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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:
[ ] Preliminary Proxy Statement
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Exchange Act Rule 14a-11 or Rule 14a-12
Getty Petroleum Corp.
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(Name of Registrant as Specified In Its Charter)
Getty Petroleum Corp.
- ---------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ X ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] 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:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: (Footnote-1)
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
[ ] 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.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
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(1) Set forth the amount on which the filing fee is calculated and state
how it was determined.
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GETTY (registered trademark)
Getty Petroleum Corp.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 20, 1996
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To the Stockholders of
GETTY PETROLEUM CORP.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Getty Petroleum Corp. (hereinafter called the "Company" or "Getty") will be
held at 1301 Avenue of the Americas, New York, New York (2nd floor), on
June 20, 1996 at 10:30 A.M., for the following purposes:
(1) To elect a Board of five directors to hold office for the ensuing
year or until the election and qualification of their respective
successors.
(2) The adoption of an amendment to the Company's 1991 Stock Option
Plan to increase the number of shares available under the Plan,
as described in the attached materials.
(3) The ratification of the appiontment of Coopers & Lybrand as
independent auditors for the Company for the fiscal year ended
January 31, 1997.
(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, 1996 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,
Samuel M. Jones,
Vice President, General Counsel
and Corporate Secretary
Jericho, New York
April 29, 1996
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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.
1
<PAGE>
GETTY PETROLEUM CORP.
125 JERICHO TURNPIKE, JERICHO, NEW YORK 11753
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished in connection with the solicitation
of proxies by and on behalf of the Board of Directors of Getty Petroleum
Corp. (hereinafter called the "Company" or "Getty") to be voted at the
Annual Meeting of Stockholders to be held at 1301 Avenue of the Americas,
New York, New York (2nd floor), on June 20, 1996 at 10:30 A.M., and at any
adjournments thereof, for the purpose of electing a Board of Directors,
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, 1996 record date for securities entitled to vote at
the meeting, the Company had outstanding (excluding shares held in
Treasury) 12,675,709 shares of Common Stock. Each such outstanding share is
entitled to one vote. In conformity with Delaware 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 29, 1996. 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, 1996.
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 tabulation set forth 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
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Milton Cooper--67 Chairman of the Board of Kimco Realty
May 1971 Corporation, a real estate investment trust.
Served as Vice President of Getty until June,
1992. Director, Secretary and Assistant
Treasurer of CLS General Partnership Corp., the
general partner of Power Test Investors Limited
Partnership, 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.
Leo Liebowitz--68 President and Chief Executive Officer (CEO) of
May 1971 Getty. Director, President and Treasurer of CLS
General Partnership Corp., the general partner
of Power Test Investors Limited Partnership.
Philip E. Coviello--53 Partner of Latham & Watkins, an international
law firm, for more than 5 years. Latham &
Watkins has performed legal services for the
Company for many years.
2
<PAGE>
Name -- Age Offices Held in Getty and/or Principal
Served as Director Since Occupations for Past Five Years
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Milton Safenowitz--68 Executive Vice President of Getty until his
May 1971 retirement on February 1, 1990. Director,
Executive Vice President and Assistant
Secretary of CLS General Partnership Corp., the
general partner of Power Test Investors Limited
Partnership.
Warren G. Wintrub--62 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.
BENEFICIAL OWNERSHIP OF COMMON 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 as a beneficial
owner of the security. Voting power includes the power to vote or direct
the voting of shares, and investment power includes the power to dispose of
or direct the disposition of shares.
The directors, nominees for director, Chief Executive Officer and four
other most highly compensated executive officers and all directors and
executive officers of the Company as a group beneficially owned as of
January 31, 1996 the number of shares of Getty Common Stock as set forth in
the table below. The number of shares column includes shares as to which
voting power and/or investment power may be acquired within 60 days (such
as upon exercise of outstanding stock options) because such shares are
deemed to be beneficially owned under the SEC rules.
Shares of Percent
Common Stock of Class
Name Beneficially Owned (1)
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Milton Cooper 1,059,538 (2) 7.97%
Philip E. Coviello 500 *
Leo Liebowitz 2,478,290 (3) 18.64%
Herbert Lotman 44,790 *
Milton Safenowitz 2,260,195 (4) 17.00%
Warren G. Wintrub 13,750 *
James R. Craig 50,458 *
John J. Fitteron 116,376 *
Samuel M. Jones 54,134 *
Alvin A. Smith 146,920 1.11%
Directors and Executive
Officers as a group (11 persons) 6,266,031 47.13%
* Total shares beneficially owned constitute less than one percent of
the outstanding shares.
(1) The percentage is determined by dividing the number of shares shown by
the aggregate number of shares outstanding and the shares which may be
acquired within 60 days.
(2) Includes 10,311 shares held in a partnership of which he is a partner,
2,013 shares held by wife for which beneficial ownership is disclaimed
and 100,000 shares held by a charitable foundation.
(3) Includes 166,410 shares held in trust for children, 230,977 shares
held by wife for which beneficial ownership is disclaimed and 20,724
shares held by a charitable foundation.
(4) Includes 2,084,077 shares held by Irrevocable Trust for the benefit of
Milton Safenowitz and 176,118 shares held by Irrevocable Trust for the
benefit of his wife.
3
<PAGE>
With the exception of Leo Liebowitz, whose address is care of Getty
Petroleum Corp., 125 Jericho Tpke., Jericho, New York 11753 and Milton
Safenowitz, whose address is 7124 Queenferry Cr., Boca Raton, FL 33496, who
may be deemed to be control persons of Getty, and Milton Cooper, whose
address is care of Kimco Realty Corporation, 3333 New Hyde Park Road, Suite
100, New Hyde Park, New York 11042-0020, management knows of no other
person owning of record or beneficially more than 5% of the outstanding
Common Stock.
DIRECTORS' MEETINGS, COMMITTEES AND EXECUTIVE OFFICERS
During the fiscal year ended January 31, 1996, four regular meetings
and one special meeting 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,
except for Mr. Lotman who was unable to attend the June 1995 meeting. 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), Lotman
and Safenowitz, met one time 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.
The Nominating Committee, consisting of Messrs. Liebowitz (Chairman),
Cooper and Safenowitz, met two times 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 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 twice last year, consists of Messrs. Cooper
(Chairman), Liebowitz and Safenowitz. The Compensation Committee
administers Getty's Incentive Compensation Plan, Supplemental Retirement
Plan and the Stock Option Plans, 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 $1,000 for each meeting attended. Directors who are
employees of the Company do not receive retainers or board meeting fees.
