<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 14, 2000
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 14, 2000, at 9:30 o'clock A.M. local time, to
1. Elect a board of nine directors for the ensuing year;
2. Consider and act upon the proposed Holly Corporation 2000 Stock
Option Plan;
3. Consider and act upon a proposal submitted by a stockholder; and
4. Transact such other business as may properly come before the
meeting, or any adjournment thereof.
Only stockholders of record on October 25, 2000 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 18 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 9, 2000
<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 to be held
December 14, 2000 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 Secretary of the Company or in
open meeting. The proxy statement and proxy are expected to be sent to
stockholders commencing on November 9, 2000. 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 2000 fiscal year, which ended on July
31, 2000, is being distributed concurrently herewith. The Board of Directors has
fixed October 25, 2000, 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 7,550,814 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
<PAGE> 4
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to the Company
with respect to beneficial ownership of the Company's Common Stock as of October
20, 2000 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.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS BENEFICIAL COMMON STOCK
OF BENEFICIAL OWNER OWNERSHIP(A) OUTSTANDING
------------------- -------------------- ------------
<S> <C> <C> <C>
Merrill Lynch Trust Company, FSB 819,995 shares(1) 10.9%
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 1,511,136 shares 20.0%
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 338,104 shares(3)(7) 4.5%
Nona Barrett 328,132 shares 4.3%
P.O. Box 150
Crested Butte, Colorado 81224
David Norsworthy, Lamar Norsworthy and Brown Brothers 285,858 shares(5) 3.8%
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
FMR Corp. 825,000 shares 10.9%
82 Devonshire Street
Boston, Massachusetts 02109
Dimensional Fund Advisors, Inc. 586,870 shares 7.8%
1299 Ocean Avenue
Santa Monica, California 90401
Matthew P. Clifton 62,352 (7) *
W. John Glancy 5,200 (7) *
William J. Gray 59,049 (7) *
Marcus R. Hickerson 1,556 *
A. J. Losee 1,000 *
Thomas K. Matthews, II 400 *
Robert G. McKenzie 1,000 *
Jack P. Reid 104,359 (7) 1.4%
Henry A. Teichholz 31,624 (7) *
John A. Knorr 24,568 (7) *
All directors and officers as a group -- 20 1,102,239 (7) 14.6%
Persons(6)
</TABLE>
---------------
* 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 nine, are residuary beneficiaries of
these trusts.
2
<PAGE> 5
(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) Includes 284,428 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 20, 2000, upon the exercise of
options, as follows: 20,000 shares for Mr. Norsworthy, 44,000 shares for Mr.
Clifton, 5,000 shares for Mr. Glancy, 32,000 shares for Mr. Gray, 40,000
shares for Mr. Reid, 14,000 shares for Mr. Teichholz, 16,000 shares for Mr.
Knorr and 267,000 shares for all directors and officers as a group.
3
<PAGE> 6
ELECTION OF DIRECTORS
At the Annual Meeting it is proposed to elect the nine 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
stockholders at the annual meeting in 1999. 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. 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 and by (E) for executive committee:
Matthew P. Clifton, 49, a director since 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)
W. John Glancy, 58, 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, 59, a director since September 1996, is a consultant
to the Company. Until October 1999, Mr. Gray was Senior Vice President,
Marketing and Supply of the Company.
Marcus R. Hickerson, 74, 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)
A. J. Losee, 75, 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)
Thomas K. Matthews, II, 74, a director since 1978, is a financial
consultant. (A)
Robert G. McKenzie, 62, 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)
Lamar Norsworthy, 54, 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. Mr. Norsworthy is also a director of Triton Energy Limited.
(E)
Jack P. Reid, 64, a director since 1977, is a consultant to the
Company. Until August 1999, Mr. Reid was Executive Vice President,
Refining, of the Company. (E)
4
<PAGE> 7
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
concerning beneficial ownership were filed in a timely manner by reporting
persons.
BOARD COMMITTEES AND MEETINGS
The Audit Committee of the Board of Directors, which met three times during
the 2000 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. The Board of Directors has adopted a
written charter for the Audit Committee, a copy of which is included in this
Proxy Statement as Appendix A. 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 five times
during the 2000 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
under the Holly Corporation Stock Option Plan which expires on December 31,
2000; this committee met three times during the 2000 fiscal year.
The Public Policy Committee of the Board of Directors, which met two times
during the 2000 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 did not
meet during the 2000 fiscal year.
The Board of Directors does not have a standing nominating committee.
During the 2000 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.
5
<PAGE> 8
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, 2000, 1999
and 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
---------------------------------------
LONG-TERM ALL
NAME AND COMPENSATION OTHER
PRINCIPAL FISCAL AWARDS COMPENSATION
POSITION YEAR SALARY BONUS OPTIONS(#) (2)
--------- ------ -------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Lamar Norsworthy............................... 2000 $471,668 $131,000 100,000 $ 19,853
Chairman of the Board and 1999 $453,000 $169,000 -- $ 15,000
Chief Executive Officer 1998 $436,000 $120,000 -- $ 18,684
Matthew P. Clifton............................. 2000 $390,000 $109,000 40,000 $ 7,311
President 1999 $314,400 $116,000 -- $ 7,758
1998 $280,600 $ 95,000 45,000 $ 18,583
W. John Glancy................................. 2000 $203,680 $ 70,000 25,000 $ 2,787
Senior Vice President, General 1999 $ 67,000 $ 24,800 -- $253,025
Counsel and Secretary
Henry A. Teichholz............................. 2000 $171,918 $ 36,500 10,000 $ 8,067
Vice President 1999 $165,718 $ 43,500 -- $ 6,921
1998 $159,728 $ 46,000 15,000 $ 6,722
John A. Knorr.................................. 2000 $161,370 $ 38,000 20,000 $ 6,720
Vice President, Crude Oil 1999 $154,750 $ 46,000 -- $ 6,440
Supply and Trading 1998 $149,030 $ 45,000 15,000 $ 6,190
</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).
