<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 4, 1998.
REGISTRATION NO.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
GIANT INDUSTRIES, INC.
23733 NORTH SCOTTSDALE ROAD
SCOTTSDALE, ARIZONA 85255
(602) 585-8888
(EXACT NAME, ADDRESS AND TELEPHONE NUMBER OF REGISTRANT)
<TABLE>
<S> <C> <C>
DELAWARE 2911, 5541 86-0642718
(STATE OF INCORPORATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
CLASSIFICATION CODE NUMBERS) IDENTIFICATION NUMBER)
</TABLE>
------------------------
MORGAN GUST
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
GIANT INDUSTRIES, INC.
23733 NORTH SCOTTSDALE ROAD
SCOTTSDALE, ARIZONA 85255
(602) 585-8888
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
<TABLE>
<S> <C>
WITH A COPY TO: WITH A COPY TO:
KAREN CIUPAK MCCONNELL ROSS CLAYTON MULFORD
W. T. EGGLESTON, JR. HUGHES & LUCE, L.L.P.
FENNEMORE CRAIG, P.C. 2800 BANK ONE CENTER
2600 NORTH CENTRAL AVENUE 1717 MAIN STREET
SUITE 2600 DALLAS, TEXAS 75201
PHOENIX, ARIZONA 85012-2390 (214) 939-5500
(602) 916-5000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and certain
other conditions under the Merger Agreement described herein are met or waived.
------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
- ---------------
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ---------------
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT OFFERING AGGREGATE AMOUNT OF
TO BE PRICE PER OFFERING REGISTRATION
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTERED(1) UNIT(2) PRICE(2) FEE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01..................... 11,050,000 $30.50 $337,025,000 $99,422.38
==================================================================================================================================
</TABLE>
(1) Represents an estimate of the maximum number of shares of the Common Stock
of the Registrant issuable upon consummation of the Merger described herein.
(2) Estimated solely for the purpose of calculating the registration fee
required pursuant to Rule 457(f)(1) and (3) under the Securities Act, and
based upon the average of the high and low sales prices of shares of the
Common Stock of Holly Corporation on April 28, 1998, less $25,000,000 cash
to be paid by the Registrant to the securityholders of Holly in connection
with the Merger.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 2
[GIANT LETTERHEAD]
, 1998
Dear Fellow Stockholder:
The Board of Directors cordially invites you to attend a Special Meeting of
Stockholders of Giant Industries, Inc. ("Giant") to be held at 9:00 a.m. local
time, on , 1998, at .
At this important Special Meeting, you will be asked to consider and vote
upon a proposal to adopt the Agreement and Plan of Merger, dated April 14, 1998
(the "Merger Agreement"), between Giant and Holly Corporation ("Holly").
Pursuant to the Merger Agreement, among other things:
(i) Holly will be merged (the "Merger") with and into Giant;
(ii) all of the issued and outstanding shares of Holly Common Stock
will be converted, in the aggregate, into the right to receive (1) that
number of fully paid and nonassessable shares of Giant Common Stock equal
to the number of shares of Giant Common Stock issued and outstanding
immediately before the effective time of the Merger (the "Effective Time")
and (2) cash in an amount equal to $25,000,000 multiplied by a fraction,
the numerator of which is the number of issued and outstanding shares of
Holly Common Stock immediately before the Effective Time and the
denominator of which is the sum of (A) the number of issued and outstanding
shares of Holly Common Stock immediately before the Effective Time, (B) the
number of shares of Holly Common Stock subject to Holly stock options
(whether vested or unvested) outstanding immediately before the Effective
Time and (C) the number of Holly phantom stock rights outstanding
immediately before the Effective Time (with the consideration described in
clauses (1) and (2) collectively referred to as the "Merger
Consideration"). Accordingly, each issued and outstanding share of Holly
Common Stock will be converted into the right to receive a fraction of the
Merger Consideration equal to one divided by the number of shares of Holly
Common Stock issued and outstanding immediately before the Effective Time.
Based upon the number of shares of Giant Common Stock and Holly Common
Stock and the number of Holly stock options and Holly phantom stock rights
outstanding as of the date of the accompanying Joint Proxy
Statement/Prospectus, the Merger Consideration would result in each
outstanding share of Holly Common Stock being converted into the right to
receive approximately 1.33 shares of Giant Common Stock plus $2.886 in
cash. These numbers, however, are subject to adjustment prior to the
Effective Time in the event that the number of outstanding shares of Giant
or Holly or the number of outstanding options and phantom stock rights of
Holly change;
(iii) Giant will assume Holly stock option and phantom stock plans;
and
(iv) the directors and senior officers of Giant immediately following
the Merger will be persons designated half by Giant and half by Holly as
provided in the Merger Agreement.
You also will be asked to consider and vote upon proposals to (i) amend and
restate Giant's certificate of incorporation in its entirety (as amended and
restated, the "New Certificate"); (ii) amend and restate Giant's bylaws in their
entirety (as amended and restated, the "New Bylaws"); and (iii) approve the
Giant 1998 Stock Incentive Plan (the "Incentive Plan").
The Merger, the Merger Agreement, the amendments to Giant's certificate of
incorporation and bylaws and the other terms and conditions of the transaction
as well as the terms of the Incentive Plan are more fully described in the
accompanying Joint Proxy Statement/Prospectus. We urge you to read this material
carefully.
THE BOARD OF DIRECTORS OF GIANT HAS UNANIMOUSLY DETERMINED THAT THE MERGER,
THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY (INCLUDING THE
ISSUANCE OF GIANT COMMON STOCK IN THE MERGER
<PAGE> 3
AND THE AMENDMENT OF GIANT'S CERTIFICATE OF INCORPORATION AND BYLAWS) ARE FAIR
TO AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF GIANT, HAS UNANIMOUSLY
APPROVED THE MERGER, THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, AND RECOMMENDS THAT GIANT STOCKHOLDERS VOTE "FOR" ADOPTION OF THE
MERGER, THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY. IN
ADDITION, THE BOARD OF DIRECTORS OF GIANT HAS UNANIMOUSLY APPROVED THE INCENTIVE
PLAN AND RECOMMENDS THAT GIANT'S STOCKHOLDERS VOTE "FOR" APPROVAL OF THE
INCENTIVE PLAN.
While the adoption of the Merger Agreement requires the affirmative vote of
the holders of record of a majority of the shares of Giant Common Stock
outstanding on May 21, 1998, the record date for the Special Meeting, the
approval of the New Certificate and the New Bylaws requires the affirmative vote
of the holders of at least 80% of Giant Common Stock outstanding on May 21, 1998
and is a condition to the Merger. Therefore, adoption of the Merger Agreement
will in effect require the affirmative vote of the holders of at least 80% of
Giant Common Stock outstanding on May 21, 1998. The approval of the Incentive
Plan requires the affirmative vote of the holders of a majority of the shares of
Giant Common Stock present or represented at the Special Meeting and entitled to
vote. The approval of the Incentive Plan is not a condition to the effectiveness
of the Merger.
It is important that your shares of Giant Common Stock are represented at
the Special Meeting, regardless of the number of shares you hold. Whether or not
you plan to attend the Special Meeting, please sign, date and return your proxy
card in the enclosed postage paid envelope as soon as possible. If you later
decide to attend the Special Meeting and vote in person, or if you wish to
revoke your proxy for any reason prior to the vote at the Special Meeting, you
may do so and your proxy will have no further effect. If you attend the Special
Meeting, you may vote in person, if you wish, even though you previously mailed
your proxy.
IF YOU DO NOT VOTE AT THE SPECIAL MEETING EITHER IN PERSON OR BY PROXY, IT
WILL HAVE THE SAME EFFECT AS IF YOU VOTED AGAINST THE MERGER, THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
ON BEHALF OF YOUR BOARD OF DIRECTORS, I URGE YOU TO VOTE "FOR" ADOPTION OF
THE MERGER, THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
Very truly yours,
JAMES E. ACRIDGE
Chairman of the Board
and Chief Executive Officer
<PAGE> 4
GIANT INDUSTRIES, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD , 1998
To the Stockholders of Giant Industries, Inc.:
Notice is hereby given that a Special Meeting of Stockholders (the "Special
Meeting") of Giant Industries, Inc. ("Giant") will be held at 9:00 a.m. local
time, on , 1998, at , for the following
purposes:
1. To consider and vote upon a proposal to adopt the Agreement and
Plan of Merger, dated April 14, 1998, set forth in Appendix A to the Joint
Proxy Statement/Prospectus accompanying this Notice (the "Merger
Agreement"), between Giant and Holly Corporation ("Holly"). Pursuant to the
Merger Agreement, among other things:
(i) Holly will be merged (the "Merger") with and into Giant.
(ii) All of the issued and outstanding shares of Holly Common Stock
will be converted, in the aggregate, into the right to receive (1) that
number of fully paid and nonassessable shares of Giant Common Stock
equal to the number of shares of Giant Common Stock issued and
outstanding immediately before the effective time of the Merger (the
"Effective Time") and (2) cash in an amount equal to $25,000,000
multiplied by a fraction, the numerator of which is the number of issued
and outstanding shares of Holly Common Stock immediately before the
Effective Time and the denominator of which is the sum of (A) the number
of issued and outstanding shares of Holly Common Stock immediately
before the Effective Time, (B) the number of shares of Holly Common
Stock subject to Holly stock options (whether vested or unvested)
outstanding immediately before the Effective Time and (C) the number of
Holly phantom stock rights outstanding immediately before the Effective
Time (with the consideration described in clauses (1) and (2)
collectively referred to as the "Merger Consideration"). Accordingly,
each issued and outstanding share of Holly Common Stock will be
converted into the right to receive a fraction of the Merger
Consideration equal to one divided by the number of shares of Holly
Common Stock issued and outstanding immediately before the Effective
Time. Based upon the number of shares of Giant Common Stock and Holly
Common Stock and the number of Holly stock options and Holly phantom
stock rights outstanding as of the date of the accompanying Joint Proxy
Statement/Prospectus, the Merger Consideration would result in each
outstanding share of Holly Common Stock being converted into the right
to receive approximately 1.33 shares of Giant Common Stock plus $2.886
in cash. These numbers, however, are subject to adjustment prior to the
Effective Time in the event that the number of outstanding shares or
Giant or Holly or the number of outstanding options and phantom stock
rights of Holly change.
(iii) Giant will assume Holly stock option and phantom stock plans.
(iv) The directors and senior officers of Giant immediately
following the Merger will be persons designated half by Giant and half
by Holly as provided in the Merger Agreement.
2. To consider and vote upon a proposal to amend and restate Giant's
certificate of incorporation in its entirety as set forth in Appendix B to
the Joint Proxy Statement/Prospectus accompanying this Notice (as amended
and restated, the "New Certificate").
3. To consider and vote upon a proposal to amend and restate Giant's
bylaws in their entirety as set forth in Appendix C to the Joint Proxy
Statement/Prospectus accompanying this Notice (as amended and restated, the
"New Bylaws").
<PAGE> 5
4. To consider and vote upon a proposal to approve the Giant
Industries, Inc. 1998 Stock Incentive Plan set forth in Appendix H to the
Joint Proxy Statement/Prospectus accompanying this Notice (the "Incentive
Plan").
5. To transact such other business as may properly come before the
Special Meeting or any adjournments or postponements thereof.
Information regarding the matters to be acted upon at the Special Meeting
is contained in the Joint Proxy Statement/Prospectus accompanying this Notice
which, together with the Appendices thereto, form a part of this Notice.
The Board of Directors of Giant has fixed the close of business on May 21,
1998 as the record date for determining the holders of Giant Common Stock
entitled to receive notice of, and to vote at, the Special Meeting and any
adjournments or postponements thereof. The holders of record of the Giant Common
Stock as of the record date are entitled to vote at the Special Meeting or any
adjournments or postponements thereof. If the Merger is effected, holders of
Giant Common Stock will not be entitled to appraisal rights under Section 262 of
the Delaware General Corporation Law.
While the adoption of the Merger Agreement requires the affirmative vote of
the holders of record of a majority of the shares of Giant Common Stock
outstanding on May 21, 1998, the record date for the Special Meeting, the
approval of the New Certificate and the New Bylaws requires the affirmative vote
of the holders of at least 80% of Giant Common Stock outstanding on May 21, 1998
and is a condition to the Merger. Therefore, adoption of the Merger Agreement
will in effect require the affirmative vote of the holders of at least 80% of
Giant Common Stock outstanding on May 21, 1998. The approval of the Incentive
Plan requires the affirmative vote of the holders of a majority of the shares of
Giant Common Stock present or represented at the Special Meeting and entitled to
vote. The approval of the Incentive Plan is not a condition to the effectiveness
of the Merger.
A list of stockholders entitled to vote at the Special Meeting will be
available for inspection during ordinary business hours for ten days prior to
the Special Meeting at the offices of Giant Industries, Inc., 23733 North
Scottsdale Road, Scottsdale, Arizona 85255.
By Order of the Board of Directors,
MORGAN GUST
Vice President,
General Counsel and Secretary
Scottsdale, Arizona
, 1998
<PAGE> 6
[HOLLY LETTERHEAD]
, 1998
Dear Fellow Stockholder:
The Board of Directors cordially invites you to attend a Special Meeting of
Stockholders of Holly Corporation ("Holly") to be held at 9:00 a.m. local time,
on , 1998, at .
At this important Special Meeting, you will be asked to consider and vote
upon a proposal to adopt the Agreement and Plan of Merger, dated April 14, 1998
(the "Merger Agreement"), between Holly and Giant Industries, Inc. ("Giant").
Pursuant to the Merger Agreement, among other things:
(i) Holly will be merged (the "Merger") with and into Giant.
(ii) All of the issued and outstanding shares of Holly Common Stock
will be converted, in the aggregate, into the right to receive (1) that
number of fully paid and nonassessable shares of Giant Common Stock equal
to the number of shares of Giant Common Stock issued and outstanding
immediately before the effective time of the Merger (the "Effective Time")
and (2) cash in an amount equal to $25,000,000 multiplied by a fraction,
the numerator of which is the number of issued and outstanding shares of
Holly Common Stock immediately before the Effective Time and the
denominator of which is the sum of (A) the number of issued and outstanding
shares of Holly Common Stock immediately before the Effective Time, (B) the
number of shares of Holly Common Stock subject to Holly stock options
(whether vested or unvested) outstanding immediately before the Effective
Time and (C) the number of Holly phantom stock rights outstanding
immediately before the Effective Time (with the consideration described in
clauses (1) and (2) collectively referred to as the "Merger
Consideration"). Accordingly, each issued and outstanding share of Holly
Common Stock will be converted into the right to receive a fraction of the
Merger Consideration equal to one divided by the number of shares of Holly
Common Stock issued and outstanding immediately before the Effective Time.
Based upon the number of shares of Giant Common Stock and Holly Common
Stock and the number of Holly stock options and Holly phantom stock rights
outstanding as of the date of the accompanying Joint Proxy
Statement/Prospectus, the Merger Consideration would result in each
outstanding share of Holly Common Stock being converted into the right to
receive approximately 1.33 shares of Giant Common Stock plus $2.886 in
cash. These numbers, however, are subject to adjustment prior to the
Effective Time in the event that the number of outstanding shares of Giant
or Holly or the number of outstanding options and phantom stock rights of
Holly change.
(iii) Giant will assume Holly stock option and phantom stock plans.
(iv) The directors and senior officers of Giant immediately following
the Merger will be persons designated half by Giant and half by Holly as
provided in the Merger Agreement.
(v) Giant's certificate of incorporation and bylaws will be amended
and restated in their entirety (as amended and restated, the "New
Certificate" and the "New Bylaws," respectively).
While the Merger has been structured as a merger of Holly into Giant, the
transaction in substance is a "merger of equals." Following the Merger, former
Holly stockholders will own 50% of the issued and outstanding shares of Giant
Common Stock (subject to adjustments to avoid the issuance of fractional shares
and any adjustments in consequence of the exercise by Holly stockholders of
appraisal rights). The Chairman of the Board and Chief Executive Officer of
Holly and the Chairman of the Board and Chief Executive Officer of Giant will be
Co-Chairmen of the Board of Directors and Co-Chief Executive Officers of the
combined company and the ten-member board of directors of the combined company
will consist of five persons who have been designated by each of Giant and
Holly, as provided in the Merger Agreement. The headquarters of the combined
company will be Giant's current headquarters in Scottsdale, Arizona, and the
combined
<PAGE> 7
company will continue to maintain an office in Dallas, Texas. The combined
company will operate under the name Giant Industries, Inc.