Other Executive Officers
Other executive officers include John J. Fitteron, age 54, Senior Vice
President and Chief Financial Officer of Getty since 1986 and Treasurer of
Getty since 1994; Alvin A. Smith, age 58, Senior Vice President of Getty
since 1985 and Chief Operating Officer of Getty since 1994; James R. Craig,
age 44, Vice President of Getty since 1987; Michael K. Hantman, age 44,
Vice President of Getty since 1991 and Corporate Controller of Getty since
1985; and Samuel M. Jones, age 59, Vice President and General Counsel of
Getty since 1986 and Corporate Secretary of Getty since 1994. Management is
not aware of any family relationships between any of its directors,
nominees or executive officers.
4
<PAGE>
COMPENSATION
Executive Compensation
The following tables provide information about executive compensation.
SUMMARY COMPENSATION TABLE
The following table sets forth information about the compensation of
the Chief Executive Officer and each of the other four most highly
compensated executive officers of Getty Petroleum Corp. for services in all
capacities to Getty Petroleum Corp. and its subsidiaries during the periods
indicated.
<TABLE>
<CAPTION>
Annual Compensation Long Term
Fiscal Year Ended January 31 Compensation Awards
-------------------------------------------------- --------------------------
Restricted
Other Annual Stock All Other
Salary Bonus Compensation Awards Options Compensation
Name and Principal Position Year ($) ($) ($) (1) ($) (#) ($) (2)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Leo Liebowitz 1996 404,103 263,000 59,886
Director, 1995 387,228 164,500 60,713
President and Chief 1994 384,860 193,950 53,564
Executive Officer
Alvin A. Smith 1996 301,192 190,700 15,000 45,373
Senior Vice 1995 268,606 99,000 15,000 40,353
President and Chief 1994 261,615 107,247 5,000 35,496
Operating Officer
John J. Fitteron 1996 198,296 182,200 15,000 32,593
Senior Vice President, 1995 187,849 99,000 15,000 32,043
Treasurer and Chief 1994 182,522 107,247 5,000 25,222
Financial Officer
Samuel M. Jones 1996 163,307 115,000 15,000 26,629
Vice President, 1995 154,646 79,000 10,000 26,616
General Counsel and 1994 146,808 87,432 5,000 21,532
Corporate Secretary
James R. Craig 1996 145,537 125,000 15,000 24,419
Vice President 1995 137,843 79,000 10,000 24,260
1994 122,354 87,432 5,000 18,665
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<FN>
(1) None of the Executive Officers listed 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>
Fiscal Year Defined Company Supplemental Term
Ended Contribution Match Retirement Life
January 31 Retirement Plan 401(k) Plan Plan Insurance
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Leo Liebowitz 1996 $2,388 $ -- $55,319 $2,179
1995 2,394 -- 56,140 2,179
1994 4,140 -- 47,245 2,179
Alvin A. Smith 1996 2,388 4,620 34,410 3,955
1995 2,394 4,620 29,859 3,480
1994 4,140 4,481 23,395 3,480
5
<PAGE>
Fiscal Year Defined Company Supplemental Term
Ended Contribution Match Retirement Life
January 31 Retirement Plan 401(k) Plan Plan Insurance
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John J. Fitteron 1996 2,388 4,620 23,011 2,574
1995 2,394 4,620 22,579 2,450
1994 3,885 4,497 14,390 2,450
Samuel M. Jones 1996 2,388 4,629 17,499 2,113
1995 2,394 4,611 17,507 2,104
1994 3,310 4,367 11,751 2,104
James R. Craig 1996 2,388 3,486 16,668 1,877
1995 2,394 3,478 16,546 1,842
1994 2,898 3,405 10,520 1,842
In December 1994, the Company entered into agreements with its non-
director officers and certain key employees, wherein the Company agreed
that, under certain circumstances if there is a change of control of the
Company, for the 36-month period thereafter for officers and a shorter
period of time with respect to those certain key employees, the Company
will pay to the person his/her average compensation for the requisite
period prior to the change of control. In December 1995, the Company
amended the agreements to also become effective upon a spin-off or similar
transaction involving a substantial portion of Getty's marketing or real
estate business or assets; accordingly the agreements would become
effective upon the completion of the proposed spin-off of the Company's
petroleum marketing business announced in March 1996.
STOCK OPTIONS
The following table sets forth as to the persons named in the Summary
Compensation Table additional information with respect to the stock options
granted during the fiscal year ended January 31, 1996, 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.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term (1)
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% of Total
Options
Granted to
Employees in
Fiscal Year Exercise or
Options Ended Base Price Expiration
Name Granted (#) 1-31-96 ($/Share) Date 5% ($) 10% ($)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Leo Liebowitz -- -- -- -- -- --
Alvin A. Smith 15,000 12.71% 13.875 12/8/05 130,889 331,698
John J. Fitteron 15,000 12.71% 13.875 12/8/05 130,889 331,698
Samuel M. Jones 15,000 12.71% 13.875 12/8/05 130,889 331,698
James R. Craig 15,000 12.71% 13.875 12/8/05 130,889 331,698
<FN>
- -----------------
(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.
6
<PAGE>
If the price of Getty Common Stock appreciates, the value of Getty
Common Stock held by the stockholders will also increase. For example, the
market value of Getty Common Stock on January 31, 1996 was approximately
$167,732,000, based upon the market price on that date. If the share price
of Getty's Common Stock increases by 5% per year, the market value on
January 31, 2006 of the same number of shares would be approximately
$273,218,000. If the price of Getty's Common Stock increases by 10% per
year, the market value on January 31, 2006 would be approximately
$435,054,000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table provides information as to options exercised by
each of the named executive officers of Getty during the fiscal year ended
January 31, 1996 and the value of options held by such officers at year end
measured in terms of the closing price of Getty Common Stock on January 31,
1996. No options were exercised by the named executive officers in the
fiscal year ended January 31, 1996, and accordingly no shares were acquired
or value realized upon the exercise of options.
Value of Unexercised
Number of Unexercised In-the-Money Options/SARs
Options at Fiscal Year End (#) at Fiscal Year End ($)
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
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Leo Liebowitz -- --
-- --
Alvin A. Smith 143,798 207,193
34,375 40,390
John J. Fitteron 115,656 129,521
34,375 40,390
Samuel M. Jones 50,651 58,353
27,500 24,061
James R. Craig 50,134 61,224
27,500 24,061
Stock Option Plans
The Company's 1985, 1988 and 1991 Stock Option Plans (the "Stock
Option Plans"), which have been approved by the Company's stockholders,
authorize 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 and, in the case of the 1985 Stock Option Plan, stock appreciation
rights ("SARs"). The Stock Option Plans are administered by a committee of
three members of the Company's Board of Directors (the "Compensation
Committee"), who are not eligible to participate in the Stock Option Plans
while serving on the Compensation Committee. No further grants may be made
under the 1985 Stock Option Plan and no SARs are outstanding. The maximum
number of shares which may be the subject of outstanding Options under the
1988 Stock Option Plan is 303,876 and is subject to further adjustments for
stock dividends and stock splits. No grants may be made under the 1988
Stock Option Plan after March 31, 1998. The maximum number of shares which
may be the subject of outstanding Options under the 1991 Stock Option Plan
is 500,000 and is subject to further adjustments for stock dividends and
stock splits. No grants may be made under the 1991 Stock Option Plan after
March 21, 2001. The Board of Directors is seeking stockholder approval of,
and recommends that the stockholders approve, an increase in the number of
shares subject to Options under the 1991 Stock Option Plan from 500,000 to
750,000. See "PROPOSAL TO AMEND THE COMPANY'S 1991 STOCK OPTION PLAN."