(2) All Other Compensation -- details for fiscal 2000:
<TABLE>
<CAPTION>
DIVIDENDS COMPANY
ON MATCHING
PHANTOM THRIFT
NAME SHARES PLAN OTHER TOTAL
---- --------- -------- ----- -----
<S> <C> <C> <C> <C>
Lamar Norsworthy............................................ $13,453 $6,400 -- $ 19,853
Matthew P. Clifton.......................................... $ 911 $6,400 -- $ 7,311
W. John Glancy.............................................. -- $2,787 -- $ 2,787
Henry A. Teichholz.......................................... $ 394 $7,673 -- $ 8,067
John A. Knorr............................................... $ 265 $6,455 -- $ 6,720
</TABLE>
6
<PAGE> 9
OPTION GRANTS IN FISCAL YEAR 2000
<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................... 100,000 25% $14.00 9/24/09 $880,452 $2,231,239
Matthew P. Clifton................. 40,000 10% 14.00 9/24/09 352,181 892,496
W. John Glancy..................... 25,000 6% 14.00 9/24/09 220,113 557,810
Henry A. Teichholz................. 10,000 3% 14.00 9/24/09 88,045 223,124
John A. Knorr...................... 20,000 5% 14.00 9/24/09 176,090 446,248
</TABLE>
---------------
(1) All of these options, which were granted on September 24, 1999 pursuant to
the Holly Corporation Stock Option Plan, 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 2009. Depending on inflation rates, these amounts could be worth
significantly less in 2009, in real terms, than their value today.
7
<PAGE> 10
AGGREGATED OPTION/STOCK APPRECIATION RIGHT (SAR)
EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/
SHARES OPTIONS/ SARS SARS
ACQUIRED 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)............ -- -- 7,062 100,000 $84,744 --
Matthew P. Clifton............. -- -- 27,000 58,000 -- --
W. John Glancy................. -- -- -- 25,000 -- --
Henry A. Teichholz............. -- -- 9,000 16,000 -- --
John A. Knorr.................. -- -- 9,000 26,000 -- --
</TABLE>
---------------
(1) The named officer holds 7,062 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, 2000 ($12.00 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."
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 2000 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 6 under the heading "Salary" for each executive listed therein. At
July 31, 2000, Messrs. Norsworthy, Clifton, Glancy, Teichholz, and Knorr were
credited with 27, 20, 1, 27 and 27 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
8
<PAGE> 11
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 $135,000 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 for the 2000 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.
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 2000, employee contributions that are made on a tax-deferred
basis are limited to $10,500 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."
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 2000
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 2000
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.
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 15,470 phantom shares were granted to participants for the 1995 and
1996 fiscal year. Phantom shares held at July 31, 2000 by executive officers are
as follows: 2,830 shares by Mr. Norsworthy, 1,340 by Mr. Clifton, none by Mr.
Glancy, 580 by Mr. Teichholz, and 390 by Mr. Knorr.
9
<PAGE> 12
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company or its subsidiaries are
eligible to be 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.
CONSULTING AGREEMENTS
In October 1999, Holly entered into a consulting agreement with Mr. Reid,
effective as of August 1, 1999. The consulting agreement, which has a term that
extends through July 31, 2002, provides 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 has a term that
extends through September 30, 2001, provides 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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Board of Directors during
the 2000 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 2000
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.
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<PAGE> 13
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 under the current Holly Corporation Stock Option Plan) and reviews
overall compensation levels for the Company's other executive officers. There
were five meetings of the Compensation Committee during the 2000 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 2000 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.
Stock options granted under the Holly Corporation Stock Option Plan
currently constitute the principal long-term incentive compensation arrangements
for executives. As of the close of the 2000 fiscal year, the Company had options
outstanding for a total of 683,000 shares; 323,000 of these options were granted
in March 1998 and have an exercise price of $26.75 per share; 360,000 of these
options were granted during the 2000 fiscal year and have exercise prices
ranging from $10.125 to $14.00 per share. Options granted during the 2000 fiscal
year become exercisable at the rate of 20% per year beginning one year after the
date of grant. As of October 20, 2000, the Company has outstanding options for a
total of 703,000 shares, of which options for a total of 329,600 shares are
immediately exercisable. The Committee has recommended adoption of the proposed
Holly Corporation 2000 Stock Option Plan being submitted to stockholders of the
Company at the Company's December 14, 2000 Annual Meeting of Stockholders; if
adopted, the 2000 Stock Option Plan would replace the expiring Holly Corporation
Stock Option Plan and authorize the grant of additional options for a total of
750,000 shares through December 31, 2010.
