED ON VALUE REALIZED FISCAL YEAR END (#) YEAR-END ($)
NAME EXERCISE (#) (#) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------------ -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Leo Liebowitz........... -- -- -- --
Vincent J.
DeLaurentis........... -- -- 36,250 --
113,750 --
A. R. Charnes........... -- -- 3,125 --
24,375 --
Michael K. Hantman...... -- -- 75,000 955
27,500 --
Samuel M. Jones......... -- -- 81,000 1,091
27,500 --
</TABLE>
A-13
<PAGE> 33
STOCK OPTION PLAN
The Company's 1997 Stock Option Plan (the "Stock Option Plan"), which has
been approved by our stockholders and was amended in 1998 after approval of our
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. The Stock Option
Plan is administered by the Compensation Committee. The maximum number of Shares
which may be the subject of outstanding Options under the Stock Option Plan is
2,000,000, subject to adjustments for stock dividends and stock splits. As of
January 31, 2000, 917,223 Shares 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 number of Shares remaining for grant under the
stock option plan at April 18, 2000 was 590,533.
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
(110% of the 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.
RETIREMENT PLANS
The Company has a retirement profit-sharing plan with 401(k) Plan for
employees meeting certain service requirements. Under the terms of the 401(k)
Plan, the annual discretionary contribution portion of the 401(k) Plan is
determined by the Board. For the 401(k) portion of the 401(k) Plan, the Board
has elected to contribute to the 401(k) Plan for each participating employee an
amount equal to 50% of the employee's contribution to the plan but in no event
more than 3% of the employee's compensation.
The Company also has a Supplemental Retirement Plan. Under the Supplemental
Retirement 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 the
executive under the 401(k) Plan. The amounts paid to the trustee under the
Supplemental Retirement 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 may not cause the Supplemental Retirement Plan to be other than
"unfunded" for purposes of the Employee Retirement Income Security Act of 1974,
as amended. An executive's account vests in the same manner as under the 401(k)
Plan and is paid upon termination of employment. Under the Supplemental
Retirement Plan, the Board may, during any fiscal year, elect not to make any
payment to the account of any or all executives.
A-14
<PAGE> 34
STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return on the Company's Common Stock against
the cumulative total return of the Standard & Poor's 500 Stock Index and the
Peer Group for the period from April 1, 1997 through January 31, 2000.*
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
1997 1998 1999 2000
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Getty Petroleum Marketing, Inc. $100.00 $133.76 $ 58.45 $ 51.95
-------------------------------------------------------------------------------------------------------
Standard & Poor's 500 $100.00 $131.44 $173.85 $190.50
-------------------------------------------------------------------------------------------------------
Peer Group $100.00 $138.82 $ 86.08 $ 58.67
-------------------------------------------------------------------------------------------------------
</TABLE>
Assumes $100 invested at the open of trading on April 1, 1997 in the Company's
common stock, Standard & Poor's 500, and Peer Group. The Company's common stock
commenced trading on the New York Stock Exchange on April 1, 1997.
*Cumulative total return assumes reinvestment of dividends.
We have chosen as our Peer Group the following companies: Crown Central
Petroleum Corp., Dairy Mart Convenience Stores, Inc., FFP Marketing Inc. and the
Uni-Marts, Inc. We have chosen these companies as our Peer Group because a
substantial segment of each of their businesses is petroleum marketing and
distribution.
Uni-Marts, Inc. was added to the Peer Group in 1999. The Company owns
442,700 shares of Uni-Marts common stock, which we believe is approximately 6%
of the total number of Uni-Marts common shares outstanding.
The Stock Performance Graph should not be deemed incorporated by reference
by any general statement incorporating by reference this Information 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 should not otherwise be deemed filed under such Acts.
We cannot assure you that the Company's stock performance will continue in
the future with the same or similar trends depicted in the graph above. We do
not make or endorse any predictions as to future stock performance.
A-15
<PAGE> 35
[ING BARINGS LOGO]
ANNEX B
November 2, 2000
Board of Directors
Getty Petroleum Marketing Inc.