7
<PAGE>
The recipients, terms (including price and exercise period) and type
of Option (and/or SAR) to be granted under the Stock Option Plans are
determined by the Compensation Committee; however, the Option price per
share under the Stock Option Plans 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 Plans 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 exceed 10 years following its grant.
The remaining shares available for grant under the 1988 and 1991 Stock
Option Plans are 207 and 49,800, respectively.
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.
On June 15, 1989 the Board of Directors approved the 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, 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.
In the event of the death of Mr. Liebowitz, benefits will amount to
twelve months salary. In the event of termination of Mr. Liebowitz'
employment due to illness or incapacity for a period of one year or longer,
benefits will amount to twenty-four months salary.
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 Liebowitz, the President and Chief Executive
Officer. Mr. Liebowitz did not participate in decisions with respect to his
own compensation. Messrs. Cooper, Safenowitz and Liebowitz are also
Directors and the principal stockholders of CLS General Partnership Corp.,
the general partner of Power Test Investors Limited Partnership (see
"Certain Transactions").
8
<PAGE>
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 1996. The Compensation and Stock Option Committee
(the "Compensation Committee") is responsible for setting and administering
the policies which govern the Incentive Compensation Plan, the Retirement
Plan, the Supplemental Retirement Plan, the Stock Option Plans and base
salary compensation and for determining amounts payable thereunder.
Compensation of the Company's executive officers (with the exception
of the Chief Executive Officer) is recommended by the Chief Executive
Officer to the Compensation Committee of the Board of Directors, is
discussed, reviewed and approved by the full Board, as is the compensation
of the Chief Executive Officer. The Company's philosophy is that under its
total compensation program the Chief Executive Officer and other executives
should: (1) have a greater portion of compensation at risk than other
employees and (2) have a significant portion of their compensation tied
directly to the performance of the business.
To assist it in performing its duties, in 1993 the Compensation
Committee retained and met with independent compensation consultants. Said
consultants were retained to perform market surveys and recommend
appropriate salary ranges for each officer position. The Compensation
Committee then established competitive salary levels for each executive
officer. The salary of the President and Chief Executive Officer was
evaluated and compared with other Chief Executive Officers of similar
companies.
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 1994 all executive officers
received a small increase in base salary, except for Alvin A. Smith who
received a greater increase to reflect his promotion to Chief Operating
Officer. In December 1995, all executive officers received a small increase
in base salary.
Annual Incentive Awards
Annual Incentive Awards are provided under the Getty Petroleum Corp.
Incentive Compensation Plan ("ICP"). The purpose of the ICP is to promote
the achievement of the Company's targeted business objectives by providing
competitive incentives to those employees who can impact the Company's
performance. The total amount of cash available for annual ICP awards is
approved by the Board of Directors after evaluating a combination of
criteria, and achievement of specific goals. Awards are based on a
combination of Company performance, business unit performance, and
individual performance based on specific objectives.
The Compensation Committee determined that the incentive compensation
of the Chief Executive Officer and other executive officers (shown under
the caption "Bonuses" in the Summary Compensation Table) should be
increased in light of the financial results for the fiscal year ended
January 31, 1996. The increase given under the fiscal year 1996 ICP, which
Plan was tied to earnings but without any ceiling on awards resulted in ICP
awards which ranged from 87% to 149% of the maximum amount each executive
officer could have received under the ICP which was in effect for the
previous fiscal year.
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 1995 options were awarded to all executive officers and certain
key employees and directors, except for Mr. Liebowitz, who has not
participated in the Stock Option Plans.
9
<PAGE>
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.
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 29, 1996 Compensation and Stock Option Committee:
Milton Cooper (Chairman)
Leo Liebowitz
Milton Safenowitz
Certain Transactions
In January 1985, Power Test Realty Company Limited Partnership (the
"Operating Partnership") was formed to acquire from Texaco Inc. and two of
its subsidiaries certain assets used in the Northeastern United States
petroleum marketing operations of Getty Oil Company. At the same time,
Power Test Investors Limited Partnership (the "Partnership") was also
formed to contribute 99% of the capital of and become the limited partner
in the Operating Partnership. On February 1, 1985, the Operating
Partnership purchased the Getty assets (including certain service stations,
distribution terminals, rolling stock and marketing equipment) and leased
them to the Company (or certain of its subsidiaries) on a long-term net
lease basis. The Company does not have any ownership interest in the
Partnership or the Operating Partnership, and does not have any ownership
interest in or option to purchase the leased assets, except under certain
limited circumstances involving properties that have become uneconomical or
unsuitable for the Company's use or if there has been significant damage to
any such properties. Neither the Partnership nor the Operating Partnership
conducts any substantial activities other than those related to the
ownership and leasing to the Company of the Getty assets.
CLS General Partnership Corp., a Delaware corporation ("CLS"), is the
sole general partner of both the Partnership and the Operating Partnership.
The three stockholders of CLS, Leo Liebowitz, Milton Safenowitz and Milton
Cooper (the "Principal Holders"), are also directors, stockholders, and in
the case of Mr. Liebowitz, an officer of the Company. The Company's
stockholders of record on June 13, 1985 were offered the right to
participate in the Operating Partnership by means of a pro rata offering of
limited partnership interests in the Partnership. The offering was
completed on July 31, 1985. As of January 31, 1996, the Principal Holders
beneficially owned an aggregate of 3,103,131 (48%) of the general and
limited partnership interests in the Partnership.
During fiscal 1996, the Company made net lease payments to the
Operating Partnership of approximately $10,553,000 and an additional sum of
$4,938,428 was paid to the Operating Partnership by Getty for properties
purchased. The Company received payments of $648,000 from the Operating
Partnership for services performed by the Company (including the provision
of office space and related services) during fiscal 1996.
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STOCK PERFORMANCE GRAPH
COMPARATIVE FIVE-YEAR TOTAL RETURNS*
Getty Petroleum (GTY), S&P 500, Peer Group
(Performance results through 1/31/96)
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 a peer group for the period of five years ended January 31, 1996.
