<PAGE> 1
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:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
HOLLY CORPORATION
100 CRESCENT COURT
SUITE 1600
DALLAS, TEXAS 75201-6927
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------------
DECEMBER 11, 1997
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 11, 1997, at 9:30 o'clock A.M. local time, to
1. Elect a board of eight directors for the ensuing year; and
2. Transact such other business as may properly come before the meeting,
or any adjournment thereof.
Only stockholders of record on October 24, 1997 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. 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:
HENRY A. TEICHHOLZ
Vice President, Treasurer and
Controller
November 3, 1997
<PAGE> 3
PROXY STATEMENT
OF
HOLLY CORPORATION
100 CRESCENT COURT
SUITE 1600
DALLAS, TEXAS 75201-6927
The enclosed proxy for the Annual Meeting of Stockholders is being
solicited on behalf of the Board of Directors of Holly Corporation and is
revocable at any time prior to the exercise of the powers conferred thereby by
written notice to the Controller of the Company or in open meeting. The proxy
statement and proxy are expected to be sent to stockholders commencing on
November 3, 1997. The cost of soliciting proxies will be borne by the Company.
Regular employees of the Company may solicit proxies by mail, telephone,
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 1997 fiscal year, which ended on July
31, 1997, is being distributed concurrently herewith. The Board of Directors has
fixed October 24, 1997, 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 8,253,514 shares of the common stock, par value
$.01 per share (the "Common Stock"), the holders of which are entitled to one
vote per share.
<PAGE> 4
PRINCIPAL STOCKHOLDERS
The table below lists the only persons known to the management to own
beneficially, as beneficial ownership is defined by Rule 13d-3 adopted by the
Securities and Exchange Commission ("SEC"), 5% or more of the Company's Common
Stock as of October 10, 1997:
<TABLE>
<CAPTION>
PERCENT OF
NAME AND ADDRESS AMOUNT AND NATURE OF COMMON STOCK
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(A) OUTSTANDING
------------------- ----------------------- ------------
<S> <C> <C>
Texas Commerce Bank, N.A. 1,058,561 shares(1) 12.8%
Trustee for Holly Corporation Employee
Stock Ownership Plan
P.O. Box 2558
Houston, Texas 77252
Brown Brothers Harriman Trust Company of Texas, as 1,511,136 shares 18.3%
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 93,854 shares 1.1%
trustee
of a trust for the benefit of David Norsworthy.
2001 Ross Avenue
Dallas, Texas 75201-2996
Lamar Norsworthy 328,859 shares(3) 4.0%
100 Crescent Court
Dallas, Texas 75201-6927
Nona Barrett 328,132 shares 4.0%
P.O. Box 150
Crested Butte, Colorado 81224
David Norsworthy, Lamar Norsworthy and Brown Brothers 285,858 shares(5) 3.5%
Harriman Trust Company of Texas, as co-trustees of
three trusts for the benefit of David and Lamar
Norsworthy and Nona Barrett, respectively(4)
2001 Ross Avenue
Dallas, Texas 75201-2996
The Guardian Life Insurance Company of America, its 775,268 shares(6) 9.4%
subsidiaries and affiliates, acting in various
fiduciary
capacities
201 Park Avenue South
New York, New York 10003
Smith Barney, Inc. 592,464 shares 7.2%
500 108th Ave. NE, Suite 1900
Bellevue, Washington 98004
</TABLE>
(All notes appear on following page)
2
<PAGE> 5
- ---------------
(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 seven, are residuary beneficiaries of
these trusts.
(3) Does not include 285,858 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 285,858 shares are held in a limited partnership of which the
general partner is a limited liability company owned and controlled by
these trusts; the 98.5% limited partner in such partnership is a trust of
which David Norsworthy, 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
and Lamar Norsworthy and Nona Barrett of which Brown Brothers Harriman
Trust Company of Texas is the trustee.
(5) The three co-trustees share indirect voting and investment powers. Lamar
Norsworthy disclaims that he is the beneficial owner except as to 1,430 of
these shares.
(6) Beneficial owner has shared voting and investment power with respect to
507,268 shares and sole voting and investment power with respect to 268,000
shares.