The Merger, the Merger Agreement and the terms and conditions of the
transactions contemplated thereby are more fully described in the accompanying
Joint Proxy Statement/Prospectus. We urge you to review this material carefully.
THE BOARD OF DIRECTORS OF HOLLY HAS UNANIMOUSLY DETERMINED THAT THE MERGER,
THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY ARE FAIR TO AND
IN THE BEST INTERESTS OF THE HOLLY STOCKHOLDERS, HAS UNANIMOUSLY APPROVED THE
MERGER, THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY AND
RECOMMENDS THAT HOLLY STOCKHOLDERS VOTE "FOR" ADOPTION OF THE MERGER, THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
The adoption of the Merger Agreement requires the affirmative vote of the
holders of record of a majority of the shares of Holly Common Stock outstanding
on May 21, 1998, the record date for the Special Meeting.
It is important that your shares of Holly Common Stock are represented at
the Special Meeting, regardless of the number of shares you hold. Whether or not
you plan to attend the Special Meeting, please sign, date and return your proxy
card in the enclosed postage paid envelope as soon as possible. If you later
decide to attend the Special Meeting and vote in person, or if you wish to
revoke your proxy for any reason prior to the vote at the Special Meeting, you
may do so and your proxy will have no further effect. If you attend the Special
Meeting, you may vote in person, if you wish, even though you previously mailed
your proxy. IF YOU DO NOT VOTE AT THE SPECIAL MEETING EITHER IN PERSON OR BY
PROXY, IT WILL HAVE THE SAME EFFECT AS IF YOU VOTED AGAINST THE MERGER, THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
PLEASE DO NOT SEND YOUR SHARE CERTIFICATES WITH THE ENCLOSED PROXY CARD AT
THIS TIME. If the Merger is consummated, you will be sent a letter of
transmittal which will include instructions as to the procedures to be used in
exchanging your certificates representing shares of Holly Common Stock for
certificates representing Giant Common Stock.
ON BEHALF OF YOUR BOARD OF DIRECTORS, I URGE YOU TO VOTE "FOR" ADOPTION OF
THE MERGER, THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
Very truly yours,
LAMAR NORSWORTHY
Chairman of the Board and
Chief Executive Officer
<PAGE> 8
HOLLY CORPORATION
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD , 1998
To the Stockholders of Holly Corporation:
Notice is hereby given that a Special Meeting of Stockholders (the "Special
Meeting") of Holly Corporation ("Holly") will be held at 9:00 a.m. local time,
on , 1998, at , for the following purposes:
1. To consider and vote upon a proposal to adopt the Agreement and
Plan of Merger, dated April 14, 1998, set forth in Appendix A to the Joint
Proxy Statement/Prospectus accompanying this Notice (the "Merger
Agreement"), between Holly and Giant Industries, Inc. ("Giant"). Pursuant
to the Merger Agreement, among other things:
(i) Holly will be merged (the "Merger") with and into Giant.
(ii) All of the issued and outstanding shares of Holly Common Stock
will be converted, in the aggregate, into the right to receive (1) that
number of fully paid and nonassessable shares of Giant Common Stock
equal to the number of shares of Giant Common Stock issued and
outstanding immediately before the effective time of the Merger (the
"Effective Time") and (2) cash in an amount equal to $25,000,000
multiplied by a fraction, the numerator of which is the number of issued
and outstanding shares of Holly Common Stock immediately before the
Effective Time and the denominator of which is the sum of (A) the number
of issued and outstanding shares of Holly Common Stock immediately
before the Effective Time, (B) the number of shares of Holly Common
Stock subject to Holly stock options (whether vested or unvested)
outstanding immediately before the Effective Time and (C) the number of
Holly phantom stock rights outstanding immediately before the Effective
Time (with the consideration described in clauses (1) and (2)
collectively referred to as the "Merger Consideration"). Accordingly,
each issued and outstanding share of Holly Common Stock will be
converted into the right to receive a fraction of the Merger
Consideration equal to one divided by the number of shares of Holly
Common Stock issued and outstanding immediately before the Effective
Time. Based upon the number of shares of Giant Common Stock and Holly
Common Stock and the number of Holly stock options and Holly phantom
stock rights outstanding as of the date of the accompanying Joint Proxy
Statement/Prospectus, the Merger Consideration would result in each
outstanding share of Holly Common Stock being converted into the right
to receive approximately 1.33 shares of Giant Common Stock plus $2.886
in cash. These numbers, however, are subject to adjustment prior to the
Effective Time in the event that the number of outstanding shares of
Giant or Holly or the number of outstanding options and phantom stock
rights of Holly change.
(iii) Giant will assume Holly stock option and phantom stock plans.
(iv) The directors and senior officers of Giant immediately
following the Merger will be persons designated half by Giant and half
by Holly as provided in the Merger Agreement.
(v) Giant's certificate of incorporation and bylaws will be amended
and restated in their entirety as set forth in Appendices B and C,
respectively, to the Joint Proxy Statement/Prospectus accompanying this
Notice (as amended and restated, the "New Certificate" and the "New
Bylaws").
2. To transact such other business as may properly come before the
Special Meeting or any adjournments or postponements thereof.
<PAGE> 9
Information regarding the matters to be acted upon at the Special Meeting
is contained in the Joint Proxy Statement/Prospectus accompanying this Notice
which, together with the Appendices thereto, form a part of this Notice.
If the Merger Agreement is adopted and the Merger is effected, holders of
Holly Common Stock who follow the procedures specified under Section 262 of the
Delaware General Corporation Law may demand an appraisal by the Delaware Court
of Chancery of the "fair value" of their Holly Common Stock in lieu of accepting
Merger Consideration. A copy of Section 262 of the Delaware General Corporation
Law is set forth in Appendix D to the Joint Proxy Statement/Prospectus
accompanying this Notice. The failure to follow the procedures specified will
result in the loss of appraisal rights.
The Board of Directors of Holly has fixed the close of business on May 21,
1998 as the record date for determining the holders of Holly Common Stock
entitled to receive notice of, and to vote at, the Special Meeting and any
adjournments or postponements thereof. A list of stockholders entitled to vote
at the Special Meeting will be available for inspection during normal business
hours for ten days prior to the Special Meeting at the offices of Holly at 100
Crescent Court, Suite 1600, Dallas, Texas 75201-6927.
The adoption of the Merger Agreement requires the affirmative vote of the
holders of record of a majority of the shares of Holly Common Stock outstanding
on May 21, 1998, the record date for the Special Meeting.
By Order of the Board of Directors,
HENRY A. TEICHHOLZ
Vice President, Treasurer
and Controller
Dallas, Texas
, 1998
<PAGE> 10
SUBJECT TO COMPLETION, DATED , 1998
JOINT PROXY STATEMENT OF
GIANT INDUSTRIES, INC.
AND
HOLLY CORPORATION
SPECIAL MEETINGS OF STOCKHOLDERS
TO BE HELD ON , 1998
------------------------
PROSPECTUS OF
GIANT INDUSTRIES, INC.
This Joint Proxy Statement/Prospectus ("Joint Proxy Statement/Prospectus")
is being furnished to (i) all holders of common stock, par value $.01 per share
("Giant Common Stock"), of Giant Industries, Inc., a Delaware corporation
("Giant"), and (ii) all holders of common stock, par value $.01 per share
("Holly Common Stock"), of Holly Corporation, a Delaware corporation ("Holly"),
in connection with the solicitation of proxies by the respective Boards of
Directors of the two companies (the "Companies") for use at the respective
Special Meetings of Stockholders of Giant (including any adjournments or
postponements thereof, the "Giant Special Meeting") and of Holly (including any
adjournments or postponements thereof, the "Holly Special Meeting," and,
together with the Giant Special Meeting, the "Special Meetings"), each to be
held on , 1998.
This Joint Proxy Statement/Prospectus relates to the Agreement and Plan of
Merger, dated April 14, 1998 (the "Merger Agreement"), between Giant and Holly
which is set forth in Appendix A to this Joint Proxy Statement/Prospectus.
Pursuant to the Merger Agreement, among other things:
(i) Holly will be merged (the "Merger") with and into Giant, with
Giant as the surviving corporation (the "Combined Company").
(ii) All of the issued and outstanding shares of Holly Common Stock
will be converted, in the aggregate, into the right to receive (1) that
number of fully paid and nonassessable shares of Giant Common Stock equal
to the number of shares of Giant Common Stock issued and outstanding
immediately before the effective time of the Merger (the "Effective Time")
and (2) cash in an amount equal to $25,000,000 multiplied by a fraction,
the numerator of which is the number of issued and outstanding shares of
Holly Common Stock immediately before the Effective Time and the
denominator of which is the sum of (A) the number of issued and outstanding
shares of Holly Common Stock immediately before the Effective Time, (B) the
number of shares of Holly Common Stock subject to Holly stock options
(whether vested or unvested) outstanding immediately before the Effective
Time and (C) the number of Holly phantom stock rights outstanding
immediately before the Effective Time (with the consideration described in
clauses (1) and (2) collectively referred to as the "Merger
Consideration"). Accordingly, each issued and outstanding share of Holly
Common Stock will be converted into the right to receive a fraction of the
Merger Consideration equal to one divided by the number of shares of Holly
Common Stock issued and outstanding immediately before the Effective Time.
Based upon the number of shares of Giant Common Stock and Holly Common
Stock and the number of Holly stock options and Holly phantom stock rights
outstanding as of the date of this Joint Proxy Statement/Prospectus, the
Merger Consideration would result in each outstanding share of Holly Common
Stock being converted into the right to receive approximately 1.33 shares
of Giant Common Stock plus $2.886 in cash. These numbers, however, are
subject to adjustment prior to the Effective Time in the event that the
number of outstanding shares of Giant or Holly or the number of outstanding
options and phantom stock rights of Holly change.
(iii) Giant will assume Holly stock option and phantom stock plans.
(iv) The directors and senior officers of Giant immediately following
the Merger will be persons designated half by Giant and half by Holly as
provided in the Merger Agreement.
(v) Giant's certificate of incorporation will be amended and restated
in its entirety as set forth in Appendix B to this Joint Proxy
Statement/Prospectus (as amended and restated, the "New Certificate").
(vi) Giant's bylaws will be amended and restated in their entirety as
set forth in Appendix C to this Joint Proxy Statement/Prospectus (as
amended and restated, the "New Bylaws").
This Joint Proxy Statement/Prospectus also constitutes the Prospectus of
Giant filed as part of a Registration Statement on Form S-4 (the "Registration
Statement") with the Securities and Exchange Commission (the "Commis-
<PAGE> 11
sion") under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the registration of shares of Giant Common Stock issuable to holders
of Holly Common Stock in connection with the Merger.
At the Giant Special Meeting, holders of Giant Common Stock are being asked
to adopt the Merger, the Merger Agreement and the transactions contemplated
thereby (including the issuance of Giant Common Stock in the Merger and the
adoption of the New Certificate and the New Bylaws). While the adoption of the
Merger Agreement requires the affirmative vote of the holders of record of a
majority of the shares of Giant Common Stock outstanding on May 21, 1998, the
record date for the Special Meetings (the "Record Date"), the approval of the
New Certificate and the New Bylaws requires the affirmative vote of the holders
of at least 80% of Giant Common Stock outstanding on the Record Date and is a
condition to the Merger. Therefore, adoption of the Merger Agreement will in
effect require the affirmative vote of the holders of at least 80% of Giant
Common Stock outstanding on the Record Date. The approval of the Incentive Plan
requires the affirmative vote of the holders of a majority of the shares of
Giant Common Stock present or represented at the Special Meeting and entitled to
vote. The approval of the Incentive Plan is not a condition to the effectiveness
of the Merger.
At the Holly Special Meeting, holders of Holly Common Stock are being asked
to adopt the Merger, the Merger Agreement and the transactions contemplated
thereby. This requires the affirmative vote of the holders of record of a
majority of the shares of Holly Common Stock outstanding on the Record Date.
Pursuant to the terms of a Major Stockholders' Agreement entered into in
connection with the Merger Agreement by certain Giant and Holly stockholders
(the "Major Stockholders' Agreement"), which is set forth in Appendix G to this
Joint Proxy Statement/Prospectus, Giant and Holly stockholders holding
approximately 21.1% and 29.7% of the outstanding shares of Giant and Holly
Common Stock, respectively, have agreed to vote to adopt the Merger, the Merger
Agreement, and the transactions contemplated thereby at their respective Special
Meetings.
All information contained in this Joint Proxy Statement/Prospectus relating
to Giant has been supplied by Giant and all information relating to Holly has
been supplied by Holly.
This Joint Proxy Statement/Prospectus and the accompanying forms of proxy
are first being mailed to stockholders of Giant and Holly on or about
, 1998.
SEE "RISK FACTORS" BEGINNING ON PAGE 24 FOR A DISCUSSION OF CERTAIN FACTORS
THAT GIANT AND HOLLY STOCKHOLDERS SHOULD CAREFULLY CONSIDER IN DETERMINING
WHETHER TO VOTE FOR ADOPTION OF THE MERGER, THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING WITH RESPECT TO AN INVESTMENT BY
HOLLY STOCKHOLDERS IN GIANT COMMON STOCK UPON EFFECTIVENESS OF THE MERGER.
THE SHARES OF GIANT COMMON STOCK TO BE ISSUED IN CONNECTION WITH THE MERGER HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
JOINT PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IN CONNECTION WITH THE SOLICITATIONS OF PROXIES OR THE
OFFERING OF SECURITIES MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY GIANT OR
HOLLY. THIS JOINT PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE SECURITIES OFFERED BY THIS JOINT
PROXY STATEMENT/PROSPECTUS, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION
IN WHICH IT IS NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION OR TO ANY
PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF
SECURITIES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF GIANT OR HOLLY SINCE THE DATE
HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS IS , 1998.
