<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:
- --------------------------------------------------------------------------------
/ / 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:
- --------------------------------------------------------------------------------
<PAGE> 2
HOLLY CORPORATION
100 CRESCENT COURT
SUITE 1600
DALLAS, TEXAS 75201-6927
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------------
DECEMBER 10, 1998
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 10, 1998, 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 30, 1998 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 6, 1998
<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 6, 1998. 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 1998 fiscal year, which ended on July
31, 1998, is being distributed concurrently herewith. The Board of Directors has
fixed October 30, 1998, 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 19, 1998:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS BENEFICIAL COMMON STOCK
OF BENEFICIAL OWNER OWNERSHIP(a) OUTSTANDING
------------------- -------------------- ------------
<S> <C> <C>
Chase Bank of Texas, N.A. 1,015,596 shares(1) 12.3%
Trustee for Holly Corporation Employee
Stock Ownership Plan
P.O. Box 2558
Houston, Texas 77252-2558
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 56,606 shares 0.7%
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
DePrince, Race & Zollo, Inc. 631,900 shares 7.7%
201 South Orange Avenue
Orlando, Florida 32801
Dimensional Fund Advisors, Inc. 450,170 shares 5.5%
1299 Ocean Avenue
Santa Monica, California 90401
</TABLE>
(All notes appear on following page)
2
<PAGE> 5
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS BENEFICIAL COMMON STOCK
OF BENEFICIAL OWNER OWNERSHIP(a) OUTSTANDING
------------------- -------------------- ------------
<S> <C> <C>
FMR Corp. 440,100 shares 5.3%
82 Devonshire Street
Boston, Massachusetts 02109
</TABLE>
(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 19, 1998 the present executive
officers and directors of the Company as a group owned beneficially 838,463
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 1997. 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, 47, 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, 57, 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............ 27,049
Marcus R. Hickerson, 72, 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, 73, 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, 72, a director since 1978, is a financial
consultant. (A)
Common Shares owned............... 400
Robert G. McKenzie, 60, 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, 52, a director since 1967, is Chairman of the Board
and Chief Executive Officer of the Company. From 1988 to 1995 he also was
President. Director of Triton Energy Limited(E)
Common Shares owned........ 328,859(1)
Jack P. Reid, 62, a director since 1977, is Executive Vice President,
Refining, of the Company. (E)
Common Shares owned............ 62,959
- ---------------
(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 19, 1998.
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 once during the
1998 fiscal year, is responsible for monitoring the Company's internal
accounting controls, recommending to the
5
<PAGE> 8
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 two times
during the 1998 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 certain nonemployee directors is responsible
for considering grants of stock options to officers and directors of the
Company; this committee met one time during the 1998 fiscal year.
The Public Policy Committee of the Board of Directors, which met one time
during the 1998 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 1998 fiscal year, the Board of Directors held seven 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, 1998, 1997
and 1996.
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 1998 $436,000 $120,000 -- $18,684(2)
Chairman of the Board 1997 420,900 70,000 -- 15,888(3)
and Chief Executive Officer 1996 404,990 140,000 -- 89,322(4)
Matthew P. Clifton 1998 280,600 95,000 -- 18,583(2)
President 1997 250,040 60,000 -- 7,441(3)
1996 204,265 80,000 -- 32,841(4)
Jack P. Reid 1998 367,200 105,000 -- 18,285(2)
Executive Vice President, 1997 354,400 70,000 -- 15,554(3)
Refining 1996 341,020 120,000 -- 74,194(4)
William J. Gray 1998 209,000 75,000 -- 7,734(2)
Senior Vice President, Marketing 1997 201,600 55,000 -- 6,850(3)
and Supply 1996 182,800 70,000 -- 29,971(4)
Christopher L. Cella 1998 176,928 30,000 -- 6,862(2)
Vice President, General 1997 170,408 37,000 -- 6,602(3)
Counsel and Secretary 1996 163,587 51,000 -- 22,754(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 1998:
<TABLE>
<CAPTION>
DIVIDENDS COMPANY
ON MATCHING MOVING
PHANTOM THRIFT EXPENSE
NAME SHARES PLAN REIMBURSEMENT TOTAL
---- --------- -------- ------------- -------
<S> <C> <C> <C> <C>
Lamar Norsworthy $11,870 $6,814 $ -- $18,684
Matthew P. Clifton 804 7,000 10,779 18,583
Jack P. Reid 11,478 6,807 -- 18,285
William J. Gray 828 6,906 -- 7,734
Christopher L. Cella 528 6,334 -- 6,862
</TABLE>
(3) All Other Compensation -- details for fiscal 1997:
<TABLE>
<CAPTION>
DIVIDENDS COMPANY
ON MATCHING
PHANTOM THRIFT
NAME SHARES PLAN TOTAL
---- --------- -------- -------
<S> <C> <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>
(4) 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>
- ---------------
* 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 12).
8
<PAGE> 11
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% 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%
---- ---------- --------- -------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Lamar Norsworthy.......... -- -- $ -- -- $ -- $ --
Matthew P. Clifton........ 45,000 13.2% 26.75 3/6/08 757,032 1,918,467
Jack P. Reid.............. 50,000 14.7% 26.75 3/6/08 841,147 2,131,631
William J. Gray........... 40,000 11.8% 26.75 3/6/08 672,917 1,705,304
Christopher L. Cella...... 15,000 4.4% 26.75 3/6/08 252,344 639,489
</TABLE>
- ---------------
(1) All of these options, which were granted pursuant to the Holly Corporation
Stock Option Plan, were non-qualified, were granted at market value on the
date of grant, vest 20% at time of grant and 20% in September of each of the
following four years, and have a term of ten years.