1991 1992 1993 1994 1995 1996
- ---------------------------------------------------------------------------
GTY $100.00 $105.60 $ 71.77 $114.49 $ 79.46 $ 90.97
S&P 500 $100.00 $122.70 $135.89 $153.75 $154.64 $214.36
Peer Group $100.00 $111.32 $100.36 $143.56 $125.53 $148.63
- ---------------------------------------------------------------------------
Assumes $100 invested at the close of trading 1/3/91 in Getty Petroleum
Corp. common stock, Standard & Poor's 500, and Peer Group.
*Cumulative total return assumes reinvestment of dividends.
The Company has chosen, as its peer group, the following companies:
Ashland Oil, Diamond Shamrock, Inc., Horsham Corp., Repsol S.A., Sun
Company and Total Petroleum. To the Company's knowledge, other than Getty,
there are no publicly traded companies whose principal business is
petroleum marketing and distribution. The Company has chosen the
aforementioned companies as its Peer Group because a substantial segment of
each of their businesses is petroleum marketing and distribution.
The Stock Performance Graph shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act or under the Exchange
Act, except to the extent that the Company specifically incorporates this
graph by reference, and shall not otherwise be deemed filed under such
Acts.
There can be no assurance that the Company's stock performance will
continue into the future with the same or similar trends depicted in the
graph above. The Company will not make or endorse any predictions as to
future stock performance.
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PROPOSAL TO AMEND THE COMPANY'S 1991 STOCK OPTION PLAN
Amendment
The Board of Directors proposes that the 1991 Stock Option Plan be
amended to increase the number of shares of Common Stock available for the
grant of Options under the Plan from 500,000 to 750,000.
In June 1991, the Company's Shareholders approved the 1991 Stock
Option Plan (the "Plan") which was amended in June 1993. As of April 22,
1996, the Plan had available a maximum of 49,800 shares remaining for the
issuance of stock options thereunder. The Board of Directors believes that
it is in the Company's interest that stock options continue to comprise a
meaningful part of compensation for officers and employees and that the
authorization of additional shares under the Plan is therefore desirable.
Accordingly, the Board of Directors has voted, subject to shareholder
approval, to increase the number of shares available for option under the
Plan by an additional 250,000 shares.
Description
The Plan authorizes the grant to directors, officers and other key
employees of the Company and its subsidiaries of long-term incentive share
awards in the form of options to purchase shares of the Company's Common
Stock; no grants may be made under the Plan after March 21, 2001. The Plan
is administered by a committee of three members of the Company's Board of
Directors (the "Compensation Committee"), who are not eligible to
participate in the Plan while serving on the Compensation Committee. The
purpose of the Plan is to benefit the Company by giving eligible directors,
officers and other key employees of the Company and its subsidiaries a
greater personal interest in the success of the enterprise.
Options which qualify as Incentive Stock Options under Section 422(b)
of the Internal Revenue Code of 1986, as amended (the "Code"), as well as
Options which do not qualify for such treatment, may be granted by the
Compensation Committee under the Plan. The Option price per share will 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. 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.
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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
500,000 shares (750,000 shares if the proposed amendment is adopted) of
which options with respect to 467,800 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, 1996 was $13.25.
Federal Income Tax Consequences
Options granted under the Plan may be either Non-Qualified Stock
Options or, if granted to employees of the Company or any of its
subsidiaries, Incentive Stock Options, as determined from time to time by
the Compensation Committee. As to Non-Qualified Stock Options, there
generally will be no federal income tax consequences to either the optionee
or the Company on the grant of the Option. Upon the exercise of a Non-
Qualified Stock Option, the optionee generally recognizes taxable ordinary
income equal to the difference between the Option price paid and the then
fair market value of the shares received. The Company will generally be
entitled to a tax deduction in an amount equal to the optionee's taxable
ordinary income. In the case of an optionee subject to Section 16(b) of the
Securities Exchange Act of 1934, as amended, if the optionee exercises the
Option within six months of the date of grant, the optionee will recognize
ordinary income upon the expiration of six months following the date of
grant equal to the excess of the fair market value of a share of Common
Stock on such date over the exercise price paid for the shares, unless the
optionee elects pursuant to Section 83(b) of the Code to use the exercise
date for purposes of calculating the amount of ordinary income. The Company
is required to withhold taxes on the ordinary income recognized by an
optionee upon exercise of a Non-Qualified Stock Option. Upon disposition of
the stock by the optionee, he will generally recognize gain or loss, as the
case may be, equal to the difference between the amount realized on such
disposition and his basis for the stock, which will include the amount
previously recognized by him as ordinary income.
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If an Option granted under the Plan is designated as an Incentive
Stock Option and thereafter continues to qualify as such, the optionee will
generally recognize no income upon grant or exercise of the Incentive Stock
Option and the Company will not be allowed a deduction for Federal income
tax purposes upon Option exercise. Upon a subsequent sale or other
disposition of shares received upon exercise of an Incentive Stock Option,
if such sale or other disposition occurs at least two years after the date
of grant and one year after the transfer of shares pursuant to the exercise
of the Option, any gain or loss will be taxed to the optionee at capital
gains rates. If either of such requirements is not satisfied, gain realized
upon such sale or other disposition will be subject to ordinary income tax.
The Company, in turn, will generally then be entitled to a deduction for
Federal income tax purposes in the amount of such ordinary income
recognized by the optionee. Whenever Incentive Stock Options are exercised,
the difference between the exercise price and the fair market value of the
shares constitutes an item of tax preference for income tax purposes. As a
result, Section 55 of the Code may impose an "alternative minimum tax" upon
the optionee exercising Incentive Stock Options.
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 fully-diluted earnings
per share, by virtue of being deemed to have been exercised under certain
circumstances.
Approval of Amendment
The affirmative vote of a majority of the votes cast at the meeting by
the holders of the Company's Common Stock is required for approval of the
proposed amendment of the Plan to increase the shares of Common Stock
available for the grant of Options from 500,000 to 750,000.
The Board of Directors recommends a vote "FOR" the proposed amendment
of the 1991 Stock Option Plan.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors on March 21, 1996 appointed the firm of Coopers
& Lybrand, 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 ended January 31, 1997 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, 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 as the Company's independent public
auditors for the fiscal year ended January 31, 1997.
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 solely
on its review of Forms 3 and 4 and amendments thereto received by it during
fiscal 1996 and of Forms 5 and amendments thereto received by it with
respect to fiscal 1996, Getty believes that during fiscal 1996 all of its
executive officers and directors complied with the Section 16(a)
requirements.