2
<PAGE> 12
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION....................................... 6
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 6
SUMMARY..................................................... 8
The Companies............................................. 8
The Special Meetings...................................... 10
The Merger................................................ 12
Risk Factors.............................................. 16
Market Price and Dividend Information..................... 17
Selected Consolidated Summary Historical Financial Data of
Giant.................................................. 18
Selected Consolidated Historical Financial Data of
Holly.................................................. 20
Selected Unaudited Pro Forma Condensed Consolidated
Financial Data of the Combined Company................. 22
RISK FACTORS................................................ 24
Substantial Indebtedness; Ability to Service Debt......... 24
Merger will Trigger Change of Control Provisions in Giant
Indentures............................................. 24
Competition............................................... 25
Raw Material Supply....................................... 25
Volatility of Crude Oil Prices and Refining Margins....... 26
Concentration of Refineries............................... 26
Government Regulations and Environmental Risks............ 27
Taxes..................................................... 28
Controlling Stockholders; Control Provisions in Major
Stockholders' Agreement and New Bylaws................. 28
Possibility of Management Deadlock........................ 29
The Y2K Issue............................................. 29
Fixed Merger Consideration................................ 30
Uncertainties in Integrating Business Operations;
Liabilities and Transaction Costs...................... 30
Dividends................................................. 31
Risk of Forward-Looking Statements........................ 31
MARKET PRICE AND DIVIDEND INFORMATION....................... 32
COMPARATIVE PER SHARE DATA.................................. 34
THE COMPANIES............................................... 35
Giant..................................................... 35
Holly..................................................... 35
RECENT DEVELOPMENTS......................................... 36
Giant..................................................... 36
Holly..................................................... 36
MANAGEMENT OF THE COMBINED COMPANY.......................... 36
Board of Directors and Executive Officers................. 37
THE SPECIAL MEETINGS........................................ 39
Date, Time and Place...................................... 39
Matters to be Considered at the Special Meetings.......... 39
Record Date; Stock Entitled to Vote; Quorum............... 39
Votes Required............................................ 40
</TABLE>
3
<PAGE> 13
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Share Ownership of Management; Voting Requirement in Major
Stockholders' Agreement................................ 40
Voting of Proxies......................................... 40
Revocability of Proxies................................... 41
Solicitation of Proxies................................... 41
THE MERGER.................................................. 41
General................................................... 41
Structure of the Merger................................... 41
Merger Consideration...................................... 42
Effective Time............................................ 42
Background of the Merger.................................. 42
Reasons for the Merger; Recommendations of the Board of
Directors.............................................. 44
Opinions of Financial Advisors............................ 47
Certain Federal Income Tax Consequences................... 55
Anticipated Accounting Treatment.......................... 56
Interests of Certain Persons in the Merger................ 57
OTHER TERMS OF THE MERGER AND THE MERGER AGREEMENT.......... 59
General................................................... 59
Conversion of Shares; Procedures for Exchange of
Certificates; Fractional Shares........................ 59
Conditions to the Consummation of the Merger.............. 60
Termination............................................... 61
Termination Fees.......................................... 62
No Solicitation........................................... 62
Conduct of Business Pending Merger........................ 63
Amendment and Waiver...................................... 64
Expenses.................................................. 64
Representations and Warranties............................ 65
Stock Exchange Listing.................................... 65
Dividend Coordination..................................... 65
Required Regulatory Approvals............................. 65
Resale of Giant Common Stock.............................. 66
Appraisal and Dissenters Rights........................... 66
Major Stockholders' Agreement............................. 68
New Certificate........................................... 71
New Bylaws................................................ 72
COMPARISON OF STOCKHOLDER RIGHTS............................ 74
Authorized Capital Stock.................................. 74
Numbers and Election of Directors......................... 74
Voting by Directors....................................... 75
Committees................................................ 75
Voting by Stockholders.................................... 76
Special Meetings of Stockholders.......................... 76
Officers.................................................. 76
Amendment of Certificate of Incorporation................. 77
Amendment of Bylaws....................................... 77
Liability and Indemnification of Officers and Directors... 77
Fiscal Year............................................... 78
</TABLE>
4
<PAGE> 14
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS OF THE COMBINED COMPANY........................ 79
Unaudited Pro Forma Condensed Consolidated Balance
Sheet.................................................. 80
Notes to Unaudited Pro Forma Condensed Consolidated
Balance Sheet.......................................... 81
Unaudited Pro Forma Condensed Consolidated Statement of
Earnings............................................... 82
Notes to Unaudited Pro Forma Condensed Consolidated
Statement of Earnings.................................. 83
APPROVAL OF THE INCENTIVE PLAN.............................. 84
Introduction.............................................. 84
Vote Required............................................. 84
Purpose................................................... 84
Summary of the Provisions of the Incentive Plan........... 84
New Plan Benefits......................................... 90
EXPERTS..................................................... 90
LEGAL MATTERS............................................... 90
STOCKHOLDER PROPOSALS....................................... 90
OTHER MATTERS............................................... 90
APPENDIX A -- AGREEMENT AND PLAN OF MERGER.................. A-1
APPENDIX B -- RESTATED CERTIFICATE OF INCORPORATION OF
GIANT INDUSTRIES, INC. ...................... B-1
APPENDIX C -- AMENDED AND RESTATED BYLAWS OF GIANT
INDUSTRIES, INC. ......................................... C-1
APPENDIX D -- SECTION 262. APPRAISAL RIGHTS................. D-1
APPENDIX E -- FAIRNESS OPINION OF BEAR, STEARNS & CO.
INC. ..................................................... E-1
APPENDIX F -- FAIRNESS OPINION OF DONALDSON, LUFKIN &
JENRETTE SECURITIES CORPORATION.............. F-1
APPENDIX G -- MAJOR STOCKHOLDERS' AGREEMENT................. G-1
APPENDIX H -- GIANT INDUSTRIES, INC. 1998 STOCK INCENTIVE
PLAN...................................................... H-1
</TABLE>
5
<PAGE> 15
AVAILABLE INFORMATION
Giant and Holly are each subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Commission. Giant has filed with the Commission the Registration Statement
under the Securities Act with respect to the Giant Common Stock to be issued to
holders of Holly Common Stock in connection with the Merger. The Registration
Statement and the exhibits thereto, as well as the reports, proxy statements and
other information filed by Giant and Holly with the Commission, may be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the Commission's regional offices at Suite 1300, Seven World Trade Center,
New York, New York 10048, and at The Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material also can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission
maintains a Web site (http//www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants. The Giant
Common Stock is listed on the New York Stock Exchange ("NYSE"), and material
filed by Giant may be inspected at the offices of the NYSE, 20 Broad Street, New
York, New York 10005. The Holly Common Stock is listed on the American Stock
Exchange ("ASE"), and material filed by Holly may be inspected at the offices of
the ASE, 86 Trinity Place, New York, New York 10006. This Joint Proxy
Statement/Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits thereto, a portion of which has been
omitted in accordance with the rules and regulations of the Commission.
Reference is made to the Registration Statement and the exhibits thereto for
further information.
Statements contained in this Joint Proxy Statement/Prospectus, or in any
document incorporated in this Joint Proxy Statement/Prospectus by reference, as
to the provisions of any contract or other document referred to herein or
therein are qualified in all respects by reference to the copy of such contract
or other document filed as an exhibit to the Registration Statement or such
other document incorporated herein by reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission pursuant to the Exchange
Act are incorporated by reference in this Joint Proxy Statement/Prospectus:
1. Giant's Annual Report on Form 10-K for the year ended December 31,
1997 (the "1997 Giant Form 10-K");
2. Giant's Current Report on Form 8-K filed April 20, 1998;
3. Holly's Annual Report on Form 10-K for the fiscal year ended July
31, 1997 (the "1997 Holly Form 10-K");
4. Holly's Quarterly Reports on Form 10-Q for the quarters ended
October 31, 1997 and January 31, 1998;
5. Holly's Current Report on Form 8-K filed April 20, 1998;
6. The information contained in Giant's Proxy Statement dated March
30, 1998 for its Annual Meeting of Stockholders to be held on May 8, 1998
that has been incorporated by reference in the 1997 Giant Form 10-K;
7. The information contained in Holly's Proxy Statement dated November
3, 1997 for its Annual Meeting of Stockholders held on December 11, 1997
that has been incorporated by reference in the 1997 Holly Form 10-K; and
8. The description of Giant's Common Stock contained in its
Registration Statement on Form 8-A filed with the Commission on November
29, 1989, pursuant to Section 12 of the Exchange Act.
6
<PAGE> 16
The information relating to Holly and Giant contained in this Joint Proxy
Statement/Prospectus does not purport to be comprehensive and should be read
together with the information in the documents incorporated by reference herein.
In addition, all documents and reports filed by either Giant or Holly
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date
of this Joint Proxy Statement/Prospectus and prior to the date of its respective
Special Meeting will be deemed to be incorporated by reference in this Joint
Proxy Statement/Prospectus and to be a part hereof from the dates of filing of
such documents or reports. Any statement contained in a document incorporated or
deemed to be incorporated by reference in this Joint Proxy Statement/Prospectus
will be deemed to be modified or superseded for purposes of this Joint Proxy
Statement/Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded will not be deemed, except as so modified or superseded,
to constitute a part of this Joint Proxy Statement/Prospectus.
COPIES OF DOCUMENTS INCORPORATED BY REFERENCE THAT ARE NOT PRESENTED IN OR
DELIVERED WITH THIS JOINT PROXY STATEMENT/PROSPECTUS (OTHER THAN EXHIBITS TO
SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE
INTO THE INFORMATION INCORPORATED HEREIN) ARE AVAILABLE, WITHOUT CHARGE, TO ANY
PERSON, INCLUDING ANY BENEFICIAL OWNER OF CAPITAL STOCK OF GIANT OR HOLLY, TO
WHOM THIS JOINT PROXY STATEMENT/PROSPECTUS IS DELIVERED, ON WRITTEN OR ORAL
REQUEST, IN THE CASE OF DOCUMENTS RELATING TO GIANT, TO GIANT INDUSTRIES, INC.,
23733 NORTH SCOTTSDALE ROAD, SCOTTSDALE, ARIZONA 85255 (TELEPHONE NUMBER (602)
585-8888, ATTENTION: INVESTOR RELATIONS), OR, IN THE CASE OF DOCUMENTS RELATING
TO HOLLY, TO HOLLY CORPORATION, 100 CRESCENT COURT, SUITE 1600, DALLAS, TEXAS
75201 (TELEPHONE NUMBER (214) 871-3555, ATTENTION: SECRETARY). IN ORDER TO
ENSURE DELIVERY OF THE DOCUMENTS PRIOR TO THE APPLICABLE SPECIAL MEETING,
REQUESTS SHOULD BE RECEIVED BY , 1998.
7
<PAGE> 17
SUMMARY
The following is a summary of certain information contained elsewhere or
incorporated by reference in this Joint Proxy Statement/Prospectus. Reference is
made to, and this summary is qualified in its entirety by, the more detailed
information contained or incorporated by reference in this Joint Proxy
Statement/ Prospectus and the Appendices hereto. Stockholders are urged to read
this Joint Proxy Statement/Prospectus, the Appendices hereto and the documents
incorporated by reference herein in their entirety. Capitalized terms which are
used but not defined in this Summary have the respective meanings ascribed to
them elsewhere in this Joint Proxy Statement/Prospectus. Unless the context
otherwise requires, "Giant" means Giant and its subsidiaries and "Holly" means
Holly and its subsidiaries.
THE COMPANIES
Giant...................... Giant, through its wholly-owned subsidiary Giant
Industries Arizona, Inc. ("Giant Arizona"), is
engaged in the refining and marketing of petroleum
products in New Mexico, Arizona, Colorado and Utah,
with a concentration in the Four Corners where
these states adjoin. Giant sells petroleum products
through company-operated retail facilities,
independent wholesalers and retailers,
industrial/commercial accounts and sales and
exchanges with major oil companies. In addition,
through its wholly-owned subsidiary Phoenix Fuel
Co. Inc. ("Phoenix Fuel"), Giant Arizona operates
an industrial/commercial petroleum fuels and
lubricants distribution operation including an
unattended fleet fueling, or cardlock, operation.
Giant's long-term strategy is to profitably grow
its refining, retail marketing and other marketing
operations through both selective acquisitions and
capital improvements to its existing operations.
This strategy, in part, is designed to increase
integration or control over the distribution of a
greater portion of Giant's refined products through
their sale in Giant's retail network. Giant also
intends to increase its market presence in the
growing southwestern United States market,
including the Phoenix and Tucson areas. Through
selective acquisitions, Giant may expand into new
market regions outside the Four Corners area where
Giant's management believes it can duplicate its
business strategy. Giant Arizona owns and operates
two refineries with total throughput capacity of
44,600 BPD. The Ciniza refinery is located on 880
acres near Gallup, New Mexico and the Bloomfield
refinery is located on 285 acres near Farmington,
New Mexico. Both of these refineries are located in
the Four Corners area, which serves as Giant's
primary market for its refined products and as the
primary source of its crude oil and natural gas
liquids ("NGLS") supply. During 1997, Giant sold
approximately 9,200,000 barrels of gasoline and
4,000,000 barrels of diesel fuel from its
refineries. At April 30, 1998, Giant operated 135
service stations/convenience stores located in New
Mexico, Arizona, Colorado and Utah. Giant also
operates a Travel Center located on I-40 adjacent
to the Ciniza refinery near Gallup, New Mexico.
Giant's retail units sold approximately 144,700,000
gallons of gasoline and diesel fuel in 1997.
Merchandise sales were $75,000,000. In 1997, Giant
had total revenues of $657,300,000 and net earnings
of $15,300,000. Giant's principal executive offices
are located at 23733 North Scottsdale Road,
Scottsdale, Arizona 85255 and its telephone number
is (602) 585-8888. See "The Companies -- Giant."
Holly...................... Holly is an independent refiner of petroleum and
petroleum derivatives and produces high value light
products such as gasoline, diesel fuel and
8
<PAGE> 18
jet fuel for sale primarily in the southwestern
United States and northern Mexico. Navajo Refining
Company ("Navajo"), one of Holly's wholly-owned
subsidiaries, owns a high-conversion petroleum
refinery in Artesia, New Mexico, which Navajo
operates in conjunction with crude, vacuum
distillation and other facilities situated 65 miles
away in Lovington, New Mexico (collectively, the
"Navajo Refinery"). The Navajo Refinery has a crude
capacity of 60,000 BPD and can process a variety of
high sulfur (sour) crude oils. Holly also owns
Montana Refining Company, a partnership ("MRC"),
which owns a 7,000 BPD petroleum refinery near
Great Falls, Montana (the "Montana Refinery"). The
Montana Refinery can process a variety of high
sulfur crude oils and primarily serves Montana.
Holly also owns interests in refined product and
crude oil pipelines and related terminals that are
operated either in conjunction with certain
operations or independently. The Navajo Refinery
primarily serves the growing southwestern United
States market, including El Paso, Albuquerque,
Phoenix and Tucson, and the northern Mexico market.
Holly's products are shipped by pipeline from El
Paso to Albuquerque via a products pipeline system
owned by Chevron Pipeline Company and from El Paso
to Tucson and Phoenix via a products pipeline
system owned by Santa Fe Pacific Pipeline. Holly
also conducts a small scale oil and gas exploration
and production program. Holly had revenues of
$721,300,000 and net income of $13,100,000 in
fiscal 1997. Holly's principal executive offices
are located at 100 Crescent Court, Suite 1600,
Dallas, Texas 75201, and its telephone number is
(214) 871-3555. See "The Companies -- Holly."
Recent Developments........ GIANT. On February 10, 1998, Giant completed the
purchase of the assets of DeGuelle Oil Company and
the stock of DeGuelle Enterprises (collectively,
"DeGuelle") for $9,750,000. DeGuelle is a Durango,
Colorado-based petroleum marketing company.
Included in the purchase were seven service
station/convenience stores, two cardlock commercial
fleet fueling facilities, a gasoline and diesel
storage bulk plant and related transportation
equipment. All of the facilities are located in
southwestern Colorado and will be supplied by
Giant's refineries. In 1997, DeGuelle had sales of
approximately 10,000,000 gallons of gasoline and
diesel fuel in addition to 35,000 gallons of
lubricants.
Giant has entered into agreements to acquire 33
service station/convenience stores from Kaibab
Industries, Inc. The retail units, located
throughout Arizona, include 15 in the greater
Phoenix area and 11 in the Tucson market, with the
balance located primarily in southern and eastern
Arizona. Other assets in the acquisition include
fuel truck/transports, other related equipment,
fuel inventories and some undeveloped real estate.
These units have had sales of approximately 70
million gallons of refined petroleum products per
year. The acquisition is expected to close in the
second quarter of 1998, subject to customary
pre-closing conditions, due diligence procedures
and regulatory approvals.
Giant previously executed an agreement to acquire
the assets of Ever-Ready Oil Co., Inc. and a
related entity (collectively, "Ever-Ready"). Giant
terminated this agreement in April 1998 due to the
exercise of rights of first refusal in favor of
third parties.
9
<PAGE> 19
HOLLY. In April 1998, Holly agreed to purchase a
400-mile West Texas crude gathering system from
Fina Pipe Line Co. and Fin-Tex Pipe Line Co.
(collectively, "Fina") for $12,000,000. In
addition, Holly may pay up to $300,000 per year for
a five-year period, subject to contingencies, in
connection with the purchase. The principal
business of the gathering system is transporting
locally produced sweet and sour crude oil to local
trading hubs. The purchase is expected to close in
the summer of 1998, subject to customary
pre-closing conditions, reviews, and due diligence
procedures. See "Recent Developments -- Holly."
THE SPECIAL MEETINGS
Date, Time and Place....... The Giant Special Meeting will be held at
at 9:00 a.m., local time, on
, 1998. The Holly Special Meeting will
be held at at 9:00 a.m., local time, on
, 1998.
Matters to be Considered at
the Special Meetings....... At the Giant Special Meeting, holders of Giant
Common Stock will be asked to adopt the Merger
Agreement. Pursuant to the Merger Agreement, among
other things:
(i) Holly will be merged (the "Merger") with and
into Giant.
