SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / 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 Section 240.14a-11(c) or
Section 240.14a-12
HOLLY CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/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:
- --------------------------------------------------------------------------------
(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 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / 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:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
HOLLY CORPORATION
100 CRESCENT COURT
SUITE 1600
DALLAS, TEXAS 75201-6927
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------------
DECEMBER 13, 200112, 2002
PLEASE TAKE NOTICE that the Annual Meeting of Stockholders of Holly Corporation
will be held in Suite 200, First National Bank Building, 303 West Main, Artesia,
New Mexico, on Thursday, December 13, 2001,12, 2002, at 9:30 o'clock A.M. local time, to
1. Elect a board of nine directors for the ensuing year;
2. Approve amending and 2.restating the Holly Corporation 2000 Stock
Option Plan as the Holly Corporation Long-Term Incentive
Compensation Plan to authorize additional forms of long-term
incentive compensation without increasing the maximum number of
shares of the Company's Common Stock that can be issued under the
Plan; and
3. Transact such other business as may properly come before the
meeting, or any adjournment thereof.
Only stockholders of record on October 26, 200125, 2002 are entitled to notice of
and to vote at the meeting.
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING IN PERSON ARE URGED TO
FILL OUT, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE
ON WHICH NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES OR TO VOTE USING
THE INTERNET OR BY TELEPHONE AS DESCRIBED ON PAGE 1521 OF THE PROXY STATEMENT
UNDER "VOTING VIA THE INTERNET OR BY TELEPHONE." PROXIES FORWARDED BY OR FOR
BROKERS, BANKS, OR FIDUCIARIES SHOULD BE RETURNED AS REQUESTED BY THEM. THE
PROMPT RETURN OF PROXIES WILL SAVE THE EXPENSE INVOLVED IN FURTHER
COMMUNICATION.
By Order of the Board of Directors:
W. JOHN GLANCY
Secretary
Dallas, TX
November 7, 20015, 2002
PROXY STATEMENT
OF
HOLLY CORPORATION
100 CRESCENT COURT
SUITE 1600
DALLAS, TEXAS 75201-6927
The enclosed proxy for the Annual Meeting of Stockholders to be held
December 13, 200112, 2002 is being solicited on behalf of the Board of Directors of
Holly Corporation (the "Company") and is revocable at any time prior to the
exercise of the powers conferred thereby by written notice to the Secretary of
the Company or in open meeting. The proxy statement and proxy are expected to be
sent to stockholders commencing on November 7, 2001.5, 2002. The cost of soliciting
proxies will be borne by the Company. Regular employees of the Company may
solicit proxies by mail, telephone, e-mail, telecopier or in person, without
special compensation. Upon request, the Company will reimburse brokers, dealers,
banks and trustees, or their nominees, for reasonable expenses incurred by them
in forwarding proxy material to beneficial owners of Common Stock.
The Company's Annual Report for its 20012002 fiscal year, which ended on July
31, 2001,2002, is being distributed concurrently herewith. The Board of Directors has
fixed October 26, 2001,25, 2002, as the record date for the determination of stockholders
entitled to vote at the Annual Meeting. At the close of business on that record
date, there were outstanding 15,529,12815,503,728 shares of the common stock, par value
$.01 per share (the "Common Stock"), the holders of which are entitled to one
vote per share.
1
OWNERSHIP OF SECURITIES
Based upon information known to the Company, the following table sets forth
certain information with respect to beneficial ownership of the Company's Common
Stock as of October 19, 200111, 2002 for (i) all persons who are beneficial owners of
five percent or more of the Company's Common Stock, (ii) each director and
nominee for director, (iii) the Company's Chief Executive Officer and the other
executive officers named in the Summary Compensation Table below, and (iv) all
current executive officers and directors as a group. Unless otherwise indicated,
the address for each stockholder listed in the following table is c/o Holly
Corporation, 100 Crescent Court, Dallas, Texas 75201-6927.
NUMBER OF SHARES AND PERCENT OF
NAME AND ADDRESS NATURE OF BENEFICIAL COMMON STOCK
OF BENEFICIAL OWNER OWNERSHIP(A) OUTSTANDING
------------------- -------------------- ------------
Merrill Lynch Trust Company, FSB 1,470,5651,227,906 (1) 9.5%7.9%
Trustee for Thrift Plan for Employees of
Holly Corporation, Its Affiliates and Subsidiaries
9603 South Meridian Boulevard
B-4-GES-SW
Englewood, Colorado 80112
Brown Brothers Harriman Trust Company of Texas, as 3,022,272 19.5%
trustee of trusts in the names of Betty Regard,
Margaret Simmons and Suzanne Bartolucci(2)
2001 Ross Avenue
Dallas, Texas 75201-2996
Brown Brothers Harriman Trust Company of Texas, as 113,212 0.7%
trustee of a trust for the benefit of David
Norsworthy.
2001 Ross Avenue
Dallas, Texas 75201-2996
Lamar Norsworthy 716,209780,209 (3)(7)(8) 4.6%5.0%
Nona Barrett 656,264 4.2%605,664 3.9%
P.O. Box 150
Crested Butte, Colorado 81224
Lamar Norsworthy and Brown Brothers Harriman Trust 571,716 (5) 3.7%
Company of Texas, as co-trustees of three trusts
for the benefit of David Norsworthy, Lamar
Norsworthy and Nona Barrett, respectively(4)
2001 Ross Avenue
Dallas, Texas 75201-2996
FMR Corp. 1,535,800 9.9%1,487,500 9.6%
82 Devonshire Street
Boston, Massachusetts 02109
Dimensional Fund Advisors, Inc. 1,131,540 7.3%1,049,740 6.8%
1299 Ocean Avenue
Santa Monica, California 90401
Matthew P. Clifton 158,705195,905 (7)(8) 1.0%1.3%
W. John Glancy 20,40041,600 (7) *
William J. Gray 70,09830,098 (7) *
Marcus R. Hickerson 9,112 (9) *
Thomas K. Matthews, II 800 *
Robert G. McKenzie 2,000 *
Jack P. Reid 228,719218,719 (7)(8) 1.5% 1.4%
Paul T. Stoffel 632,400 4.1%572,400 3.7%
Stephen J. McDonnell 8,00020,000 (7) *
John A. Knorr 27,13612,284 (7)(8) *
All directors and officers as a group -- 20 2,709,8632,619,730 (7)(8) 17.5%16.9%
Persons(6)
- ---------------
* less than one percent
(a) Sole voting and investment power except as shown otherwise.
(1) Plan participants share voting power.
(2) The named individuals are life beneficiaries and their "children and
descendants," of whom there are now eleven, are residuary beneficiaries of
these trusts.
2
(3) Does not include 571,716 shares which are beneficially owned by three trusts
of which this owner is a co-trustee and which are listed separately.
(4) The named individuals are the life beneficiaries and members of their
families are the residuary beneficiaries of these trusts. Substantially all
of the 571,716 shares are held in a limited partnership of which the general
partner is a limited liability company
2
owned and controlled by these trusts; the 98.5% limited partner in such
partnership is a trust of which Lamar Norsworthy and Brown Brothers Harriman
Trust Company of Texas are co-trustees and under which, unless the life
beneficiary of the trust exercises a power of appointment directing
otherwise, residuary beneficiaries are the trusts for the benefit of David
Norsworthy, Lamar Norsworthy and Nona Barrett of which Brown Brothers
Harriman Trust Company of Texas is the trustee.
(5) The co-trustees share indirect voting and investment powers. Lamar
Norsworthy disclaims that he is the beneficial owner except as to 2,860 of
these shares.
(6) Includes 568,856 shares as to which Lamar Norsworthy, Chairman of the Board
and Chief Executive Officer of the Company, disclaims beneficial ownership.
(7) The number of shares beneficially owned includes shares of Common Stock of
which such individuals have the right to acquire beneficial ownership either
currently or within 60 days after October 19, 2001,11, 2002, upon the exercise of
options, as follows: 80,000144,000 shares for Mr. Norsworthy, 122,000159,200 shares for
Mr. Clifton, 20,00041,200 shares for Mr. Glancy, 16,000 shares for Mr. Gray, 100,000 shares for Mr. Reid,
8,00020,000 shares for Mr. McDonnell, 10,0008,000 shares for Mr. Knorr and 438,500576,900
shares for all directors and officers as a group.
(8) The number of shares beneficially owned includes shares in the Company Stock
ESOP Accounts of the Thrift Plan
for Employees of Holly Corporation, Its Affiliates and Subsidiaries as
follows: 21,509 shares for Mr. Norsworthy, 36,705 shares for Mr. Clifton,
43,871 shares for Mr. Reid, 17,1364,284 shares for Mr. Knorr and 294,701120,067 shares for all directors and officers
as a group. Participants may direct the voting of the shares in their Company Stock ESOP
Accounts. Over the twelve months beginning November 2001, shares in the
Company Stock ESOP Account for each employee participant will be gradually
shifted to each participant's regular Thrift Plan account and will
consequently become subject to the participant's directions as to holding or
selling such shares. In the case of Mr. Reid, allAll such shares are currently subject to the participant's
directions as to holding or selling such shares.
(9) Includes 6,000 shares as which Marcus R. Hickerson, a Director of the
Company, disclaims beneficial ownership.
3
ELECTION OF DIRECTORS
At the Annual Meeting it is proposed to elect the nine nominees shown below
to hold office as directors until the next annual meeting of stockholders or
until their respective successors shall have been elected and qualify.
Each of the nominees listed below other than Paul T. Stoffel was elected as director by the
stockholders at the annual meetingAnnual Meeting in 2000. Mr. Stoffel was
elected as a director by action of the Board of Directors on March 9, 2001. If any nominee should unexpectedly
become unavailable for election, votes will be cast, pursuant to the
accompanying proxy, for the election of a substitute who may be selected by the
present Board of Directors. Management has no reason to believe that any of the
nominees named below will be unable to serve.
All properly executed proxies delivered pursuant to this solicitation and
not revoked will be voted at the Annual Meeting in accordance with the
directions given. With respect to the election of directors, in voting by proxy,
stockholders may vote in favor of all nominees or withhold their votes as to all
nominees or withhold their votes as to specific nominees. The election of
directors will be decided by a plurality vote.vote assuming that a quorum is present.
Thus, abstentions and broker non-votes will be treated as votes neither "for"
nor "against" the election of directors, although abstentions and broker
non-votes will be counted in determining if a quorum is present.
Set forth below is certain information about each nominee, including
principal occupations for at least five years. Offices with the Company have
been held for at least five years, unless otherwise indicated. Membership on
certain Board committees is indicated by (A) for Audit Committee, by (C) for
Compensation Committee, by (P) for Public Policy Committee and by (E) for
Executive Committee:
Matthew P. Clifton, 50,51, a director since 1995, has been with the
Company for over twenty years and ishas been President of the Company. From 1991 to
1995 he served as Senior Vice President with responsibilities for refining
operations, engineering and oil and gas activities for the Company.Company since
1995. (E)
W. John Glancy, 59,60, a director from 1975 to 1995 and since September
1999, is Senior Vice President, General Counsel and Secretary of the
Company. From December 1998 to September 1999, he was Senior Vice
President, Legal of the Company and he has held the office of Secretary
since April 1999. From 1995 through March 1997 he was a partner and
subsequently counsel in the Dallas office of the Weil, Gotshal & Manges LLP
law firm; from March 1997 through March 1999, he practiced law in the Law
Offices of W. John Glancy in Dallas. (E)
William J. Gray, 60,61, a director since September 1996, was a consultant
to the Company from October 1999 through September 2001. Until October
1999, Mr. Gray was Senior Vice President, Marketing and Supply of the
Company. (P)
Marcus R. Hickerson, 75,76, a director since 1960, was a consultant to
Centex Development Company from 1987 to 1999 and has been President of
Waxahachie Community Development Corporation since October 1999. (A)(C)(P)
Thomas K. Matthews, II, 75,76, a director since 1978, is a financial
consultant. (A)(C)(P)
Robert G. McKenzie, 63,64, a director since 1992, is a private
consultant. From January 1990 to August 1999, he was Executive Vice
President and Chief Operating Officer of Brown Brothers Harriman Trust
Company of Texas. (A)(C)(P)
Lamar Norsworthy, 55,56, a director since 1967, is Chairman of the Board
and Chief Executive Officer of the Company, and from 1988 to 1995 he was
also President.Company. Mr. Norsworthy is also a
director of Cooper Cameron Corporation. (E)
Jack P. Reid, 65,66, a director since 1977, iswas a consultant to the
Company.Company from August 1999 through July 2002. Until August 1999, Mr. Reid was
Executive Vice President, Refining, of the Company. (E)(P)
4
Paul T. Stoffel, 67,68, a director since 2001, is Chairman of Triple S
Capital Corp. and of Paul Stoffel Investments, engaged in public and
private equity investments. Mr. Stoffel is also a director of Centex
Corporation. (A)
4
SECTION 16(A)16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon the Company's review of the reports and amendments on Forms 3, 4
and 5 furnished to the Company pursuant to Section 16(a) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), all such reports
concerning beneficial ownership were filed in a timely manner by reporting
persons.persons except for one report on Form 4 for May 2002 by Scott C. Surplus, Vice
President, Treasury and Tax of the Company, which related to four sales on one
day of a total of 2,500 shares of Common Stock and which was filed four days
after the due date.
BOARD COMMITTEES AND MEETINGS
The Audit Committee of the Board of Directors, which met threefour times during
the 20012002 fiscal year, is responsible for monitoring the Company's internal
accounting controls, recommending to the Board the selection of independent
auditors, reviewing quarterly and annual reports filed with the Securities and
Exchange Commission, and reviewing certain activities of the independent
auditors and their reports and conclusions. In addition, the Committee selects
persons to conduct internal audits of certain Company transactions and related
financial controls and reviews the reports developed from such internal audits.
The Board of Directors has adopted a written charter for the Audit Committee.
All members of the Audit Committee are independent as independence is defined in
Section 121(A) of the American Stock Exchange's listing standards.
The Compensation Committee of the Board of Directors, which met threefour times
during the 20012002 fiscal year, is responsible for recommending to the Board
changes in the compensation of executive personnel, for determining salaries and
bonuses for employee directors, and for reviewing and making recommendations
relative to the Company's employee benefit plans. In addition, an Outside
Directors Committee composed of certain nonemployee directors is responsible for
considering grants of stock options to officers and directors of the Company
under the Holly Corporation 2000 Stock Option Plan, and an Executive Stock
Option Committee composed of outside directors is responsible for interpreting
the Holly Corporation Stock Option Plan, (the "Old Option Plan")which authorized grants of stock
options prior to January 2001, with respect to options under the Old Option Planthat plan that are
held by officers and directors of the Company
and was responsible for grants of options to officers and directors under the
Old Option Plan through December 31, 2000.Company. During the 20012002 fiscal year, the
Outside Directors Committee met one time and the Executive Stock Option
Committee met three times.did not meet.
The Public Policy Committee of the Board of Directors, which met three
timestwice
during the 20012002 fiscal year, is responsible for (1) reviewing the Company's
policies and procedures on matters of public and governmental concern that
significantly affect the Company, including but not limited to environmental,
occupational health and safety, and equal employment opportunity matters, and
(2) recommending to management and the Board of Directors the formulation or
modification of policies and procedures concerning such matters.
