SCHEDULE 14A
Information Required in Proxy Statement
Reg. ss. 240.14a-101
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)
(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Getty Realty Corp.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
[Letterhead of Getty(R) Realty Corp.]
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 18, 1998
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To the Stockholders of
GETTY REALTY CORP.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Getty
Realty Corp., (hereinafter called the "Company" or "Getty") will be held at 270
Park Avenue, 11th Floor, Conference Room "C," New York, New York, on June 18,
1998 at 3:00 P.M., for the following purposes:
(1) To elect a Board of five directors to hold office for the ensuing
year or until the election and qualification of their respective
successors.
(2) To adopt an amendment to the Company's 1998 Stock Option Plan.
(3) To ratify the appointment of Coopers & Lybrand L.L.P. as independent
auditors for the Company for the fiscal year ended January 31, 1999.
(4) To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
The transfer books of the Company will not be closed, but only
stockholders of record at the close of business on April 22, 1998 are entitled
to notice of and to vote at this meeting or any adjournments thereof.
You are cordially invited to attend the meeting. Whether or not you expect
to attend, please promptly vote, sign, date and return the enclosed
proxy/instruction card in the enclosed U.S. postage-paid envelope. This will
ensure that your shares are voted in accordance with your wishes and that a
quorum will be present. Even though you have returned your proxy card, you may
withdraw your proxy at any time prior to its use and vote in person at the
meeting should you so desire.
By Order of the Board of Directors,
/s/ Randi Young Filip
Randi Young Filip
Corporate Secretary
Jericho, New York
April 30, 1998
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PLEASE NOTE--IF YOU DO NOT PLAN TO ATTEND THE MEETING, IT WOULD BE APPRECIATED
IF YOU WOULD PROMPTLY SIGN AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED
ENVELOPE WHICH REQUIRES NO POSTAGE.
<PAGE>
GETTY REALTY CORP.
125 JERICHO TURNPIKE, JERICHO, NEW YORK 11753
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PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
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This Proxy Statement is furnished in connection with the solicitation of
proxies by and on behalf of the Board of Directors of Getty Realty Corp.
(hereinafter called the "Company" or "Getty"), to be voted at the Annual Meeting
of Stockholders to be held at 270 Park Avenue, 11th Floor, New York, New York,
on June 18, 1998 at 3:00 P.M., and at any adjournments thereof, for the purpose
of electing a Board of Directors, considering the adoption of an amendment to
the Company's 1998 Stock Option Plan, ratifying the appointment of independent
auditors for the Company, and transacting such other business as may properly
come before the meeting.
On the April 22, 1998 record date for securities entitled to vote at the
meeting, the Company had outstanding (excluding shares held in Treasury)
13,564,873 shares of Common Stock and 2,888,799 shares of Preferred Stock. Each
such outstanding common share is entitled to one vote and each share of
preferred shall be entitled to a vote which is equal to 1.1312 for each share
held. In conformity with Maryland law, shares abstaining from voting or not
voted on certain matters will not be treated as votes cast with respect to those
matters, and, therefore, will not affect the outcome of any such matter.
This Proxy Statement and form of proxy will be sent to stockholders in an
initial mailing on or about April 30, 1998. The date by which proposals of
security holders intended to be presented at the next annual meeting must be
received by the Company for inclusion in the proxy statement and form of proxy
for such meeting is December 31, 1998.
FORMATION OF THE COMPANY AND CONVERSION
OF SHARES OF OLD GETTY
The Company was incorporated in Maryland as Getty Realty Holding Corp. on
December 23, 1997, for the purpose of effecting the acquisition of Power Test
Investors Limited Partnership ("PTI"), which was completed on January 30, 1998
(the "Merger"). Also on January 30, 1998, Getty Realty Holding Corp. changed its
name to Getty Realty Corp. Pursuant to the Agreement and Plan of Reorganization
and Merger dated as of December 16, 1997, as amended, all of the directors and
officers of Getty Realty Corp., a Delaware corporation ("Old Getty") became
directors and officers of the Company, in which capacity they presently serve.
Each share of common stock of Old Getty was converted into the right to receive
one share of Common Stock of the Company ("Getty Common Stock").
Holders of the Company's Series A Participating Convertible Redeemable
Preferred Stock ("Getty Preferred Stock") will be entitled to vote their shares
at the Annual Meeting, together with the holders of Getty Common Stock, and will
be entitled to 1.1312 votes for each share of Getty Preferred Stock held.
The Exchange Agent for both Getty Common Stock and the Getty Preferred
Stock is Registrar and Transfer Company, Attention: Florence Bogaenko, 10
Commerce Drive, Cranford, NJ 07016, Telephone: (908) 497-2300.
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<PAGE>
As a result of the Merger and related transactions, Power Test Investors
Limited Partnership was dissolved and Old Getty replaced CLS General Partnership
Corp. as the general partner of Power Test Realty Company Limited Partnership.
All information herein provided for the period prior to January 30, 1998
pertains to Old Getty and the directors and officers of the Company when they
were directors and officers of Old Getty.
THE DISTRIBUTION
On March 21, 1997, Getty completed the spinoff of its petroleum marketing
assets and business to its common stockholders. In anticipation of the spinoff,
Getty transferred such assets and business to its subsidiary Getty Petroleum
Marketing Inc. ("Marketing") on January 31, 1997. On March 21, 1997 (the
"Distribution Date"), Getty distributed the stock of Marketing to Getty common
stockholders on a one-for-one basis (the "Distribution"). In connection with the
Distribution, Getty and Marketing entered into certain lease, service, licensing
and tax sharing arrangements. See "Certain Transactions."
ELECTION OF DIRECTORS
Five directors are to be elected at the meeting for a term of one year or
until their respective successors shall be elected and qualified. The plurality
vote of the holders of a majority of the shares having voting power present in
person or represented by proxy at the meeting is necessary for the election of
the directors.
It is intended that votes will be cast pursuant to the enclosed proxy for
the election of the nominees named in the table below. In the event that any of
the nominees should become unable or unwilling to serve as a director, it is
intended that the proxy will be voted for the election of such person, if any,
as shall be designated by the Board of Directors. The names of, and certain
information with respect to, the persons nominated for election as directors are
as follows:
Name--Age Offices Held in Getty and/or Principal
Served as Director Since Occupations for Past Five Years
- ------------------------ --------------------------------------------------
Milton Cooper--69 Chairman of the Board of Kimco Realty Corporation,
May 1971 a real estate investment trust. Served as Vice
President of Getty until June 1992. Director,
Secretary and Assistant Treasurer of CLS General
Partnership Corp., Director of Blue Ridge Real
Estate/Big Boulder Corporation, a real estate
management and land development firm, and a
Trustee of MassMutual Corporate Investors and
MassMutual Participation Investors.
Philip E. Coviello--55 Partner of Latham & Watkins, an international law
June 1996 firm, for more than 5 years. Latham & Watkins has
performed legal services for the Company for many
years.
Leo Liebowitz--70 President and Chief Executive Officer (CEO) of
May 1971 Getty. Chairman, Chief Executive Officer and
Director of Marketing. Director, President and
Treasurer of CLS General Partnership Corp.
Milton Safenowitz--70 Executive Vice President of Getty until his
May 1971 retirement on February 1, 1990. Director of
Marketing. Director, Executive Vice President and
Assistant Secretary of CLS General Partnership
Corp.