(ii) All of the issued and outstanding shares of
Holly Common Stock will be converted, in the
aggregate, into the right to receive (1) that
number of fully paid and nonassessable shares of
Giant Common Stock equal to the number of shares of
Giant Common Stock issued and outstanding
immediately before the Effective Time and (2) cash
in an amount equal to $25,000,000 multiplied by a
fraction, the numerator of which is the number of
issued and outstanding shares of Holly Common Stock
immediately before the Effective Time and the
denominator of which is the sum of (A) the number
of issued and outstanding shares of Holly Common
Stock immediately before the Effective Time, (B)
the number of shares of Holly Common Stock subject
to Holly stock options (whether vested or unvested)
outstanding immediately before the Effective Time
and (C) the number of Holly phantom stock rights
outstanding immediately before the Effective Time
(with the consideration described in clauses (1)
and (2) collectively referred to as the "Merger
Consideration"). Accordingly, each issued and
outstanding share of Holly Common Stock will be
converted into the right to receive a fraction of
the Merger Consideration equal to one divided by
the number of shares of Holly Common Stock issued
and outstanding immediately before the Effective
Time. Based upon the number of shares of Giant
Common Stock and Holly Common Stock and the number
of Holly stock options and Holly phantom stock
rights outstanding as of the date of this Joint
Proxy Statement/Prospectus, the Merger
Consideration would result in each outstanding
share of Holly Common Stock being converted into
the right to receive approximately 1.33 shares of
Giant Common Stock plus $2.886 in cash. These
numbers, however, are subject to adjustment prior
to the Effective Time in the event that the number
of outstanding shares of Giant or Holly or the
number of outstanding options and phantom stock
rights of Holly change.
10
<PAGE> 20
(iii) Giant will assume Holly stock option and
phantom stock plans.
(iv) The directors and senior officers of Giant
immediately following the Merger will be persons
designated half by Giant and half by Holly as
provided in the Merger Agreement.
Holders of Giant Common Stock also will be asked to
consider and vote upon proposals to adopt the New
Certificate and New Bylaws and approve the
Incentive Plan.
At the Holly Special Meeting, holders of Holly
Common Stock will be asked to adopt the Merger
Agreement. See "The Merger," "Other Terms of the
Merger and the Merger Agreement" and "The Special
Meetings -- Matters to be Considered at the Special
Meetings."
Record Date; Shares
Entitled to Vote........... Only holders of record of Giant Common Stock and
Holly Common Stock at the close of business on May
21, 1998 (the "Record Date") are entitled to
receive notice of and to vote at the Giant Special
Meeting or the Holly Special Meeting, respectively.
Holders of Giant Common Stock or Holly Common
Stock, as the case may be, as of the Record Date
are entitled to one vote per share on each matter
to be voted on at the applicable Special Meeting.
See "The Special Meetings -- Record Date; Stock
Entitled to Vote; Quorum."
Votes Required............. While the adoption of the Merger Agreement requires
the affirmative vote of the holders of record of a
majority of the shares of Giant Common Stock
outstanding on the Record Date, the approval of the
New Certificate and the New Bylaws requires the
affirmative vote of the holders of at least 80% of
Giant Common Stock outstanding on the Record Date
and is a condition to the Merger. Therefore, to
adopt the Merger Agreement will in effect require
the affirmative vote of the holders of at least 80%
of Giant Common Stock outstanding on the Record
Date. The approval of the Incentive Plan requires
the affirmative vote of the holders of a majority
of the shares of Giant Common Stock present or
represented at the Giant Special Meeting and
entitled to vote. The approval of the Incentive
Plan is not a condition to the effectiveness of the
Merger.
The adoption of the Merger Agreement requires the
affirmative vote of the holders of record of a
majority of the shares of Holly Common Stock
outstanding on the Record Date. See "The Special
Meetings -- Votes Required."
Share Ownership of
Management and Others...... At the close of business on February 27, 1998,
directors and executive officers of Giant
beneficially owned 2,551,396 shares of Giant Common
Stock, which represented approximately 23.2% of the
shares of Giant Common Stock outstanding on that
date. At the close of business on February 27,
1998, directors and executive officers of Holly
beneficially owned 839,363 shares of Holly Common
Stock, which represented approximately 10.2% of the
shares of Holly Common Stock outstanding on that
date. Giant and Holly officers and directors are
expected to vote "FOR" adoption of the Merger, the
Merger Agreement and the transactions contemplated
thereby at their respective Special Meetings.
11
<PAGE> 21
Certain stockholders of Giant and Holly have
entered into the Major Stockholders' Agreement in
connection with the execution of the Merger
Agreement and have agreed, among other things, to
vote their shares in favor of the Merger at their
respective Special Meetings. The shares subject to
the Major Stockholders' Agreement represent
2,315,892 shares, or approximately 21.1%, of the
outstanding Giant Common Stock, and 2,453,983
shares, or approximately 29.7%, of the outstanding
Holly Common Stock. See "The Special
Meetings -- Share Ownership of Management; Voting
Requirements in Major Stockholders' Agreement" and
"Other Terms of the Merger and Merger Agreement --
Major Stockholders' Agreement."
THE MERGER
The Merger................. At the Effective Time, Holly will merge with and
into Giant, with Giant as the surviving corporation
in the Merger (the "Combined Company"). At the
Effective Time, the Giant certificate of
incorporation and bylaws will be amended and
restated and the New Certificate and New Bylaws
will be the certificate of incorporation and bylaws
of the Combined Company.
The Effective Time will occur at such time as a
certificate of merger is duly filed with the
Delaware Secretary of State in accordance with
applicable provisions of the Delaware General
Corporation Law ("DGCL"), or at such subsequent
date or time as Giant and Holly agree and specify
in the certificate of merger. The filing of the
certificate of merger will occur as soon as
practicable but no later than the second business
day after satisfaction or waiver of the conditions
to the consummation of the Merger set forth in the
Merger Agreement, unless another date is agreed to
in writing by Holly and Giant. See "The Merger --
Effective Time."
Conversion of Shares....... At the Effective Time, each outstanding share of
Holly Common Stock will be converted into the right
to receive approximately 1.33 fully paid and
nonassessable shares of Giant Common Stock and
$2.886 in cash (subject to adjustment under certain
circumstances). Cash also will be paid in lieu of
fractional shares of Giant Common Stock. Each
Holder of a Holly stock option or phantom stock
right also will have the right to receive the same
amount in cash as that to be paid to each holder of
a share of Holly Common Stock, and Holly stock
option and phantom stock plans will be adopted by
Giant. See "The Merger -- Merger Consideration,"
"-- Interests of Certain Persons in the
Merger -- Effect of the Merger on Employee Benefit
and Stock Plans" and "Other Terms of the Merger and
the Merger Agreement -- Conversion of Shares;
Procedures for Exchange of Certificates; Fractional
Shares."
Background of and Reasons
for the Merger............. For a description of the background of the Merger,
see "The Merger -- Background of the Merger." For a
description of the reasons for the Merger, see "The
Merger -- Reasons for the Merger; Recommendation of
the Boards of Directors."
Recommendations of the
Boards of Directors........ The Board of Directors of Giant (the "Giant Board")
has unanimously determined that the Merger, the
Merger Agreement, and the transac-
12
<PAGE> 22
tions contemplated thereby (including the issuance
of shares of Giant Common Stock and the adoption of
the New Certificate and the New Bylaws) are fair to
and in the best interests of Giant stockholders,
has unanimously approved the Merger, the Merger
Agreement and the transactions contemplated
thereby, and recommends that Giant stockholders
vote "FOR" adoption of the Merger, the Merger
Agreement and the transactions contemplated
thereby. In addition, the Giant Board has
unanimously approved the Incentive Plan and
recommends that Giant's stockholders vote "FOR"
approval of the Incentive Plan.
The Board of Directors of Holly (the "Holly Board")
has unanimously determined that the Merger, the
Merger Agreement and the transactions contemplated
thereby are fair to and in the best interests of
Holly stockholders, has approved the Merger, the
Merger Agreement and the transactions contemplated
thereby, and recommends that Holly stockholders
vote "FOR" adoption of the Merger, the Merger
Agreement and the transactions contemplated
thereby. See "The Merger -- Reasons for the Merger;
Recommendations of the Boards of Directors."
Opinions of Financial
Advisors................... On April 13, 1998, Bear, Stearns & Co. Inc. ("Bear
Stearns") rendered its oral opinion to the Giant
Board, which Bear Stearns confirmed by delivery of
its written opinion dated April 13, 1998 (the "Bear
Stearns Opinion") that, as of such date, the Merger
Consideration was fair from a financial point of
view to the public stockholders of Giant. A copy of
the Bear Stearns Opinion, which sets forth the
assumptions and qualifcations made, matters
considered and limitations on the review undertaken
by Bear Stearns, is attached as Appendix E to this
Joint Proxy Statement/Prospectus, is incorporated
herein by reference and should be read carefully by
Giant stockholders in its entirety.
On April 14, 1998, Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ") rendered its oral
opinion to the Holly Board, which was subsequently
confirmed by delivery of its written opinion dated
April 14, 1998 (the "DLJ Opinion"), that, as of
such date, the Merger Consideration was fair from a
financial point of view to Holly stockholders. A
copy of the DLJ Opinion, which sets forth the
assumptions and qualifications made, matters
considered and limitations on the review undertaken
by DLJ, is attached as Appendix F to this Joint
Proxy Statement/Prospectus, is incorporated herein
by reference and should be read carefully by Holly
stockholders in its entirety. See "The
Merger -- Opinions of Financial Advisors."
Ownership of Giant
Following the Merger....... Immediately upon consummation of the Merger, former
Holly stockholders will own 50% of the issued and
outstanding shares of Giant Common Stock (subject
to adjustments to avoid the issuance of fractional
shares and any adjustments in consequence of or the
exercise by Holly stockholders of appraisal
rights).
Board of Directors and
Management Following the
Merger................... Because the Merger is "a merger of equals," certain
provisions of the New Bylaws of the Combined
Company provide for Co-Chairmen of the Board and
Co-Chief Executive Officers and a Board of
Directors comprised of an equal number of directors
initially designated by each of Giant ("G
Directors") and Holly ("H Directors"). The New
Bylaws
13
<PAGE> 23
also provide that action of the Board of Directors
will require a number of votes equal to the sum of
the greater of the number of G Directors or the
number of H Directors voting on the matter plus
one. The Merger Agreement provides for and
designates five G Directors and five H Directors;
that Mr. James E. Acridge, who currently serves as
Chairman of the Board and Chief Executive Officer
of Giant, and Mr. Lamar Norsworthy, who currently
serves as Chairman of the Board and Chief Executive
Officer of Holly, will be Co-Chairmen of the Board
and Co-Chief Executive Officers of the Combined
Company; and that the other senior officers of the
Combined Company initially will be two Executive
Vice Presidents designated by Giant and two
designated by Holly. In addition, Mr. Acridge, Mr.
Norsworthy, certain other Holly stockholders, Giant
and Holly have entered into the Major Stockholders'
Agreement in which, among other things, the
stockholder parties, who together will initially
own a total of approximately 26.8% of the Combined
Company's common stock, have agreed to vote their
shares for directors nominated after the Merger by
the Board of Directors of the Combined Company
under the New Bylaws, and against any amendment to
the New Bylaws or the New Certificate that is not
proposed by the entire Board of Directors of the
Combined Company. These provisions of the New
Bylaws, the Merger Agreement and the Major
Stockholders' Agreement are intended to provide for
a period of equal management and control of the
Combined Company by the Giant constituents and the
Holly constituents.
The Major Stockholders' Agreement also contains
deadlock resolution agreements in the event that
Mr. Acridge and Mr. Norsworthy, at any time after
the fifteenth month following the Effective Time,
are unable to resolve certain differences, if any,
that may arise between them. If implemented, the
deadlock resolution procedure could result in
either Mr. Acridge or Mr. Norsworthy resigning from
all positions (including as a director) with the
Combined Company, using his best efforts to cause
the other G Directors or H Directors, as the case
may be, to resign from the Board of Directors, and
either (i) selling to the other all or
substantially all of his shares in the Combined
Company, or (ii) entering into a standstill
agreement with the Combined Company.
Unless otherwise determined by the Board of
Directors of the Combined Company, the requirement
contained in the New Bylaws that the Combined
Company have an equal number of directors
designated as G Directors and H Directors will
cease no later than December 31, 2003, and the
requirement for Co-Chairmen of the Board and
Co-Chief Executive Officers will cease no later
than the annual meeting of the stockholders of the
Combined Company in 2004. These requirements will
terminate earlier if the deadlock resolution
procedure is implemented and in certain other
circumstances. See "Other Terms of the Merger and
the Merger Agreement -- Major Stockholders'
Agreement" and "-- New Bylaws."
14
<PAGE> 24
Certain Federal Income Tax
Consequences............. The Merger is intended to be a reorganization as a
result of which no gain or loss will be recognized
by Giant or Holly and no gain or loss will be
recognized by Holly stockholders, except in respect
of cash received by Holly stockholders as a result
of the cash payment of $2.886 per share to be made
by Giant in connection with the Merger and cash
paid in lieu of issuing fractional shares. It is a
condition to the consummation of the Merger that
Giant and Holly receive an opinion of counsel
reasonably acceptable to them to the effect that,
among other things, the Merger will constitute a
"reorganization" within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). See "The Merger -- Certain
Federal Income Tax Consequences" and "Other Terms
of the Merger and the Merger Agreement --
Conditions to the Consummation of the Merger."
Anticipated Accounting
Treatment................ The Merger is expected to be accounted for as a
purchase in accordance with generally accepted
accounting principles. See "The Merger --
Anticipated Accounting Treatment."
Interests of Certain
Persons in the Merger...... Certain directors and executive officers of each of
Giant and Holly may have interests in the Merger
that are different from the interests of
stockholders of Giant or Holly. Such interests
relate to, among other things, interests under the
Major Stockholders' Agreement, positions on the
Board of Directors of the Combined Company,
employment agreements, the conversion of employee
stock options and phantom stock rights, vesting of
stock options and phantom stock rights held by
executive officers of Giant, indemnification of
existing directors and officers, and the
contemplated payment of bonuses to Giant and Holly
executive officers and employees in amounts and
forms as agreed to by the respective Boards of
Directors of the Companies. See "The Merger --
Interests of Certain Persons in the Merger,"
"Management of the Combined Company" and "Other
Terms of the Merger and the Merger Agreement --
Major Stockholders' Agreement."
Conditions to the Merger... The obligations of Giant and Holly to consummate
the Merger are subject to various conditions,
including obtaining the requisite stockholder
approvals; obtaining requisite regulatory approvals
from certain governmental authorities; the absence
of legal restraints or prohibitions preventing the
consummation of the Merger; the absence of certain
material litigation; the absence of material
adverse changes with respect to the other party;
the effectiveness of the Registration Statement of
which this Joint Proxy Statement/Prospectus is a
part; approval for listing on the NYSE of the
shares of Giant Common Stock to be issued pursuant
to the Merger and under the Incentive Plan;
dissenters rights of appraisal not having been
exercised with respect to more than 5% of the
issued and outstanding shares of Holly Common
Stock; the representations and warranties of the
other party contained in the Merger Agreement being
materially true; the performance of the other party
of all material obligations contained in the Merger
Agreement; the receipt of an opinion of counsel in
respect of certain federal income tax consequences
of the Merger; the receipt of customary opinions of
counsel as to other matters; the arrangement of
financing with respect to the redemp-
15
<PAGE> 25
tion contingency with respect to certain of Giant's
outstanding notes; and, as a further condition to
the obligation of Holly to consummate the Merger,
the condition that Giant shall have offered to
holders of its outstanding stock options and
phantom stock rights the right to waive certain
cash-out provisions of such instruments and shall
have amended its employment agreements as provided
in the Merger Agreement to Holly's reasonable
satisfaction. See "The Special Meetings -- Vote
Required," "Other Terms of the Merger and the
Merger Agreement -- Conditions to the Consummation
of the Merger" and "-- Required Regulatory
Approvals."
Termination of the Merger
Agreement................ The Merger Agreement may be terminated by either
Giant or Holly if the Merger is not consummated by
December 31, 1998. The Merger Agreement also may be
terminated under certain other circumstances,
including by the mutual written consent of Giant
and Holly. In certain instances, Giant or Holly may
be required to pay to the other a fee in connection
with the termination of the Merger Agreement in the
amount of $8 million (the "Termination Fee"), and
in certain events, additional amounts equal to the
non-terminating party's expenses, up to a maximum
additional amount of $1.5 million, which payment of
expenses will be credited against any Termination
Fee if one is payable. See "Other Terms of the
Merger and the Merger Agreement -- Termination" and
"-- Termination Fees" and "-- Expenses."
