<PAGE> 1
ENVIRONMENTAL INDEMNITY AGREEMENT
This ENVIRONMENTAL INDEMNITY AGREEMENT (together with all Exhibits and Schedules
attached hereto, this "Indemnity Agreement"), effective as of the Restatement
Effective Date, is made and entered into as of November 2, 2000 between Getty
Properties Corp., a Delaware corporation, whose address is 125 Jericho Turnpike,
Jericho, New York 11753 (formerly known as Getty Realty Corp.,) (as further
defined hereinafter, "Landlord"), and Getty Petroleum Marketing Inc., a Maryland
corporation whose address is 125 Jericho Turnpike, Jericho, New York 11753 (as
further defined hereinafter, "Tenant") (together referred to as the "Parties").
RECITALS
A. Contemporaneously with this Indemnity Agreement, the Parties are executing
that certain Consolidated, Amended and Restated Master Lease (the "Restated
Master Lease") and related documents, pursuant to which Landlord leased to
Tenant certain lands and subleased or sub-subleased to Tenant certain other
lands, together with all right, title and interest of Landlord, if any, in
and to certain improvements and appurtenances (together, the "Premises").
B. Landlord and Tenant desire to allocate risks associated with certain
liabilities, potential liabilities and responsibilities regarding the
environmental condition of certain of the Properties.
NOW, THEREFORE, in exchange for good and valuable consideration and of the
mutual covenants and agreements contained herein, and as a further inducement to
enter the Restated Master Lease, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:
SECTION I. DEFINITIONS.
1. Any term not otherwise defined herein shall have the meaning assigned to
such term in the Restated Master Lease. For purposes of this Indemnity
Agreement, the following term shall have the following meaning.
a. "Highspire Petroleum Terminal Property" shall mean, for purposes of this
Indemnity Agreement, any and all land and Improvements at the Highspire
Petroleum Terminal, 911 South Eisenhower, Middletown, Pennsylvania,
except for the land and Improvements that constitute the terminal
loading rack at which Tenant has rights to obtain fuel through operation
of a cardlock or similar access system.
SECTION II. LANDLORD'S REPRESENTATIONS AND WARRANTIES.
1. Landlord represents and warrants to Tenant that, to the knowledge of
Landlord, as of the date hereof, except for (i) those Service Station
Properties listed on Exhibits D and E to the 1997 Master Lease, Schedules 2
and 3 and Exhibit C to the Restated Master Lease, and Schedule 12 and
Schedule Z hereto, (ii) those Service Station Properties and Petroleum
Terminal Properties listed on Schedule 7A and Schedule 7B to that certain
Informational Side Letter of even date herewith between the parties hereto
and on Schedule 3.1(r)(ii) to the Merger Agreement, and
<PAGE> 2
(iii) those Service Station Properties and Petroleum Terminal Properties
set forth in the July 31, 2000 Project Summary Binders:
a. There are no material permits, licenses or other authorizations for
which Landlord is responsible that are required with respect to the
business, operations, assets or current uses of the Service Station
Properties or Petroleum Terminal Properties under applicable
Environmental Laws that have not been obtained and complied with and are
not otherwise in full force and effect.
b. Except as authorized by the permits, licenses or Environmental Law: (i)
no Hazardous Substances are located on the Service Station Properties or
Petroleum Terminal Properties, nor have Hazardous Substances been
generated, treated, contained, handled, located, used, manufactured,
processed, buried, incinerated, deposited, stored, discharged, refined,
dumped, disposed, or released on, under or about any part of the Service
Station Properties or Petroleum Terminal Properties by Landlord or any
previous owner, tenant, occupant, or user of the Premises except as set
forth on Schedule 3 to the Restated Master Lease; and (ii) no Hazardous
Substances have migrated from or to the Service Station Properties or
Petroleum Terminal Properties upon, under or about other properties in
violation of any Environmental Laws.
