PROXY GETTY PETROLEUM MARKETING INC. COMMON STOCK PROXY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING ON JANUARY ___, 2001
The undersigned appoints Vadim Gluzman and Vincent DeLaurentis, or either
of them, with full power of substitution, as proxies to vote all shares of
Common Stock held by the undersigned at the Special Meeting of Stockholders of
Getty Petroleum Marketing Inc. to be held at the offices of Akin, Gump, Strauss,
Hauer & Feld, L.L.P., 590 Madison Avenue, 20th Floor, New York, New York 10022
at 10:00 a.m., local time, on January ___, 2001, and at any adjournment thereof.
Unless otherwise marked, this proxy will be voted FOR item 1.
please vote, sign, date and return this proxy
card promptly using the enclosed envelope.
(continued and to be signed on reverse side.)
<PAGE>
(continued from the other side)
MARK THE APPROPRIATE BOX, BUT YOU NEED NOT MARK ANY BOX IF YOU WISH TO VOTE-
IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATION.
1. Proposal to approve the merger of Getty Petroleum Marketing Inc. (the
"Company") and Mikecon Corp., a Delaware corporation (the "Purchaser"),
under the terms of the Agreement and Plan of Merger, dated as of November
2, 2000 (the "Merger Agreement"), by and among OAO LUKOIL, a Russian open
joint stock company, ("LUKOIL"), Lukoil International GmbH, Lukoil Americas
Corporation, a Delaware corporation ("Parent"), the Purchaser and the
Company pursuant to which the Purchaser will be merged with and into the
Company, with the Company as the surviving corporation, and each
outstanding share of the Company's common stock, par value $0.01 per share
(the "Shares"), other than Shares held by LUKOIL, the Company or any of
their respective direct or indirect wholly owned subsidiaries, will be
converted into the right to receive $5.00 in cash, without interest.
|_| FOR |_| AGAINST |_| ABSTAIN
Please sign exactly as your name appears on the Dated: January ___, 2001
records of the Company and date. Joint owners
should each sign personally. When signing as an
attorney, executor, administrator, trustee, ------------------------
guardian, officer of a corporation or in another ------------------------
representative capacity, please give the full Signature(s)
title under signature(s).
2
<PAGE>
SCHEDULE 14A INFORMATION
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement |_| Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Under Rule 14a-12
Getty PETROLEUM Marketing inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|_| No fee required.
|X| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies: Common
Stock, par value $0.01 per share
--------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies: 3,952,720
--------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined): $5.00
--------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction: $19,810,100
--------------------------------------------------------------------------------
(5) Total fee paid: $790.54
--------------------------------------------------------------------------------
|_| Fee paid previously with preliminary materials.
<PAGE>
--------------------------------------------------------------------------------
|X| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount Previously Paid: $14,774.71
--------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.: Schedule TO, File No.
5-52951
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(3) Filing Party: OAO LUKOIL, Lukoil International GmbH, Lukoil Americas
Corporation and Mikecon Corp.
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(4) Date Filed: November 9, 2000
<PAGE>
[GETTY LOGO]
December __, 2000
To the Stockholders of Getty Petroleum Marketing Inc.:
You are cordially invited to attend a Special Meeting of Stockholders of
Getty Petroleum Marketing Inc. (the "Company") to be held on January ___, 2001,
as set forth in the attached Notice of Special Meeting of Stockholders. At this
meeting you will be asked to consider and vote on the proposed merger between
the Company and Mikecon Corp. (the "Purchaser"), an indirect wholly owned
subsidiary of OAO LUKOIL ("LUKOIL"), under the terms of the Agreement and Plan
of Merger (the "Merger Agreement"), among LUKOIL, Lukoil International GmbH,
Lukoil Americas Corporation, the Purchaser and the Company. Details of the
proposed merger and other important information are contained in the
accompanying proxy statement.
The merger is the second and final step in the acquisition of the Company
by LUKOIL pursuant to the terms of the Merger Agreement. The first step was a
tender offer by the Purchaser for all the outstanding shares of common stock of
the Company (the "Shares"). After expiration of the tender offer on December 8,
2000, the Purchaser purchased 10,080,665 Shares (approximately 72% of the
outstanding Shares) for $5.00 in cash per Share. In the merger, the Company's
remaining stockholders will receive the same consideration paid in the tender
offer, $5.00 in cash, for each Share owned, and thereafter they will have no
further equity interest in the Company.
On November 2, 2000, your Board of Directors, by unanimous vote of the
directors, and after review of parts of the transaction by a special committee
comprised of the directors who were not officers of the Company or officers or
directors of Getty Realty Corp., (1) determined that each of the Merger
Agreement, the tender offer and the merger are fair and in the best interests of
the Company'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) as required by the Merger
Agreement, recommended that the Company's stockholders approve the merger. In
addition, the Board of Directors of the Company received a written opinion from
its financial advisor, ING Barings LLC, that, as of November 2, 2000, the cash
consideration of $5.00 per Share to be received by stockholders of the Company
pursuant to the tender offer and the merger is fair from a financial point of
view to such stockholders. The opinion is included as Annex B to the enclosed
proxy statement and you are urged to read the opinion in its entirety.
Approval of the proposed merger requires the affirmative vote of the
holders of a majority of the outstanding Shares. As a result of the completion
of the tender offer, the Purchaser owns and has the right to vote at the Special
Meeting sufficient Shares to cause the Merger Agreement to be approved without
the affirmative vote of any other stockholder. The Merger Agreement requires the
Purchaser to vote all of its Shares in favor of approving and adopting the
Merger Agreement and the merger contemplated thereby.
<PAGE>
We urge you to read the enclosed material carefully and request that you
complete and return the enclosed proxy as soon as possible. You may, of course,
attend the Special Meeting and vote in person, even if you have previously
returned your proxy card.
Sincerely yours,
Vincent J. DeLaurentis,
President and Chief Operating Officer
<PAGE>
GETTY PETROLEUM MARKETING INC.
-----------------------------------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY ___, 2001
------------------------------------------------------
December__, 2000
To the Stockholders of Getty Petroleum Marketing Inc.:
A Special Meeting of Stockholders of Getty Petroleum Marketing Inc. will be
held at the offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P., 590 Madison
Avenue, 20th Floor, New York, New York 10022, on January ___, 2001 at 10:00
a.m., local time, for the following purposes:
1. To consider and vote on the proposed merger between Getty Petroleum
Marketing Inc., a Maryland corporation (the "Company"), and Mikecon
Corp., a Delaware corporation (the "Purchaser"), under the terms of
the Agreement and Plan of Merger, dated November 2, 2000 (the "Merger
Agreement"), by and among OAO LUKOIL, a Russian open joint stock
company ("LUKOIL"), Lukoil International GmbH, Lukoil Americas
Corporation, a Delaware corporation ("Parent"), the Purchaser and the
Company, pursuant to which: (a) the Purchaser will be merged with and
into the Company (the "Merger"), with the Company as the surviving
corporation; and (b) each outstanding share of the Company's common
stock, par value $0.01 per share (the "Shares"), other than Shares
held by LUKOIL, the Company or any of their respective direct or
indirect wholly owned subsidiaries, will be converted into the right
to receive $5.00 in cash, without interest; and
2. To consider and act upon any matters incidental to the foregoing and
to transact such other business as may properly come before the
meeting or any and all adjournments or postponements thereof.
Only holders of record of Shares at the close of business on December 27,
2000 are entitled to notice of, and to vote at, the Special Meeting or any
adjournment or postponement thereof.
Your attention is respectfully directed to the accompanying Proxy
Statement. We urge you to read it carefully. Whether or not you expect to attend
the meeting in person, please complete and return the enclosed proxy in the
envelope provided. The proxy may be revoked at any time before it is exercised
in the manner described in the Proxy Statement.
By Order of the Board of Directors
Samuel M. Jones,
Secretary
Please complete and sign the accompanying form of proxy and return it promptly
in the enclosed envelope whether or not you intend to be present at the Special
Meeting. No postage is required is mailed in the United States. Please do not
send in any stock certificates for your Shares at this time.
<PAGE>
GETTY PETROLEUM MARKETING INC.
PROXY STATEMENT
------------------------------------------------------
FOR A SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY ___, 2001
------------------------------------------------------
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of Getty Petroleum Marketing Inc. (the
"Company") to be used at a Special Meeting of Stockholders to be held at the
offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P., 590 Madison Avenue, 20th
Floor, New York, New York 10022 on January ___, 2001, at 10:00 a.m., local time,
and any adjournments or postponements thereof.
The purpose of the Special Meeting is to consider and vote on the proposed
merger between the Company and Mikecon Corp., a Delaware corporation (the
"Purchaser"), under the terms of the Agreement and Plan of Merger, dated
November 2, 2000 (the "Merger Agreement"), by and among OAO LUKOIL, a Russian
open joint stock company ("LUKOIL"), Lukoil International GmbH, Lukoil Americas
Corporation, a Delaware corporation ("Parent"), the Purchaser and the Company
pursuant to which the Purchaser will be merged with and into the Company (the
"Merger"), with the Company as the surviving corporation and each outstanding
share of common stock, par value $0.01 per share, of the Company (the "Shares"),
other than Shares held by LUKOIL, the Company or any of their respective direct
or indirect wholly owned subsidiaries, will be converted into the right to
receive $5.00 in cash, without interest thereon. A copy of the Merger Agreement
is included in this Proxy Statement as Annex A.
The Purchaser was formed by Parent for the purpose of entering into the
Merger Agreement and effecting the transactions contemplated thereby. For
further information regarding LUKOIL, Lukoil International GmbH, Parent and the
Purchaser (together, the "Lukoil Entities"), see "Information Concerning the
Lukoil Entities."
Pursuant to the Merger Agreement, as the first step in the acquisition of
the Company by LUKOIL, on November 9, 2000, the Purchaser commenced a cash
tender offer (the "Offer") for all of the outstanding Shares at $5.00 per Share
in cash. After expiration of the Offer on December 8, 2000, the Purchaser
purchased 10,080,665 Shares, constituting approximately 72% of the outstanding
Shares. The Merger is the second and final step in the acquisition by LUKOIL of
all of the outstanding Shares.
As a result of the purchase of Shares pursuant to the Offer, the Purchaser
has the right to vote sufficient Shares to cause the Merger Agreement to be
approved and adopted without the affirmative vote of any other stockholder. The
Merger Agreement requires the Purchaser to vote all of its Shares in favor of
approving and adopting the Merger Agreement. Only holders of record of Shares at
the close of business on December 27, 2000 (the "Record Date") are entitled to
notice of, and to vote at, the Special Meeting. The Shares represent the only
outstanding voting securities of the Company and each Share represents the right
to cast one vote. As of the Record Date, there were 14,033,385 Shares
outstanding held by approximately ________ holders of record.
<PAGE>
Each stockholder is requested to sign and return the enclosed proxy card in
order to ensure that his or her Shares are voted. Proxies in the form enclosed,
unless previously revoked, will be voted at the Special Meeting. A stockholder
giving a proxy may revoke it at any time before it is voted at the Special
Meeting by sending in a proxy bearing a later date, by delivering a written
notice of revocation or by attending the Special Meeting in person and casting a
ballot or delivering notice of revocation of the proxy. If a choice or
instruction is specified by the stockholder on a signed and returned proxy card,
the proxy will be voted in accordance with such specification. If no choice or
instruction is specified by such stockholder on a signed and returned proxy
card, the proxy will be voted as recommended by the Board of Directors. On
November 2, 2000, the Board of Directors recommended that stockholders of the
Company vote FOR approval of the Merger.
A majority of the outstanding Shares entitled to vote, represented in
person or by proxy, is required for a quorum at the Special Meeting. Approval of
the proposed Merger requires the affirmative vote of the holders of a majority
of the outstanding Shares or 7,016,693 Shares based on the number of Shares
outstanding on the Record Date. The Purchaser owns and has the right to vote
10,080,665 Shares, or approximately 72% of the outstanding Shares, and therefore
can cause the Merger to be approved without the affirmative vote of any other
stockholder.
Appraisal rights are not available in the Merger.
After the initial mailing of this Proxy Statement, proxies may be solicited
by telephone, telegram or personally by directors, officers and other employees
of the Company (who will not receive any additional compensation therefor). All
expenses with respect to the solicitation of proxies, including printing and
postage costs, will be paid by the Company.
All information contained in this Proxy Statement concerning LUKOIL,
Parent, the Purchaser and their affiliates (other than the Company), the
financing of the Merger and plans for Parent and the Company after the Merger
has been supplied by LUKOIL, Parent and the Purchaser. With the exception of the
aforementioned information, all information contained in this Proxy Statement
has been supplied by the Company.
No person is authorized to give any information or to make any
representation not contained in this Proxy Statement, and if given or made, such
information or representation should not be relied upon as having been
authorized. This Proxy Statement does not constitute the solicitation of a proxy
in any jurisdiction from any person to whom it is unlawful to make such proxy
solicitation in such jurisdiction. The delivery of this Proxy Statement shall
not, under any circumstances, imply that there has not been any change in the
information set forth herein since the date of this Proxy Statement.
The date of this Proxy Statement is December ___, 2000
------------------------------------------------------
THIS PROXY STATEMENT IS FIRST BEING
SENT TO STOCKHOLDERS ON DECEMBER ___, 2000
------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
SUMMARY TERM SHEET FOR THE MERGER............................................1
INTRODUCTION.................................................................4
General...................................................................4
Voting at the Special Meeting of Stockholders.............................5
THE MERGER...................................................................6
Background of the Merger..................................................6
Reasons for the Board's Conclusions......................................17
Opinion of the Company's Financial Advisor...............................20
Payment for the Shares...................................................20
Certain Legal Matters; Regulatory Approvals..............................21
Purpose of the Offer and Merger; Certain Agreements......................22
Certain United States Federal Income Tax Consequences....................30
INFORMATION CONCERNING THE COMPANY..........................................30
The Company..............................................................30
Directors and Executive Officers of the Company..........................31
OWNERSHIP OF SHARES BY DIRECTORS, OFFICERS AND PRINCIPAL STOCKHOLDERS.......35
INFORMATION CONCERNING THE LUKOIL ENTITIES..................................36
The Lukoil Entities......................................................36
Financing the Merger.....................................................37
PROXY SOLICITATION; REVOCATION OF PROXIES...................................37
OTHER MATTERS...............................................................38
STOCKHOLDER PROPOSALS.......................................................38
ANNEXES
Annex A - The Merger Agreement.............................................A-1
Annex B - Opinion of ING Barings...........................................B-1
<PAGE>
SUMMARY TERM SHEET FOR THE MERGER
This summary term sheet for the merger highlights information from this
proxy statement regarding the merger and the merger agreement. This summary term
sheet does not contain all of the information that may be important to you.
Accordingly, we encourage you to carefully read this entire proxy statement and
the documents to which we have referred you.
What am I being asked to vote upon and approve?
You are being asked to consider and vote on the proposed merger between
Mikecon Corp. and into Getty Petroleum Marketing Inc., with Getty Petroleum
Marketing Inc. as the surviving corporation. After the merger has been
completed, Getty Petroleum Marketing Inc. will be a wholly owned subsidiary of
Lukoil Americas Corporation, which is an indirect wholly owned subsidiary of OAO
LUKOIL.
What consideration will I receive if the merger is approved?
Upon completion of the merger, you will be entitled to receive $5.00 in
cash for each share of Getty Petroleum Marketing Inc. common stock that you
hold.
Who is acquiring Getty Petroleum Marketing Inc.?
Mikecon Corp. is a Delaware corporation that was formed for the purpose of
making the tender offer and merging with Getty Petroleum Marketing Inc. Mikecon
Corp. is wholly owned by Lukoil Americas Corporation, which is a Delaware
corporation. Both Mikecon Corp. and Lukoil Americas Corporation are indirect,
wholly owned subsidiaries of OAO LUKOIL, a Russian open joint stock company and
Russia's largest vertically integrated oil company. See "Information Concerning
the Lukoil Entities."
What does the board of directors of Getty Petroleum Marketing Inc. recommend
with respect to the merger?
The merger is the second and final step in the acquisition of Getty
Petroleum Marketing Inc. by OAO LUKOIL. On November 2, 2000, the board of
directors of Getty Petroleum Marketing Inc., by unanimous vote of the directors
and after review of parts of the transaction by a special committee comprised of
the directors who were not officers of the Company or officers or directors of
Getty Realty Corp:
o determined that the merger is fair to and in the best interests
of you and the company's other stockholders,
o approved the merger agreement and the transactions contemplated
by it,
o declared the merger agreement advisable, and
o recommended that you and the other stockholders of Getty
Petroleum Marketing Inc. approve the merger.
The merger agreement required the board of directors of Getty Petroleum
Marketing Inc. to recommend that the stockholders approve the merger.
1
<PAGE>
What did our financial advisors say with respect to the fairness of the merger
to the stockholders?
On November 2, 2000, ING Barings, LLC, our financial advisors, delivered
its written opinion to the board of directors of Getty Petroleum Marketing Inc.
that, as of November 2, 2000, the cash consideration of $5.00 per share of
common stock to be received by stockholders of the Company pursuant to the
tender offer and the merger is fair from a financial point of view to such
stockholders. The opinion is attached as Annex B to this proxy statement. You
are urged to read the opinion in its entirety.
When and where will the special meeting of stockholders be held?
The special meeting of stockholders will be held at the offices of Akin,
Gump, Strauss, Hauer & Feld, L.L.P., 590 Madison Avenue, 20th Floor, New York,
New York 10022, on January ___, 2001 at 10:00 a.m., local time.
How many votes are required to approve the merger?
Approval of the merger requires the affirmative vote of the holders of a
majority of the outstanding shares of the common stock of Getty Petroleum
Marketing Inc. The Purchaser owns and has the right to vote 10,080,665 shares of
common stock, or approximately 72% of the outstanding shares of common stock,
and therefore can cause the merger to be approved without the affirmative vote
of any other stockholder.
Does LUKOIL have the financial resources to make payment for all shares of
common stock upon completion of the merger?
Yes. There are no financing conditions to the merger and Lukoil Americas
Corporation has sufficient funds on hand to pay for all remaining shares of
common stock upon consummation of the merger.
Am I entitled to vote my shares of common stock at the special meeting of
stockholders?
You are entitled to vote at the special meeting if you owned shares of the
common stock of Getty Petroleum Marketing Inc. at the close of business on
December 27, 2000, the record date for the special meeting. At the close of
business on the record date, 14,033,385 shares of Getty Petroleum Marketing
Inc.'s common stock were outstanding and entitled to vote at the special
meeting.
How can I vote my shares of common stock?
You may vote in either of two ways:
o by completing and returning the enclosed proxy card, or
o by appearing at the special meeting of stockholders and voting in
person.
If you complete and return the enclosed proxy but wish to revoke it, you
must either file with the Secretary of Getty Petroleum Marketing Inc. a written,
later-dated notice of revocation or send a later-dated proxy relating to the
same shares to the Secretary of Getty Petroleum Marketing Inc. at or before the
special meeting of stockholders or attend the special meeting of stockholders
and vote in person. The principal executive offices of Getty Petroleum Marketing
Inc. are located at 125 Jericho Turnpike, Jericho, New York 11753.
2
<PAGE>
How will the merger work?
Upon the terms and conditions of the merger agreement and approval of the
stockholders, Mikecon Corp., the wholly owned subsidiary of Lukoil Americas
Corporation, will merge with and into Getty Petroleum Marketing Inc. Getty
Petroleum Marketing Inc. will remain in existence as a wholly owned subsidiary
of Lukoil Americas Corporation. At the time the merger becomes effective, each
outstanding share of common stock of Getty Petroleum Marketing Inc. (other than
shares held by OAO LUKOIL, Getty Petroleum Marketing Inc. or any direct or
indirect wholly owned subsidiary of either OAO LUKOIL or Getty Petroleum
Marketing Inc.) will automatically be converted into the right to receive $5.00
in cash, without interest, and holders of such shares will thereafter have no
further equity interest in Getty Petroleum Marketing Inc.
What are the federal income tax consequences to me of the merger?
The merger will be a taxable transaction to you. For United States federal
income tax purposes, you will generally recognize gain or loss in the merger in
an amount determined by the difference between the cash you receive and the tax
basis in your shares of the common stock of Getty Petroleum Marketing Inc. The
merger may also be a taxable transaction for state, local and other purposes.
Because determining the tax consequences of the merger can be complicated, you
should consult your own tax advisor in order to understand fully how the merger
will affect you. See "The Merger--Certain Federal Income Tax Consequences."
Will I have appraisal rights?
The stockholders of Getty Petroleum Marketing Inc. will not have appraisal
rights in the merger.
How will I get payment for my shares of common stock in the merger?
Promptly after consummation of the merger, a transmittal letter and
instructions for surrendering certificates formerly representing shares of
common stock of Getty Petroleum Marketing Inc. will be mailed to each
stockholder of record of Getty Petroleum Marketing Inc. at the effective time of
the Merger. Lukoil Americas Corporation has appointed American Stock Transfer &
Trust Company to act as the paying agent for the merger. Do not send stock
certificates with your proxy.
3
<PAGE>
INTRODUCTION
General
This Proxy Statement is being furnished to stockholders of Getty Petroleum
Marketing Inc., a Maryland corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors (the "Board of Directors" or
the "Board") of the Company from holders of the outstanding shares of the Common
Stock, par value $0.01 per share (the "Shares"), of the Company for use at the
Special Meeting of Stockholders to be held on January ___, 2001 at 10:00 a.m.,
local time, at the offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P., 590
Madison Avenue, 20th Floor, New York, New York 10022, and at any adjournments or
postponements thereof (the "Special Meeting").
At the Special Meeting, stockholders will be asked to consider and vote on
the proposed merger between the Company and Mikecon Corp., a Delaware
corporation (the "Purchaser"), under the terms of the Agreement and Plan of
Merger, dated November 2, 2000 (the "Merger Agreement"), by and among OAO
LUKOIL, a Russian open joint stock company ("LUKOIL"), Lukoil International
GmbH, Lukoil Americas Corporation, a Delaware corporation ("Parent"), the
Purchaser and the Company. A copy of the Merger Agreement is included with this
Proxy Statement as Annex A. The Merger Agreement provides for the merger (the
"Merger") of the Purchaser with and into the Company, with the Company to be the
surviving corporation (the "Surviving Corporation") in the Merger. As a result
of the Merger, the Company will become a wholly owned subsidiary of Parent.
On November 2, 2000, the Company entered into the Merger Agreement with
LUKOIL and its affiliated companies. On November 9, 2000, the Purchaser
commenced a cash tender offer for all outstanding Shares pursuant to an Offer to
Purchase (which, together with the related letter of transmittal, constituted
the "Offer"), at a price per Share of $5.00 in cash. Shortly after 12:00
midnight, New York City time, on December 8, 2000, the Purchaser accepted for
payment pursuant to the Offer 10,080,665 Shares, consisting of all Shares
validly tendered and not withdrawn as of the expiration of the Offer, at $5.00
in cash per Share. The Merger is intended to follow the purchase of Shares
pursuant to the Offer as the second and final step in the acquisition of the
Company pursuant to the Merger Agreement.
Approval of the Merger requires the affirmative vote of the holders of a
majority of the outstanding Shares as of the Record Date, or approximately
7,016,693 Shares. As a result of the purchase of Shares pursuant to the Offer,
the Purchaser owns 10,080,665 Shares, constituting approximately 72% of the
issued and outstanding Shares. As required by the Merger Agreement, the
Purchaser will vote all Shares owned by it in favor of the approval and adoption
of the Merger Agreement. The Purchaser therefore has sufficient voting power to
cause the Merger Agreement to be approved without the affirmative vote of any
other stockholder.
Pursuant to the terms of the Merger Agreement, after the approval of the
Merger by the stockholders of the Company, the satisfaction or waiver of the
other conditions to the Merger and the filing of Articles of Merger with, and
acceptance by, the State Department of Assessments and Taxation of Maryland in
accordance with the provisions of the Maryland General Corporation Law (the
"MGCL") and the filing of a Certificate of Merger with, and acceptance by, the
Secretary of State of Delaware in accordance with the provisions of the Delaware
General Corporation Law (the date and time of such filings and acceptance is
herein after referred to as the "Effective Time"), each Share issued and
outstanding immediately prior to the Effective Time (other than Shares owned by
the Company or LUKOIL or any of their respective direct or indirect wholly owned
subsidiaries (which will be cancelled and retired without any conversion thereof
and without any payment with respect thereto)) will be converted into the right
to receive $5.00 per Share in cash, without interest thereon. At the Effective
Time, the stock transfer books of the Company shall be closed and no transfer of
Shares shall thereafter be made.
4
<PAGE>
Voting at the Special Meeting of Stockholders
The close of business on December 27, 2000 has been established as the
record date (the "Record Date") for the determination of stockholders entitled
to notice of, and to vote at, the Special Meeting. At the close of business on
the Record Date, there were 14,033,385 Shares issued and outstanding, each of
which is entitled to one vote at the Special Meeting, held by approximately
_______ holders of record.
Shares represented by a properly signed, dated and returned proxy will be
treated as present at the meeting for purposes of determining a quorum, without
regard to whether the proxy is marked as casting a vote or abstaining. Proxies
relating to "street name" Shares that are voted by brokers will be counted as
Shares present for purposes of determining the presence of a quorum, but will
not be treated as Shares having voted at the Special Meeting as to the Merger
proposal if authority to vote is withheld by the broker. Accordingly,
abstentions and broker non-votes will have the same effect as votes against the
approval of the Merger Agreement.
In order to vote on the approval of the Merger Agreement at the Special
Meeting, stockholders may attend the Special Meeting and vote in person or
deliver executed proxies to the following address:
American Stock Transfer & Trust Company
59 Maiden Lane
New York, New York 10038
Instructions with regard to the surrender of stock certificates to the
paying agent, together with a letter of transmittal to be used for this purpose,
will be forwarded to the Company's stockholders as promptly as practicable
following the Effective Time of the Merger. Stockholders should surrender stock
certificates only after receiving a letter of transmittal. Stockholders should
not send any stock certificates at this time.
5
<PAGE>
THE MERGER
Background of the Merger
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 the 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. ING Barings ultimately
distributed the confidential information memorandum to seven 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 Corp. ("Getty
Properties"), a subsidiary of Getty Realty Corp. ("Getty Realty"), that, as the
Company's lessor under the master leases pursuant to which the Company leased
most of its properties (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 meetings, the Board also initially discussed with legal
counsel the potential desirability of creating a special committee of directors
who were not officers of the Company or officers or directors of Getty Realty or
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.
6
<PAGE>
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 five 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.
7
<PAGE>
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 Apri1 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 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 Apri1 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.
8
<PAGE>
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 transaction which would
involve Getty Realty or one or more of the Company's 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.
9
<PAGE>
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 six
identified potential acquirors with whom the Company had previously had
discussions or others if necessary for the Board to comply with its 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 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.
10
<PAGE>
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. After extensive negotiations, Getty
Properties and the Lukoil Entities agreed to amend the Master Lease in order to,
among other things, consolidate the existing master leases into a single lease,
establish the initial term of the amended Master Lease as being for fifteen
years, provide for the exercise of renewals only on an "all or nothing" basis,
modify the rent escalator provisions, amend the use, casualty, condemnation and
default and cure provisions, provide credit enhancements in favor of the
landlord, establish standards for the abandonment of properties under the
amended master lease and for the allocation of environmental risks, and to
permit commercial leasehold financing.
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 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 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.
11
<PAGE>
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.
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 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 (as defined in the Merger Agreement). 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.
On November 9, 2000, the Board received another letter from United Sub
regarding its interest in acquiring all of the outstanding Shares. The letter
set forth United Sub's responses to clarifying questions posed to United Sub's
financial advisor by ING Barings following United Sub's November 6 proposal.
12
<PAGE>
The November 9 letter stated that United Sub had procured a commitment
letter from its financing institution for the portion of United Sub's proposed
$5.75 purchase price per Share that would not be provided by a $30 million
equity contribution by United; however, a copy of the commitment letter was not
provided. The letter also stated that United Sub's financing institution was
willing to meet with the Company or ING Barings to answer questions. The letter
indicated that United Sub (1) wished to resume due diligence immediately, (2)
believed it could complete its environmental due diligence study of the Company
in three to four weeks from the time it was permitted to resume work and (3) if
resolution of matters was reached with the Board, intended to launch a cash
tender offer prior to the expiration of the Offer.
The letter further stated that (1) United Sub's tender offer would have a
90% minimum condition, (2) United Sub required that a confirmatory audit
indicate that the Company's working capital deficit at closing not materially
exceed the $15,530,000 level at September 30, 2000, (3) the proposed purchase
price of $5.75 per Share would be reduced by any break-up fees and expense
reimbursements owed to the Purchaser as a result of the termination of the Offer
and (4) United Sub intended to seek certain unspecified changes to the Master
Lease.
United Sub's legal advisors subsequently advised the Company's legal
advisors that public disclosure at this time of the discussions between the
Company and United Sub "might have an adverse effect on [United Sub's] ability
to provide the [Company's] shareholders with a superior alternative to the
Lukoil transaction."
The Board held a special meeting on the evening of November 12, 2000, at
which the Board determined that disclosure of possible terms of any agreement
between the Company and United Sub would jeopardize continuation of negotiations
with respect to such matters. The Board further directed the officers of the
Company not to disclose publicly any such possible terms of any agreement with
United Sub until such an agreement has been reached or, upon the advice of
counsel, as may otherwise be required by law.
On November 16, 2000, the Company sent a letter to its stockholders stating
that no formal written offer had yet been presented to the Company by United,
and that all that had been made was a highly conditional proposal. The Board
recommended to the stockholders that they tender their shares to the Purchaser
pursuant to the Offer.
Discussions between representatives of United Sub and representatives of
the Company continued through late November 2000, as United Sub continued its
due diligence review. During the week ending December 1, 2000, representatives
of United Sub advised representatives of the Company that a formal offer would
be sent to the Board by late afternoon on Friday, December 1, 2000. During the
early afternoon of December 1, representatives of United Sub advised
representatives of the Company that United Sub would not make an offer unless
the Company agreed to reimburse United Sub $3 million prior to receiving an
offer.
The Board met on December 2, 2000. Following that meeting, discussions with
United Sub were discontinued and the Company sent a letter to United Sub. The
letter noted the Board's concerns over the conditions United was requiring to
make an offer and the conditions of that offer were it to be made (including,
among other items, its financing contingency and a requirement that 90% of the
Shares be tendered as a minimum condition). Nonetheless, the Board did indicate
a willingness to consider an offer if one was made by United prior to the
deadline imposed by the Merger Agreement.