Appraisal and Dissenters'
Rights................... Under the DGCL, the holders of Holly Common Stock
are entitled to elect to exercise appraisal rights
in lieu of accepting Merger Consideration and may
do so by demanding an appraisal by the Delaware
Court of Chancery of the "fair value" of their
Holly Common Stock. A holder of Holly Common Stock
electing to demand such an appraisal must deliver
to Holly, before the vote on the adoption of the
Merger Agreement at the Holly Special Meeting, a
written demand for appraisal of such Holly Common
Stock. See "Other Terms of the Merger and the
Merger Agreement -- Appraisal and Dissenters
Rights" and Appendix D to this Joint Proxy
Statement/Prospectus.
RISK FACTORS
See "Risk Factors," beginning on page 24, for a discussion of some of the
factors that Giant and Holly stockholders should carefully consider in
determining whether to vote for adoption of the Merger, the Merger Agreement and
the transactions contemplated thereby, including with respect to an investment
by Holly stockholders in Giant Common Stock upon effectiveness of the Merger.
16
<PAGE> 26
MARKET PRICE AND DIVIDEND INFORMATION
Giant Common Stock is listed on the NYSE. Holly Common Stock is listed on
the ASE. The following table sets forth the high and low sales prices per share
of Giant Common Stock and Holly Common Stock as reported on the NYSE Composite
Transaction Tape and the ASE Composite Transaction Tape, respectively, for the
periods indicated, and dividends paid thereon per share.
<TABLE>
<CAPTION>
GIANT COMMON STOCK
-----------------------------
QUARTER ENDED HIGH LOW DIVIDENDS
------------- ---- ---- ---------
<S> <C> <C> <C>
June 30, 1998 (through , 1998)..........
March 31, 1998...................................... $21 $18 7/8 $.05
December 31, 1997................................... 20 1/2 16 3/4 .05
September 30, 1997.................................. 20 5/8 15 .05
June 30, 1997....................................... 16 7/8 10 .05
March 31, 1997...................................... 15 5/8 12 3/8 .05
December 31, 1996................................... 16 1/8 13 3/4 .05
September 30, 1996.................................. 16 1/4 13 3/8 .05
June 30, 1996....................................... 15 5/8 12 1/4 .05
March 31, 1996...................................... 14 10 7/8 .05
</TABLE>
<TABLE>
<CAPTION>
HOLLY COMMON STOCK
-----------------------------
FISCAL QUARTER ENDED HIGH LOW DIVIDENDS
-------------------- ---- ---- ---------
<S> <C> <C> <C>
July 31, 1998 (through , 1998)..........
April 30, 1998...................................... $32 7/8 $25 5/8 $.15
January 31, 1998.................................... 27 7/8 24 3/8 .15
October 31, 1997.................................... 28 13/16 25 13/16 .15
July 31, 1997....................................... 27 1/4 24 3/16 .15
April 30, 1997...................................... 27 1/4 23 1/8 .12
January 31, 1997.................................... 28 24 .12
October 31, 1996.................................... 29 5/8 24 3/4 .12
July 31, 1996....................................... 28 1/8 24 1/2 .12
April 30, 1996...................................... 27 1/4 21 1/2 .10
January 31, 1996.................................... 23 3/8 21 1/4 .10
October 31, 1995.................................... 23 3/8 21 1/2 .10
</TABLE>
On April 13, 1998, the last full trading day prior to the execution of the
Merger Agreement, and on , 1998, the last full trading day prior to
the date of this Joint Proxy Statement/Prospectus, the closing sales price per
share of Giant and Holly were as follows:
<TABLE>
<CAPTION>
APRIL 13, 1998 , 1998
-------------- ------
<S> <C> <C>
Giant........................................... $20 3/16 $
Holly........................................... $27 $
</TABLE>
Dividends payable by the Combined Company will be subject to the discretion
of the Board of Directors, and it is anticipated that such dividends at least
initially will not be greater on a per share basis than dividends currently paid
by Giant. Future dividend payments by the Combined Company are subject to the
results of the Combined Company's operations and existing and future debt
covenants under notes and credit agreements and under Giant's Indentures. See
"Risk Factors -- Dividends," "Market Price and Dividend Information" and
"Comparative Per Share Data."
17
<PAGE> 27
SELECTED CONSOLIDATED SUMMARY HISTORICAL FINANCIAL DATA OF GIANT
The selected consolidated summary historical financial information
presented below under Earnings Statement Data and Balance Sheet Data, as of and
for each of the five years in the period ended December 31, 1997, is based upon
the historical audited consolidated financial statements of Giant. The
information presented below should be read in conjunction with the consolidated
financial statements of Giant and related notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
incorporated by reference herein, and other financial information included
elsewhere in this Joint Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- ---------
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
EARNINGS STATEMENT DATA:(1)
Net revenues................................... $ 313.2 $ 291.6 $ 332.9 $ 499.2 $ 657.3
Cost of products sold(3)....................... 209.8 195.5 234.3 361.9 487.8
-------- -------- -------- -------- ---------
Gross margin................................... 103.4 96.1 98.6 137.3 169.5
Operating and selling, general and
administrative expenses...................... 60.6 63.8 64.7 79.9 104.4
Depreciation and amortization.................. 11.4 12.2 13.3 17.7 24.0
-------- -------- -------- -------- ---------
Operating income............................... 31.4 20.1 20.6 39.7 41.1
Interest expense............................... (5.8) (11.8) (11.5) (12.3) (18.1)
Interest income................................ 1.5 1.8 2.3 0.8 2.1
-------- -------- -------- -------- ---------
Earnings from continuing operations before
income taxes................................. 27.1 10.1 11.4 28.2 25.1
Provision for income taxes..................... 9.6 2.6 3.7 11.1 9.8
-------- -------- -------- -------- ---------
Earnings from continuing operations............ $ 17.5 $ 7.5 $ 7.7 $ 17.1 $ 15.3
======== ======== ======== ======== =========
Earnings from continuing operations per common
share -- basic............................... $ 1.43 $ 0.61 $ 0.68 $ 1.52 $ 1.38
Earnings from continuing operations per common
share -- assuming dilution................... $ 1.43 $ 0.61 $ 0.67 $ 1.50 $ 1.37
Cash dividends per common share................ -- -- $ 0.20 $ 0.20 $ 0.20
OTHER FINANCIAL DATA:(1)
EBITDA(4)...................................... $ 44.3 $ 34.1 $ 36.2 $ 58.2 $ 67.2
Cash flow from continuing operating
activities................................... $ 34.9 $ 7.8 $ 24.5 $ 42.8 $ 31.3
Cash flow (used in) investing activities....... $ (46.6) $ (10.4) $ (45.0) $ (2.6) $ (85.2)
Cash flow from (used in) financing
activities................................... $ 24.0 $ (4.8) $ 17.2 $ (37.1) $ 123.9
Capital expenditures(5)........................ $ 9.3 $ 19.9 $ 75.1 $ 36.2 $ 115.1
Ratio of EBITDA to interest expense............ 7.6x 2.9x 3.1x 4.7x 3.7x
Ratio of earnings to fixed charges(6).......... 4.0x 1.7x 1.8x 3.0x 2.2x
OPERATING DATA:(1)
Refining Division
Refinery throughput-crude and NGLs
(mbbls/day)(2)............................... 25.3 23.6 28.7 40.2 40.2
Rated crude oil capacity utilized(2)........... 98% 92% 88% 90% 87%
Refinery margin (dollars/bbl).................. 6.69 5.60 5.13 6.21 6.39
Retail Division(7)
Number of outlets at period end................ 52 51 52 53 149
Volume (millions of gallons)................... 103.3 115.9 107.4 105.8 144.7
Gross fuel margin (cents/gallon)............... 16.7 17.8 17.7 18.5 19.9
Merchandise sales.............................. $ 32.5 $ 42.7 $ 45.7 $ 49.1 $ 75.0
Merchandise margins............................ 33% 33% 33% 32% 31%
</TABLE>
18
<PAGE> 28
<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- ---------
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents...................... $ 20.1 $ 12.9 $ 9.5 $ 12.6 $ 82.6
Total assets................................... 274.4 279.4 324.9 324.0 535.4
Total long-term debt, including current
portion...................................... 120.3 120.2 146.7 114.5 276.1
Stockholders' equity........................... 105.9 109.7 109.7 122.1 133.5
Net debt to net capitalization(8).............. 48.6% 49.4% 55.6% 45.5% 59.2%
</TABLE>
- ---------------
(1) In October 1995, Giant acquired the Bloomfield refinery and in May 1997 and
June 1997, Giant acquired the Thriftway stations and Phoenix Fuel,
respectively, using the purchase method of accounting. Earnings statement
data and other financial data as presented include the results of operations
for Giant from the date of acquisitions forward.
(2) The refinery throughput and related utilization rate were reduced in 1997 as
a result of a scheduled turnaround for major maintenance at the Bloomfield
refinery.
(3) Excludes depreciation and amortization.
(4) Defined as earnings before interest expense, income taxes, depreciation and
amortization. EBITDA is not intended to represent cash flow or any other
measure of financial performance in accordance with generally accepted
accounting principles. EBITDA is included herein because Giant management
believes EBITDA provides additional information for measuring Giant's
ability to service debt and because Giant's Indentures contain certain
covenants based on EBITDA.
(5) Capital expenditures include approximately $55 million for the purchase of
the Bloomfield refinery in 1995, $14 million for the construction,
remodeling or acquisition of 37 retail stations in 1996, $43 million for the
purchase of the Thriftway stations in May 1997 and $30 million for the
purchase of Phoenix Fuel in June 1997.
(6) The ratio of earnings to fixed charges is computed by dividing (i) earnings
before income taxes plus fixed charges by (ii) fixed charges. Fixed charges
consist of interest on indebtedness, amortization of debt issue costs,
capitalized interest and the estimated interest component (one-third) of
rental and lease expense.
(7) Includes Travel Center.
(8) Net debt as a percentage of net capitalization has been computed by dividing
net debt (total long-term debt less cash and cash equivalents and marketable
securities) by net capitalization (total capitalization less cash and cash
equivalents and marketable securities).
19
<PAGE> 29
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF HOLLY
The selected historical financial information presented below under Income
Statement Data and Balance Sheet Data, as of and for each of the five years in
the period ended July 31, 1997, has been derived from the historical
consolidated financial statements of Holly. The historical information for the
six months ended January 31, 1997 and 1998 is unaudited. The unaudited
information is taken from unaudited financial statements that include all
adjustments, which in the opinion of Holly management are only of a normal
recurring nature, and which Holly management considers necessary for a fair
presentation of the results of operations for these periods. Operating results
for the six months ended January 31, 1998 are not necessarily indicative of the
results that may be expected for the entire year ending July 31, 1998. The
information presented below should be read in conjunction with the consolidated
financial statements of Holly and related notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
incorporated by reference herein, and the other financial information included
elsewhere in this Joint Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
(UNAUDITED)
AS OF AND FOR
THE SIX MONTHS
ENDED
AS OF AND FOR THE YEAR ENDED JULY 31, JANUARY 31,
------------------------------------------- ---------------
1993 1994 1995 1996 1997 1997 1998
------ ------ ------ ------ ------ ------ ------
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues
Refined products.................................. $628.8 $549.5 $612.2 $670.1 $713.6 $367.4 $300.8
Oil and gas....................................... 1.1 1.4 1.2 5.4 5.8 3.1 4.6
Miscellaneous..................................... 0.7 1.4 1.4 0.8 1.9 0.4 0.3
------ ------ ------ ------ ------ ------ ------
630.6 552.3 614.8 676.3 721.3 370.9 305.7
Costs and Expenses
Cost of refined products.......................... 565.4 480.7 553.7 600.5 656.6 347.1 276.2
General and administrative........................ 12.1 12.6 13.9 14.1 13.3 7.0 6.8
Depreciation, depletion and amortization.......... 11.3 10.9 15.8 19.3 20.2 9.9 11.2
Exploration expenses, including dry holes......... 3.1 4.6 3.9 4.0 3.7 1.2 1.6
------ ------ ------ ------ ------ ------ ------
591.9 508.8 587.3 637.9 693.8 365.2 295.8
------ ------ ------ ------ ------ ------ ------
Income from operations............................ 38.7 43.5 27.5 38.4 27.5 5.7 9.9
Other Income (Expense)
Equity in earnings of joint venture............... -- -- -- -- 0.4 -- 0.9
Interest income................................... 0.1 0.5 1.0 3.0 3.2 1.9 0.5
Interest expense.................................. (9.5) (9.0) (8.4) (9.6) (9.3) (4.8) (4.3)
Pipeline settlement income........................ 4.0 -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
(5.4) (8.5) (7.4) (6.6) (5.7) (2.9) (2.9)
------ ------ ------ ------ ------ ------ ------
Income before income taxes and cumulative effect of
accounting change................................. 33.3 35.0 20.1 31.8 21.8 2.8 7.0
Income tax provision (benefit)
Current........................................... 12.7 11.8 6.0 13.4 7.2 (0.5) (1.3)
Deferred.......................................... 0.7 2.5 1.7 (0.8) 1.5 1.6 4.1
------ ------ ------ ------ ------ ------ ------
13.4 14.3 7.7 12.6 8.7 1.1 2.8
------ ------ ------ ------ ------ ------ ------
Income before cumulative effect of accounting
change............................................ 19.9 20.7 12.4 19.2 13.1 1.7 4.2
Cumulative effect of accounting change.............. (0.9) -- 5.7 -- -- -- --
------ ------ ------ ------ ------ ------ ------
Net income.......................................... $ 19.0 $ 20.7 $ 18.1 $ 19.2 $ 13.1 $ 1.7 $ 4.2
====== ====== ====== ====== ====== ====== ======
Income per common share -- basic and diluted
Income before cumulative effect of accounting
change.......................................... $ 2.42 $ 2.51 $ 1.51 $ 2.33 $ 1.59 $ .21 $ .51
Cumulative effect of accounting change............ (.12) -- .69 -- -- -- --
------ ------ ------ ------ ------ ------ ------
Net income -- basic and diluted................... $ 2.30 $ 2.51 $ 2.20 $ 2.33 $ 1.59 $ .21 $ .51
====== ====== ====== ====== ====== ====== ======
Cash dividends paid per common share................ $ .30 $ .35 $ .40 $ .42 $ .51 $ .24 $ .30
====== ====== ====== ====== ====== ====== ======
Average number of shares of common stock outstanding
(in thousands).................................... 8,254 8,254 8,254 8,254 8,254 8,254 8,254
====== ====== ====== ====== ====== ====== ======
OTHER FINANCIAL DATA:
EBITDA(1)........................................... $ 54.1 $ 54.9 $ 44.3 $ 60.7 $ 51.2 $ 17.5 $ 22.5
Net cash provided by operating activities........... 38.7 27.7 34.2 44.5 5.5 8.4 0.2
Net cash provided by (used for) financing
activities........................................ (13.4) (8.5) (8.9) 24.4 (15.0) (2.0) 6.3
Net cash (used for) investing activities............ (20.1) (22.5) (15.2) (18.3) (34.4) (16.7) (23.4)
Capital expenditures................................ 20.1 22.5 15.2 18.3 30.3 14.1 23.4
Ratio of EBITDA to interest expense................. 5.7x 6.1x 5.3x 6.3x 5.5x 3.6x 5.2x
Ratio of earnings to fixed charges(2)............... 4.4x 4.7x 3.2x 4.1x 3.2x 1.5x 2.3x
</TABLE>
20
<PAGE> 30
<TABLE>
<CAPTION>
(UNAUDITED)
AS OF AND FOR
THE SIX MONTHS
ENDED
AS OF AND FOR THE YEAR ENDED JULY 31, JANUARY 31,
------------------------------------------- ---------------
1993 1994 1995 1996 1997 1997 1998
------ ------ ------ ------ ------ ------ ------
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Refinery throughput-crude oil (mbbls/day)........... 62.1 60.9(3) 65.6 65.4 65.6 66.6 53.6(3)
Rated crude oil capacity utilized................... 93% 91%(3) 98% 98% 98% 99% 80%(3)
Refinery margin (dollars/bbl)....................... 5.33 5.89 5.00 5.33 4.99 4.32 5.50
BALANCE SHEET DATA:
Cash and cash equivalents........................... $ 6.6 $ 3.3 $ 13.4 $ 64.0 $ 20.0 $ 53.7 $ 3.2
Total assets........................................ 249.8 281.8 287.4 351.3 349.8 369.0 339.0
Total long-term debt................................ 80.1 74.4 68.8 97.1 86.3 97.1 86.3
Stockholders's equity............................... 46.5 64.8 80.0 96.2 105.1 96.0 106.9
Net debt to net capitalization(4)................... 61.3% 52.3% 40.9% 25.6% 38.7% 31.1% 43.7%
</TABLE>
- ---------------
(1) Defined as earnings before interest expense, income taxes, depreciation and
amortization. EBITDA is not intended to represent cash flow or any other
measure of financial performance in accordance with generally accepted
accounting principles. EBITDA is included herein because management believes
EBITDA provides additional information for measuring Holly's ability to
service debt.