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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 29, 1996 By Order of the Board of Directors,
Samuel M. Jones,
Vice President, General Counsel
and Corporate Secretary
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===========================================================================
SECOND AMENDED AND RESTATED
1991 STOCK OPTION PLAN OF
GETTY PETROLEUM CORP.
GETTY PETROLEUM CORP., a corporation organized under the laws of the
State of Delaware, hereby adopts this Stock Option Plan for officers,
directors and key employees of Getty Petroleum Corp. and its subsidiaries.
The purposes of this Plan are as follows:
(1) To further the growth, development and financial success of the
Company by providing additional incentives to certain of its officers,
directors and key employees who have been or will be given responsibility
for the management or administration of the Company's business affairs, by
assisting them to become owners of capital stock of the Company and thus to
benefit directly from its growth, development and financial success.
(2) To enable the Company to obtain and retain the services of the
type of professional, technical and managerial employees and officers and
directors considered essential to the long-range success of the Company by
providing and offering them an opportunity to become owners of capital
stock of the Company under Options, including Options in the case of
officers and key employees that are intended to qualify as "Incentive Stock
Options" under Section 422 of the Internal Revenue Code of 1986, as
amended.
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Plan, they shall have
the meaning specified below unless the context clearly indicates to the
contrary. The masculine pronoun shall include the feminine and neuter and
the singular shall include the plural, where the context so indicates.
Section 1.1 - Board
"Board" shall mean the Board of Directors of the Company.
Section 1.2 - Code
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.3 - Committee
"Committee" shall mean the Stock Option Committee of the Board,
appointed as provided in Section 6.1.
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Section 1.4 - Company
"Company" shall mean Getty Petroleum Corp. In addition, "Company"
shall mean any corporation assuming, or issuing new employee stock options
in substitution for, Incentive Stock Options, outstanding under the Plan,
in a transaction to which Section 424(a) of the Code applies.
Section 1.5 - Director
"Director" shall mean a member of the Board.
Section 1.6 - Employee
"Employee" shall mean any employee (as defined in accordance with the
Regulations and Revenue Rulings then applicable under Section 3401(c) of
the Code) of the Company, or of any corporation which is then a Parent
Corporation or Subsidiary, whether such employee is so employed at the time
this Plan is adopted or becomes so employed subsequent to the adoption of
this Plan.
Section 1.7 - Exchange Act
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
Section 1.8 - Incentive Stock Option
"Incentive Stock Option" shall mean an Option which qualifies under
Section 422 of the Code and which is designated as an Incentive Stock
Option by the Committee.
Section 1.9 - Non-Qualified Option
"Non-Qualified Option" shall mean an Option which is not an Incentive
Stock Option and which is designated as a Non-Qualified Option by the
Committee.
Section 1.10 - Officer
"Officer" shall mean an officer of the Company, any Parent Corporation
or any Subsidiary within the meaning of Rule 16a-1(f) under the Exchange
Act, or any comparable rule adopted thereunder then in effect.
Section 1.11 - Option
"Option" shall mean an option to purchase capital stock of the
Company, granted under the Plan. "Options" includes both Incentive Stock
Options and Non-Qualified Options.
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Section 1.12 - Optionee
"Optionee" shall mean a Director, Officer or Employee to whom an
Option is granted under the Plan.
Section 1.13 - Parent Corporation
"Parent Corporation" shall mean any corporation in an unbroken chain
of corporations ending with the Company if each of the corporations other
than the Company then owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
Section 1.14 - Plan
"Plan" shall mean this 1991 Stock Option Plan of Getty Petroleum
Corp., which became effective on March 21, 1991 and was amended and
restated on June 17, 1993 and further amended and restated on
June ____, 1996.
Section 1.15 - Secretary
"Secretary" shall mean the Secretary of the Company.
Section 1.16 - Securities Act
"Securities Act" shall mean the Securities Act of 1933, as amended.
Section 1.17 - Special Committee
"Special Committee" shall mean the Special Committee, as may be
appointed as provided in Section 6.4.
Section 1.18 - Subsidiary
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other
than the last corporation in the unbroken chain then owns stock possessing
50% or more of the total combined voting power of all classes of stock in
one of the other corporations in such chain.
Section 1.19 - Termination of Employment
"Termination of Employment" shall mean the time when the employee-
employer relationship (or director relationship in the case of a Director)
between the Optionee and the Company, a Parent Corporation or a Subsidiary
is terminated for any reason, with or without cause, including, but not by
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way of limitation a termination by resignation, discharge, death or
retirement, but excluding terminations where there is a simultaneous
reemployment by the Company, a Parent Corporation or a subsidiary. The
Committee, in its absolute discretion, shall determine the effect of all
other matters and questions relating to Termination of Employment,
including, but not by way of limitation, the question of whether a
Termination of Employment resulted from a discharge for good cause, and all
questions of whether particular leaves of absence constitute Terminations
of Employment; provided, however, that, with respect to Incentive Stock
Options, a leave of absence shall constitute a Termination of Employment
if, and to the extent that, such leave of absence interrupts employment for
the purposes of Section 422(a)(2) of the Code and the then applicable
Regulations and Revenue Rulings under said Section.
Article II
SHARES SUBJECT TO PLAN
Section 2.1 - Shares Subject to Plan
The shares of stock subject to Options shall be shares of the
Company's Common Stock $.10 par value. Subject to adjustment under Section
2.3, the aggregate number of such shares which may be issued upon exercise
of Options shall not exceed 750,000.
Section 2.2 - Unexercised Options
If any Option expires or is canceled without having been fully
exercised, the number of shares subject to such Option but as to which such
Option was not exercised prior to its expiration or cancellation may again
be optioned hereunder, subject to the limitations of Section 2.1.
Section 2.3 - Changes in Company's Shares
In the event that the outstanding shares of Common Stock of the
Company are hereafter changed into or exchanged for a different number or
kind of shares or other securities of the Company, or of another
corporation, by reason of reorganization, merger, consolidation,
recapitalization, reclassification, stock split-up, stock dividend or
combination of shares, appropriate adjustments shall be made by the
Committee in the number and kind of shares for the purchase of which
Options may be granted, including adjustments of the limitations in Section
2.1 on the maximum number and kind of shares which may be issued on
exercise of Options.
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ARTICLE III
GRANTING OF OPTIONS
Section 3.1 - Eligibility
Any Director, Officer or key Employee of the Company or of any
corporation which is then a Parent Corporation or a Subsidiary shall be
eligible to be granted Options, except as provided in Sections 3.2 and 6.4.
Section 3.2 - Qualification of Incentive Stock Options
No Incentive Stock Option shall be granted unless such Option, when
granted, qualifies as an "Incentive Stock Option" under Section 422 of the
Code.