The Executive Committee of the Board of Directors has the authority of the
Board, to the extent permitted by law and subject to any limitations that may be
specified from time to time by the Board, for the management of the business and
affairs of the Company between meetings of the Board. This committee met three
times during the 20012002 fiscal year.
The Board of Directors does not have a standing nominating committee.
During the 20012002 fiscal year, the Board of Directors held five meetings.
Each director, other than Mr. Reid,McKenzie and Mr. Stoffel, attended at least 75% of
the aggregate of the total number of meetings of the Board and of all committees
of the Board on which that director served.
5
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table and notes present the compensation provided by the
Company to its chief executive officer and the other four most highly
compensated executive officers for all services rendered in all capacities to
the Company and its subsidiaries for the fiscal years ended July 31, 2002, 2001
2000
and 1999.2000. All references to stock options and shares of the Company's Common
Stock reflect adjustments for the two-for-one stock split effective July 6,
2001.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION(1)
------------------------------------
LONG-TERM ALL
NAME AND COMPENSATION OTHER
PRINCIPAL FISCAL AWARDS COMPENSATION
POSITION YEAR SALARY BONUS OPTIONS(#) (2)
--------- ------ -------- -------- ------------ ------------
Lamar Norsworthy.................................. 2002 $510,000 $280,500 -- $14,511
Chairman of the Board and 2001 $490,576 $765,000 120,000 $ 6,994
Chairman of the Board andChief Executive Officer 2000 $471,668 $131,000 200,000 $ 19,853
Chief Executive Officer 1999 $453,000 $169,000$19,853
Matthew P. Clifton................................ 2002 $422,004 $198,342 -- $ 15,000
Matthew P. Clifton................................7,499
President 2001 $405,600 $632,000 106,000 $ 7,311
President 2000 $390,000 $109,000 80,000 $ 7,311
1999 $314,400 $116,000W. John Glancy.................................... 2002 $221,004 $ 87,518 -- $ 7,758
W. John Glancy....................................6,634
Senior Vice President, General 2001 $210,160 $211,000 56,000 $ 8,406
Senior Vice President, GeneralCounsel and Secretary 2000 $203,680 $ 70,000 50,000 $ 2,787
Counsel and Secretary 1999 $ 67,000 $ 24,800 -- $253,025
Stephen J. McDonnell.............................. 2002 $207,800 $ 62,500 -- $ 7,979
Vice President and 2001 $193,302 $100,000 60,000 --
Vice President and
Chief Financial Officer
John A. Knorr..................................... 2002 $176,640 $ 50,000 -- $ 6,911
Vice President, Crude Oil 2001 $168,340 $ 95,000 24,000 $ 6,853
Vice President, Crude Oil 2000 $161,370 $ 38,000 40,000 $ 6,720
Supply and Trading 1999 $154,7502000 $161,370 $ 46,000 --38,000 40,000 $ 6,4406,720
- ---------------
(1) Any perquisites or other personal benefits received from the Company by any
of the named executives were substantially less than the reporting
thresholds established by the SEC (the lesser of $50,000 or 10% of the
individual's total annual salary and bonus).
(2) All Other Compensation -- details for fiscal 2001:2002:
DIVIDENDS COMPANY
ON MATCHING
PHANTOM THRIFT
NAME SHARES PLAN OTHER TOTAL
---- --------- -------- ----- -----
Lamar Norsworthy............................................ $594$8,111 $6,400 -- $6,994$14,511
Matthew P. Clifton.......................................... $911$1,099 $6,400 -- $7,311$ 7,499
W. John Glancy.............................................. -- $8,406$6,634 -- $8,406$ 6,634
Stephen J. McDonnell........................................ -- $7,979 -- -- --$ 7,979
John A. Knorr............................................... $289 $6,565$ 319 $6,592 -- $6,853$ 6,911
6
OPTION GRANTS IN FISCAL YEAR 2001
% OF POTENTIAL REALIZABLE
TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL RATES OF STOCK
NUMBER OF GRANTED PRICE APPRECIATION FOR
SECURITIES TO OPTION TERM(2)
UNDERLYING EMPLOYEES EXERCISE -----------------------
OPTIONS IN FISCAL OR BASE EXPIRATION (A) (B)
NAME GRANTED(1) YEAR PRICE DATE 5% 10%
---- ---------- --------- -------- ---------- --------- -----------
Lamar Norsworthy................. 120,000 18.7% $ 11.90 3/9/11 $898,062 $2,275,864
Matthew P. Clifton............... 26,000 4.0% $ 8.625 12/20/10 141,030 357,397
80,000 12.5% $ 11.90 3/9/11 598,708 1,517,243
W. John Glancy................... 16,000 2.5% $ 8.625 12/20/10 86,787 219,936
40,000 6.2% $ 11.90 3/9/11 299,354 758,621
Stephen J. McDonnell............. 40,000 6.2% $6.09375 8/14/10 153,293 388,475
20,000 3.1% $ 11.90 3/9/11 149,677 379,311
John A. Knorr.................... 4,000 0.6% $ 8.625 12/20/10 21,697 54,984
20,000 3.1% $ 11.90 3/9/11 149,677 379,311
---------------
(1) All of these options were non-qualified, were granted at market value on the
date of grant, vest 20% after one year and 20% thereafter in each of the
following four years, and have a term of ten years.
(2) Caution is recommended in interpreting the financial significance of these
figures. They are calculated by multiplying the number of options granted by
the difference between a future hypothetical stock price and the option
exercise price and are shown pursuant to rules of the Securities and
Exchange Commission. These figures assume that the value of Company stock
appreciates 5% or 10% each year, compounded annually, for ten years (the
life of each option) and the figures are not intended to forecast possible
future appreciation, if any, of such stock price or to establish a present
value of the options. Also, if appreciation does occur at the 5% or 10% per
year rate, the amounts shown would not be realized by the recipients until
the year 2010 or 2011. Depending on inflation rates, these amounts could be
worth in 2010 or 2011 significantly less, in real terms, than their value
today.
7
AGGREGATED OPTION/STOCK APPRECIATION RIGHT (SAR)
EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/
SHARES OPTIONS/ SARS IN-THE-MONEY OPTIONS/ SARS
ACQUIRED AT FY END AT FY END(2)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
Lamar Norsworthy(1)........................ -- -- 54,124 280,000 $604,928 $2,030,000118,124 216,000 $1,142,427 $1,652,880
Matthew P. Clifton..............Clifton............ -- -- 88,000 188,000 $363,800 $1,208,800143,200 132,800 $ 747,056 $ 958,024
W. John Glancy..................Glancy................ -- -- 10,000 96,00031,200 74,800 $ 93,500262,296 $ 675,600557,684
Stephen J. McDonnell............McDonnell.......... -- -- 12,000 48,000 $ 105,610 $ 422,440
John A. Knorr................. 18,800 $136,412 -- 60,00043,200 -- $ 499,250
John A. Knorr................... 32,000 $266,000 -- 62,000 -- $ 436,950341,056
- ---------------
(1) In addition to stock options for 40,000104,000 shares of Common Stock exercisable
at the end of the 20012002 fiscal year, the named officer holds 14,124 Phantom
Shares, which were granted for past services and to compensate for the
exclusion of the officer from the Employee Stock Ownership Plan ("ESOP") in
the 1986-88 fiscal years. Phantom Shares are unsecured rights to cash
payments based on the market value of such shares at future dates. Payments
based on market value of Common Stock are generally due 40 days after
termination of employment or the date of final distribution to the officer
under the ESOP unless the officer elects to defer payments to future dates
that may not be later than 60 days after the officer's death or permanent
disability.
(2) Calculated based on the fair market value of the Company's Common Stock on
July 31, 20012002 ($16.3516.83 per share) minus the exercise price.
BONUS ARRANGEMENTS
The Company and its principal subsidiaries provide incentive bonuses for
certain key personnel. Bonuses are based in part on the performance of the
Company and in part on assessment of individual performance. See "Compensation
Committee Report on Executive Compensation."
For the 2001 fiscal year, the
Company paid each executive both a regular annual bonus and an extraordinary
bonus with respect to the exceptional results for the Company's 2001 fiscal
year.
RETIREMENT PLAN
The Company has a noncontributory Retirement Plan for all permanent
employees. The following table sets forth the estimated annual retirement
benefits (subject to reduction for Social Security offsets) that would be
payable in 20012002 for certain salary ranges under the Retirement Plan and the
retirement restoration plan described below:
PENSION PLAN TABLE
YEARS OF CREDITED SERVICE AT NORMAL RETIREMENT
HIGHEST THREE-YEAR -------------------------------------------------------------------
AVERAGE SALARY 10 15 20 25 30 35
- ------------------ ------- -------- -------- -------- -------- --------
$150,000....................................... $24,000 $ 36,000 $ 48,000 $ 60,000 $ 72,000 $ 84,000
200,000....................................... 32,000 48,000 64,000 80,000 96,000 112,000
250,000....................................... 40,000 60,000 80,000 100,000 120,000 140,000
300,000....................................... 48,000 72,000 96,000 120,000 144,000 168,000
350,000....................................... 56,000 84,000 112,000 140,000 168,000 196,000
400,000....................................... 64,000 96,000 128,000 160,000 192,000 224,000
450,000....................................... 72,000 108,000 144,000 180,000 216,000 252,000
500,000....................................... 80,000 120,000 160,000 200,000 240,000 280,000
The compensation covered by the Company's retirement plans is the salary
paid to each employee, the amount of which is shown in the Summary Compensation
Table on page 6 under the heading "Salary" for each executive listed therein. At
July 31, 2001,2002, Messrs. Norsworthy, Clifton, Glancy, McDonnell, and Knorr were
credited with 28, 21, 2, 029, 22, 3, 1 and 2829 years of service, respectively. Under the
Plan, subject to certain age and length-of-service requirements, employees upon
normal retirement are entitled to a life annuity with yearly
8
pension payments
equal to 1.6% of average annual salary compensation during their highest
compensated consecutive 36-month period of employment with the Company
multiplied by total credited years of service,
7
less 1.5% of primary Social Security benefits multiplied by such service years
but not to exceed 45% of such benefits.
Benefits up to limits set by the Internal Revenue Code are funded by
Company contributions to the Retirement Plan, with the amounts determined on an
actuarial basis. The Internal Revenue Code currently limits benefits that may be
covered by the Retirement Plan's assets to $140,000$160,000 per year (subject to
increases for future years based on price level changes) and limits the
compensation that may be taken into account in computing such benefits to
$170,000$200,000 per year (subject to certain upward adjustments for future years).
Effective from the 1995 fiscal year, the Company has a retirement restoration
plan that provides for additional payments from the Company so that total
retirement plan benefits for executives will be maintained at the levels
provided in the Retirement Plan before the application of the Internal Revenue
Code limitations.
THRIFT PLAN
The Company has a Thrift Plan, which is qualified under the Internal
Revenue Code, for eligible employees of the Company and its subsidiaries.
Employees with at least one year of service may elect to participate in the
Thrift Plan by making contributions to the Plan of from 2% to 18% of their
compensation. The Company matches employee contributions up to 4% of their
compensation. In 2001,2002, employee contributions that are made on a tax-deferred
basis are limited to $10,500$11,000 per year. Employees may direct Company
contributions to be invested in Common Stock. Company contributions vest upon
the earlier of five years of credited service or termination of employment due
to retirement, disability or death. Matching Company contributions for executive
officers under the Thrift Plan have been included in the Summary Compensation
Table under the column captioned "All Other Compensation."
Many employees of the Company and eligible affiliates with at least one
year of service, other than employees covered by collective bargaining
agreements, participated in an Employee Stock Ownership Plan ("ESOP")
established in 1985. Initially, the ESOP owned 1,500,000 shares of Common Stock.
For the 1987 through the 1996 fiscal years, shares of Common Stock held by the
ESOP were allocated to the accounts of participants for each fiscal year on the
basis of payments of principal on the ESOP's ten-year installment note issued to
the Company in connection with the ESOP's purchase of Common Stock from the
Company. Shares were allocated to participants based on their compensation.
Participants' shares vest upon the earlier of five years' credited service or
termination of employment due to retirement, disability or death. For the 20012002
fiscal year, no shares of Common Stock held by the ESOP were allocated to
participants since allocations after the 1996 fiscal year arewere effectively
limited to allocations of forfeitures and there were no forfeitures for the 20012002
fiscal year. Effective August 1, 1999, the ESOP was merged into the Thrift Plan
and each participant's ESOP account became a Company Stock ESOP Account in the
Thrift Plan. Over the twelve months ending October 2002, shares in the Company
Stock ESOP Account for each participant will bewere gradually shifted to each
participant's regular Thrift Plan account and will consequently becomebecame subject to the
participant's directions as to holding or selling such shares.
ESOP RESTORATION PLAN
The Company adopted an ESOP restoration plan to provide additional benefits
to executives whose allocations of Company shares from the ESOP for the 1995 and
1996 fiscal years were reduced because of the application of Internal Revenue
Code limitations. The plan provides for the grant to participants after the end
of the 1995 and 1996 fiscal years of "phantom shares" equal in number to the
number of shares not allocated to participants because of the Internal Revenue
Code limitations. The phantom shares under the plan are unsecured rights to cash
payments based on dividends paid on shares of Common Stock and on the market
value of such shares at future dates. Payments based on market value of Common
Stock will generally be made at the time of a participant's termination of
employment or at the time of a final distribution to the participant under the
ESOP unless the participant elects to defer payments over a 10-year period. A
total of 9
30,940 phantom shares were granted to participants for the 1995 and
1996 fiscal year. Phantom shares held at
8
July 31, 20012002 by executive officers are as follows: 5,660 shares by Mr.
Norsworthy, 2,680 by Mr. Clifton, none by Mr. Glancy, none by Mr. McDonnell, and
780 by Mr. Knorr.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company or its subsidiaries are
eligible to receive (a) $10,000 per annum, plus $1,000 per day per attended
meeting, other than conference telephone meetings, of the Board and per attended
meeting of a committee of the Board that does not immediately precede or follow
a Board meeting and (b) a deferred compensation arrangement providing for
current and deferred payments calculated on the basis of phantom shares. The
phantom shares provide for current payments equal to cash or property
distributions on an equivalent number of shares of Common Stock and a payment
following termination of service as a Director equal to the then value of an
equivalent number of shares of Common Stock. Each of the directors other than
Mr. Norsworthy, Mr. Clifton and Mr. Glancy currently has 1,455.725 phantom
shares relating to service as a director for the years ending with the 2001 and
2002 Annual Meetings. For the year ending with the 2001
Annual Meeting, the number of phantom shares allocated to each outside director
was 840.34 (after adjustment for the two-for-one stock split in July 2001), a
number based on the number of shares of Common Stock having a value of $10,000
on March 9, 2001. For the year ending with the 20022003 Annual Meeting, the
number of phantom shares awarded to each outside director will equal the number
of shares of Common Stock having a market value of $10,000 on the date of the
20012002 Annual Meeting. Officers of the Company do not receive compensation for
serving on the Board of Directors.
CONSULTING AGREEMENTS
In October 1999, Holly entered into a consulting agreement with Mr. Reid,
effective as of August 1, 1999. The consulting agreement, which hashad a term that
extendsextended through July 31, 2002, providesprovided for a monthly consulting fee of $27,500 and
reimbursement of out of pocket expenses. In addition, Mr. Reid agreed not to
compete against the Company during the term of the agreement.