(2) The ratio of earnings to fixed charges is computed by dividing (i) earnings
before income taxes plus fixed charges by (ii) fixed charges. Fixed charges
consist of interest on indebtedness, amortization of debt issue costs,
capitalized interest and the estimated interest component (one-third) of
rental and lease expense.
(3) Refinery throughput and utilization rates were reduced as a result of a
scheduled turnaround for major maintenance at the Navajo Refinery.
(4) Net debt as a percentage of net capitalization has been computed by dividing
net debt (total long-term debt less cash and cash equivalents) by net
capitalization (total capitalization less cash and cash equivalents).
21
<PAGE> 31
SELECTED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA OF
THE COMBINED COMPANY
The selected unaudited pro forma condensed consolidated financial data of
the Combined Company presented below give effect to the Merger. The information
presented below should be read in conjunction with the historical consolidated
financial statements of Giant and of Holly and related notes thereto which are
incorporated by reference in this Joint Proxy Statement/Prospectus, and the
Unaudited Pro Forma Condensed Consolidated Financial Statements, the related
notes thereto, and other financial information included elsewhere in this Joint
Proxy Statement/Prospectus. These selected unaudited pro forma condensed
consolidated financial data are presented for informational purposes only and
are not necessarily indicative of the results that actually would have occurred
had the Merger been effective on January 1, 1997 with respect to Earnings
Statement Data and Operating Data and December 31, 1997 with respect to Balance
Sheet Data, nor are such data necessarily indicative of future operating results
or financial position. See "Unaudited Pro Forma Condensed Consolidated Financial
Statements."
<TABLE>
<CAPTION>
AS OF AND
FOR THE COMBINED
TWELVE MONTH
PERIODS ENDED
DECEMBER 31, 1997
FOR GIANT AND
JANUARY 31, 1998 FOR
HOLLY
-----------------------
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE DATA)
<S> <C>
EARNINGS STATEMENT DATA:
Net revenues.............................................. $1,309,058
Cost of products sold(1).................................. 995,564
----------
Gross margin.............................................. 313,494
Operating expenses........................................ 162,793
Depreciation, depletion and amortization.................. 42,842
Selling, general and administrative expenses.............. 32,417
----------
Operating income.......................................... 75,442
Interest expense.......................................... (26,177)
Interest and investment income............................ 2,715
Equity in earnings of joint venture....................... 1,323
----------
Earnings before income taxes.............................. 53,303
Provision for income taxes................................ 22,009
----------
Net earnings.............................................. $ 31,294
==========
Earnings per common share -- basic........................ $ 1.42
==========
Earnings per common share -- assuming dilution............ $ 1.41
==========
Cash dividends per common share(2)........................ $ 0.20
==========
OTHER FINANCIAL DATA:
EBITDA(3)................................................. $ 122,322
Capital expenditures(4)................................... $ 154,700
Ratio of EBITDA to interest expense....................... 4.7x
Ratio of earnings to fixed charges(5)..................... 2.8x
</TABLE>
22
<PAGE> 32
<TABLE>
<CAPTION>
AS OF AND
FOR THE COMBINED
TWELVE MONTH
PERIODS ENDED
DECEMBER 31, 1997
FOR GIANT AND
JANUARY 31, 1998 FOR
HOLLY
-----------------------
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE DATA)
<S> <C>
OPERATING DATA:
Refining Division
Refinery throughput - crude oil (bbls/day)(6)............. 92,800
Rated crude oil capacity utilized(6)...................... 88%
Refinery margin (dollars/bbl)............................. 5.88
Retail Division
Number of outlets at period end........................... 149
Volume (millions of gallons).............................. 144,700
Gross fuel margin (cents/gallon).......................... 20
Merchandise sales......................................... $ 75,000
Merchandise margins....................................... 31%
BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 59,269
Total assets.............................................. 1,033,928
Total long-term debt, including current portion........... 364,908
Stockholders' equity...................................... 353,332
Net debt to net capitalization(7)......................... 46.4%
</TABLE>
- ---------------
(1) Excludes depreciation and amortization.
(2) The pro forma cash dividends per common share amount represents Giant's
historical dividends per share.
(3) Defined as earnings before interest expense, income taxes, depreciation and
amortization. EBITDA is not intended to represent cash flow or any other
measure of financial performance in accordance with generally accepted
accounting principles. EBITDA is included herein because management believes
EBITDA provides additional information for measuring the Combined Company's
ability to service debt and because Giant's Indentures contain certain
covenants based on EBITDA.
(4) Capital expenditures include approximately $43 million for the purchase of
the Thriftway stations in May 1997 and $30 million for the purchase of
Phoenix Fuel in June 1997.
(5) The ratio of earnings to fixed charges is computed by dividing (i) earnings
before income taxes plus fixed charges by (ii) fixed charges. Fixed charges
consist of interest on indebtedness, amortization of debt issue costs,
capitalized interest and the estimated interest component (one-third) of
rental and lease expense.
(6) Refinery throughput and utilization rates were reduced as a result of
scheduled turnarounds for major maintenance at Holly's Navajo and Giant's
Bloomfield Refineries in 1997.
(7) Net debt as a percentage of net capitalization has been computed by dividing
net debt (total long-term debt less cash and cash equivalents and marketable
securities) by net capitalization (total capitalization less cash and cash
equivalents and marketable securities).
23
<PAGE> 33
RISK FACTORS
In addition to the other information contained in this Joint Proxy
Statement/Prospectus, the significant risk factors described below should be
considered carefully by the stockholders of Holly and by the stockholders of
Giant.
SUBSTANTIAL INDEBTEDNESS; ABILITY TO SERVICE DEBT
The Combined Company will have substantial indebtedness with significant
debt service requirements. The Combined Company's debt will include Giant's
total debt, which at March 31, 1998 was $272.5 million, and Holly's total debt,
which at March 31, 1998 was $87.7 million, and on a pro forma basis for the
Combined Company is $362.7 million. Stockholders' equity at March 31, 1998 was
$131.8 million for Giant and $ for Holly.
The degree to which the Combined Company will be leveraged has important
consequences to holders of its Common Stock, including the following: (i) the
Combined Company's ability to obtain additional financing in the future, whether
for working capital, capital expenditures, acquisitions or other purposes, may
be impaired; (ii) a substantial portion of the Combined Company's cash flow from
operations will be required to be dedicated to the payment of interest on its
debt, thereby reducing funds available to the Combined Company for other
purposes; (iii) the Combined Company's flexibility in planning for or reacting
to changes in market conditions may be limited; (iv) the Combined Company may be
more vulnerable in the event of a downturn in its business; and (v) to the
extent of the Combined Company's outstanding debt under its credit facilities,
the Combined Company will be vulnerable to increases in interest rates.
The Combined Company's ability to meet its debt service obligations will
depend on the future operating performance and financial results of the Combined
Company, which will be subject in part to factors beyond the control of the
Combined Company. Although Giant and Holly believe that the Combined Company's
cash flow will be adequate to meet its interest payments, there can be no
assurance that the Combined Company will continue to generate earnings in the
future sufficient to cover its fixed and variable charges. If the Combined
Company is unable to generate earnings in the future sufficient to cover its
fixed and variable charges and is unable to borrow sufficient funds under bank
credit facilities or from other sources, it may be required to refinance all or
a portion of its existing debt or to sell all or a portion of its assets. There
can be no assurance that a refinancing would be possible, nor can there be any
assurance as to the timing of any asset sales or the proceeds which the Combined
Company could realize therefrom. In addition, the terms of certain of the
Combined Company's debt will restrict its ability to sell assets and the
Combined Company's use of the proceeds therefrom.
MERGER WILL TRIGGER CHANGE OF CONTROL PROVISIONS IN GIANT INDENTURES
Giant is required to offer (a "Change of Control Offer") to purchase all of
its outstanding $150 million of 9% Senior Subordinated Notes due 2007 (the "9%
Notes") and its $100 million of 9 3/4% Senior Subordinated Notes due 2003 (the
"9 3/4% Notes" and collectively with the 9% Notes, the "Notes") at a purchase
price (the "Purchase Price") equal to 101% of the aggregate principal amount of
the Notes, plus accrued and unpaid interest to the date of purchase, upon a
Change of Control (as defined in the respective Indentures). The 9% Notes were
issued pursuant to an Indenture dated August 26, 1997 (the "9% Indenture"), and
the 9 3/4% Notes were issued pursuant to an Indenture dated November 29, 1993
(the "9 3/4% Indenture" and, collectively with the 9% Indenture, the
"Indentures"). The Indentures are among Giant, its Subsidiaries, as guarantors,
The Bank of New York, as trustee under the 9% Indenture and NBD Bank, National
Association, as trustee under the 9 3/4% Indenture. The Merger will constitute a
Change of Control triggering Giant's obligation to issue a Change of Control
Offer. Under current market conditions, the price of the Notes exceeds the
Purchase Price. As a result, assuming no change in market conditions, Giant
believes most holders will decline to tender notes to the Combined Company.
Moreover, Giant and Holly have agreed to arrange for a credit facility for the
Combined Company to finance this purchase contingency and intend that such
credit facility, combined with any other available financial resources, would be
sufficient to enable the Combined Company to satisfy its purchase obligations if
all Notes are tendered in response to the Change of Control Offer. However,
there can
24
<PAGE> 34
be no assurance as to the amount of Notes that will be tendered or that the
Combined Company will have a credit facility or other financial resources that
would be sufficient to satisfy the Combined Company's purchase obligations.
COMPETITION
The industry in which the Combined Company will be engaged is highly
competitive. Many of its competitors are large, integrated, major or independent
oil companies which, because of their more diverse operations, larger
refineries, stronger capitalization and better brand name recognition, may be
better able than the Combined Company to withstand volatile industry conditions,
including shortages or excesses of crude oil or refined products or intense
price competition at the wholesale and retail levels. Many of these competitors
have financial and other resources substantially greater than those the Combined
Company will have. In addition, Giant and Holly have benefited in the past from
the limited capacity of product pipelines connecting competing refineries to
areas immediately adjacent to their refineries. Giant and Holly are aware of a
number of proposals or industry discussions regarding product pipeline projects
that if or when undertaken and completed could impact principal market areas of
the Combined Company. One of these projects, the expansion of the ATA Line
(formerly called the Emerald Line) into Albuquerque, was completed in 1997. In
addition, various proposals or actions have been announced to increase the
supply of pipeline-supplied products to El Paso, Texas, which is connected to
the Albuquerque market to the north and the Phoenix and Tucson markets to the
west. Such proposals include the announced intention of Ultramar Diamond
Shamrock Corporation ("UDS") to sell an interest in its existing pipeline
between its McKee refinery near Amarillo, Texas and El Paso, Texas to Phillips
Petroleum Company ("Phillips"). According to such announcements, the pipeline
would be expanded during 1998 to allow for additional quantities of fuels to be
transported from UDS' McKee refinery and Phillips' Borger refinery, both in the
Amarillo area. Other proposed projects would allow production to be delivered to
markets from large, technically sophisticated Gulf Coast refineries through
construction of new connecting pipelines and in some cases the reversal of
existing crude oil pipelines. Longhorn Partners Pipeline, L.P. (a partnership
composed of affiliates of Exxon Pipeline Company, Amoco Pipeline Company,
Williams Energy Group, The Beacon Group Energy Investment Fund, L.P. and Axis
Gas Corporation) has announced plans to utilize an existing crude oil pipeline
from West Texas to the Gulf Coast and construct 250 miles of new connecting
pipeline from West Texas to El Paso. There have also been discussions by other
companies regarding possible future projects to utilize other crude oil
pipelines for the movement of products from West Texas through Albuquerque and
the Four Corners area to the Utah markets. The completion of some or all of
these projects would result in increased competition by increasing the amount of
refined products available in the Albuquerque, El Paso, Tucson, Phoenix and
other market areas, as well as allowing additional competitors improved access
to these market areas.
RAW MATERIAL SUPPLY
The Ciniza and Bloomfield refineries operated by Giant primarily process a
mixture of crude oil, condensate and NGLs. The locally produced, high quality
crude oil known as Four Corners Sweet is the primary feedstock for these
refineries. Local supply is primarily dependent on the level and success of
exploration and drilling activity in the Four Corners and Paradox Basin areas.
Although Giant currently obtains substantially all of its crude oil supply from
the Four Corners area, its refineries supplement their supply of crude oil with
Alaska North Slope ("ANS") crude oil, transported from the West Coast through
Giant's gathering system's interconnection with the Four Corners and Texas-New
Mexico pipeline systems, which together can transport approximately 65,000 bpd.
The Ciniza refinery also has access to West Texas Intermediate and other crude
oils by rail.
Giant believes that local crude oil production currently approximates local
crude oil demand and that the production of crude oil and condensate in the Four
Corners has improved as a result of enhanced recovery programs and increased
drilling activities by major oil companies in the area. Based on projections of
local crude oil availability from the field and current levels of usage of ANS
(which are limited to approximately 1,500 bpd by the refineries'
configurations), Giant believes an adequate supply of crude oil and other
feedstocks will be available from local producers, crude oil sourced through
common carrier pipelines and
25
<PAGE> 35
other sources to sustain its refinery operations for the foreseeable future at
substantially the levels currently being experienced. However, there is no
assurance that this situation will continue.
Giant continues to evaluate other supplemental crude oil supply
alternatives for its refineries on both a short-term and long-term basis. Giant
understands that production of ANS has been declining and is aware of proposals
that would, at some time in the future, eliminate the shipping of ANS through
the Four Corners pipeline system. In the event of a shortage in supply of
locally produced feedstock and ANS, Giant has identified potential opportunities
to access other supplemental crude oil supplies via the pipelines. In addition,
the Four Corners area produces significant amounts of NGLs, most of which are
currently shipped out of the area by pipeline. In 1997, Giant undertook several
projects at its refineries that increased its ability to use NGLs and intends to
complete additional projects in 1998 to further its NGL utilization. Any
significant long-term interruption in crude oil supply or the crude oil
transportation system, however, would have an adverse effect on the Combined
Company's operations.
If additional supplemental crude oil becomes necessary, Giant intends to
implement then available alternatives as necessary and as are most advantageous
under then prevailing conditions. Giant currently believes that the most
desirable strategy to supplement local crude oil supplies on a long-term basis
would be the delivery of supplemental crude oil from outside of the Four Corners
area by pipeline. Such crude oil may be of lesser quality than locally available
crude oils, and Giant believes such crude oil will generally have a delivered
cost greater than that of locally available crude oil. Implementation of
supplemental supply alternatives may result in additional raw materials costs,
operating costs, capital costs, or a combination thereof in amounts which are
not presently ascertainable by Giant but which will vary depending on factors
such as the specific alternative implemented, the quantity of supplemental
feedstocks required, and the date of implementation. Implementation of some
supply alternatives requires the consent or cooperation of third parties and
other considerations beyond the control of the Combined Company.
The refineries operated in New Mexico and Montana by Holly are dependent on
a continuing supply of crude oil. Although these refineries have to date been
able to obtain reliable supplies of crude oil on acceptable terms, generally
from the Permian Basin area in the case of the New Mexico refining operations
and from Canada in the case of the Montana refining operations, there can be no
assurance that supplies of crude oil will continue to be available on acceptable
terms for future operation of these refineries by the Combined Company.