Section 3.3 - Granting of Options
(a) The Committee shall from time to time, in its absolute
discretion:
(i) Determine which Directors, Officers or key Employees should
be granted Options; and
(ii) Determine the number of shares to be subject to such Options
granted to such selected recipients, and determine whether such
Options are to be Incentive Stock Options or Non-Qualified Options;
and
(iii) Determine the terms and conditions of such Options,
consistent with the Plan.
(b) Upon the selection of a recipient to be granted an Option, the
Committee shall instruct the Secretary to issue such Option and may impose
such conditions on the grant of such Option as it deems appropriate.
Without limiting the generality of the preceding sentence, the Committee
may, in its discretion and on such terms as it deems appropriate, require
as a condition on the grant of an Option that the recipient surrender for
cancellation some or all of the unexercised Options which have been
previously granted to him. An Option, the grant of which is conditioned
upon such surrender, may have an Option price lower (or higher) than the
Option price of the surrendered Option, may cover the same (or a lesser or
greater) number of shares as the surrendered Option, may contain such other
terms as the Committee deems appropriate and shall be exercisable in
accordance with its terms, without regard to the number of shares, price,
Option period or any other term or condition of the surrendered Option.
(c) Options may not be granted by the Committee to Directors or
Officers unless such grants have been authorized by the Special Committee.
Such authorization shall be in writing and shall specify the Directors or
Officers to whom such grants are to be made and the number of shares to be
covered by such Options.
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ARTICLE IV
TERMS OF OPTIONS
Section 4.1 - Option Agreement
Each Option shall be evidenced by a written Stock Option Agreement,
which shall be executed by the Optionee and an authorized Officer of the
Company and which shall contain such terms and conditions as the Committee
(or, in the case of a Director or Officer, as the Special Committee) shall
determine, consistent with the Plan. Stock Option Agreements evidencing
Incentive Stock Options shall contain such terms and conditions as may be
necessary to qualify such Options as "Incentive Stock Options" under
Section 422 of the Code.
Section 4.2 - Option Price
(a) The price of the shares subject to each Option shall be set by
the Committee; provided, however, that the price per share shall be not
less than 100% of the fair market value of such shares on the date such
Option is granted; provided, further, that, in the case of an Incentive
Stock Option, the price per share shall not be less than 110% of the fair
market value of such shares on the date such Option is granted in the case
of an individual then owning (within the meaning of Section 424(d) of the
Code) more than 10% of the total combined voting power of all classes of
stock of the Company, any Subsidiary or any Parent Corporation. However,
the Committee may upon the concurrence of the Board grant Non-Qualified
Options at an exercise price which is less than the fair market value of
such shares.
(b) For purposes of the Plan, the fair market value of a share of the
Company's stock as of a given date shall be: (i) the closing price of a
share of the Company's stock on the principal exchange on which shares of
the Company's stock are then trading, if any, on the day previous to such
date, or, if shares were not traded on the day previous to such date, then
on the next preceding trading day during which a sale occurred; or (ii) if
such stock is not traded on an exchange but is quoted on NASDAQ or a
successor quotation system, (1) the last sales price (if the stock is then
listed as a National Market Issue under the NASD National Market System) or
(2) the mean between the closing representative bid and asked prices (in
all other cases) for the stock on the day previous to such date as reported
by NASDAQ or such successor quotation system; or (iii) if such stock is not
publicly traded on an exchange and not quoted on NASDAQ or a successor
quotation system the mean between the closing bid and asked prices for the
stock, on the day previous to such date, as determined in good faith by the
Committee (or, in the case of a Director or Officer, by the Special
Committee); or (iv) if the Company's stock is not publicly traded, the fair
market value established by the Committee (or, in the case of a Director or
Officer, by the Special Committee) acting in good faith.
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Section 4.3 - Commencement of Exercisability and Limitations on Exercise
(a) Except as the Committee may otherwise provide, no Option may be
exercised in whole or in part during the first year after such Option is
granted.
(b) Subject to the provisions of Sections 4.3(a), 4.3(c), 4.3(d) and
7.3, Options shall become exercisable at such times and in such
installments (which may be cumulative) as the Committee shall provide in
the terms of each individual Option; provided, however, that by a
resolution adopted after an Option is granted the Committee may, on such
terms and conditions as it may determine to be appropriate and subject to
Sections 4.3(a), 4.3(c), 4.3(d) and 7.3, accelerate the time at which such
Option or any portion thereof may be exercised.
(c) No portion of an Option which is unexercisable at Termination of
Employment shall thereafter become exercisable.
(d) Notwithstanding any other provision of this Plan, in the case of
an Incentive Stock Option, the aggregate fair market value (determined at
the time the Incentive Stock Option is granted) of the shares of the
Company's stock with respect to which "Incentive Stock Options" (within the
meaning of Section 422 of the Code) are exercisable for the first time by
the Optionee during any calendar year (under the Plan and all other
incentive stock option plans of the Company, any Subsidiary and any Parent
Corporation) shall not exceed $100,000.
Section 4.4 - Expiration of Options
(a) No Option may be exercised to any extent by anyone after the
first to occur of the following events:
(i) The expiration of ten years from the date the Option was
granted; or
(ii) With respect to an Incentive Stock Option in the case of an
Optionee owning (within the meaning of Section 424(d) of the Code), at
the time the Incentive Stock Option was granted, more than 10% of the
total combined voting power of all classes of stock of the Company,
any Subsidiary or any Parent Corporation, the expiration of five years
from the date the Incentive Stock Option was granted; or
(iii) Except in the case of any Optionee who is disabled (within
the meaning of Section 22(e)(3) of the Code), the expiration of three
months from the date of the Optionee's Termination of Employment for
any reason other than such Optionee's death unless the Optionee dies
within said three-month period; or
(iv) In the case of an Optionee who is disabled (within the meaning of
Section 22(e)(3) of the Code), the expiration of one year from the
date of the Optionee's Termination of Employment for any reason other
than such Optionee's death unless the Optionee dies within said one-
year period; or
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(v) The expiration of one year from the date of the Optionee's death.
(b) Subject to the provisions of Section 4.4(a), the Committee shall
provide, in the terms of each individual Option, when such Option expires
and becomes unexercisable; and (without limiting the generality of the
foregoing) the Committee may provide in the terms of individual Options
that said Options expire immediately upon a Termination of Employment for
any reason.
Section 4.5 - Consideration
In consideration of the granting of the Option, the Optionee shall
agree, in the written Stock Option Agreement, to remain in the employ
(serve as a Director in the case of Directors) of the Company, a Parent
Corporation or a Subsidiary for a period of at least one year after the
Option is granted. Nothing in this Plan or in any Stock Option Agreement
hereunder shall confer upon any Optionee any right to continue in the
employ (or to serve as a Director in the case of Directors) of the Company,
any Parent Corporation or any Subsidiary or shall interfere with or
restrict in any way the rights of the Company, its Parent Corporation and
its Subsidiaries, which are hereby expressly reserved, to discharge (in the
case of Directors, for the shareholders to terminate) any Optionee at any
time for any reason whatsoever, with or without cause.