(2) We recommend caution 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 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 2008. Depending on inflation rates, these amounts could be worth
significantly less in 2008, in real terms, than their value today.
9
<PAGE> 12
AGGREGATED OPTION/STOCK APPRECIATION RIGHT (SAR)
EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
SHARES UNDERLYING UNEXERCISED OPTIONS/SARS
ACQUIRED OPTIONS/SARS AT FY END AT FY END(2)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lamar Norsworthy(1).. 0 $0 14,124 0 $340,742 $0
Matthew P. Clifton... 0 0 9,000 36,000 0 0
Jack P. Reid(1)...... 0 0 24,630 40,000 352,949 0
William J. Gray...... 0 0 8,000 32,000 0 0
Christopher L.
Cella.............. 0 0 3,000 12,000 0 0
</TABLE>
- ---------------
(1) 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.
(2) Calculated based on the fair market value of the Company's Common Stock on
July 31, 1998 ($24.125 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."
10
<PAGE> 13
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 1998 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, 1998, Messrs. Norsworthy, Clifton, Reid, Gray, and Cella were credited
with 25, 18, 39, 29 and 8 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 $125,000 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
$160,000 for the 1998 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.
11
<PAGE> 14
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 1998, employee contributions that 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. 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 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 1998 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 1998 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
12
<PAGE> 15
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, 1998 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 1998 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 1998
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.
13
<PAGE> 16
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 two meetings of the Compensation Committee during
the 1998 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 1998 fiscal year, the Company's major compensation programs for
executives were salaries, stock options, 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.
Pursuant to the Compensation Committee's recommendation, the Board of
Directors last year approved a program of stock option grants to executives of
the Company and subsidiaries. Stock options under the Holly Corporation Stock
Option Plan were granted by the Executive Stock Option Committee to officers of
the Company for a total of 265,000 shares of the Company's common stock during
the 1998 fiscal year. Options were granted by the Stock Option Committee to
other Company executives for an additional 75,000 shares. All options granted
during the 1998 fiscal year have an exercise price of $26.75 per share and were
exercisable immediately to the extent of 20% of the shares subject to option,
with the remainder of the options vesting over time. As a result of the option
grants during fiscal 1998, there were outstanding at October 19, 1998 options
for a total of 348,333 shares, of which options for a total of 144,333 shares
were immediately exercisable. The Compensation Committee anticipates that stock
options will continue to be an important part of long-term incentive
compensation for Company executives.
14
<PAGE> 17
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
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, 1998, Mr. Norsworthy's annual salary
was increased by approximately 3.9% to a level of $450,000 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 1998 fiscal year was substantially improved over the 1997 fiscal year and
actions taken by the Company during fiscal 1998 have strengthened the Company's
position for the future. Based on this evaluation of Company performance, Mr.
Norsworthy's bonus for the 1998 fiscal year was set by the Committee at
$120,000, which was approximately 27.5% of his salary for the year and
represents an increase of approximately 71.4% over the bonus amount paid to Mr.
Norsworthy with respect to the 1997 fiscal year.
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.
15
<PAGE> 18
STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing, for the period of five fiscal
years commencing August 1, 1993 and ending July 31, 1998, 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 1993 100 100 100
JULY 1994 107.89 105.16 113.45
JULY 1995 87.03 132.62 121.93
JULY 1996 101.82 154.59 129.39
JULY 1997 103.63 235.19 205.56
JULY 1998 98.57 280.54 190.02
</TABLE>
(1) The amounts shown assume that the value of the investment in the Company and
each index was $100 on August 1, 1993 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. (acquired January 1997), Getty Realty Corporation, Giant
Industries, Inc., Sun Company, Inc., Tesoro Petroleum Corp., Tosco
Corporation, Total Petroleum (North America) Ltd. (acquired September
1997), 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.
16
<PAGE> 19
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 1999 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 1999 Annual Meeting should be received by the Company by July 5, 1999,
in order to be considered for inclusion in the proxy statement for that meeting.
FINANCIAL STATEMENTS AVAILABLE
A copy of the Company's 1998 Annual Report containing the audited
consolidated balance sheets at July 31, 1998 and 1997, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three fiscal years ended July 31, 1998, 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 6, 1998
17
<PAGE> 20
HOLLY-PS-98-2
<PAGE> 21
[HOLLY CORPORATION LOGO] THIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT.
Regardless of whether you plan to attend the Annual Meeting of Stockholders, you
can be sure your shares are represented at the meeting by promptly returning
your proxy in the enclosed envelope.
DETACH HERE HOLF
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.
1. Election of Directors:
NOMINEES: M.P. Clifton, W.J. Gray, M.R. Hickerson, A.J. Losee, T.K.
Matthews, R.G. McKenzie, L. Norsworthy and J.P. Reid
<TABLE>
<CAPTION>
FOR WITHHELD
<S> <C>
[ ] [ ]
</TABLE>
[ ]
------------------------------------------------------------------
For all nominees except as noted above
2. Other Business - Voting upon any other business property before the meeting
or any adjournment thereof.
Receipt of the Company's Annual Report for its 1998 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 [ ]
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:
--------------------------------------------- ---------------
<PAGE> 22
DETACH HERE
HOLLY CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS - DECEMBER 10, 1998
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Lamar Norsworthy, Gerald L. Regard and Jack P. Reid, or any of them or
P 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
R Annual Meeting of Stockholders to be held in Artesia, New Mexico on December
10, 1998, and at all adjournments thereof.
O
TO VOTE IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF
X DIRECTORS YOU DO NOT NEED TO MARK ANY OF THE BOXES. JUST DATE AND SIGN ON
THE REVERSE SIDE.
Y
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