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, and Mr. Glancy,
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.
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<PAGE> 14
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, 2000, Mr. Norsworthy's annual salary
was increased by approximately 4% to a level of $490,000 per year for the period
through the end of the Company's 2001 fiscal 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 2000
fiscal year was disappointing. Based on this evaluation, Mr. Norsworthy's bonus
for the 2000 fiscal year was set by the Committee at $131,000, which is a
reduction of $38,000 from the bonus for the 1999 fiscal year and represents a
25% reduction in Mr. Norsworthy's bonus expressed as a percentage of fiscal year
salary.
Compensation Committee of the Board of Directors
Thomas K. Matthews, II, A. J. Losee
Chairman Robert G. McKenzie
Marcus R. Hickerson
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.
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<PAGE> 15
STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing, for the period of five fiscal
years commencing July 31, 1995 and ending July 31, 2000, 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>
<S> <C> <C> <C>
Holly Corporation S&P 500 New Industry Peer Group (2)
July 1995 100.00 100.00 100.00
July 1996 117.00 116.10 112.00
July 1997 119.00 177.60 173.20
July 1998 113.10 212.40 160.10
July 1999 73.30 255.30 146.00
July 2000 62.00 279.00 141.30
<S> <C>
Old Industry Peer Group (2)
July 1995 100.00
July 1996 111.60
July 1997 171.50
July 1998 160.70
July 1999 140.10
July 2000 134.20
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
July 1995 July 1996 July 1997 July 1998 July 1999 July 2000
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Holly Corporation $100.00 $117.00 $119.00 $113.10 $ 73.30 $ 62.00
S&P 500 $100.00 $116.10 $177.60 $212.40 $255.30 $279.00
New Industry Peer Group(2) $100.00 $112.00 $173.20 $160.10 $146.00 $141.30
Old Industry Peer Group(2) $100.00 $111.60 $171.50 $160.70 $140.10 $134.20
</TABLE>
(1) The amounts shown assume that the value of the investment in the Company and
each index was $100 on July 31, 1995 and that all dividends were
reinvested.
(2) The Company has altered the composition of its peer group this year. The
objective in selecting the New Industry Peer Group, as it was in selecting
the Old Industry Peer Group, is to select companies that are similar to the
Company in regards to petroleum refining operations. The Company has
removed Ashland, Inc. from the New Industry Peer Group because Ashland,
Inc. contributed substantially all of its refining, marketing and
transportation assets to Marathon Ashland Petroleum LLC. and a lower
percentage of that company's net operations are refining and marketing as
compared to the other companies in the New Industry Peer Group. The Company
has removed Getty Realty Corporation from the New Industry Peer Group
because Getty Realty Corp. is a real estate company specializing in the
ownership, leasing and management of gasoline stations and convenience
store properties. The Company has added Frontier Oil Corporation to the New
Industry Peer Group because the primary business of Frontier Oil
Corporation is crude oil refining and wholesale marketing of refined
petroleum products. The New Industry Peer Group is made up of Crown Central
Petroleum Corporation, Frontier Oil Corporation, Giant Industries, Inc.,
Sunoco, Inc., Tesoro Petroleum Corp., Tosco 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.
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<PAGE> 16
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.
PROPOSED 2000 STOCK OPTION PLAN
The Board of Directors has recommended, subject to stockholders' approval,
adoption of the 2000 Stock Option Plan (the "Plan") to take the place of the
current Stock Option Plan (the "1990 Plan"), which was adopted in 1990 and under
which no options may be granted after December 31, 2000. There are currently
703,000 shares of Common Stock subject to outstanding options under the 1990
Plan, and additional options for 48,500 shares could be granted prior to the
expiration of the 1990 Plan on December 31, 2000.
This summary of the proposed Plan does not purport to be complete and is
qualified in its entirety by reference to the text of the Plan, a copy of which
is attached as Appendix B and incorporated by this reference.
The proposed Plan authorizes the grant of nonqualified stock options and
incentive stock options to purchase up to an aggregate of 750,000 shares of the
Company's Common Stock at exercise prices that generally may be less than, equal
to, or greater than the fair market value of the Company's Common Stock at the
date of the grant. The plan also provides for issuance of options that are
intended to be "performance-based" for purposes of Section 162(m) of the
Internal Revenue Code of 1986 as amended (the "Code"), so that the Company may
preserve its federal income tax deduction for compensation expense relating to
such options for its named executive officers. "Performance-based" options must
have an exercise price that is not less than 100% of the fair market value of
the Company's Common Stock on the date of grant. No more than 75,000 shares may
be the subject of "performance-based" options granted to any one individual in
any one fiscal year. The authority to grant options under the Plan expires on
December 31, 2010.
Grants of options under the proposed Plan can be made to officers, current
or proposed directors, and key employees and consultants of the Company whose
services are deemed to be of potential benefit to the Company. Incentive stock
options may be granted under the Plan only to employees of the Company or its
50% or more owned corporate subsidiaries, as defined in the Code. As of the date
hereof, it is estimated that approximately 30 persons would be eligible to
participate in the proposed Plan. No grants under the proposed Plan have been
made and it is not currently determinable what grants of options under the
proposed Plan may be made to any particular persons.