Section 4.6 - Adjustments in Outstanding Options
In the event that the outstanding shares of the stock subject to
Options are changed into or exchanged for a different number or kind of
shares of the Company or other securities of the Company by reason of
merger, consolidation, recapitalization, reclassification, stock split-up,
stock dividend or combination of shares, the Committee shall make an
appropriate and equitable adjustment in the number and kind of shares as to
which all outstanding Options, or portions thereof then unexercised, shall
be exercisable, to the end that after such event the Optionee's
proportionate interest shall be maintained as before the occurrence of such
event. Such adjustment in an outstanding Option shall be made without
change in the total price applicable to the Option or the unexercised
portion of the Option (except for any change in the aggregate price
resulting from rounding-off of share quantities or prices) and with any
necessary corresponding adjustment in Option price per share; provided,
however, that, in the case of Incentive Stock Options, each such adjustment
shall be made in such manner as not to constitute a "modification" within
the meaning of Section 424(h)(3) of the Code. Any such adjustment made by
the Committee shall be final and binding upon all Optionees, the Company
and all other interested persons.
Section 4.7 - Merger, Consolidation, Acquisition, Liquidation or
Dissolution
Notwithstanding the provisions of Section 4.6, in its absolute
discretion, and on such terms and conditions as it deems appropriate, the
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Committee may provide by the terms of any Option that such Option cannot be
exercised after the merger or consolidation of the Company with or into
another corporation, the acquisition by another corporation or person of
all or substantially all of the Company's assets or 80% or more of the
Company's then outstanding voting stock or the liquidation or dissolution
of the Company; and if the Committee so provides, it may, in its absolute
discretion and on such terms and conditions as it deems appropriate, also
provide, either by the terms of such Option or by a resolution adopted
prior to the occurrence of such merger, consolidation, acquisition,
liquidation or dissolution, that, for some period of time prior to such
event, such Option shall be exercisable as to all shares covered thereby,
notwithstanding anything to the contrary in Section 4.3(a), Section 4.3(b)
and/or any installment provisions of such Option, but subject to Section
4.3(d).
ARTICLE V
EXERCISE OF OPTIONS
Section 5.1 - Person Eligible to Exercise
During the lifetime of the Optionee, only he may exercise an Option
(or any portion thereof) granted to him. After the death of the Optionee,
any exercisable portion of an Option may, prior to the time when such
portion becomes unexercisable under the Plan or the applicable Stock Option
Agreement, be exercised by his personal representative or by any person
empowered to do so under the deceased Optionee's will or under the then
applicable laws of descent and distribution.
Section 5.2 - Partial Exercise
At any time and from time to time prior to the time when any
exercisable Option or exercisable portion thereof becomes unexercisable
under the Plan or the applicable Stock Option Agreement, such Option or
portion thereof may be exercised in whole or in part; provided, however,
that the Company shall not be required to issue fractional shares and the
Committee may, by the terms of the Option, require any partial exercise to
be with respect to a specified minimum number of shares.
Section 5.3 - Manner of Exercise
An exercisable Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary or his office of all of the
following prior to the time when such Option or such portion becomes
unexercisable under the Plan or the applicable Stock Option Agreement:
(a) Notice in writing signed by the Optionee (or other person then
entitled to exercise such Option or portion) stating that such Option or
portion is exercised, such notice complying with all applicable rules
established by the Committee; and
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(b) (i) Full payment (in cash or by check) for the shares with
respect to which such Option or portion is thereby exercised; or
(ii) With the consent of the Committee, shares of the Company's
Common Stock owned by the Optionee duly endorsed for transfer to the
Company with a fair market value (as determinable under Section
4.2(b)) on the date of delivery not less than the aggregate Option
price of the shares with respect to which such Option or portion is
thereby exercised; or
(iii) With the consent of the Committee, a full recourse
promissory note bearing interest (at at least such rate as shall then
preclude the imputation of interest under the Code or any successor
provision) and payable upon such terms as may be prescribed by the
Committee. The Committee may also prescribe the form of such note and
the security, if any, to be given for such note. No Option may,
however, be exercised by delivery of a promissory note or by a loan
from the Company when or where such loan or other extension of credit
is prohibited by law; or
(iv) Any combination of the consideration provided in the
foregoing subsections (i), (ii) and (iii); and
(c) Such representations and documents as the Committee, in its
absolute discretion, deems necessary or advisable to effect compliance with
all applicable provisions of the Securities Act and any other federal or
state securities laws or regulations. The Committee may, in its absolute
discretion, also take whatever additional actions it deems appropriate to
effect such compliance including, without limitation, placing legends on
share certificates and issuing stop-transfer orders to transfer agents and
registrars; and
(d) In the event that the Option or portion thereof shall be
exercised pursuant to Section 5.1 by any person or persons other than the
Optionee, appropriate proof of the right of such person or persons to
exercise the Option or portion thereof.
Section 5.4 - Conditions to Issuance of Stock Certificates
The shares of stock issuable and deliverable upon the exercise of an
Option, or any portion, thereof, may be either previously authorized but
unissued shares or issued shares which have then been reacquired by the
Company. The Company shall not be required to issue or deliver any
certificate or certificates for shares of stock purchased upon the exercise
of any Option or portion thereof prior to fulfillment of all of the
following conditions:
(a) The admission of such shares to listing on all stock exchanges on
which such class of stock is then listed; and
(b) The completion of any registration or other qualification of such
shares under any state or federal law or under the rulings or regulations
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of the Securities and Exchange Commission or any other governmental
regulatory body, which the Committee shall, in its absolute discretion,
deem necessary or advisable; and
(c) The obtaining of any approval or other clearance from any state
or federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable; and
(d) The payment to the Company (or other employer corporation) of all
amounts which it is required to withhold under federal, state or local law
in connection with the exercise of the Option; and
(e) The lapse of such reasonable period of time following the
exercise of the Option as the Committee may establish from time to time for
reasons of administrative convenience.
Section 5.5 - Rights as Shareholders
The holders of Options shall not be, nor have any of the rights or
privileges of, shareholders of the Company in respect of any shares
purchasable upon the exercise of any part of an Option unless and until
certificates representing such shares have been issued by the Company to
such holders.