The Company is advised that as of October 10, 1997 the present executive
officers and directors of the Company as a group owned beneficially 839,363
shares (including 284,428 shares as to which Lamar Norsworthy, Chairman of the
Board and Chief Executive Officer of the Company, disclaims beneficial
ownership) or approximately 10.2% of the Common Stock. Other than Lamar
Norsworthy, no executive officer owns more than 1% of the Company's Common
Stock.
3
<PAGE> 6
ELECTION OF DIRECTORS
At the Annual Meeting it is proposed to elect the eight management 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 was elected as director by the
shareholders at the annual meeting in 1996. 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. 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 and beneficial ownership of shares
of Common Stock ("Common Shares"). 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, compensation committee and
public policy committee; (E) for executive committee:
Matthew P. Clifton, 46, a director since September 1995, has been with
the Company for over fifteen years and is 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. (E)
Common Shares owned............ 18,352
William J. Gray, 56, a director since September 1996, has been with
the Company for over twenty five years and is Senior Vice President,
Marketing and Supply of the Company.
Common Shares owned............ 28,429
Marcus R. Hickerson, 71, a director since 1960, has been a consultant
to Centex Development Company since 1987. (A)
Common Shares owned............. 1,556
4
<PAGE> 7
A. J. Losee, 72, a director since 1978, is of Counsel in the Artesia,
New Mexico law firm of Losee, Carson, Haas & Carroll, P.A., and has
practiced law for more than 40 years. (A) (E)
Common Shares owned............. 1,000
Thomas K. Matthews, II, 71, a director since 1978, is a financial
consultant. (A)
Common Shares owned............... 400
Robert G. McKenzie, 59, a director since 1992, has been Executive Vice
President and Chief Operating Officer of Brown Brothers Harriman Trust
Company of Texas since January 1990. (A)
Common Shares owned............. 1,000
Lamar Norsworthy, 51, a director since 1967, is Chairman of the Board
and Chief Executive Officer of the Company. From 1988 to 1995 he also was
President. (E)
Common Shares owned........ 328,859(1)
Jack P. Reid, 61, a director since 1977, is Executive Vice President,
Refining, of the Company. (E)
Common Shares owned............ 62,580
- ---------------
(1) Mr. Norsworthy shares with two co-trustees voting and investment power for
an additional 285,858 Common Shares as to which he disclaims beneficial
ownership except as to 1,430 shares; see "Principal Stockholders".
Certain information set forth above for each director nominee is based on
information furnished by such nominee; stockholdings are as of October 10, 1997.
No nominee other than Mr. Norsworthy owns beneficially as much as 1% of the
Common Stock.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
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 were
filed in a timely manner by reporting persons.
BOARD COMMITTEES AND MEETINGS
The Audit Committee of the Board of Directors, which met two times during
the 1997 fiscal year, is responsible for monitoring the Company's internal
accounting controls, recommending to
5
<PAGE> 8
the Board the selection of independent auditors, and reviewing certain
activities of the independent auditors and their reports and conclusions.
The Compensation Committee of the Board of Directors, which met five times
during the 1997 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 Executive
Stock Option Committee composed of nonemployee directors is responsible for
considering grants of stock options to officers and directors of the Company;
this committee met one time during the 1997 fiscal year.
The Public Policy Committee of the Board of Directors, which met three
times during the 1997 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.
The Board of Directors does not have a standing nominating committee.
During the 1997 fiscal year, the Board of Directors held four meetings.
Each director 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.