Options granted may permit exercise by various means including payment in
cash, shares of Common Stock, assignment of proceeds of loans secured by shares
to be acquired by exercise, and promissory notes. In the event of certain
transactions affecting the Common Stock subject to options under the Plan or in
the event of stock splits, stock dividends or changes in the Company's capital
structure, the total number of shares that may be subject to options under the
Plan and the number of shares subject to options that have theretofore been
granted under the Plan may be proportionately adjusted as determined, by the
Board of Directors or a designated committee of the Board, to be appropriate to
prevent dilution or enlargement of option rights.
Terms of options, including the number of shares, exercise price, vesting,
period of exercisability, methods of exercise, and the degree to which the
option is exercisable following termination of employment, will be specified by
the Board of Directors or a designated committee of the Board and set out in
stock option agreements evidencing specific options granted. Options may not be
exercisable for more than 10 years from the date of grant, except that, if the
option agreement so provides, an option may in all events remain exercisable for
one year after the death of an optionee to the extent the option was exercisable
at the date of the optionee's death.
The proposed 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 recapitalization
involving a fundamental change in the Company's capital structure, to terminate
all outstanding options under the Plan, whether or not currently exercisable,
upon payment to each optionee of an amount equal to the current market
14
<PAGE> 17
value of the shares that could be acquired upon exercise of the option less the
exercise price under the option. Alternatively, the Company may elect in such
circumstances to cause any outstanding options to be assumed by the surviving or
acquiring corporation.
The Board of Directors or a designated committee of the Board may amend or
terminate the Plan at any time without shareholder approval except where such
approval is required by law, rule or regulation or to maintain compliance with
Section 162(m)(4)(C) of the Code, provided that no termination or amendment of
the Plan may, unless required by law, rule or regulation, adversely affect any
previously granted option without the consent of the option holder.
Federal Income Tax Consequences: It is anticipated that all options granted
pursuant to the Plan will be non-qualified stock options for federal income tax
purposes. Under presently applicable provisions of the Code, a person who
receives a stock option will not normally realize any income, nor will the
Company normally receive any deduction for federal income tax purposes, upon the
grant of an option under the Plan. Upon the exercise of an option, the optionee
will generally be deemed to receive ordinary compensation income equal to the
difference between the fair market value of the stock acquired at the date of
exercise of the option and the exercise price paid by the optionee. Subject to
the possible application of certain limitations in the case of options granted
to highly compensated officers, the Company will generally have a federal income
tax deduction for compensation expense in an amount equal to the amount treated
as ordinary income by the optionee. Any taxable income recognized in connection
with a non-qualified stock option exercised by an optionee who is also an
employee of the Company will be subject to tax withholding by the Company. It is
not currently anticipated that incentive stock options as authorized by the Code
will normally be granted under the Plan. However, if an incentive stock option
were granted to an employee under the Plan, the employee would not be taxed for
federal income tax purposes either at the time of grant or at exercise, but the
difference between the exercise price and the fair market value of the optioned
Company Stock on the date of exercise would be treated as an item of preference
for purposes of the alternative minimum tax. Assuming that the employee did not
dispose of the stock until the later of one year after exercise or two years
after grant of the incentive stock option, any gain on subsequent sale of the
stock would be taxable at capital gain rates. The Company would generally not be
allowed an income tax deduction with respect to the optionee's exercise of an
incentive stock option assuming that the optionee satisfied the holding period
requirement.
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 Plan. Abstentions will count as a
vote against the proposal, but broker non-votes will have no effect. Shareholder
approval is needed in order to preserve the Company's federal income tax
deduction for certain "performance-based" options, to permit the issuance of
incentive stock options under the Plan, and to comply with listing rules of the
American Stock Exchange.
STOCKHOLDER PROPOSAL REGARDING A SALE OF THE COMPANY
The Company has been advised that William Steiner, 4 Radcliff Drive, Great
Neck, New York 11024, who holds 1,000 shares of the Company's Common Stock,
intends to submit the following proposal at the Annual Meeting:
"MAXIMIZE VALUE RESOLUTION"
"Resolved that the shareholders of Holly Corporation urge the Holly
Corporation Board of Directors to arrange for the prompt sale of Holly
Corporation to the highest bidder.
"The purpose of the Maximize Value Resolution is to give all Holly
Corporation shareholders the opportunity to send a message to the Holly
Corporation Board that they support the prompt sale of Holly Corporation to
the highest bidder. A strong and or majority vote by the shareholders would
indicate to the board the displeasure felt by the shareholders of the
shareholder returns over many years and the drastic action that should be
taken. Even if it is approved by the majority of the Holly Corporation
shares represented and entitled to vote at the annual meeting, the Maximize
Value Resolution will not be
15
<PAGE> 18
binding on the Holly Corporation Board. The proponent however believes that
if this resolution receives substantial support from the shareholders, the
board may choose to carry out the request set forth in the resolution:
"The prompt auction of Holly Corporation should be accomplished by any
appropriate process the board chooses to adopt including a sale to the
highest bidder whether in cash, stock, or a combination of both. It is
expected that the board will uphold its fiduciary duties to the utmost
during the process.
"The proponent further believes that if the resolution is adopted, the
management and the board will interpret such adoption as a message from the
company's stockholders that it is no longer acceptable for the board to
continue with its current management plan and strategies.