Warren G. Wintrub--64 Retired Partner, former member of the Executive
June 1993 Committee and Chairman of the Retirement Committee
of Coopers & Lybrand, an international
professional services organization, for more than
5 years prior to his retirement in January 1992.
Director of Chromcraft Revington, Inc., Corporate
Property Associates 10 Incorporated and Corporate
Property Associates 11 Incorporated.
2
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BENEFICIAL OWNERSHIP OF CAPITAL STOCK
Under the rules of the Securities and Exchange Commission (the "SEC"), a
person who directly or indirectly has or shares voting power and/or investment
power with respect to a security is considered a beneficial owner of the
security. Voting power includes the power to vote or direct the voting of
shares, and investment power includes the power to dispose of or direct the
disposition of shares.
The following table sets forth the beneficial ownership of Getty Common
Stock and Getty Preferred Stock based on beneficial ownership as of January 31,
1998, as to each person who is (i) a beneficial owner of more than 5% of the
outstanding shares of Getty Common Stock or Getty Preferred Stock, (ii) a Getty
director, (iii) the Named Executive Officers (as defined below), and (iv) all
directors and executive officers, as a group. The number of shares column
includes shares as to which voting power and/or investment power may be acquired
within 60 days (such as upon exercise of outstanding stock options) because such
shares are deemed to be beneficially owned under the SEC rules.
<TABLE>
<CAPTION>
Shares of Approximate Shares of Approximate
Common Stock Percent of Class(1) Preferred Stock Percent of Class(1)
Beneficially Owned Common Stock Beneficially Owned Preferred Stock
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Milton Cooper 1,054,794(2) 7.78% 217,865(7) 7.54%
Director
c/o Kimco Realty Corporation
333 New Hyde Park Road
New Hyde Park, NY 11042
Philip E. Coviello 21,238(3) * -- --
Director
Leo Liebowitz 2,334,335(4) 17.21% 555,351(8) 19.22%
Director, President and
Chief Executive Officer
c/o Getty Realty Corp.
125 Jericho Turnpike
Jericho, NY 11753
Milton Safenowitz 2,205,920(5) 16.26% 598,655(9) 20.72%
Director
7124 Queenferry Cr
Boca Raton, FL 33496
Warren G. Wintrub 47,514(3) * -- --
Director
John J. Fitteron 113,396(3) * 880 *
Senior Vice President,
Treasurer and Chief
Financial Officer
Directors and Executive
Officers as a Group
(6 persons) 5,777,197 42.15% 1,372,752 47.48%
Southeastern Asset
Management Inc., et. al 1,223,800(6) 9.02% -- --
6410 Poplar Ave., Suite 900
Memphis, TN 38119
</TABLE>
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* Total shares beneficially owned constitute less than one percent of the
outstanding shares.
(1) The percentage is determined by dividing the numbers of shares shown by
the aggregate number of shares outstanding and the shares which may be
acquired within 60 days.
(2) Includes 10,311 shares held in a partnership of which he is a partner,
2,013 shares held by his wife for which beneficial ownership is disclaimed
and 165,000 shares held by a charitable foundation.
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<PAGE>
(3) Includes with respect to Messrs. Coviello, Wintrub and Fitteron, options
covering 6,582, 22,130 and 112,646 shares, respectively, that are
presently exercisable or will become exercisable within 60 days.
(4) Includes 230,977 shares held by his wife for which beneficial ownership is
disclaimed and 30,724 shares held by a charitable foundation and 29,825
shares held in Getty's Retirement (401(k)) and Profit Sharing Plan.
(5) Includes 1,514,802 shares held by an Irrevocable Trust for the benefit of
Milton Safenowitz, 176,118 shares held by an Irrevocable Trust for the
benefit of his wife and 515,000 shares held in The Safenowitz Family
Partnership LP of which he is beneficiary.
(6) On February 13, 1998, the Company received a Schedule 13G dated February
4, 1998 filed with the SEC in respect of ownership of an aggregate of
1,223,800 shares of Getty Common Stock by a group comprised of
Southeastern Asset Management, Inc., Longleaf Partners Realty Fund (a
series of Longleaf Partners Funds Trust) and Mr. O. Mason Hawkins. Each of
Southeastern Asset Management, Inc. and Longleaf Partners Realty Fund
reported shared voting power and shared dispositive power with respect to
all of such shares. Mr. O. Mason Hawkins was included in the group by
virtue of his position as Chairman of the Board and Chief Executive
Officer of Southeastern Asset Management, Inc. The Company has not
attempted to verify independently any of the information contained in the
Schedule 13G.
(7) Includes 4,321 shares held by a retirement fund of which he is a
beneficiary and 17,820 shares held by a charitable foundation of which he
is the president. Excludes 56,157 shares held by his wife and 14,720
shares held by his children and grandchildren, as to which he disclaims
beneficial ownership.
(8) Includes 75,306 shares held by his wife. Excludes 225,515 shares held by
his children, as to which he disclaims beneficial ownership.
(9) Includes 289,156 shares held by The Milton Safenowitz Irrevocable Trust,
of which he is the beneficiary and 37,136 shares held by The Marilyn
Safenowitz Irrevocable Trust, of which his wife is the beneficiary.
Excludes 130,577 shares held by his children, as to which he disclaims
beneficial ownership.
DIRECTORS' MEETINGS, COMMITTEES AND EXECUTIVE OFFICERS
During the fiscal year ended January 31, 1998, four regular meetings and
two special meetings of the Board of Directors of the Company were held. Each
director who served as a director of the Company during the fiscal year attended
all of the meetings of the Board of Directors of the Company and of the
Committees of the Board on which each such director served. The Board of
Directors of the Company has certain standing committees, including an Audit
Committee, a Nominating Committee and a Compensation and Stock Option Committee,
the membership and functions of which are described below.
The Audit Committee, consisting of Messrs. Wintrub (Chairman), Coviello
and Safenowitz, met twice last year. The Committee selects the firm of
independent public accountants which audits the consolidated financial
statements of Getty and its subsidiaries, discusses the scope and the results of
the audit with the accountants and discusses Getty's financial accounting and
reporting principles. The Committee also examines the summary reports of the
internal auditors for the Company and discusses the adequacy of Getty's
financial controls with the accountants and with management.
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<PAGE>
The Nominating Committee, consisting of Messrs. Liebowitz (Chairman),
Cooper and Safenowitz, met one time last year. The Committee recommends
candidates to the Board for election as officers. The Committee recommends
nominees for election to the Board and reviews the role, composition and
structure of the Board and its committees. The Committee will consider nominees
recommended by shareholders upon submission in writing to the Secretary of the
Company, in accordance with the provisions of the Company's Bylaws, with the
names of such nominees, together with their qualifications for service as a
director of the Company.
The Compensation and Stock Option Committee (the "Compensation
Committee"), which met one time last year, consists of Messrs. Cooper
(Chairman), Safenowitz and Wintrub. The Compensation Committee administers
Getty's Incentive Compensation Plan, Supplemental Retirement Plan and the 1998
Stock Option Plan, and reviews the compensation of the directors and officers of
Getty.
Directors' Compensation
Directors receive annual retainer fees of $12,000, and committee and board
meeting fees of $1,000 for each meeting attended. Directors who are employees of
the Company do not receive retainers or board meeting fees. Mr. Wintrub received
a payment of $75,000 in connection with a special assignment for the Board of
Directors structuring and implementing the acquisition of PTI.