c. Landlord has not received, and is not aware that there is proposed or
threatened, with respect to the Service Station Properties or Petroleum
Terminal Properties any written notice, demand, request for information,
Claim (as hereinafter defined), proceeding, citation, complaint,
summons, investigation, order, agreement or litigation alleging
violation of Environmental Laws on the Service Station Properties or
Petroleum Terminal Properties, or alleging the suspected presence or
release of Hazardous Substances thereon, for which Landlord (or Tenant
after the Restatement Effective Date) may be liable.
d. None of the Service Station Properties or Petroleum Terminal Properties
are or have been listed on the National Priorities List, or any other
list, schedule, law, inventory or record of hazardous or solid waste
sites maintained by any federal, state or local agency, and Landlord has
not been designated as a "potentially responsible party" with respect to
any such sites.
e. Landlord has reported to the applicable Government, to the extent
required by the Environmental Laws, any matter required to be reported
by Landlord under such Environmental Laws.
SECTION III. PETROLEUM TERMINAL PROPERTIES.
1. In the event that one or more of the owned Petroleum Terminal Properties
set forth on Schedule Y hereto is not in compliance in any respect with any
Environmental Law(s) as in effect as of the Restatement Effective Date or
if there are conditions existing at any Petroleum Terminal Property as of
the Restatement Effective Date that Tenant addresses to ensure continuing
compliance, or to mitigate the cost of continuing compliance, with such
Environmental Laws or to
2
<PAGE> 3
mitigate the potential for future non-compliance with such Environmental
Laws, Tenant and Landlord shall share the actual, out-of-pocket costs and
expenses related to the Remediation and other compliance-related activities
(any such Remediation and other compliance-related activities being
referred to herein as the "Preexisting Condition Terminal
Compliance") (Liabilities associated with any Remediation activities at the
Newark Petroleum Terminal Property related to or arising from the
Industrial Sites Recovery Act ("ISRA") shall not be considered Preexisting
Condition Terminal Compliance, but shall be addressed by Subsection 4
below) as follows:
a. First, Tenant shall pay all costs and expenses incurred in connection
with such Preexisting Condition Terminal Compliance until the amount so
incurred with respect thereto equals $1,500,000 in aggregate.
b. Second, Landlord and Tenant shall share equally the next $8,500,000 of
such costs and expenses incurred in connection with such Preexisting
Condition Terminal Compliance until the amount so incurred with respect
thereto equals $10,000,000 in aggregate.
c. Third, to the extent that such costs and expenses incurred in connection
with such Preexisting Condition Terminal Compliance exceeds $10,000,000,
all such costs and expenses shall be borne by Tenant.
d. Notwithstanding the above, Landlord shall be solely responsible for the
actual, out-of-pocket costs and expenses related to the Preexisting
Condition Terminal Compliance for the Highspire Petroleum Terminal
Property.
The net effect of the foregoing provisions is that, for Petroleum Terminal
Properties other than the Highspire Petroleum Terminal Property, Landlord
shall not pay more than $4,250,000 in connection with all Preexisting
Condition Terminal Compliance. Until the amount expended with respect to
Preexisting Condition Terminal Compliance exceeds $10,000,000, Tenant shall
forward to Landlord copies of all invoices and bills received by Tenant in
connection with such Preexisting Condition Terminal Compliance and evidence
of Tenant's payment therefor. Within forty-five (45) days after receipt of
such evidence, Landlord shall, if so required pursuant to this Section III,
reimburse Tenant for Landlord's share of the amount paid by Tenant with
respect to such invoices and bills.
2. In connection with any proposed Preexisting Condition Terminal Compliance
contemplated at a time when the costs and expenses incurred by Tenant for
all prior Preexisting Condition Terminal Compliance expenditures exceed
$1,500,000 in aggregate (and Landlord shall not have paid its maximum
amount), Tenant shall furnish to Landlord plans setting forth the scope of
such project and an estimate of the cost thereof, certified by a reputable
environmental engineering firm (a "Terminal Expenditure Plan").
a. Landlord shall have thirty (30) days from the receipt of any such
Terminal Expenditure Plan either to approve such Terminal Expenditure
Plan or provide Tenant with an alternate Terminal Expenditure Plan,
certified by a reputable environmental engineering firm, which alternate
Terminal Expenditure Plan shall have the same scope as Tenant's Terminal
Expenditure Plan but may have a lower cost estimate than that set forth
in Tenant's Terminal Expenditure Plan.