In August 1999, Holly entered into a consulting agreement with Mr. Gray,
effective as of October 1, 1999. The consulting agreement which extended through
September 30, 2001, provided for a monthly consulting fee of $15,700 and
reimbursement of out of pocket expenses. In addition, the Company, for purposes
of calculating Mr. Gray's benefit payments under the Holly Corporation
Retirement Plan and Retirement Restoration Plan, agreed to increase his age and
years of service by five years prior to the commencement of such payments. Mr.
Gray also agreed not to compete against the Company, during the term of the
agreement. Following the termination of Mr. Gray's consulting agreement, the
Company has agreed to continue to pay part of the cost of Mr. Gray's medical
insurance until age 65.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Board of Directors during
the 20012002 fiscal year are listed below. None of the members of the Committee was
an officer or employee of the Company or any of its subsidiaries during the 2001
fiscal year. The member of the Committee who in prior yearsto 1972 was an officer of the
Company or of a subsidiary is indicated below by (O).
Mr. Losee ceased to be
a member of the Compensation Committee on March 9, 2001, the date of his
retirement from the Company's Board of Directors.
Marcus R. Hickerson(O) Thomas K. Matthews, II
A.J. Losee
Robert G. McKenzie
No executive officer of the Company served as a director or member of the
compensation committee of another entity which had an executive officer serving
as a member of the Company's Board of Directors or the Board's Compensation
Committee.
109
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board is responsible for the compensation
programs for the executive officers of the Company. The Committee determines the
compensation of officers who are also directors (other than any grants of stock
options, which are subject to the jurisdiction of the Outside Directors
Committee under the Holly Corporation 2000 Stock Option Plan) and reviews
overall compensation levels for the Company's other executive officers. There
were threefour meetings of the Compensation Committee during the 20012002 fiscal year.
The basic objective of the Company's compensation program for executives is
to provide levels of compensation that allow the Company to attract and retain
productive executives who are motivated to protect and enhance the long-term
value of the Company for its stockholders.shareholders. The Company seeks to establish and
maintain levels of compensation that will be competitive with levels for
comparable companies. Competitive compensation levels are estimated on the basis
of available information on compensation paid by companies in the Company's
industry that are most similar to the Company, taking into account the Company's
size and place in the refining industry. Executive compensation programs are
intended to reward each executive based on Company performance and individual
performance and to balance appropriately short-term and long-term
considerations.
For the 20012002 fiscal year, the Company's major compensation programs for
executives were salaries, regular annual bonuses, and extraordinary bonuses with
respect to the 2001 fiscal year, stock options, benefits under
retirement and thrift plans, and benefits under the retirement restoration plan.
The Compensation Committee has recommended to the Board of Directors that the
current Holly Corporation 2000 Stock Option Plan be amended and restated as the
Holly Corporation Long-Term Incentive Compensation Plan to authorize for future
years additional forms of long-term incentive compensation without increasing
the maximum number of shares that can be issued under the Plan.
Salaries of executives are set at levels intended to be competitive with
levels for comparable businesses. Salaries are reviewed and adjusted annually.
Stock options granted under the Holly Corporation Stock Option Plan and the
Holly Corporation 2000 Stock Option Plan currently constitute the principal
long-term incentive compensation arrangements for executives. As of the close of
the 20012002 fiscal year, the Company had options outstanding for a total of
1,623,0001,493,700 shares, with exercise prices ranging from $5.0625 to $13.375$19.80 per share. For all outstanding options, the number of shares and exercise prices
were adjusted for the two-for-one stock split in July 2001.
Of the total outstanding options, options for a total of 642,00050,000 shares (adjusted for the
July 2001 two-for-one stock split) were
granted during the 20012002 fiscal year under the Holly Corporation Stock Option
Plan (under which options could be
granted through December 31, 2000) and the Holly Corporation 2000 Stock Option
Plan (under which options could be granted from January 1, 2001).Plan. All options granted during the 20012002 fiscal year become exercisable at the
rate of 20% per year beginning one year after the date of grant. Options for a
total of 379,000179,300 shares (adjusted for the July 2001 two-for-one stock split) were exercised during the 20012002 fiscal year. As of
October 19, 2001,11, 2002, the Company has outstanding options for a total of 1,574,5001,466,800
shares, of which options for a total of 528,500626,800 shares are immediately
exercisable.
Bonuses are based in part on an evaluation of the performance of the
Company and in part on assessments of individual performance. Because of the
relative size of the Company in the refining industry and the susceptibility of
the Company and the industry to unexpected changes in circumstances that can
have major impacts -- positive or negative -- on performance, the Company's
performance, as measured principally by net income, is evaluated by the
Committee after the end of the fiscal year in light of the circumstances of the
Company and the industry for the year completed. In this evaluation, particular
consideration is given to the Company's handling during the year of the
controllable elements affecting current and future results of operations and to
the Company's performance for the year as compared to historical levels; the
Committee also takes into account as appropriate any major differences between
Company performance and the performance levels of other companies in the
refining industry. In the case of Mr. Norsworthy and Mr. Clifton, Company
performance has been the predominant element in the determination of bonuses. In
the case of bonuses for other executives, the relative importance of individual
performance and Company performance varies among executives depending on their
responsibilities within the Company. Amounts of bonuses for different
performance levels are intended to be competitive with bonus levels of
comparable companies.
In view of the extraordinary performance of the Company
for the 2001 fiscal
1110
year, two bonuses -- a regular annual bonus and an extraordinary bonus -- were
paid to each executive with respect to the 2001 fiscal year.
Compensation of Lamar Norsworthy, the Company's Chairman of the Board and
Chief Executive Officer, is determined by the Committee under the principles
described above. The Committee believes that Mr. Norsworthy's current salary
level is at or slightly below a competitive level based on comparisons with
other refining companies. Effective August 1, 2001,2002, Mr. Norsworthy's annual
salary was increased by approximately 4% to a level of $510,000$530,400 per year. Since
Mr. Norsworthy has overall responsibility for the Company, Mr. Norsworthy's
bonus is based primarily on evaluation of the performance of the Company for the
last completed fiscal year. In the Committee's view, the Company's performance
for the 2002 fiscal year, although not as good as the outstanding performance
for the 2001 fiscal year, was extraordinarily good.very good compared to the performance of
comparable companies. Based on this evaluation, Mr. Norsworthy's regular annual bonus
for the 20012002 fiscal year was set by the Committee at $270,000 and his extraordinary bonus for the 2001 fiscal year was
set by the Committee at $495,000.$280,500.
Compensation Committee of the Board of Directors
Thomas K. Matthews, II, Marcus R. Hickerson
Chairman Robert G. McKenzie
The Compensation Committee Report on Executive Compensation will not be
deemed incorporated by reference in any filing by the Company under the
Securities Act of 1933, as amended (the "Securities Act") or the Exchange Act,
except to the extent that the Company specifically incorporates such report by
reference.
1211
STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing, for the period of five fiscal
years commencing July 31, 19961997 and ending July 31, 2001,2002, the yearly percentage
change in the cumulative total shareholder return on the Company's Common Shares
to the cumulative total return of the S&P Composite 500 Stock Index and of an
industry peer group chosen by the Company.
COMPARISON OF FIVE-YEAR CUMULATIVE SHAREHOLDER RETURNS(1)
[PERFORMANCE GRAPH]
HOLLY CORPORATION S&P 500 INDUSTRY PEER GROUP (2)
----------------- ------- -----------------------
July 1996 100.00 100.00 100.00
July 1997 101.77 152.14 164.88
July 1998 96.81 181.48 149.47
July 1999 62.61 218.14 135.94
July 2000 53.03 237.72 131.70
July 2001 149.96 203.66 219.71
- -------------------------------------------------------------------------------------------------------------------
July 1996
July 1997 July 1998 July 1999 July 2000 July 2001 July 2002
- -------------------------------------------------------------------------------------------------------------------
Holly Corporation $100.00 $101.77 $ 96.8195.12 $ 62.6161.52 $ 53.03 $149.9652.10 $147.34 $155.14
S&P 500 $100.00 $152.14 $181.48 $218.14 $237.72 $203.66$119.28 $143.38 $156.25 $133.86 $102.23
Industry Peer Group(2) $100.00 $164.88 $1149.47 $135.94 $131.70 $219.71$ 90.66 $ 82.45 $ 79.88 $133.25 $131.16
(1) The amounts shown assume that the value of the investment in the Company
and each index was $100 on July 31, 19961997 and that all dividends were
reinvested.
(2) The Industry Peer Group is made up of Crown Central Petroleum Corporation
(acquired March 2001), Frontier Oil Corporation, Giant Industries, Inc.,
Sunoco, Inc., Tesoro Petroleum Corp., Tosco Corporation (acquired September
2001), Ultramar Diamond Shamrock Corporation (acquired January 2002) and
Valero Energy Corporation. It should be noted that almost all of the peer
group companies are also engaged in retail gasoline marketing in addition
to their refining activities and are engaged in oil and gas exploration and
production to a greater extent than is the Company; in addition, most of
the peer companies are substantially larger than the Company in terms of
assets and sales.
The stock price performance depicted in the foregoing graph is not
necessarily indicative of future price performance. The graph will not be deemed
to be incorporated by reference in any filing by the Company under the
Securities Act or the Exchange Act, except to the extent that the Company
specifically incorporates such graph by reference.
12
PROPOSAL FOR APPROVAL OF AMENDMENT AND RESTATEMENT OF THE
HOLLY CORPORATION 2000 STOCK OPTION PLAN AS
THE HOLLY CORPORATION LONG-TERM INCENTIVE COMPENSATION PLAN
GENERAL
The Board of Directors has recommended, subject to stockholders' approval,
the amendment and restatement of the Holly Corporation 2000 Stock Option Plan
(the "Current Plan") as the Holly Corporation Long-Term Incentive Compensation
Plan (the "Amended Plan"). The material features of the Amended Plan are
described below.
The maximum number of shares of Common Stock (the "Shares") that may be
subject to outstanding options under the Current Plan is 1,500,000. As of
October 11, 2002, 25,700 Shares had been issued upon exercise of options under
the Current Plan, 530,300 Shares were subject to outstanding options under the
Current Plan, and 944,000 Shares were available for issuance under future
options that could be granted under the Current Plan. The exercise prices for
outstanding options under the Current Plan range from $11.90 to $19.80 per
Share. The Current Plan provides for the grant of options to any officer,
current or proposed director, key employee or consultant whose services are
deemed to be of potential benefit to the Company or any of its wholly owned or
partially owned subsidiary corporations or partnerships; provided, however, that
incentive stock options may only be granted to employees of the Company or its
subsidiary corporations. Under the Current Plan, options may be granted in a
manner intended to satisfy the performance-based compensation requirements of
Section 162(m) of the Internal Revenue Code of 1986 as amended (the "Code"), and
hence options thus granted should be eligible for full income tax deductions to
the Company for compensation expense relating to the exercise of such options.
The Board of Directors believes that the Amended Plan will be of benefit to
the Company by authorizing, in addition to stock options as permitted under the
Current Plan, a variety of other long-term incentive compensation arrangements
that can be used to attract, retain and reward high quality executives,
employees and other persons who provide services to the Company and/or its
subsidiaries.
PROPOSED AMENDMENT AND RESTATEMENT OF THE CURRENT PLAN -- GENERAL
The proposed amendment and restatement of the Current Plan will allow the
Board of Directors to designate a committee (the "Committee") composed of
outside directors to grant, in addition to non-qualified stock options and
incentive stock options as allowed under the Current Plan, restricted stock
awards, bonus stock, stock appreciation rights, phantom stock awards, and
performance awards payable upon the satisfaction of performance goals measured
over a period of from one to ten years. Under the proposed Amended Plan, awards
may be granted to current or proposed officers, directors, employees or
consultants except in the case of incentive stock options which may be granted
only to employees of the Company. So that grants may qualify for an exemption
from the income tax deduction limitations of Section 162(m) of the Code, the
Amended Plan allows the Company to subject the granting, vesting or payment of
any award to business criteria set forth in the Amended Plan and limits the
number of Shares on which an award is based or the cash payment under a
performance award to amounts specified in the Amended Plan. The Amended Plan
also provides for the Committee to permit in its discretion certain transfers of
awards. The number of Shares that are authorized for issuance under the Amended
Plan, including Shares relating to stock options previously granted under the
Current Plan, will not be changed from the number of Shares currently authorized
for issuance under the Current Plan.
DESCRIPTION OF THE AMENDED PLAN
The description of the Amended Plan set forth below is a summary of the
principal features of the proposed Amended Plan. This summary, however, does not
purport to be a complete description of all of the provisions of the proposed
Amended Plan. The description is qualified in its entirety by reference to the
proposed Amended Plan, a copy of which is attached as Appendix A and
incorporated by this reference.
13
Administration of the Amended Plan. The Amended Plan will be administered,
except to the extent the Board of Directors elects otherwise, by the Committee,
which will be composed of two or more directors designated by the Board of
Directors who are "non-employee directors" within the meaning of Rule 16b-3
under the Exchange Act and "outside directors" as defined under Section 162(m)
of the Code.
Unless otherwise specified by the Board of Directors, the Committee will
have full and final authority to administer the Amended Plan in the manner that
it determines, from time to time, is in the best interest of the Company. This
includes the authority to select persons to participate in the Amended Plan,
grant stock options, restricted stock awards, bonus stock, stock appreciation
rights, phantom stock awards, and performance awards under the Amended Plan,
construe and interpret the Amended Plan, determine the type, number and other
terms and conditions of, and all other matters relating to awards, to delegate
duties with respect to the Amended Plan , to terminate, modify or amend the
Amended Plan as ratified by the Board of Directors and to execute all other
responsibilities permitted or required under the Amended Plan. Nevertheless, no
one person may be granted in a year awards which relate to more than 150,000
Shares, such amount being the limitation currently applicable to stock options
under the Current Plan. In the case of awards not relating to a number of
Shares, such awards granted in any year to any one individual may not provide
for payments totaling more than an amount equal to the fair market value of
150,000 Shares at the time of grant. Except for these limitations and the
limitation described below on the total number of Shares that may be issued to
all persons under the Amended Plan, the Amended Plan does not specify limits as
to the total of amounts that may be paid to any one recipient or to all
recipients pursuant to awards under the Amended Plan.
Shares Subject to the Amended Plan. The total number of Shares reserved
and available for delivery in connection with awards under the Amended Plan,
subject to adjustments for Share splits and other similar transactions, will be
1,500,000, including Shares issued or to be issued under options granted under
the Current Plan prior to the effectiveness of the proposed amendment and
restatement. If Shares subject to any award are not issued or transferred, or
cease to be issuable or transferable for any reason, including (but not
exclusively) because an award is forfeited, terminated, expires unexercised, or
is settled in cash in lieu of Shares or is exchanged for other awards, the
Shares that were subject to that award shall again be available for issue,
transfer or exercise pursuant to awards under the Amended Plan to the extent of
such forfeiture, termination, expiration, settlement or exchange, except that if
any such Shares could not again be available for awards to a particular person
under any applicable law or regulation, such Shares will only be available for
awards to eligible persons who are not subject to such limitations. The Shares
sold pursuant to the Amended Plan may be authorized but unissued Shares or
Shares that have been reacquired by the Company. There are no fees, commissions
or other charges applicable to a purchase of Shares under the Amended Plan.
The number and kind of Shares to be delivered or used for measurement under
the Amended Plan may be subject to adjustment for stock splits, stock dividends,
recapitalizations, mergers, and other changes affecting the capital stock of the
Company.