During fiscal 1998 Mr. Safenowitz converted his group life insurance to an
individual policy, the premiums of which the Company has agreed to pay on his
behalf. During fiscal 1998 the Company made a payment of $13,696 representing
the first quarterly payment therefor.
Other Executive Officers
Other Executive Officers during fiscal 1998 included John J. Fitteron, age
56, Senior Vice President and Chief Financial Officer of Getty since 1986 and
Treasurer of Getty since 1994. Management is not aware of any family
relationships between any of its directors, nominees or Executive Officers.
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COMPENSATION
Executive Compensation
The following tables provide information about executive compensation.
SUMMARY COMPENSATION TABLE
The following table sets forth information about the compensation of the
Chief Executive Officer and each of the other Executive Officers of Getty (the
"Named Executive Officers") for services in all capacities to Getty and its
subsidiaries during the periods indicated.
<TABLE>
<CAPTION>
Annual Compensation Long Term
Fiscal Year Ended January 31 Compensation Awards
Restricted
Other Annual Stock All Other
Salary Bonus Compensation Awards Options Compensation
Name and Principal Position Year ($) ($) ($)(1) ($) (#) ($)(2)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Leo Liebowitz 1998 260,822 250,000 36,207
Director, 1997 404,103 123,400 69,843
President and Chief 1996 404,103 263,000 59,886
Executive Officer
John J. Fitteron 1998 222,428 225,000 20,000 46,086
Senior Vice President, 1997 215,775 190,000 20,000 44,954
Treasurer and Chief 1996 198,296 190,000 15,000 32,593
Financial Officer
</TABLE>
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(1) None of the Named Executive Officers received perquisites or other
personal benefits that exceeded the lesser of $50,000 or 10% of the salary
and bonus for such officer.
(2) All other compensation includes Company contributions to the defined
contribution retirement profit sharing plan, matching contributions under
the Company's 401(k) savings plan, Company contributions to the
Supplemental Retirement Plan for executives and term life insurance
premiums as follows:
<TABLE>
<CAPTION>
Fiscal Year Defined Company Supplemental Term
Ended Contribution Match Retirement Life
January 31 Retirement Plan 401(k) Plan Plan Insurance
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Leo Liebowitz 1998 $2,546 $ -- $31,437 $2,224
1997 2,373 -- 65,246 2,224
1996 2,388 -- 55,319 2,179
John J. Fitteron 1998 2,546 4,750 34,346 4,444
1997 2,373 4,750 33,871 3,960
1996 2,388 4,620 23,011 2,574
</TABLE>
In December 1994, the Company entered into agreements (collectively, the
"Change of Control Agreements") with its non-director officers and certain key
employees, wherein the Company agreed to make certain payments under certain
circumstances upon a "change of control" of the Company. Under such
circumstances, the Company also agreed that all Getty stock options granted to
such officer or key employee would immediately vest, and made provision to allow
such individual to exercise his or her options within three years of the "change
of control" for the officers, and a shorter period for key employees. In March
1996, the Company amended the Change of Control Agreements to treat a spinoff or
similar transaction involving a substantial portion of the Company's marketing
or real estate business or assets as a "change of control." Accordingly, a
"change of control" for purposes of the Change of Control Agreements occurred on
the Distribution Date. On April 8, 1997 the Company formally confirmed to Mr.
Fitteron and to each covered employee its obligations under the Change of
Control Agreements including a minimum guaranteed annual compensation (the
"Guaranteed Salary"). On March 9, 1998 the Change of Control Agreements were
further
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<PAGE>
amended, so as to provide that in the event of the termination of an officer or
covered employee by the Company for other than cause, or by either party
following the assignment to such officer or covered employee of materially less
favorable job responsibilities or duties, then for the 24-month period after the
date of termination for officers, and a shorter period of time for the covered
employees, Getty will make payments to each such individual over the applicable
period at an annual rate not less than the Guaranteed Salary, reduced by the
amount of compensation, if any, such officer or key employee receives from any
other employer during the covered period. In addition, the Company will continue
to pay at least the foregoing Guaranteed Salary to Mr. Fitteron and each covered
employee as long as he or she remains an employee of the Company.
STOCK OPTIONS
The following table sets forth as to the Named Executive Officers
additional information with respect to the stock options granted during the
fiscal year ended January 31, 1998, including the potential realizable value
from the stock options assuming they are exercised at the end of the option term
and assuming 5% and 10% annual rates of stock price appreciation during the
option term.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term (1)
- ---------------------------------------------------------------------------------------------------------
% of Total
Options
Granted to
Employees in
Fiscal Year Exercise or
Options Ended Base Price Expiration
Name Granted (#) 1-31-98 ($/Share) Date 5% ($) 10% ($)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Leo Liebowitz -- -- -- -- -- --
John J. Fitteron 20,000 47.1% 21.3125 12/13/07 268,066 679,333
</TABLE>
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(1) The dollar amounts under the potential realizable value column are the
result of calculations of assumed annual compound rates of appreciation
over the ten-year life of the options in accordance with the rules of the
SEC and are not intended to forecast possible future appreciation, if any,
of the Company's Common Stock. The actual value, if any, an executive may
realize will depend on the excess of the market price of the shares over
the exercise price on the date the option is exercised. The Company did
not use an alternative formula for a grant date valuation, as the Company
is not aware of any formula which will determine with reasonable accuracy
a present value based on unknown or volatile factors. If the price of
Getty Common Stock appreciates, the aggregate value of Getty Common Stock
held by the Company's stockholders will also increase. For example, the
aggregate market value of Getty Common Stock on January 31, 1998 was
approximately $323,828,000, based upon the market price on that date. If
the share price of Getty Common Stock increases by 5% per year, the
aggregate market value on January 31, 2008 of the same number of shares
would be approximately $527,481,000. If the price of Getty Common Stock
increases by 10% per year, the aggregate market value on January 31, 2008
would be approximately $839,926,000.
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<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCALYEAR ENDOPTION VALUES
The following table provides information as to options exercised by each
of the Named Executive Officers of Getty during the fiscal year ended January
31, 1998 and the value of options held by such officers at year end measured in
terms of the closing price of Getty Common Stock on January 31, 1998.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money Options/SARs
Options at Fiscal Year End (#) at Fiscal Year End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable (1) Unexercisable (1)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Leo Liebowitz -- -- -- --
-- --
John J. Fitteron 119,874(2) 3,408,662 112,646 --
20,000 51,250
</TABLE>
- ----------
(1) Pursuant to the Change in Control Agreements, all unexercisable options
held on the Distribution Date by the Named Executive Officers became
exercisable on the Distribution Date.
(2) Pursuant to the stock option replacement program approved by the Board,
Mr. Fitteron undertook a cashless exercise with respect to 58,880 stock
options and surrendered 50,157 stock options, for which he received
112,646 replacement options. See "Proposal to Amend the Company's 1998
Stock Option Plan."