125 Jericho Turnpike
Jericho, NY 11753
Gentlemen:
We understand that OAO Lukoil Holding ("Lukoil") has proposed to acquire
all of the issued and outstanding shares of common stock, par value $0.01 per
share (the "Common Stock"), of Getty Petroleum Marketing Inc. ("Getty") at a
price of $5.00 per share in cash (the "Consideration") pursuant to a tender
offer and a second-step merger of Getty with a wholly-owned, indirect U.S.
subsidiary of Lukoil (the "Proposed Transaction"). The terms of the Proposed
Transaction are subject to the terms and conditions of the Agreement and Plan of
Merger dated November 2, 2000 among Lukoil and its related entities and Getty
(the "Agreement").
You have requested our opinion, as investment bankers, as to the fairness,
from a financial point of view, of the Consideration offered in the Proposed
Transaction to the holders of the Common Stock.
We have acted as financial advisor to Getty in connection with the Proposed
Transaction and have participated on behalf of Getty in the negotiations
relating to the Proposed Transaction and will receive a customary fee for our
services. ING Barings has previously rendered and continues to render certain
investment banking and financial advisory services to Getty and to Getty Realty
Corp. ("Realty"), which leases properties to Getty, and has received customary
fees for the rendering of such services. As you are aware, our firm is a full
service securities firm that engages in securities trading and brokerage
activities, in addition to providing investment banking services. In the
ordinary course of business, we may trade or otherwise effect transactions for
our own account and for the accounts of our clients in the securities of Getty,
Realty and Lukoil and, accordingly, we and other clients of ours may at any time
hold a long or short position in such securities.
In conducting our analysis and arriving at our opinion as expressed herein,
we have reviewed and analyzed, among other things, the following:
(i) a draft of the Agreement dated November 2, 2000, which you have advised
us is in substantially final form;
(ii) Getty's Annual Reports on Form 10-K for each of the fiscal years ended
January 31, 1998, January 31, 1999 and January 31, 2000, Getty's Quarterly
Reports on Form 10-Q for the quarters ended April 30, 2000, and July 31, 2000,
and Getty's Form 8-K filed on April 5, 2000;
(iii) certain other publicly available information concerning Getty,
including the market price and trading volume for its Common Stock;
(iv) certain internal information, including projections for each of the
five fiscal years ending January 31, 2005 and other data relating to Getty and
its business and prospects provided to us by management of Getty;
[ING BARINGS LETTERHEAD]
B-1
<PAGE> 36
[ING BARINGS LOGO]
(v) certain publicly available information concerning certain other
companies engaged in businesses which we believe to be generally comparable to
Getty and the trading markets for certain of such other companies' securities;
(vi) the financial terms of certain recent transactions which we believe to
be generally comparable; and
(vii) premiums paid for public stock in all-cash, change of control
transactions involving companies of similar size.
We have also met with certain officers and employees of Getty concerning its
business and operations, assets, present condition and prospects and undertook
such other studies, analyses and investigations as we deemed appropriate.
In arriving at our opinion, we have relied upon the accuracy and
completeness of the financial and other information used by us and have not
independently verified such information, nor do we assume any responsibility to
do so. We have assumed that the financial forecasts and projections provided to
or reviewed by us have been reasonably prepared based on the best current
estimates and judgment of Getty's management as to the future financial
condition and results of operations of Getty. We have not conducted a physical
inspection of certain properties and facilities of Getty. We have visited but
have not made or obtained any independent evaluation or appraisal of any of the
properties and facilities of Getty. We have also taken into account our
assessment of general economic, market and financial conditions and our
experience in similar transactions, as well as our experience in securities
valuation in general. Our opinion necessarily is based upon economic, market,
financial and other conditions as they exist and can be evaluated on the date
hereof and we assume no responsibility to update or revise our opinion based
upon events or circumstances occurring after the date hereof.
This letter and the opinion expressed herein are intended for the use of
the Board of Directors of Getty in its consideration of the Proposed
Transaction. This opinion does not address Getty's underlying business decision
to approve the Proposed Transaction or constitute a recommendation to the Board
of Directors of Getty as to how such directors should vote, whether shareholders
should tender any shares in the tender offer or as to any other action such
shareholders should take regarding the Proposed Transaction. Furthermore, the
Board of Directors of Getty has not asked us to consider the effect, if any,
that the Proposed Transaction may have with respect to Realty. This opinion may
not be reproduced, summarized, excerpted from or otherwise publicly referred to
or disclosed in any manner without the prior written consent of ING Barings,
except Getty may include this opinion in its entirety in any proxy statement,
information statement or Schedule 14D-9 relating to the Proposed Transaction
sent to Getty's shareholders.