Eligibility. Any current or proposed officer, director, or key employee or
consultant whose services are deemed of potential benefit to the Company or one
of its subsidiaries is eligible to participate in the Amended Plan. An employee
on leave of absence may be considered still employed by the Company for
determining eligibility under the Amended Plan. However, in the case of
incentive stock options, such options can be granted only to a person who is an
employee of the Company or one of its corporate subsidiaries. Additional
restrictions would apply in the case of an incentive stock option granted to a
person owning more than 10% of the outstanding Shares of the Company. As of
October 11, 2002, it is estimated that approximately 30 persons are eligible to
participate in the Current Plan and that the approval of the proposed Amended
Plan would not change the number of persons eligible to participate.
Types of Awards Under the Amended Plan. The following types of awards may
be granted under the Amended Plan: (i) incentive stock options as defined in
Section 422 of the Code, (ii) non-qualified stock options, which are stock
options that are not incentive stock options, (iii) restricted stock awards,
(iv) bonus stock, (v) stock appreciation rights, (vi) phantom stock awards, and
(vii) performance awards.
Awards may be granted on the terms and conditions set forth below. In
addition, the Committee may impose on any award or the exercise thereof such
additional terms and conditions as the Committee will
14
determine, including certain performance conditions described below, terms
requiring forfeiture of awards in the event of termination of employment of an
award holder and terms permitting an award holder to make elections relating to
his or her award. The Committee will retain full power and discretion to
accelerate or waive, at any time, any term or condition of an award that is not
mandatory under the Amended Plan; provided, however, that the Committee will not
have any discretion to accelerate or waive any term or condition of an award
that is intended to qualify as "performance-based compensation" for purposes of
Section 162(m) of the Code if such discretion would cause the award not to so
qualify. Awards granted under the Amended Plan may, in the discretion of the
Committee, be granted either alone, or in addition to, in tandem with, or in
exchange for, other awards or other rights to receive payment from the Company
or certain affiliated entities. The term of each award will be for such period
as may be determined by the Committee; provided that in no event will the term
of any stock option or stock appreciation right exceed a period of ten years (or
such shorter term as may be required in respect of an incentive stock option
under Section 422 of the Code). No incentive stock option may be granted
pursuant to the Amended Plan after December 13, 2010 and no other award may be
granted under the Amended Plan after December 31, 2010.
Unless permitted by the Committee pursuant to the express terms of an award
agreement, awards will generally not be transferable other than by will or the
laws of descent and distribution or to a named beneficiary. The Committee may
allow for the transfer of awards, prior to an award holder's death, pursuant to
a qualified domestic relations order and to certain immediate family members or
entities related to an immediate family member even in the absence of a
qualified domestic relations order.
Terms and Conditions of Stock Options. As under the Current Plan, the
Amended Plan authorizes grants of stock options to eligible persons including
(i) incentive stock options which comply with Section 422 of the Code and (ii)
non-qualified stock options. The exercise price of each stock option granted
under the Amended Plan shall be stated in the agreement governing such stock
option and may vary; however, the exercise price for an incentive stock option
must not be less than the greater of (a) the par value per Share or (b) the fair
market value of the Share as of the date of grant. The exercise price per Share
subject to a stock option other than an incentive stock option shall not be less
than the par value per Share (but may be less than the fair market value of a
Share on the date of grant). Any incentive stock option which fails to comply
with Section 422 of the Code for any reason will result in the reclassification
of the incentive stock option as a non-qualified stock option which will be
exercisable as such. The Committee determines the methods and form of payment
for the exercise price of a stock option and the methods and forms in which
Shares will be delivered to a person exercising a stock option.
Term and Conditions of Restricted Stock Awards. The Committee will be
authorized to grant restricted stock awards. Restricted stock awards are Shares
subject to such restrictions as the Committee may impose. Except to the extent
set forth in a particular award, a person granted a restricted stock award will
have all of the rights of a stockholder of the Company, including the right to
vote the restricted Shares and the right, subject to possible reinvestment
conditions, to receive dividends thereon. However, during any period that
restricted Shares are subject to restrictions imposed by the Committee, the
restricted Shares may not be transferred or encumbered by an award holder.
Except as determined by the Committee, upon termination of employment during the
restricted period, restricted Shares will be forfeited and reacquired by the
Company. Certificates evidencing restricted Shares may bear a legend making
reference to the restrictions imposed on such Shares. The Committee will
determine the time or times at which and the circumstances under which any
restrictions imposed on restricted Shares will lapse.
Terms and Conditions of Bonus Stock. The Committee will be authorized to
grant Shares to eligible persons as a bonus. A stock bonus award will be subject
to such other terms and conditions as the Committee may determine, including
such conditions necessary to prevent any recipient of bonus stock from incurring
liability under Section 16(b) of the Exchange Act.
Terms and Conditions of Stock Appreciation Rights. The Committee will be
authorized to grant stock appreciation rights. A stock appreciation right is the
right to receive in cash an amount equal to the excess of the fair market value
of a Share on the date of exercise over the grant price of the stock
appreciation right as determined by the Committee. The Committee will determine
at the date of grant or thereafter, the time or
15
times at which and the circumstances under which a stock appreciation right may
be exercised. The Committee will also determine the method of exercise and form
of payment.
Terms and Conditions of Phantom Stock Awards. Phantom stock awards are
rights to receive in cash an amount equal to the market value of a specified
number of Shares at the end of a specified period. The Committee will determine
when imposed restrictions will lapse and whether restrictions will lapse
separately, in combination, in installments or otherwise. All phantom stock
awards that are subject to restrictions shall be forfeited upon the termination
of an award holder's employment or service with the Company during a restriction
period to which forfeiture conditions apply, unless such conditions are
otherwise waived or modified by the Committee. Unless otherwise determined by
the Committee, amounts equal to dividends on the specified number of Shares
covered by a phantom stock award will be either (i) paid with respect to such
phantom stock award on the dividend payment date in cash or in unrestricted
Shares having a fair market value equal to the amount of such dividends, or (ii)
automatically deemed reinvested in additional phantom stock awards, other
awards, or other investment vehicles specified by the Committee.
Terms and Conditions of Performance Awards. The Committee will have the
right to grant eligible persons the right to receive cash amounts upon the
satisfaction of performance conditions, established by the Committee, measured
over a period of not less than one and not more than ten years. The Committee
may also subject the grant or settlement of any other award under the Plan to
such performance conditions. The performance conditions associated with a
performance award may be any of the business criteria described below if the
award is granted to an officer subject to Section 162(m) of the Code or, in the
case of any other award, may be based on any of the business criteria set forth
below or any other performance conditions specified by the Committee. The
Committee may use any measures of performance it deems appropriate in
establishing performance conditions, and may exercise its discretion, to the
extent such discretion does not violate applicable law, to increase the amounts
payable under any award based on such conditions. Further, if the Committee
determines that an eligible person is a "covered employee" under Section 162(m)
of the Code or the regulations thereunder and the contemplated award should
qualify as "performance-based compensation" under such section, then the grant
and/or settlement of such award will be contingent upon achievement of one or
more pre-established performance goals based on business criteria set forth
below. For purposes of Section 162(m) of the Code, covered employees are the
chief executive officer of a given corporation and the four highest compensated
officers other than the chief executive officer.
In the case of an award to a person who is a covered employee under Section
162(m) of the Code, performance goals will consist of one or more of the
business criteria described below and targeted levels of performance with
respect to each of such criteria as specified by the Committee. Performance
goals will be designed to be objective, "substantially uncertain" of achievement
at the date of grant and will otherwise meet the requirements of Section 162(m)
of the Code and regulations thereunder. Performance goals may vary among award
recipients or among awards to the same recipient. Performance goals will be
established not later than 90 days after the beginning of any performance period
applicable to such awards, or at such other date as may be required or permitted
for "performance-based compensation" under Section 162(m) of the Code. One or
more of the following business criteria for the Company, on a consolidated
basis, and/or for specified subsidiaries, divisions or business or geographical
units of the Company (except with respect to the total stockholder return and
earnings per share criteria), will be used by the Committee in establishing
performance goals: (i) earnings per share; (ii) increase in revenues; (iii)
increase in cash flow; (iv) increase in cash flow returns; (v) return on net
assets; (vi) return on assets; (vii) return on investment; (viii) return on
capital; (ix) return on equity; (x) economic value added; (xi) gross margin;
(xii) net income; (xiii) pretax earnings; (xiv) pretax earnings before interest,
depreciation and amortization (EBITDA); (xv) pretax earnings after interest
expense and before incentives, service fees, and extraordinary or special items;
(xvi) operating income; (xvii) total stockholder return; (xviii) debt reduction;
and (xix) any of the above goals determined on an absolute or relative basis or
as compared to the performance of a published or special index deemed applicable
by the Committee including, but not limited to, the Standard & Poor's 500 Stock
Index or a group of comparable companies selected by the Committee.
All determinations by the Committee as to the establishment, amount and
achievement of performance goals will be made in writing and the Committee may
not delegate any responsibility relating to such awards
16
granted to covered employees under Section 162(m) of the Code. The Committee
will specify the circumstances under which awards will be paid or forfeited if
an award holder is terminated before settlement.
Amendment and Termination. The Board of Directors may amend or terminate
the Amended Plan without the consent of stockholders or eligible persons, except
that any amendment to the Amended Plan will be subject to the approval of the
Company's stockholders no later than the annual meeting next following such
Board of Directors action if such stockholder approval is required by any
federal or state law or regulation or the rules of any stock exchange or
automated quotation system on which the Shares may then be listed or quoted. The
Board of Directors may, in its discretion, submit other changes to the Amended
Plan to stockholders for approval. However, without the consent of an affected
award holder, no Board of Directors or stockholder action may materially and
adversely affect the rights of such award holder under any previously granted
and outstanding award.
Right of Company to Terminate Awards in Event of Certain Corporate
Transactions. Unless otherwise specifically provided in particular award
agreements, the Amended Plan authorizes the Company, in the event of an
acquisition of substantially all of the assets of the Company or of a greater
than 80% stock interest in the Company by an entity in which the Company does
not have a 50% or greater interest prior to such acquisition or in the event of
a merger, consolidation, recapitalization or other similar transaction involving
a fundamental change in the Company's capital structure, to terminate some or
all outstanding awards under the Amended Plan, whether or not currently
exercisable by or otherwise payable to the holders of the awards, upon payment
to each holder of an award so terminated of an amount equal to the value of the
award based on the current market value of the Company's Shares or, if
applicable, the value of the award based upon the extent to which performance
criteria associated with the award have been satisfied as of the date of
termination of the award. Alternatively the Company may elect in such
circumstances to cause some or all awards to be assumed by the surviving or
acquiring corporation. In all other circumstances, the Committee may amend or
terminate any award under the Amended Plan provided that, and notwithstanding
any other provisions described herein, no such Committee action may materially
and adversely affect the rights of such award holder under such award unless
either the power to take such action is reserved in the agreement granting the
award in question or the affected holder of the award consents to the amendment
or termination.
Section 16(b) Liability. It is the intent of the Company that the grant of
any awards to or other transaction by an award recipient who is subject to
Section 16(b) of the Exchange Act will be exempt from liability under Section
16(b) pursuant to an applicable exemption (except for transactions acknowledged
in writing to be non-exempt by such award recipient). Accordingly, if a
provision of the Amended Plan or any award agreement does not comply with the
requirements of Rule 16b-3 of the Exchange Act, such provision will be deemed
amended to the extent necessary to conform to such Rule so that the award
recipient avoids liability under Section 16(b) of the Exchange Act.
FEDERAL INCOME TAX CONSEQUENCES OF AWARDS UNDER THE AMENDED PLAN
Set forth below is a summary of the federal income tax consequences to
award recipients and to the Company as a result of the grant and exercise of
awards under the Amended Plan. This summary is based on statutory provisions,
Treasury regulations thereunder, judicial decisions, and Internal Revenue
Service rulings in effect on the date hereof. This summary does not discuss any
potential foreign, state, or local tax consequences.
Non-Qualified Stock Options and Incentive Stock Options. Option holders
will not realize taxable income upon the grant of a non-qualified stock option.
Upon the exercise of a non-qualified stock option, an option holder will
recognize ordinary compensation income (subject to withholding by the Company or
a subsidiary) in an amount equal to the excess of (i) the amount of cash and the
fair market value of the Shares received, over (ii) the exercise price paid
therefor. An option holder will generally have a tax basis in any Shares
received pursuant to the exercise of a non-qualified stock option, that equals
the fair market value of such Shares on the date of exercise. Subject to the
discussion under "-- Tax Code Limitations on Deductibility," the Company (or a
subsidiary) will be entitled to a deduction for federal income tax purposes
17
that corresponds as to timing and amount with the compensation income recognized
by an option holder under the foregoing rules.
Persons eligible to receive an incentive stock option will not have taxable
income upon the grant or exercise of such a stock option. Upon exercise of an
incentive stock option, the excess of the fair market value of the Shares
received over the exercise price will increase the alternative minimum taxable
income of the option holder, which may cause such option holder to incur
alternative minimum tax. The payment of any alternative minimum tax attributable
to the exercise of an incentive stock option would be allowed as a credit
against the option holder's regular tax liability in a later year to the extent
the option holder's regular tax liability is in excess of the alternative
minimum tax for that year. Upon the disposition of Shares acquired upon exercise
of an incentive stock option that have been held for the requisite holding
period (two years from the date of grant and one year from the date of exercise
of the incentive stock option), an option holder will generally recognize
capital gain (or loss) equal to the excess (or shortfall) of the amount received
in the disposition over the exercise price paid by the option holder for the
Shares. However, if an option holder disposes of such Shares that have not been
held for the requisite holding period (a "disqualifying disposition"), the
option holder will recognize ordinary compensation income in the year of the
disqualifying disposition in an amount equal to the amount by which the fair
market value of the Shares at the time of exercise of the incentive stock option
(or, if less, the amount realized in the case of an arm's length disqualifying
disposition to an unrelated party) exceeds the exercise price paid by the option
holder for such Shares. An option holder would also recognize capital gain to
the extent the amount realized in the disqualifying disposition exceeds the fair
market value of the Shares on the exercise date.
The Company and its subsidiaries will generally not be entitled to any
federal income tax deduction upon the grant or exercise of an incentive stock
option, unless an option holder makes a disqualifying disposition of the Shares.
If an option holder makes a disqualifying disposition, the Company (or a
subsidiary) will then, subject to the discussion below under "-- Tax Code
Limitations on Deductibility," be entitled to a tax deduction that corresponds
as to timing and amount with the compensation income recognized by an option
holder under the rules described in the preceding paragraph.
Under current rulings, if an option holder transfers previously held Shares
(other than Shares acquired by exercise of an incentive stock option that have
not been held for the requisite holding period) in satisfaction of part or all
of the exercise price of a non-qualified stock option or incentive stock option,
no additional gain will be recognized on the transfer of such previously held
Shares in satisfaction of the non-qualified stock option or incentive stock
option exercise price (although an option holder would still recognize ordinary
compensation income upon exercise of an non-qualified stock option in the manner
described above). Moreover, that number of Shares received upon exercise which
equals the number of Shares of previously held Shares surrendered in
satisfaction of the non-qualified stock option or incentive stock option
exercise price will have a tax basis that equals, and a holding period that
includes, the tax basis and holding period of the previously held Shares
surrendered in satisfaction of the non-qualified stock option or incentive stock
option exercise price. Any additional Shares received upon exercise will have a
tax basis that equals the amount of cash (if any) paid by the option holder,
plus the amount of compensation income recognized by the option holder under the
rules described above.