VOLATILITY OF CRUDE OIL PRICES AND REFINING MARGINS
The Combined Company's cash flow from operations will be primarily
dependent upon producing and selling quantities of refined products at refinery
margins sufficient to cover fixed and variable expenses. In recent years, crude
oil costs and prices of products have fluctuated substantially. These costs and
prices depend on numerous factors including the demand for crude oil, gasoline
and other refined products, which in turn depend on, among other factors,
changes in the economy, the level of foreign and domestic production of crude
oil and refined products, the availability of imports of crude oil and refined
products, the marketing of alternative and competing fuels and the extent of
government regulation.
The Combined Company's crude oil requirements will be supplied from sources
which include major oil companies, large independent producers and smaller local
producers. Crude oil supply contracts are generally relatively short-term
contracts with market-responsive pricing provisions. The prices received by the
Combined Company for its refined products will be affected by additional local
factors such as product pipeline capacity, local market conditions and the level
of operations of West Texas refineries. A large rapid increase in crude oil
prices would adversely affect the Combined Company's operating margins if the
increased cost of raw materials could not be passed along to its customers.
CONCENTRATION OF REFINERIES
The Combined Company's refining activities will be conducted at Giant's two
refinery locations in New Mexico and Holly's two locations in New Mexico and
Montana. The refineries will constitute a significant portion of the Combined
Company's operating assets. As a result, the operations of the Combined Company
26
<PAGE> 36
will be subject to significant interruption if any of the refineries were to
experience a major accident, be damaged by severe weather or other natural
disaster, or otherwise be forced to shut down. Although the Combined Company
will maintain business interruption insurance against some types of risks, if
the refineries were to experience an interruption in supply or operations, the
Combined Company's business could be materially adversely affected.
GOVERNMENT REGULATIONS AND ENVIRONMENTAL RISKS
The Combined Company's operations will be subject to a variety of federal,
state and local environmental laws and regulations governing the discharge of
pollutants into the soil, air and water, product specifications, and the
generation, treatment, storage, transportation and disposal of solid and
hazardous waste and materials. Environmental laws and regulations which affect
such operations, processes and margins have become and are becoming increasingly
stringent. Examples are the Clean Air Act Amendments and the additional
environmental regulations adopted by the United States Environmental Protection
Agency ("EPA") and state and local environmental agencies to implement the Clean
Air Act Amendments. Although Giant and Holly believe that their respective
refineries are able to process currently used feedstocks at full capacity in
substantial compliance with existing environmental laws and regulations, Giant
and Holly cannot predict the nature, scope or effect of legislation or
regulatory requirements that could be imposed or how existing or future laws or
regulations will be administered or interpreted with respect to products or
activities to which they have not been previously applied. Compliance with more
stringent laws or regulations, as well as more vigorous enforcement policies of
the regulatory agencies, could adversely affect the financial position and the
results of operations of the Combined Company and could require substantial
expenditures by the Combined Company.
The Combined Company's operations are inherently subject to accidental
spills, discharges or other releases of petroleum or hazardous substances which
may give rise to liability to governmental entities or private parties under
federal, state or local environmental laws, as well as under common law.
Accidental discharges of contaminants have occurred from time to time during the
normal course of Giant's and Holly's operations, including discharges associated
with Giant's and Holly's refineries, pipeline and trucking operations, as well
as discharges at gasoline service stations and other petroleum product
distribution facilities currently and formerly operated by Giant. Giant and
Holly have undertaken, and the Combined Company intends to undertake or has
completed, all investigative or remedial work thus far requested by governmental
agencies to address potential contamination by Giant or Holly. Although Giant
and Holly have invested substantial resources to prevent future accidental
discharges and to remediate contamination resulting from prior discharges, there
can be no assurance that accidental discharges will not occur in the future,
that future action will not be taken in connection with past discharges, that
governmental agencies will not assess penalties against the Combined Company in
connection with any past or future contamination, or that third parties will not
assert claims against the Combined Company for damages allegedly arising out of
any past or future contamination.
Giant anticipates incurring the following costs relating to environmental
matters: (1) $1.1 million in 1998 and a total of $3.0 to $3.5 million over the
next five years for compliance with EPA emissions standards required by the
Clean Air Act Amendments; (2) $475,000 for modifications to or removal of
underground storage tanks by December 1998 to comply with new underground
storage tank standards; (3) $250,000 (which Giant has accrued as an
environmental reserve) for remediation of hydrocarbon contamination adjacent to
a 55,000 barrel crude oil storage tank that was located in Bloomfield, New
Mexico; (4) $650,000 (which Giant has accrued as an environmental reserve) for
possible environmental expenditures relating to soil and shallow groundwater
contamination at Giant's Farmington property; (5) unknown amounts, if any
(estimated by a consultant for Giant at approximately $1.2 million, without
regard to Giant's defenses and arguments including possible setoff rights)
relating to the Lee Acres Landfill site, which was added to the National
Priorities List as a Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA") Superfund site in 1990; and (6) $2.0 million (which
Giant has accrued as an environmental reserve) for obligations of Bloomfield
Refinery Company ("BRC") to investigate and propose measures for
27
<PAGE> 37
correcting any releases of hazardous waste or hazardous constituents at or from
the Bloomfield refinery, which obligations were assumed by Giant in connection
with the acquisition of that refinery.
Holly also is and has been the subject of various federal, state, and
private proceedings relating to environmental matters. The most significant
enforcement action is a suit filed in July 1993 by the United States Department
of Justice ("DOJ") on behalf of the EPA against Holly's subsidiary, Navajo
Refining Company ("Navajo"), alleging that, beginning in September 1990 and
continuing through the present, Navajo has violated and continues to violate the
Resource Conservation and Recovery Act ("RCRA") and implementing regulations of
the EPA by treating, storing and disposing of certain hazardous waste in the
refinery's wastewater treatment system without compliance with regulatory
requirements. Navajo, the DOJ and the State of New Mexico have agreed to settle
this litigation. Under the settlement agreement, Holly will close the existing
evaporation ponds used in its wastewater treatment system. The agreement also
provides that Holly will utilize an alternative to the existing wastewater
treatment system at an estimated total cost of approximately $3.0 million. The
costs to implement the alternative treatment system will be capitalized and
amortized over the future useful life of the resulting asset in accordance with
generally accepted accounting principles. Finally, the agreement involves the
payment of a civil penalty of less than $2 million. In addition to expenses
related to the settlement agreement, Holly currently expects to spend
approximately $1.5 million on environmental compliance relating to Holly's
operations in calendar year 1998.
TAXES
The Combined Company and its operations and products will be subject to
taxes imposed by federal, state, local and Native American governments, which
taxes have generally increased over time. There can be no certainty of the
effect that increases in these taxes, or the imposition of new taxes, could have
on the Combined Company, or whether such taxes could be passed on to the
Combined Company's customers. Giant has received several tax notifications and
assessments from the Navajo Nation relating to Giant's operations and crude oil
removed from properties located outside the boundaries of the Navajo Reservation
in an area of disputed jurisdiction, including a $1.8 million severance tax
assessment issued to a subsidiary of Giant in November 1991. Giant has invoked
its appeal rights. Giant may receive further tax assessments before resolution
of the Nation's taxing authority, which assessments will be the liability of the
Combined Company.
CONTROLLING STOCKHOLDERS; CONTROL PROVISIONS IN MAJOR STOCKHOLDERS' AGREEMENT
AND NEW BYLAWS
James E. Acridge and Lamar Norsworthy, each of whom will be Co-Chairman of
the Board and Co-Chief Executive Officer of the Combined Company, will own
approximately 10.5% and 2.0%, respectively, of the outstanding Common Stock of
the Combined Company immediately upon consummation of the Merger. Mr. Acridge
and Mr. Norsworthy will have a substantial ability to control the Combined
Company and direct its policies. Mr. Acridge has pledged substantially all of
his shares of Common Stock to various financial institutions as security for
personal loans, the proceeds of which were used for general purposes and not to
finance the acquisition of Giant Common Stock. Mr. Acridge retains the right to
direct the voting and, subject to certain margin requirements, disposition of
such shares and the right to receive all dividends, subject to standard default
provisions.
Immediately upon consummation of the Merger, the Giant stockholders in the
aggregate and the Holly stockholders in the aggregate will each hold 50% of the
Combined Company's Common Stock. The New Bylaws of the Combined Company provide
for Co-Chairmen of the Board and Co-Chief Executive Officers and a Board of
Directors comprised of an equal number of G Directors and H Directors. Under the
New Bylaws, the G Directors select any replacements for G Directors and the H
Directors select any replacements for H Directors (subject to the voting rights
of stockholders of the Combined Company with respect to the election of
directors), with the result that there are expected to be an equal number of G
Directors and H Directors until the termination of these provisions, which will
occur not later than December 31, 2003 unless otherwise determined by the Board
of Directors of the Combined Company. The New Bylaws also provide that action of
the Board of Directors will require a number of votes equal to the sum of the
greater of the number of G Directors or the number of H Directors voting on the
matter plus one. The Merger Agreement provides that initially there will be five
G Directors and five H Directors, that initially Mr. Acridge
28
<PAGE> 38
and Mr. Norsworthy will be Co-Chairmen of the Board and Co-Chief Executive
Officers, and that initially the other officers of the Combined Company will be
two Executive Vice Presidents designated by Giant and two designated by Holly.
In addition, Mr. Acridge, Mr. Norsworthy, certain other Holly stockholders,
Giant and Holly have entered into the Major Stockholders' Agreement in which,
among other things, the stockholder parties, who will initially own a total of
approximately 26.8% of the Combined Company's Common Stock, have agreed to vote
their shares of Giant Common Stock and Holly Common Stock in favor of the
Merger, against any proposal that could be expected to hinder the Merger, for
directors nominated after the Merger by the Board of Directors of the Combined
Company under the New Bylaws, and against any amendment to the New Bylaws or the
New Certificate that is not proposed by the entire Board of Directors of the
Combined Company. These portions of the New Bylaws, the Merger Agreement and the
Major Stockholders' Agreement are intended, because the Merger is a "merger of
equals," to provide for equal management and control of the Combined Company by
the Giant constituents and the Holly constituents.
In addition, the Major Stockholders' Agreement contains deadlock resolution
agreements in the event that Mr. Acridge and Mr. Norsworthy, at any time after
the fifteenth month following the Effective Time, are unable to resolve
differences that may arise between them. If implemented, the deadlock resolution
procedure could result in either Mr. Acridge or Mr. Norsworthy resigning from
all positions (including as a director) with the Combined Company, using his
best efforts to cause the other G Directors or H Directors, as the case may be,
to resign from the Board of Directors, and either (i) selling to the other all
or substantially all of his shares, or (ii) entering into a standstill agreement
with the Combined Company. Moreover, unless otherwise determined by the Board of
Directors, the New Bylaws' requirement that the Combined Company have an even
number of directors and the designation of G Directors and H Directors will
cease to apply no later than December 31, 2003, and the requirement for
Co-Chairmen of the Board and Co-Chief Executive Officers will cease to apply no
later than the annual meeting of the stockholders in 2004. These requirements
will cease to apply earlier if the deadlock resolution procedure is implemented
and in certain other circumstances. As a practical matter, the resignation of
either Mr. Acridge or Mr. Norsworthy, whether pursuant to the deadlock
resolution proceedings or otherwise, or reaching December 31, 2003 if neither
had resigned by then, could result (and would result in the case of a
resignation pursuant to the deadlock resolutions proceedings) in the management
and control of the Combined Company resting in either the Giant constituents or
the Holly constituents rather than being shared equally between them. Further,
if either Mr. Acridge or Mr. Norsworthy resigns for any reason, the Combined
Company will no longer have Co-Chairmen or Co-Chief Executive Officers, and the
one of Mr. Acridge or Mr. Norsworthy who did not resign will be the sole
Chairman and Chief Executive Officer. See "Other Terms of the Merger and the
Merger Agreement -- Major Stockholders' Agreement" and "-- New Bylaws."
POSSIBILITY OF MANAGEMENT DEADLOCK
Because initially the stock of the Combined Company will be owned 50% by
former Giant stockholders and 50% by former Holly stockholders, because the
Board will be composed of an equal number of G Directors and H Directors, and
because senior management (including the Co-Chairman of the Board and Co-Chief
Executive Officers) will be divided equally between former Giant and former
Holly senior executives, there exists the possibility that a deadlock could
arise with respect to the operations and future strategies of the Combined
Company. Although the Board of Directors would have the responsibility to seek
to resolve a deadlock that adversely affected the Combined Company and although
the Major Stockholders' Agreement provides for a deadlock resolution procedure
available beginning 15 months after the Merger, there can be no assurance that
action by the Board of Directors or use of the deadlock resolution procedure as
provided in the Major Stockholders' Agreement would resolve a deadlock before it
seriously affected the Combined Company's operations and future prospects.
THE Y2K ISSUE
The Year 2000 ("Y2K") issue is the result of computer systems using a
two-digit format rather than four to define the applicable year. Such computer
systems will be unable to properly interpret dates beyond the year 1999, which
could lead to a system failure or miscalculations causing disruptions of
operations.
29
<PAGE> 39
In 1997, Giant developed a three-phase program for Y2K information systems
compliance. Phase I is to identify those systems with which Giant has exposure
to Y2K issues. Phase II is the development and implementation of action plans to
be Y2K compliant in all areas by mid-1999. Phase III, to be completed in 1999,
is the final testing of each major area of exposure to ensure compliance. Giant
has identified three major areas determined to be critical for successful Y2K
compliance: (1) financial and informational system applications, (2)
manufacturing and process applications and (3) business relationships.
For Phase I, Giant is in the process of conducting an internal review of
all systems and contacting all software suppliers to determine major areas of
exposure to Y2K issues. In the financial and information system area, a number
of applications have been identified as being Y2K compliant due to their recent
implementation. Giant's core financial and reporting systems are not Y2K
compliant but were already scheduled for replacement by mid-1999. Some
subsidiary financial systems will either be added to this replacement project or
will require internal systems revisions to be Y2K compliant. In the
manufacturing and process area and the business relationship area, Giant is in
the process of identifying areas of exposure.
Giant believes it will cost approximately $2.5 million to replace the core
financial and reporting systems and has identified the potential for 4,000 man
hours of work to bring the remaining financial and informational system
applications into compliance at an estimated cost of approximately $800,000.
Giant is interviewing outside consultants to undertake a portion of the work and
expects approximately two-thirds of the cost to be incurred in 1998 and the
remainder in 1999. Giant has not yet determined what costs will be incurred in
connection with the manufacturing and processing area and the business
relationship area.
Holly has identified key financial, informational and operational systems
that may be affected by Y2K issues, and plans are being developed to address any
system modifications required to address these issues. The financial impact of
making the required Y2K systems changes for Holly's business is currently not
expected to be material to Holly's financial position, results of operations or
cash flow.
Giant and Holly are reviewing the impact on Y2K issues of combining their
operations that could result in increased expenses and delays in implementation
of Y2K systems changes by the Combined Company.
FIXED MERGER CONSIDERATION
The Merger Consideration was fixed by Giant and Holly at the date of the
Merger Agreement, April 14, 1998, through arm's length negotiations. There is no
provision in the Merger Agreement for any adjustment in the Merger Consideration
to account for changes in the market prices of Giant Common Stock or Holly
Common Stock between April 14, 1998 and the Effective Time (the "Interim
Period"). Changes in the market prices of Giant Common Stock and Holly Common
Stock are outside the control of Giant and Holly. A market price decrease of
Giant Common Stock or a market price increase of Holly Common Stock during the
Interim Period would be unfavorable to holders of Holly Common Stock.
Correspondingly, an increase in the market price of Giant Common Stock or a
market price decrease of Holly Common Stock during the Interim Period would be
unfavorable to the holders of Giant Common Stock. Accordingly, stockholders are
urged to obtain current market quotations in determining whether to vote for the
Merger.
UNCERTAINTIES IN INTEGRATING BUSINESS OPERATIONS; LIABILITIES AND TRANSACTION
COSTS
The integration of businesses involves a number of special risks, including
the diversion of management's attention from regular business concerns to the
assimilation of the combined operations, difficulties in the integration of
operations and systems and the ability to achieve operating synergies, the
assimilation and retention of the personnel of Giant and Holly, challenges in
retaining the customers of the two Companies and potential short-term effects on
operating results.