"I URGE YOUR SUPPORT, VOTE FOR THIS RESOLUTION"
STATEMENT OF THE BOARD OF DIRECTORS OF THE COMPANY IN OPPOSITION TO THE
STOCKHOLDER PROPOSAL
The Board of Directors of the Company recommends that you vote "AGAINST"
this proposal for the following reasons:
A fundamental goal of the Company's Board of Directors and its
management is to maximize stockholder value and the operations of the
Company are conducted and managed with this goal in mind. The Board
continues to seek to maximize stockholder value through on-going
initiatives designed to increase operating efficiencies and enhance the
profitability of the Company's operations. A key recent initiative to
enhance stockholder value is the Company's cost reduction and production
efficiency program that was announced in May 2000 and is currently being
implemented. In addition, the Board, in consultation with its advisors,
reviews on a regular basis strategic alternatives and opportunities
available to the Company in furtherance of maximizing stockholder value.
The Board believes that efforts seeking to force a sale of the Company
are not in the best interests of the Company and its stockholders and that
such efforts could seriously prejudice stockholders' financial interests.
While the Board recognizes that the proposal only requests certain action
by the Board and does not obligate the Board to take any action, an
announcement that the proposal has been adopted could damage the Company's
long-term relationships with its customers and employees. This could
adversely impact the Company's ability to effectively compete in the short
and long term, resulting in a possible decline in revenues, profits and, in
turn, stockholder value. The Board believes that efforts to force a sale
would be particularly unwise in the current circumstance where the market
value of the Company's stock appears to have been adversely affected to a
substantial degree by the pendency of the Longhorn Partners Pipeline, L.P.
lawsuit, which the Company believes is without merit.
FOR THE REASONS STATED ABOVE, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT STOCKHOLDERS VOTE "AGAINST" THIS PROPOSAL. PROXIES SOLICITED BY THE BOARD
OF DIRECTORS WILL BE SO VOTED UNLESS STOCKHOLDERS OTHERWISE SPECIFY IN THE
PROXIES.
The affirmative vote of the holders of a majority of the shares represented
and entitled to vote at the annual meeting is required for approval of the
stockholder proposal. Abstentions will count as a vote against the proposal, but
broker non-votes will have no effect.
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 2001 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.
16
<PAGE> 19
STOCKHOLDER PROPOSALS
Proposals of stockholders to be considered for presentation at the
Company's 2001 Annual Meeting should be received by the Company by July 16,
2001, in order to be considered for inclusion in the proxy statement for that
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 2000 Annual Report containing the audited
consolidated balance sheet at July 31, 2000 and 1999, and the related
consolidated statements of income, cash flows, stockholders' equity and
comprehensive income for each of the three fiscal years ended July 31, 2000, 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.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board has reviewed and discussed with management
the audited financial statements of the Company for the 2000 fiscal year and has
discussed with representatives of Ernst & Young LLP, the Company's independent
auditors for the 2000 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. 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 2000 fiscal year be included in
the Company's Annual Report on Form 10-K for the 2000 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
A.J. Losee
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.
17
<PAGE> 20
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 shareholders 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 13, 2000.
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. Stockholders 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
18
<PAGE> 21
APPENDIX A
HOLLY CORPORATION
AUDIT COMMITTEE
CHARTER
ADOPTED BY THE BOARD OF DIRECTORS
JUNE 9, 2000
Organization: The Holly Corporation Audit Committee (the "Committee") shall
consist of at least three Directors, one of whom shall be designated by the
Board of Directors (the "Board") as the Chairman. The Committee shall have as
members only Directors of Holly Corporation (the "Company") who are independent
under the standards applicable to companies whose shares are listed on the
American Stock Exchange. Each member of the Committee shall be financially
literate and at least one member of the Committee shall have accounting or
related financial management expertise as the foregoing qualifications are
interpreted by the Board in its business judgment.
Statement of Policy: The Committee shall provide assistance to the Board in
fulfilling its oversight responsibility to the shareholders of the Company
relating to the Company's financial statements and the financial reporting
process, the systems of internal accounting and financial controls, the annual
independent audit of the Company's financial statements, and legal compliance
and ethics programs as established by management and the Board. In so doing, it
is the responsibility of the Committee to maintain free and open communication
between the Committee, outside auditors, and management of the Company. In
discharging its oversight role, the Committee is empowered to investigate any
matter brought to its attention with full access to all books, records,
facilities, and personnel of the Company and the power to retain outside counsel
or other experts for this purpose.
Responsibilities and Processes: The outside auditor for the Company is
ultimately accountable to the Board and the Committee as representatives of the
Company's shareholders. The Committee and the Board have the ultimate authority
and responsibility to select, evaluate and, where appropriate, replace the
Company's outside auditor. The Committee has responsibility for ensuring its
receipt from the outside auditor for the Company of a formal written statement
delineating all relationships between the outside auditor and the Company,
consistent with Independence Standards Board Standard No. 1. The Committee has
responsibility for actively engaging in a dialogue with the outside auditor with
respect to any disclosed relationships or services that may impact the
objectivity and independence of the outside auditor and for taking, or
recommending that the Board take, appropriate action to oversee the independence
of the outside auditor.
The Committee will, as it deems necessary in its business judgment, carry
out the following processes:
- Annually, the Committee shall review and recommend to the Board the
selection of the Company's outside auditor for the current fiscal year.