Restricted Stock Awards, Bonus Stock, Stock Appreciation Rights, Phantom
Stock Awards, and Performance Awards. In general, a recipient of a restricted
stock award will recognize ordinary compensation income as a result of the
receipt of a restricted stock award in an amount equal to the fair market value
of the Shares when such Shares first cease to be subject to a prohibition on
transfer or to a substantial risk of forfeiture; the amount of income realized
will be the value of the Shares at the date the Shares first become transferable
or cease to be subject to the substantial risk of forfeiture. However, if such a
recipient makes a valid election under Section 83(b) of the Code, the restricted
Shares will be taxable at the date of receipt of the Shares and the recipient
will realize ordinary income upon the grant of the restricted stock award in an
amount equal to the value of the Shares without regard to the restrictions on
transferability and the risk of forfeiture. In the case of bonus stock awards
received, the recipient will normally realize ordinary compensation income equal
to the market value of the Shares received at the time the Shares are received.
The holder of a stock appreciation right will realize ordinary income equal to
the amount received upon exercise of the
18
stock appreciation right. In general, an award recipient will realize ordinary
compensation income with respect to a phantom stock award at the time or times
the award recipient is entitled to receive cash payments in respect of the
phantom stock award; the amount of taxable income will generally be the amount
of cash received. Performance awards will generally result in ordinary
compensation income to the award recipient at the time payment is received and
in the amount received.
An award recipient will be subject to withholding for federal, and any
applicable state and local, income taxes at the time the award recipient
recognizes income under the rules described above. Subject to the discussion
immediately below, the Company (or a subsidiary) will be entitled to a deduction
for federal income tax purposes that corresponds as to timing and amount with
the compensation income recognized by an award recipient under the foregoing
rules.
Tax Code Limitations on Deductibility. In order for the amounts described
above to be deductible by the Company (or a subsidiary), such amounts must
constitute reasonable compensation for services rendered or to be rendered and
must be ordinary and necessary business expenses. The ability of the Company (or
a subsidiary) to obtain a deduction for future payments under the Amended Plan
could also in some circumstances be limited by the golden parachute payment
rules of Section 280G of the Code, which prevent the deductibility of certain
excess parachute payments made in connection with a change in control of a
corporation. Finally, the ability of the Company (or a subsidiary) to obtain a
deduction for amounts paid under the Amended Plan could be limited by Section
162(m) of the Code, which limits to $1 million per officer the deductibility,
for federal income tax purposes, of most compensation paid during a taxable year
of the Company to certain executive officers of the Company. However, an
exception to this limitation applies in the case of certain performance-based
compensation. The Amended Plan is intended to satisfy the requirements for this
exception.
BENEFITS UNDER THE AMENDED PLAN
The awards, if any, that will be made to eligible persons under the Plan
are subject to the discretion of the Committee and, therefore, are not
determinable at this time. The following table sets forth, for the named
executive officers and for other executives as a group, all stock options
received prior to October 11, 2002 under the Current Plan.
NUMBER OF SHARES UNDERLYING OPTIONS RECEIVED
THROUGH OCTOBER 11, 2002 UNDER CURRENT HOLLY
NAME AND PRINCIPAL POSITION CORPORATION 2000 STOCK OPTION PLAN
- --------------------------- --------------------------------------------
Lamar Norsworthy, Chairman of the Board and Chief
Executive Officer.............................. 120,000
Matthew P. Clifton, President.................... 80,000
W. John Glancy, Senior Vice President, General
Counsel and Secretary.......................... 40,000
Stephen J. McDonnell, Vice President and Chief
Financial Officer.............................. 20,000
John A. Knorr, Vice President, Crude Oil Supply
and Trading.................................... 20,000(1)
All Other Executives as a Group.................. 276,000(1)
-------
Total............................................ 556,000(1)
=======
- ---------------
(1) Includes options under the Current Plan that were exercised prior to October
11, 2002.
The closing market price of the Shares on October 28, 2002 was $17.00 per
Share as reported on the American Stock Exchange.
19
VOTE NECESSARY TO APPROVE PROPOSAL
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock voted on this matter at the Annual Meeting, a quorum
being present, will be required to approve the Amended Plan. Abstentions will
count as a vote against the proposal, but broker non-votes will have no effect.
Stockholder approval for the amendment and restatement of the Current Plan is
needed in order to permit a full federal income tax deduction to the Company for
certain "performance-based" awards, and to comply with the listing rules of the
American Stock Exchange.
If the proposed amendment and restatement of the Current Plan is not
approved by the stockholders at the Annual Meeting, the Current Plan will
continue to read in the form currently approved by the stockholders of the
Company at the 2000 Annual Meeting and will continue to be referred to as the
Holly Corporation 2000 Stock Option Plan.
THE BOARD OF DIRECTORS OF HOLLY CORPORATION RECOMMENDS THAT YOU VOTE FOR
THE APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE CURRENT PLAN TO CREATE THE
AMENDED PLAN.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company has selected Ernst & Young LLP,
independent certified public accountants, to audit the books, records and
accounts of the Company and its consolidated subsidiaries for the 20022003 fiscal
year. Ernst & Young LLP has conducted such audits since 1977. It is expected
that a representative of such firm will be present in person or by conference
telephone at the stockholders' meeting,Annual Meeting, will have an opportunity to make a statement if
the representative so desires, and will be available to respond to appropriate
questions.
13
AUDIT FEES
The following table sets forth the aggregate fees billed to the Company in
the fiscal year ended July 31, 20012002 by its principal audit firm, Ernst & Young
LLP:
Audit Fees.................................................. $320,000$340,000
Financial Information Systems Design and Implementation
Fees...................................................... --
All Other Fees.............................................. $633,043$545,669
STOCKHOLDER PROPOSALS
Proposals of stockholders to be considered for presentation at the
Company's 20022003 Annual Meeting should be received by the Company by July 10,
2002,2003, in order to be considered for inclusion in the proxy statement for that
meeting. Pursuant to Rule 14a-4(c)(1) under the Securities Exchange Act of 1934,
the Company management will have discretionary authority to vote on any matter
of which the Company does not receive notice by September 23, 2002,21, 2003, with respect
to proxies submitted for the Company's 20022003 Annual Meeting.
OTHER MATTERS
The Board of Directors of the Company does not know of any other matters to
be acted upon at the meeting. However, if any other matter properly comes before
the meeting, the persons voting the proxies will vote them in accordance with
their best judgment.
FINANCIAL STATEMENTS AVAILABLE
A copy of the Company's 20012002 Annual Report containing the audited
consolidated balance sheet at July 31, 20012002 and 2000,2001, and the related
consolidated statements of income, cash flows, stockholders' equity and
comprehensive income for each of the three fiscal years ended July 31, 2001,2002, is
being mailed with this Proxy Statement to stockholders entitled to notice of the
Annual Meeting. The Annual Report does not constitute a part of the proxy
solicitation material.
20
AUDIT COMMITTEE REPORT
The Audit Committee of the Board has reviewed and discussed with management
the audited financial statements of the Company for the 20012002 fiscal year and has
discussed with representatives of Ernst & Young LLP, the Company's independent
auditors for the 20012002 fiscal year, the matters required to be discussed by
Statement on Auditing Standards No. 61, as currently in effect. The Audit
Committee has received the written disclosures and the letter from the
independent auditors required by Independence Standards Board Standard No. 1, as
currently in effect, and has discussed with representatives of Ernst & Young LLP
the independence of Ernst & Young LLP. The Audit Committee has also considered
whether the independent auditors' provision of non-audit services to the Company
is compatible with the auditors' independence. Based on the review and
discussions referred to above, the Audit Committee has recommended to the Board
of Directors that the audited financial statements for the 20012002 fiscal year be
included in the Company's Annual Report on Form 10-K for the 20012002 fiscal year
for filing with the Securities and Exchange Commission.
Audit Committee of the Board of Directors
Marcus R. Hickerson, Thomas K. Matthews, II
Chairman Robert G. McKenzie
Paul T. Stoffel
The Audit Committee Report will not be deemed proxy soliciting material and
will not be incorporated by reference in any filing by the Company under the
Securities Act or the Exchange Act except to the extent that the Company
specifically incorporates such report by reference.
14
VOTING VIA THE INTERNET OR BY TELEPHONE
If you have shares registered directly with the Company's transfer agent,
you may choose to vote those shares via the Internet or by telephone. Specific
instructions for registered stockholders interested in voting via the Internet
or by telephone are set forth on the enclosed proxy card. If you hold shares
with a broker or bank, you may also be eligible to vote via the Internet or by
telephone if your broker or bank participates in the proxy voting program
provided by ADP Investor Communication Services. If your bank or brokerage firm
is participating in ADP's program, your voting form will provide instructions.
Votes submitted via the Internet or by telephone must be received by the
transfer agent by 12:00 midnight Eastern Standard Time on December 12, 2001.11, 2002.
Submitting your proxy via the Internet or by telephone will not affect your
right to vote in person should you decide to attend the annual meeting. The
telephone and Internet voting procedures are designed to authenticate
stockholders' identities, to allow stockholders to give their voting
instructions and to confirm that stockholders' instructions have been recorded
properly. Counsel has advised the Company that the Internet voting procedures
that have been made available are consistent with the requirements of applicable
law. A stockholder voting via the Internet should understand that there may be
costs associated with electronic access, such as usage charges from Internet
access providers and telephone companies, that must be borne by the stockholder.
W. JOHN GLANCY
Secretary
1521
HOLLY-PS-01APPENDIX A
HOLLY CORPORATION
LONG-TERM INCENTIVE COMPENSATION PLAN
AS AMENDED AND RESTATED
(FORMERLY DESIGNATED THE HOLLY CORPORATION 2000 STOCK OPTION PLAN)
1. Purpose. The purpose of the Holly Corporation Long-Term Incentive
Compensation Plan as amended and restated (formerly designated the Holly
Corporation 2000 Stock Option Plan) (the "Plan") is to advance the interests of
Holly Corporation (the "Company") by strengthening the ability of the Company
and its subsidiaries to attract, retain and motivate able people of high caliber
as employees, directors and consultants through arrangements that relate the
compensation for such persons to the long-term performance of the Company.
Accordingly, the Plan provides for granting Incentive Stock Options,
Non-Qualified Stock Options, Restricted Stock Awards, Bonus Stock Awards, Stock
Appreciation Rights, Phantom Stock Awards, Performance Awards or any combination
of the foregoing, as the Committee shall determine.
2. Definitions. For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to such terms defined in Section 1
hereof:
(a) "Amendment Effective Date" means December 12, 2002. The Plan prior to
amendment was effective January 1, 2001.
(b) "Award" means any Option, Restricted Stock Award, Bonus Stock Award,
Stock Appreciation Right, Phantom Stock Award, or Performance Award, together
with any other right or interest granted to a Participant under the Plan.
(c) "Beneficiary" means one or more persons, trusts or other entities that
have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or to which Awards or
other rights are transferred if and to the extent permitted under Section 10(d)
hereof. If, upon a Participant's death, there is no designated Beneficiary or
surviving designated Beneficiary, then the term Beneficiary means the persons,
trusts or other entities entitled by will or the laws of descent and
distribution to receive such benefits.
(d) "Board" means the Company's board of directors.
(e) "Bonus Stock Award" means Shares granted to a Participant under Section
6(c) hereof.
(f) "Code" means the Internal Revenue Code of 1986, as amended from time to
time, including regulations thereunder and successor provisions and regulations
thereto.
(g) "Committee" means a committee of two or more directors designated by
the Board to administer the Plan; provided, however, that, unless otherwise
determined by the Board, the Committee shall consist solely of two or more
directors, each of whom shall be (i) a "nonemployee director" within the meaning
of Rule 16b-3 under the Exchange Act, and (ii) an "outside director" as defined
under Section 162(m) of the Code, unless administration of the Plan by "outside
directors" is not then required in order to qualify for tax deductibility under
Section 162(m) of the Code.
(h) "Covered Employee" means an Eligible Person who is a Covered Employee
as specified in Section 8(b)(vi) of the Plan.
(i) "Disability" means, as determined by the Board in the sole discretion
exercised in good faith of the Board, a physical or mental impairment of
sufficient severity that either the Participant is unable to continue performing
the duties he performed before such impairment or the Participant's condition
entitles him to disability benefits under any insurance or employee benefit plan
of the Company or its Subsidiaries and that impairment or condition is cited by
the Company as the reason for termination of the Participant's employment or
participation as a member of the Board.
A-1
(j) "Eligible Person" means any current or proposed officer, director, or
key employee or consultant whose services are deemed to be of potential benefit
to the Company or any of its Subsidiaries. An employee on leave of absence may
be considered as still in the employ of the Company or a Subsidiary for purposes
of eligibility for participation in the Plan.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, including rules thereunder and successor provisions and rules
relating thereto.
(l) "Fair Market Value" means the fair market value as determined by the
Committee. Unless otherwise determined by the Committee, the Fair Market Value
of a Share shall be the closing price of a Share, on the date on which the
determination of Fair Market Value is being made or if no Shares were traded on
such date then the last trading date prior thereto, as quoted on the composite
transactions table for the American Stock Exchange or, if the Shares are not
then subject to trading on the American Stock Exchange, then as quoted in a
comparable manner on any other national stock exchange or, if not so quoted,
then as reported for the over-the-counter market on which the largest volume of
trading of Shares has occurred in the 30 trading days prior to the date for
which a determination is made.
(m) "Incentive Stock Option" means any Option intended to be and designated
as an incentive stock option within the meaning of Section 422 of the Code or
any successor provision thereto.
(n) "Non-Qualified Stock Option" means any Option that does not constitute
an Incentive Stock Option.
(o) "Option" means a right granted to a Participant under Section 6(a)
hereof to purchase Shares or other Awards at a specified price during specified
time periods.
(p) "Participant" means a person who has been granted an Award under the
Plan which remains outstanding, including a person who is no longer an Eligible
Person.
(q) "Performance Award" means a right granted to a Participant under
Section 8 hereof to receive cash based on performance conditions, as provided in
Section 8, measured over a period of not less than one year nor more than ten
years.
(r) "Phantom Stock Award" means a right granted to a Participant under
Section 7(b) hereof.
(s) "Qualified Member" means a member of the Committee who is a
"Non-Employee Director" within the meaning of Rule 16b-3(b)(3) and an "outside
director" within the meaning of regulation 1.162-27 under Section 162(m) of the
Code.
(t) "Restricted Stock Award" means Shares granted to a Participant under
Section 6(b) hereof that are subject to certain restrictions and to a risk of
forfeiture.
(u) "Rule 16b-3" means Rule 16b-3, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act, as from time to time
in effect and applicable to the Plan and Participants.
(v) "Securities Act" means the Securities Act of 1933 and the rules and
regulations promulgated thereunder, or any successor law, as it may be amended
from time to time.
(w) "Shares" means shares of the Company's common stock, par value $.01 per
share, and such other securities as may be substituted (or resubstituted) for
shares of the Company's common stock, par value $.01 per share, pursuant to
Section 10 hereof.
(x) "Stock Appreciation Right" means a right granted to a Participant under
Section 7(a) hereof.
(y) "Subsidiary" means with respect to the Company, any corporation or
other entity of which at least 50% of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by the Company
or any other entity determined by the Committee to constitute a Subsidiary due
to its relationship to the Company.