Stock Option Plan
The Company's 1998 Stock Option Plan (the "Stock Option Plan"), which has
been approved by the Company's stockholders, authorizes the grant to directors,
officers and other key employees of the Company and its subsidiaries of
long-term incentive share awards in the form of options ("Options") to purchase
shares of the Company's Common Stock. In connection with the Merger, all
outstanding stock options under Old Getty's stock option plans were assumed by
Getty under the Stock Option Plan effective as of January 30, 1998, and each
then outstanding option under the Old Getty stock option plans became options
with respect to the Company's Common Stock at such time. The Stock Option Plan
is administered by a committee of three members of the Company's Board of
Directors (the "Compensation Committee"). The maximum number of shares which may
be the subject of outstanding Options under the 1998 Stock Option Plan is
1,100,000 and is subject to further adjustments for stock dividends and stock
splits. As of January 31, 1998, 363,553 shares of the Company's Common Stock
were issuable upon the exercise of options then outstanding under the Stock
Option Plan (including 127,823 shares issuable upon the exercise of options
granted to certain officers, directors and key employees of Marketing who were
granted options under the Old Getty stock option plans and who retained such
options following the Distribution). No grants may be made under the Stock
Option Plan after January 30, 2008. The number of remaining shares available for
grant under the Stock Option Plan is 736,447 at April 22, 1998.
The recipients, terms (including price and exercise period) and type of
Option to be granted under the Stock Option Plan is determined by the
Compensation Committee; however, the Option price per share under the Stock
Option Plan generally must be at least equal to the fair market value of a share
of the Company's Common Stock (110% of such amount in the case of Incentive
Stock Options granted to any individual who owns stock representing more than
10% of the voting power of the Company's Common Stock) on the date the Option is
granted. Subject to certain limitations, Options granted under the Stock Option
Plan may be either Incentive Stock Options (within the meaning of Section 422(b)
of the Internal Revenue Code) or Non-Qualified Stock Options. With certain
limited exceptions, Options may not be exercised for a period of 12 months
following the grant of the Option and are exercisable in installments as are
specified in the Stock Option Plan or the terms of each Option. The exercise
period of an Option may not extend more than 10 years following its grant.
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<PAGE>
Retirement Plans
The Company has a retirement profit-sharing plan with Deferred 401(k)
Savings Plan Provisions (the "Retirement Plan") for employees meeting certain
service requirements. Under the terms of the Retirement Plan, the annual
discretionary contribution portion of the Retirement Plan is determined by the
Board of Directors. For the 401(k) portion of the Retirement Plan, the Board of
Directors has elected to contribute to the Retirement Plan for each
participating employee an amount equal to 50% of such employee's contribution to
the plan but in no event more than 3% of such employee's compensation.
The Company also has a Supplemental Retirement Plan for Executives (the
"Supplemental Plan"). Under the Supplemental Plan, which is not qualified for
purposes of Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), a participating executive may receive in his trust account an amount
equal to 10% of his compensation, reduced by the amount of any contributions
allocated to such executive under the Retirement Plan. The amounts paid to the
trustee under the Supplemental Plan may be used to satisfy claims of general
creditors in the event of the Company's or any of its subsidiaries' bankruptcy.
The trustee shall not cause the Supplemental Plan to be other than "unfunded"
for purposes of the Employee Retirement Income Security Act of 1974, as amended.
An executive's account shall vest in the same manner as under the Retirement
Plan and shall be paid upon termination of employment. Under the Supplemental
Plan the Board of Directors may during any fiscal year elect not to make any
payment to the account of any or all executives.
Pursuant to a long-standing arrangement, in the event of the death of Mr.
Liebowitz, benefits in an amount equal to twelve months' salary will be paid to
his estate. In the event of termination of Mr. Liebowitz's employment due to
illness or incapacity for a period of one year or longer, benefits equal to
twenty-four months' salary will be payable to Mr. Liebowitz.
Mr. Liebowitz receives an annual pension of $3,500 from a subsidiary's
defined benefit retirement plan which was terminated effective October 1, 1985.
Compensation Committee Interlocks and Insider Participation
As previously noted, the current members of the Compensation Committee are
Messrs. Cooper (a former Vice President), Safenowitz (a former Executive Vice
President) and Wintrub. Mr. Liebowitz participated in the Compensation Committee
until June 19, 1997 and did not participate thereafter. Mr. Liebowitz did not
participate in decisions with respect to his own compensation. Messrs. Cooper,
Liebowitz and Safenowitz are also the principal stockholders of Marketing, with
Messrs. Liebowitz and Safenowitz also serving as directors of Marketing. Mr.
Liebowitz serves as Chairman and Chief Executive Officer of Marketing and is a
member of the Nominating Committee and the Compensation Committee of the board
of directors of Marketing. The Company has certain lease, service, licensing and
tax sharing arrangements with Marketing. In addition, Messrs. Cooper, Safenowitz
and Liebowitz are also directors and the principal stockholders of CLS General
Partnership Corp., which during the fiscal year was the general partner of Power
Test Realty Company Limited Partnership, with which the Company has certain
lease arrangements. See "Certain Transactions."
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REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
To Our Stockholders:
This report addresses the Company's compensation policies with respect to
the compensation of the Chief Executive Officer and the other Executive Officers
during fiscal 1998. The Compensation and Stock Option Committee (the
"Compensation Committee") is responsible for setting and administering the
policies which govern the Incentive Compensation Plan, the Retirement Plan, the
Supplemental Retirement Plan, the Stock Option Plan and base salary compensation
and for determining amounts payable thereunder.
Compensation of the Company's Executive Officers (with the exception of
the Chief Executive Officer) is recommended by the Chief Executive Officer to
the Compensation Committee of the Board of Directors, is discussed, reviewed and
approved by the full Board, as is the compensation of the Chief Executive
Officer. The Company's philosophy is that under its total compensation program
the Chief Executive Officer and other executives should: (1) have a greater
portion of compensation at risk than other employees and (2) have a significant
portion of their compensation tied directly to the performance of the business.
Base Salary
The base salary program is designed to provide each individual with a
salary competitive with salaries paid for similar positions in similar
companies. Besides being able to attract and retain capable people, Getty will
endeavor to ensure that each individual's compensation will be based on the
person's ability, effort and achievement.
In 1991, in light of the Company's financial results, the Compensation
Committee froze the base salary component of the Chief Executive Officer and
other Executive Officers. Upon the recommendation of the consultants, the freeze
was lifted in June 1993. In December 1997, consistent with the practice of the
prior few years, all Executive Officers received a small increase in base
salary.
Annual Incentive Awards
Annual Incentive Awards are provided under the Getty Incentive
Compensation Plan ("ICP"). The purpose of the ICP is to promote the achievement
of the Company's targeted business objectives by providing competitive
incentives to those employees who can impact the Company's performance. The
total amount of cash available for annual ICP awards is approved by the Board of
Directors after evaluating a combination of criteria, and achievement of
specific goals. Awards are based on a combination of Company performance,
business unit performance, and individual performance based on specific
objectives.
The Compensation Committee determined that the incentive compensation of
the Chief Executive Officer and other Executive Officer (shown under the caption
"Bonuses" in the Summary Compensation Table) should be between 82.5% to 115% of
the targeted amount each Executive Officer could have received under the ICP for
the fiscal year ended January 31, 1998.
Stock Options
Stock options are granted to encourage and facilitate personal stock
ownership by the directors, executives and certain other key employees and thus
strengthen their personal commitment to Getty and provide a longer term
perspective to their managerial responsibilities. The stock option portion of
the compensation program directly links the executive's interests with those of
the stockholders. The Compensation Committee's policy is to grant stock option
awards based on individual performance and the potential to contribute to the
future success of the Company. In December 1997, stock options were awarded to
Mr. Fitteron and to certain key employees and directors; no options were granted
to Mr. Liebowitz, who has not to date participated in the Stock Option Plan.