On the afternoon of December 4, 2000, the Company received a letter from
United Sub and United Sub issued a press release related to that letter. The
letter and press release reiterated United Sub's December 1 demand for
reimbursement of $3 million as a condition to submitting a formal offer.
Nonetheless, after the Company and its advisors reviewed the letter and the
press release, the Company and its advisors held further discussions with United
Sub's advisors.
13
<PAGE>
Although United Sub did not at that time submit a formal written offer for
consideration by the Company's Board, as a result of those discussions, several
hours later United Sub's advisors provided the Company with (1) a copy of a
commitment letter from United Sub's financing source and (2) a draft merger
agreement in a form United Sub was purportedly prepared to sign, specifically
marked against what the Company provided to United Sub on November 16, 2000
(which itself was the same as the Lukoil Merger Agreement in all material
respects). After the Company and its advisors reviewed the commitment letter,
the Company and its advisors held yet further discussions with United Sub's
advisors regarding the terms and conditions of United Sub's potential proposal.
During those discussions, the Company's advisors expressed to United Sub's
advisors the Company's concern that the commitment letter contained a
substantial number of conditions precedent that were beyond the control of the
Company to satisfy or that were subject to satisfaction only in the sole
discretion of the financing source.
On the morning of December 5, 2000, the Company's Board met. The Company's
legal and financial advisors briefed the Board with respect to the discussions
with United Sub, including the terms of the documents United Sub's advisors had
provided. The Company's legal advisors again advised the directors of their
statutory duties under Maryland law and the Company's contractual obligations
under the Merger Agreement with Lukoil. After discussion of the terms and
conditions of United Sub's potential proposal, including United Sub's demand for
reimbursement of $3 million as a condition to submitting a formal offer, the
Board instructed its advisors to continue discussions with United Sub and
adjourned the meeting until later in the evening.
Throughout the day on December 5, 2000, the Company's advisors continued
discussions with United Sub and its advisors. Late in the day, the Company's
advisors had a discussion with United Sub's financing source and its financing
source's counsel regarding the terms and conditions of the commitment letter.
Shortly before the Board reconvened at 8:00 p.m., United Sub retracted its
December 1 demand for reimbursement of $3 million as a condition to submitting a
formal offer. United Sub's advisors then delivered a letter to the Board setting
forth the terms of a merger proposal which included a purchase price proposal of
approximately $5.65 per Share after payment of the break-up fees and expenses
which would be due to Lukoil Americas as a result of the termination of the
Merger Agreement - the same merger consideration as stated in United Sub's
December 4 press release. After further consultation with its outside counsel
and financial advisors and lengthy discussions, the Board concluded that it
could not determine that it had received a "Superior Company Proposal" (as
defined in the Merger Agreement) from United Sub. In reaching this conclusion,
the Board considered a number of factors including, without limitation, the
following:
o The transaction with Lukoil Americas and its subsidiary was fully
financed and substantially more likely to close - the Offer was
scheduled to close, subject to its terms and conditions, as early
as Friday, December 8, 2000. Under the transaction with Lukoil
Americas and its subsidiary, the Company's stockholders would
receive payment for their Shares not only on a date earlier than
they would pursuant to a transaction with United Sub, but also,
in the opinion of its advisors, with greater certainty.
o The advice of the Company's advisors that United Sub's financing,
as set forth in its unsigned commitment letter, had substantial
risks associated with its completion. The Company's advisors
informed the Board that United Sub and its advisors had not
provided (1) sufficient assurances that all of these issues were
capable of being resolved or (2) sufficient or complete assurance
that the proposed acquisition of the Company by United Sub would
not trigger a default under the terms of United's public debt
indenture.
14
<PAGE>
o United Sub's and its financing source's continued insistence on a
90% minimum condition to United Sub's tender offer raised
substantial additional risk that any holder(s) of a significant
amount of the Company's stock could effectively block the
completion of United Sub's proposal.
o The risk that deeming United Sub's merger proposal a "Superior
Company Proposal" could jeopardize the chances that Lukoil's
Offer would remain available, potentially leaving stockholders
with no transaction or opportunity to sell their Shares at a
premium.
In view of these and other factors considered in connection with its
evaluation of United Sub's proposal, 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 conclusion. The Board continued to
recommend that the Company's stockholders tender their Shares pursuant to
Lukoil's Offer.
On the afternoon of December 7, 2000, the Board received the first of two
unsolicited letters from United Sub regarding its continued interest in
acquiring all of the outstanding Shares. (Contemporaneously, United Sub issued a
press release related to its first letter.) The first letter stated that United
Sub was willing to pay $6.00 per Share and that United Sub would be responsible
for payment of the break-up fees and expenses which could be due to Lukoil
Americas as a result of the termination of the Merger Agreement under certain
circumstances described in the Merger Agreement. The letter also purported to
address and provide assurance on certain of the Board's concerns with United
Sub's previous merger proposal as they existed on the evening of December 5.
This letter stated that a potential alternative structure that the Company
had initially raised with United Sub could eliminate the substantial additional
risk to the completion of United Sub's proposal raised by its insistence on the
90% minimum condition to United Sub's tender offer. The letter did not address
the following issues related to United Sub's potential structure:
o its high level of complexity;
o the high likelihood of litigation which could arise out of it;
o the protracted time which could be required for all of the
Company's stockholders to receive their merger consideration
under it; or
o how the alternative structure would resolve the Board's concerns
over United Sub's financing difficulties.
The letter cursorily addressed the Board's concerns that United Sub's
financing, as set forth in its commitment letter, had substantial risks
associated with its completion, including that United Sub and its advisors had
not provided (1) sufficient assurances that all of these issues were capable of
being resolved or (2) sufficient or complete assurance that the proposed
acquisition of the Company by United Sub would not trigger a default under the
terms of United's public debt indenture. The letter concluded with a proposal
that United Sub was prepared to proceed directly to a merger offering $6.00 per
Share plus an interest factor of 10% per annum to compensate for the delay in
completion of a transaction with United Sub from December 8, 2000 - the
expiration date of Lukoil's Offer.
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Later in the afternoon, the Board received a second letter from United Sub
which reiterated the purchase price from its first letter of the day and further
proposed that United Sub would accept a reduction in the Company's working
capital related to the payment of the break-up fees and expenses which could be
due to Lukoil Americas. This letter also stated that United Sub wished to
commence a tender offer for the Shares on December 8 and sought the Company's
permission to do so under the confidentiality agreement between the Company and
United. Contemporaneously, United Sub issued two additional press releases
related to its second letter. The Company's legal advisors responded by letter
indicating that the Company was confused by United Sub's request because the
confidentiality agreement did not contain a standstill provision.
Also on the afternoon of December 7, 2000, United Sub and an alleged
stockholder of the Company filed a complaint in the Supreme Court of the State
of New York, County of New York (the "Court"), against the Company, each of the
directors of the Company and each of the Lukoil Entities. The allegations of the
complaint included that the directors of the Company failed to act in the best
interests of the stockholders of the Company by (1) failing to exercise
reasonable business judgment in evaluating the economic benefits of the proposal
made by United Sub, (2) failing to disclose the scope and extent of their
conflict of interest as directors and majority stockholders of both the Company
and Getty Realty and further placing their personal interests and the interests
of Getty Realty ahead of the stockholders of the Company in rejecting the
proposal made by United Sub, (3) incorporating into the Merger Agreement a
termination fee designed to discourage the acceptance of other proposals, and
(4) issuing misleading characterizations of United Sub's offer and the financing
of that offer. United Sub further alleged that the Lukoil Entities aided and
abetted the directors of the Company in committing such conduct. Among other
things, the complaint sought to enjoin the Purchaser from accepting for payment
the Shares validly tendered in the Offer on the Expiration Date, consummating
the Merger and unspecified damages. The Company believed that United Sub's
action was frivolous and totally without merit. The Company intended to oppose
and seek dismissal of United Sub's complaint. The Court ordered that the parties
appear before it for a hearing on the issue of whether an injunction was
appropriate, at 3:00 p.m. on Friday, December 8, 2000 and further ordered that
pending such hearing the Lukoil Entities were enjoined from accepting for
payment the Shares tendered in the Offer and the parties were enjoined from
consummating the Merger.
On the evening of December 7, 2000, the Board held a special meeting at
which the Board discussed with its legal and financial advisors the events
occurring since its December 5 special meeting. After lengthy discussion, the
Board temporarily adjourned the meeting in order to provide the Company Special
Committee with an opportunity to convene with its counsel.
Upon reconvening the Board's special meeting, the legal advisor to the
Company Special Committee advised the Board that the Company Special Committee
had considered whether United Sub's letters constituted a "Superior Company
Proposal" (as defined in the Merger Agreement). In particular, the Company
Special Committee members focused on the requirement in the Merger Agreement
that an offer was a "Superior Company Proposal," only where the proposed
transaction was "reasonably capable of being completed, taking into account all
financial, regulatory, legal and other aspects of such proposal." The Board was
further advised that the Company Special Committee had unanimously determined
that United Sub's December 7 letters did not constitute a "Superior Company
Proposal" under the Merger Agreement. The Company Special Committee recommended
that the Board reject United's December 7 letters, and continue to recommend
that stockholders accept the Lukoil Offer. In reaching its conclusion, the
Company Special Committee considered various factors, including:
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o Its uncertainty as to whether (1) the issues regarding United
Sub's proposed financing were capable of being resolved or (2)
United Sub could provide the Company with sufficient or complete
assurance that United Sub's proposed acquisition of the Company
would not trigger a "Default" under the terms of United's public
debt indenture.
o The pattern of United Sub's actions with respect to the previous
merger discussions with the Company and its advisors (including
United Sub's failure to timely produce or significantly delaying
the production of a formal merger proposal, as well as necessary
documents and other information) which presented substantial
doubt as to the likelihood that a merger between United Sub and
the Company would close.
o The potential that the Company's stockholders could be left with
no transaction or opportunity to sell their Shares at a premium
if the Merger Agreement was terminated, a merger agreement with
United Sub was not timely consummated due to its substantial
conditions or otherwise, or the terms of United's proposal were
substantially renegotiated.
After further consultation with its outside counsel and financial advisors
and discussions, the Board concluded that United Sub had not demonstrated that
it had resolved or had the ability to resolve any of the uncertainties, risks or
impediments to completion of United Sub's merger proposal that the Board had
considered on December 5. The Board reaffirmed its December 5 conclusion that it
could not determine that it had received a "Superior Company Proposal" from
United Sub. The Board then reaffirmed its recommendation that stockholders
accept Lukoil's Offer.
In view of these and other factors considered in connection with its
evaluation of United Sub's letters, neither the Company Special Committee nor
the Board found it practicable to, or did, quantify or otherwise attempt to
assign relative weights to the specific factors considered in reaching its
conclusion.
On the afternoon of December 8, 2000, the Supreme Court of the State of New
York heard arguments on a motion brought by United and an alleged stockholder of
the Company seeking to enjoin the Purchaser from accepting for payment the
Shares validly tendered in the Offer on the Expiration Date and consummating the
Merger. At such hearing, the Court denied in its entirety the plaintiffs' motion
for a preliminary injunction.
Shortly after 12:00 midnight, New York City time, on December 8, 2000, the
Purchaser accepted for payment all Shares validly tendered and not withdrawn in
the Offer, consisting of 10,080,665 Shares, or approximately 72% of the
outstanding Shares. The Purchaser promptly paid for such Shares.
Reasons for the Board's Conclusions
In reaching the determination described above with respect to the Merger
Agreement, the Offer and the Merger, the Board considered a number of factors
including, without limitation, the following:
o The Company's financial condition, results of operations and
business and strategic objectives, as well as the risks involved
in achieving those objectives;
o Current conditions and trends in the petroleum industry in
general, and in the gasoline marketing business in particular,
were impacting the Company's market valuation. In particular, the
Board considered:
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o the significant competition and consolidation in the
industry and market in which the Company operates, the
larger size of other participants in the industry and
the greater available capital and resources of these
other participants as compared to the Company; and
o the Company's status as an independent marketer of
petroleum products, without refining capacity, while
many of the Company's competitors are large vertically
integrated oil companies;
o 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;
o 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 the Purchaser. These efforts resulted in
the receipt or solicitation of an indication of interest from
approximately 67 entities. The Company's public disclosure seven
months before the Merger Agreement was signed that the Company
was considering strategic alternatives resulted in Lukoil USA
making the most attractive offer, and did not result in a
superior offer from any other entity;
o The financial and valuation analyses presented to the Board by
ING Barings, including:
o market prices and financial data relating to other
companies engaged in businesses considered comparable
to the Company;
o prices and premiums paid in recent selected
acquisitions of companies engaged in businesses
considered comparable to those of the Company;
o premiums paid in all-cash acquisition transactions for
targets of similar size to the Company since January
2000;
o a discounted cash flow valuation of the Company based
on its financial projections through its fiscal year
2005; and
o a hypothetical leveraged buyout valuation of the
Company.
These analyses established 16 reference ranges of value for the
Board's consideration. The Board noted that LUKOIL's offer price
of $5.00 per Share was higher than the top end of five reference
ranges, fell at the high end of five reference ranges, fell
within another five reference ranges and was lower than the low
end of only one reference range;
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o 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 Offer 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. Stockholders are urged to read the opinion carefully and
in its entirety;
o The terms and conditions of the Merger Agreement, including,
without limitation, that the terms of the Merger Agreement would
not prevent other third parties from making proposals to the
Company after the execution of the Merger Agreement, would 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 were to reasonably determine 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 the Purchaser's
proposal and (B) a majority of the Board were to determine in
good faith (after consultation with legal counsel) that it was
necessary to take such actions in order to comply with its
fiduciary) duties under applicable law, and would permit the
Company, subject to the non-solicitation provisions and the
payment of the termination fee and expense reimbursement, to
enter into a transaction with another third party that a majority
of the Board determined 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 the Purchaser's proposal,
and which was reasonably capable of being consummated if the
Board were to reasonably determine in good faith (after
consultation with legal counsel) that it was 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;
o 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;
o 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;
o The structure of the transaction, which provided for all cash
consideration, was not subject to any financing contingency and
was designed, among other things, to result in the holders of the
Shares receiving, at the earliest practicable time, the
consideration paid in the Offer;
o The Company Special Committee's review of the aspects of the
Merger which involved Getty Realty or one or more of the
principal stockholders of the Company, including the amendments
to the Master Lease, and its recommendation to approve such
aspects of the Merger;
o The approval of the transaction by principal stockholders holding
40% of the issued and outstanding Shares of the Company, as
evidenced by the execution of their respective Support
Agreements;
o The principal stockholders' obligations under the Support
Agreements terminate upon termination of the Merger Agreement;
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o 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 represented a 122% premium over
the closing 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
o The potential availability to the Company's stockholders of
dissenters' rights in the Merger under applicable law. See
"--Certain Legal Matters; Regulatory Approvals--Appraisal
Rights."
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.
Opinion of the Company's Financial Advisor
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 of Directors 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. The Board of Directors received a written opinion from ING Barings,
its financial advisor, that, as of November 2, 2000, the cash consideration of
$5.00 per Share to be received by the stockholders of the Company pursuant to
the Offer and Merger is fair from a financial point of view to such
stockholders. The full text of the written opinion of ING Barings dated November
2, 2000, which sets forth assumptions made, matters considered and limitations
on the review undertaken, is attached as Annex B to this Proxy Statement.
Stockholders are urged to read this opinion carefully in its entirety.
Pursuant to the terms of their engagement, the Company has agreed to pay
ING Barings a fee of $900,000. The Company also 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 the 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 may in the future
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.
Payment for the Shares
Promptly after consummation of the merger, American Stock Transfer & Trust
Company, in its capacity as paying agent, will send a transmittal letter and
instructions to each person that was a record holder of Shares immediately prior
to the Effective Time advising such holder of the procedure for surrendering his
or her certificate or certificates in exchange for $5.00 in cash for each
formerly outstanding Share. To receive the payment to which they are entitled
pursuant to the terms of the Merger Agreement, stockholders must carefully
comply with the instructions on such transmittal letter and return it, along
with their certificates, to the paying agent pursuant to the terms thereof. Do
not send stock certificates with your proxy. Interest will not be paid on the
amounts payable upon surrender of certificates which formerly represented the
Shares. If the cash price of $5.00 per share is to be paid to any person other
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than the registered holder of such Shares, it will be a condition to the payment
by the paying agent that the surrendered certificate is properly endorsed for
transfer and the person requesting delivery of the cash price will pay to the
paying agent any transfer or other taxes as a result of the payment to a person
other than the registered holder unless such person can establish to the
reasonable satisfaction of the paying agent that such tax has been paid or is
not payable. None of the paying agent, Parent, the Purchaser or the Company
shall be liable to a holder of Shares for any cash delivered pursuant to the
Merger Agreement to any public official pursuant to applicable abandoned
property, escheat and similar laws.
One year after consummation of the Merger, the paying agent will deliver to
the Parent any cash funds not theretofore disbursed to holders of certificates
formerly representing Shares, and thereafter the holders of such certificates
shall look to Parent (subject to applicable abandoned property, escheat or other
similar laws) for any cash payments due as a result of the merger for the Shares
formerly represented by such certificates.
Certain Legal Matters; Regulatory Approvals
Appraisal Rights. No appraisal rights are available under the MGCL in
connection with the Merger because the Shares continued to be listed on the New
York Stock Exchange on the Record Date.
State Takeover Laws. The Company is incorporated under the laws of the
State of Maryland. In general, Section 3-602 of the MGCL prevents a corporation
from engaging in any business combination with any "interested stockholder,"
which is defined generally as a person that beneficially owns 10% or more of the
voting power of the outstanding voting stock of a corporation, or any affiliate
of the interested stockholder for a period of five years. The Company has
represented to Parent and the Purchaser in the Merger Agreement that the Board
of Directors of the Company has taken all action necessary to render Section
3-602 of the MGCL inapplicable to the Offer, the Merger, the Merger Agreement
and the transactions contemplated thereby. In addition, 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. This provision of the MGCL does not apply, among other things,
to corporations that have generally or specifically approved or exempted
acquisitions of shares in its charter or bylaws adopted at any time before the
acquisition of "control shares". This provision of the MGCL does not apply to
the Merger because the Company's bylaws (the "Bylaws") contain such provisions.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In Edgar v. Mite Corp., the Supreme Court of
the United States invalidated on constitutional grounds the Illinois Business
Takeover Statute, which, as a matter of state securities law, made takeovers of
corporations meeting certain requirements more difficult. However, in 1987 in
CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the State of
Indiana may, as a matter of corporate law and, in particular, with respect to
those aspects of corporate law concerning corporate governance, constitutionally
disqualify a potential acquiror from voting on the affairs of a target
corporation without the prior approval of the remaining stockholders. The state
law before the Supreme Court was by its terms applicable only to corporations
that had a substantial number of holders in the state and were incorporated
there.
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The Company, directly or through subsidiaries, conducts business in a
number of states in the United States, some of which have enacted takeover laws.
The Purchaser has reserved the right to challenge the applicability or validity
of any state law purportedly applicable to the Merger, and no action taken in
connection with the Merger is intended as a waiver of such right. In the event
it is asserted that one or more state takeover laws is applicable to the Merger,
and an appropriate court does not determine that it is inapplicable or invalid
as applied to the Merger, the Purchaser might be required to file certain
information with, or receive approvals from, the relevant state authorities. In
addition, if enjoined, the Purchaser might be delayed in consummating the
Merger.
Antitrust. Under the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976,
as amended (the "HSR Act") and the rules that have been promulgated thereunder
by the Federal Trade Commission ("FTC"), certain mergers and acquisitions 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
acquisition of Shares by the Purchaser pursuant to the Offer was subject to the
HSR Act requirements.
Under the provisions of the HSR Act applicable to the purchase of Shares
pursuant to the Offer, such purchase could not be made until the expiration of a
fifteen calendar day waiting period following the required filing of a
Notification and Report Form under the HSR Act by Parent, which Parent submitted
on November 6, 2000. Accordingly, the waiting period under the HSR Act would
have expired at 11:59 P.M., New York City time, on November 21, 2000, which was
the fifteenth calendar day following filing of the Notification and Report Form
by Parent, if the FTC had not granted early termination of the waiting period.
The FTC granted Parent's request for early termination on November 20, 2000.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
the Purchaser pursuant to the Offer and Merger. At any time before or after the
Purchaser's purchase of Shares, either the Antitrust Division or the FTC could
take such action under the antitrust laws as it deems necessary or desirable in
the public interest, including seeking to enjoin the Merger, seeking divestiture
of Shares acquired by the Purchaser or divestiture of substantial assets of
Parent, the Company or any of their respective subsidiaries. State attorney
generals may also bring legal action under the antitrust laws, and private
parties may bring such action under certain circumstances. There can be no
assurance that a challenge to the Merger on antitrust grounds will not be made
or, if a challenge is made, what the result will be.
Purpose of the Offer and Merger; Certain Agreements
Purpose of the Offer and Merger
The purpose of the Offer was to enable Parent to acquire as many
outstanding Shares as possible as a first step in acquiring the entire equity
interest in the Company. The purpose of the Merger is for Parent to acquire all
remaining Shares not purchased pursuant to the Offer. Upon consummation of the
Merger, the Company will become a wholly owned subsidiary of Parent and an
indirect wholly owned subsidiary of LUKOIL.
Subject to certain matters described below, it is currently expected that,
initially following the Merger, the business and operations of the Company will
generally continue as they are currently being conducted. Parent will continue
to evaluate all aspects of the business, operations, capitalization and
management of the Company after the consummation of the Merger and will take
such further actions as it deems appropriate under the circumstances then
existing.
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The Shares are currently traded on the New York Stock Exchange. Following
the consummation of the Merger, the Shares will no longer be listed on the New
York Stock Exchange and the registration of the Shares under the Exchange Act
will be terminated. Accordingly, after the Merger, there will be no publicly
traded equity securities of the Company outstanding and the Company will no
longer be required to file periodic reports with the Commission.
Except as otherwise discussed in this Proxy Statement, Parent has no
present plans or proposals that would result in any extraordinary corporate
transaction, such as a merger, reorganization, liquidation involving the Company
or any of its subsidiaries, or purchase, sale or transfer of a material amount
of assets of the Company or any of its subsidiaries or in any other material
changes to the Company's capitalization, corporate structure, business of the
Company or the management of the Company.
The Purchaser has caused the Board to be reconstituted pursuant to the
Merger Agreement. On December 13, 2000, Leo Liebowitz, Howard Safenowitz,
Matthew J. Chanin and Howard Silverman resigned as directors of the Company, and
Vadim Gluzman and Ralif Rafilovich Safin were duly appointed as directors.
Ronald Hall and Richard Montag have remained on the Board pursuant to the Merger
Agreement to ensure compliance with applicable provisions of the Merger
Agreement. The Board established a special merger committee and delegated to
such committee all power and authority of the Board to authorize and direct the
taking of all actions to consummate the Merger, except to the extent that the
MGCL or the Merger Agreement prohibits such delegation of authority. The Board
appointed Messrs. Gluzman and Safin to serve as members of the special merger
committee. Subsequently, the Board duly appointed Sergey P. Kukura as a director
of the Company.
On December 13, 2000, Mr. Liebowitz resigned as Chairman and Chief
Executive Officer of the Company.
Certain Agreements
Merger Agreement
The following is a summary of the material terms of the Merger Agreement.
The summary is qualified in its entirety by reference to the Merger Agreement, a
copy of which is attached hereto as Annex A.
Composition of the Board following Consummation of the Offer. The Merger
Agreement provides that, promptly after the purchase of and acceptance of
payment for the Shares by the Purchaser pursuant to the Offer, the Purchaser is,
subject to the provisions of the next paragraph, entitled to designate such
number of directors (the "Purchaser Designees"), rounded up to the next whole
number, on the Company's Board of Directors as is equal to the product of the
total number of directors on such Board (after giving effect to any increase in
the size of or vacancies on such Board pursuant to the following sentence)
multiplied by the percentage that the number of Shares beneficially owned or of
record by the Lukoil Entities at such time bears to the total number of Shares
then issued and outstanding on a fully diluted basis. In furtherance thereof,
the Company will, upon the request of the Purchaser, either increase the size of
its Board of Directors or use its reasonable best efforts promptly to secure the
resignations of such number of its incumbent directors, or both, as is necessary
to enable the Purchaser Designees to be so elected or appointed to the Company's
Board of Directors. The Merger Agreement further provides that the Company's
obligation to appoint the Purchaser Designees to the Company's Board of
Directors will be subject to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. The Purchaser, Parent and LUKOIL will use their
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respective reasonable best efforts to ensure that at least two members of the
Board of Directors shall, at all times prior to the Effective Time, be a
director of the Company who was a director of the Company on the date of the
Merger Agreement (the "Continuing Director"). Each of the Continuing Directors
must be a director then serving, if any, who as of the date of the Merger
Agreement and as of the date of determination, is neither an employee,
consultant of or holder of greater than a 1% beneficial interest in the Company
or Getty Properties nor a director of Getty Properties ("Independent"). The
Purchaser has caused the Board to be reconstituted pursuant to the Merger
Agreement. On December 13, 2000, Leo Liebowitz, Howard Safenowitz, Matthew J.
Chanin and Howard Silverman resigned as directors of the Company, and Vadim
Gluzman and Ralif Rafilovich Safin were duly appointed as directors. Ronald Hall
and Richard Montag have remained on the Board pursuant to the Merger Agreement
to ensure compliance with applicable provisions of the Merger Agreement.
Subsequently, the Board duly appointed Sergey P. Kukura as a director of the
Company.
If there is more than one Continuing Director and prior to the Effective
Time the number of Continuing Directors is reduced for any reason, the remaining
Continuing Directors or directors will be entitled to designate persons who are
Independent to fill such vacancies who will be deemed to be Continuing
Directors. If there is only one Continuing Director and he or she resigns or is
removed from office, such Continuing Director will be entitled to designate an
Independent person as his or her successor who will be deemed to be a Continuing
Director. If there are no Continuing Directors able to continue to serve in such
capacity due to death or mental incapacity, then a majority of the directors
remaining on the Company's Board of Directors may designate Independent persons
to act as successors of such Continuing Directors who will be deemed to be
Continuing Directors. From and after the time, if any, that the Purchaser
Designees constitute at least a majority of the Company's Board of Directors and
prior to the Effective Time, pursuant to the terms of the Merger Agreement, any
amendment or termination of the Merger Agreement by the Company or the
transactions contemplated thereby, or any amendment to the Company's articles of
incorporation or by-laws, which in either case materially and adversely affects
the stockholders may be effected only if such action is approved by, as
determined by the Board of Directors, either a majority of the entire Board of
Directors which majority must include the concurrence of the Continuing
Directors or, to the extent permitted under the MGCL, a committee of the Board
of Directors consisting of only Continuing Directors.
The Merger. The Merger Agreement provides that subject to the conditions
thereof, and in accordance with the MGCL and the DGCL, the Merger will be
effected and the Purchaser will be merged with and into the Company as soon as
practicable following the closing of the Offer. Following the Merger, the
separate existence of the Purchaser will cease and the Company will continue as
the surviving corporation (as such, the "Surviving Corporation"). At Parent's
election, any direct or indirect domestic subsidiary of Parent other than the
Purchaser may be merged with and into the Company instead of the Purchaser, and
in such event the parties to the Merger Agreement will execute an amendment to
the Merger Agreement in order to reflect such election. Parent has not made this
election.
At the Effective Time, the articles of incorporation of the Company in
effect immediately before the Effective Time will be the articles of
incorporation of the Surviving Corporation until duly amended as provided
therein or by applicable law. At the Effective Time and without any further
action on the part of the Company or the Purchaser, the Bylaws will be amended
in their entirety to read as the bylaws of the Purchaser as in effect
immediately prior to the Effective Time and, as amended, will be the bylaws of
the Surviving Corporation. Immediately prior to the Effective Time, each
Continuing Director will resign effective as of the Effective Time. The officers
of the Company immediately prior to the Effective Time will be the officers of
the Surviving Corporation, until the earlier of their resignation or removal or
until their respective successors are duly elected and qualified, as the case
may be.
Effect of the Merger on the Capital Stock of the Constituent Corporations.
At the Effective Time, each issued and outstanding Share (other than Shares held
by the Company or by LUKOIL or any of their respective direct or indirect wholly
owned subsidiaries, which will automatically be cancelled and will cease to
exist and no cash or other consideration will be delivered or deliverable in
exchange therefor) will, by virtue of the Merger and without any action by the
holders thereof, be converted into the right to receive $5.00 per Share (the
"Merger Consideration") payable to the holder thereof, without interest thereon,
less any required withholding taxes, upon surrender and exchange of a stock
certificate.
24
<PAGE>
As of the Effective Time, each share of common stock of the Purchaser then
issued and outstanding will be converted into, and represent all of, the fully
paid and nonassessable shares of common stock, par value $0.01 per share, of the
Surviving Corporation.
The Merger Agreement provides that at the Effective Time, each then
outstanding option to purchase Shares, whether or not otherwise vested and
exercisable in accordance with its terms (a "Stock Option"), will be cancelled
by the Company and in consideration of such cancellation and, except to the
extent that Parent and the holder of any such Stock Option otherwise agree,
Parent will pay to such holders of Stock Options an amount in respect thereof
equal to the product of (A) the excess, if any, of (i) the Merger Consideration
over (ii) the exercise price per Share subject to such Stock Option and (B) the
number of Shares subject to such Stock Option immediately prior to its
cancellation. Such payment will be decreased by any required withholding taxes
and without interest.
Conduct of Business of the Company. Pursuant to the Merger Agreement, the
Company has agreed that prior to the Effective Time, the Company and its
subsidiaries will carry on its business in the usual, regular and ordinary
course in all material respects and to use its reasonable best efforts to
preserve intact their current business organizations, and their relationships
with customers, suppliers and others having business dealings with the Company.