6
<PAGE> 9
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, 1997, 1996
and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION ALL
NAME AND --------------------------------------- OTHER
PRINCIPAL FISCAL OTHER ANNUAL COMPEN-
POSITION YEAR SALARY BONUS COMPENSATION(1) SATION
--------- ------ -------- -------- --------------- -------
<S> <C> <C> <C> <C> <C>
Lamar Norsworthy 1997 $420,900 $ 70,000 -- $15,888(2)
Chairman of the Board 1996 404,990 140,000 -- 89,322(3)
and Chief Executive Officer 1995 389,340 80,000 -- 89,471(4)
Matthew P. Clifton 1997 250,040 60,000 -- 7,441(2)
President 1996 204,265 80,000 -- 32,841(3)
1995 154,200 51,000 -- 27,325(4)
Jack P. Reid 1997 354,400 70,000 -- 15,554(2)
Executive Vice President, 1996 341,020 120,000 -- 74,194(3)
Refining 1995 327,870 70,000 -- 76,575(4)
William J. Gray 1997 201,600 55,000 -- 6,850(2)
Senior Vice President, Marketing 1996 182,800 70,000 -- 29,971(3)
and Supply 1995 174,710 55,000 -- 28,195(4)
Christopher L. Cella 1997 170,408 37,000 -- 6,602(2)
Vice President, General 1996 163,587 51,000 -- 22,754(3)
Counsel and Secretary 1995 157,025 43,000 -- 21,691(4)
</TABLE>
- ---------------
(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
individuals' total annual salary and bonus).
7
<PAGE> 10
(2) All Other Compensation -- details for fiscal 1997:
<TABLE>
<CAPTION>
DIVIDENDS COMPANY
ON MATCHING
PHANTOM THRIFT
NAME SHARES PLAN TOTAL
---- --------- -------- -------
<S> <C> <C> <C>
Lamar Norsworthy $10,090 $5,798 $15,888
Matthew P. Clifton 683 6,758 7,441
Jack P. Reid 9,756 5,798 15,554
William J. Gray 704 6,146 6,850
Christopher L. Cella 449 6,153 6,602
</TABLE>
(3) All Other Compensation -- details for fiscal 1996:
<TABLE>
<CAPTION>
DIVIDENDS
DISTRIBUTED
DIVIDENDS COMPANY ON
ESOP ON MATCHING COMPANY UNALLOCATED
RESTORATION PHANTOM THRIFT CONTRIBUTION ESOP
NAME PLAN* SHARES PLAN TO ESOP SHARES TOTAL
---- ----------- --------- -------- ------------ ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Lamar Norsworthy $68,164 $7,208 $9,352 $4,105 $493 $89,322
Matthew P. Clifton 21,579 214 6,450 4,105 493 32,841
Jack P. Reid 53,067 7,177 9,352 4,105 493 74,194
William J. Gray 17,947 290 7,136 4,105 493 29,971
Christopher L. Cella 11,600 182 6,374 4,105 493 22,754
</TABLE>
(4) All Other Compensation -- details for fiscal 1995:
<TABLE>
<CAPTION>
DIVIDENDS
DISTRIBUTED
DIVIDENDS COMPANY ON
ESOP ON MATCHING COMPANY UNALLOCATED MOVING
RESTORATION PHANTOM THRIFT CONTRIBUTION ESOP EXPENSE
NAME PLAN* SHARES PLAN TO ESOP SHARES REIMBURSEMENT TOTAL
---- ----------- --------- -------- ------------ ----------- ------------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Lamar Norsworthy $68,735 $5,648 $9,240 $4,847 $1,001 $ -- $89,471
Matthew P. Clifton 11,539 -- 5,976 4,847 1,001 3,962 27,325
Jack P. Reid 55,635 5,852 9,240 4,847 1,001 -- 76,575
William J. Gray 15,611 -- 6,736 4,847 1,001 -- 28,195
Christopher L. Cella 9,819 -- 6,024 4,847 1,001 -- 21,691
</TABLE>
- ---------------
* Amounts shown are the market value on the date of award of a number of
shares of Common Stock equal to the number of Phantom Shares awarded to the
named officer (see ESOP Restoration Plan on page 11).
8
<PAGE> 11
The following table sets forth information with respect to the exercisable
value of unexercised Phantom Shares at July 31, 1997 (other than Phantom Shares
under the ESOP Restoration Plan).