A-2
3. Administration.
(a) Authority of the Committee. The Plan shall be administered by the
Committee except to the extent the Board elects to administer all or part of the
Plan or except to the extent the Board appoints a separate committee other than
the Committee to administer all or part of the Plan, in which case references
herein to the "Committee" shall be deemed to include references to the "Board"
and/or such additional committee, as applicable. To the extent a portion of the
Plan is administered by the Committee, and another portion of the Plan is
administered by the Board and/or a separate committee, references herein to
"Committee" shall be deemed to be references to the "Board" or such additional
committee, as applicable, but only to the extent the Board or additional
committee administers a portion of the Plan and only with respect to those
portions of the Plan that the Board has elected to administer or over which the
separate committee has been delegated authority. Subject to the express
provisions of the Plan and Rule 16b-3, the Committee shall have the authority,
in its sole and absolute discretion, to (i) adopt, amend, and rescind
administrative and interpretive rules and regulations relating to the Plan; (ii)
determine the Eligible Persons to whom, and the time or times at which, Awards
shall be granted; (iii) determine the amount of cash and the number of Options,
Restricted Stock Awards, Bonus Stock Awards, Stock Appreciation Rights, Phantom
Stock Awards, or Performance Awards, or any combination thereof, that shall be
the subject of each Award; (iv) determine the terms and provisions of each Award
agreement (which need not be identical), including provisions defining or
otherwise relating to (A) the term and the period or periods and extent of
exercisability of Options, (B) the extent to which the transferability of Shares
and Awards is restricted, (C) the effect of termination of employment of a
Participant on the Award, and (D) the effect of approved leaves of absence
(consistent with any applicable regulations of the Internal Revenue Service);
(v) accelerate the time of exercisability of any Option that has been granted;
(vi) construe the respective Award agreements and the Plan; (vii) make
determinations of the Fair Market Value of the Shares pursuant to the Plan;
(viii) delegate its duties under the Plan to such agents as it may appoint from
time to time, provided that the Committee may not delegate its duties with
respect to making Awards to, or otherwise with respect to Awards granted to,
Eligible Persons who are subject to Section 16(b) of the Exchange Act or Section
162(m) of the Code; (ix) subject to ratification by the Board, terminate,
modify, or amend the Plan; and (x) make all other determinations, perform all
other acts, and exercise all other powers and authority necessary or advisable
for administering the Plan, including the delegation of those ministerial acts
and responsibilities as the Committee deems appropriate. Subject to Rule 16b-3
and Section 162(m) of the Code, the Committee may correct any defect, supply any
omission, or reconcile any inconsistency in the Plan, in any Award, or in any
Award agreement in the manner and to the extent it deems necessary or desirable
to carry the Plan into effect, and the Committee shall be the sole and final
judge of that necessity or desirability. The determinations of the Committee on
the matters referred to in this Section 3(a) shall be final and conclusive.
(b) Manner of Exercise of Committee Authority. At any time that a member
of the Committee is not a Qualified Member, any action of the Committee relating
to an Award granted or to be granted to a Participant who is then subject to
Section 16 of the Exchange Act in respect of the Company, or relating to an
Award intended by the Committee to qualify as "performance-based compensation"
within the meaning of Section 162(m) of the Code and regulations thereunder, may
be taken either (i) by a subcommittee, designated by the Committee, composed
solely of two or more Qualified Members, or (ii) by the Committee but with each
such member who is not a Qualified Member abstaining or recusing himself or
herself from such action; provided, however, that, upon such abstention or
recusal, the Committee remains composed solely of two or more Qualified Members.
Such action, authorized by such a subcommittee or by the Committee upon the
abstention or recusal of such non-Qualified Member(s), shall be the action of
the Committee for purposes of the Plan. Any action of the Committee shall be
final, conclusive and binding on all persons, including the Company, its
Subsidiaries, stockholders, Participants, Beneficiaries, and transferees under
Section 10(d) hereof or other persons claiming rights from or through a
Participant. The express grant of any specific power to the Committee, and the
taking of any action by the Committee, shall not be construed as limiting any
power or authority of the Committee. The Committee may delegate to officers or
managers of the Company or any Subsidiary, or committees thereof, the authority,
subject to such terms as the Committee shall determine, to perform such
functions, including administrative functions, as the Committee may determine,
to the extent that such delegation will not result in the loss of an exemption
under
A-3
Rule 16b-3(d)(1) for Awards granted to Participants subject to Section 16 of the
Exchange Act in respect of the Company and will not cause Awards intended to
qualify as "performance-based compensation" under Section 162(m) of the Code to
fail to so qualify. The Committee may appoint agents to assist it in
administering the Plan.
(c) Limitation of Liability. The Committee and each member thereof shall
be entitled to, in good faith, rely or act upon any report or other information
furnished to him or her by any officer or employee of the Company or a
Subsidiary, the Company's legal counsel, independent auditors, consultants or
any other agents assisting in the administration of the Plan. Members of the
Committee and any officer or employee of the Company or a Subsidiary acting at
the direction or on behalf of the Committee shall not be personally liable for
any action or determination taken or made in good faith with respect to the
Plan, and shall, to the fullest extent permitted by law, be indemnified and held
harmless by the Company with respect to any such action or determination.
4. Shares Subject to Plan.
(a) Overall Number of Shares Available for Delivery. Subject to adjustment
in a manner consistent with any adjustment made pursuant to Section 10 of the
Plan, the total number of Shares that may be delivered in connection with Awards
under the Plan shall not exceed 1,500,000, including all Shares delivered with
respect to Options granted under the Plan prior to the Amendment Effective Date.
(b) Application of Limitation to Grants of Awards. No Award may be granted
if (i) the number of Shares to be delivered in connection with such Award
exceeds (ii) the number of Shares remaining available under the Plan minus the
number of Shares issuable in settlement of or relating to then-outstanding
Awards. The Committee may adopt reasonable counting procedures to ensure
appropriate counting, avoid double counting (as, for example, in the case of
tandem or substitute awards) and make adjustments if the number of Shares
actually delivered differs from the number of Shares previously counted in
connection with an Award.
(c) Availability of Shares Not Delivered under Awards. Shares subject to
an Award under the Plan that expires or is canceled, forfeited, settled in cash
or otherwise terminated without a delivery of Shares to the Participant,
including (i) the number of Shares withheld in payment of any exercise price of
an Award or taxes relating to Awards, and (ii) the number of Shares surrendered
in payment of any exercise price of an Award or taxes relating to any Award,
will again be available for Awards under the Plan, except that if any such
Shares could not again be available for Awards to a particular Participant under
any applicable law or regulation, such Shares shall be available exclusively for
Awards to Participants who are not subject to such limitation.
(d) Shares Offered. The Shares to be delivered under the Plan shall be
made available from (i) authorized but unissued Shares, or (ii) previously
issued Shares reacquired by the Company.
5. Eligibility; Per Person Award Limitations. Awards may be granted under
the Plan only to Eligible Persons. In each fiscal year or 12-month period, as
applicable, during any part of which the Plan is in effect, an Eligible Person
may not be granted (a) Awards, provided for in Sections 6 and 7 of the Plan,
relating to more than 150,000 Shares, subject to adjustment in a manner
consistent with any adjustment made pursuant to Section 10 of the Plan, or (b)
Awards, provided for in Section 8 of the Plan, with a value at the time of
payment which exceeds the Fair Market Value of 150,000 Shares as of the date of
the grant of the Award.
6. Options, Restricted Stock and Bonus Stock.
(a) Options. The Committee is authorized to grant Options to Participants
on the following terms and conditions:
(i) Exercise Price. The exercise price or prices for Shares under
each Option shall be determined by the Committee at the time the Option is
granted, and may be less than, equal to or greater than, the Fair Market
Value of the Shares at the time of the granting of the Option, provided
that the exercise price per Share for any Option that is intended to be
performance-based compensation under Section 162(m)(4)(C) of the Code or an
Incentive Stock Option under Section 422 of the Code shall not be less than
the Fair Market Value of a Share as of the effective date of grant of the
Option; provided,
A-4
however, that in the case of an individual who owns stock possessing more
than ten percent of the total combined voting power of all classes of stock
of the Company or its parent or any Subsidiary, the exercise price per
Share of any Incentive Stock Option under Section 422 of the Code shall not
be less than 110% of the Fair Market Value of a Share as of the effective
date of grant of the Incentive Stock Option.
(ii) Time and Method of Exercise. The Committee shall determine the
time or times at which or the circumstances under which an Option may be
exercised in whole or in part (including based on achievement of
performance goals and/or future service requirements), the methods by which
such exercise price may be paid or deemed to be paid, the form of such
payment, including, without limitation, cash, Shares, other Awards or
awards granted under other plans of the Company or any Subsidiary, or other
property (including notes, to the extent permitted under applicable law, or
other contractual obligations of Participants to make payment on a deferred
basis), and the methods by or forms in which Shares will be delivered or
deemed to be delivered to Participants, including, but not limited to, the
delivery of Restricted Stock Awards subject to Section 6(b) hereof. In the
case of an exercise whereby the exercise price is paid with Shares, the
value of such Shares for purposes of calculating the exercise price paid
shall be the Fair Market Value. Notwithstanding anything to the contrary
herein, unless otherwise provided in any agreement evidencing an Option, in
the event of the death of a Participant while in the employ of the Company
or one of its Subsidiaries, an Option theretofore granted to the
Participant shall be exercisable within the year succeeding such death
(even if the Option would otherwise expire prior to one year from the date
of death) but only to the extent that the optionee was entitled to exercise
the Option as of the date of death.
(iii) Incentive Stock Options. The terms of any Incentive Stock
Option granted under the Plan shall comply in all respects with the
provisions of Section 422 of the Code. Anything in the Plan to the contrary
notwithstanding, no term of the Plan relating to Incentive Stock Options
(including any Stock Appreciation Right in tandem therewith) shall be
interpreted, amended or altered, nor shall any discretion or authority
granted under the Plan be exercised, so as to disqualify either the Plan or
any Incentive Stock Option under Section 422 of the Code, unless the
Participant has first requested the change that will result in such
disqualification. Incentive Stock Options shall not be granted more than
ten years after the earlier of the adoption of the Plan or the approval of
the Plan by the Company's stockholders. Notwithstanding the foregoing, the
Fair Market Value of Shares subject to an Incentive Stock Option and the
aggregate Fair Market Value of shares of stock of any parent or Subsidiary
corporation (within the meaning of Sections 424(e) and (f) of the Code)
subject to any other incentive stock option (within the meaning of Section
422 of the Code) of the Company or a parent or Subsidiary corporation
(within the meaning of Sections 424(e) and (f) of the Code) that first
becomes purchasable by a Participant in any calendar year may not (with
respect to that Participant) exceed $100,000, or such other amount as may
be prescribed under Section 422 of the Code or applicable regulations or
rulings from time to time. As used in the previous sentence, Fair Market
Value shall be determined as of the date the Incentive Stock Options are
granted. Failure to comply with this provision shall not impair the
enforceability or exercisability of any Option, but shall cause the excess
amount of Shares to be reclassified in accordance with the Code. No
Incentive Stock Option may be granted after December 13, 2010.
(b) Restricted Stock Awards. The Committee is authorized to grant
Restricted Stock Awards to Participants on the following terms and conditions:
(i) Grant and Restrictions. Restricted Stock Awards shall be subject
to such restrictions on transferability, risk of forfeiture and other
restrictions, if any, as the Committee may impose, which restrictions may
lapse separately or in combination at such times, under such circumstances
(including based on achievement of performance goals and/or future service
requirements), in such installments or otherwise, as the Committee may
determine at the date of grant or thereafter. Except to the extent
restricted under the terms of the Plan and any Award agreement relating to
the Restricted Stock Award, a Participant granted a Restricted Stock Award
shall have all of the rights of a stockholder, including the right to vote
the Restricted Stock Award and the right to receive dividends thereon
(subject to any mandatory reinvestment or other requirement imposed by the
Committee). During the restricted period
A-5
applicable to the Restricted Stock Award, the Restricted Stock Award may
not be sold, transferred, pledged, hypothecated, margined or otherwise
encumbered by the Participant.
(ii) Forfeiture. Except as otherwise determined by the Committee,
upon termination of employment during the applicable restriction period,
Restricted Stock Awards that are at that time subject to restrictions shall
be forfeited and reacquired by the Company; provided that the Committee may
provide, by rule or regulation or in any Award agreement, or may determine
in any individual case, that restrictions or forfeiture conditions relating
to Restricted Stock Awards shall be waived in whole or in part in the event
of terminations resulting from specified causes, and the Committee may in
other cases waive in whole or in part the forfeiture of Restricted Stock
Awards.
(iii) Certificates for Shares. Restricted Stock Awards granted under
the Plan may be evidenced in such manner as the Committee shall determine.
If certificates for Shares relating to Restricted Stock Awards are
registered in the name of the Participant, the Committee may require that
such certificates bear an appropriate legend referring to the terms,
conditions and restrictions applicable to such Restricted Stock Awards,
that the Company retain physical possession of the certificates, and that
the Participant deliver a stock power to the Company, endorsed in blank,
relating to such Shares.
(iv) Dividends and Splits. As a condition to the grant of a
Restricted Stock Award, the Committee may require or permit a Participant
to elect that any cash dividends paid on a Share related to the Restricted
Stock Award be automatically reinvested in additional Shares related to the
Restricted Stock Award or applied to the purchase of additional Awards
under the Plan. Unless otherwise determined by the Committee, Shares
distributed in connection with a stock split or stock dividend, and other
property distributed as a dividend, shall be subject to restrictions and a
risk of forfeiture to the same extent as the Restricted Stock Award with
respect to which such Shares or other property has been distributed.
(c) Bonus Stock Awards. The Committee is authorized to grant Awards of
Shares as bonuses, provided that, in the case of Participants subject to Section
16 of the Exchange Act, the amount of such grants remains within the discretion
of the Committee to the extent necessary to ensure that such Awards are exempt
from liability under Section 16(b) of the Exchange Act. Bonus Stock Awards shall
be subject to such other terms as shall be determined by the Committee.
(d) Performance Goals. To the extent the Committee determines that any
Award granted pursuant to this Section 6 shall constitute performance-based
compensation for purposes of Section 162(m) of the Code, the grant or settlement
of the Award shall, in the Committee's discretion, be subject to the achievement
of performance goals determined and applied in a manner consistent with Section
8(b).
7. Stock Appreciation Rights and Phantom Stock.
(a) Stock Appreciation Rights. The Committee is authorized to grant Stock
Appreciation Rights to Participants on the following terms and conditions:
(i) Right to Payment. A Stock Appreciation Right shall confer on the
Participant to whom it is granted a right to receive, upon exercise
thereof, the excess of (A) the Fair Market Value of one Share on the date
of exercise over (B) the grant price of the Stock Appreciation Right as
determined by the Committee.
(ii) Rights Related to Options. A Stock Appreciation Right granted in
connection with an Option shall entitle a Participant, upon exercise
thereof, to surrender that Option or any portion thereof, to the extent
unexercised, and to receive payment of an amount computed pursuant to
Subsection 7(a)(i) hereof. That Option shall then cease to be exercisable
to the extent surrendered. A Stock Appreciation Right granted in connection
with an Option shall be exercisable only at such time or times and only to
the extent that the related Option is exercisable and shall not be
transferable except to the extent that the related Option is transferable.