Without limiting the generality of the foregoing, except as expressly
contemplated by the Merger Agreement, the Company and its subsidiaries will not,
without the prior consent of Parent:
(i) propose to declare or pay any dividends on its stock; split,
combine or reclassify any stock; repurchase or redeem any of its
stock; or issue any equity securities or debt securities with
voting rights;
(ii) amend or propose to amend the charter documents of the Company or
any of its subsidiaries;
(iii) (A) incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or
warrants or rights to acquire any debt securities of the Company
or guarantee any debt securities of other persons other than (x)
indebtedness of the Company or its subsidiaries to the Company or
its subsidiaries, (y) borrowings under existing credit lines,
including in support of letters of credit, in the ordinary course
of business or (z) otherwise in the ordinary course of business,
(B) make any loans, advances or capital contributions to, or
investments in, any other person, other than by the Company or
its subsidiaries to or in the Company of its subsidiaries or (C)
pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or
otherwise), other than, in the case of clauses (B) and (C),
loans, advances, capital contributions, investments, payments,
discharges or satisfactions incurred or committed to in the
ordinary course of business;
(iv) (A) increase the compensation payable or to become payable to any
of its executive officers or employees, (B) take any action with
respect to the grant of any severance or termination pay, or stay
bonus or other incentive arrangement (other than pursuant to
benefit plans and policies in effect on the date of the Merger
Agreement) or (C) amend, establish or create any benefit plan,
arrangement, policy or agreement which would be an employee
benefit plan of the Company if in existence as of the date of the
Merger Agreement, except any such increases or grants made in the
ordinary course of business;
25
<PAGE>
(v) directly or indirectly acquire, make any investment in, or make
any contributions to, any person (other than a subsidiary of the
Company) other than in the ordinary course of business consistent
with past practice;
(vi) make any new capital expenditure or expenditures in excess of
$5.0 million in the aggregate;
(vii) enter into, amend or terminate any material contract or any
contract involving amounts in excess of $1.0 million per year
other than in the ordinary course of business consistent with
past practice;
(viii) enter into any agreement, understanding or commitment that
restrains, limits or impedes the Company's ability to compete
with or conduct any line of business, including, but not limited
to, geographic limitations on the Company's activities;
(ix) make or rescind any material tax election or settle or compromise
any material income tax liability of the Company or of any of its
subsidiaries with any tax authority without notice to Parent;
(x) make any change in any method of accounting or accounting
practice or policy, except as required by generally accepted
accounting principles;
(xi) revalue any material assets of the Company or any of its
subsidiaries, including but not limited to writing down the value
of inventory or writing off notes or accounts receivable other
than in the ordinary course of business, except for any
revaluation resulting from a change in circumstances or
conditions from those prevailing as of January 31, 2000;
(xii) acquire, sell, transfer, lease or encumber any assets except in
the ordinary course of business and consistent with past
practice;
(xiii) adopt a plan of complete or partial liquidation or adopt
resolutions providing for the complete or partial liquidation,
dissolution, consolidation, merger, restructuring or
recapitalization of the Company; or
(xiv) settle or compromise any material claims or litigation or, except
in the ordinary course of business or in an amount less than
$100,000, waive, release or assign any material rights or claims
or make any payment, direct or indirect, of any material
liability before the same becomes due and payable in accordance
with its terms.
In addition to the foregoing, the Board of Directors or any committee
thereof will take no action to waive any provision of any Company equity plan
that would otherwise cause the stock options thereunder to be cancelled or
converted at the Effective Time in accordance with their terms and without
further action by the Company, the Board of Directors or any committee thereof.
The Board of Directors shall cause the executive officers of the Company to take
all actions reasonably necessary or appropriate to cause all stock options to be
cancelled at the Effective Time, including, if requested by Parent, by providing
written notice to all holders of stock options that all stock options will be
cancelled and converted at the Effective Time as provided in the Merger
Agreement.
26
<PAGE>
Recommendation and Meeting of Stockholders. The Merger Agreement provides
that as soon as practicable following the acceptance for payment of and payment
for Shares by the Purchaser in the Offer, if required by law to consummate the
Merger, the Company will convene and hold a special meeting of the stockholders
of the Company (the "Stockholders Meeting") for the purpose of considering and
voting upon the Merger. The Merger Agreement requires that, subject to the Board
of Directors' statutory duties under applicable law, the Board of Directors
shall recommend that the holders of Shares vote in favor of the adoption of the
Merger at the Stockholders Meeting. At the Stockholders Meeting, Parent and the
Purchaser shall cause all of the Shares owned by them to be voted in favor of
the approval of the Merger.
On November 2, 2000, the Board of Directors recommended that the
stockholders of the Company vote in favor of the Merger pursuant to the Merger
Agreement.
Access to Information, Notification of Certain Matters. The Merger
Agreement provides that the Company and its subsidiaries will afford to Parent
and its officers, employees, accountants, counsel, financial advisors and other
representatives reasonable access during normal business hours prior to the
Effective Time to all of the Company's and its subsidiaries' properties, books,
contracts, commitments and records and its officers, management employees and
representatives and the Company will furnish promptly to Parent all information
concerning the Company's business, properties and personnel as Parent may
reasonably request.
Employee Benefit Plans. The Merger Agreement provides that Parent shall, or
shall cause the Surviving Corporation to, provide the employees of the Company
as a group (other than those employees covered by a collective bargaining
agreement) through December 31, 2001 without interruption with employee benefits
that are in the aggregate substantially as favorable as those provided to the
employees immediately prior to the Effective Time. Employees will be given
credit for all service with the Company or its subsidiaries (or service credited
by the Company or its subsidiaries for similar plans) for all purposes. From and
after the Effective Time, the Parent will and will cause the Surviving
Corporation and its subsidiaries to (i) cause any pre-existing condition or
limitation and any eligibility waiting periods (to the extent such conditions,
limitations or waiting periods did not apply to the employees of the Company
under the Company's existing benefit plans) under any group health plans of the
Lukoil Entities or any of their respective subsidiaries to be waived with
respect to employees of the Company and its subsidiaries and their eligible
dependents, and (ii) give each employee of the Company and its subsidiaries
credit for the plan year in which the Effective Time occurs toward applicable
deductibles and annual out-of-pocket limits for expenses incurred prior to the
Effective Time (or such later date on which participation commences) during the
applicable plan year.
The Company established a leveraged Employee Stock Ownership Plan (the
"ESOP") in 1997 that purchased 671,298 newly issued Shares from the Company
using the proceeds of a loan made by the Company to the ESOP (the "ESOP Loan").
The Merger Agreement provides that immediately following any disposition of
Shares pursuant to the Offer or the Merger, the Company will cause the ESOP
trust to prepay the ESOP Loan to the maximum extent possible, and the Company
will forgive any remaining balances outstanding under such loan. After the
Merger has been completed, Parent will cause the Surviving Corporation to make
contributions to the Retirement and Profit Sharing Plan in an amount equal to
the amounts it would have contributed to the ESOP. The trustee of the ESOP
tendered 667,065 Shares subject to the ESOP in the Offer.
Directors' and Officers' Insurance and Indemnification. The Merger
Agreement provides that for a period of six years after the Effective Time, the
Surviving Corporation will cause to be maintained in effect the provisions with
respect to indemnification, exculpation and advancement of expenses set forth in
the articles of incorporation and bylaws of the Company and its subsidiaries and
in any agreements disclosed to the Purchaser as in effect on the date of the
Merger Agreement.
27
<PAGE>
In accordance with the Merger Agreement, the Company has purchased policies
or extensions of current policies of directors' and officers' 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 as disclosed to Parent on the date of the Merger Agreement, (b) which
shall 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, and (c) providing coverage for a six-year period after
the Effective Time 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, including, without limitation, in
respect of the transactions contemplated by the Merger Agreement. The Merger
Agreement also provides that Parent will and will cause the Surviving
Corporation to maintain such policies in full force and effect, and continue to
honor the Company's obligations under such policies for the six-year period
commencing on the Effective Time. Notwithstanding the foregoing, the Surviving
Corporation will not be liable for any settlement effected without its written
consent.
Any member of the Company's Board of Directors who intentionally fails to
timely resign from the Company's Board of Directors pursuant to the Merger
Agreement, or who subsequently revokes such resignation, will not be eligible
for the benefits provided for above.
Public Announcements. The Merger Agreement provides that the Company and
Parent will use all reasonable best efforts to develop a joint communications
plan and each party shall use all reasonable best efforts (i) to ensure that all
press releases and other public statements with respect to the transactions
contemplated hereby will be consistent with such joint communications plan and
(ii) unless otherwise required by applicable law or by obligations pursuant to
any listing agreement with or rules of any securities exchange, to consult with
each other before issuing any press release or otherwise making any public
statement with respect to the Merger Agreement or the transactions contemplated
thereby.
Conditions to the Merger. The Merger Agreement provides that the respective
obligation of each party to effect the Merger is subject to the satisfaction or
written waiver on or prior to the Effective Time, of the following conditions:
(i) the Company will have obtained all approvals of stockholders of the Company
necessary to approve the Merger Agreement and the Merger, (ii) the waiting
period (and any extension thereof) applicable to the Merger under the HSR Act
will have been terminated or will have expired, (iii) no temporary restraining
order, preliminary or permanent injunction or other order issued by a court or
other governmental authority of competent jurisdiction or other legal restraint
or prohibition will be in effect making the Merger illegal or otherwise
prohibiting consummation of the Merger if such restriction is not in effect due
to the lack of cooperation of one of the parties to the Merger Agreement, (iv)
all required consents and all other authorizations, consents, orders and
approvals of, and declarations and filing with, and all expirations of waiting
periods imposed by any governmental authority which would reasonably be expected
to have a Material Adverse Effect on the Company or delay the ability of the
Company, Parent or the Purchaser to consummate the transactions contemplated by
the Merger Agreement will have been obtained, waived, declared or filed or have
occurred, as the case may be, and shall be in full force and effect, and (v) the
Purchaser shall have purchased all Shares duly tendered and not withdrawn. The
conditions set forth in clauses (ii), (iv) and (v) above have been satisfied and
the Company is not aware of the occurrence of any events described in clause
(iii) above.
Termination and Fees. The Merger Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the Merger
Agreement by the stockholders of the Company:
28
<PAGE>
(a) By mutual written consent of Parent and the Company by action of
their respective boards of directors; or
(b) By the Company or Parent if any governmental entity has issued an
order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by the Merger Agreement, and such order, decree,
ruling or other action has become final and nonappealable; or
(c) By Parent if any approval by the stockholders of the Company
required for the consummation of the Merger or the other
transactions contemplated by the Merger Agreement has not been
obtained at the Company stockholders meeting or any adjournment
thereof by reason of the failure to obtain the required vote at a
duly held meeting of stockholders or at any adjournment thereof.
The Merger Agreement provides that, in the event of termination of the
Merger Agreement by either Parent, the Purchaser or the Company pursuant to the
provisions described above, the Merger Agreement will become void and have no
effect and there will be no liability or obligation thereunder on the part of
Parent, the Purchaser or the Company, except that (i) certain provisions,
including fees and expenses, governing law, confidentiality and specific
enforcement, will survive termination, and (ii) no party will be relieved of
liability for any willful breach of the Merger Agreement.
Confidentiality. Except as required by law, each of the Lukoil Entities
agreed to keep all information provided by the Company, other than information
generally available to the public or information available to the Lukoil
Entities on a nonconfidential basis prior to its disclosure by the Company,
confidential and not to disclose the information to anyone, other than those
actively participating in the Merger. The Lukoil Entities also have agreed not
to use the confidential information other than in connection with the Merger and
not to disclose any information about the Merger to anyone not involved with the
Merger. If the Lukoil Entities are requested pursuant to, or required by, legal
process to disclose any confidential information concerning the Company or the
Merger, they agree to promptly notify the Company of such request or disclosure
and use their reasonable best efforts to ensure the disclosed information will
be accorded confidential treatment. The Lukoil Entities are also permitted to
make general solicitations of employment not specifically directed towards
employees of the Company or its subsidiaries.
In addition, the Lukoil Entities will not solicit for employment or employ
any management level person who is employed by the Company or any of its
Subsidiaries and is identified in writing by a Lukoil Entity in connection with
the Lukoil Entities' evaluation or consummation of the Merger. However, the
Lukoil Entities are allowed to employ any individual who contacts a Lukoil
Entity on his own without solicitation by a Lukoil Entity.
The confidentiality and non-solicitation agreements will terminate upon the
consummation of the Merger.
Support Agreements
29
<PAGE>
Parent and the Purchaser entered into separate support agreements
(collectively, the "Support Agreements") with each of Leo Liebowitz, Milton
Cooper, Howard Safenowitz, and certain of their affiliates (collectively, the
"Principal Stockholders"). Pursuant to the Support Agreements, the Principal
Stockholders agreed to tender, as soon as practicable after commencement of the
Offer but in no event later than 10 business days after the commencement of the
Offer, certain beneficially owned Shares ( the "Tender Shares"). The Principal
Stockholders agreed not to withdraw such shares except following termination of
the Merger Agreement or the Offer.
The Principal Stockholders tendered their Tender Shares pursuant to the
Support Agreements and the Purchaser accepted such Shares for payment shortly
after 12:00 midnight on December 8, 2000.
Certain United States Federal Income Tax Consequences
The following summarizes the material United States federal income tax
consequences of the Merger to stockholders. This discussion is based on current
law, which is subject to change at any time, possibly with retroactive effect.
This summary only applies to a stockholder who is a United States person for
federal income tax purposes who holds Shares as a capital asset. This summary
does not deal with the tax consequences of the Merger to special classes of
stockholders, such as insurance companies, tax-exempt organizations, financial
institutions, dealers in securities, non-United States persons, persons who
acquired the Shares pursuant to an exercise of employee stock options or rights
or otherwise as compensation, persons who hold Shares as part of a position in a
"straddle" or as part of a "hedging" or "conversion" transaction for United
States federal income tax purposes, and persons with a "functional currency"
other than the United States dollar. Further this summary does not address the
tax consequences of the Merger under applicable state, local or foreign laws.
Each stockholder should consult with his or her own tax advisor about the tax
consequences of the Merger in light of his or her particular circumstances,
including the application of any state, local or foreign law.
The receipt of cash in exchange for Shares pursuant to the Merger will be a
fully taxable transaction for federal income tax purposes. A stockholder will
generally recognize gain or loss for federal income tax purposes in an amount
equal to the difference between the sum of the amount of cash received in the
Merger and such stockholder's adjusted tax basis in his or her Shares exchanged
therefor.
The gain or loss recognized on the exchange of Shares for cash will be
capital gain or loss; such capital gain or loss will be a long-term capital gain
or loss if the stockholder has held the stock for more than one year as of the
date of exchange. There are certain limitations on the deductibility of capital
losses.
A United States stockholder may be subject, under certain circumstances, to
backup withholding at a rate of 31% with respect to the cash received in
exchange for Shares in the Merger, unless such stockholder provides proof of an
applicable exemption or a correct taxpayer identification number, and otherwise
complies with applicable requirements of the backup withholding rules. Any
amounts required to be withheld under the backup withholding rules are not an
additional tax and may be refunded or credited against the stockholder's federal
income tax liability if the required information is furnished to the Internal
Revenue Service.
INFORMATION CONCERNING THE COMPANY
The Company
Getty Petroleum Marketing Inc. is a Maryland corporation. The address of
the Company's principal executive offices is 125 Jericho Turnpike, Jericho, New
York 11753. The telephone number of the Company at such offices is (516)
338-6000.
30
<PAGE>
The Company is one of the nation's largest independent marketers of
petroleum products. It serves retail and wholesale customers through a
distribution and marketing network of approximately 1,300 Getty(R) and other
branded retail outlets located in 13 Northeastern and Middle-Atlantic states.
The Company stores and distributes petroleum products from nine proprietary
distribution terminals and bulk plants and 30 through-put and exchange
terminals. The Company purchases gasoline, fuel oil and related petroleum
products from a number of Northeast and Middle-Atlantic suppliers. These
products are delivered by cargo ship, barge, pipeline and truck to the Company's
distribution terminals and bulk plants located in its marketing region. Through
the Company's proprietary truck transportation fleet and distribution network,
it sells and distributes products throughout a 13 state marketing region. Most
of the retail outlets are held under long-term leases or subleases with Getty
Properties. The Company also sells, on a wholesale basis, gasoline, fuel oil,
diesel fuel and kerosene from distribution terminals and bulk plants in
truckload and barge quantities, and sells fuel oil, kerosene, propane and oil
burner and related services to residential, commercial and governmental
customers in New York's Mid-Hudson Valley.
The Company is subject to the information and reporting requirements of the
Exchange Act and, in accordance therewith, is required to file reports and other
information with the Commission relating to its business, financial condition
and other matters. Certain information as of particular dates, concerning the
Company's directors and officers, their remuneration, stock options granted to
them, the principal holders of the Company's securities, any material interests
of such persons in transactions with the Company and other matters is required
to be disclosed in proxy statements distributed to the Company's stockholders
and filed with the Commission. These reports, proxy statements and other
information should be available for inspection at the public reference
facilities of the Commission located in Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and also should be available for inspection and copying
at prescribed rates at regional offices of the Commission located at Seven World
Trade Center, New York, New York 10048 and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of this material may
also be obtained by mail, upon payment of the Commission's customary fees, from
the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C.
20549. Electronic filings filed through the Commission's Electronic Data
Gathering, Analysis and Retrieval system ("EDGAR"), including those made by or
in respect of the Company, are publicly available through the Commission's home
page on the Internet at http://www.sec.gov. Such information should also be
available for inspection at the library of the NYSE, 20 Broad Street, New York,
New York 10005.
Directors and Executive Officers of the Company
General
The Board is currently comprised of five members. Pursuant to 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 the Purchaser in accordance with the Offer for Shares
representing not less than a majority of the outstanding Shares pursuant to the
Offer, the Purchaser was 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.
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<PAGE>
On December 13, 2000, the Purchaser requested that four directors resign
from the Board. Matthew J. Chanin, Leo Liebowitz, Howard Safenowitz and Howard
Silverman resigned from the Board on that date and Vadim Gluzman and Ralif R.
Safin were appointed to serve as directors of the Company until their successors
are duly qualified and appointed or elected. Messrs. Hall and Montag have
remained on the Board pursuant to the Merger Agreement to ensure compliance with
applicable provisions of the Merger Agreement. The Board established a special
merger committee and delegated to such committee all power and authority of the
Board to authorize and direct the taking of all actions to consummate the
Merger, except to the extent that the MGCL or the Merger Agreement prohibits
such delegation of authority. The Board appointed Messrs. Gluzman and Safin to
serve as members of the special merger committee. Subsequently, the Board duly
appointed Sergey P. Kukura to serve as a director of the Company.
Directors of the Company
Set forth below, for each director of the Company, is information regarding
their age as of December __, 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>
Vadim Gluzman...........................................38 Chairman of the Board, December 2000
Secretary and sole director
of Lukoil Americas
Corporation and Mikecon
Corp. since the formation of
the companies in 2000. He
has also served as President
of Lukoil Americas L.L.C.
since 1997.
Ronald E. Hall..........................................68 Director and former Chairman December 1996
of the Board of Howell Corp.
since 1995. Prior thereto,
Mr. Hall was President and
Chief Executive Officer of
CITGO Petroleum Corp. for
more than five years.
Sergey P. Kukura........................................48 First-Vice President of December 2000
LUKOIL. Mr. Kukura has also
served as a director of
LUKOIL since 1995 and a
member of the LUKOIL
management committee since
1993.
32
<PAGE>
Richard E. Montag.......................................68 Real.Estate Investment December 1996
Consultant, formerly Vice
President of Real Estate
Development, The Richard E.
Jacobs Group, for more than
five years until 1998.
Ralif Rafilovich Safin..................................46 Director and First Vice December 2000
President of LUKOIL. He
also serves a Vice President
of Langepasuraikogalymneft
oil consortium in Moscow.
Prior to that, Mr. Safin
served as chief engineer of
Kogalymneftegas production
consortium.
</TABLE>
Executive Officers of the Company
Set forth below, for each officer of the Company, is information regarding
their age as of December __, 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>
Name Age Position Officer Since
---- --- -------- -------------
<S> <C> <C> <C>
Leo Liebowitz*..........................................73 Chairman of the Board, Chief 1997
Executive Officer and Director
Vincent J. DeLaurentis..................................50 President and Chief Operating 1997
Officer
A.R. Charnes............................................56 Vice.President of Marketing 1998
Michael K. Hantman......................................49 Vice.President and Corporate 1997
Controller
Samuel M. Jones.........................................64 Vice.President, Corporate 1997
Secretary and General Counsel
</TABLE>
* Resigned as of December 13, 2000.
Mr. Liebowitz was Chairman and Chief Executive Officer and a director of
the Company from March 21, 1997 until his resignation on December 13, 2000. He
is also 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.
33
<PAGE>
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 as of March 21, 1997. 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. 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. Prior thereto, he was Vice President,
Corporate Secretary and General Counsel of Getty Realty. He joined Getty Realty
in 1985 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.
34
<PAGE>
OWNERSHIP OF SHARES BY DIRECTORS, OFFICERS AND PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of Shares based on
beneficial ownership as of December __, 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 for the last fiscal year, (3) the named executive officers, and
(4) all directors and executive officers as a group.
<TABLE>
<CAPTION>
Shares of Common Stock Percent of
Name Beneficially Owned Class
---- ---------------------- -----------
<S> <C> <C>
Mikecon Corp.(1)......................................................10,080,665 71.83
540 Madison Avenue, 37th Floor
New York, New York 10022
Dimensional Fund Advisors Inc.(2) .....................................1,004,706 7.16
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
Vadim Gluzman(3)....................................................... 0 0
Director
Ralif Rafilovich Safin................................................. 0 0
Director
Sergey P. Kukura....................................................... 0 0
Director
Richard E. Montag(4)................................................... 0 0
Director
Ronald E. Hall(5)...................................................... 0 0
Director
Leo Liebowitz(6)....................................................... 0 0
Former Director, Chairman of the Board and Chief
Executive Officer
Matthew J. Chanin(7)................................................... 0 0
Former Director
Howard Safenowitz(8)................................................... 0 0
Former Director
Howard Silverman(9).................................................... 0 0
Former Director
Vincent J. DeLaurentis(10)............................................. 0 0
President and Chief Operating Officer
A.R. Charnes(11)....................................................... 0 0
Vice President of Marketing
Michael K. Hantman(12)................................................. 0 0
Vice President and Corporate Controller
Samuel M. Jones(13).................................................... 0 0
Vice President, Corporate Secretary and General Counsel
Directors and Executive Officers as a group (9 persons)(14)............
0 0
</TABLE>
35
<PAGE>
---------------------
* Total Shares beneficially owned constitute less than one percent of the
outstanding Shares.
(1) Mikecon Corp. is the direct wholly owned subsidiary of Lukoil Americas
Corporation and an indirect wholly owned subsidiary of OAO LUKOIL.
(2) Based on representations made by such stockholder to the Company.
(3) Mr. Gluzman is the sole director, Chairman of the Board and Secretary of
both Mikecon Corp. and Lukoil Americas Corporation.
(4) Excludes 7,500 Shares subject to options that will be cancelled in
connection with the Merger.
(5) Excludes 7,500 Shares subject to options that will be cancelled in
connection with the Merger.
(6) Mr. Liebowitz resigned as Chairman of the Board and Chief Executive Officer
on December 13, 2000.
(7) Excludes 7,500 Shares subject to options that will be cancelled in
connection with the Merger. Mr. Chanin resigned as a director of the
Company on December 13, 2000.
(8) Excludes 10,000 Shares subject to options that will be cancelled in
connection with the Merger. Mr. Safenowitz resigned as a director of the
Company on December 13, 2000.
(9) Excludes 10,000 Shares subject to options that will be cancelled in
connection with the Merger. Mr. Silverman resigned as a director of the
Company on December 13, 2000.
(10) Excludes 75,000 Shares subject to options that will be cancelled in
connection with the Merger.
(11) Excludes 22,500 Shares subject to options that will be cancelled in
connection with the Merger.
(12) Excludes 72,500 Shares subject to options that will be cancelled in
connection with the Merger.
(13) Excludes 76,500 Shares subject to options that will be cancelled in
connection with the Merger.
(14) Excludes 261,500 Shares subject to options that will be cancelled in
connection with the Merger. See notes (4), (5), (10), (11), (12) and (13)
above.
Information Concerning the Lukoil Entities
The Lukoil Entities
LUKOIL is Russia's largest vertically integrated oil company, specializing
in oil and gas exploration and production, refining, sales of crude oil products
and transportation. LUKOIL's coverage includes 40 regions in Russia and 25 other
countries of the world. LUKOIL has more than 120,000 employees. As of January 1,
2000, the proven reserves of oil and gas condensate available to LUKOIL amounted
to 13.5 billion barrels. Over 60% of these reserves are concentrated in Western
Siberia, Russia, another 30% in the European part of Russia and the remainder
outside of Russia. LUKOIL's subsidiaries and dependent companies produced a
total of 75.6 million tons of crude, which was approximately 24% of Russia's
total oil production in 1999. LUKOIL accounted for 12% of Russia's total oil
refining operation in 1999 and exported a total of 30.5 million tons of crude in
1999. The LUKOIL retail trade network includes over 1,000 gas stations. As of
October 25, 2000, LUKOIL's market capitalization was more than $10.5 billion.
The principal business address of LUKOIL is 11 Sretensky Boulevard, Moscow
101000 Russia, and the telephone number of such office is 011 (7095) 927-4444.
36
<PAGE>
The Purchaser is a newly formed Delaware corporation and a wholly owned
subsidiary of Parent. The Purchaser has not conducted any business other than in
connection with the Offer and the Merger Agreement. All of the issued and
outstanding shares of capital stock of the Purchaser are beneficially owned by
Parent. The principal address of the Purchaser is 540 Madison Avenue, New York,
New York 10022, and the telephone number of such office is (212) 421-4141.
Parent is a newly formed Delaware corporation and the indirect who1ly owned
subsidiary of LUKOIL. The Parent has not conducted any business other than in
connection with the Offer and the Merger Agreement. The principal business
address of Parent is 540 Madison Avenue, New York, New York 10022 and the
telephone number of such office is (212) 421-4141.
LUKOIL owns all of the outstanding interests in Parent through a number of
intermediate holding companies. These include Lukoil International, an Austrian
corporation which holds, through an intermediate company, all of the issued and
outstanding limited liability company interests of Lukoil Americas L.L.C., a
Delaware limited liability company, which holds all of the issued and
outstanding shares of common stock of Parent. Each of Lukoil International and
Lukoil Americas L.L.C. are holding companies with no operations other than the
administration of the respective security interests that each holds. The
principal address of Lukoil International is 11 Sretensky Boulevard, Moscow
101000, Russia, and the telephone number of such office is 011 (7095) 927-4444.
The principal address of Lukoil Americas L.L.C. is 540 Madison Avenue, New York,
New York 10022, and the telephone number of such office is (212) 421-4141.
Financing the Merger
There are no financing conditions to the Merger. Parent made a capital
contribution to the Purchaser in an amount sufficient to purchase all of the
shares of common stock of the Company that were tendered in the Offer and that
will be converted and paid for in the Merger. Parent has obtained such funds
from equity contributions and inter-company borrowings from direct and indirect
wholly owned subsidiaries of LUKOIL. Of the total funds contributed to the
Purchaser, Parent has borrowed $56 million from Lukoil Finance Limited, which is
an indirect, wholly owned subsidiary of LUKOIL.
PROXY SOLICITATION; REVOCATION OF PROXIES
Proxies are being solicited by and on behalf of the Board of Directors. All
expenses of this solicitation, including the cost of preparing and mailing this
Proxy Statement, will be borne of the Company. In addition to solicitation by
use of the mails, proxies may be solicited by directors, officers and employees
of the Company in person or by telephone, telegram or other means of
communication. Such directors, officers and employees will not be additionally
compensated, but may be reimbursed for out-of-pocket expenses, in connection
with such solicitation. Arrangements will also be made with custodians, nominees
and fiduciaries for forwarding of proxy solicitation material to beneficial
owners of Shares held of record by such persons, and the Company may reimburse
such custodians, nominees and fiduciaries for reasonable expenses incurred in
connection therewith.
If the Special Meeting is adjourned for any reason, the approval of the
Merger Agreement shall be considered and voted upon by stockholders at the
subsequent adjourned meeting.
It is urged that proxies be returned promptly. Therefore, stockholders are
urged to fill in, sign and return the accompanying form of proxy in the enclosed
envelope.
You may revoke your proxy at any time prior to its exercise by sending in a
proxy bearing a later date, by delivering a written notice of revocation or by
attending the Special Meeting in person and casting a ballot or delivering
notice of revocation of your proxy.
37
<PAGE>
other matters
The Board does not know of any other business which may be presented for
consideration at the Special Meeting. If any business not described herein
should come before the Special Meeting, the persons named in the enclosed proxy
will vote on those matters in accordance with their discretion.
stockholder proposals
The Company does not expect to hold another annual meeting of stockholders.
There are therefore no deadlines for submitting stockholder proposals at the
Company's next annual meeting of stockholders.
BY ORDER OF THE BOARD
OF DIRECTORS
SAMUEL M. JONES
Secretary
December __, 2000
38
<PAGE>
ANNEX A
This AGREEMENT AND PLAN OF MERGER, dated as of November 2, 2000 (this
"Agreement"), is by and among OAO LUKOIL, a Russian open joint stock company
---------
("Parent"), LUKOIL International GmbH, an Austrian corporation and a direct,
------
wholly owned subsidiary of Parent ("LUKOIL Austria"), LUKOIL Americas
----------------
Corporation, a Delaware corporation and an indirect, wholly owned subsidiary of
Parent ("LUKOIL Americas"), Mikecon Corp., a Delaware corporation and a direct,
---------------
wholly owned subsidiary of LUKOIL Americas ("Merger Sub" and, together with
-----------
Parent, LUKOIL Austria and LUKOIL Americas, the "LUKOIL Entities"), and Getty
---------------
Petroleum Marketing Inc., a Maryland corporation (the "Company").
-------
W I T N E S S E T H :
WHEREAS, the respective Boards of Directors of the LUKOIL Entities and the
Company have each approved the acquisition of the Company by LUKOIL Americas
upon the terms and subject to the conditions of this Agreement;
WHEREAS, in furtherance of such acquisition, LUKOIL Americas proposes to
cause Merger Sub to commence a tender offer (as it may be amended from time to
time as permitted under this Agreement, the "Offer") to purchase all of the
-----
issued and outstanding shares of the common stock, par value $0.01 per share, of
the Company ("Company Common Stock") at a price per share of Company Common
----------------------
Stock of $5.00 net to the seller in cash (such price, as it may be increased in
accordance with the terms of this Agreement, the "Price Per Share") upon the
---------------
terms and conditions set forth in this Agreement, including Annex A hereto;
-------
WHEREAS, in order to complete such acquisition, the respective Boards of
Directors of LUKOIL Americas, Merger Sub and the Company have approved the
merger of Merger Sub with and into the Company (the "Merger"), upon the terms
------
and subject to the conditions of this Agreement and in accordance with the
Maryland General Corporation Law (the "MGCL") and the Delaware General
----
Corporation Law ("DGCL"), whereby each issued and outstanding share of Company
----
Common Stock not owned directly or indirectly by the LUKOIL Entities, the
Company or any of their Subsidiaries will be converted into the right to receive
the Price Per Share in cash;
WHEREAS, the Board of Directors of the Company (the "Company Board") has
--------------
(a) determined that each of this Agreement, the Offer and the Merger are fair to
and in the best interests of the Company's stockholders, (b) approved this
Agreement and the transactions contemplated hereby, including the Offer and the
Merger, and (c) declared the advisability of this Agreement and resolved to
recommend that the Company's stockholders accept the Offer, tender their shares
of Company Common Stock thereunder and approve this Agreement and the Merger;
WHEREAS, the LUKOIL Entities and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger; and
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and
intending to be legally bound hereby, the parties hereto agree as follows:
A-1
<PAGE>
ARTICLE I.