Based upon and subject to the foregoing, it is our opinion as investment
bankers that the Consideration offered in the Proposed Transaction is fair, from
a financial point of view, to Getty's shareholders.
Very truly yours,
ING BARINGS LLC SIGNATURE
ING BARINGS LLC
B-2
<PAGE> 37
ANNEX C
[GETTY PETROLEUM LOGO]
November 9, 2000
Dear Fellow Stockholders:
We are pleased to inform you that on November 2, 2000, Getty Petroleum
Marketing Inc. entered into an Agreement and Plan of Merger with Lukoil Americas
Corporation and Mikecon Corp., both indirect wholly owned subsidiaries of OAO
LUKOIL, a Russian company, which provides for the acquisition of Getty Marketing
by Mikecon Corp. Under the terms of the Merger Agreement, Mikecon Corp. today
commenced a tender offer to purchase all of Getty Marketing's outstanding shares
of common stock at a price of $5.00 per share in cash.
Following the successful completion of the tender offer, Mikecon Corp. will
be merged with Getty Marketing, and all shares of Getty Marketing common stock
not purchased in the tender offer will receive in the merger the same $5.00 per
share in cash. The closing of the tender offer will be conditioned upon (1) at
least a majority of Getty Marketing's outstanding shares being tendered and not
withdrawn prior to the expiration of the tender offer, and (2) expiration or
termination of the appropriate waiting period under the Hart-Scott-Rodino Act.
The closing of the tender offer is also subject to other conditions.
YOUR BOARD OF DIRECTORS, AT A SPECIAL MEETING HELD ON NOVEMBER 2, 2000, BY
THE UNANIMOUS VOTE OF THE DIRECTORS, AND AFTER REVIEW OF PARTS OF THE
TRANSACTION BY A SPECIAL COMMITTEE COMPRISED OF THE INDEPENDENT DIRECTORS, HAS
(1) DETERMINED THAT EACH OF THE MERGER AGREEMENT, THE TENDER OFFER AND THE
MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF GETTY MARKETING'S STOCKHOLDERS;
(2) APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE TENDER OFFER AND THE MERGER; (3) DECLARED THE MERGER AGREEMENT
ADVISABLE; AND (4) RECOMMENDED THAT GETTY MARKETING'S STOCKHOLDERS ACCEPT THE
TENDER OFFER, TENDER THEIR SHARES PURSUANT TO THE TENDER OFFER AND APPROVE THE
MERGER. ACCORDINGLY, YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU ACCEPT THE
TENDER OFFER AND TENDER ALL OF YOUR SHARES OF GETTY MARKETING COMMON STOCK
PURSUANT TO THE TENDER OFFER.
In arriving at its recommendation, your Board of Directors gave careful
consideration to a number of factors which are described in the enclosed
Schedule 14D-9, including the opinion of Getty Marketing's financial advisor,
ING Barings LLC, that, as of November 2, 2000, the offer price of $5.00 per
share in cash proposed to be received in the tender offer and the proposed
merger pursuant to the Merger Agreement is fair, from a financial point of view,
to Getty Marketing's stockholders.
Howard Safenowitz, Milton Cooper and I, and certain of our affiliates, who
own an aggregate of approximately 40% of Getty Marketing's issued and
outstanding common stock, have entered into separate support agreements with
Lukoil Americas and Mikecon. We have, subject to the provisions of the support
agreements, agreed, among other things, to validly tender all our shares
pursuant to the tender offer.
Additional information with respect to the tender offer and the merger is
contained in the enclosed Schedule 14D-9, and we urge you to consider this
information carefully.
On behalf of the management and directors of Getty Marketing, we thank you
for the support you have given Getty Marketing.
Sincerely yours,
[LEO LIEBOWITZ SIGNATURE]
Leo Liebowitz
Chairman and Chief Executive Officer