A-6
(iii) Right Without Option. A Stock Appreciation Right granted
independent of an Option shall be exercisable as determined by the
Committee and set forth in the Award agreement governing the Stock
Appreciation Right.
(iv) Terms. The Committee shall determine at the date of grant the
time or times at which and the circumstances under which a Stock
Appreciation Right may be exercised in whole or in part (including based on
achievement of performance goals and/or future service requirements), the
method of exercise, whether or not a Stock Appreciation Right shall be in
tandem or in combination with any other Award, and any other terms and
conditions of any Stock Appreciation Right.
(b) Phantom Stock Awards. The Committee is authorized to grant Phantom
Stock Awards to Participants, which are rights to receive cash at the end of a
specified deferral period, subject to the following terms and conditions:
(i) Award and Restrictions. Satisfaction of a Phantom Stock Award
shall occur upon expiration of the deferral period specified for such
Phantom Stock Award by the Committee (or, if permitted by the Committee, as
elected by the Participant). In addition, Phantom Stock Awards shall be
subject to such restrictions (which may include a risk of forfeiture), if
any, as the Committee may impose, which restrictions may lapse at the
expiration of the deferral period or at earlier specified times (including
based on achievement of performance goals and/or future service
requirements), separately or in combination, in installments or otherwise,
as the Committee may determine.
(ii) Forfeiture. Except as otherwise determined by the Committee,
upon termination of employment during the applicable deferral period or
portion thereof to which forfeiture conditions apply (as provided in any
Award agreement evidencing the Phantom Stock Awards), all Phantom Stock
Awards that are at that time subject to deferral (other than a deferral at
the election of the Participant) shall be forfeited; provided that the
Committee may provide, by rule or regulation or in any Award agreement, or
may determine in any individual case, that restrictions or forfeiture
conditions relating to Phantom Stock Awards shall be waived in whole or in
part in the event of terminations resulting from specified causes, and the
Committee may in other cases waive in whole or in part the forfeiture of
Phantom Stock Awards.
(c) Performance Goals. To the extent the Committee determines that any
Award granted pursuant to this Section 7 shall constitute performance-based
compensation for purposes of Section 162(m) of the Code, the grant or settlement
of the Award shall, in the Committee's discretion, be subject to the achievement
of performance goals determined and applied in a manner consistent with Section
8(b).
8. Performance Awards.
(a) Performance Awards. The Committee may grant Performance Awards based
on performance criteria measured over a period of not less than one year and not
more than ten years. The Committee may use such business criteria and other
measures of performance as it may deem appropriate in establishing any
performance conditions, and may exercise its discretion to increase the amounts
payable under any Award subject to performance conditions except as limited
under Section 8(b) in the case of a Performance Award granted to a Covered
Employee.
(b) Performance Goals. The grant and/or settlement of a Performance Award
shall be contingent upon terms set forth in this Section 8(b).
(i) General. The performance goals for Performance Awards shall
consist of one or more business criteria and a targeted level or levels of
performance with respect to each of such criteria, as specified by the
Committee. In the case of any Award granted to a Covered Employee,
performance goals shall be designed to be objective and shall otherwise
meet the requirements of Section 162(m) of the Code and regulations
thereunder (including Treasury Regulation sec. 1.162-27 and successor
regulations thereto), including the requirement that the level or levels of
performance targeted by the Committee are such that the achievement of
performance goals is "substantially uncertain" at the time of grant. The
Committee may determine that such Performance Awards shall be granted
and/or settled upon achievement of any one performance goal or that two or
more of the performance goals must be achieved as a condition to the
A-7
grant and/or settlement of such Performance Awards. Performance goals may
differ among Performance Awards granted to any one Participant or for
Performance Awards granted to different Participants.
(ii) Business Criteria. One or more of the following business
criteria for the Company, on a consolidated basis, and/or for specified
Subsidiaries, divisions or business or geographical units of the Company
(except with respect to the total stockholder return and earnings per share
criteria), shall be used by the Committee in establishing performance goals
for Performance Awards granted to a Covered Employee: (A) earnings per
share; (B) increase in revenues; (C)increase in cash flow; (D) increase in
cash flow return; (E) return on net assets; (F) return on assets; (G)
return on investment; (H) return on capital; (I) return on equity; (J)
economic value added; (K) gross margin; (L) net income; (M) pretax
earnings; (N) pretax earnings before interest, depreciation and
amortization; (O) pretax operating earnings after interest expense and
before incentives, service fees, and extraordinary or special items; (P)
operating income; (Q) total stockholder return; (R) debt reduction; and (S)
any of the above goals determined on an absolute or relative basis or as
compared to the performance of a published or special index deemed
applicable by the Committee including, but not limited to, the Standard &
Poor's 500 Stock Index or a group of comparable companies.
(iii) Performance Period; Timing for Establishing Performance
Goals. Achievement of performance goals in respect of Performance Awards
shall be measured over a performance period of not less than one year and
not more than ten years, as specified by the Committee. Performance goals
in the case of any Award granted to a Covered Employee shall be established
not later than 90 days after the beginning of any performance period
applicable to such Performance Awards, or at such other date as may be
required or permitted for "performance-based compensation" under Section
162(m) of the Code.
(iv) Settlement of Performance Awards; Other Terms. After the end of
each performance period, the Committee shall determine the amount, if any,
of Performance Awards payable to each Participant based upon achievement of
business criteria over a performance period. The Committee may not exercise
discretion to increase any such amount payable in respect of a Performance
Award designed to comply with Section 162(m) of the Code. The Committee
shall specify the circumstances in which such Performance Awards shall be
paid or forfeited in the event of termination of employment by the
Participant prior to the end of a performance period or settlement of
Performance Awards.
(v) Written Determinations. All determinations by the Committee as to
the establishment of performance goals, the amount of any Performance
Award, and the achievement of performance goals relating to Performance
Awards shall be made in writing in the case of any Award granted to a
Covered Employee. The Committee may not delegate any responsibility
relating to such Performance Awards.
(vi) Status of Performance Awards under Section 162(m) of the
Code. It is the intent of the Company that Performance Awards granted to
persons who are designated by the Committee as likely to be Covered
Employees within the meaning of Section 162(m) of the Code and regulations
thereunder (including Treasury Regulation sec. 1.162-27 and successor
regulations thereto) shall, if so designated by the Committee, constitute
"performance-based compensation" within the meaning of Section 162(m) of
the Code and regulations thereunder. Accordingly, the terms of this Section
8(b) shall be interpreted in a manner consistent with Section 162(m) of the
Code and regulations thereunder. The foregoing notwithstanding, because the
Committee cannot determine with certainty whether a given Participant will
be a Covered Employee with respect to a fiscal year that has not yet been
completed, the term Covered Employee as used herein shall mean only a
person designated by the Committee, at the time of grant of a Performance
Award, who is likely to be a Covered Employee with respect to that fiscal
year. If any provision of the Plan as in effect on the date of adoption or
any agreements relating to Performance Awards that are designated as
intended to comply with Section 162(m) of the Code does not comply or is
inconsistent with the requirements of Section 162(m) of the Code or
regulations thereunder, such provision shall be construed or deemed amended
to the extent necessary to conform to such requirements.
A-8
9. Certain Provisions Applicable to All Awards.
(a) General. Awards may be granted on the terms and conditions set forth
in Sections 6, 7 and 8 hereof and this Section 9. In addition, the Committee may
impose on any Award or the exercise thereof, such additional terms and
conditions, not inconsistent with the provisions of the Plan, as the Committee
shall determine, including terms requiring forfeiture of Awards in the event of
termination of employment by the Participant and terms permitting a Participant
to make elections relating to his or her Award. The Committee shall retain full
power and discretion to accelerate or waive, at any time, any term or condition
of an Award that is not mandatory under the Plan; provided, however, that the
Committee shall not have any discretion to accelerate or waive any term or
condition of an Award that is intended to qualify as "performance-based
compensation" for purposes of Section 162(m) of the Code if such discretion
would cause the Award not to so qualify. Except in cases in which the Committee
is authorized to require other forms of consideration under the Plan, or to the
extent other forms of consideration must be paid to satisfy the requirements of
the Delaware General Corporation Law, no consideration other than services may
be required for the grant of any Award.
(b) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards granted
under the Plan may, in the discretion of the Committee, be granted either alone
or in addition to, in tandem with, or in substitution or exchange for, any other
Award or any award granted under another plan of the Company, any Subsidiary, or
any business entity to be acquired by the Company or a Subsidiary, or any other
right of a Participant to receive payment from the Company or any Subsidiary.
Such additional, tandem and substitute or exchange Awards may be granted at any
time. If an Award is granted in substitution or exchange for another Award, the
Committee shall require the surrender of such other Award in consideration for
the grant of the new Award. In addition, Awards may be granted in lieu of cash
compensation, including in lieu of cash amounts payable under other plans of the
Company or any Subsidiary.
(c) Term of Awards. The term of each Award shall be for such period as may
be determined by the Committee; provided that in no event shall the term of any
Option or Stock Appreciation Right exceed a period of ten years (or such shorter
term as may be required in respect of an Incentive Stock Option under Section
422 of the Code).
(d) Form and Timing of Payment under Awards; Deferrals. Subject to the
terms of the Plan and any applicable Award agreement, payments to be made by the
Company or a Subsidiary upon the exercise of an Option or other Award or
settlement of an Award may be made in a single payment or transfer, in
installments, or on a deferred basis. The settlement of any Award may, subject
to any limitations set forth in the Award agreement, be accelerated and cash
paid in lieu of Shares in connection with such settlement, in the discretion of
the Committee or upon occurrence of one or more specified events. In the
discretion of the Committee, Awards granted pursuant to Sections 7 or 8 of the
Plan may be payable in Shares to the extent permitted by the terms of the
applicable Award agreement. Installment or deferred payments may be required by
the Committee (subject to Section 10(f) of the Plan, including the consent
provisions thereof in the case of any deferral of an outstanding Award not
provided for in the original Award agreement) or permitted at the election of
the Participant on terms and conditions established by the Committee. Payments
may include, without limitation, provisions for the payment or crediting of
reasonable interest on installment or deferred payments or the grant or
crediting of amounts in respect of installment or deferred payments denominated
in Shares. Any deferral shall only be allowed as is provided in a separate
deferred compensation plan adopted by the Company. The Plan shall not constitute
an "employee benefit plan" for purposes of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended.
(e) Exemptions from Section 16(b) Liability. It is the intent of the
Company that the grant of any Awards to or other transaction by a Participant
who is subject to Section 16 of the Exchange Act shall be exempt from Section
16(b) of the Exchange Act pursuant to an applicable exemption (except for
transactions acknowledged by the Participant in writing to be non-exempt).
Accordingly, if any provision of this Plan or any Award agreement does not
comply with the requirements of Rule 16b-3 as then applicable to any such
transaction, such provision shall be construed or deemed amended to the extent
necessary to conform to the
A-9
applicable requirements of Rule 16b-3 so that such Participant shall avoid
liability under Section 16(b) of the Exchange Act.
10. General Provisions.
(a) Company's Right to Terminate or Modify Awards in Certain
Circumstances. Except to the extent that an Award agreement provides otherwise
with specific reference to this Section 10(a), in the event of (i) an
acquisition of substantially all of the assets of the Company or of a greater
than 80% stock interest in the Company by an entity in which the Company does
not have a 50% or greater interest prior to such acquisition, or (ii) a merger,
consolidation, or recapitalization involving a fundamental change in the capital
structure of the Company, the Company shall have the right to terminate any
Award upon the payment of an amount equal to the then value of the Award,
without regard to vesting or forfeiture provisions of the Award, as determined
by the Committee, taking into account to the extent determined by the Committee
to be appropriate the Fair Market Value of Shares at the time of termination and
the performance of the Company up to the time of termination. Upon tender of
payment by the Company to a holder of the amount determined by the Committee
pursuant to this provision, the Award held by such holder shall automatically
terminate. Alternatively, in such circumstances, the Company, in the discretion
of the Board, may make arrangements for the acquiring or surviving corporation
to assume any or all outstanding Awards and substitute on equitable terms Awards
relating to the stock or performance of such acquiring or surviving corporation.
The determinations of the Board and/or the Committee pursuant to this Section
10(a) shall be final, binding and conclusive.
(b) No Limitation on Other Company Transactions. The existence of the Plan
and the Awards granted hereunder shall not affect in any way the right or power
of the Board or the stockholders of the Company to make or authorize any
adjustment, recapitalization, reorganization or other change in the Company's
capital structure or its business, any merger or consolidation of the Company,
any issue of debt or equity securities affecting Shares or the rights thereof,
the dissolution or liquidation of the Company or any sale, lease, exchange or
other disposition of all or any part of its assets or business or any other
corporate act or proceeding.
(c) Dilution or Other Adjustments. In the event that there is any change
in the Shares through merger, consolidation, reorganization or recapitalization
or in the event of any stock split or dividend to holders of Shares payable in
Shares or the issuance to such holders of rights to subscribe to Shares, or in
the event of any change in the capital structure of the Company, the Board
shall, subject to any requirements of applicable law, regulations and rules,
make such adjustments with respect to any provision or provisions of the Plan,
including but not limited to the limitations on Awards that may be granted under
the Plan as set forth in Sections 4 and 5, and with respect to Awards
theretofore granted under the Plan as the Board deems appropriate to prevent
dilution or enlargement of Award rights. The determinations of the Board
pursuant to this Section 10(b) shall be final, binding and conclusive. Except as
hereinbefore expressly provided, the issuance by the Company of shares of stock
of any class or securities convertible into shares of stock of any class, for
cash, property, labor or services, upon direct sale, upon the exercise of rights
or warrants to subscribe therefor, or upon conversion of shares or obligations
of the Company convertible into such shares or other securities, and in any case
whether or not for fair value, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number of Shares relating to Awards
theretofore granted or the exercise price per Share in the case of Options.
(d) Transferability.
(i) Permitted Transferees. The Committee may, in its discretion,
permit a Participant to transfer all or any portion of an Award or
authorize all or a portion of an Award to be granted to an Eligible Person
on terms which permit transfer by such Participant; provided that, in
either case a transferee may only be a child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, former spouse, sibling, niece,
nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, including adoptive relationships, in each
case with respect to the Participant, a trust in which these persons have
more than fifty percent of the beneficial interest, a foundation in which
these persons (or the Participant) control the management of assets, and
any other entity in which these persons (or the
A-10
Participant) own more than fifty percent of the voting interests
(collectively, "Permitted Transferees"); provided further that, (A) there
may be no consideration for any such transfer and (B) subsequent transfers
of Awards transferred as provided above shall be prohibited except
subsequent transfers back to the original holder of the Award and transfers
to other Permitted Transferees of the original holder. Agreements
evidencing Awards with respect to which such transferability is authorized
at the time of grant must be approved by the Committee, and must expressly
provide for transferability in a manner consistent with this Subsection
10(d)(i).
(ii) Qualified Domestic Relations Orders. An Award may be
transferred, to a Permitted Transferee, pursuant to a domestic relations
order entered or approved by a court of competent jurisdiction upon
delivery to the Company of written notice of such transfer and a certified
copy of such order.
(iii) Other Transfers. Except as expressly permitted by Subsections
10(d)(i) and 10(d)(ii) above, Awards shall not be transferable other than
by will or the laws of descent and distribution. Notwithstanding anything
to the contrary in this Section 10, an Incentive Stock Option shall not be
transferable other than by will or the laws of descent and distribution.