On January 28, 1998, the Board of Directors approved a stock option
replacement program (the "Option Replacement Program"), whereby then existing
nonqualified stock options, which contained a gross up provision for the payment
of federal income and applicable state income taxes, became fully vested and
option holders were afforded the opportunity to undertake a cashless stock
option exercise by surrendering a sufficient number of options to pay the
exercise price for the balance of shares under a stock option grant. Those who
elected to participate received the full tax gross up on the shares purchased
and received replacement options (without a tax gross up provision) to acquire
additional shares with an exercise price per share equal to the then current
market price. The Board deemed it in the best interests of the Company to offer
the Option Replacement Program so as to reduce the number of stock options
outstanding which have the tax gross up feature, the existence of which requires
a quarterly charge or credit in the Company's earnings based on the change in
the market price of Getty Common Stock.
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Also on January 28, 1998, the Compensation Committee recommended to the Board
that the Stock Option Plan be amended to permit the issuance of replacement
options to former directors, officers and employees of Old Getty who presently
serve as directors, officers and employees of Marketing.
The Compensation Committee believes that the three components described above
provide compensation that is competitive with that offered by other
corporations, and effectively links executive and stockholder interest through
varied plans that are structured to coincide with the long term vision of Getty.
In 1993, the Internal Revenue Code was amended to add Section 162(m)
denying the federal income tax deduction by publicly held corporations of
compensation in excess of $1 million paid to certain executives and highly
compensated officers during one taxable year. It is the Company's policy to take
this rule into account in setting the compensation of its affected executives.
In addition to salaries and bonuses, compensation income recognized upon the
exercise of stock options may represent compensation subject to the Section
162(m) limitation. Although it is possible that in any given year, some portion
of the compensation paid to a Company executive will not be tax deductible under
Section 162(m), the Compensation Committee believes that portions of the
affected executive's total compensation that are performance based are excepted
from application of Section 162(m). Deductibility will also depend upon the
amount of any bonus paid as an ICP award, upon the market price of the Company's
shares on the date stock options are exercised, and the number of options
exercised by an executive in any one taxable year.
The report of the Compensation Committee shall not be deemed incorporated
by reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933, as amended (the
"Securities Act") or under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), except to the extent that the Company specifically incorporates
this information by reference, and shall not otherwise be deemed filed under
such Acts.
April 30, 1998 Compensation and Stock Option Committee:
Milton Cooper (Chairman)
Milton Safenowitz
Warren Wintrub
CERTAIN TRANSACTIONS
Power Test Investors Limited Partnership
In 1985, PTI was formed as a public master limited partnership and
capitalized by a rights offering to all Getty stockholders. PTI was, during
fiscal 1998, the limited partner in Power Test Realty Company Limited
Partnership (the "Operating Partnership"), which was also formed in 1985 and
which purchased the Northeast and Mid-Atlantic petroleum marketing assets of
Getty Oil Company from Texaco Inc. The Operating Partnership leased these assets
to Getty on a long-term net lease basis.
CLS General Partnership Corp., a Delaware corporation ("CLS"), was, during
fiscal 1998, the sole general partner of both PTI and the Operating Partnership.
The three stockholders of CLS, Leo Liebowitz, Milton Safenowitz and Milton
Cooper, are also directors, stockholders, and in the case of Mr. Liebowitz, an
officer of the Company.
During fiscal 1998, the Company made net lease payments to the Operating
Partnership of approximately $10,032,000 and an additional sum of $989,857 was
paid to the Operating Partnership by Getty for properties purchased. The Company
received payments of $672,000 from the Operating Partnership for services
performed by the Company (including the provision of office space and related
services) during fiscal 1998.
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On January 30, 1998, the date of the Merger, the Company acquired all of
the limited partnership interests in PTI, PTI was liquidated, and the Company
now owns a 99% interest in the Operating Partnership. Getty Properties Corp., a
wholly-owned subsidiary of the Company, owns the 1% general partner interest in
the Operating Partnership.
Getty Petroleum Marketing Inc.
As a result of the Distribution, Messrs. Liebowitz, Safenowitz and Cooper
each beneficially owns approximately the same percentage of the outstanding
common stock of Marketing as he owns of the Company's common stock, without
giving effect to the issuance of 5% of Marketing's common stock to an Employee
Stock Ownership Plan. See "Beneficial Ownership of Common Stock." Messrs.
Liebowitz and Safenowitz serve as directors of Marketing, and Mr. Liebowitz
serves as Marketing's Chief Executive Officer.
In connection with the Distribution, the Company and Marketing entered
into a Master Lease Agreement (the "Master Lease") with respect to approximately
1,000 service station and convenience store properties and 10 distribution
terminals and bulk plants (including those properties leased by the Company from
the Operating Partnership). The initial term of the Master Lease is 15 years (or
periods ranging from one to fifteen years with respect to approximately 400
properties leased by Getty from third parties other than the Operating
Partnership), and generally provides Marketing with four ten-year renewal
options (or with respect to such leased properties, such shorter period as the
underlying lease may provide). The Master Lease is a "triple-net" lease, so
Marketing is responsible for the cost of all taxes, maintenance, repair,
insurance and other operating expenses. Rent for each of the properties was set
using the fair market value of each such property, assuming certain
environmental conditions for which the Company is responsible. The Company
anticipates that it will receive, on an annual basis, net lease payments from
Marketing aggregating approximately $57 million which commenced in the fiscal
year beginning February 1, 1997.
The Company and Marketing also entered into a Services Agreement (the
"Services Agreement"), under which the Company receives certain administrative
and technical services from Marketing and provides certain limited services to
Marketing. The Services Agreement expires in March 1999, except that it may be
earlier terminated in whole or in part by either party upon 120 days' notice.
The net fees paid by the Company during the past fiscal year to Marketing under
the Services Agreement was $960,000. The Company presently expects that most of
such services will be provided by Marketing for the coming year.
In addition, the Company and Marketing entered into a Trademark License
Agreement providing for an exclusive, royalty-free license to Marketing of
certain Getty trademarks, service marks and trade names (including the name
"Getty") used in connection with Marketing's business, within the territory
specified in the Agreement. The term of the Agreement is 55 years, but in the
event that the Master Lease terminates prior thereto, the license will become
non-exclusive and Marketing will pay to the Company certain customary signage
rental and royalty fees.
In connection with the Distribution, the Company and Marketing also
entered into a Tax Sharing Agreement that defined the parties' rights and
obligations with respect to filing of returns, payments, deficiencies and
refunds of federal, state and other income, franchise or motor fuel taxes
relating to the Company's business for tax years prior to and including the
Distribution and with respect to certain tax attributes of the Company after the
Distribution.
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STOCK PERFORMANCE GRAPH
COMPARATIVE FIVE-YEAR TOTAL RETURNS*
Getty (GTY), S&P 500, Old Peer Group and New Peer Group
(Performance results through 1/31/98)
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareholder return on the Company's Common Stock against
the cumulative total return of the Standard & Poor's 500 Stock Index and two
peer groups for the period of five years ended January 31, 1998.