- The Committee, or the Chairman or a member designated by the Chairman,
shall review with management and the independent auditor the Company's
Quarterly Report on Form 10-Q prior to the filing of such report for each
quarter.
- Prior to the filing of the Company's Annual Report on Form 10-K, the
Committee shall review and discuss the audited financial statements with
management and discuss with the outside auditor the matters required to
be discussed by relevant auditing standards. The Committee shall report
to the Board and to the shareholders whether, based on such review and
discussions, the Committee recommends to the Board that the most recent
year's audited financial statements be included in the Company's Annual
Report on Form 10-K to be filed with the Securities and Exchange
Commission.
- The Committee shall meet privately (without members of management
present) with the outside auditor at least once each year and, when
requested, with the Company's General Counsel.
A-1
<PAGE> 22
- Prior to the commencement of each annual audit, The Committee shall
discuss with the outside auditor the overall scope and plans for the
audit including the adequacy of staffing and compensation.
- The Committee shall discuss with management and the outside auditor the
adequacy and effectiveness of the accounting and financial controls,
including the Company's system to monitor and manage business risk, and
legal and ethical compliance programs.
- The Committee shall review annually the continued adequacy of the
Committee's Charter.
- The Committee shall receive periodic reports from management on all
matters within the Committee's area of responsibilities, including as
appropriate (i) the Company's accounting and financial reporting
practices, (ii) accounting, financial reporting, legal and tax
developments of significance to the Company, and (iii) the status and
results of special studies conducted for the Company by independent
auditors.
The Committee Chairman shall make regular reports to the Board on the
Committee's activities.
Miscellaneous:
- Nothing in this Charter will, or will be deemed to, increase, expand or
modify in any manner adverse to any member of the Committee the duties,
obligations, or responsibilities of any member of the Committee, it being
the intent and purpose of this Charter to grant enabling power to the
Committee.
- Nothing in this Charter will, or will be deemed to, decrease or modify in
any manner adverse to any member of the Committee, such member's right to
rely on statements and certifications made by the Company's officers,
employees, agents, counsel, experts and auditors.
- Nothing in this Charter will, or will be deemed to, adversely affect in
any manner the rights of members of the Committee to indemnification and
advancement of expenses under the Bylaws of the Company or under any
contract, agreement, arrangement or understanding benefitting such
member.
- Notwithstanding any other provision of this Charter, no provision of this
Charter will, except to the extent required by applicable law, be
construed to create any legally enforceable duty, liability or obligation
on the part of the Committee or any of its members.
A-2
<PAGE> 23
APPENDIX B
HOLLY CORPORATION
2000 STOCK OPTION PLAN
1. PURPOSE.
The purpose of this 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 and retain key personnel of high
caliber through encouraging a sense of proprietorship by means of stock
ownership. This Plan replaces the Company's Stock Option Plan as amended in 1990
(the "Prior Plan"), which terminates as to the grant of additional options on
December 31, 2000 but continues after December 31, 2000 to govern options
granted under the Prior Plan.
2. SHARES SUBJECT TO THE PLAN.
The aggregate amount of stock for which options may be granted under this
Plan after December 31, 2000 shall not exceed 750,000 shares of Common Stock of
the Company, par value $0.01 per share (the "Common Stock"). The shares issuable
pursuant to stock options may be authorized and previously unissued shares or
previously issued shares that have been reacquired by the Company. Any share
subject to unexercised portions of options granted under this Plan which shall
have been terminated, been cancelled or expired, may again be subject to options
under this Plan. Notwithstanding the foregoing, no more than 75,000 shares may
be subject to options that are intended to be "performance-based compensation,"
as that term is used in Section 162(m)(4)(C) of the Internal Revenue Code of
1986 as amended (the "Code"), granted to any one Participant in any fiscal year;
solely for purposes of this limitation, options that are cancelled continue to
count against the limit, and options that are repriced are treated as if they
had been cancelled and new grants made. Subject to compliance with requirements
of applicable law, regulations and rules, the limitations set forth in this
Section on the aggregate amount of stock for which options may be granted under
the Plan and on the number of shares that may be subject to options intended to
be "performance-based compensation" are subject to adjustment as provided in
Section 9.
3. ELIGIBILITY.
Options hereunder may be granted to any officer, current or proposed
director, or 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 (as defined in Section 424(f) of the Code). The Board of Directors
of the Company or the Committee (as defined below) shall determine which persons
are to be granted options hereunder, the number of options, the number of shares
subject to each option, the exercise price or prices of each option, the period
of each option, limitations (if any) on exercisability of each option (including
the $100,000 limit on incentive stock options first exercisable by an individual
in any calendar year), limitations (if any) on the transferability of each
option (provided that any incentive stock options shall be non-transferable
other than at death, and during the employee's lifetime may be exercised only by
the employee), whether such option shall be treated as an incentive stock option
under Section 422 of the Code or as a nonqualified option, and such other terms
and conditions of each option, if any, as are not inconsistent with the
provisions of this Plan.