3
<PAGE> 4
b. If Landlord fails to approve Tenant's Terminal Expenditure Plan or to
provide Tenant with such alternate Terminal Expenditure Plan within such
thirty (30) day period, Landlord's approval of such Terminal Expenditure
Plan shall be deemed granted.
c. In the event that Landlord provides Tenant with an alternate Terminal
Expenditure Plan, such Preexisting Condition Terminal Compliance shall
be conducted in accordance with such alternate Terminal Expenditure
Plan, unless Tenant reasonably disapproves of such Terminal Expenditure
Plan within seven (7) days of receipt of the same.
d. If Tenant fails to respond to such alternate Terminal Expenditure Plan
within such seven (7) day period, then Tenant's approval of such
alternate Terminal Expenditure Plan shall be deemed granted.
e. If Tenant reasonably disapproves of such alternate Terminal Expenditure
Plan and if Landlord and Tenant cannot thereafter promptly agree on a
Terminal Expenditure Plan, such dispute shall be resolved by an
arbitration conducted in accordance with the applicable provisions set
forth in Exhibit F of the Restated Master Lease.
f. Except as provided in Subsection g. below, all Preexisting Condition
Terminal Compliance shall be conducted in accordance with the Terminal
Expenditure Plan.
g. In the event of an imminent and substantial endangerment or when, in the
reasonable judgment of Tenant, immediate action is necessary to avoid
enforcement activities, or a fine and/or penalty in excess of $1500 per
day or $100,000 in the aggregate, by an applicable Government, Tenant
may take such action as necessary to respond to the imminent and
substantial endangerment or to avoid enforcement by the applicable
Government, prior to agreement on a Terminal Expenditure Plan and such
action shall not affect in any way Landlord's obligations under this
Section.
All costs and expenses incurred by Landlord related in any way to the
development of an alternate Terminal Expenditure Plan (as contemplated by
subsection a, above) or by Tenant and Landlord related in any way to
arbitration of a dispute concerning a Terminal Expenditure Plan (as
contemplated by subsection e., above) shall not be chargeable as costs and
expenditures hereunder.
3. With respect to any Preexisting Condition Terminal Compliance for which
Notice has been given in good faith prior to the tenth (10th) anniversary
of the Restatement Effective Date, Landlord's obligations hereunder shall
survive and continue in full force and effect until completion of the
Terminal Expenditure Plan or Landlord's fulfillment of its obligations
hereunder, whichever is sooner. Landlord shall have no liability or
obligation whatsoever hereunder with respect to any Preexisting Condition
Terminal Compliance for which Notice has been received after the tenth
(10th) anniversary of the Restatement Effective Date.
4. Landlord shall be solely responsible for any and all liability or
obligation at the Newark Petroleum Terminal Property related to or arising
from ISRA, except for that liability or obligation under ISRA created or
caused by Tenant after the Restatement Effective Date, including but not
limited to all liability or obligation related in any way to the
Contamination for which Texaco is responsible, or to Contamination
discovered as a result of the sampling for
4
<PAGE> 5
which the New Jersey Department of Transportation has given notice and
shall hold Tenant harmless for any such liability or obligation. Landlord
shall retain and continue to exercise whatever rights it may have to compel
a third party to fully discharge any Remediation or other related
obligations the third party may have under ISRA, and shall remain solely
responsible for any associated actual, out-of-pocket costs and expenses. If
Landlord fails to compel such third party to fully discharge any
Remediation or other similar obligations under ISRA, Landlord shall be
fully responsible for the discharge of such responsibilities.
SECTION IV. TENANT'S OBLIGATIONS.