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
- -----------------------------------------------------------------------------------------------------------
SHARES NUMBER OF VALUE OF UNEXERCISED
ACQUIRED UNEXERCISED IN-THE-MONEY
ON VALUE OPTIONS/SARS AT OPTIONS/SARS AT
EXERCISE REALIZED FISCAL YEAR-END FISCAL YEAR-END
NAME (#) ($) (#) ($)
---- -------- -------- --------------- --------------------
EXERCISABLE/ EXERCISABLE/
UNEXERCISABLE UNEXERCISABLE
--------------- --------------------
<S> <C> <C> <C> <C>
Lamar Norsworthy...................... 0 0 14,124/0 $366,341/$0
Jack P. Reid.......................... 0 0 14,630/0 $$379,466/$0
</TABLE>
Phantom Shares were granted to the named officers for past services and to
compensate for the exclusion of the officers 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.
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."
9
<PAGE> 12
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 1997 for certain salary ranges under the Retirement Plan and the
retirement restoration plan described below:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE AT NORMAL RETIREMENT
HIGHEST THREE-YEAR -------------------------------------------------------------
AVERAGE SALARY 10 15 20 25 30 35
- ------------------ ------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
$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
</TABLE>
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 7 under the heading "Salary" for each executive listed therein. At
July 31, 1997, Messrs. Norsworthy, Clifton, Reid, Gray, and Cella were credited
with 24, 17, 38, 28 and 7 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 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, 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 $120,000 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
$150,000 for the 1997 fiscal 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.
10
<PAGE> 13
THRIFT AND STOCK OWNERSHIP PLANS
The Company has a Thrift Plan and an ESOP, which are 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 14% of their
compensation. The Company matches employee contributions up to 4% of their
compensation. In 1997, employee contributions which are made on a tax-deferred
basis are limited to $9,500 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."
All employees of the Company and eligible affiliates with at least one year
of service, other than employees covered by collective bargaining agreements,
participate in the ESOP established in 1985. Initially, the ESOP owned 1,500,000
shares of Common Stock. Commencing with the 1987 fiscal year, shares of Common
Stock held by the ESOP have been 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 are 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 1997 fiscal year, no shares of Common Stock held by the ESOP were
allocated to participants since allocations after the 1996 fiscal year are
effectively limited to allocations of forfeitures and there were no forfeitures
for the 1997 fiscal year. The dividends received on unallocated shares of Common
Stock held by the ESOP through the 1996 fiscal year are included in the Summary
Compensation Table under the column captioned "All Other Compensation."
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
11
<PAGE> 14
under the ESOP unless the participant elects to defer payments over a 10-year
period. A total of 15,470 phantom shares were granted to participants for the
1995 and 1996 fiscal year. Phantom shares granted through July 31, 1997 to
executive officers are as follows: 5,660 shares to Mr. Norsworthy, 1,340 to Mr.
Clifton, 4,500 to Mr. Reid, 1,380 to Mr. Gray and 880 to Mr. Cella.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company or its subsidiaries are paid
$12,000 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. Officers of the Company do not receive compensation for serving on the
Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Board of Directors during
the 1997 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 1997
fiscal year. The member of the Committee who in prior years was an officer of
the Company or of a subsidiary is indicated below by (O).
<TABLE>
<S> <C>
Marcus R. Hickerson(O) Thomas K. Matthews, II
A.J. Losee Robert G. McKenzie
</TABLE>
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.
12
<PAGE> 15
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 Executive Stock Option
Committee) and reviews overall compensation levels for the Company's other
executive officers. There were five meetings of the Compensation Committee
during the 1997 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 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 1997 fiscal year, the Company's major compensation programs for
executives were salaries, annual bonuses, benefits under retirement and thrift
plans, and benefits under the retirement restoration plan.
Salaries of executives are set at levels intended to be competitive with
levels for comparable businesses. Salaries are reviewed and adjusted annually.
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, Mr. Clifton, Mr. Reid and Mr.
Gray, Company performance is the predominant element in the determination of
bonuses. In the case of bonuses for other executives, the relative importance of
13
<PAGE> 16
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.