(iv) Effect of Transfer. Following the transfer of any Award as
contemplated by Subsections 10(d)(i), 10(d)(ii) and 10(d)(iii) above, (A)
such Award shall continue to be subject to the same terms and conditions as
were applicable immediately prior to transfer, provided that the term
"Participant" shall be deemed to refer to the Permitted Transferee, the
recipient under a qualified domestic relations order, the estate or heirs
of a deceased Participant, or other transferee, as applicable, to the
extent appropriate to enable the Permitted Transferee to exercise the
transferred Award in accordance with the terms of the Plan and applicable
law and (B) the provisions of the Award relating to exercisability thereof
shall continue to be applied with respect to the original Participant and,
following the occurrence of any such events described therein, the Awards
shall be exercisable by the Permitted Transferee, the recipient under a
qualified domestic relations order, the estate or heirs of a deceased
Participant, or other transferee, as applicable, only to the extent and for
the periods that would have been applicable in the absence of the transfer.
(v) Procedures and Restrictions. Any Participant desiring to transfer
an Award as permitted under Subsections 10(d)(i), 10(d)(ii) or 10(d)(iii)
above shall make application therefor in the manner and time specified by
the Committee and shall comply with such other requirements as the
Committee may require to assure compliance with all applicable securities
laws. The Committee shall not give permission for such a transfer if (A) it
would give rise to short-swing liability under Section 16(b) of the
Exchange Act or (B) it may not be made in compliance with all applicable
federal, state and foreign securities laws.
(vi) Registration. To the extent the issuance to any Permitted
Transferee of any Shares issuable pursuant to Awards transferred as
permitted in this Section 10(d) is not registered pursuant to the effective
registration statement of the Company generally covering the Shares to be
issued pursuant to the Plan to initial holders of Awards, the Company shall
not have any obligation to register the issuance of any such Shares to any
such transferee.
(e) Taxes. The Company and any Subsidiary are authorized to withhold from
any Award granted, or any payment relating to an Award under the Plan, including
from a distribution of Shares, amounts of withholding and other taxes due or
potentially payable in connection with any transaction involving an Award, and
to take such other action as the Committee may deem advisable to enable the
Company and Participants to satisfy obligations for the payment of withholding
taxes and other tax obligations relating to any Award. This authority shall
include authority to withhold or receive Shares or other property and to make
cash payments in respect thereof in satisfaction of a Participant's tax
obligations, either on a mandatory or elective basis in the discretion of the
Committee.
(f) Changes to the Plan and Awards. The Board may amend, alter, suspend,
discontinue or terminate the Plan or the Committee's authority to grant Awards
under the Plan without the consent of stockholders or Participants, except that
any amendment or alteration to the Plan, including any increase in any Share
limitation, shall be subject to the approval of the Company's stockholders not
later than the annual meeting
A-11
next following such Board action if such stockholder approval is required by any
federal or state law or regulation or the rules of any stock exchange or
automated quotation system on which the Shares may then be listed or quoted, and
the Board may otherwise, in its discretion, determine to submit other such
changes in this Plan to stockholders for approval; provided that, without the
consent of an affected Participant, no such Board action may materially and
adversely affect the rights of such Participant under any previously granted and
outstanding Award. The Committee may waive any conditions or rights under, or
amend, alter, suspend, discontinue or terminate any Award theretofore granted
and any Award agreement relating thereto, except as otherwise provided in the
Plan; provided that, without the consent of an affected Participant, no such
Committee action may materially and adversely affect the rights of such
Participant under such Award.
(g) Limitation on Rights Conferred under Plan. Neither the Plan nor any
action taken hereunder shall be construed as (i) giving any Eligible Person or
Participant the right to continue as an Eligible Person or Participant or in the
employ or service of the Company or a Subsidiary, (ii) interfering in any way
with the right of the Company or a Subsidiary to terminate any Eligible Person's
or Participant's employment or service at any time, (iii) giving an Eligible
Person or Participant any claim to be granted any Award under the Plan or to be
treated uniformly with other Participants and employees, or (iv) conferring on a
Participant any of the rights of a stockholder of the Company unless and until
the Participant is duly issued or transferred Shares in accordance with the
terms of an Award.
(h) Nonexclusivity of the Plan. Neither the adoption of the Plan by the
Board nor its submission to the stockholders of the Company for approval shall
be construed as creating any limitations on the power of the Board or a
committee thereof to adopt such other incentive arrangements as it may deem
desirable, including incentive arrangements and awards which do not qualify
under Section 162(m) of the Code. Nothing contained in the Plan shall be
construed to prevent the Company or any Subsidiary from taking any corporate
action which is deemed by the Company or such Subsidiary to be appropriate or in
its best interest, whether or not such action would have an adverse effect on
the Plan or any Award made under the Plan. No employee, beneficiary or other
person shall have any claim against the Company or any Subsidiary as a result of
any such action.
(i) Payments in the Event of Forfeitures; Fractional Shares; Share
Allotments. Unless otherwise determined by the Committee, in the event of a
forfeiture of an Award with respect to which a Participant paid cash or other
consideration to the Company in exchange for such Award, the Participant shall
be repaid the amount of such cash or other consideration. Unless otherwise
determined by the Committee, no fractional Shares, or Shares in lots of less
than 100 Shares, shall be issued or delivered pursuant to the Plan or any Award.
The Committee shall determine whether cash, other Awards or other property shall
be issued or paid in lieu of such fractional Shares, or lots of less than 100
Shares, and whether fractional Shares or any rights thereto shall be forfeited
or otherwise eliminated.
(j) Severability. If any provision of the Plan is held to be illegal or
invalid for any reason, the illegality or invalidity shall not affect the
remaining provisions hereof, but such provision shall be fully severable and the
Plan shall be construed and enforced as if the illegal or invalid provision had
never been included herein. If any of the terms or provisions of the Plan or any
Award agreement conflict with the requirements of Rule 16b-3 (as those terms or
provisions are applied to Eligible Persons who are subject to Section 16(b) of
the Exchange Act) or Section 422 of the Code (with respect to Incentive Stock
Options), then those conflicting terms or provisions shall be deemed inoperative
to the extent they so conflict with the requirements of Rule 16b-3 (unless the
Board or the Committee, as appropriate, has expressly determined that the Plan
or such Award should not comply with Rule 16b-3) or Section 422 of the Code.
With respect to Incentive Stock Options, if the Plan does not contain any
provision required to be included herein under Section 422 of the Code, that
provision shall be deemed to be incorporated herein with the same force and
effect as if that provision had been set out at length herein; provided,
further, that, to the extent any Option that is intended to qualify as an
Incentive Stock Option cannot so qualify, such Option (to that extent) shall be
deemed a Non-Qualified Stock Option for all purposes of the Plan.
(k) Governing Law. All questions arising with respect to the provisions of
the Plan and Awards shall be determined by application of the laws of the State
of Texas, without giving effect to any conflict of law
A-12
provisions thereof, except to the extent Texas law is preempted by federal law
or where the law of the state of incorporation of the Company shall be
mandatorily applied. The obligation of the Company to sell and deliver Shares
hereunder is subject to applicable federal and state laws and to the approval of
any governmental authority required in connection with the authorization,
issuance, sale, or delivery of such Shares.
(l) Conditions to Delivery of Shares. Nothing herein or in any Award
granted hereunder or any Award agreement shall require the Company to issue any
Shares with respect to any Award if that issuance would, in the opinion of
counsel for the Company, constitute a violation of the Securities Act or any
similar or superseding statute or statutes, any other applicable statute or
regulation, or the rules of any applicable securities exchange or securities
association, as then in effect. At the time of any exercise of an Option or
Stock Appreciation Right, or at the time of any grant of a Restricted Stock
Award, Bonus Stock Award or Phantom Stock Award, the Company may, as a condition
precedent to the exercise of such Option or Stock Appreciation Right, vesting of
any Restricted Stock Award or Phantom Stock Award, or grant of any Bonus Stock
Award, require from the Participant (or in the event of his death, his legal
representatives, heirs, legatees, or distributees) such written representations,
if any, concerning the holder's intentions with regard to the retention or
disposition of the Shares being acquired pursuant to the Award and such written
covenants and agreements, if any, as to the manner of disposal of such Shares
as, in the opinion of counsel to the Company, may be necessary to ensure that
any disposition by that holder (or in the event of the holder's death, his legal
representatives, heirs, legatees, or distributees) will not involve a violation
of the Securities Act or any similar or superseding statute or statutes, any
other applicable state or federal statute or regulation, or any rule of any
applicable securities exchange or securities association, as then in effect.
(m) Plan Effective Date, Stockholder Approval and Plan Duration. The Plan
has been adopted by the Board originally effective as of January 1, 2001 and as
amended and restated effective as of December 12, 2002 contingent upon the
approval of the stockholders of the Company. If the stockholders of the Company
do not approve the Plan as amended and restated, the Plan shall continue in
effect as originally adopted effective January 1, 2001. No Award, other than an
Incentive Stock Option, shall be granted under the Plan after December 31, 2010
and no Incentive Stock Option shall be granted under the Plan after December 13,
2010.
A-13
HOLLY-PS-02
DETACH HERE
PROXY
HOLLY CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS - DECEMBER 13, 200112, 2002
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Lamar Norsworthy, Gerard L. Regard, Matthew P. Clifton and Kathryn H. Walker, or
any of them or their substitutes, are hereby appointed proxies to represent and
to vote the stock of Holly Corporation standing in the name(s) of the
undersigned at the Annual Meeting of Stockholders to be held in Artesia, New
Mexico on December 13, 2001,12, 2002, and at all adjournments thereof.
TO VOTE IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS YOU DO
NOT NEED TO MARK ANY OF THE BOXES. JUST DATE AND SIGN ON THE REVERSE SIDE.
- ----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ----------- -----------
[HOLLY CORPORATION LOGO] THIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT.
----------------- ----------------
VOTE BY TELEPHONE VOTE BY INTERNET
----------------- ----------------
It's fast, convenient, and immediate! It's fast, convenient, and your vote
Call Toll-Free on a Touch-Tone Phone is immediately confirmed and posted.
1-877-PRX-VOTE (1-877-779-8683).
--------------------------------------- ---------------------------------------
FOLLOW THESE FOUR EASY STEPS: FOLLOW THESE FOUR EASY STEPS:
1. READ THE ACCOMPANYING PROXY 1. READ THE ACCOMPANYING PROXY
STATEMENT/PROSPECTUS AND PROXY CARD. STATEMENT/PROSPECTUS AND PROXY CARD.
2. CALL THE TOLL-FREE NUMBER 2. GO TO THE WEBSITE
1-877-PRX-VOTE (1-877-779-8683). http://www.eproxyvote.com/hoc
3. ENTER YOUR VOTER CONTROL NUMBER 3. ENTER YOUR VOTER CONTROL NUMBER
LOCATED ON YOUR PROXY CARD ABOVE LOCATED ON YOUR PROXY CARD ABOVE
YOUR NAME. YOUR NAME.
4. FOLLOW THE RECORDED INSTRUCTIONS. 4. FOLLOW THE INSTRUCTIONS PROVIDED.
--------------------------------------- ---------------------------------------
YOUR VOTE IS IMPORTANT! YOUR VOTE IS IMPORTANT
Call 1-877-PRX-VOTE anytime! Go to http://www.eproxyvote.com/hoc
anytime!
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
DETACH HERE
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE.
This proxy when properly executed will be voted as directed. If no direction is
given, it will be voted FOR the election of all nominees as directors and in the
discretion of those authorized to vote this proxy on any other business.
The Board of Directors recommends a vote "FOR" the nominees.
1. Election of Directors:
Nominees: (01) M.P. Clifton, (02) W.J. Glancy, (03) W.J. Gray,
(04) M.R. Hickerson, (05) T.K. Matthews, (06) R.G. McKenzie,
(07) L. Norsworthy, (08) J.P. Reid and (09) P.T. Stoffel
FOR WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
[ ] [ ]
[ ]
---------------------------------------
For all nominees except as noted above
2. Other Business - Voting upon any other business properly brought before the
meeting or any adjournment thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Receipt of the Company's Annual Report for its
2001
[HOLLY CORPORATION LOGO] THIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT.
- ----------------- ----------------
VOTE BY TELEPHONE VOTE BY INTERNET
- ----------------- ----------------
It's fast, convenient, and immediate! It's fast, convenient, and your vote
Call Toll-Free on a Touch-Tone Phone is immediately confirmed and posted.
1-877-PRX-VOTE (1-877-779-8683).
- --------------------------------------- ---------------------------------------
FOLLOW THESE FOUR EASY STEPS: FOLLOW THESE FOUR EASY STEPS:
1. READ THE ACCOMPANYING PROXY 1. READ THE ACCOMPANYING PROXY
STATEMENT/PROSPECTUS AND PROXY CARD. STATEMENT/PROSPECTUS AND PROXY CARD.
2. CALL THE TOLL-FREE NUMBER 2. GO TO THE WEBSITE
1-877-PRX-VOTE (1-877-779-8683). http://www.eproxyvote.com/hoc
3. ENTER YOUR VOTER CONTROL NUMBER 3. ENTER YOUR VOTER CONTROL NUMBER
LOCATED ON YOUR PROXY CARD ABOVE LOCATED ON YOUR PROXY CARD ABOVE
YOUR NAME. YOUR NAME.
4. FOLLOW THE RECORDED INSTRUCTIONS. 4. FOLLOW THE INSTRUCTIONS PROVIDED.
- --------------------------------------- ---------------------------------------
YOUR VOTE IS IMPORTANT! YOUR VOTE IS IMPORTANT
Call 1-877-PRX-VOTE anytime! Go to http://www.eproxyvote.com/hoc
anytime!
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
DETACH HERE
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS
GIVEN, IT WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES AS DIRECTORS, FOR THE
APPROVAL OF AMENDING AND RESTATING THE 2000 STOCK OPTION PLAN AS THE HOLLY
CORPORATION LONG-TERM INCENTIVE COMPENSATION PLAN AND IN THE DISCRETION OF THOSE
AUTHORIZED TO VOTE THIS PROXY ON ANY OTHER BUSINESS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES.
1. Election of Directors:
NOMINEES: (01) M.P. Clifton, (02) W.J. Glancy, (03) W.J. Gray,
(04) M.R. Hickerson, (05) T.K. Matthews, (06) R.G. McKenzie,
(07) L. Norsworthy, (08) J.P. Reid and (09) P.T. Stoffel
FOR WITHHELD
ALL [ ] FROM ALL [ ]
NOMINEES NOMINEES
[ ]
---------------------------------------
For all nominees except as noted above
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM 2.
FOR AGAINST ABSTAIN
2. Approval of amending and restating the 2000 Stock Option Plan as the [ ] [ ] [ ]
Holly Corporation Long-Term Incentive Compensation Plan.
3. Other Business - Voting upon any other business properly brought
before the meeting or any adjournment thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Receipt of the Company's Annual Report for its 2002 fiscal year,
Notice of Annual Meeting and related Proxy Statement is hereby
acknowledged, and all former proxies are hereby revoked.
Please sign below exactly as name(s) appear(s) hereon. Joint
tenants should both sign. Executors, administrators, trustees
or guardians should show their capacity as such. Corporations
should sign by President or other authorized officer and
indicate such title.
Signature: Date: Signature: Date:
------------------- ------------ ------------------- ------------