1. Notwithstanding anything to the contrary herein, in the Restated Master
Lease, or any other agreement, Tenant shall have no liability or obligation
whatsoever, and Landlord shall indemnify and hold Tenant harmless with
respect to any and all allegations, actions, orders, decrees, suits,
demands, demand letters, injunctions, judgments, orders, decrees, rulings,
damages, dues, penalties, fines, costs, amounts paid in settlement,
liabilities, obligations, taxes, liens, losses, expenses, and fees
(hereinafter "Claims") with respect to a breach of Landlord's
representations in Section II, above, as well as:
a. The Highspire Petroleum Terminal Property;
b. Any Petroleum Terminal Property and Service Station Property closed,
sold or otherwise disposed of prior to February 1, 1997 (the "Spinoff
Transaction");
c. Service Stations Properties closed, sold or otherwise disposed of after
the Spinoff Transaction and before the Restatement Effective Date,
except for the Service Station Properties identified on Schedule Z
hereto;
d. UST Upgrades at the Service Station Properties for which Landlord is
responsible pursuant to Section 7.6 of the Restated Master Lease; and
e. Remediation activities at the Service Station Properties for which
Landlord is responsible pursuant to Section 9 of the Restated Master
Lease.
2. Notwithstanding anything to the contrary herein, in the Restated Master
Lease, or any other agreement, any condition not in full compliance with
any Environmental Law as of the Restatement Effective Date at any Service
Station Property or Petroleum Terminal Property shall not operate as a
lease default and Tenant shall have no liability or obligation whatsoever
to engage in any Remediation or other compliance-related activity with
respect to any such non-compliance condition as of the Restatement
Effective Date at any such Service Station Property or Petroleum Terminal
Property, except when required by a bona fide Claim asserted by an
applicable Government or a party other than Landlord or any Landlord
affiliate (excluding any Claim relating to any breach of Landlord's
representations in Section II, above), provided, however, that at any time,
in Tenant's sole discretion, Tenant may engage in any Remediation or other
compliance-related activity with respect to any Service Station Property or
Petroleum Terminal Property. Landlord shall not take any action (i)
reasonably likely to cause an applicable Government or a party other than
Landlord to assert a Claim that seeks such Remediation or other
compliance-related activity or (ii) to compromise, admit any fact, concede
liability or otherwise materially prejudice Tenant's ability to defend any
actual or potential Claim. Tenant shall not be deemed to be required by a
bona fide Claim to take action if Tenant
5
<PAGE> 6
has a reasonable, good faith basis for asserting a challenge or defense and
Tenant is, in fact, diligently challenging or defending against such Claim.
So long as Tenant has a reasonable, good faith basis for asserting a
challenge or defense and Tenant is, in fact, diligently challenging or
defending against such Claim, any condition that is the subject of Tenant's
challenge or defense shall not operate as a lease default.
3. Except as set forth in this Indemnity Agreement and in the Restated Master
Lease, Landlord shall have no liability to Tenant for any environmental
matter related to the Service Station Properties or Petroleum Terminal
Properties.
SECTION V. LANDLORD'S ADDITIONAL OBLIGATIONS.
1. LANDLORD'S COOPERATION. Landlord hereby grants Tenant the right to exercise
Landlord's rights to compel each third party listed on Schedule 12 hereto
to discharge fully any Remediation or other similar obligations that such
third party may owe to Landlord pursuant to any purchase and sale or
similar agreement for any of those Properties (a "Sale Agreement"). Tenant
shall comply with all applicable obligations of Landlord under any Sale
Agreement, including, without limitation, Landlord's obligation to provide
for and permit access to the Property that is the subject matter of such
Sale Agreement by such third party and/or its employees, agents and
contractors in the manner set forth in such Sale Agreement. Such third
parties shall be solely responsible for fulfilling all Remediation and
similar obligations, and Landlord shall under no circumstance have any
obligation or liability with respect thereto, except as may be specifically
required by Article 9 of the Restated Master Lease. If such rights of
Landlord under any such Sale Agreement are not assignable, then Landlord
shall cooperate with Tenant (which cooperation may include, without
limitation, litigation) as Tenant shall reasonably request, and at Tenant's
expense (including, without limitation, Indemnifying Landlord), so as to
enforce the performance of such third party obligations under such Sale
Agreement.