[CHART OMITTED]
1993 1994 1995 1996 1997 1998
- --------------------------------------------------------------------------------
Getty Realty Corp. $100.00 $159.52 $110.71 $126.75 $171.20 $298.28
Standard & Poor's 500 $100.00 $113.14 $113.80 $157.75 $199.67 $253.56
Old Peer Group $100.00 $140.70 $123.51 $147.58 $171.14 $203.29
New Peer Group $100.00 $123.35 $117.88 $158.23 $200.56 $228.50
- --------------------------------------------------------------------------------
Assumes $100 invested at the close of trading 1/31/93 in Getty Common Stock,
Standard & Poor's 500, Old Peer Group and New Peer Group.
*Cumulative total return assumes reinvestment of dividends, and in the case of
the Company, includes a special dividend relating to the Distribution.
The Company has chosen, as its New Peer Group, the following companies:
Franchise Finance Corp. of America, U.S. Restaurant Properties, Inc., Realty
Income Corp. and FFPPartners, L.P. The Company has chosen such companies as its
New Peer Group because a substantial segment of each of their businesses is as a
real estate company that owns and leases commercial properties.
The Company has selected a different Peer Group than in prior years, since
following the Distribution of the Company's petroleum marketing business, it is
no longer meaningful to track the Company's performance against that of
petroleum marketing companies. The Company has, however, included in the Stock
Performance Graph for purposes of historical comparison data relating to the
Company's former peer group (the "Old Peer Group"), which includes Ashland,
Repsol S.A., Sun Company, E-Z Serve Corporation and FFP Partners, L.P.
The Stock Performance Graph shall not be deemed incorporated by reference
by any general statement incorporating by reference this Proxy Statement into
any filing under the Securities Act or under the Exchange Act, except to the
extent that the Company specifically incorporates this graph by reference, and
shall not otherwise be deemed filed under such Acts.
There can be no assurance that the Company's stock performance will
continue into the future with the same or similar trends depicted in the graph
above. The Company will not make or endorse any predictions as to future stock
performance.
13
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PROPOSAL TO AMEND THE COMPANY'S 1998 STOCK OPTION PLAN
Amendment
The Board of Directors proposes that the Stock Option Plan (the "Plan") be
amended to permit the grant of stock options to former directors, officers and
employees of Old Getty who presently serve as directors, officers and employees
of Marketing. A description of the Plan and the proposed amendment is set forth
below and is qualified by reference to the full text of the proposed amendment
which is set forth as Exhibit A to this Proxy Statement.
On January 30, 1998, the Company's stockholders approved the Plan. As of
April 1998, the Plan had available a maximum of 736,447 shares remaining for
issuance upon the exercise of stock options granted thereunder.
On January 28, 1998, the Board of Directors approved the Option
Replacement Program, whereby then existing nonqualified stock options, which
contained a gross up provision for the payment of federal income and applicable
state income taxes became fully vested and option holders were afforded the
opportunity to undertake a cashless stock option exercise by surrendering a
sufficient number of options to pay the exercise price for the balance of shares
under a stock option grant. Those who elected to participate received the full
tax gross up on the shares purchased and received replacement options to acquire
additional shares with an exercise price per share equal to the then current
market price. The Board deemed it in the best interests of the Company to offer
the Option Replacement Program so as to reduce the number of stock options
outstanding which have the tax gross up feature, the existence of which requires
a quarterly charge or credit in the Company's earnings based on the change in
the market price of Getty Common Stock.
Twenty-seven option holders elected to participate in the Option
Replacement Program, resulting in the grant of replacement options in the
aggregate amount of 296,736 shares. The replacement options granted are
conditioned on the stockholders' approval and, if approval is not obtained, the
replacement options will be null and void as to the Marketing employees who were
directors, officers and employees of Getty Petroleum Corp. before the spinoff.
Furthermore, 113,506 shares subject to option grants are held by option holders
who were directors, officers or employees of Getty Petroleum Corp. before the
spinoff and are now directors, officers and employees of Marketing. The
amendment would permit the issuance of replacement options to such individuals.
The Board of Directors believes that it is in the Company's interest to
facilitate the Option Replacement Program. Accordingly, the Board of Directors
has voted, subject to stockholders approval, to permit the grant of stock
options to former directors, officers and employees of Old Getty, who presently
serve as directors, officers and employees of Marketing.
Description
The following summary of certain terms and provisions of the Plan, which
describes all material terms and provisions thereof, is qualified in its
entirety by reference to the full text of the Plan, a copy of which was filed as
Exhibit 10.1 to the Registration Statement on Form S-4 with the SEC on January
12, 1998 as Registration Number 333-44065.
The Plan authorizes the grant to directors, officers and other key
employees of the Company and its subsidiaries of long-term incentive share
awards in the form of options to purchase shares of the Company's Common Stock;
no grants may be made under the Plan after January 30, 2008. There are
approximately 2 directors, 1 officer and 9 key employees who have received
grants under the Plan. The Plan is administered by a committee of three members
of the Company's Board of Directors (the "Compensation Committee"). The purpose
of the Plan is to benefit the Company by giving directors, officers and other
key employees of the Company and its subsidiaries a greater personal interest in
the success of the enterprise.
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Options which qualify as Incentive Stock Options under Section 422(b) of
the Internal Revenue Code of 1986, as amended (the "Code"), as well as Options
which do not qualify for such treatment, may be granted by the Compensation
Committee under the Plan. The Option price per share must generally be at least
the fair market value of a share of the Company's Common Stock at the time the
Option is granted, except that the Option price per share for any Incentive
Stock Option granted to any individual who owns stock representing more than 10%
of the voting power of the Company's Common Stock must be at least 110% of the
fair market value of the Company's Common Stock at the time such Incentive Stock
Option is granted. However, the Compensation Committee may grant Non-Qualified
Stock Options at a price which is less than the then current market value of the
Company's Common Stock. The maximum number of shares that may be granted to any
individual in any fiscal year may not exceed 250,000. Shares purchased upon
exercise of an Option must be paid for in full at the time of exercise in cash
or, if the Compensation Committee so permits, in whole or in part in shares of
the Company's Common Stock valued at their fair market value at the date of
exercise or by the execution by an optionee of a promissory note for all or a
portion of the exercise price on such terms and conditions as the Compensation
Committee may impose. With certain limited exceptions, no Option granted under
the Plan will be exercisable unless, at the time of such exercise, the optionee
is a director or officer of, or in employment with, the Company or a subsidiary
following the grant of such Option. An Option shall become exercisable at such
times and in such installments as the Committee shall provide in the terms of
each individual option. Such installments may be cumulative. The expiration date
of an Option and the manner in which such Option shall be exercised are
determined by the Compensation Committee. With limited exceptions, no shares
acquired upon exercise of any Option by any director or officer may be sold,
assigned or otherwise transferred until at least six months have elapsed from
the date that such Option was granted.
The Compensation Committee may permit the voluntary surrender of all or a
portion of any option granted under the Plan to be conditioned upon the granting
to the recipient of a new Option for the same or a different number of shares as
the Option surrendered, or may require surrender of all or a portion of any
Option granted under the Plan as a condition precedent to a grant of a new
Option to such recipient. Such new Option will be exercisable at the price,
during the period, and in accordance with any other terms or conditions
specified by the Compensation Committee at the time the new Option is granted,
all determined in accordance with the provisions of the Plan without regard to
the price, period of exercise, or any other terms or conditions of the Option
surrendered. Shares subject to outstanding Options that are surrendered will,
upon surrender, no longer be charged against the maximum number of shares
available under the Plan. Such surrender may be desirable if the market value of
the Company's Common Stock has fallen below the exercise price of the
outstanding Options. Through such surrender recipients would be provided with
the new Options at current market values, thereby restoring the incentive nature
of such Options.