THE TENDER OFFER
1.1 The Offer.
(a) Provided that this Agreement shall not have been terminated in
accordance with Article VII and subject to the conditions of this Agreement,
then (i) not later than the first Business Day after execution of this
Agreement, LUKOIL Americas and the Company shall issue mutually acceptable
public announcements regarding the execution of this Agreement and file such
announcement with the Securities and Exchange Commission (the "SEC") under cover
---
of Schedule TO and (ii) Merger Sub shall, and LUKOIL Americas shall cause Merger
Sub to, as soon as practicable, but in no event later than seven Business Days
from and after the date of such announcement, including the date of announcement
as the first Business Day in accordance with Rule 14d-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), commence (within the
-------------
meaning of Rule 14d-2(a) of the Exchange Act) the Offer to purchase all of the
outstanding shares of Company Common Stock (other than as otherwise provided in
this Agreement) at the Price Per Share. The initial expiration date of the Offer
shall be the twentieth Business Day from and after the date the Offer is
commenced, including the date of commencement as the first Business Day in
accordance with Rule 14d-2 under the Exchange Act subject to extension as
provided herein. The Offer shall be made pursuant to an Offer to Purchase and
related Letter of Transmittal in form reasonably satisfactory to the Company and
containing terms and conditions consistent with this Agreement. The obligation
of Merger Sub to accept for payment and pay for shares of Company Common Stock
tendered pursuant to the Offer in accordance with the terms of this Agreement
shall be subject only to (x) there being at least that number of shares of
Company Common Stock representing a majority of the total issued and outstanding
shares of Company Common Stock on a fully diluted basis (the "Minimum Shares")
---------------
validly tendered and not withdrawn prior to the expiration of the Offer (the
"Minimum Condition") and (y) the satisfaction of the other conditions set forth
------------------
in Annex A hereto, any of which conditions may be waived by Merger Sub in its
sole discretion; provided, however, that Merger Sub shall not waive the Minimum
Condition without the prior written consent of the Company. Each party agrees
that no shares of Company Common Stock held by it or any of its Subsidiaries
will be tendered to Merger Sub pursuant to the Offer.
(b) Merger Sub expressly reserves the right to modify the terms of the
Offer, except that, without the prior written consent of the Company, Merger Sub
will not (i) decrease the Price Per Share payable in the Offer, (ii) decrease
the number of shares of Company Common Stock sought pursuant to the Offer or
change the form of consideration payable in the Offer, (iii) change or amend the
conditions to the Offer set forth in Annex A hereto or impose additional
-------
conditions to the Offer, (iv) change the expiration date of the Offer or (v)
otherwise amend or add any term or condition of the Offer in any manner adverse
in any material respect to the holders of shares of Company Common Stock;
provided, however, that if on any scheduled expiration date of the Offer all
-------- -------
conditions to the Offer have not been satisfied or waived, Merger Sub may, and
upon the request of the Company the Merger Sub shall, from time to time extend
the expiration date of the Offer for up to 10 additional Business Days for each
such extension (but in no event shall Merger Sub extend the expiration date of
the Offer beyond January 25, 2001); and provided, further, that Merger Sub may
-------- -------
(x) extend the Offer for any period required by any rule, regulation,
interpretation or position of the SEC or staff thereof applicable to the Offer
and (y) extend the Offer for any reason not permitted above; provided, however,
-------- -------
that in no event shall an extension permitted under the foregoing clause (y)
exceed, in the aggregate, 10 Business Days or extend the expiration date of the
Offer beyond January 25, 2001, and, during any such extension pursuant to clause
(y), Merger Sub shall waive all conditions of the Offer set forth in Annex A
-------
other than (1) the Minimum Condition and (2) the condition in paragraph (b) of
Annex A solely to the extent Parent or Merger Sub would violate any statute,
rule, regulation, judgment, order or injunction. Assuming the prior satisfaction
or waiver of all the conditions to the Offer set forth in Annex A hereto, and
subject to the terms and conditions of this Agreement, Merger Sub shall, and the
LUKOIL Entities other than Merger Sub shall cause Merger Sub to, accept for
payment and pay for, in accordance with the terms of the Offer, all shares of
Company Common Stock validly tendered and not withdrawn pursuant to the Offer as
soon as permitted under applicable law. The LUKOIL Entities shall provide, or
cause to be provided, to Merger Sub, on a timely basis, the funds necessary to
purchase any shares of Company Common Stock that Merger Sub becomes obligated to
purchase pursuant to the Offer.
A-2
<PAGE>
(c) Notwithstanding the foregoing provisions of this Section 1.1,
LUKOIL Americas and Merger Sub shall have the right to elect to provide one or
more subsequent offering periods of up to an additional twenty (20) Business
Days in the aggregate pursuant to Rule 14d-11 of the Exchange Act.
(d) Merger Sub shall be permitted to assign to any direct or indirect
wholly owned subsidiary of LUKOIL Americas formed under the laws of any state or
commonwealth of the United States the right to make payment for and accept
delivery of all, but not less than all, of the tendered and not properly
withdrawn shares of Company Common Stock pursuant to the Offer. In the event of
any such election, the parties agree to execute an appropriate amendment to this
Agreement in order to reflect such election.
1.2 SEC Filings.
(a) As soon as reasonably practicable on the date the Offer is
commenced, Merger Sub and LUKOIL Americas shall file with the SEC a Tender Offer
Statement on Schedule TO (together with all amendments and supplements thereto,
the "Schedule TO") with respect to the Offer. The Schedule TO will contain
------------
(including as an exhibit) or incorporate by reference the offer to purchase and
forms of the related letter of transmittal (which documents, together with any
supplements or amendments thereto, are referred to collectively herein as the
"Offer Documents"), and shall also include the notice contemplated by Section
----------------
3-106(d)(1) of the MGCL, which shall be mailed to the holders of Company Common
Stock with the Offer Documents. The LUKOIL Entities and the Company shall each
provide promptly such information as is necessary to the preparation of the
Schedule TO and the Offer Documents, including, without limitation, the exhibits
and schedules thereto, which the respective party responsible therefor shall
reasonably request. The Company and its outside legal counsel shall be given a
reasonable opportunity to review and comment upon the Offer Documents and any
amendment or supplement thereto prior to the filing thereof with the SEC, and
Merger Sub and LUKOIL Americas shall consider any such comments in good faith.
Merger Sub and LUKOIL Americas shall provide to the Company and its outside
legal counsel any comments which Merger Sub or LUKOIL Americas or their counsel
may receive from the Staff of the SEC with respect to the Offer Documents
promptly after receipt thereof and consult in good faith with the Company and
its outside legal counsel with respect thereto. Merger Sub and LUKOIL Americas
shall promptly correct the Schedule TO and the Offer Documents if and to the
extent that they shall have become false or misleading in any material respect
(and each of Parent, LUKOIL Austria and the Company, with respect to information
supplied by it specifically for use in the Schedule TO or the Offer Documents,
shall promptly notify Merger Sub and LUKOIL Americas of any required corrections
of such information and shall cooperate with Merger Sub and LUKOIL Americas with
respect to correcting such information) and to supplement the Schedule TO or the
Offer Documents to include any information that shall become necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, and to take all steps necessary to cause the Schedule
TO, as so corrected or supplemented, to be filed with the SEC and the Offer
Documents, as so corrected or supplemented, to be disseminated to holders of
Company Common Stock, in each case to the extent required by applicable federal
securities laws.
A-3
<PAGE>
(b) The Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 (together with all amendments and supplements
thereto, the "Schedule 14D-9") on the date that the LUKOIL Entities file the
---------------
Schedule TO with the SEC pursuant to Section 1.2(a). The Schedule 14D-9 will
contain the recommendation of the Company Board described in Section 5.1(a),
subject to the right of the Company Board to withdraw or modify such
recommendation in accordance with the terms of this Agreement. The Company
hereby consents to the reference by LUKOIL Americas and Merger Sub to the
Company Board's recommendation in the Schedule TO filed pursuant to Section
1.2(a). The LUKOIL Entities and the Company shall each provide promptly such
information as is necessary to the preparation of the Schedule 14D-9, including,
without limitation, the exhibits and schedules thereto, which the respective
party responsible therefor shall reasonably request. Merger Sub, LUKOIL Americas
and their outside legal counsel shall be given a reasonable opportunity to
review and comment upon the Schedule 14D-9 and any amendment or supplement
thereto prior to the filing thereof with the SEC, and the Company shall consider
any such comments in good faith. The Company will cooperate with Merger Sub and
LUKOIL Americas in mailing or otherwise disseminating the Schedule 14D-9 with
the appropriate Offer Documents to the holders of Company Common Stock. The
Company agrees to provide to Merger Sub, LUKOIL Americas and their outside legal
counsel any comments which the Company or its counsel may receive from the Staff
of the SEC with respect to the Schedule 14D-9 promptly after receipt thereof and
consult in good faith with Merger Sub, LUKOIL Americas and their outside legal
counsel with respect thereto. The Company agrees to promptly correct the
Schedule 14D-9 if and to the extent that it shall have become false or
misleading in any material respect (and the LUKOIL Entities, with respect to
information supplied by them specifically for use in the Schedule 14D-9, shall
promptly notify the Company of any required corrections of such information and
shall cooperate with the Company with respect to correcting such information)
and to supplement the Schedule 14D-9 to include any information that shall
become necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, and to take all steps
necessary to cause the Schedule 14D-9, as so corrected or supplemented, to be
filed with the SEC and, as so corrected or supplemented, to be disseminated to
holders of Company Common Stock, in each case to the extent required by
applicable federal securities laws.
1.3 Company Action.
(a) The Company hereby approves of and consents to the Offer and the
Merger and represents, warrants and covenants to the LUKOIL Entities that (i)
the Company Board (at a meeting duly called and held) has by the unanimous vote
of all directors present and voting (A) determined that each of this Agreement,
the Offer and the Merger are fair to and in the best interests of the Company's
stockholders, (B) approved this Agreement and the transactions contemplated
hereby, including the Offer and the Merger, and such approval is sufficient to
render the restrictions on "business combinations" (as defined in Section 3-601
of the MGCL) set forth in Section 3-602 of the MGCL inapplicable to this
Agreement and the transactions contemplated hereby, including the Offer and the
Merger, (C) declared the advisability of this Agreement and resolved to
recommend acceptance of the Offer and approval of the Merger by the holders of
Company Common Stock and resolved to present the Merger to the stockholders of
the Company if so required under the MGCL in order to complete the Merger, and
(D) resolved to elect not to be subject to any "moratorium", "control share
acquisition", "business combination", "fair price" or other form of
anti-takeover laws and regulations of any jurisdiction that may purport to be
applicable to this Agreement or the transactions contemplated hereby, (ii) the
Company Board or any committee of the Company Board that administers any of the
Company Equity Plans has resolved that the provisions of each Company Equity
Plan that cause all Company Options thereunder to be cancelled and converted at
the Effective Time shall be given full force and effect and shall not be waived,
and the Company Board has further authorized and directed each of the executive
officers of the Company to take all actions reasonably necessary or appropriate
to ensure that, on and after the Effective Time, there will be no Company
Options outstanding that may be exercised for shares of capital stock of the
Surviving Corporation, which actions, if requested by LUKOIL Americas, shall
include the giving of written notice to holders of Company Options that such
Company Options will be cancelled and converted at the Effective Time, (iii) the
by-laws of the Company contain provisions opting out of the Maryland Control
Share Acquisition Act, and (iv) ING Barings LLC ("ING Barings") has delivered to
the Company Board its written opinion dated November 2, 2000, to the effect
that, based upon and subject to the matters set forth therein and as of the date
thereof, the Merger Consideration to be received by the holders of shares of
Company Common Stock pursuant to the Offer and the Merger is fair to such
holders from a financial point of view. The Company has been advised that all of
its directors and executive officers who own shares of Company Common Stock
intend to tender their shares of Company Common Stock pursuant to the Offer.
A-4
<PAGE>
(b) Promptly upon execution of this Agreement and in connection with
the Offer, the Company shall furnish Merger Sub with such information (including
a list of the stockholders of the Company, mailing labels and a list of
securities positions, each as of a recent date), and shall thereafter render
such additional assistance as Merger Sub may reasonably request in communicating
the Offer to the Company's stockholders (including updated lists of
stockholders, mailing labels and lists of security positions).
1.4 Composition of the Company Board.
(a) Promptly upon the acceptance for payment of, and payment by Merger
Sub in accordance with the Offer for, shares of Company Common Stock in
accordance with the Offer, Merger Sub shall be entitled to designate such number
of members of the Company Board, rounded up to the next whole number, equal to
that number of directors which equals the product of the total number of
directors on the Company Board (giving effect, if applicable, to (i) the number
of newly created directorships if the size of the Company Board is increased
pursuant to this Section 1.4(a) and (ii) the number of vacancies if the
resignation of any directors is secured pursuant to this Section 1.4(a))
multiplied by the percentage of such number of shares of Company Common Stock
then owned beneficially or of record in the aggregate by the LUKOIL Entities of
the total issued and outstanding shares of Company Common Stock on a fully
diluted basis; provided, however, that until the Effective Time there shall be
-------- -------
at least two Continuing Directors serving as directors of the Company, and the
LUKOIL Entities shall use their reasonable best efforts to ensure that at least
two Continuing Directors serve as directors of the Company until the Effective
Time. Upon the written request of Merger Sub, the Company shall, on the date of
such request, either increase the size of the Company Board or use its
reasonable best efforts to secure the resignations of such number of its
incumbent directors as is necessary to enable Merger Sub's designees to be so
elected or appointed to the Company Board. The Company Board shall take no
action from the time that Merger Sub has accepted for payment shares of Company
Common Stock in accordance with the Offer until the Company Board has been
reconstituted in accordance with this Section 1.4(a), unless otherwise directed
by the Merger Sub.
(b) The Company's obligations under this Section 1.4 shall be subject
to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. The
Company shall promptly take all actions required pursuant to Section 14(f) of
the Exchange Act and Rule 14f-1 promulgated thereunder in order to fulfill its
obligations under this Section 1.4, and shall include in the Schedule 14D-9 such
information with respect to the Company and its officers and directors as is
required under Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder. The LUKOIL Entities will supply to the Company in writing and be
solely responsible for any information with respect to any of them and their
nominees, officers, directors and affiliates as may be required by Section 14(f)
of the Exchange Act and Rule 14f-1 promulgated thereunder and applicable rules
and regulations.
A-5
<PAGE>
(c) After the time that Merger Sub's designees constitute at least a
majority of the Company Board and until the Effective Time, any (i) amendment or
termination of this Agreement by the Company or (ii) action by the Company with
respect to amendments to the Organizational Documents of the Company or this
Agreement and the transactions contemplated hereby which in either case
materially and adversely affects the interests of the stockholders of the
Company, shall require, in addition to any other affirmative vote required under
the MGCL, the affirmative vote of not less than a majority of, as determined by
the Company Board, either (1) the entire Company Board, which majority shall
include the concurrence of all Continuing Directors or (2) to the extent
permitted under the MGCL, a committee of the Company Board consisting of only
Continuing Directors; provided, however, that if the foregoing provisions of
-------- -------
this subsection (c) relating to the concurrence of a majority of Continuing
Directors or approval by a committee consisting of Continuing Directors are
invalid or incapable of being enforced under applicable law, then none of the
LUKOIL Entities shall approve (either in its capacity as a stockholder or as a
party to this Agreement, as applicable), and the LUKOIL Entities shall use their
reasonable best efforts to prevent the occurrence of, any of the actions
referred to in clauses (i) and (ii) above unless such actions shall have
received the unanimous approval of the entire Company Board. For purposes of
this Section 1.4, the term "Continuing Director" shall mean a director then
--------------------
serving, if any, who (x) as of the date hereof and as of the date of
determination, is neither an employee or consultant of or holder of greater than
a 1% beneficial interest in the Company or Getty Properties Corp. nor a director
of Getty Properties Corp. ("Independent") and (y) is a director of the Company
-----------
as of the date hereof. If there is more than one Continuing Director and prior
to the Effective Time, the number of Continuing Directors is reduced for any
reason, the remaining Continuing Director or Directors shall be entitled to
designate persons who are Independent to fill such vacancies who shall be deemed
Continuing Directors for purposes of this Agreement, and the Company, Merger Sub
and LUKOIL Americas shall, upon such designation, cause such designee(s) to be
so elected. In the event there is only one Continuing Director and he or she
resigns or is removed or if all Continuing Directors resign or are removed, he,
she or they, as applicable, shall be entitled to designate his, her or their
successors who are Independent, as the case may be, each of whom shall be deemed
a Continuing Director for purposes of this Agreement, and the Company, Merger
Sub and LUKOIL Americas shall, upon such designation, cause such designee(s) to
be so elected. In the event that there are no Continuing Directors able to
continue to serve in such capacity due to death or mental incapacity, then a
majority of the directors then remaining on the Company Board shall be entitled
to designate their successors, each of whom shall be Independent and shall be
deemed a Continuing Director for the purposes of this Agreement, and the
Company, Merger Sub and LUKOIL Americas shall, upon such designation, cause such
designees to be elected or appointed. The Company Board shall not delegate any
matter set forth in this Section 1.4 to any committee of the Company Board
unless such committee consists only of Continuing Directors.
ARTICLE II.
THE MERGER
2.1 The Merger.
Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the MGCL and the DGCL, as soon as practicable
following completion of the Offer, Merger Sub shall be merged with and into the
Company. Following the Merger, the separate corporate existence of Merger Sub
shall cease, and the Company shall continue as the surviving corporation (the
"Surviving Corporation"). At LUKOIL America's election, any direct or indirect
----------------------
domestic subsidiary of LUKOIL Americas other than Merger Sub may be merged with
and into the Company instead of the Merger Sub. In the event of such an
election, the parties agree to execute an appropriate amendment to this
Agreement in order to reflect such election.
A-6
<PAGE>
2.2 Closing.
The closing of the Merger (the "Closing") will take place as soon as
-------
practicable after satisfaction or waiver (as permitted by this Agreement and
applicable law) of all of the conditions (excluding conditions that, by their
terms, cannot be satisfied until the Closing Date) set forth in Article VI (the
"Closing Date"), unless another time or date is agreed to in writing by the
-------------
parties hereto. The Closing shall be held at the offices of Latham & Watkins,
885 Third Avenue, New York, New York 10022, unless another place is agreed to in
writing by the parties hereto.
2.3 Effective Time.
Upon the Closing and after Merger Sub shall have given the notice
required, if any, under Section 3-106(d)(1) of the MGCL, LUKOIL Americas shall
file or cause to be filed (i) with the State Department of Assessments and
Taxation of Maryland (the "SDAT") articles of merger (the "Articles of Merger")
---- ------------------
and (ii) with the Secretary of State of the State of Delaware a certificate of
merger (the "Certificate of Merger") each executed in accordance with the
----------------------
relevant provisions of the MGCL and DGCL, and shall make all other filings,
recordings or publications required under the MGCL and DGCL in connection with
the Merger. The Merger shall become effective at such time as the Articles of
Merger are duly filed with, and accepted for record by, the SDAT and the
Certificate of Merger is duly filed with, and accepted for record by, the
Secretary of State of the State of Delaware, or at such time as the parties may
agree and specify in the Articles of Merger and the Certificate of Merger (the
time the Merger becomes effective being herein referred to as the "Effective
---------
Time").
----
2.4 Effects of the Merger.
At and after the Effective Time, the Merger will have the effects set
forth in Section 3-114 of the MGCL and Section 259(a) of the DGCL.
2.5 Charter.
At the Effective Time, the charter of the Company as in effect
immediately prior to the Effective Time shall be the charter of the Surviving
Corporation, until duly amended as provided therein or by applicable law.
2.6 Bylaws.
At the Effective Time and without any further action on the part of
the Company or Merger Sub, the bylaws of the Company shall be amended in their
entirety to read as the bylaws of Merger Sub read as in effect immediately prior
to the Effective Time and, as so amended, shall be the bylaws of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law.
2.7 Officers and Directors.
Immediately prior to the Effective Time, each Continuing Director
shall resign as a Company director effective as of the Effective Time. The
officers of the Company immediately prior to the Effective Time shall be the
officers of the Surviving Corporation, until the earlier of their resignation or
removal or otherwise ceasing to be an officer or until their respective
successors are duly elected and qualified, as the case may be.
2.8 Effect on Stock.
As of the Effective Time, by virtue of the Merger and without any
action on the part of the LUKOIL Entities, the Company or the holder of any
shares of Company Common Stock or any shares of stock of Merger Sub:
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<PAGE>
(a) Stock of Merger Sub. Each issued and outstanding share of stock of
-------------------
Merger Sub shall be converted into and become 200,000 fully paid and
nonassessable shares of common stock, par value $0.01 per share, of the
Surviving Corporation ("Surviving Corporation Common Stock"). Each certificate
-----------------------------------
that prior to the Effective Time represented one (1) or more shares of stock of
Merger Sub shall thereafter represent that number of shares of Surviving
Corporation Common Stock into which the shares of stock of Merger Sub
theretofore represented by such certificate shall have been converted; provided,
--------
however, that each record holder of a certificate or certificates that prior to
-------
the Effective Time represented one (1) or more shares of stock of Merger Sub
shall receive, upon surrender of such certificate or certificates, a new
certificate or certificates representing the number of shares of Surviving
Corporation Common Stock to which such record holder shall be entitled pursuant
to the foregoing conversion.
(b) Cancellation of Certain Company Common Stock and LUKOIL
----------------------------------------------------------------
Entity-Owned Stock. Each share of Company Common Stock that is owned by the
-------------------
Company, any wholly owned Subsidiary of the Company or by the LUKOIL Entities or
any other wholly owned Subsidiary of a LUKOIL Entity shall automatically be
cancelled and shall cease to be outstanding, and no Merger Consideration shall
be delivered in exchange therefor.
(c) Conversion of Company Common Stock. At the Effective Time each
-----------------------------------
issued and outstanding share of Company Common Stock (other than shares of
Company Common Stock to be cancelled in accordance with Section 2.8(b) or shares
of Company Common Stock for which appraisal rights have been properly asserted
in accordance with Section 2.9(h)) shall be converted into the right to receive
$5.00 in cash, without interest (the "Merger Consideration"). As of the
---------------------
Effective Time, all shares of Company Common Stock shall no longer be
outstanding and shall automatically be retired and shall cease to be
outstanding, and each holder of a certificate representing any such shares of
Company Common Stock shall cease to have any rights with respect thereto, except
the right to receive, upon the surrender of such certificates, the Merger
Consideration.
(d) Stock Options. At the Effective Time, each unexpired and
--------------
unexercised outstanding option, whether or not then vested or exercisable in
accordance with its terms, to purchase shares of Company Common Stock (the
"Company Options") previously granted by the Company or its Subsidiaries under
----------------
any plan, agreement or arrangement (collectively, the "Company Equity Plans")
--------------------
shall be cancelled and shall be automatically converted into the right to
receive from LUKOIL Americas, at the Effective Time, cash in an amount equal to
the product of (i) the Merger Consideration minus the exercise price per share
under such Company Option, times (ii) the number of shares of Company Common
Stock which may be purchased upon exercise of such Company Option (whether or
not then exercisable or vested), less any required withholding, and thereupon
each Company Option shall terminate and each holder thereof shall have no
further rights to any Company Common Stock with respect thereto. Prior to the
consummation of the Offer, the Company Board or any appropriate committee
thereof shall resolve to give effect to the provisions of this Section 2.8(d)
and, if necessary, the Company shall amend the terms of any Company Equity Plan
to effectuate such resolution and shall not modify or amend such resolution or
amendment, as the case may be, without the approval of LUKOIL Americas, which
such approval shall not be unreasonably withheld.
A-8
<PAGE>
2.9 Surrender and Payment.
(a) Exchange Agent. Prior to the Effective Time, LUKOIL Americas shall
--------------
designate a bank or trust company reasonably acceptable to the Company to act as
agent (the "Exchange Agent") for the holders of shares of Company Common Stock
---------------
and Company Options in connection with the Merger and the payment of the Merger
Consideration to which holders of shares of Company Common Stock shall become
entitled pursuant to Section 2.8. Prior to the filing of the Articles of Merger
with the SDAT, Merger Sub or LUKOIL Americas shall deposit with the Exchange
Agent cash in an aggregate amount equal to the product of (i) the number of
shares of Company Common Stock issued and outstanding (and not to be retired
pursuant to Section 2.8(b)) immediately prior to the Effective Time, multiplied
by (ii) the Merger Consideration (plus an additional amount as required to cash
out Company Options pursuant to Section 2.8(d)). The deposit made by Merger Sub
or LUKOIL Americas pursuant to the preceding sentence is hereinafter referred to
as the "Payment Fund." The Exchange Agent shall cause the Payment Fund to be (i)
------------
held for the benefit of the holders of Company Common Stock and (ii) promptly
applied to making the payments provided for in Section 2.8(c). The Payment Fund
shall not be used for any purpose that is not provided for herein.
(b) Exchange Procedures. As soon as reasonably practicable after the
-------------------
Effective Time, the Exchange Agent shall provide to each holder of record of a
certificate or certificates or other instrument or instruments (the
"Certificates") which immediately prior to the Effective Time represented issued
------------
and outstanding shares of Company Common Stock (other than shares to be retired
in accordance with Section 2.8(b)), (i) a letter of transmittal (which shall be
upon customary terms and may specify that delivery shall be effected, and risk
of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent) and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for the Merger Consideration. Upon
surrender of a Certificate for cancellation to the Exchange Agent, together with
such letter of transmittal, duly executed in accordance with the letter of
transmittal and the instructions thereto, and such other documents as may
reasonably be required by the Exchange Agent, the Exchange Agent shall pay the
holder of such Certificate the Merger Consideration in respect of such
Certificate, and the Certificate so surrendered shall forthwith be retired and
shall cease to exist. If any portion of the Merger Consideration is to be paid
to a Person other than the registered holder of the shares of Company Common
Stock represented by the Certificate or Certificates surrendered in exchange
therefor, it shall be a condition to such payment that the Certificate or
Certificates so surrendered shall be properly endorsed or otherwise be in proper
form for transfer and that the Person requesting such payment shall pay to the
Exchange Agent any transfer or other taxes required as a result of such payment
to a Person other than the registered holder of such shares or establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
payable. Until surrendered as contemplated by this Section 2.9, each Certificate
(other than Certificates representing Dissenting Shares or shares of Company
Common Stock to be retired pursuant to Section 2.8(b)) shall be deemed at any
time after the Effective Time to represent only the right to receive the Merger
Consideration (without interest) upon such surrender.
(c) No Further Ownership Rights in Company Common Stock. All Merger
-----------------------------------------------------
Consideration paid upon the surrender for exchange of Certificates in accordance
with the terms of this Article II shall be deemed to have been paid in full
satisfaction of all rights pertaining to the shares of Company Common Stock
theretofore represented by such Certificates. At and after the Effective Time,
there shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of shares of Company Common Stock. If, after the
Effective Time, Certificates are presented to the Surviving Corporation or the
Exchange Agent for any reason, they shall be canceled and exchanged as provided
in this Article II, except as otherwise provided by law.
(d) Unclaimed Funds. Any portion of the Payment Fund made available to
---------------
the Exchange Agent pursuant to Section 2.9(a) that remains unclaimed by holders
of Certificates for 180 days after the Effective Time of the Merger shall be
delivered to LUKOIL Americas, upon demand, and any holders of Certificates who
have not theretofore complied with this Article II shall thereafter look only to
LUKOIL Americas for payment of the Merger Consideration.
A-9
<PAGE>
(e) No Liability. None of the LUKOIL Entities, the Company, Surviving
------------
Corporation or the Exchange Agent shall be liable to any Person in respect of
any Merger Consideration delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. Subject to applicable law
and public policy, if any Certificates shall not have been surrendered
immediately prior to such date on which any Merger Consideration in respect of
such Certificate would otherwise escheat to or become the property of any
Governmental Entity, any amounts payable in respect of such Certificate shall,
to the extent permitted by applicable law and public policy, become the property
of the Surviving Corporation, free and clear of all claims or interest of any
person previously entitled thereto.
(f) Investment of Funds. The Payment Fund shall be invested by the
--------------------
Exchange Agent in (i) marketable direct obligations issued or unconditionally
guaranteed by the United States of America or any agency thereof maturing within
one year from the date of acquisition thereof, (ii) commercial paper maturing no
more than one year from the date of creation thereof and currently having at
least A-1 or B-1 rating from Standard & Poor's Ratings Group or Moody's
Investors Service, Inc., respectively, (iii) certificates of deposit maturing no
more than one year from the date of creation thereof issued by commercial banks
incorporated under the laws of the United States of America, each having
combined capital, surplus and undivided profits of not less than $1,000,000,000
and having a senior unsecured rating of "A" or better by a nationally recognized
rating agency (an "A Rated Bank"), (iv) time deposits maturing no more than 30
------------
days from the date of creation thereof with A Rated Banks, (v) money market
accounts and (vi) mutual funds or money market funds that invest solely in one
or more of the investments described in clauses (i) through (v) above. All
earnings thereon shall inure to the benefit of LUKOIL Americas. If for any
reason (including losses) the Payment Fund is inadequate to pay the amounts to
which holders of Company Common Stock shall be entitled under this Article II,
LUKOIL Americas and the Surviving Corporation shall in any event be liable for
payment thereof.
(g) Lost Certificates. In the event that any Certificate shall have
------------------
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the Person claiming such Certificate to be lost, stolen or destroyed before the
Company has notice that the Certificate has been acquired by a protected
purchaser (as that term is defined in Section 8-303 of the Maryland Uniform
Commercial Code), and, if requested by LUKOIL Americas, the posting by such
Person of a bond in such reasonable amount as LUKOIL Americas may direct as
indemnity against any claim that may be made against it with respect to such
Certificate or the payment of the Merger Consideration, the Exchange Agent will
issue in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration with respect to such Certificate to which such Person is entitled
pursuant hereto.
(h) Dissenting Shares. Notwithstanding anything in this Agreement to
-----------------
the contrary, shares of Company Common Stock outstanding immediately prior to
the Effective Time and held by a holder who has not voted in favor of the Merger
or consented thereto in writing and who has properly demanded appraisal for such
shares in accordance with the MGCL to the extent available thereunder (the
"Dissenting Shares"), shall not be converted into the right to receive the
------------------
Merger Consideration, but rather, each holder shall be entitled to payment of
the fair value of such Dissenting Shares in accordance with the MGCL unless such
holder fails to perfect or withdraws or otherwise loses its right to appraisal.