2. RESTATEMENT EFFECTIVE DATE. Upon the occurrence of the Restatement
Effective Date, Landlord shall deliver to Tenant a certificate containing
representations as of the Restatement Effective Date substantially
identical to those contained in Section II, except that the Exhibits and
Schedules referred to in that Section shall, for the purposes of such
certificate, contain such modifications or amendments as may be necessary
to cause the representations contained in such certificate to be true and
correct as of the Restatement Effective Date. In no event, shall the
modifications or amendments to the Exhibits and Schedules serve to cure any
breach of the representations made on the date hereof.
SECTION VI. MISCELLANEOUS PROVISIONS.
1. AMENDMENT AND MODIFICATION. Any amendment or modification to this Indemnity
Agreement must be in writing signed by both of the Parties hereto.
2. ASSIGNMENT. This Indemnity Agreement and all of the provisions hereof shall
bind and benefit the Parties hereto and their respective successors and
permitted assigns. Nothing in this Indemnity Agreement, expressed or
implied, is intended or shall be construed to confer upon any person other
than the Parties hereto, and their respective successors and assigns, any
right,
6
<PAGE> 7
remedy, or Claim under or by reason of this Indemnity Agreement or any
provision herein contained. Both Parties have the right to assign (and each
successive assignee may further assign) their rights under this Indemnity
Agreement to any person or entity, which such person or entity by
acceptance of such assignment shall be deemed to assume all liabilities,
indebtedness and obligations included in the rights assigned.
3. GOVERNING LAW. This Indemnity Agreement and its interpretation and
performance shall be governed by and construed and regulated in accordance
with the laws of the State of New York, without regard to principles of
conflicts of law.
4. COUNTERPARTS. This Indemnity Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument and shall become a
binding agreement when one or more of the counterparts have been signed by
each of the Parties and delivered to the other party.
5. AGENT FOR SERVICE OF PROCESS. Tenant hereby irrevocably names and
designates Lukoil Americas Corporation, a Delaware corporation whose
address is 540 Madison Avenue, New York, NY, as Tenant's agent (Tenant's
"Agent") for service of process, including all notices required to
institute any proceeding in any court or in any other way required to
confer personal jurisdiction over Tenant in any court, and for the receipt
of any Notices or other communications required under this Indemnity
Agreement, including any and all Notices under this Indemnity Agreement
issued for the purpose of demanding compliance with this Indemnity
Agreement. Service or demand upon Agent shall be good and sufficient
service and demand upon Tenant for all purposes, including, without
limitation, the purpose of obtaining personal jurisdiction over Tenant for
any legal action or proceeding or for the purpose of commencing any
proceeding. Tenant agrees to take any and all action necessary to continue
Agent's designation in full force and effect. If Agent becomes unable to
act as Agent for any reason then Tenant shall forthwith irrevocably
designate a replacement Agent satisfying the requirements of this Section
that would apply to any replacement Agent, as set forth in the next
sentence. By Notice to Landlord (but no more frequently than once every six
months), Tenant may substitute in place of Agent any other Person having
full-time business offices and a street address in Manhattan. Tenant agrees
that delivery of any Notice to Agent, or any service of process upon Agent,
in accordance with the notice requirements of this Indemnity Agreement,
shall constitute valid and effective personal service upon Tenant. Any such
Notice or service of process shall be effective in accordance with the
provisions of this Indemnity Agreement relating to Notices. Any failure of
Agent to give any notice of such service of process or Notice to Tenant
shall not impair or affect the validity of such Notice, service of process,
or any judgment rendered in any proceeding based thereon.
6. ENTIRE AGREEMENT. This Indemnity Agreement embodies the entire agreement
and understanding of the Parties hereto in respect of the subject matter
contained herein. There are no separate understandings or agreements, oral
or written, between the Parties with respect to the subject matter
contained herein. This Indemnity Agreement supersedes all prior agreements
and understandings between the Parties with respect to such subject matter.