The aggregate number of shares of the Company's Common Stock which may be
made the subject of Options pursuant to the Plan shall not exceed 1,100,000
shares of which options with respect to 349,236 shares have been granted. The
aggregate fair market value of stock (determined at the time of grant) for which
an optionee may exercise Incentive Stock Options for the first time during any
calendar year may not exceed $100,000. The Plan provides that the Compensation
Committee may make equitable adjustments in the terms of Options and the maximum
number of shares available under the Plan in the event of certain corporate
events, such as reorganizations, mergers or recapitalizations. The Plan may be
amended by the Board of Directors at any time, provided that, without the
approval of the holders of a majority of the Company's Common Stock, no
amendment may be made which (i) increases the maximum number of shares available
under the Plan, (ii) changes the class of directors, officers or employees
eligible to receive Options under the Plan, (iii) reduces the minimum purchase
price of such Options, or (iv) materially increases the benefits accruing to
participants under the Plan. The closing price of the Company's Common Stock on
the New York Stock Exchange on January 31, 1998 was $23.875.
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Federal Income Tax Consequences
The following discussion is a general summary of the material U.S. federal
income tax consequences to U.S. participants in the Plan, and is intended for
general information only. The discussion is based on the Code, regulations
thereunder, rulings and decisions now in effect, all of which are subject to
change. Alternative minimum tax and state and local income taxes are not
discussed, and may vary depending on individual circumstances and from locality
to locality. Depending on the interaction of Section 83(a) of the Code with the
provisions of the Rule 16b-3 under the Exchange Act which apply to the Plan at
the time of the grant of options, the tax consequences to persons subject to
Section 16 of the Exchange Act may be different from the general consequences
described below.
Section 162(m). Under Section 162(m) of the Code, income tax deductions of
publicly-traded companies may be limited to the extent total annual compensation
(including base salary, annual bonus, stock option exercises and non-qualified
benefits) paid for certain executive officers exceeds $1 million (less the
amount of any "excess parachute payments" as defined in Section 280G of the
Code) in any one year. However, under Section 162(m), the deduction limit does
not apply to certain "qualified performance-based compensation" established by
an independent compensation committee which is adequately disclosed to, and
approved by, stockholders. In particular, stock options will satisfy the
performance-based exception if the awards are made by a qualifying compensation
committee under a plan that has been approved by the Company's stockholders, if
the plan states the maximum number of shares that can be granted to any
particular employee within a specified period and if the compensation is based
solely on an increase in the stock price after the grant date (i.e. the option
exercise price is equal to or greater than the fair market value of the stock
subject to the award on the grant date).
Nonqualified Stock Options ("NQSOs"). For federal income tax purposes, the
recipient of NQSOs granted under the Plan will not have taxable income upon the
grant of the option, nor will the Company then be entitled to any deduction.
Generally, upon exercise of NQSOs the optionee will realize ordinary income, in
an amount equal to the difference between the option exercise price and the fair
market value of the stock at the date of exercise. Subject to the deductibility
limits of Section 162(m), upon exercise of a NQSO by an employee of the Company
or any of its subsidiaries, the Company will be entitled to a deduction in an
amount equal to such difference. An optionee's basis for the stock for purposes
of determining his gain or loss on his subsequent disposition of the shares
generally will be the fair market value of the stock on the date of exercise of
the NQSO.
The tax consequence resulting from the exercise of a NQSO through delivery
of already-owned Company shares are not completely certain. In published
rulings, the IRS has taken the position that, (i) to the extent an equivalent
value of shares is acquired, the optionee will recognize no gain, (ii) the
employee's basis in the stock acquired upon such exercise is equal to the
employee's basis in the surrendered shares, (iii) any additional shares acquired
upon such exercise are compensation to the employee taxable under the rules
described above and (iv) the employee's basis in any such additional shares is
their then-fair market value.
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Incentive Stock Options ("ISOs"). There is no taxable income to an optionee when
an ISO is granted to him or when that option is exercised; provided, however,
that upon exercise the optionee's alternative minimum taxable income will
generally include an amount equal to the difference between the option exercise
price and the fair market value at the time of exercise. Gain realized by an
optionee upon sale of stock issued on exercise of an ISO is taxable at capital
gains rates, and no tax deduction is available to the Company unless the
optionee disposes of the shares within two years after the date of grant of the
option or within one year of the date the shares were transferred to the
optionee. In such event, the difference between the option exercise price and
the fair market value of the shares on the date of the option's exercise will be
taxed at ordinary income rates, and, subject to the deductibility limits of
Section 162(m), the Company will be entitled to a deduction to the extent the
employee must recognize ordinary income. An ISO exercised more than three months
after an optionee's retirement from employment, other than by reason of death or
disability, will be taxed as a NQSO, with the optionee deemed to have received
income upon such exercise taxable at ordinary income rates. Subject to the
deductibility limits of Section 162(m), the Company will be entitled to a tax
deduction equal to the ordinary income, if any, realized by the optionee.
The tax consequences resulting from the exercise of an ISO through
delivery of already-owned shares of Common Stock are not completely certain. In
published rulings and proposed regulations, the IRS has taken the position that
generally the employee will recognize no income upon such stock-for-stock
exercise, that, to the extent an equivalent number of shares is acquired, the
employee's basis in the shares acquired upon such exercise is equal to the
employee's basis in the surrendered shares increased by any compensation income
recognized by the employee, that the employee's basis in any additional shares
acquired upon such exercise is zero and that any sale or other disposition of
the acquired shares within the one-or two-year period described above will be
viewed first as a disposition of the shares with the lowest basis.
Accounting Treatment
Generally, the Company's reported earnings will not be affected by the
grant of Options or the exercise of Options, except in the case where Options
are issued for less than fair market value at the date of grant. Such grants,
however, may impact the calculation of diluted earnings per share, by virtue of
being deemed to have been exercised under certain circumstances.
Approval of Amendment
The affirmative vote of a majority of the votes cast at the meeting by the
holders of Getty Common Stock and Getty Preferred Stock is required for approval
of the proposed amendment of the Plan to permit the grant of stock options to
former directors, officers and employees of Old Getty who presently serve as
directors, officers and employees of Marketing.
The Board of Directors recommends a vote "FOR" the proposed amendment of
the Stock Option Plan.
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RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Pursuant to the direction of the Board of Directors, on March 26, 1998 the
Audit Committee appointed the firm of Coopers & Lybrand L.L.P., subject to
ratification by the stockholders at the Annual Meeting, to audit the accounts of
the Company with respect to its operations for the fiscal year ending January
31, 1999 and to perform such other services as may be required. Should this firm
of auditors be unable to perform these services for any reason, the Board of
Directors will appoint other independent auditors to perform these services.
Representatives of the firm of Coopers & Lybrand L.L.P., the Company's
principal auditors for the most recently completed fiscal year, are expected to
be present at the Annual Meeting, will have the opportunity to make a statement
if they desire to do so, and will be available to respond to appropriate
questions from stockholders.