If, after the Effective Time, such holder fails to perfect or withdraws or
otherwise loses its right to appraisal, such shares of Company Common Stock
shall be treated as if they had been converted as of the Effective Time into a
right to receive the Merger Consideration. The Company shall give LUKOIL
Americas prompt notice of any demands received by the Company for appraisal of
shares of Company Common Stock, and LUKOIL Americas shall have the right to
participate in all negotiations and proceedings with respect to such demands.
The Company shall not, except with the prior written consent of LUKOIL Americas
or upon the entry of a final judgment by a court of competent jurisdiction, make
any payment with respect to, or settle or offer to settle, any such demands.
A-10
<PAGE>
(i) Withholding Rights. LUKOIL Americas and Merger Sub shall be
-------------------
entitled to deduct and withhold, or cause to be deducted or withheld, from the
consideration otherwise payable pursuant to this Agreement to any holder of
shares of Company Common Stock, Stock Options or Certificates such amounts as
are required to be deducted and withheld with respect to the making of such
payment under the Internal Revenue Code of 1986, as amended (the "Code"), or any
provision of applicable state or local tax law, solely due to the residency of,
or the applicability of United States federal, state or local backup withholding
requirements to, such holder. To the extent that amounts are so deducted and
withheld, such deducted and withheld amounts shall be treated for all purposes
of this Agreement as having been paid to such holders in respect of which such
deduction and withholding was made.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company.
Except as expressly set forth in the Company Disclosure Schedule
delivered by the Company to LUKOIL Americas at or prior to the execution of this
Agreement (the "Company Disclosure Schedule"), the Company represents and
-----------------------------
warrants to the LUKOIL Entities as follows:
(a) Organization, Standing and Power. Each of the Company and its
----------------------------------
Subsidiaries has been duly incorporated and is validly existing and in good
standing under the laws of its jurisdiction of incorporation and has requisite
corporate power and authority to carry on its business as presently conducted.
Each of the Company and its Subsidiaries is duly qualified and in good standing
or otherwise authorized to do business in each jurisdiction in which the nature
of its business or the ownership or leasing of its properties makes such
qualification necessary, except where the failure to so qualify would not
reasonably be expected to have a Material Adverse Effect on the Company or
materially impair or delay the ability of the Company to consummate the
transactions contemplated hereby. The copies of the Organizational Documents of
the Company and of each of its Subsidiaries which were previously furnished or
made available to LUKOIL USA are true, complete and correct copies of such
documents as in effect on the date of this Agreement. Exhibit 21 to the
Company's Annual Report on Form 10-K for the year ended January 31, 2000 sets
forth a true, correct and complete list of all Subsidiaries of the Company
required to be so reported. The Company does not own, directly or indirectly,
any capital stock or other equity interest in any Person other than the
Subsidiaries listed on such Exhibit 21.
(b) Capital Structure.
-----------------
(i) As of the date of this Agreement, the authorized stock of the
Company consists of (A) 30,000,000 shares of Company Common Stock, of which
14,002,866 shares are issued and outstanding, and (B) 10,000,000 shares of
preferred stock, par value $0.01 per share, of which no shares are issued
and outstanding. All issued and outstanding shares of the stock of the
Company are duly authorized, validly issued, fully paid and nonassessable,
and no class of stock is entitled to preemptive rights. As of the date of
this Agreement, there are no outstanding options, warrants or other rights
to acquire stock or assets from the Company or its Subsidiaries other than
options representing in the aggregate the right to purchase 771,835 shares
of Company Common Stock under the Company Equity Plans. Each outstanding
Company Option will be cancelled and converted at the Effective Time in
accordance with its terms and without further action by the Company,
Company Board or any committee thereof. The Company has delivered to LUKOIL
Americas a letter from the Company's transfer agent certifying the number
of issued and outstanding shares of Company Common Stock on a date not more
than five Business Days prior to the date hereof.
A-11
<PAGE>
(ii) The Company Disclosure Letter lists each Subsidiary and its
jurisdiction of organization. All of the issued and outstanding shares of
stock of the Company's Subsidiaries are duly authorized, validly issued,
fully paid and nonassessable and are owned by the Company, free and clear
of any liens, claims, encumbrances, restrictions, preemptive rights or any
other claims of any third party ("Liens").
-----
(iii) As of the date of this Agreement, no bonds, debentures,
notes or other indebtedness of the Company having the right to vote on any
matters on which stockholders may vote ("Company Voting Debt") are issued
-------------------
or outstanding.
(iv) Except as otherwise set forth in this Section 3.1(b), as of
the date of this Agreement, there are no securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of any
kind to which the Company or its Subsidiaries is a party or by which any of
them is bound obligating the Company or a Subsidiary to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of stock
or other voting securities of the Company or such Subsidiary or obligating
the Company or such Subsidiary to issue, grant, extend or enter into any
such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking. As of the date of this Agreement, there are no
outstanding obligations of the Company or any Subsidiary to repurchase,
redeem or otherwise acquire any shares of stock of the Company or such
Subsidiary.
(c) Authority; No Conflicts.
-----------------------
(i) The Company has all requisite corporate power and corporate
authority to enter into this Agreement and, subject to the adoption of this
Agreement and approval of the Merger by the requisite vote of the holders of
Company Common Stock, if any, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject in the case of the
consummation of the Merger to the approval of this Agreement and the Merger by
the requisite vote of the stockholders of the Company, if required. This
Agreement has been duly executed and delivered by the Company and constitutes a
valid and binding agreement of the Company, enforceable against it in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and similar laws relating to or affecting
creditors generally and by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
A-12
<PAGE>
(ii) The execution and delivery of this Agreement does not or
will not, as the case may be, and the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation of, or
constitute a default (with or without notice or lapse of time, or both) under,
or give rise to a right of consent, termination, amendment, cancellation or
acceleration of any obligation or the loss of a material benefit under, or the
creation of a Lien on any assets (any such conflict, violation, default, right
of consent, termination, amendment, cancellation or acceleration, loss or
creation, a "Violation") pursuant to: (A) any provision of the Organizational
---------
Documents of the Company or any of its Subsidiaries or (B) except as would not
reasonably be expected to have a Material Adverse Effect on the Company or
materially impair or delay the ability of the Company to consummate the
transactions contemplated hereby and, subject to obtaining or making the
consents, approvals, orders, authorizations, registrations, declarations and
filings referred to in paragraph (iii) below, any loan or credit agreement,
note, bond, indenture, Lease, Third Party Lease, Sublease, Mortgage, benefit
plan or other agreement, obligation, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company, the Company's Subsidiaries or their respective Real
Properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any supranational, national, state,
municipal or local government, any instrumentality, subdivision, court,
administrative agency or commission or other authority thereof, or any
quasi-governmental or private body exercising any regulatory, taxing, or other
governmental or quasi-governmental authority (a "Governmental Entity"), is
--------------------
required by or with respect to the Company or any Subsidiary in connection with
the execution and delivery of this Agreement by the Company or the consummation
by the Company of the transactions contemplated hereby, except for (x) those
required under or in relation to (A) the HSR Act, (B) filing of a Schedule
14D-9, Rule 14f-1 filings and Forms 3 and 4 filings under the Exchange Act, (C)
the MGCL and the DGCL with respect to the filing and recordation of appropriate
merger or other documents, including the Articles of Merger, and (D) rules and
regulations of the New York Stock Exchange ("NYSE"), and (y) such consents,
----
approvals, orders, authorizations, registrations, declarations ---- and filings
the failure to make or obtain which would not reasonably be expected to have a
Material Adverse Effect on the Company or materially impair or delay the ability
of the Company to consummate the transactions contemplated hereby.
(d) Reports and Financial Statements.
--------------------------------
(i) The Company has filed all required reports, schedules, forms,
statements and other documents required to be filed by it with the SEC since
April 30, 1997 (collectively, including all exhibits thereto, the "Company SEC
-----------
Reports"). None of the Company SEC Reports, as of their respective dates (and,
-------
if amended or superseded by a filing prior to the date of this Agreement or of
the Closing Date, then on the date of such filing), contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Each of the financial
statements (including the related notes) included in the Company SEC Reports
presents fairly, in all material respects, the consolidated financial position
and consolidated results of operations and cash flows of the Company and its
Subsidiaries as of the respective dates or for the respective periods set forth
therein, all in conformity with U.S. generally accepted accounting principles
("GAAP") consistently applied during the periods involved except as otherwise
----
noted therein, and subject, in the case of the unaudited interim financial
statements, to the absence of complete notes and normal year-end adjustments.
All of such Company SEC Reports, as of their respective dates (and as of the
date of any amendment to the respective Company SEC Report), complied as to form
in all material respects with the applicable requirements of the Exchange Act
and the rules and regulations promulgated thereunder. None of the Subsidiaries
is, or has been at any time, subject to the reporting requirements of Sections
13(a) and 15(d) of the Exchange Act.
(ii) Except as set forth in the Company SEC Reports filed prior
to the date of this Agreement, and except for liabilities and obligations
incurred in the ordinary course of business since January 31, 2000, the Company
does not have any liabilities or obligations of any nature required by GAAP to
be set forth on a consolidated balance sheet of the Company which would be
reasonably expected to have a Material Adverse Effect on the Company.
A-13
<PAGE>
(e) Information Supplied.
--------------------
(i) None of the information supplied or to be supplied by the
Company for inclusion or incorporation by reference in (A) the proxy statement
related to the Company Stockholders Meeting (the "Proxy Statement"), if
----------------
applicable, (B) the Schedule 14D-9 or (C) the Offer Documents will, at the
respective times such documents are filed, and, with respect to the Offer
Documents and the Proxy Statement, if any, when first published, sent or given
to the stockholders of the Company, contain an untrue statement of material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they are made, not misleading or, in the case of the Offer Documents and
the Proxy Statement, if any, or any amendment thereof or supplement thereto, at
the time of the Company Stockholders Meeting (as defined below), if any, and at
the Effective Time, contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements made therein, in the light of the circumstances under which
they are made, not misleading or necessary to correct any statement in any
earlier communication with respect to the Offer or the solicitation of proxies
for the Company Stockholders Meeting, if any, which shall have become
misleading. The Proxy Statement, if any, and Schedule 14D-9 will comply as to
form in all material respects with the requirements of the Exchange Act and the
rules and regulations of the SEC thereunder.
(ii) Notwithstanding the foregoing provisions of this Section
3.1(e), no representation or warranty is made by the Company with respect to
statements made or incorporated by reference in the Proxy Statement, if any, or
Schedule 14D-9 based on information supplied in writing by the LUKOIL Entities
for inclusion or incorporation by reference therein.
(f) Compliance with Applicable Laws; Regulatory Matters.
----------------------------------------------------------------
(i) The Company and its Subsidiaries hold, and each of the Real
Properties is operated in compliance with, all permits, licenses, certificates,
franchises, registrations, variances, exemptions, orders and approvals required
to be obtained by the Company and its Subsidiaries from all Governmental
Entities, including but not limited to permits for the storage, distribution,
marketing or transportation of gasoline, diesel fuel, fuel oil, propane,
kerosene or other petroleum products or with respect to the construction,
ownership, operation, leasing, maintenance or use of the Real Properties or any
part thereof for such purposes (the "Company Permits"), except for those the
----------------
failure of which to hold or be in compliance with would not reasonably be
expected to have a Material Adverse Effect on the Company or materially impair
or delay the ability of the Company to consummate the transactions contemplated
hereby. To the best knowledge of the Company, its lessees and sublessees hold,
and each of the Real Properties is operated by such lessees and sublessees in
compliance with, all required permits, licenses, certificates, franchises,
registrations, variances, exemptions, orders and approvals of all Governmental
Entities other than the Company Permits (the "Dealer Permits," and, collectively
--------------
with the Company Permits, the "Permits"), except for those the failure of which
-------
to hold or be in compliance with would not reasonably be expected to have a
Material Adverse Effect on the Company or materially impair or delay the ability
of the Company to consummate the transactions contemplated hereby. To the best
knowledge of the Company, each of the Permits is valid and in full force and
effect, and none of the Company, its Subsidiaries, its lessees or sublessees is
in breach or violation of any Permit which breach would reasonably be expected
to have a Material Adverse Effect on the Company or materially impair or delay
the ability of the Company to consummate the transactions contemplated hereby.
The businesses of the Company and its Subsidiaries and the Real Properties are
not being and have not been conducted or operated in violation of any law,
ordinance, regulation, judgment, decree, injunction, rule or order of any
Governmental Entity, except for violations which would not reasonably be
expected to have a Material Adverse Effect on the Company or materially impair
or delay the ability of the Company to consummate the transactions contemplated
hereby. The transactions contemplated by this Agreement will not cause any of
the Company Permits to be void or require the Surviving Corporation to renew or
transfer any such Company Permit, except as set forth on Schedule 3.1(c)(iii) of
the Company Disclosure Schedule or where the voiding or failure so to renew or
transfer would not reasonably be expected to have a Material Adverse Effect on
the Company or materially impair or delay the ability of the Company to
consummate the transactions contemplated hereby ("Required Permit Renewals").
------------------------
A-14
<PAGE>
(ii) The Company has delivered to LUKOIL USA true, correct and
complete copies of Environmental Reports delivered to the Company or any of its
Subsidiaries within the six-month period ending on the date of this Agreement.
(g) Litigation. There is no litigation, arbitration, claim, suit,
----------
action, investigation or proceeding pending or, to the best knowledge of the
Company, threatened, against or affecting the Company, any Subsidiary or the
Real Properties which would reasonably be expected to have a Material Adverse
Effect on the Company or materially impair or delay the ability of the Company
to consummate the transactions contemplated hereby, nor is there any judgment,
award, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against the Company or any Subsidiary which would
reasonably be expected to have a Material Adverse Effect on the Company or
materially impair or delay the ability of the Company to consummate the
transactions contemplated hereby.
(h) Taxes. Except as would not reasonably be expected to have a
-----
Material Adverse Effect or materially impair or delay the ability of the Company
to consummate the transactions contemplated hereby (i) each of the Company and
each of its Subsidiaries has timely filed all federal, state, local and non-U.S.
Tax Returns required to be filed by it, and all such Tax Returns are true,
correct and complete, and has paid and discharged all Taxes shown as due
thereon, other than such payments as are being contested in good faith by
appropriate proceedings; (ii) no Tax authority is now asserting in writing or,
to the best knowledge of the Company or its Subsidiaries, threatening in writing
to assert against the Company or any of its Subsidiaries any deficiency or claim
with respect to Taxes of the Company or any of its Subsidiaries; (iii) no waiver
of any statute of limitations with respect to, or any extension of a period for
the assessment of, any Tax has been granted by the Company or any of its
Subsidiaries; (iv) the accruals and reserves for Taxes reflected in the
Company's audited consolidated balance sheet as of January 31, 2000 (and the
notes thereto) and the most recent quarterly financial statements (and the notes
thereto) are adequate to cover all Taxes accruable through the date thereof in
accordance with GAAP; (v) no election under Section 341(f) of the Code has been
made by the Company or any of its Subsidiaries; (vi) the Company and each of its
Subsidiaries has withheld or collected and paid over to the appropriate Tax
authority or is properly holding for such payment all Taxes required by law to
be withheld or collected from any employee, independent contractor, creditor,
stockholder or any other third party; (vii) there are no Liens for Taxes upon
the assets of the Company or any of its Subsidiaries, other than Liens for Taxes
that are being contested in good faith by appropriate proceedings or are not yet
due; (viii) neither the Company nor any of its subsidiaries have constituted
either a "distributing corporation" or a "controlled corporation" (within the
meaning of Section 355(a) (1) (A) of the Code) in a distribution of stock
qualifying for tax-free treatment under Section 355 of the Code in the two years
prior to the date of this Agreement; (ix) the federal income Tax Returns for the
Company and each of its Subsidiaries have been examined and settled with the
Internal Revenue Service (or the applicable statutes of limitation for the
assessment of federal income Taxes for such period have expired) for all fiscal
years ending on or before January 31, 1997; (x) neither the Company nor any of
its Subsidiaries are a party to any agreement relating to the sharing,
allocation, or indemnification of Taxes other than agreements between members of
the affiliated group of which the Company is the common parent under Section
1504 of the Code; and (xi) neither the Company nor any of its Subsidiaries have
agreed, or is required to make, any adjustment under Section 481 of the Code.
The Company has no knowledge of any Taxes or assessments relating to any of the
Real Properties or any part thereof or any planned public improvements that may
result in a Tax or assessment against any of the Real Properties, except for
those which would not reasonably be expected to have a Material Adverse Effect
on the Company or materially impair or delay the ability of the Company to
consummate the transactions contemplated hereby.
A-15
<PAGE>
(i) Absence of Certain Changes or Events. Since January 31, 2000
-------------------------------------
through the date of this Agreement:
(i) Each of the Company and its Subsidiaries has conducted its
business in the ordinary course and has not incurred any material liability,
except in the ordinary course of their respective businesses.
(ii) There has not been any event, change, occurrence or
development of a state of facts or circumstances having, or which would
reasonably be expected to have, a Material Adverse Effect on the Company or
materially impair or delay the ability of the Company to consummate the
transactions contemplated hereby; provided, that losses from operations in the
ordinary course of business as reflected in the Company's financial statements
dated as of July 31, 2000 shall not be considered in determining whether there
has been any such event, change, occurrence or development.
(iii) There has not been any damage, destruction or condemnation
in excess of $100,000 per occurrence or $500,000 in the aggregate, in each case,
net of any insurance recoveries.
(iv) There has not been any material change in the Company's
accounting methods, practices or principles.
(v) Neither the Company nor any Subsidiary has (1) sold,
transferred or otherwise disposed of (or agreed or committed to sell, transfer
or otherwise dispose of) any property other than the sale of inventory in the
ordinary course of business, where the amount of any such sale, transfer or
disposition exceeds $100,000 per occurrence or $500,000 in the aggregate or (2)
canceled, compromised, released or assigned any debt or claim in its favor,
where the amount of any such cancellation, compromise, release or assignment
exceeds $100,000 per occurrence or $500,000 in the aggregate.
(vi) Neither the Company nor any Subsidiary has instituted,
settled or agreed to settle any litigation, action or proceeding before any
Governmental Entity other than in the ordinary course of business consistent
with past practice for amounts individually or in the aggregate not material to
the Company and its Subsidiaries taken as a whole.
(vii) Neither the Company nor any Subsidiary has assumed,
guaranteed, endorsed or otherwise become responsible (or otherwise agreed to
become responsible) for the obligations of any other Person except for (A) the
endorsement of negotiable instruments, (B) guarantees made by the Company on
behalf of Subsidiaries, including, without limitation, (1) for the purchase of
motor fuel, heating oil and other petroleum-related products in the ordinary
course, (2) of equipment leases and (3) for purchase money financing obligations
with respect to equipment and (C) other obligations, in each case in the
ordinary course of business consistent with past practice, and in the case of
clause (C), not in excess of $100,000 individually or $500,000 in the aggregate.
A-16
<PAGE>
(viii) Neither the Company nor any Subsidiary has granted, or has
agreed or committed to grant, any severance or termination pay to (or amendment
to any such existing arrangement with) any director or officer of the Company or
any of its Subsidiaries or, other than in the ordinary course of business
consistent with past practice, any employee of the Company or any of its
Subsidiaries (other than employees who receive less than $100,000 in total
annual cash compensation from the Company or any of its Subsidiaries); enter
into any employment, severance, change of control, deferred compensation or
other similar arrangement (or any amendment to any such existing agreement) with
any director or officer of the Company or any of its Subsidiaries; increase
benefits payable under any existing severance or change of control or
termination pay policies or employment, severance or change of control
agreements with respect to any director or officer of the Company or any of its
Subsidiaries or, other than in the ordinary course of business consistent with
past practice, any employee of the Company or any of its Subsidiaries (other
than employees who receive less than $100,000 in total annual cash compensation
from the Company or any of its Subsidiaries); increase (or amend the terms of)
compensation, bonus or other benefits payable to directors, officers or
employees of the Company or any of its Subsidiaries (other than employees who
receive less than $100,000 in total annual cash compensation from the Company or
any of its Subsidiaries), other than in the ordinary course of business
consistent with past practice; or adopt any collective bargaining agreement.
(ix) Neither the Company nor any Subsidiary has entered into any
licensing or other Contract with regard to the acquisition or disposition of any
material Intellectual Property other than non-exclusive licenses granted in the
ordinary course of business consistent with past practice.
(x) Neither the Company nor any of its Subsidiaries has declared,
set aside or paid any dividend or other distribution in respect of shares of the
Company Common Stock, or any redemption or other acquisition by the Company or
any of its Subsidiaries of any shares of Company Common Stock.
(j) Vote Required. Subject to Section 3-106 of the MGCL, the requisite
-------------
affirmative vote of the holders of a majority of the outstanding shares of
Company Common Stock (the "Required Company Vote") is the only vote of the
-----------------------
holders of any class or series of the Company or any Subsidiary securities
necessary to approve the Merger and the transactions contemplated by this
Agreement, and such vote is not necessary in the event of a merger described in
Section 2.3.
A-17
<PAGE>
(k) Certain Agreements. All contracts listed as an exhibit to the
-------------------
Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2000
under the rules and regulations of the SEC relating to the business of the
Company and its Subsidiaries or listed on the Company Disclosure Schedule are
the only contracts material to the operation, prospects and financial condition
of the Company taken as a whole (the "Company Material Contracts"), which
----------------------------
Company Material Contracts include, but are not limited to: contracts pursuant
to which the Company or any of its Subsidiaries licenses other persons to use
any material Intellectual Property (other than contracts entered into for the
licensing of data or software in the ordinary course of business); contracts
which restrict the Company or any of its affiliates from competing in any line
of business or with any Person in any geographical area; contracts involving the
acquisition, merger or purchase of all or substantially all of the assets or
business of a third party involving aggregate consideration of $5.0 million or
more or the purchase or sale of assets, or a series of purchases and sales of
assets, involving aggregate consideration of $5.0 million or more or the grant
to any person of any preferential rights to purchase any material amount of its
assets; contracts, including mortgages or other grants of security interests,
guarantees and notes, relating to the borrowing of money in an amount in excess
of $5.0 million in the aggregate; any contract or other agreement to indemnify
for any liability or cost with respect to any Environmental Law; and any
contract or other agreement which would prohibit or materially delay the
consummation of the Offer, Merger or any of the transactions contemplated by
this Agreement. Each of the Company Material Contracts is valid and in full
force and effect except to the extent they have previously expired or been
terminated in accordance with their terms, and neither the Company nor its
Subsidiaries has violated any provision of, or committed or failed to perform
any act which, with or without notice, lapse of time, or both, could reasonably
be expected to constitute a default under the provisions of, any such Company
Material Contract, except for defaults which would not reasonably be expected to
have a Material Adverse Effect on the Company or materially impair or delay the
ability of the Company to consummate the transactions contemplated hereby. To
the knowledge of the Company, no counterparty to any such Company Material
Contract has violated any provision of, or committed or failed to perform any
act which, with or without notice, lapse of time, or both, could reasonably be
expected to constitute a default or other breach under the provisions of, such
Company Material Contract, except for defaults or breaches which would not
reasonably be expected to have a Material Adverse Effect on the Company or
materially impair or delay the ability of the Company to consummate the
transactions contemplated hereby.
(l) Employee Benefit Plans; Labor Matters.
-------------------------------------
(i) With respect to each "employee benefit plan" as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and with respect to each other written employee benefit plan,
-----
program, arrangement, policy, payroll procedure and contract (including any
bonus, deferred compensation, stock bonus, stock purchase, restricted stock,
stock option, employment, termination, change in control and severance plan,
program, arrangement, contract) to which the Company or any Subsidiary is a
party, which is sponsored, maintained or contributed to by the Company or any
Subsidiary, or with respect to which the Company or any Subsidiary could incur
any liability under Section 4069 of ERISA, but excluding, in each case, any
"multiemployer plan" within the meaning of Section 3(37) of ERISA (the "Company
-------
Benefit Plans"), the Company has made available to LUKOIL Americas (A) a true
--------------
and complete copy along with, any trust instruments and insurance contracts
forming a part of any Company Benefit Plans, and all amendments thereto; (B) the
three (3) most recent actuarial valuations, if any, prepared for each Company
Benefit Plan; (C) the two (2) most recent reports (Series 5500 and all schedules
thereto), if any, required under ERISA or the Code in connection with each
Company Benefit Plan or related trust; (D) the most recent determination letters
received from the Internal Revenue Service, if any, for each Company Benefit
Plan and related trust which is intended to satisfy the requirements of Section
401(a) of the Code; and (E) the most recent summary plan description together
with the most recent summary of material modifications, if any, required under
ERISA with respect to each Benefit Plan. All Company Benefit Plans are listed in
Section 3.1(l)(i) of the Company Disclosure Schedule. Each "change in control"
or similar provision contained therein is specifically identified on Schedule
3.1(l)(i).
A-18
<PAGE>
(ii) Each of the Company Benefit Plans that is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA and that is
intended to be qualified under Section 401(a) of the Code (the "Pension Plan")
-------------
has received a favorable determination letter from the United States Internal
Revenue Service, and the Company is not aware of any circumstances likely to
result in the revocation of any such favorable determination letter All Company
Benefit Plans, to the extent subject to ERISA and/or the Code, are in
substantial compliance with ERISA, the Code, and all other applicable law. There
is no material pending or threatened litigation relating to the Company Benefit
Plans. Neither the Company nor any of its Subsidiaries has engaged in a
transaction with respect to any Company Benefit Plan that, assuming the taxable
period of such transaction expired as of the date hereof, could subject the
Company or any Subsidiary to a tax or penalty imposed by either Section 4975 of
the Code or Section 502(i) of ERISA in an amount which would be material.
(iii) No liability under Title IV of ERISA has been or is
expected to be incurred by the Company or any of its Subsidiaries with respect
to any ongoing, frozen or terminated "single-employer plan", within the meaning
of Section 4001(a)(15) of ERISA currently or formerly maintained by any of them,
or the single employer plan of any entity which is considered one employer with
the Company under Section 4001 of ERISA or Section 414 of the Code (an "ERISA
-----
Affiliate"). The Company and the Subsidiaries have not incurred and do not
---------
expect to incur any withdrawal liability with respect to a multiemployer plan
(within the meaning of Section 3(37) of ERISA) under Subtitle E of Title IV of
ERISA. The withdrawal liability of the Company and its Subsidiaries under each
Company Benefit Plan which is a multiemployer plan to which the Company or any
of its Subsidiaries has contributed during the preceding 12 months, determined
as if a "complete withdrawal," within the meaning of Section 4203 of ERISA, had
occurred as of the date hereof, does not exceed $50,000. No notice of a
"reportable event", within the meaning of Section 4043 of ERISA for which the
30-day reporting requirement has not been waived, has been required to be filed
for any Pension Plan or by any ERISA Affiliate within the 12-month period ending
on the date hereof or will be required to be filed in connection with the
transactions contemplated by this Agreement.
(iv) All contributions required to be made under the terms of any
Company Benefit Plan have been timely made or have been reflected on the audited
Financial Statements of the Company. Neither any Pension Plan nor any
single-employer plan of an ERISA Affiliate has an "accumulated funding
deficiency" (whether or not waived) within the meaning of Section 412 of the
Code or Section 302 of ERISA and no ERISA Affiliate has an outstanding funding
waiver. Neither the Company nor any of its Subsidiaries has provided, or is
required to provide, security to any Pension Plan or to any single-employer plan
of an ERISA Affiliate pursuant to Section 401(a)(29) of the Code.
(v) Under each Pension Plan which is a single-employer plan, as
of the last day of the most recent plan year ended prior to the date hereof, the
actuarially determined present value of all "benefit liabilities", within the
meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in the Plan's most recent actuarial valuation),
did not exceed the then current value of the assets of such Plan, and there has
been no material change in the financial condition of such Plan since the last
day of the most recent plan year.
(vi) Neither the Company nor any of its Subsidiaries has any
obligations for retiree health and life benefits under any Company Benefit Plan
or has ever represented, promised or contracted (whether in oral or written
form) to any current or former employees or directors of the Company or any of
its Subsidiaries ("Employees") that such Employee(s) would be provided with
---------
retiree health or life benefits.
(vii) The consummation of the transactions contemplated by this
Agreement will not (x) entitle any Employees of the Company or any of the
Subsidiaries to severance pay, (y) accelerate the time of payment or vesting or
trigger any payment or funding (through a grantor trust or otherwise) of
compensation or benefits under, increase the amount payable or trigger any other
material obligation pursuant to, any of the Company Benefit Plans or (z) result
in any breach or violation of, or a default under, any of the Company Benefit
Plans.
A-19
<PAGE>
(viii) Any amount that could be received (whether in cash,
property, or vesting of property) as a result of the transaction contemplated by
this Agreement by any officer, director, employee or independent contractor of
the Company or any of its Subsidiaries, who is a "disqualified individual" (as
defined in proposed Treasury Regulation Section 1.280G-1), under any employment
arrangement or Company Benefit Plan would not be characterized as an "excess
parachute payment" (as defined in Section 280G of the Code).
(ix) All Company Benefit Plans covering current or former
non-U.S. Employees complies in all material respects with applicable law. No
unfunded liabilities exist with respect to any Company Benefit Plan that covers
such non-U.S. Employees.
(x) The Company and each Subsidiary (A) has correctly categorized
all Employees as either employees or independent contractors for federal tax
purposes, and is in compliance with all applicable federal, state and local
laws, rules and regulations (domestic and foreign) respecting their employment,
employment practices, labor, terms and conditions of employment and wages and
hours, in each case, with respect to Employees; (B) has withheld all amounts
required by law or by agreement to be withheld from the wages, salaries and
other payments to Employees; (C) is not liable for any arrears of wages or any
taxes or any penalty for failure to comply with any of the foregoing; (D) is not
liable for any payment to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment compensation benefits,
social security or other benefits for Employees; and (E) has provided Employees
with the benefits to which they are entitled pursuant to the terms of all
Company Benefit Plans; except, in each case, where failure to do so would not
result in any liability which would be material to the Company.
(xi) Neither the Company nor any Subsidiary is a party to any
collective bargaining or other labor union contracts and no collective
bargaining agreement is being negotiated by the Company or any Subsidiary. There
is no pending labor dispute, strike or work stoppage against the Company or any
Subsidiary which may interfere with the respective business activities of the
Company or any Subsidiary, except where such dispute, strike or work stoppage
would not reasonably be expected to have a Material Adverse Effect on the
Company. There is no pending charge or complaint against the Company or any
Subsidiary by the National Labor Relations Board or any comparable state agency,
except where such unfair labor practice, charge or complaint would not
reasonably be expected to have a Material Adverse Effect on the Company.