The Restated Master Lease contains certain parallel provisions, but in the
event of any conflict between this Indemnity Agreement and the Restated
Master Lease, this Indemnity Agreement governs and controls.
7
<PAGE> 8
7. HEADINGS. The article and section headings contained in this Indemnity
Agreement are for convenience and reference purposes only and shall not
affect in any way the meaning or interpretation of this Indemnity
Agreement.
8. SEVERABILITY. If any one or more terms or provisions contained in this
Indemnity Agreement or the application of such terms or provisions shall,
for any reason and to any extent, be held to be invalid, illegal or
unenforceable in any respect, then the remainder of this Indemnity
Agreement, or the application of terms or provisions to persons or
circumstances other than those as to which it is invalid, illegal or
unenforceable, shall not be affected by such invalidity. All remaining
provisions of this Indemnity Agreement shall be valid and enforced to the
fullest extent permitted by law.
9. FURTHER ASSURANCES. Each party to this Indemnity Agreement agrees to
execute such documents or instruments, and to take such action, as the
other party may reasonably request after the date hereof in order to
effectuate and perfect the indemnification contemplated hereby.
10. THIRD PARTY BENEFICIARY. The Landlord and Tenant are the intended
beneficiaries of this Indemnity Agreement.
11. SUBMISSION TO JURISDICTION. Each of the Parties to this Indemnity Agreement
hereby submits to the exclusive jurisdiction of the United Stated District
Court for the Southern District of New York for purposes of all legal
proceedings arising out of or relating to this Indemnity Agreement and the
estates and relationships created hereby. If the Parties hereto are unable
to submit to the jurisdiction of the United States District Court for the
Southern District of New York notwithstanding reasonably diligent efforts
to do so, then the Parties shall submit to the exclusive jurisdiction of
any New York State court sitting in New York County, New York. Each of the
Parties to this Indemnity Agreement hereby irrevocably waives, to the
fullest extent it may effectively do so, any objection which it may now or
hereafter have to the laying of venue of any such proceedings brought in
any such court and any Claim that any such proceeding brought in any such
court has been brought in an inconvenient forum.
12. INTERPRETATION. No inference in favor of or against any party shall be
drawn from the fact that such party has drafted any portion of this
Indemnity Agreement. The Parties have both participated substantially in
the negotiation, drafting and revision of this Indemnity Agreement with
representation by counsel and such other advisers as they have deemed
appropriate. The words "include" and "including" shall be construed to be
followed by the words: "without limitation."
13. REMEDIES. Any breach by Tenant of any obligation or undertaking herein
shall not, under any circumstances, absolve Landlord of its obligations and
undertakings herein. The sole remedies available to Landlord upon breach by
Tenant shall be the ability to seek injunctive relief to ensure compliance
and to seek actual damages accrued as a result of the breach.
8
<PAGE> 9
IN WITNESS WHEREOF, the Parties have caused this Indemnity Agreement to be
signed by their respective officers thereunto duly authorized as of the date
above.
Getty Properties Corp.
By: /s/ John Fitteron
------------------------------
Name: John Fitteron
-------------------------
Title: Senior Vice President
------------------------
Getty Petroleum Marketing Inc.
By: /s/ Leo Liebowitz
------------------------------
Name: Leo Liebowitz
-------------------------
Title: Chairman and Chief
Executive Officer
------------------------
9
<PAGE> 10
SCHEDULE Y
(Petroleum Terminal Properties)
<TABLE>
<S> <C> <C>
Newark Petroleum Terminal 86 Doremus Avenue Newark, NJ
Mt. Vernon Petroleum Terminal 4301 Boston Post Road Bronx, NY
Long Island City Petroleum Terminal 3023 Greenpoint Ave. Long Island, NY
New Haven Petroleum Terminal 85 Forbes Avenue New Haven, CT
E. Providence Petroleum Terminal Massasoit Ave. and Dexter Road E. Providence, RI
Rensselaer Petroleum Terminal 49 Riverside Avenue Rensselaer, NY
</TABLE>
10