Section 5.6 - Transfer Restrictions
Unless otherwise approved in writing by the Special Committee, 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 (but excluding) the date that such Option was granted. The
Committee, in its absolute discretion, may impose such other restrictions
on the transferability of the shares purchasable upon the exercise of an
Option as it deems appropriate. Any such other restriction shall be set
forth in the respective Stock Option Agreement and may be referred to on
the certificates evidencing such shares. The Committee may require the
Optionee to give the Company prompt notice of any disposition of shares of
stock, acquired by exercise of an Incentive Stock Option, within two years
from the date of granting such Option or one year after the transfer of
such shares to such Optionee. The Committee may direct that the
certificates evidencing shares acquired by exercise of an Option refer to
such requirement to give prompt notice of disposition.
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ARTICLE VI
ADMINISTRATION
Section 6.1 - Stock Option Committee
The Stock Option Committee shall consist of at least three Directors,
appointed by and holding office during the pleasure of the Board.
Appointment of Committee members shall be effective upon acceptance of
appointment. Committee members may resign at any time by delivering
written notice to the Board. Vacancies in the Committee shall be filled by
the Board.
Section 6.2 - Duties and Power of Committee
It shall be the duty of the Committee to conduct the general
administration of the Plan in accordance with its provisions. The
Committee shall have the power to interpret the Plan and the Options and to
adopt such rules for the administration, interpretation and application of
the Plan as are consistent therewith and to interpret, amend or revoke any
such rules. Any such interpretations and rules in regard to Incentive
Stock Options shall be consistent with the basic purpose of the Plan to
grant "Incentive Stock Options" within the meaning of Section 422 of the
Code. In its absolute discretion, the Board may at any time and from time
to time exercise any and all rights and duties of the Committee under the
Plan.
Section 6.3 - Majority Rule
The Committee shall act by a majority of its members in office. The
Committee may act either by vote at a meeting or by a memorandum or other
written instrument signed by a majority of the Committee.
Section 6.4 - Special Committee
The Special Committee shall consist of at least two Directors
appointed by and holding office during the pleasure of the Board. No
Option may be granted to any member of the Special Committee during the
term of his membership on the Special Committee. No person shall be
eligible to serve on the Special Committee unless he is then a
"disinterested person" within the meaning of Rule 16b-3(c)(2)(i) under the
Exchange Act, or any comparable rule adopted thereunder then in effect.
Appointment of Special Committee members shall be effective upon acceptance
of appointment. Special Committee members may resign at any time by
delivering written notice to the Board. Vacancies in the Special Committee
shall be filled by the Board.
Section 6.5 - Compensation; Professional Assistance; Good Faith Actions
Members of the Committee or the Special Committee shall receive such
compensation for their services as members as may be determined by the
Board. All expenses and liabilities incurred by members of the Committee
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or the Special Committee in connection with the administration of the Plan
shall be borne by the Company. The Committee and the Special Committee
may, with the approval of the Board, employ attorneys, consultants,
accountants, appraisers, brokers or other persons. The Committee, the
Special Committee, the Company and its officers and directors shall be
entitled to rely upon the advice, opinions or valuations of any such
persons. All actions taken and all interpretations and determinations made
by the Committee or the Special Committee in good faith shall be final and
binding upon all Optionees, the Company and all other interested persons.
No member of the Committee or the Special Committee shall be personally
liable for any action, determination or interpretation made in good faith
with respect to the Plan or the Options, and all members of the Committee
and the Special Committee shall be fully protected by the Company in
respect to any such action, determination or interpretation.
ARTICLE VII
OTHER PROVISIONS
Section 7.1 - Options Not Transferable
No Option or interest or right therein or part thereof shall be liable
for the debts, contracts or engagements of the Optionee or his successors
in interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether
such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempt disposition thereof
shall be null and void and of no effect; provided, however, that nothing in
this Section 7.1 shall prevent transfers by will or by the applicable laws
of descent and distribution.
Section 7.2 - Amendment, Suspension or Termination of the Plan
The Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Board.
However, without approval of the Company's shareholders given within 12
months before or after the action by the Board, no action of the Board may,
except as provided in Section 2.3, materially modify the eligibility
requirements of Section 3.1, amend Section 3.3(c) to permit the grant of
Options to Officers or Directors other than upon the written authorization
of the Special Committee, reduce the minimum Option price requirements of
Section 4.2(a) or extend the limit imposed in this Section 7.2 on the
period during which Options may be granted. Neither the amendment,
suspension nor termination of the Plan shall, without the consent of the
holder of the Option, alter or impair any rights or obligations under any
Option theretofore granted. No Option may be granted during any period of
suspension nor after termination of the Plan, and in no event may any
Option be granted under this Plan after March 21, 2001.
Section 7.3 - Approval of Plan by Shareholders
This Plan was approved by the Company's shareholders on June 20, 1991
and amended and restated on June 17, 1993 and the Plan as further amended
and restated will be submitted for the Approval of the Company's
shareholders within 12 months after the date of the Board's adoption of the
Plan as further amended and restated. Options for the additional 250,000
shares may be granted prior to such shareholder approval; provided,
however, that such Options shall not be exercisable prior to the time when
the Plan as further amended and restated is approved by the shareholders;
provided, further, that if such approval has not been obtained at the end
of said 12-month period, all Options for the additional 250,000 shares
previously granted under the Plan shall thereupon be canceled and become
null and void. The Company shall take such actions as may be necessary to
satisfy the requirements of Rule 16b-3(b) under the Exchange Act, or any
comparable rule adopted thereunder then in effect.
Section 7.4 - Effect of Plan Upon Other Option and Compensation Plans
The adoption of this Plan shall not affect any other option,
compensation or incentive plans in effect for the Company, any Parent
Corporation or any Subsidiary. Nothing in this Plan shall be construed to
limit the right of the Company, any Parent Corporation or any Subsidiary
(a) to establish any other forms of incentives or compensation for
Officers, Directors or Employees of the Company, any Parent Corporation or
any Subsidiary or (b) to grant or assume options otherwise than under this
Plan in connection with any proper corporate purpose, including, but not by
way of limitation, the grant or assumption of options in connection with
the acquisition by purchase, lease, merger, consolidation or otherwise, of
the business stock or assets of any corporation, firm or association.
Section 7.5 - Titles
Titles are provided herein for convenience only and are not to serve
as a basis for interpretation or construction of the Plan.
Section 7.6 - Conformity to Securities Laws
The Plan is intended to conform to the extent necessary with all
provisions of the Securities Act and the Exchange Act and any and all
regulations and rules promulgated by the Securities and Exchange Commission
thereunder, including without limitation Rule 16b-3. Notwithstanding
anything herein to the contrary, the Plan shall be administered, and
Options shall be granted and may be exercised, only in such a manner as to
conform to such laws, rules and regulations. To the extent permitted by
applicable law, the Plan and Options granted hereunder shall be deemed
amended to the extent necessary to conform to such laws, rules and
regulations.
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