(m) Change of Control Payments; Takeover Restrictions.
-------------------------------------------------
(i) Neither the Company nor its Subsidiaries has any plans or
agreements to which they are parties, or by which they or their properties are
bound, pursuant to which payments, including with respect to the acceleration of
benefits, will be required upon (A) or as a result of a "change of control" of
the Company or (B) the termination or closing of any of the Company's operations
or facilities.
(ii) No state takeover statute or similar statute or regulation
of any state or other jurisdiction applies to this Agreement or any of the
transactions contemplated hereby, including the Merger. No provision of the
Charter or Bylaws of the Company or any Subsidiary would, directly or
indirectly, restrict or impair the ability of the LUKOIL Entities or its
affiliates to vote, or otherwise to exercise the rights of a stockholder with
respect to, securities of the Company or any Subsidiary that may be acquired or
controlled by the LUKOIL Entities or its affiliates pursuant to this Agreement
or permit any stockholder to acquire securities of the Company on a basis not
available to the LUKOIL Entities in the event that the LUKOIL Entities were to
acquire securities of the Company.
A-20
<PAGE>
(n) No Undisclosed Liabilities. Since January 31, 2000, there have not
--------------------------
been incurred any liabilities by the Company or its Subsidiaries of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, which would be required by GAAP, applied on a basis consistent with
the financial statements, to be disclosed in the consolidated balance sheet of
the Company and its Subsidiaries and the notes thereto, other than: (i)
liabilities disclosed in the Company SEC Reports; and (ii) liabilities incurred
in the ordinary course of business consistent with past practice.
(o) Intellectual Property. The Company owns or has rights to all
----------------------
Intellectual Property material to the conduct of its business. To the knowledge
of the Company, (i) no material claims are pending or threatened that the
Company or any Subsidiary is infringing on or otherwise violating the rights of
any person with regard to any Intellectual Property and (ii) no person is
infringing on or otherwise violating any right of the Company or any Subsidiary
with respect to any Intellectual Property owned by and/or licensed to the
Company or any Subsidiary.
(p) Brokers or Finders. No agent, broker, investment banker, financial
------------------
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company, except ING Barings in an amount not exceeding that
previously disclosed to LUKOIL Americas.
(q) Opinion of Financial Advisor. The Company has received the opinion
----------------------------
of ING Barings, dated the date of this Agreement, to the effect that, as of such
date, the consideration to be paid in each of the Offer and the Merger is fair,
from a financial point of view, to the holders of Company Common Stock. A
complete and correct originally executed copy of such opinion has been delivered
by the Company to the LUKOIL Entities. The Company has been authorized by ING
Barings to permit the inclusion of such opinion (and, subject to prior review
and consent by ING Barings, a reference thereto) in the Offer Documents and in
the Schedule 14D-9 referred to in Section 1.2 (b) and the Proxy Statement.
(r) Environmental Matters. Except as would not reasonably be expected
---------------------
to, individually or in the aggregate, result in a Material Adverse Effect,
(i) Except to the extent reasonably necessary for conduct of the
business in accordance with all Environmental Laws and acceptable industry
standards for the petroleum industry in which the company operates, the Company
has not treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled or Released any substance, including any Hazardous
Substance, or owned or operated any property or facility in a manner that has
given or would give rise to any damages, including any damages for response
costs, corrective action costs, personal injury, property damage or natural
resources damages pursuant to any Environmental Law.
(ii) The Company has not received any notice, report or other
information (whether formal or informal, written or otherwise) of any
investigation, administrative order, consent order or agreement, litigation,
settlement, or claim by any Person with respect to any Hazardous Substance,
Environmental Law, or Environmental Permit related in any way to the business of
the Company or any of the Real Properties.
(iii) The Company has not transported any Hazardous Substance or
arranged for the transportation thereof to any location for which the Company
has received notice, report or other information that the Company is or may be a
potentially responsible party under the Comprehensive Environmental Response,
Compensation and Liability Act or similar state statute.
A-21
<PAGE>
(iv) The Company, the Real Properties, and business of the
Company are in compliance with all applicable Environmental Laws and have
obtained and are in compliance with all Environmental Permits.
(v) The Company has disclosed in writing to the LUKOIL Entities
prior to the date hereof a complete and accurate list of all underground storage
tanks that are currently located on any of the Real Properties or that after
February 24, 1997 were located on any of the Property and subsequently removed
or filled.
(vi) All underground storage tanks located on the Real Properties
are in substantial compliance with all applicable local, state and federal
underground storage tank requirements, and with either (A) the new tank
standards under 40 C.F.R. Section 280.20 or (B) the upgrading requirements under
40 C.F.R. Section 280.21. (vii) The consummation of the Offer or the Merger will
not result in any liabilities for site investigation or cleanup, or require the
consent of any Person, pursuant to any Environmental Law, including any
so-called "transaction-triggered" or "responsible party transfer" requirement.
(viii) The Company has not, either expressly or by operation of
Law, assumed or undertaken any liability, including any obligation for cleanup
or corrective or remedial action, of any other Person relating to any
Environmental Law or agreement.
(ix) The Company Disclosure Schedule sets forth a true and
complete list of all parties indemnified by the Company for liabilities arising
under Environmental Laws.
(x) The Company has reported to the applicable Governmental
Entity, to the extent required by Environmental Law, any matter required to be
reported by the Company under such Environmental Laws.
(s) Real Properties.
---------------
(i) Properties. The Company Disclosure Schedule sets forth a
----------
complete list of all real estate owned occupied by the Company or any of its
Subsidiaries (each a "Real Property"), and the Company has made available a true
and complete list of all material improvements, buildings, other rights of
ownership thereon, and personal property thereon, including trade fixtures.
(ii) Title To The Leases and Subleases. The Company is the sole
----------------------------------
holder and owner of (A) the tenant's leasehold estate with respect to the master
leases described in the Company Disclosure Schedule (collectively, the
"Leases"), (B) the subtenant or sub-subtenant leasehold estate under the third
party leases including the Power Test Leases described in the Company Disclosure
Schedule (collectively, the "Third Party Leases"), (C) the tenant's leasehold
------------------
estate with respect to the leases described in the Company Disclosure Schedule
(collectively, the "Marketing Leases"),and (D) the landlord's interest under the
----------------
subleases described in the Company Disclosure Schedule (collectively, the
"Subleases"). The Leases, Third Party Leases, the Marketing Leases and Subleases
--------
are the only agreements governing any leasehold estates held by the Company or
its Subsidiaries with respect to the Real Properties. True, accurate and
complete copies of the Leases, Marketing Leases and Subleases have been made
available to LUKOIL Americas.
A-22
<PAGE>
(iii) Parties in Possession. To the knowledge of the Company,
----------------------
there are no parties in possession of the Real Properties except for Subtenants
under written Subleases, true, accurate and complete copies of which have been
delivered to LUKOIL Americas prior to the date hereof.
(iv) Leases. Except as would not reasonably be expected to have a
------
Material Adverse Effect or materially impair or delay the ability of the Company
to consummate the transactions contemplated hereby: the Company has received no
notice of any intention by any Lessor under a Lease to cancel or terminate the
same (nor has the Company canceled or terminated any Lease), nor has the Company
vacated all or any portion of such leased Properties; no party is in default
under any Lease except as set forth on the Company Disclosure Schedule; the
Company has performed all obligations required of it under all of the Leases and
there remain no unfulfilled obligations of the Company under the Leases, the
nonperformance of which could entitle a Lessor to damages under such Lease or
could cause the Company to be in default under such Lease; except as set forth
on the Company Disclosure Schedule, (A) no Lease has been modified, altered or
amended in any respect, and (B) no Lessor has the right to cancel or terminate
its Lease, and (C) the Company has no interest in such Real Properties other
than the leasehold possessory interest set forth in such Lease; each of the
Leases is valid and subsisting and in full force and effect in accordance with
its terms and constitutes the legal, valid, binding and enforceable obligation
of the Lessor thereunder; none of the rents or other charges paid by the Company
under any of the Leases violates any Laws; and any and all renewal terms with
respect to any and all of the Leases have been exercised by or on behalf of the
Company.
(v) Third Party Leases. To the Company's knowledge, each of the
------------------
Third Party Leases is valid and subsisting and in full force and effect in
accordance with its terms and constitutes the legal, valid, binding and
enforceable obligation of the Third Party Lessor thereunder; none of the Third
Party Leases have been pledged or encumbered by the Company; any and all renewal
terms with respect to any and all of the Third Party Leases have been exercised
by or on behalf of the Company as set forth in the Company Disclosure Schedule.
(vi) Marketing Leases. Except as would not reasonably be expected
----------------
to have a Material Adverse Effect or materially impair or delay the ability of
the Company to consummate the transactions contemplated hereby: the Company has
received no notice of any intention by any Lessor under a Marketing Lease to
cancel or terminate the same (nor has the Company canceled or terminated any
Marketing Lease), nor has the Company vacated all or any portion of such leased
Properties. No party is in default under any Marketing Lease except as set forth
on the Company Disclosure Schedule. The Company has performed all obligations
required of it under all of the Marketing Leases and there remain no unfulfilled
obligations of the Company under the Marketing Leases, the nonperformance of
which could entitle a Lessor to damages under such Marketing Lease or could
cause the Company to be in default under such Marketing Lease. Except as set
forth on the Company Disclosure Schedule, (A) no Marketing Lease has been
modified, altered or amended in any respect since made available to LUKOIL
Americas, and (B) no Lessor has the right to cancel or terminate its Marketing
Lease, and (C) the Company has no interest in such Real Properties other than
the leaseholds.
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<PAGE>
(vii) Subleases. Except as would not reasonably be expected to
---------
have a Material Adverse Effect or materially impair or delay the ability of the
Company to consummate the transactions contemplated hereby: there are no
subleases, concessions or sub-occupancy agreements in effect with respect to the
Real Properties other than the Subleases made available to Lukoil Americas; the
Company has received no notice of any intention by any tenant under a Sublease
(a "Subtenant") to (A) cancel or terminate the same (nor has the Company
--------
canceled or terminated any Sublease), or (B) vacate all or any portion of such
tenant's leased property with respect to any Sublease; to the extent that any of
the Subleases call for security, such security remains on deposit with the
Company, and has not been applied towards any payment due under said Subleases;
the Company has not received any advance rent or advance compensation under any
of the Subleases in excess of one month; no party is in default under any
Sublease; the Company has performed all obligations required of it under all of
the Subleases and there remain no unfulfilled obligations of the Company under
the Subleases, the nonperformance of which could entitle a Subtenant to damages
under such Sublease or could cause the Company to be in default under such
Sublease; no Sublease has been modified, altered or amended in any respect; no
Subtenant has the right to cancel or terminate its Sublease, to renew or extend
its Sublease, or to expand or contract the Real Properties covered thereby
except as provided therein; no Subtenant has any interest in the Real Properties
other than the leasehold possessory interest set forth in such Sublease; no
Subtenant has given notice to the Company of its intention to institute
litigation with respect to any Sublease; except as specifically provided in the
Subleases, no Subtenant or other occupant is entitled to any rebates,
allowances, concessions, free rent or rent abatement for any period after the
date hereof; each of the Subleases is valid and subsisting and in full force and
effect in accordance with its terms and constitutes the legal, valid, binding
and enforceable obligation of the Subtenant thereunder; each Subtenant has
accepted the Properties covered by its Sublease and is in possession of such
Real Properties in accordance with its Sublease; all initial installation work,
if any, required of the Company has been fully performed, paid for and accepted
by the Subtenant; and no Subtenant has any pending litigation, offsets or
counterclaims against the Company which, if successfully asserted, would reduce
the rent payable under such Subtenant's Sublease or result in the cancellation
or termination thereof; and none of the Subleases and none of the rents or other
amounts payable thereunder have been assigned, pledged or encumbered by the
Company or the Company's predecessors in title to the Properties except for any
assignments, pledges or encumbrances which will be fully released on or before
the date hereof.
(viii) Operating Agreements. There are no management, service,
supply, maintenance, employment or other contracts in effect with respect to the
Properties of any nature whatsoever, written or oral (collectively, "Operating
Agreements"), other than the Operating Agreements made available to Lukoil
Americas. The Company has performed all of its obligations under each of the
Operating Agreements in all material respects and no fact or circumstance has
occurred which, by itself or with the passage of time or the giving of notice or
both, would constitute a default under any of the Operating Agreements would
reasonably be expected to have a Material Adverse Effect on the Company or
materially impair or delay the ability of the Company to consummate the
transactions contemplated hereby. All other parties to the Operating Agreements
have performed all of their obligations thereunder in all material respects, and
are not in default thereunder in any material respect. Except where there would
be no Material Adverse Effect, the Company has received no notice of any
intention by any of the parties to any of the Operating Agreements to cancel or
terminate the same, nor has the Company canceled or terminated any of the same.
(ix) Condemnation Proceedings; Roadways. The Company has no
------------------------------------
knowledge of, nor has the Company received any written notice of, any
condemnation proceeding pending or threatened against the Real Properties or any
part thereof involving payments likely to be in excess of $100,000 except as set
forth in the Company Disclosure Schedule. The Company has no knowledge of, nor
has the Company received any written notice of, any change or proposed change in
(i) the route, grade or width of, or otherwise affecting, any street, creek or
road adjacent to or serving the Real Properties, or (ii) the existing zoning
and/or land use restrictions affecting the Real Properties, except, in each
case, where such change would not result in a Material Adverse Effect on the
Company.
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<PAGE>
(x) Operations. To the Company's knowledge, approximately 1,244
----------
service stations are currently open and operating.
(xi) Structural Condition. The Company has no knowledge of any,
---------------------
and there is no, latent or patent defect in (1) the Improvements or structural
elements thereof or mechanical systems therein (including, without limitation,
the roof or roofs of the Improvements and all heating, ventilating, air
conditioning, plumbing, electrical, utility and sprinkler systems therein), or
(2) the Utilities serving the Real Properties which, in each case, would result
in a Material Adverse Effect on the Company.
(xii) Zoning and Platting. The present zoning of the Real
Properties permits the current use thereof without special variances or such
current use is permitted by "grandfathering" or the non-compliance thereof would
not result in a Material Adverse Effect on the Company.
(xiii) Access. Except with respect to the Mt. Vernon and New
Haven terminals, each of the Real Properties has full and free access to and
from public highways, streets or roads and the Company has no knowledge of any
pending or threatened Government Entity proceeding or any other fact or
condition which would limit or result in the termination of such Real Property's
existing access to and from public highways, streets or roads, except those
conditions which would not result in a Material Adverse Effect on the Company.
(xiv) No Other Property Interests. There are no property
interests, buildings, structures or other Improvements or personal property that
are owned by the Company or its Subsidiaries that are necessary for the
operation of the Real Properties that are not being conveyed or leased to the
Company pursuant to the Lease.
(xv) Other Agreements. There are no options, rights of first
refusal, contracts or other obligations outstanding (written or oral) for the
sale, exchange, transfer, financing or refinancing of any of the Properties or
any interest therein which are superior to the rights of the Company under the
Lease.
(t) ESOP.
----
(i) The ESOP Trustee has been properly appointed as trustee of
the ESOP Trust. The Company has delivered to the ESOP Trustee complete, current
and accurate copies of the ESOP plan document and the ESOP Trust Agreement.
(ii) The ESOP has been duly authorized and established and the
Trust Agreement has been duly authorized by all necessary corporate action on
the part of the Company; the ESOP constitutes in all material respects an
employee stock ownership plan within the meaning of Section 4975(e)(7) of the
Code, Treasury Regulation Section 54.4975-11; and Section 407(d)(6) of ERISA;
and the execution and delivery of this Agreement and the consummation of the
transactions contemplated by the parties hereto will not constitute a violation
of, or give rise to any liability under, Title I of ERISA or Section 4975 of the
Code.
A-25
<PAGE>
(iii) The shares of Company Common Stock held by the ESOP are
owned of record and beneficially by the ESOP free and clear of all encumbrances
other than the ESOP Loan evidenced by the ESOP Loan Agreement. There are no
provisions in the ESOP Loan Agreement requiring a penalty on prepayments. Upon
tender (or other disposition) of the unallocated shares of the Company Common
Stock held in ESOP, the proceeds from such disposition shall be first used to
repay the ESOP Loan with any excess, if any, to be allocated to ESOP
Participants in accordance with the terms and conditions of the ESOP. There are
no liabilities of the ESOP other than the ESOP Loan and the obligation to pay
benefits to ESOP Participants under the ESOP in the ordinary course of business.
Except as contemplated by this Agreement or pursuant to the ESOP Trust
Agreement, neither the ESOP nor the ESOP Trustee are a party to any voting
trust, stockholder agreement, proxy or other agreement or understanding in
effect with respect to the voting of any shares of Company Common Stock held by
the ESOP.
3.2 Representations and Warranties of the LUKOIL Entities.
The LUKOIL Entities represent and warrant to the Company as follows:
(a) Organization, Standing and Power. Except where a failure would
---------------------------------
materially impair or delay the ability of LUKOIL Parent or Merger Sub to
consummate the transactions contemplated hereby, the LUKOIL Entities other than
Merger Sub have been duly incorporated and are validly existing and (to the
extent applicable) in good standing under the laws of their jurisdictions of
organization and have requisite corporate power and authority to carry on their
business as presently conducted; Merger Sub has been duly incorporated and is
validly existing and in good standing under the laws of the State of Delaware;
the LUKOIL Entities are duly qualified and in good standing or otherwise
authorized to do business in each jurisdiction in which the nature of their
business or the ownership or leasing of their properties makes such
qualification necessary. LUKOIL Austria is a direct, wholly owned Subsidiary of
Parent. LUKOIL Americas is an indirect, wholly owned subsidiary of Parent.
Merger Sub is a direct, wholly owned subsidiary of LUKOIL Americas.
(b) Authority; No Conflicts.
-----------------------
(i) The LUKOIL Entities have all requisite corporate power and
corporate authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance
by the LUKOIL Entities of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate and stockholder action on the part of the LUKOIL Entities. This
Agreement has been duly executed and delivered by the LUKOIL Entities and
constitutes a valid and binding agreement of each LUKOIL Entity,
enforceable against each LUKOIL Entity in accordance with its terms, except
as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors generally, or by general equity principles (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
(ii) The execution, delivery and performance by the LUKOIL
Entities of this Agreement does not or will not, as the case may be, and
the consummation of the transactions contemplated hereby will not, result
in any Violation of: (A) any provision of the Organizational Documents of
the LUKOIL Entities or any of their Material Subsidiaries or (B) subject to
obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in paragraph (iii)
below, any loan or credit agreement, note, mortgage, bond, indenture,
lease, benefit plan or other agreement, obligation, instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the LUKOIL Entities, any of
their Material Subsidiaries or their respective properties or assets
except, in each case, as could not reasonably be expected to materially
impair or delay the ability of the LUKOIL Entities to consummate the
transactions contemplated hereby.
A-26
<PAGE>
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is
required by or with respect to any LUKOIL Entity in connection with the
execution and delivery of this Agreement by the LUKOIL Entities or the
consummation by the LUKOIL Entities of the transactions contemplated
hereby, except for (A) the consents, approvals, orders, authorizations,
registrations, declarations and filings required under or in relation to
clause (x) of Section 3.1(c)(iii), (B) Parent will not be permitted to make
payments under the Lease Guaranty until such time, if any, as Parent
receives a license from the Central Bank of the Russian Federation
permitting it to make payments under the Lease Guaranty, and (C) such
consents, approvals, orders, authorizations, registrations, declarations
and filings the failure to make or obtain which could not reasonably be
expected to materially impair or delay the ability of the LUKOIL Entities
to consummate the transactions contemplated hereby.
(c) Information Supplied.
(i) None of (A) the Offer Documents or (B) the information
supplied or to be supplied by the LUKOIL Entities for inclusion or
incorporation by reference in the Proxy Statement, if any, the Schedule
14D-9 and any other documents to be filed with the SEC in connection with
the transactions contemplated hereby, including any amendment or supplement
to such documents, will, at the respective times such documents are filed,
and, with respect to the Proxy Statement, if any, and the Offer Documents,
when first published, sent or given to stockholders of the Company, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to made the statements
made therein, in the light of the circumstances under which they are made,
not misleading or, in the case of the Proxy Statement, if any, or any
amendment thereof or supplement thereto, at the time of the Company
Stockholders Meeting, if any, and at the Effective Time, contain any untrue
statement of a material fact, or omit to state any material fact required
to be stated therein or necessary in order to made the statements made
therein, in the light of the circumstances under which they are made, not
misleading or necessary to correct any statement in any earlier
communication with respect to the Offer or the solicitation of proxies for
the Company Stockholders Meeting, if any, which shall have become
misleading. The Offer Documents will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and
regulations of the SEC thereunder.
(ii) Notwithstanding the foregoing provisions of this Section
3.2(c), no representation or warranty is made by Merger Sub or LUKOIL
Americas with respect to statements made or incorporated by reference in
the Offer Documents based on information supplied by the Company for
inclusion or incorporation by reference therein.
(d) Vote Required. No vote of the holders of the outstanding ordinary
-------------
shares of common stock of (1) Parent, (2) LUKOIL Austria, or (3) LUKOIL
Americas, par value $0.01 per share, is necessary to approve this Agreement or
any of the transactions contemplated hereby.
(e) Brokers or Finders. No agent, broker, investment banker, financial
------------------
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of any of the LUKOIL Entities, except Credit Suisse First Boston.
A-27
<PAGE>
(f) Ownership of Company Stock. As of the date of this Agreement, none
--------------------------
of the LUKOIL Entities or any of their Subsidiaries or, to the best of their
knowledge, any of their affiliates or associates (as such terms are defined
under the Exchange Act) (i) beneficially owns, directly or indirectly or (ii) is
party to any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of, in case of either clause (i) or
(ii), shares of stock of the Company except for the Support Agreements.
(g) Financing. The LUKOIL Entities have available, and will make
---------
available to Merger Sub, sufficient funds to pay for shares of Company Common
Stock and Company Options pursuant to the Offer and the Merger on the terms
contemplated by this Agreement.
(h) No Business Activities. Merger Sub is not a party to any material
----------------------
agreements and has not conducted any activities other than in connection with
the organization of Merger Sub, the negotiation and execution of this Agreement
and the consummation of the transactions contemplated hereby. Merger Sub, as of
the date of this Agreement, has no Subsidiaries.
ARTICLE IV.
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 Covenants of the Company.
During the period from the date of this Agreement and continuing until
the Effective Time (except as expressly contemplated or permitted by this
Agreement or to the extent that LUKOIL Americas shall otherwise consent in
writing):
(a) Ordinary Course. The Company shall, and shall cause its
-----------------
Subsidiaries to, carry on their respective businesses in the usual, regular and
ordinary course in all material respects, and shall use all reasonable best
efforts to preserve intact their present business organizations and preserve
their relationships with customers, suppliers and others having business
dealings with them.
(b) Dividends; Changes in Share Capital. The Company shall not, and
-------------------------------------
shall not propose to, (i) declare or pay any dividends on or make other
distributions in respect of any of its stock, (ii) split, combine or reclassify
any of its stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for, shares of its
stock, or (iii) repurchase, redeem or otherwise acquire any shares of its stock
or any securities convertible into or exercisable or exchangeable for any shares
of its stock except as otherwise permitted under certain option agreements to
effect cashless option exercises.
(c) Issuance of Securities. The Company shall not and shall cause its
----------------------
Subsidiaries not to issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its stock of any class, any Company
Voting Debt or any securities convertible into or exercisable or exchangeable
for, or any rights, warrants or options to acquire, any such shares or Company
Voting Debt, or enter into any agreement with respect to any of the foregoing,
other than the issuance of Company Common Stock upon the exercise of stock
options granted in accordance with the terms of the Company Equity Plans as in
effect on the date of this Agreement.
(d) Organizational Documents. Except to the extent required to comply
------------------------
with their respective obligations to the LUKOIL Entities hereunder, the Company
and its Subsidiaries shall not amend or propose to amend their respective
Organizational Documents.
A-28
<PAGE>
(e) Indebtedness. The Company shall not (i) incur any indebtedness for
------------
borrowed money or guarantee any such indebtedness or issue or sell any debt
securities or warrants or rights to acquire any debt securities of the Company
or guarantee any debt securities of other Persons other than (x) indebtedness of
the Company or its Subsidiaries to the Company or its Subsidiaries, (y)
borrowings under existing credit lines, including in support of letters of
credit, in the ordinary course of business or (z) otherwise in the ordinary
course of business, (ii) make any loans, advances or capital contributions to,
or investments in, any other Person, other than by the Company or its
Subsidiaries to or in the Company or its Subsidiaries or (iii) pay, discharge or
satisfy any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than, in the case of clauses (ii)
and (iii), loans, advances, capital contributions, investments, payments,
discharges or satisfactions incurred or committed to in the ordinary course of
business.
(f) Benefit Plans. The Company shall not, and shall not permit its
--------------
Subsidiaries to, (i) increase the compensation payable or to become payable to
any of its executive officers or employees, (ii) take any action with respect to
the grant of any severance or termination pay, or stay bonus or other incentive
arrangement (other than pursuant to benefit plans and policies in effect on the
date of this Agreement) or (iii) amend, establish or create any benefit plan,
arrangement, policy or agreement which would be a Company Benefit Plan if in
existence as of the date of this Agreement, except any such increases or grants
made in the ordinary course of business. The Company Board or any committee
thereof shall take no action to waive any provision of any Company Equity Plan
that would otherwise cause the Company Options thereunder to be cancelled or
converted at the Effective Time in accordance with their terms and without
further action by the Company, the Company Board or any committee thereof. The
Company Board shall cause the executive officers of the Company to take all
actions reasonably necessary or appropriate to cause all Company Options to be
cancelled at the Effective Time, including, if requested by LUKOIL Americas, by
providing written notice to all holders of Company Options that all Company
Options will be cancelled and converted at the Effective Time as provided in
this Agreement.
(g) Investments. The Company shall not directly or indirectly acquire,
-----------
make any investment in, or make any contributions to, any person (other than a
Subsidiary of the Company) other than in the ordinary course of business
consistent with past practice. The Company and its Subsidiaries shall not make
any new capital expenditure or expenditures in excess of $5.0 million in the
aggregate.
(h) Contracts. The Company shall not enter into, amend or terminate
---------
any Company Material Contract or any contract involving amounts in excess of
$1.0 million per year other than in the ordinary course of business consistent
with past practice. The Company shall not enter into any agreement,
understanding or commitment that restrains, limits or impedes the Company's
ability to compete with or conduct any line of business, including, but not
limited to, geographic limitations on the Company's activities.
(i) Tax Elections. The Company shall not make or rescind any material
-------------
tax election or settle or compromise any material income tax liability of the
Company or of any of its Subsidiaries with any Tax authority without notice to
LUKOIL Americas.
(j) Accounting. The Company shall not make any change in any method of
----------
accounting or accounting practice or policy, except as required by GAAP. The
Company shall not revalue any material assets of the Company or any of its
Subsidiaries, including but not limited to writing down the value of inventory
or writing off notes or accounts receivable other than in the ordinary course of
business, except for any revaluation resulting from a change in circumstances or
conditions from those prevailing as of January 31, 2000.
A-29
<PAGE>
(k) Transfer of Assets. The Company shall not, and shall cause its
------------------
Subsidiaries not to, acquire, sell, transfer, lease or encumber any assets
except in the ordinary course of business and consistent with past practice.
(l) Liquidation or Dissolution. The Company shall not adopt a plan of
--------------------------
complete or partial liquidation or adopt resolutions providing for the complete
or partial liquidation, dissolution, consolidation, merger, restructuring or
recapitalization of the Company.
(m) Litigation. The Company shall not settle or compromise any
----------
material claims or litigation or, except in the ordinary course of business or
in an amount less than $100,000, waive, release or assign any material rights or
claims or make any payment, direct or indirect, of any material liability before
the same becomes due and payable in accordance with its terms.
(n) Other Actions. The Company shall not, and shall not permit its
--------------
Subsidiaries to, take any action that does, or could reasonably be expected to,
result in (i) any of the representations or warranties of the Company set forth
in this Agreement that are qualified as to materiality becoming untrue, (ii) any
of such representations and warranties that are not so qualified becoming untrue
in any material respect or (iii) except as otherwise permitted by Sections
5.1(a) or 5.4, any of the conditions to the Merger set forth in Article VI not
being satisfied.
(o) Agreements. The Company shall not, and shall not permit its
----------
Subsidiaries, to enter into any agreement to do any of the foregoing.
4.2 Advice of Changes; Government Filings.
Each party shall (a) confer on a regular and frequent basis with the
other party, (b) report to the other party (to the extent not prohibited by law,
regulation and any applicable confidentiality agreement) on operational matters
and (c) promptly notify the other party orally and in writing of (i) any
representation or warranty made by it contained in this Agreement that is
qualified as to materiality becoming untrue or inaccurate in any respect or any
such representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect, (ii) the failure by it (A) to comply with or
satisfy in any respect any covenant, condition or agreement required to be
complied with or satisfied by it under this Agreement that is qualified as to
materiality or (B) to comply with or satisfy in any material respect any
covenant, condition or agreement required to be complied with or satisfied by it
under this Agreement that is not so qualified as to materiality or (iii) any
change, event or circumstance that has had or would reasonably be expected to
have a Material Adverse Effect on the Company or materially and adversely affect
its ability to consummate the Merger in a timely manner; provided, however, that
-------- -------
no such notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement. The Company shall file all reports required to be filed by
it with the SEC and all other Governmental Entities between the date of this
Agreement and the Effective Time and the Company shall (to the extent not
prohibited by law or regulation or any applicable confidentiality agreement)
deliver to LUKOIL Americas copies of all such material reports promptly after
the same are filed. Subject to applicable laws relating to the exchange of
information, each party shall have the right to review in advance, and to the
extent practicable each party will consult with the other party, with respect to
all the information relating to each party and each of its Subsidiaries, which
appears in any filings, announcements or publications made with, or written
materials submitted to, any third party or any Governmental Entity in connection
with the transactions contemplated by this Agreement. In exercising the
foregoing right, each of the parties hereto agrees to act reasonably and as
promptly as practicable. Each party agrees that, to the extent practicable, it
will consult with the other party with respect to the obtaining of all permits,
consents, approvals and authorizations of all third parties and Governmental
Entities necessary or advisable to consummate the transactions contemplated by
this Agreement and each party will keep the other party apprised of the status
of matters relating to completion of the transactions contemplated hereby.
A-30
ARTICLE V.