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 June 1, 1997, Mr. Norsworthy's annual salary
was increased by approximately 3.5% to a level of $433,200 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. For the 1997 fiscal year, Mr. Norsworthy's bonus of
$70,000 was approximately 16.6% of his salary for the year. This bonus level,
which was one half of the bonus amount paid to Mr. Norsworthy with respect to
the 1996 fiscal year, was determined on the basis of the Committee's evaluation
of the overall performance of the Company for the 1997 fiscal year. In the
Committee's view, the Company's performance for the 1997 fiscal year, although
at least partly explainable in terms of adverse industry factors experienced
during part of the year, was disappointing in terms of net income and total
return to shareholders.
The Compensation Committee, after reviewing various alternative long-term
incentive compensation programs for management of the Company, recently
recommended to the Board of Directors that it consider a compensation program
involving stock option grants for management under the existing Holly
Corporation Stock Option Plan. The Board of Directors has recently approved this
program, which is expected to be implemented in the 1998 fiscal year through
grants of options as determined by the appropriate committees of the Board.
Compensation Committee of the Board of Directors
Thomas K. Matthews, II, Chairman A.J. Losee
Marcus R. Hickerson 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.
14
<PAGE> 17
STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing, for the period of five fiscal
years commencing July 31, 1992 and ending July 31, 1997, 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)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD HOLLY INDUSTRY PEER
(FISCAL YEAR COVERED) CORPORATION S&P 500 GROUP(2)
<S> <C> <C> <C>
JULY 1992 100 100 100
JULY 1993 110.97 108.73 114.77
JULY 1994 119.73 114.34 130.22
JULY 1995 96.58 144.19 139.94
JULY 1996 113.00 168.08 148.51
JULY 1997 115.00 255.72 235.93
</TABLE>
(1) The amounts shown assume that the value of the investment in the Company and
each index was $100 on July 31, 1992 and that all dividends were
reinvested.
(2) The peer group, as chosen by the Company, includes companies that are
similar to the Company in regards to refining operations. This group is
made up of Ashland Oil, Inc., Crown Central Petroleum Corporation, Diamond
Shamrock, Inc., Getty Petroleum Corporation, Giant Industries, Inc., Sun
Company, Inc., Tesoro Petroleum Corp., Tosco Corporation, Total Petroleum
(North America) Ltd., Ultramar Corporation, Ultramar Diamond Shamrock
Corporation 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.
15
<PAGE> 18
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.
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 1998 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, will have an opportunity to make a
statement if the representative so desires, and will be available to respond to
appropriate questions.
STOCKHOLDER PROPOSALS
Proposals of stockholders to be considered for presentation at the
Company's 1998 Annual Meeting should be received by the Company by July 6, 1998,
in order to be considered for inclusion in the proxy statement for that meeting.
FINANCIAL STATEMENTS AVAILABLE
A copy of the Company's 1997 Annual Report containing the audited
consolidated balance sheets at July 31, 1997 and 1996, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three fiscal years ended July 31, 1997, is being mailed with this Proxy
Statement to shareholders entitled to notice of the Annual Meeting. The Annual
Report does not constitute a part of the proxy solicitation material.
HENRY A. TEICHHOLZ
Vice President, Treasurer and
Controller
November 3, 1997
16
<PAGE> 19
HOLLY CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS - DECEMBER 11, 1997
P
R SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
O
X Lamar Norsworthy, Gerald L. Regard and Jack P. Reid, or any of them or
Y 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 11, 1997, 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.
-----------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
-----------
/ X / Please mark
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.
<TABLE>
<S> <C>
1. Election of Directors: 2. Other Business - Voting upon any other business
properly before the meeting or any adjournment
NOMINEES: M.P. Clifton, W.J. Gray, M.R. Hickerson, thereof.
A.J. Losee, T.K. Matthews, R.G. McKenzie, L. Norsworthy
and J.P. Reid Receipt of the Company's Annual Report for its 1997
FOR WITHHELD fiscal year, Notice of the Annual Meeting and related
Proxy Statement is hereby acknowledged, and all former
/ / / / proxies are hereby revoked.
/ / / /
MARK HERE
FOR ADDRESS / /
CHANGE AND / /
/ / NOTE AT LEFT
/ /
For all nominees except as noted above 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.
Signature: ______________________________ Date: ____________ Signature: ______________________________ Date: __________
</TABLE>