4. ADMINISTRATION.
The Plan shall be administered by the Board of Directors of the Company,
or, if the Board of Directors so chooses, by a Committee. The term "Committee"
refers to the Stock Option Committee or other committee of the Board of
Directors duly appointed to administer the Plan and having such powers as may be
specified by the Board of Directors. Unless the powers of the Committee have
been specifically limited by the Board of Directors, the Committee shall have
all of the powers of the Board of Directors granted herein, including, without
limitation, the power to amend or terminate the Plan at any time, subject to the
terms of the Plan and
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<PAGE> 24
any applicable limitations imposed by law. The Committee may appoint a
subcommittee (the "Outside Directors Committee") of two or more outside
directors as defined for purposes of Section 162(m)(4)(C) of the Internal
Revenue Code of 1986 (the "Code"). The Outside Directors Committee, if
appointed, shall have the exclusive authority to approve grants under the Plan
to the chief executive officer of the Company and to other executive officers
whose compensation may otherwise exceed the deduction limit of Section 162(m) of
the Code. Grants approved by the Outside Directors Committee will be subject to
ratification by the Committee as a whole or by the Board of Directors if the
Board of Directors so provides in authorizing the Committee. Subsequent
references in this Plan to the "Board" shall include the Committee, if one is
appointed. Options under the Plan may be granted only by the Board. Stock Option
Agreements, in form as approved by the Board, and containing such terms and
conditions not inconsistent with the provisions of this Plan as shall have been
determined by the Board, may be executed on behalf of the Company by the
Chairman of the Board and Chief Executive Officer, the President, or any
Executive Vice President of the Company. The Board shall have complete authority
to construe, interpret and administer this Plan; to prescribe, amend and rescind
rules and regulations pertaining to it; and to make all other determinations
necessary or deemed advisable in the administration of the Plan. The
determinations, interpretation and construction made by the Board with respect
to any aspect of the Plan and any option granted pursuant thereto shall be final
and conclusive.
5. OPTION PRICE.
The purchase price or prices for Common Stock under each option shall be
determined by the Board at the time the option is granted, and may be less than,
equal to or greater than the fair market value of the Common Stock 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 be not less than the fair market value of a share of Common Stock as
of the effective date of grant of the option (or such greater amount as may be
required by applicable provisions of the Code). The optionee may pay the
purchase price upon exercise of a stock option in cash, by check or cash
equivalent, or, with the consent of the Board, (i) by tender to the Company, or
attestation to the ownership, of shares of Common Stock owned by the optionee
having a fair market value (based upon the closing price of the Common Stock on
the date immediately preceding the date of exercise as listed in The Wall Street
Journal (Southwest Edition)) not less than the exercise price, (ii) by the
assignment of the proceeds of a sale or loan with respect to some or all of the
shares being acquired upon the exercise of the option (including, without
limitation, through an exercise complying with the provisions of Regulation T as
promulgated from time to time by the Board of Governors of the Federal Reserve
System) (a "Cashless Exercise"), (iii) by the optionee's promissory note in a
form approved by the Board, (iv) by such other consideration to the extent
permitted by applicable law, or (v) by any combination thereof. The Board may at
any time or from time to time, by adoption of or by amendment to the standard
form of Stock Option Agreement, or by other means, grant options that permit
some or all of the foregoing forms of consideration to be used in payment of the
exercise price or that otherwise restrict the use of one or more forms of
consideration specified in this Section 5.
6. TERMS OF OPTION AND LIMITATIONS ON RIGHT TO EXERCISE.
The period during which such option granted pursuant to this Plan may be
exercised in whole or in part shall be determined by the Board with respect to
each option, at the time of grant, provided that no option granted pursuant to
this Plan shall, by its terms, be exercisable more than ten years after the date
of its grant (five years in the case of an incentive stock option granted to a
ten percent stockholder), other than in the event of the death of an optionee as
provided in Section 8. The Company shall not be obligated to issue any
fractional shares (nor shares in lots of less than 100 shares) upon the exercise
of any options granted under this Plan. No optionee nor his legal
representatives, legatees or distributees, as the case may be, will be, or will
be deemed to be, a holder of any shares subject to an option unless and until
said option has been exercised and the purchase price of the shares in respect
of which it has been exercised has been paid.
B-2
<PAGE> 25
7. TERMINATION OF EMPLOYMENT.
The Board shall determine at the time each option is granted what limits
shall apply to the exercise of the option in the event an optionee shall cease
to be employed by the Company or a subsidiary for any reason other than death.
Neither this Plan nor any option granted hereunder is intended to confer upon
any optionee any rights with respect to continuance of employment or other
utilization of his services by the Company or by a subsidiary or affiliate, nor
to interfere in any way with his right or that of his employer to terminate his
employment or other services at any time (subject to the terms of any written
employment contract).
8. DEATH OF OPTIONEE.
Unless otherwise provided as a term of any option granted under this Plan,
in the event of the death of an optionee while in the employ of the Company or
of a subsidiary or affiliate, the option theretofore granted to him shall be
exercisable within the year next 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 at the date of his
death.
9. DILUTION OR OTHER ADJUSTMENTS.
In the event that there is any change in the Common Stock subject to being
optioned under this Plan or subject to options granted hereunder, through
merger, consolidation, reorganization or recapitalization or in the event of any
stock split or dividend to holders of such stock payable in stock of the same
class or the issuance to such holders of rights to subscribe to stock of the
same class, 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 options
that may be granted under the Plan as set forth in Section 2, and with respect
to options theretofore granted under the Plan as the Board deems appropriate to
prevent dilution or enlargement of option rights. The determinations of the
Board pursuant to this Section 9 shall be final, binding and conclusive.