ADDITIONAL AGREEMENTS
5.1 Recommendation; Preparation of Proxy Statement; the Company
Stockholders Meeting.
(a) The Company shall, through the Company Board, recommend to its
stockholders that they accept the Offer and tender all of their shares of
Company Common Stock to Merger Sub and vote in favor of this Agreement and the
Merger; provided, however, that the Company Board may withdraw or modify such
-------- -------
recommendation (and its declaration of the advisability of this Agreement and
the Merger) to the extent that the Company Board determines to do so in exercise
of its statutory duties as permitted under Section 5.4. Except as provided in
Section 5.4, if required by the MGCL or the Company's Organizational Documents
in order to consummate the Merger, the Company shall, as soon as practicable
following the acquisition by Merger Sub of the shares of the Company Common
Stock pursuant to the Offer, duly call, give notice of, convene and hold a
meeting of its stockholders (the "Company Stockholders Meeting") for the purpose
----------------------------
of obtaining the Required Company Vote. The LUKOIL Entities shall vote or cause
to be voted all the shares of Company Common Stock owned of record by the LUKOIL
Entities or any other Subsidiary of any LUKOIL Entity in favor of the approval
of the Merger and this Agreement. After the date hereof and prior to the
expiration of the Offer, no LUKOIL Entity shall purchase, offer to purchase, or
enter into any contract, agreement or understanding regarding the purchase of
shares of Company Common Stock, except pursuant to the terms of the Offer, the
Merger and the Support Agreements (as defined in Annex A).
(b) Notwithstanding the preceding paragraph or any other provision of
this Agreement, in the event Merger Sub or any other Subsidiary of any LUKOIL
Entity shall beneficially own, in the aggregate, at least 90% of the outstanding
shares of the Company Common Stock, the Company shall not be required to call
the Company Stockholders Meeting or to file or mail the Proxy Statement, and the
parties hereto shall, at the request of LUKOIL Americas or the Company and
subject to Article VI, take all necessary and appropriate action to cause the
Merger to become effective as soon as practicable after the acceptance for
payment of and payment for shares of the Company Common Stock by Merger Sub
pursuant to the Offer without a meeting of stockholders of the Company in
accordance with Section 3-106 of the MGCL and, unless waived by all holders of
Company Common Stock other than the LUKOIL Entities or any other subsidiary of
any LUKOIL Entity, Merger Sub shall give notice of the Merger to each such
stockholder at least 30 days before the Articles of Merger are filed with the
SDAT in accordance with Section 3-106(d)(1) of the MGCL.
(c) If required by applicable law, as soon as practicable following
LUKOIL Americas' request, the Company and LUKOIL Americas shall prepare and file
with the SEC the Proxy Statement. Each of the Company and LUKOIL Americas shall
use reasonable best efforts to cause the Proxy Statement to be mailed to the
holders of the Company Common Stock, as promptly as practicable.
5.2 Access to Information.
(a) From the date hereof until the earlier of the Effective Time or
the termination of this Agreement in accordance with the terms hereof, upon
reasonable notice, the Company shall afford to the officers, employees,
accountants, counsel, financial advisors and sources and other representatives
of LUKOIL Americas ("Parent Representatives") reasonable access during normal
-----------------------
business hours, to all of its and its Subsidiaries' properties, books,
contracts, commitments and records and its officers, management employees and
representatives and, during such period, the Company shall furnish promptly to
LUKOIL Americas, all information concerning its business, properties and
personnel as the other party may reasonably request; provided, however, the
Company may restrict the foregoing access to the extent that (i) a Governmental
Entity requires the Company or any of its Subsidiaries to restrict access to any
properties or information reasonably related to any such contract on the basis
of applicable laws and regulations or (ii) any law, treaty, rule or regulation
of any Governmental Entity applicable to the Company or any of its Subsidiaries
requires the Company or any of its Subsidiaries to restrict access to any
properties or information (subject, however, to existing confidentiality and
similar non-disclosure obligations and the preservation of attorney client and
work product privileges).
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<PAGE>
(b) From the date hereof until the earlier of the Effective Time or
the termination of this Agreement, the LUKOIL Entities shall abide by the
confidentiality provisions set forth in Annex B hereto.
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5.3 Approvals and Consents; Cooperation.
The Company and each LUKOIL Entity shall cooperate with each other and
use (and shall cause their respective Subsidiaries to use) its reasonable best
efforts to take or cause to be taken all actions, and do or cause to be done all
things, necessary, proper or advisable on their part under this Agreement and
applicable laws to consummate the Offer and consummate and make effective the
Merger and the other transactions contemplated by this Agreement as soon as
practicable, including (i) preparing and filing as promptly as practicable
(including, without limitation, filing the notifications provided for under the
HSR Act within seven Business Days following the date of this Agreement) all
documentation to effect all necessary applications, notices, petitions, filings,
tax ruling requests and other documents and to obtain as promptly as practicable
all consents, waivers, licenses, orders, registrations, approvals, permits, tax
rulings and authorizations necessary or advisable to be obtained from any third
party and/or any Governmental Entity in order to consummate the Offer or Merger
or any of the other transactions contemplated by this Agreement and (ii) taking
all reasonable steps as may be necessary to obtain all such consents, waivers,
licenses, registrations, permits, authorizations, tax rulings, orders and
approvals; provided, that in each case the LUKOIL Entities shall not be required
to divest any assets or take any other actions adverse in any material respect
to its business or the business of the Company. Without limiting the generality
of the foregoing, the Company and each LUKOIL Entity agree to make all necessary
filings in connection with the Required Regulatory Approvals as promptly as
practicable after the date of this Agreement, and to use its reasonable best
efforts to furnish or cause to be furnished, as promptly as practicable, all
information and documents requested with respect to such Required Regulatory
Approvals and shall otherwise cooperate with the applicable Governmental Entity
in order to obtain any Required Regulatory Approvals in as expeditious a manner
as possible. The Company and each LUKOIL Entity shall use reasonable best
efforts to cause the expiration of the notice periods under the HSR Act with
respect to the Offer or the Merger and the other transactions contemplated by
this Agreement as promptly as possible after the execution of this Agreement.
Each of the Company and LUKOIL Americas shall use reasonable best efforts to
resolve such objections, if any, as may be asserted by any Governmental Entity
with respect to the Offer or the Merger or any other transactions contemplated
by this Agreement in connection with the Required Regulatory Approvals;
provided, that the LUKOIL Entities shall not be required to divest any assets or
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take any other actions adverse in any material respects to its business or the
business of the Company in order to resolve any such objections. In connection
therewith, if any administrative or judicial action or proceeding is instituted
(or threatened to be instituted) challenging the Offer or the Merger or any
other transaction contemplated by this Agreement as violative of applicable
antitrust or competition laws, the Company and each LUKOIL Entity shall
cooperate and shall use reasonable best efforts to contest and resist, except
insofar as the Company and LUKOIL Americas may otherwise agree, any such action
or proceeding, including any action or proceeding that seeks a temporary
restraining order or preliminary injunction that would prohibit, prevent or
restrict consummation of the Offer or the Merger or any other transaction
contemplated by this Agreement, except insofar as the Company and LUKOIL
Americas may otherwise agree or LUKOIL Americas determines, in its reasonable
discretion, that contesting or resisting any such action or proceeding is, or
may become, adverse to its or the Company's business or the business of Parent
or any other LUKOIL Entity. The Company and each LUKOIL Entity shall, upon
request by the other, furnish the other with all information concerning itself,
its Subsidiaries, directors, officers and stockholders and such other matters as
may reasonably be necessary for inclusion in the Offer Documents, Schedule
14D-9, Proxy Statement or any other statement, filing, tax ruling request,
notice or application made by or on behalf of the Company and each LUKOIL Entity
or any of their respective affiliates to any third party and/or any Governmental
Entity in connection with the Offer, the Merger or the other transactions
contemplated by this Agreement.
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Notwithstanding the foregoing, nothing in this Agreement shall require
the LUKOIL Entities to waive any condition set forth in Annex A or Article VI.
5.4 No Solicitation.
(a) The Company shall not, nor shall it permit any Company Subsidiary
to, nor shall it authorize any officer, director or employee of, or any
investment banker, attorney or other advisor or representative of, the Company
or Company Subsidiary to, (i) solicit, initiate, knowingly encourage the
submission of, or participate in any discussions or negotiations regarding or
furnish to any person any information with respect to, or take any other action
to knowingly facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to any Company Takeover
Proposal (as defined in Section 5.4(e)), or (ii) enter into any agreement with
respect to any Company Takeover Proposal; provided, however, that at any time
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during the period following the execution of the Agreement and prior to the
consummation of the Offer (the "Company Application Period"), if the Company
----------------------------
receives a proposal or offer that was not solicited by the Company and that did
not otherwise result from a breach of this Section 5.4(a) and that the Company
Board determines in good faith (after consultation with its outside counsel and
its financial advisor) could result in a third party making a Superior Company
Proposal (as defined in Section 5.4(e)), and subject to compliance with Section
5.4(c), the Company may, to the extent necessary to comply with the applicable
statutory obligations of the Company Board, as determined in good faith by it
after consultation with outside counsel, (A) furnish information with respect to
the Company to the person making such proposal or offer pursuant to a
confidentiality agreement containing terms at least as stringent as set forth in
Annex B hereto, as determined by the Company after consultation with its outside
counsel, and (B) participate in discussions or negotiations with such person
regarding such proposal or offer. Without limiting the foregoing, it is agreed
that any violation of the restrictions set forth in the preceding sentence by
any executive officer of the Company or any Company Subsidiary or any affiliate,
director or investment banker, attorney or other advisor or representative of
the Company or any of the Company Subsidiaries, shall be deemed to be a breach
of this Section 5.4(a) by the Company. The Company shall, and shall cause its
officers and directors and any investment banker, attorney or other advisor or
representative of the Company or any Company Subsidiary to, cease immediately
all discussions and negotiations regarding any proposal that constitutes, or
would reasonably be expected to lead to, a Company Takeover Proposal.
(b) Except as expressly permitted by this Section 5.4, neither the
Company Board nor any committee thereof shall approve any letter of intent,
agreement in principle, acquisition agreement or similar agreement relating to
any Company Takeover Proposal or approve or recommend, or propose to approve or
recommend, any Company Takeover Proposal. The Company may terminate this
Agreement pursuant to Section 7.1(g) only if (i) the Company Board has received
a Superior Company Proposal, (ii) in light of such Superior Company Proposal the
Company Board has determined in good faith, after consultation with outside
counsel, that it is necessary for the Company Board to withdraw or modify its
approval or recommendation of this Agreement, the Offer or the Merger in order
to comply with applicable statutory obligations of the members of the Company
Board, (iii) the Company has notified Parent in writing of the determination
described in clause (ii) above, (iv) at least three Business Days following
receipt by Parent of the notice referred to in clause (iii) above, and taking
into account any revised proposal made by Parent since receipt of the notice
referred to in clause (iii) above, such Superior Company Proposal remains a
Superior Company Proposal and the Company Board has again made the
determinations referred to in clause (ii) above (although no additional time
period shall be required following such determinations), (v) the Company is in
compliance with this Section 5.4, and (vi) the Company Board concurrently
approves, and the Company concurrently enters into, a definitive agreement
providing for the implementation of such Superior Company Proposal.
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<PAGE>
(c) The Company promptly shall advise LUKOIL Americas orally and in
writing of any Company Takeover Proposal or any inquiry with respect to or that
could reasonably be expected to lead to any Company Takeover Proposal, the
identity of the person making any such Company Takeover Proposal or inquiry and
the material terms of any such Company Takeover Proposal or inquiry. The Company
shall (i) keep Parent fully informed of the status of any such Company Takeover
Proposal or inquiry and (ii) provide to LUKOIL Americas as soon as practicable
after receipt or delivery thereof with copies of all correspondence and other
written material sent or provided to the Company from any third party in
connection with any Company Takeover Proposal or inquiry; provided, however,
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that the Company shall not be required to provide any nonpublic information
specified in clause (ii) regarding the business or financial condition or
prospects of such third party if (A) the Company is prohibited form disclosing
such information pursuant to a legally binding confidentiality agreement and (B)
such Company Takeover Proposal provides for consideration consisting solely of
cash.
(d) Neither the Company nor the Company Board nor any committee
thereof shall withdraw or modify, or propose publicly to withdraw or modify, in
a manner adverse to LUKOIL Americas or Merger Sub, the approval or
recommendation of the Company Board of this Agreement, the Offer or the Merger,
or approve or recommend, or propose publicly to approve or recommend, a Company
Takeover Proposal, unless a withdrawal or modification of such approval or
recommendation is, in the good faith judgment of the Company Board after
consultation with its outside counsel, necessary to comply with applicable
statutory obligations. Nothing contained in this Section 5.4 shall prohibit the
Company (i) from taking and disclosing to its stockholders a position and making
disclosure required by Rule 14e-2 promulgated under the Exchange Act or (ii)
from making any other required disclosure to the Company's stockholders if, in
the good faith judgment of the Company Board, after consultation with its
outside counsel, failure to make such other disclose would be inconsistent with
its obligations under law.
(e) For purposes of this Agreement:
"Company Takeover Proposal" means any inquiry, proposal or offer for a
-------------------------
merger, consolidation, dissolution, liquidation, recapitalization or other
business combination involving the Company or Company Subsidiary, any
proposal or offer for the issuance by the Company of over 10% of its equity
securities as consideration for the assets or securities of any person or
any proposal or offer to acquire in any manner, directly or indirectly,
over 10% of the equity securities of consolidated total assets of the
Company, in each case, other than the transactions contemplated by this
Agreement.
"Superior Company Proposal" means any proposal made by a third party
---------------------------
to acquire all or substantially all of the equity securities or assets of
the Company, pursuant to a tender or exchange offer, a merger, a
consolidation, a liquidation or dissolution, a recaptialization, a sale of
its assets or otherwise, which a majority of the Company Board determines
in its good faith judgment (i) to be superior from a financial point of
view to the holders of Company Common Stock than the transactions
contemplated by this Agreement (after consultation with the Company's
financial advisor), taking into account all the terms and conditions of
such proposal and this Agreement (including any proposal by LUKOIL Americas
to amend the terms of the transactions contemplated by this Agreement) and
(ii) reasonably capable of being completed, taking into account all
financial, regulatory, legal and other aspects of such proposal.
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<PAGE>
(f) Notwithstanding anything to the contrary contained in this Section
5.4 or elsewhere in this Agreement, prior to the Effective Time, the
Company may refer any third party to this Section 5.4 and Section 7.2 and
make a copy of this Section 5.4 and Section 7.2 available to a third party.
5.5 Employee Benefits.
(a) LUKOIL Americas shall, or shall cause the Surviving Corporation
to, maintain for Employees as a group (excluding Employees covered by collective
bargaining agreements) through December 31, 2001, without interruption, employee
benefit plans that will provide benefits to Employees as a group that are in the
aggregate, substantially as favorable as those provided to such Employees
immediately prior to the Effective Time. Except as described in the following
sentence, Employees shall be given credit for all service with the Company or
its Subsidiaries (or service credited by the Company or its Subsidiaries for
similar plans) for all purposes under any benefit plans in which they become
eligible to participate following the Effective Time. Such crediting shall
include crediting for benefit accrual purposes under seniority, vacation,
severance and similar plans but not under defined benefit pension plans, defined
benefit SERP plans and other similar plans.
(b) From and after the Effective Time, LUKOIL Americas shall and shall
cause the Surviving Corporation and its Subsidiaries to (i) cause any
pre-existing condition or limitation and any eligibility waiting periods (to the
extent such conditions, limitations or waiting periods did not apply to the
employees of the Company under the Company Benefit Plans) under any group health
plans of the LUKOIL Entities or any of their respective Subsidiaries to be
waived with respect to employees of the Company and its Subsidiaries and their
eligible dependents, and (ii) give each employee of the Company and its
Subsidiaries credit for the plan year in which the Effective Time occurs toward
applicable deductibles and annual out-of-pocket limits for expenses incurred
prior to the Effective Time (or such later date on which participation
commences) during the applicable plan year.
(c) From and after the Effective Time, the Surviving Corporation
shall, and LUKOIL Americas shall cause the Surviving Corporation to, make all
payments required under the tax gross-up provisions of outstanding Company
Options.
(d) For each year with respect to which a payment (the amount of such
payment for a year, including principal and interest, the "Annual Payment")
---------------
would have been due following the date of this Agreement on the ESOP Loan, but
for the acceleration thereof described in Section 5.11, LUKOIL Americas shall
cause the Surviving Corporation to make a special profit sharing contribution to
the Getty Petroleum Marketing, Inc. Retirement and Profit Sharing Plan (the "PS
Plan") equal to the amount of the Annual Payment for such year (the "Profit
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Sharing Contribution"). Such Profit Sharing Contribution shall be allocated
---------------------
among the accounts of all "Eligible Employees" under the PS Plan (whether or not
------------------
such individuals elected to make contributions under such PS Plan) in proportion
to "Compensation" under the PS Plan with respect to the plan year for which the
contribution is made; provided, that, such Eligible Employees are employed on
-------- ----
the last day of the plan year for which the Profit Sharing Contribution is to be
made. Such Profit Sharing Contribution shall vest in accordance with the vesting
schedule set forth in Sections 7.1 and 7.2 (other than Section 7.2(d)) of the
ESOP as they exist on the date hereof irrespective of any future amendments or
any future termination of the ESOP.
A-35
<PAGE>
5.6 Fees and Expenses.
Whether or not the transactions contemplated hereby are consummated,
all Expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such Expenses, except
(a) if the Merger is consummated, as between the Company's stockholders (in
their capacities as stockholders) and the Surviving Corporation, the Surviving
Corporation or its Subsidiaries shall pay, or cause to be paid, any and all
property or transfer taxes imposed on the Company or its Subsidiaries (excluding
any transfer tax imposed on any holder or former holder of shares of stock of
the Company resulting from the Merger), as the case may be, (b) the Expenses
incurred in connection with the printing, filing and mailing to stockholders of
the Proxy Statement and the solicitation of stockholder approvals shall be borne
by the Company, and (c) as provided in Section 7.2. As used in this Agreement,
"Expenses" includes all accrued and unpaid out-of-pocket expenses (including,
--------
without limitation, all fees and expenses of counsel, accountants, investment
bankers, experts and consultants to a party hereto and its affiliates) incurred
by a party or on its behalf in connection with or related to the authorization,
preparation, negotiation, execution and performance of this Agreement and the
transactions contemplated hereby, including the preparation, printing, filing
and mailing of the Offer Documents and the Proxy Statement and the solicitation
of stockholder approvals and all other matters related to the transactions
contemplated hereby, estimates of which expenses or obligations to pay expenses
of the Company or its Subsidiaries, as of the date of this Agreement, have been
provided in writing by the Company to LUKOIL Parent. Without the consent of
LUKOIL Americas, the Company shall not incur or become committed to pay costs
and expenses for advisors and other third parties materially different in amount
and nature than previously disclosed in writing to LUKOIL Americas, except to
the extent reasonably required to respond to developments after the execution of
this Agreement.
5.7 Indemnification; Directors' and Officers' Insurance.
If the Merger shall occur, the Surviving Corporation shall cause to be
maintained in effect for a period of six (6) years after the Effective Time, the
current provisions regarding exculpation and indemnification of, and advance of
expenses to, current or former officers and directors (each an "Indemnified
-----------
Party") contained in the Organizational Documents of the Company or its
-----
Subsidiaries and in any agreements between an Indemnified Party and the Company
or its Subsidiaries set forth on the Company Disclosure Schedule on the date of
this Agreement. Prior to the acceptance for payment of Company Common Stock
pursuant to the Offer, the Company shall, in consultation with LUKOIL Americas,
purchase policies or extensions of current policies of directors' and officers'
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 set forth on the Company Disclosure Schedule on the date of this
Agreement, (b) which shall not result in any gaps or lapses in coverage with
respect to matters occurring prior to the date on which the Company Common Stock
is accepted for payment pursuant to the Offer, (c) providing coverage for a six
(6) year period after the Effective Time with respect to claims arising from
acts, facts, errors, omissions or events that occurred on or before the date on
which the Company Common Stock is accepted for payment pursuant to the Offer,
including, without limitation, in respect of the transactions contemplated
hereby, and (d) so long as the premium to be paid by the Company for such
policies does not exceed 200% of the premium to be paid for the 12-month period
ending February 21, 2002; provided that if such policies cannot be obtained at
such cost, the Company shall obtain as much of such policies as can be so
obtained at a cost equal to 200% of the premium to be paid for the 12-month
period ending February 21, 2002. On or before the Closing Date, the parties
shall use their reasonable best efforts to obtain such policies in the form and
for the premiums previously described to LUKOIL Americas. LUKOIL Americas shall,
and shall cause the Surviving Corporation to, maintain such policies in full
force and effect, and continue to honor the Company's obligations thereunder for
the six (6) year period provided herein. Notwithstanding anything to the
contrary in this Section 5.7, the Surviving Corporation shall not be liable for
any settlement effected without its written consent; provided, further, that the
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benefits set forth in this Section 5.7 shall not be available to any Company
director who intentionally fails timely to resign from the Company Board
pursuant to Section 2.7 or who subsequently revokes such resignation. This
covenant shall survive the closing of the transactions contemplated hereby and
is intended to be for the benefit of, and shall be enforceable by, each of the
Indemnified Parties and their respective heirs and legal representatives.
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<PAGE>
5.8 Public Announcements.
The initial press releases issued by the LUKOIL Entities and the
Company with respect to the Offer and Merger shall be mutually acceptable.
Thereafter, so long as this Agreement is in effect, the Company and LUKOIL
Americas shall use all reasonable best efforts to develop a joint communications
plan and each party shall use all reasonable best efforts (i) to ensure that all
press releases and other public statements with respect to the transactions
contemplated hereby shall be consistent with such joint communications plan and
(ii) unless otherwise required by applicable law or by obligations pursuant to
any listing agreement with or rules of any securities exchange, to consult with
each other before issuing any press release or otherwise making any public
statement with respect to this Agreement or the transactions contemplated
hereby.
5.9 Takeover Statutes.
The Company and the members of the Company Board have granted such
approvals, if any, and shall have taken such actions, if any, as are necessary
so that the transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise have or will have
acted to render inapplicable, the effects of Sections 3-602 and 3-701 of the
MGCL or any other takeover statute ("Takeover Statute") as may be applicable to
the transactions to be undertaken pursuant to this Agreement. The Company shall
assist in any challenge by any of the LUKOIL Entities to the validity or
applicability to the Offer or Merger of any Takeover Statute.
5.10 Performance by Merger Sub.
LUKOIL Americas shall cause Merger Sub prior to the Merger to comply
with its obligations hereunder and under the Offer and shall, subject to the
terms herein, cause Merger Sub to consummate the Merger as contemplated herein
and whenever prior to the Merger this Agreement requires Merger Sub to take any
action, such requirement shall be deemed to include an undertaking of LUKOIL
Americas to cause Merger Sub to take such action. Without limitation of the
foregoing, LUKOIL Americas shall vote all of its shares of stock in Merger Sub
for the approval of this Agreement.
5.11 ESOP.
Immediately following any disposition of all shares of Company Common
Stock pursuant to the transactions contemplated hereby, the Company shall (a)
cause the ESOP Trust to prepay the ESOP Loan to the maximum extent possible,
including in full, including any accrued interest and any other fees and
payments required to be paid to the Company upon complete prepayment of the ESOP
Loan and (b) forgive any remaining balance outstanding under the ESOP Loan,
including any accrued interest and any other fees and payments required to be
paid to the Company upon complete prepayment of the ESOP Loan.
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<PAGE>
ARTICLE VI.
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger.
The obligations of the Company, LUKOIL Americas and Merger Sub to
effect the Merger are subject to the satisfaction or waiver (subject to Section
1.4(c)) on or prior to the Effective Time of the following conditions:
(a) Stockholder Approval. The Company shall have obtained all
---------------------
approvals of holders of shares of stock of the Company necessary to approve this
Agreement and the Merger to the extent required by law.
(b) HSR Act. The waiting period (and any extension thereof) applicable
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to the Merger under the HSR Act shall have been terminated or shall have
expired.
(c) No Injunctions or Restraints, Illegality. No temporary restraining
----------------------------------------
order, preliminary or permanent injunction or other order issued by a court or
other Governmental Entity of competent jurisdiction or other legal restraint or
prohibition shall be in effect and have the effect of making the Merger illegal
or otherwise prohibiting consummation of the Merger; provided, however, that the
provisions of this Section 6.1(c) shall not be available to any party whose
failure to fulfill its obligations pursuant to Section 5.3 shall have been the
cause of, or shall have resulted in, such order or injunction.
(d) Required Regulatory Approvals. All authorizations, consents,
-------------------------------
orders and approvals of, and declarations and filings with, and all expirations
of waiting periods imposed by, any Governmental Entity which, if not obtained in
connection with the consummation of the transactions contemplated hereby, would
reasonably be expected to have a Material Adverse Effect on the Company or
materially impair or delay the ability of the Company, LUKOIL Americas or Merger
Sub to consummate the transactions contemplated hereby (collectively, "Required
Regulatory Approvals"), shall have been obtained, waived, declared or filed or
have occurred, as the case may be, and all such Required Regulatory Approvals
shall be in full force and effect.
(e) Merger Sub's Purchase of the Shares. Merger Sub shall have
---------------------------------------
purchased, pursuant to the terms and conditions of the Offer, all shares of
Company Common Stock duly tendered and not withdrawn.
ARTICLE VII.
TERMINATION AND AMENDMENT
7.1 Termination.
This Agreement may be terminated at any time prior to the Effective
Time, by action taken or authorized by the Board of Directors of the terminating
party or parties, whether before or after approval of this Agreement and the
matters contemplated herein, including the Merger, by the stockholders of the
Company:
(a) By mutual written consent of LUKOIL Americas and the Company by
action of their respective Boards of Directors;
(b) By the Company, if prior to the acceptance for payment by Merger
Sub for shares of Company Common Stock pursuant to the Offer, Merger Sub (i)
shall have failed to commence the Offer within the seven Business Day period
specified in Section 1.1(a) (but the Company's termination under this clause (i)
must occur within the three Business Days after the conclusion of the seven
Business Day period specified in Section 1.1(a)); (ii) fails to accept for
payment validly tendered and not withdrawn shares of Company Common Stock in
violation of the terms of the Offer or this Agreement; or (iii) shall not have
accepted for payment, if required to do so pursuant to the terms and conditions
of the Offer and this Agreement, all shares of Company Common Stock validly
tendered and not withdrawn on or before January 25, 2001.
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<PAGE>
(c) By the Company or LUKOIL Americas if the Offer is terminated or
withdrawn pursuant to its terms without any shares of Company Common Stock being
purchased thereunder; provided that the right to terminate this Agreement under
this Section 7.1(c) shall not be available to any party whose material breach of
this Agreement has been the cause of, or resulted in, the failure to purchase
shares thereunder;
(d) By the Company or LUKOIL Americas if any Governmental Entity shall
have issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement, and such order, decree, ruling or other action shall have become
final and nonappealable;
(e) By LUKOIL Americas if any approval by the stockholders of the
Company required for the consummation of the Merger or the other transactions
contemplated hereby shall not have been obtained at the Company Stockholders
Meeting or any adjournment thereof by reason of the failure to obtain the
required vote at a duly held meeting of stockholders or at any adjournment
thereof;
(f) By LUKOIL Americas, prior to the acceptance for payment by Merger
Sub for shares of Company Common Stock pursuant to the Offer, if the Company
Board or any committee thereof withdraws or modifies, or publicly proposes to
withdraw or modify, in a manner adverse to LUKOIL Americas or Merger Sub, its
approval or recommendation of this Agreement, the Offer or the Merger or fails
to recommend to the Company's stockholders that they give the Company
Stockholder Approval or approves or recommends, or publicly proposes to approve
or recommend, any Company Takeover Proposal; or
(g) By the Company, prior to the acceptance for payment by Merger Sub
for shares of Company Common Stock pursuant to the Offer, in accordance with all
of the requirements of Section 5.4(b);
(h) By LUKOIL Americas, prior to the acceptance for payment by Merger
Sub for shares of Company Common Stock pursuant to the Offer, (i) upon a
material breach of any covenant or agreement on the part of the Company set
forth in this Agreement, or (ii) if (a) any representation or warranty of the
Company that is qualified as to materiality shall have become untrue or (b) any
representation or warranty of the Company that is not so qualified shall have
become untrue in any material respect (a "Terminating Company Breach") and such
---------------------------
Terminating Company Breach has not been cured within twenty (20) Business Days
following notice of such breach to the Company by LUKOIL Americas; provided,
--------
however, that LUKOIL Americas may terminate this Agreement immediately in the
-------
event that such Terminating Company Breach was willful or in the event that such
breach is not capable of being cured within such period; or
(i) By the Company prior to the acceptance for payment by Merger Sub
for shares of Company Common Stock pursuant to the Offer (i) upon a material
breach of any covenant or agreement on the part of a LUKOIL Entity set forth in
this Agreement, including Section 1.4(c), or (ii) if (A) any representation or
warranty of a LUKOIL Entity that is qualified as to materiality shall have
become untrue or (B) any representation or warranty of a LUKOIL Entity that is
not so qualified shall have become untrue in any material respect ("Terminating
-----------
Parent Breach") and such Terminating Parent Breach has not been cured within
--------------
twenty (20) Business Days following notice of such breach to LUKOIL Americas by
the Company; provided, however, that, the Company may terminate this Agreement
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immediately in the event that such Terminating Parent Breach was willful or in
the event that such breach is not capable of being cured within such period.
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<PAGE>
7.2 Effect of Termination.
In the event of termination of this Agreement by either the Company or
LUKOIL Americas as provided in Section 7.1, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of the
LUKOIL Entities or the Company or their respective officers or directors except
(i) with respect to the last sentence of Section 5.2, Section 5.6, this Section
7.2 and Article VIII and (ii) with respect to any liabilities or damages
incurred or suffered by a party as a result of the willful breach by the other
party of any of its covenants or other agreements set forth in this Agreement.
The Company shall pay LUKOIL Americas:
(a) a fee of $3 million plus actual out-of-pocket expenses in an
amount not to exceed $2 million (x) if this Agreement is terminated pursuant to
Sections 7.1(f), 7.1(g) or 7.1(h) or (y) if (A) after the date of this Agreement
any person (including any person who has previously made a Company Takeover
Proposal) makes a Company Takeover Proposal, (B) the Offer remains open until
the scheduled expiration date immediately following the date such Company
Takeover Proposal is made and the Minimum Tender Condition is not satisfied at
such scheduled expiration date of the Offer, or the Offer is terminated pursuant
to clause (d), (e), (f), (g), (h), (i) or (j) of Annex A and (C) within 12
months of the termination of the Offer the Company enters into a binding
agreement to consummate any Company Takeover Proposal.