The Board of Directors recommends a vote "FOR" the proposal to ratify the
selection of Coopers & Lybrand L.L.P. as the Company's independent public
auditors for the fiscal year ending January 31, 1999.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Pursuant to Section 16(a) of the Securities Exchange Act and the rules
issued thereunder, Getty's Executive Officers and directors are required to file
with the Securities and Exchange Commission and the New York Stock Exchange
reports of ownership and changes in ownership of the Common Stock. Copies of
such reports are required to be furnished to Getty. Based on its review of Forms
3 and 4 received by it during fiscal 1998 and of Form 5 received by it with
respect to fiscal 1998, Getty believes that during fiscal 1998 all of its
Executive Officers and directors complied with the Section 16(a) requirements.
OTHER MATTERS
Management does not know of any matters, other than those referred to
above, to be presented at the meeting for action by the stockholders. However,
if any other matters are properly brought before the meeting, or any adjournment
or adjournments thereof, it is intended that votes will be cast pursuant to the
proxies with respect to such matters in accordance with the best judgment of the
persons acting under the proxies.
The proxy may be revoked at any time prior to its exercise. Brokerage
houses and other custodians will be requested to forward solicitation material
to beneficial owners of stock held of record by such persons. The Company will
reimburse brokerage houses, banks and custodians for their out-of-pocket
expenses in forwarding proxy material to the beneficial owners. The cost of this
solicitation, which will be effected by mail, will be borne by the Company.
April 30, 1998 By Order of the Board of Directors,
/s/ Randi Young Filip
Randi Young Filip
Corporate Secretary
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EXHIBIT A
FIRST AMENDMENT TO THE 1998 STOCK OPTION PLAN OF
GETTY REALTY CORP.
Getty Realty Corp. (prior to January 30, 1998 known as Getty Realty
Holding Corp., the "Company"), a corporation organized under the laws of the
State of Maryland, by resolution of its Board of Directors (the "Board") adopted
the 1998 Stock Option Plan of Getty Realty Corp. (the "Plan") on January 12,
1998, effective as of January 30, 1998. The Plan provides, in part, for the
assumption and incorporation of the 1991, 1988 and 1985 Stock Option Plans
(collectively, the "Old Getty Option Plans") of Getty Realty Corp., a Delaware
corporation (prior to March 31, 1997 known as Getty Petroleum Corp., "Old
Getty"), and as of January 30, 1998, each then outstanding option granted under
the Old Getty Option Plans became, in accordance with its terms, exercisable
with respect to shares of the Company's common stock.
Getty Petroleum Corp. entered into that certain Stock Option Reformation
Agreement by and between Getty Petroleum Corp. and Getty Petroleum Marketing
Inc., a Maryland corporation ("Getty Marketing"), effective as of March 21, 1997
which provided, in part, that in connection with the spin-off of the Getty
Marketing from Getty Petroleum Corp. each then outstanding option to purchase
Getty Petroleum Corp. common stock would be reformed as one option exercisable
with respect to Getty Marketing common stock and one option exercisable with
respect to Old Getty common stock.
On January 28, 1998, the Board approved a stock option replacement program
(the "Option Replacement Program"), whereby individuals who held certain options
exercisable with respect to shares of the Company's common stock under the Plan
that contained a tax gross-up feature were permitted to exercise such options in
exchange for the grant of replacement options exercisable with respect to shares
of the Company's common stock under the Plan that do not contain such a tax
gross-up feature.
In order to effectuate the Option Replacement Program and to amend the
Plan in certain other respects, this Amendment to the Plan has been adopted by a
resolution of the Board of Directors of the Company on January 28, 1998,
effective as of such date. This Amendment to the Plan, together with the Plan,
constitutes the entire Plan as amended to date.
1. The name of the Plan shall be changed to the "1998 Stock Option Plan of Getty
Realty Corp."
2. The recitals are amended by adding a new paragraph (4) to the end thereof to
read in its entirety as follows:
"(4) To permit certain grants of Options to officers, directors and
employees of Getty Petroleum Marketing Inc., a Maryland corporation
("Getty Marketing"), who, prior to the spin-off of Getty Marketing from
Getty Petroleum Corp., a Delaware corporation ("Getty Petroleum")
effective March 21, 1997 (the "Spin-off"), served in the same capacity as
officers, directors and employees of Getty Petroleum."
3. The following new Sections 1.12 and 1.13 are added to the Plan and current
Sections 1.12 through 1.22 are redesignated as Sections 1.14 through 1.24,
respectively:
"Section 1.12--Marketing Individual
"Marketing Individual" shall mean any officer, director or employee
of Getty Marketing, who, prior to the Spin-off, served in the same
capacity as an officer, director or employee of Getty Petroleum."
"Section 1.13--Marketing Optionee
"Marketing Optionee" shall mean any Marketing Individual who is
granted an Option under the Plan."
4. Section 1.17 of the Plan (after giving effect to the renumbering of the
Sections in Article I, described in paragraph 3 above) is amended by adding the
following new sentence to the end thereof:
"Unless otherwise specifically stated, the term "Optionee" shall
also include any Marketing Optionee."
5. Section 1.24 (after giving effect to the renumbering of the Sections
described in paragraph 3 above) is amended by adding the following parenthetical
after the word "Optionee" in the first sentence thereof "(other
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than a Marketing Optionee)" and by deleting the period at the end of the first
sentence therein and replacing it with the following proviso:
"; provided, however, that with respect to any Marketing Optionee,
`Termination of Employment' shall mean the time when service by any such
Marketing Optionee as an employee of (or as a director of) Getty Marketing
(or any parent corporation or subsidiary corporation of Getty Marketing as
defined in Code Sections 424(e) and 424(f), respectively) is terminated
for any reason, with or without cause, including, but not by way of
limitation, a termination by resignation, discharge, death or retirement,
but excluding terminations where there is a simultaneous reemployment by
(or commencement of services as director of) Getty Marketing (or any
parent corporation or subsidiary corporation of Getty Marketing as defined
in Code Sections 424(e) and 424(f), respectively."
6. Section 3.1 is amended by adding the following sentence to the end thereof:
"In addition, any Marketing Individual shall be eligible to be
granted Options, except as provided in Section 3.2."
7. Section 3.3(a)(i) is amended to read in its entirety as follows:
"(i) Determine which Directors, Officers, key Employees or Marketing
Individuals should be granted Options; and"
8. Section 4.5 is amended by adding the following parenthetical after the word
"Optionee" in the first sentence thereof "(other than a Marketing Optionee)" and
by adding the following sentence to the end thereof:
"In consideration of the granting of an Option to a Marketing
Optionee, the Marketing Optionee shall agree, in the written Stock Option
Agreement, that prior to such grant the Marketing Optionee shall have
exercised some or all Options previously granted to such Marketing
Optionee, or to provide such other consideration determined by the
Committee to be sufficient and appropriate and which is set forth in the
written Stock Option Agreement."
9. Section 4.6(b)(ii) is amended by replacing the word "Employee" with the word
"Optionee."
*****
Executed at Jericho, New York, this ______ day of ________________, 1998.
GETTY REALTY CORP.
By:
-----------------------------------
Officer
*****
I hereby certify that the foregoing Amendment was duly adopted by the
Board of Directors of Getty Realty Corp. on January 28, 1998.
Executed on this ______ day of _________________ , 199__.
By:
-----------------------------------
Secretary
*****
I hereby certify that the foregoing Amendment was duly approved by the
Stockholders of Getty Realty Corp. on _________________ , 199__.
Executed on this ______ day of _________________ , 199__.
By:
-----------------------------------
Secretary
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