10. EXPIRATION AND TERMINATION OF THE PLAN.
Authority to grant stock options under the Plan will expire on December 31,
2010 (except that no incentive stock options may be granted later than ten years
from the date of stockholder approval of the Plan). Options may be granted prior
to the expiration of the Plan as long as the total number of shares which may be
issued pursuant to options granted and outstanding under this Plan does not
(except as provided in Section 9 above) exceed the limitation of Section 2
above. This Plan may be abandoned or terminated at any time by the Board except
with respect to any options then outstanding under the Plan.
11. RESTRICTION ON ISSUANCE OF SHARES.
The Company shall not be obligated to sell or issue any shares upon the
exercise of any option granted under this Plan unless
(a) the shares with respect to which the option is being exercised
have been registered under applicable federal securities laws or are exempt
from such registration;
(b) the prior approval of such sale or issuance has been obtained from
any State regulatory body having jurisdiction; and
(c) in the event the stock has been listed on any stock exchange, the
shares with respect to which the option is being exercised have been duly
listed on such exchange in accordance with the procedure specified
therefor.
If shares to be issued upon the exercise of any option granted under the Plan
are intended to be issued by the Company in reliance upon exemptions from the
registration requirements of applicable federal securities laws, to enable the
Company to avail itself of such exemptions the optionee, if so requested by the
Company, shall
B-3
<PAGE> 26
furnish to the Company such evidence and representations satisfactory to it as
may be reasonably necessary with respect to such exemptions.
12. PROCEEDS.
The proceeds to be derived by the Company upon exercise of any option
granted under this Plan will be used for general corporate purposes.
13. RIGHT OF COMPANY TO TERMINATE OPTIONS.
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 recapitalization involving a fundamental change in the
capital structure of the Company, the Company shall have the right to terminate
all outstanding options, whether or not currently exercisable, under this Plan
upon payment to each optionee of an amount equal to the current market value of
the shares that could be acquired upon exercise of the optionee's option less
the exercise price with respect to that option. Upon tender of payment by the
Company to an optionee pursuant to this provision, the option held by such
optionee shall automatically terminate. Alternatively, the Company, in its
discretion, may make arrangements in such circumstances for the acquiring or
surviving corporation to assume any or all outstanding options and substitute on
equitable terms options on the stock of such acquiring or surviving corporation.
14. AMENDMENT OF THE PLAN.
The Board may terminate or amend the Plan at any time. Subject to changes
in applicable law, regulations or rules that would permit otherwise, without the
approval of the Company's stockholders, there may be (a) no change in the
material provisions regarding performance-based compensation pursuant to Section
162(m)(4)(C) of the Code, and (b) no other amendment of the Plan that would
require approval of the Company's stockholders under any applicable law,
regulation, rule, or applicable stock exchange listing requirement. No
termination or amendment of the Plan may adversely affect any then outstanding
option, or any unexercised portion thereof, without the consent of the optionee,
unless such termination or amendment is required to comply with any applicable
law, regulation, rule, or applicable stock exchange listing requirement.
15. STOCKHOLDERS' APPROVAL.
The Plan is expressly made subject to approval by the affirmative votes of
the holders of a majority of the outstanding shares of the Common Stock of the
Company present, or represented, and entitled to vote at a meeting of the
stockholders of the Company; if such approval has not been obtained on or before
September 22, 2001, the Plan shall not enter into effect.
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<PAGE> 27
HOLLY-PS-00
<PAGE> 28
DETACH HERE
PROXY
HOLLY CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS - DECEMBER 14, 2000
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Lamar Norsworthy, Gerard L. Regard and Matthew P. Clifton, 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
14, 2000, 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
----------- -----------
<PAGE> 29
[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 STATEMENT/PROSPECTUS AND PROXY
CARD. 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 14-DIGIT VOTER CONTROL 3. ENTER YOUR 14-DIGIT VOTER CONTROL
NUMBER LOCATED ON YOUR PROXY CARD NUMBER LOCATED ON YOUR PROXY CARD
ABOVE YOUR NAME. ABOVE 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
<TABLE>
<S> <C>
ZHLY4A DETACH HERE
[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, FOR THE APPROVAL OF THE 2000 STOCK OPTION PLAN, AGAINST THE STOCKHOLDER PROPOSAL REGARDING A SALE OF THE
COMPANY 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. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM 2.
1. Election of Directors: FOR AGAINST ABSTAIN
2. Approval of 2000 Stock Option Plan. [ ] [ ] [ ]
NOMINEES: (01) M.P. Clifton, (02) W.J. Glancy,
(03) W.J. Gray, (04) M.R. Hickerson, (05) A.J. Losee, THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" ITEM 3.
(06) T.K. Matthews, (07) R.G. McKenzie, (08) L. Norsworthy
and (09) J.P. Reid FOR AGAINST ABSTAIN
3. Stockholder proposal regarding sale [ ] [ ] [ ]
FOR [ ] [ ] WITHHELD of the Company.
ALL FROM ALL
NOMINEES NOMINEES 4. 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 [ ]
FOR ALL NOMINEES EXCEPT AS NOTED ABOVE
Receipt of the Company's Annual Report for its 2000 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:
----------------------------------- ------------ -------------------------------------- ------------
</TABLE>