(b) actual out-of-pocket expenses in an amount not to exceed $2
million (except to the extent such expenses have been reimbursed pursuant to (a)
above) if (x) (A) after the date of this Agreement any Person makes a Company
Takeover Proposal and (B) within 12 months of termination of the Offer, the
Company enters into a binding agreement to consummate any Company Takeover
Proposal or (y) the Offer is terminated pursuant to clause (d), (e), (f), (g),
(h), (i) or (j) of Annex A.
Any amounts due under Section 7.2(a)(x) (pursuant to Section 7.1(g))
shall be paid simultaneously with, and as a condition to, the termination of
this Agreement. Any amount due under Section 7.2(a)(x) (pursuant to Section
7.1(f) or 7.1(h)) or Section 7.2(b)(y) shall be paid within two Business Days of
termination of this Agreement or Offer, as the case may be. Any amount due under
Section 7.2(a)(y) or 7.2(b)(x) shall be paid on the Business Day following
execution of a binding agreement providing for the Company Takeover Proposal.
All amounts will be paid by wire transfer of same-day funds.
7.3 Amendment.
Subject to Section 1.4(c), this Agreement may be amended by the
parties hereto, by action taken or authorized by their respective Boards of
Directors, at any time before or after approval of the matters presented in
connection with the Merger by the stockholders of the Company, but, after any
such approval, no amendment shall be made which by law requires further approval
by such stockholders without such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
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7.4 Extension; Waiver.
Subject to Section 1.4(c), at any time prior to the Effective Time,
the parties hereto, by action taken or authorized by their respective Boards of
Directors, may, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party. No delay on the part of any
party hereto in exercising any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any waiver on the part of any party hereto of any
right, power or privilege hereunder operate as a waiver of any other right,
power or privilege hereunder, nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder. Unless
otherwise provided, the rights and remedies herein provided are cumulative and
are not exclusive of any rights or remedies which the parties hereto may
otherwise have at law or in equity. The failure of any party to this Agreement
to assert any of its rights under this Agreement or otherwise shall not
constitute a waiver of those rights.
ARTICLE VIII.
GENERAL PROVISIONS
8.1 Non-Survival of Representations, Warranties and Agreements; No Other
Representations and Warranties.
None of the representations, warranties, covenants and other
agreements in this Agreement or in any instrument delivered pursuant to this
Agreement, including any rights arising out of any breach of such
representations, warranties, covenants and other agreements, shall survive the
Effective Time, except for those covenants and agreements contained herein and
therein that by their terms apply or are to be performed in whole or in part
after the Effective Time and this Article VIII. Each party hereto agrees that,
except for the representations and warranties contained in this Agreement or in
any instrument or agreement delivered pursuant to this Agreement, neither the
Company nor any LUKOIL Entity makes any other representations or warranties, and
each hereby disclaims any other representations and warranties made by itself or
any of its officers, directors, employees, agents, financial and legal advisors
or other representatives, with respect to the execution and delivery of this
Agreement, the documents and the instruments referred to herein, or the
transactions contemplated hereby or thereby.
8.2 Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed duly given (a) on the date of delivery if delivered personally,
(b) on the first Business Day following the date of dispatch if delivered by a
nationally recognized next-day courier service, (c) on the earlier of the date
of receipt or the tenth Business Day following the date of mailing if delivered
by registered or certified mail, return receipt requested, postage prepaid or
(d) if sent by facsimile transmission, with a copy sent on the same day in the
manner provided in (a) or (b) or (c) above, when transmitted with confirmation
that transmission was made. All notices hereunder shall be delivered as set
forth below, or pursuant to such other instructions as may be designated in
writing by the party to receive such notice:
(a) if to any LUKOIL Entity, to:
LUKOIL Americas Corporation
540 Madison Avenue, 37th Floor
New York, New York 10055
Attention: Vadim Gluzman, President
Facsimile: (212) 421-4704
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with a copy (which shall not constitute notice) to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Attention: Patrick J. Dooley, Esq.
Facsimile: (212) 872-1002
if to the Company, to:
Getty Petroleum Marketing Inc.
125 Jericho Turnpike
Jericho, Turnpike 11753
Attention: Vincent DeLaurentis, President
Facsimile: (516) 338-6062
with a copy (which shall not constitute notice) to:
Latham & Watkins
Sears Tower, Suite 5800
Chicago, Illinois 60606
Attention: Marc D. Bassewitz, Esq.
Facsimile: (312) 993-9767.
8.3 Interpretation.
When a reference is made in this Agreement to Sections, Exhibits or
Schedules, such reference shall be to a Section of or Exhibit or Schedule to
this Agreement unless otherwise indicated. The table of contents, glossary of
defined terms and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include," "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation." The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden or proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement. Any reference to any federal, state, local or foreign statute or
law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. It is understood and agreed
that, except for the definition of Environmental Material Adverse Effect,
neither the specifications of any dollar amount in this Agreement nor the
inclusion of any specific item in the Schedules or Exhibits is intended to imply
that such amounts or higher or lower amounts, or the items so included or other
items, are or are not material, and neither party shall use the fact of setting
of such amounts or the fact of the inclusion of such item in the Schedules or
Exhibits in any dispute or controversy between the parties as to whether any
obligation, item or matter is or is not material for purposes hereof.
8.4 Counterparts.
This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement and shall become effective
when one or more counterparts have been signed by each of the parties and
delivered to the other party, it being understood that both parties need not
sign the same counterpart.
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8.5 Entire Agreement; No Third Party Beneficiaries.
(a) This Agreement (including the Schedules, Exhibits and Annexes)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, including the Confidentiality Agreement.
(b) This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or implied,
is intended to or shall confer upon any other Person any right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement, other than
(x) Article II (as relates to the payment of the Merger Consideration) and (y)
Section 5.7 (which is intended to be for the benefit of the Indemnified Persons
covered thereby and may be enforced by such Indemnified Persons).
8.6 Governing Law; Jurisdiction; Waiver of Jury Trial.
(a) Except with respect to applicable statutory obligations of the
Company Board and the state law requirements to effect the Merger, to which the
MGCL or the DGCL shall apply, this Agreement shall be governed and construed in
accordance with the laws of the State of New York, without regard to the laws
that might be applicable under conflicts of laws principles.
(b) Each of the parties hereto hereby irrevocably and unconditionally
submits, for itself and its property, to the exclusive jurisdiction of the
Federal court of the United States of America sitting in the borough of
Manhattan or, if such court will not accept jurisdiction, the New York State
Supreme Court sitting in the borough of Manhattan, and any appellate court from
any thereof, in any action or proceeding brought by any party arising out of or
relating to this Agreement or the agreements delivered in connection herewith or
the transactions contemplated hereby or thereby or for recognition or
enforcement of any judgment relating thereto, and each of the parties hereby
irrevocably and unconditionally (i) agrees not to commence any such action or
proceeding except in such courts, (ii) agrees that any claim in respect of any
such action or proceeding may be heard and determined, to the extent permitted
by law, in such New York State court or such Federal court, (iii) waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any such action or proceeding in
any such New York State or Federal court, and (iv) waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such New York State or Federal court. Each of
the parties hereto agrees that a final judgment (after any appeals) in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Each party to this Agreement irrevocably consents to service of process in the
manner provided for notices in Section 8.2. Nothing in this Agreement will
affect the right of any party to this Agreement to serve process in any other
manner permitted by law.
(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE
AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) IT UNDERSTANDS
AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (ii) IT MAKES SUCH WAIVERS
VOLUNTARILY, AND (iii) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION
8.6(c).
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<PAGE>
8.7 Severability.
If any term or other provision of this Agreement is invalid, illegal
or incapable of being enforced by any law or public policy, all other terms and
provisions of this Agreement shall nevertheless remain in full force and effect.
Upon such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner in order that the transactions
contemplated hereby are consummated as originally contemplated to the greatest
extent possible. Any provision of this Agreement held invalid or unenforceable
only in part, degree or certain jurisdictions will remain in full force and
effect to the extent not held invalid or unenforceable. To the extent permitted
by applicable law, each party waives any provision of law which renders any
provision of this Agreement invalid, illegal or unenforceable in any respect.
8.8 Assignment.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto, in whole or in part
(whether by operation of law or otherwise), without the prior written consent of
the other parties, and any attempt to make any such assignment without such
consent shall be null and void, except Merger Sub may make such assignment to
any direct or indirect domestic subsidiary of LUKOIL Americas. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective permitted successors and
assigns.
8.9 Enforcement.
The parties agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in accordance
with their specific terms. It is accordingly agreed that the parties shall be
entitled to specific performance of the terms hereof, this being in addition to
any other remedy to which they are entitled at law or in equity.
8.10 Definitions.
As used in this Agreement:
"Board of Directors" means the Board of Directors of any specified Person
------------------
and any properly serving and acting committees thereof.
"Business Day" means any day on which banks are not required or authorized
-------------
to close in the City of New York.
"Encumbrances" means any mortgage, security interest, pledge, claim, lien,
------------
charge, covenant, easement, right of way, restriction, encroachment, lease,
occupancy, tenancy, option, preemptive purchase or other right or any other
encumbrances whatsoever.
"Environmental Law" means any Law relating to: (i) the protection,
------------------
investigation or restoration of the environment, health, safety, or natural
resources; (ii) the handling, use, presence, disposal, release or threatened
release of any Hazardous Substance; or (iii) noise, odor, wetlands, pollution,
contamination or any injury or threat of injury to persons or property or
notifications to government agencies or the public in connection with any
Hazardous Substance.
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<PAGE>
"Environmental Material Adverse Effect" means, with respect to the Company,
-------------------------------------
all developments, occurrences or circumstances arising or worsening after the
date of execution of this Agreement relating to the Company's compliance with or
liability under Environmental Laws which are reasonably likely to increase the
Company's aggregate liabilities and expenses under, or to comply with,
Environmental Laws by greater than $4 million
"Environmental Permit" means any permit, license, approval or other
---------------------
authorization under any applicable Environmental Law and any other requirement
of any Governmental Entity relating to pollution or protection of the
environment.
"Environmental Report" means any written report of any environmental
---------------------
consultant or any of their controlled affiliates that has been delivered to the
Company or any of its Subsidiaries pursuant to any service or maintenance
contract between such environmental consultant and the Company or any of its
Subsidiaries.
"ESOP" means the Employee Stock Ownership Plan for Employees of Getty
----
Petroleum Marketing Inc., effective March 21, 1997, and as amended through and
following the date of this Agreement.
"ESOP Loan" means the outstanding loans to the ESOP Trust from the Company
---------
pursuant to the ESOP Loan Agreement.
"ESOP Loan Agreement" means the Employee Stock Ownership Plan for Employees
-------------------
of Getty Petroleum Marketing Inc. Loan Agreement dated April 14, 1997, by and
between the Company and Leo Liebowitz, Samuel M. Jones and Michael K. Hantman
(the "ESOP Trustee"), the Non-Recourse Promissory Note dated April 14, 1997, the
Pledge Agreement dated April 14, 1997 and all other ancillary documents relating
thereto.
"ESOP Participants" means those persons having an account balance under the
-----------------
ESOP.
"ESOP Trust" shall mean the trust established by the Trust Agreement
-----------
pursuant to the ESOP, dated March 21, 1997 and as amended through and following
the date of this Agreement.
"Hazardous Substance" means any substance that is listed, classified or
--------------------
regulated pursuant to any Environmental Law, including any petroleum product or
by-product, asbestos-containing material, lead-containing paint or plumbing,
polychlorinated biphenyls, electromagnetic fields, microwave transmission,
radioactive materials or radon.
"Intellectual Property" means patents, copyrights, trademarks (registered
---------------------
and unregistered), service marks, brand names, trade names, and registrations in
any jurisdiction of, and applications in any jurisdiction to register, the
foregoing.
"knowledge" means, with respect to the Company and its Subsidiaries, the
---------
actual knowledge of Leo Liebowitz, Vincent DeLaurentis, A.R. Charnes, Samuel M.
Jones, Michael K. Hantman, Scott Hanley and the four regional marketing managers
who are currently Edward Janoski, DonnaLee Stewart, Louis Maschi and Bernard
Walker.
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<PAGE>
"Laws" means any law, statute, ordinance, regulation, judgment, order,
----
decree, injunction, arbitration award, license, authorization, opinion, agency
requirement or permit of any Governmental Entity or common law.
"Lease Guaranty" means that certain Guaranty of Lease made and entered into
--------------
as of the date hereof by Parent and LUKOIL Austria for the benefit of Getty
Properties Corp.
"Material Adverse Effect" means, with respect to any Person, any adverse
------------------------
change, circumstance or effect that, individually or in the aggregate with all
other adverse changes, circumstances and effects, is materially adverse to the
business, operations, assets, liabilities, financial condition, results of
operations of such entity and its Subsidiaries taken as a whole; provided that
(i) with respect to LUKOIL Americas, the term Material Adverse Effect shall mean
solely, any adverse change, circumstance, event or effect that is materially
adverse to LUKOIL Americas' ability to pay the Price Per Share or the Merger
Consideration or otherwise perform its obligations under this Agreement and (ii)
with respect to the Company, the term Material Adverse Effect shall not include
(x) any change, circumstance, event, effect or legal claim that relates to or
results primarily from the execution and delivery of this Agreement or the
announcement (or other disclosure) or consummation of the transactions
contemplated by this Agreement, or (y) changes in general economic conditions or
financial markets (including fluctuations in the price of shares of Company
Common Stock) or conditions generally affecting the petroleum marketing industry
or related industries.
"Organizational Documents" means, with respect to any entity, the
--------------------------
certificate of incorporation, bylaws or other similar governing documents of
such entity.
"Person" means an individual, corporation, partnership, limited liability
------
company, association, trust, unincorporated organization, entity or group (as
defined in the Exchange Act).
"Principal Stockholders" means: (1) Leo Liebowitz, the Leo Liebowitz
-----------------------
Grantor Retained Annuity Trust, The Leo Liebowitz Foundation, Rose Liebowitz and
the Rose Liebowitz Grantor Retained Annuity Trust; (2) Howard Safenowitz,
individually and as custodian for his minor children, and the following entities
related to the Safenowitz family: The Marilyn Safenowitz Irrevocable Trust, The
Safenowitz Family Partnership, LP, Safenowitz Equity Partners, LP, and
Safenowitz Partners LP; and (3) Milton Cooper and The Milton Cooper Foundation.
"Property" means any interest in any real, personal or mixed property,
--------
whether tangible or intangible.
"Real Property Agreements" (x) which have been duly executed means (a) the
-------------------------
Consolidated, Amended and Restated Master Lease between Getty Properties Corp.
and the Company executed on the date hereof (the "Master Lease"), (b) the
-------------
Environmental Indemnification Agreement between Getty Properties Corp. and the
Company executed on the date hereof, (c) the Indemnity Agreement with respect to
Taxes between Getty Properties Corp. and the Company executed on the date hereof
and, (y) which are to be delivered by or on behalf of Getty Properties Corp.
means (a) to the extent that Getty Properties Corp. has not repaid the Amended
and Restated Loan Agreement between Getty Properties Corp. (f/k/a Leemilt's
Petroleum, Inc.) and Fleet Bank of Massachusetts, N.A., as successor to Bank of
New England, N.A., dated as of October 31, 1995 at the time that Merger Sub
accepts for payment shares of Company Common Stock in accordance with the Offer,
the Subordination and Non-Disturbance Agreement between Fleet Bank and the
Company, in a form agreed to by the parties hereto, (b) estoppel certificate
substantially in the form agreed to by the parties, and (c) the amendments to
the Power Test Lease substantially in the form agreed to by the parties.
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<PAGE>
"Subsidiary" when used with respect to any Person means any corporation or
----------
other organization, whether incorporated or unincorporated, (i) of which such
Person or any other Subsidiary of such Person is a general partner (excluding
partnerships, the general partnership interests of which held by such Person or
any Subsidiary of such Person do not have a majority of the voting and economic
interests in such partnership) or (ii) at least a majority of the securities or
other interests of which having by their terms ordinary voting power to elect a
majority of the Board of Directors or others performing similar functions with
respect to such corporation or other organization is directly or indirectly
owned or controlled by such Person or by any one or more of its Subsidiaries, or
by such Person and one or more of its Subsidiaries.
"Suspense Account" shall have the same meaning as provided for in the ESOP.
----------------
"Tax" (including, with correlative meaning, the terms "Taxes" and
--- -----
"Taxable") means any and all taxes, fees, levies, duties, tariffs, imposts, and
-------
other charges of any kind (together with any and all interest, penalties,
additions to tax and additional amounts imposed with respect thereto) imposed by
any Tax authority including, without limitation: taxes or other charges on or
with respect to income, franchises, windfall or other profits, gross receipts,
property, sales, use, capital stock, payroll, employment, social security,
workers' compensation, unemployment compensation, or net worth; taxes or other
charges in the nature of excise, withholding, ad valorem, stamp, transfer, value
added, or gains taxes; and customs' duties, tariffs, and similar charges; and
liability for the payment of any of the foregoing as a result of (x) being a
member of an affiliated, consolidated, combined or unitary group, (y) being
party to any tax sharing agreement and (z) any express or implied obligation to
indemnify any other person with respect to the payment of any of the foregoing.
"Tax Return" means all returns and reports (including elections, claims,
----------
declarations, disclosures, schedules, estimates, computations and information
returns) required to be supplied to a Tax authority in any jurisdiction relating
to Taxes.
"the other party", with respect to the Company, means the LUKOIL Entities
---------------
and, with respect to a LUKOIL Entity, means the Company.
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<PAGE>
IN WITNESS WHEREOF, the LUKOIL Entities and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of November 2, 2000.
OAO LUKOIL,
a Russian open joint stock company
By: /s/ Ralif Safin
---------------------------------------
Name: Ralif Safin
Title: First Vice President
LUKOIL INTERNATIONAL GmbH,
an Austrian corporation
By: /s/ Ralif Safin
---------------------------------------
Name: Ralif Safin
Title: First Vice President
LUKOIL AMERICAS CORPORATION,
a Delaware corporation
By: /s/ Vadim Gluzman
---------------------------------------
Name: Vadim Gluzman
Title: President
MIKECON CORP.,
a Delaware corporation
By: /s/ Vadim Gluzman
---------------------------------------
Name: Vadim Gluzman
Title: President
GETTY PETROLEUM MARKETING INC.,
a Maryland corporation
By: /s/ Leo Liebowitz
---------------------------------------
Name: Leo Liebowitz
Title: Chairman and Chief Executive Officer
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<PAGE>
ANNEX A
Conditions To The Offer
Notwithstanding any other provision of the Offer or the Agreement,
Merger Sub shall not be obligated to accept for payment any shares of Company
Common Stock or, subject to any applicable rules and regulations of the SEC, to
pay for any shares of Company Common Stock tendered pursuant to the Offer unless
(i) all applicable waiting periods under the HSR Act have expired or been
terminated and (ii) the Minimum Shares shall have been validly tendered pursuant
to the Offer and not withdrawn. Furthermore, notwithstanding any other term of
this Offer, Merger Sub may, subject to the terms of the Agreement, terminate,
amend or extend the Offer or postpone the acceptance for payment of or payment
for Company Common Stock if, at any time prior to the expiration of the Offer,
any of the following shall occur and remain in effect:
(a) there shall be overtly threatened or pending any suit, action or
proceeding by any Governmental Entity or third party that has a reasonable
likelihood of success, (i) challenging the acquisition by LUKOIL Americas or
Merger Sub of any Company Common Stock, seeking to restrain or prohibit the
making or consummation of the Offer or the Merger, or seeking to obtain from the
Company, LUKOIL Americas or Merger Sub any damage that are material in relation
to the Company taken as whole as a result of the transactions contemplated by
this Agreement, (ii) seeking to prohibit or limit in any material respect the
ownership or operation by the Company, LUKOIL Americas or any of their
respective Subsidiaries of any material portion of the business or assets of the
Company, LUKOIL Americas or any of their respective Subsidiaries, or to compel
the Company, LUKOIL Americas or any of their respective Subsidiaries to dispose
of or hold separate any material portion of the business or assets of the
Company, LUKOIL Americas or any of their respective Subsidiaries, as a result of
the Offer and the Merger, (iii) seeking to impose limitations on the ability of
LUKOIL Americas or Merger Sub to acquire or hold, or exercise full rights of
ownership of, any shares of Company Common Stock, including the right to vote
the Company Common Stock purchased by it on all matters properly presented to
the stockholders of the Company or (iv) seeking to prohibit Parent or any of its
subsidiaries from controlling in any material respect the business or operations
of the Company and its Subsidiaries; or
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to the
Offer or the Merger that could reasonably be expected to (i) prohibit or impose
any material limitations on LUKOIL Americas' or Merger Sub's ownership or
operation (or that of any of their respective affiliates) of all or a material
portion of their or the Company's businesses or assets or compel Parent or
Merger Sub to dispose of or hold separate all or any portion of the business or
assets of the Company or any of its Subsidiaries or Parent or any of its
Subsidiaries, which in any such case referred to in this clause (i) accounted,
in the aggregate, for more than $50.0 million in sales of Parent or the Company,
as the case may be, in the most recently fiscal year completed, (ii) prohibit
the making or consummation of the Offer or the Merger, (iii) impose material
limitations on the ability of Merger Sub, or render Merger Sub unable, to accept
for payment, pay for or purchase some or all of the shares of Company Common
Stock pursuant to the Offer and the Merger, or effectively to exercise full
rights of ownership of the shares of Company Common Stock, including, without
limitation, the right to vote the shares of Company Common Stock purchased by
Merger Sub or LUKOIL Americas on all matters properly presented to the Company's
stockholders or (iv) require the divestiture by LUKOIL Americas or Merger Sub of
any shares of Company Common Stock; or
(c) there shall have occurred: (i) any general suspension of trading
in, or limitation on prices for, securities on the NYSE longer than eight hours
other than a trading halt triggered as a result of a specified decrease in a
market index; or (ii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States; or
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<PAGE>
(d) (i) any representation or warranty of the Company contained in the
Agreement that is qualified as to Material Adverse Effect or materiality shall
not be true and correct; (ii) any representation or warranty of the Company in
the Agreement that is not so qualified shall not be true and correct in all
material respects, in each case as of the date of evaluation as though made on
or as of such date (other than representations and warranties that by their
terms address matters only as of another specified date, which shall be true and
correct only as of such other specified date); or (iii) there shall have
occurred an Environmental Material Adverse Effect; or
(e) the Company shall have breached or failed in any material respect
to perform any material obligation or to comply with any material agreement or
covenant of the Company to be performed by or complied with by it under the
Agreement; or
(f) there shall have occurred an event, change, occurrence, or
development of a state of facts or circumstances having, or which would
reasonably be expected to have, a Material Adverse Effect on the Company; or
(g) (i) it shall have been publicly disclosed or Merger Sub shall have
otherwise learned that beneficial ownership (determined for the purposes of this
paragraph as set forth in Rule 13d-3 promulgated under the Exchange Act) of more
than 10% of the outstanding shares of Company Common Stock has been acquired
after the date of this Agreement by any corporation (including the Company or
any of its Subsidiaries or affiliates), partnership, person or other entity or
group (as defined in Section 13(d)(3) of the Exchange Act), other than LUKOIL
Americas, any of its affiliates or by a Principal Stockholder or any affiliate
of a Principal Stockholder or (ii) (A) the Board of Directors of the Company or
any committee thereof shall have withdrawn or modified in a manner adverse to
LUKOIL Americas or Merger Sub the approval or recommendation of the Offer, the
Merger or the Agreement, or approved or recommended any takeover proposal or any
other acquisition of shares of Company Common Stock other than the Offer and the
Merger, (B) any corporation, partnership, person or other entity or group shall
have entered into a definitive agreement or an agreement in principle with the
Company with respect to an Acquisition Proposal, or (C) the Board of Directors
of the Company or any committee thereof shall have resolved to do any of the
foregoing; or
(h) (i) one or more duly executed Real Property Agreements shall not
be in full force and effect (without modification or amendment approved by
LUKOIL Americas, which such approval shall not be unreasonably withheld), (ii)
one or more Real Property Agreements to be delivered on behalf of Getty
Properties Corp. shall not be delivered as of immediately prior to the date on
which the Offer expires, or (iii) Getty Properties Corp. shall not have
delivered the documents required to be delivered and in such manner pursuant to
Section 30.1.11 of the Master Lease; or
(i) a duly executed Amended and Restated Trademark License Agreement
between Getty Properties Corp. and the Company, in the form executed on the date
hereof, shall not be in full force and effect; or
(j) a duly executed Trademark License Agreement between Getty TM Corp.
and the Company, in the form executed on the date hereof, shall not be in full
force and effect; or
(k) any of the duly executed Support Agreements among LUKOIL Americas,
Merger Sub and each of the Principal Stockholders (each a "Support Agreement")
------------------
in the form executed on the date hereof, shall not be in full force or effect or
such stockholders shall have breached, or have threatened to breach any material
provisions thereof; or
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(l) the Company shall not have obtained all Required Permit Renewals;
or
(m) the Agreement shall have been terminated by the Company or LUKOIL
Americas pursuant to its terms,
which, in the sole judgment of LUKOIL Americas or Merger Sub (which shall be
reasonably exercised) in any such case, and regardless of the circumstances
(including any action or inaction by Merger Sub, LUKOIL Americas or any
affiliate of LUKOIL Americas) giving rise to any such condition, makes it
inadvisable to proceed with the Offer and/or with such acceptance for payment or
payment.
The foregoing conditions are for the sole benefit of LUKOIL Americas
and Merger Sub and may be asserted by LUKOIL Americas and Merger Sub regardless
of the circumstances giving rise to such condition or, except for the Minimum
Condition, may be waived by LUKOIL Americas and Merger Sub in whole or in part
at any time and from time to time. The failure by LUKOIL Americas or Merger Sub
at any time to exercise any of the foregoing rights shall not be deemed a waiver
of any such right, the waiver of any such right with respect to particular facts
and other circumstances shall not be deemed a waiver with respect to any other
facts and circumstances, and each such right shall be deemed an ongoing right
that may be asserted at any time and from time to time.
The capitalized terms used in this Annex A shall have the meanings set
-------
forth in the Agreement to which it is annexed, except that the term Agreement
shall be deemed to referred to the Agreement to which this Annex A is appended.
-------
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<PAGE>
ANNEX B
Confidentiality Provisions
Except as required by Law, unless otherwise agreed to in writing by
the Company, the LUKOIL Entities agree (i) to keep all Proprietary Information
confidential and not to disclose or reveal any Proprietary Information to any
Person other than Parent Representatives who are actively and directly
participating in the Merger or who otherwise need to know the Proprietary
Information for the purpose of consummating the Merger and to cause those
Persons to observe the terms of Section 5.2(b) and this Annex B, (ii) not to use
Proprietary Information for any purpose other than in connection with the
consummation of the Merger in a manner that the Company has approved and (iii)
not to disclose to any Person (other than those Parent Representatives who are
actively and directly participating in the consummation of the Merger or who
otherwise need to know the Proprietary Information for the purpose of
consummating the Merger and, in the case of Parent Representatives, whom the
LUKOIL Entities will cause to observe the terms of Section 5.2(b) and this Annex
B) any information about the Merger, or the terms and conditions or any other
facts relating thereto, including, without limitation, the fact that Proprietary
Information has been made available to the LUKOIL Entities and Parent
Representatives. LUKOIL Americas shall be responsible for any breach of the
terms of Section 5.2(b) and this Annex B by any LUKOIL Entity or Parent
Representative.
In the event that a LUKOIL Entity is requested pursuant to, or
required by, legal process to disclose any Proprietary Information or any other
information concerning the Company or the Merger, the LUKOIL Entities agree that
they shall provide the Company with prompt notice of such request or requirement
in order to enable the Company to seek an appropriate protective order or other
remedy, to consult with the LUKOIL Entities with respect to the Company's taking
steps to resist or narrow the scope of such request or legal process, or to
waive compliance, in whole or in part, with the terms of Section 5.2(b) and this
Annex B. In any such event, the LUKOIL Entities shall use their reasonable best
efforts to ensure that all Proprietary Information and any other information
that is so disclosed will be accorded confidential treatment.
If this Agreement is terminated pursuant to Article VII hereof, (1)
the provisions of this Annex B shall survive for two years following such
termination and (2) the LUKOIL Entities shall, upon the written request of the
Company, promptly deliver to the Company or destroy all Proprietary Information,
including all copies, reproductions or extracts thereof or based thereon in the
possession of the LUKOIL Entities or Parent Representatives.
Without the prior written consent of the Company, the LUKOIL entities
shall not directly or indirectly solicit for employment or employ any
management-level person who is on the date of this Agreement employed by the
Company or any of its Subsidiaries and who is identified in writing by a LUKOIL
Entity in connection with the LUKOIL Entities' evaluation or consummation of the
Merger; provided, however, that the LUKOIL Entities shall not be prohibited from
-------- -------
employing any such Person who contacts a LUKOIL Entity on his or her own
initiative and without any direct or indirect solicitation by a LUKOIL Entity;
provided, further, that the term "solicitation" does not include general
-------- -------
solicitations of employment not specifically directed towards employees of the
Company or any of its Subsidiaries.
The provisions of this Annex B contain the entire agreement among the
Company and the LUKOIL Entities concerning the confidentiality of the
Proprietary Information, and shall supercede the terms and conditions of any
existing confidentiality agreement between or among the Company, on the one
hand, and any one or more of the LUKOIL Entities, on the other hand.
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<PAGE>
"Company Representative" means, as to any Person, such Person's
-----------------------
affiliates and its and their directors, officers, employees, agents, advisors
(including, without limitation, financial advisors, counsel and accountants) and
controlling Persons.
"Proprietary Information" means all information about the Company
------------------------
furnished by the Company or the Company Representatives, whether furnished
before or after the date of this Agreement, whether oral or written, and
regardless of the manner in which it was furnished, but does not include
information which (i) is or becomes generally available to the public other than
as a result of a disclosure by a LUKOIL Entity or a Parent Representative, (ii)
was available to the LUKOIL Entities on a nonconfidential basis prior to its
disclosure by the Company or a Company Representatives or (iii) becomes
available to the LUKOIL Entities on a nonconfidential basis from a Person other
than the Company or a Company Representative who is not known to a LUKOIL Entity
to be otherwise bound by a confidentiality agreement with the Company or any
Company Representative.
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<PAGE>
ANNEX B
November 2, 2000
[ING BARINGS LOGO]
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;
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<PAGE>
(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 visited but have not
conducted a physical inspection of certain properties and facilities of Getty.
We 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,
/S/ ING BARINGS LLC
ING BARINGS LLC
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