The Merger will result in the Combined Company assuming, as a matter of
law, all of the liabilities and obligations of both Giant and Holly, whether
known or unknown, contingent or matured.
In connection with the Merger, one-time transaction costs, which are
expected to be recorded in 1998, are estimated at $ million and one-time
integration costs, most of which are expected to be recorded in 199 , are
estimated at $ million. In addition, in connection with the preparation of
the pro forma
30
<PAGE> 40
information included elsewhere in this Joint Proxy Statement/Prospectus,
management of Giant and Holly have conformed certain differences in accounting
practices (see "Pro Forma Condensed Consolidated Financial Information of the
Combined Company"). Following the Merger, management of the Combined Company
will conduct a complete review of the accounting policies employed by Giant and
Holly, including the methods used to apply such policies, in order to identify
the appropriate accounting practices to be applied by the Combined Company.
Additionally, management of the Combined Company will review, and when
appropriate conform, the methods employed to develop and assess information used
to make accounting estimates. Any adjustments or changes that may result from
such reviews are expected to be recorded during the accounting period in which
the Effective Time occurs, and may have a material effect on the results
reported during such period.
DIVIDENDS
Any future dividends are subject to the results of the Combined Company's
operations, declarations by the Board of Directors and existing and future debt
covenants. The Indentures relating to Giant's Notes contain certain covenants
that restrict the payment of dividends. At December 31, 1997, Giant's retained
earnings available for dividends under the most restrictive terms of the
Indentures were approximately $19,700,000. The Indentures include the payment of
dividends in their definitions of "Restricted Payments," which are prohibited
unless certain conditions are met. In addition, the terms of outstanding
indebtedness of both Giant and Holly to banks under notes and credit agreements
restrict the level of dividends, and it is expected that the Combined Company
will be subject to restrictions on the level of dividends under the terms of
notes and credit agreements, whether assumed by operation of the Merger or
entered into subsequently. There can be no assurance as to whether dividends
will be declared by the Combined Company at levels previously experienced by
Holly or Giant stockholders, or at all. See "Market Price and Dividend
Information."
RISK OF FORWARD-LOOKING STATEMENTS
This Joint Proxy Statement/Prospectus contains certain statements that are
"forward-looking" statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. All statements other than statements of
historical facts included in this Joint Proxy Statement/Prospectus, including
statements that use terminology such as "estimate," "expect," "intend,"
"anticipate," "believes," "may," "will," "continue" and similar expressions, are
forward-looking statements. Although Giant and Holly believe that the
assumptions upon which the forward-looking statements contained in this Joint
Proxy Statement/Prospectus are based are reasonable, any of the assumptions
could prove to be inaccurate and, as a result, the forward-looking statements
based on those assumptions also could be incorrect. All phases of Giant's and
Holly's operations involve risks and uncertainties, many of which are outside
Giant's and Holly's control and any one of which, or a combination of which,
could materially affect the results of the Combined Company's operations and
whether the forward-looking statements ultimately prove to be correct. Important
factors that could cause actual results to differ materially from Giant's and
Holly's expectations include, but are not limited to: (i) continued or increased
competitive pressures from existing competitors and new entrants, including
price-cutting strategies; (ii) risks involved in integrating Giant's and Holly's
operations; (iii) unanticipated costs related to the Combined Company's growth
and operating strategy; (iv) reductions in the spread between market prices for
refined products and crude oil; (v) constraints on the transportation of refined
products; (vi) inefficiencies or shutdowns in refinery operations; (vii) the
effectiveness of capital investments and marketing strategies of the Combined
Company, (viii) loss or retirement of one or more key members of management;
(ix) inability to negotiate favorable terms with suppliers; (x) increases in
interest rates or the cost of borrowing or a default under any material debt
agreements; (xi) inability to develop new service station/convenience stores in
advantageous locations; (xii) deterioration in general or regional economic
conditions; (xiii) adverse state or federal legislation or regulation that
increases the costs of regulatory compliance, or adverse findings by a regulator
with respect to existing operations; (xiv) adverse determinations in connection
with pending or future litigation or other material claims and judgments; (xv)
inability to achieve profitable future sales levels or other operating results;
(xvi) the unavailability of funds for capital expenditures; (xvii) governmental
factors affecting operations, markets, products, services
31
<PAGE> 41
and prices; (xviii) the impact of the mandated use of specific formulations of
gasolines on operations; (xix) the adequacy of raw material supplies; (xx) the
Combined Company's ability to successfully abate various tax assessments; (xxi)
the potential effects of various pipeline projects as they relate to the
Combined Company's market areas and future profitability; (xxii) the completion
of capital projects; (xxiii) the ability of the Combined Company to become Y2K
compliant; (xxiv) the performance of any business acquired or to be acquired by
Holly, Giant or the Combined Company; and (xxv) other risks discussed in this
Joint Proxy Statement/Prospectus or detailed from time to time in Giant's or
Holly's filings with the Commission.
MARKET PRICE AND DIVIDEND INFORMATION
Giant Common Stock is listed on the NYSE. Holly Common Stock is listed on
the ASE. The following table sets forth the high and low sale prices per share
of Giant Common Stock and Holly Common Stock as reported on the NYSE Composite
Transaction Tape and the ASE Composite Transaction Tape, respectively, for the
periods indicated, and dividends paid thereon per share.
<TABLE>
<CAPTION>
GIANT COMMON STOCK
-----------------------------
QUARTER ENDED HIGH LOW DIVIDENDS
------------- ---- ---- ---------
<S> <C> <C> <C>
June 30, 1998 (through , 1998)................
March 31, 1998.............................................. $21 $18 7/8 $.05
December 31, 1997........................................... 20 1/2 16 3/4 .05
September 30, 1997.......................................... 20 5/8 15 .05
June 30, 1997............................................... 16 7/8 10 .05
March 31, 1997.............................................. 15 5/8 12 3/8 .05
December 31, 1996........................................... 16 1/8 13 3/4 .05
September 30, 1996.......................................... 16 1/4 13 3/8 .05
June 30, 1996............................................... 15 5/8 12 1/4 .05
March 31, 1996.............................................. 14 10 7/8 .05
</TABLE>
<TABLE>
<CAPTION>
HOLLY COMMON STOCK
-----------------------------
FISCAL QUARTER ENDED HIGH LOW DIVIDENDS
-------------------- ---- ---- ---------
<S> <C> <C> <C>
July 31, 1998 (through , 1998)................
April 30, 1998.............................................. $32 7/8 $25 5/8 $.15
January 31, 1998............................................ 27 7/8 24 3/8 .15
October 31, 1997............................................ 28 13/16 25 13/16 .15
July 31, 1997............................................... 27 1/4 24 3/16 .15
April 30, 1997.............................................. 27 1/4 23 1/8 .12
January 31, 1997............................................ 28 24 .12
October 31, 1996............................................ 29 5/8 24 3/4 .12
July 31, 1996............................................... 28 1/8 24 1/2 .12
April 30, 1996.............................................. 27 1/4 21 1/2 .10
January 31, 1996............................................ 23 3/8 21 1/4 .10
October 31, 1995............................................ 23 3/8 21 1/2 .10
</TABLE>
On April 13, 1998, the last trading day prior to the execution of the
Merger Agreement, the closing sale prices of Giant Common Stock and Holly Common
Stock, as reported on the NYSE Composite Transaction Tape and the ASE Composite
Transaction Tape, respectively, were $20 3/16 per share and $27 per share,
respectively. The pro forma equivalent per share value of the Holly Common Stock
on April 13, 1998, was $29 3/4 per share. The pro forma equivalent per share
value of Holly Common Stock on any date equals the closing sale price of Giant
Common Stock on such date, as reported on the NYSE Composite Transaction Tape,
multiplied by 1.33 plus $2.886 (assuming no change in the outstanding
capitalization of Giant or Holly from the date of the Merger Agreement until the
Effective Time).
32
<PAGE> 42
On , 1998, the last trading day prior to the date of this
Joint Proxy Statement/Prospectus, the closing sale prices of Giant Common Stock
and Holly Common Stock, as reported on the NYSE Composite Transaction Tape and
the ASE Composite Tape, respectively, were $ per share and $
per share ($ on a pro forma equivalent per share basis), respectively.
Stockholders are urged to obtain current quotations for the market prices
of Giant Common Stock and Holly Common Stock. No assurance can be given as to
the market price of Giant Common Stock or Holly Common Stock at the Effective
Time. Because the Merger Consideration is fixed in the Merger Agreement and
neither Giant nor Holly has the right to terminate the Merger Agreement based on
changes in the market price of either party's stock, the market value of the
shares of Giant Common Stock that holders of Holly Common Stock will receive in
the Merger may vary significantly from the prices shown above.
Any future dividends are subject to the results of the Combined Company's
operations, declarations by the Board of Directors and existing and future debt
covenants. The terms of outstanding indebtedness of both Giant and Holly to
banks under notes and credit agreements restrict the level of dividends and it
is expected that the Combined Company will be subject to restrictions on the
level of dividends under the terms of outstanding indebtedness under notes and
credit agreements, whether assumed by operation of the Merger or entered into
subsequently. In addition, the Indentures relating to Giant's Notes contain
certain covenants that restrict the payment of dividends. At December 31, 1997,
Giant's retained earnings available for dividends under the most restrictive
terms of the Indentures were approximately $19,700,000. The Indentures include
the payment of dividends in their definitions of "Restricted Payments," which,
subject to certain limitations, are prohibited unless:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such
Restricted Payment;
(b) at the time of and immediately after giving effect to such
Restricted Payment, Giant would be able to incur at least $1.00 of
"Additional Indebtedness" pursuant to the applicable covenants of the
Indentures; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate amount of all Restricted Payments declared or made does not
exceed the sum of (A) 50% of the "Consolidated Net Income" of Giant and its
"Restricted Subsidiaries" (or in the event such Consolidated Net Income
shall be a deficit, minus 100% of such deficit) during the period (treated
as one accounting period) subsequent to September 30, 1997 in the case of
the 9% Indenture and September 30, 1993 in the case of the 9 3/4% Indenture
and ending on the last day of the fiscal quarter immediately preceding the
date of such Restricted Payment, and (B) $30 million in the case of the 9%
Indenture and $15 million in the case of the 9 3/4% Indenture. Consolidated
Net Income excludes, among other things, any full cost ceiling limitation
writedown.
Capitalized terms used but not defined above have the meaning assigned to them
in the Indentures which are incorporated herein by reference.
33
<PAGE> 43
COMPARATIVE PER SHARE DATA
(UNAUDITED)
The following table sets forth certain historical, pro forma and pro forma
equivalent per share financial information for Giant for the year ended December
31, 1997 and for Holly for the twelve months ended January 31, 1998. This
information should be read in conjunction with the Unaudited Pro Forma Condensed
Consolidated Financial Statements of the Combined Company, including the notes
thereto, appearing elsewhere in this Joint Proxy Statement/Prospectus, and the
historical consolidated financial statements of Giant and Holly, including the
notes thereto, and other financial information incorporated by reference herein.
<TABLE>
<CAPTION>
AS OF AND FOR THE
YEAR ENDED
DECEMBER 31, 1997
-------------------
<S> <C>
GIANT:
Income from continuing operations
Basic:
Historical........................................... $ 1.38
Pro forma combined................................... $ 1.42
Assuming dilution:
Historical........................................... $ 1.37
Pro forma combined................................... $ 1.41
Cash dividends per common share:
Historical........................................... $ 0.20
Pro forma combined(1)................................ $ 0.20
Book value per common share at period end:
Historical........................................... $12.14
Pro forma combined................................... $16.07
</TABLE>
<TABLE>
<CAPTION>
AS OF AND FOR THE
TWELVE MONTHS ENDED
JANUARY 31, 1998
-------------------
<S> <C>
HOLLY(2):
Income before cumulative effect of accounting changes:
Basic and diluted:
Historical -- basic and diluted...................... $ 1.89
Pro forma equivalent -- basic(3)..................... $ 1.89
Pro forma equivalent -- assuming dilution(3)......... $ 1.88
Cash dividends per common share:
Historical........................................... $ 0.57
Pro forma equivalent(3).............................. $ 0.27
Book value per common share at period end:
Historical........................................... $12.95
Pro forma equivalent(3).............................. $21.37
</TABLE>
- ---------------
(1) The Giant pro forma combined cash dividends per common share amounts
represent historical dividends per share.
(2) Holly's fiscal year ends on July 31. The above information for Holly is
based on Holly's unaudited historical balance sheet as of January 31, 1998
and on Holly's unaudited historical results of operations for the twelve
months ended January 31, 1998, which consists of the first six months of
Holly's fiscal year ending July 31, 1998 and the last six months of Holly's
fiscal year ended July 31, 1997.
(3) The Holly pro forma equivalent per share amounts are calculated by
multiplying the Giant pro forma combined per share amounts as presented
above by the assumed exchange ratio of 1.33 shares of Giant Common Stock for
each share of Holly Common Stock to be received in connection with the
Merger, without consideration of cash to be paid to the holders of Holly
Common Stock in connection with the Merger.
34
<PAGE> 44
THE COMPANIES
GIANT
Giant, through its wholly-owned subsidiary Giant Arizona, is engaged in the
refining and marketing of petroleum products in New Mexico, Arizona, Colorado
and Utah, with a concentration in the Four Corners where these states adjoin.
Giant sells petroleum products through company-operated retail facilities,
independent wholesalers and retailers, industrial/commercial accounts and sales
and exchanges with major oil companies. In addition, through its wholly-owned
subsidiary Phoenix Fuel, Giant Arizona operates an industrial/commercial
petroleum fuels and lubricants distribution operation including an unattended
fleet fueling, or cardlock, operation. Giant's long-term strategy is to
profitably grow its refining, retail marketing and other marketing operations
through both selective acquisitions and capital improvements to its existing
operations. This strategy, in part, is designed to increase integration or
control over the distribution of a greater portion of Giant's refined products
through their sale in Giant's retail network. Giant also intends to increase its
market presence in the growing southwestern United States market including the
Phoenix and Tucson areas. Through selective acquisitions, Giant may expand into
new market regions outside the Four Corners area where Giant's management
believes it can duplicate its business strategy.
Giant Arizona owns and operates two refineries with total throughput
capacity of 44,600 BPD. The Ciniza refinery is located on 880 acres near Gallup,
New Mexico and the Bloomfield refinery is located on 285 acres near Farmington,
New Mexico. Both of these refineries are located in the Four Corners area, which
serves as Giant's primary market for its refined products and as the primary
source of its crude oil and natural gas liquids supply. During 1997, Giant sold
approximately 9,200,000 barrels of gasoline and 4,000,000 barrels of diesel fuel
from its refineries. At April 30, 1998 Giant operated 135 service
stations/convenience stores located in New Mexico, Arizona, Colorado and Utah.
Giant also operates a Travel Center located on I-40 adjacent to the Ciniza
refinery near Gallup, New Mexico. Giant's retail units sold approximately
144,700,000 gallons of gasoline and diesel fuel in 1997. Merchandise sales in
1997 were $75,000,000. In 1997, Giant had total revenues of $657,300,000 and net
earnings of $15,300,000.
HOLLY
Holly is an independent refiner of petroleum and petroleum derivatives and
produces high value light products such as gasoline, diesel fuel and jet fuel
for sale primarily in the southwestern United States and northern Mexico.
Navajo, one of Holly's wholly-owned subsidiaries, owns a high-conversion
petroleum refinery in Artesia, New Mexico, which Navajo operates in conjunction
with crude, vacuum distillation and other facilities situation 65 miles away in
Lovington, New Mexico (collectively, the "Navajo Refinery"). The Navajo Refinery
has a crude capacity of 60,000 BPD and can process a variety of high sulfur
(sour) crude oils. Holly also owns MRC, which owns a 7,000 BPD petroleum
refinery near Great Falls, Montana (the "Montana Refinery"). The Montana
Refinery can process a variety of high sulfur crude oils and primarily serves
Montana. Holly also owns interests in refined product and crude oil pipelines
and related terminals that are operated either in conjunction with refining
operations or independently. The Navajo Refinery primarily serves the growing
southwestern United States market, including El Paso, Albuquerque, Phoenix and
Tucson, and the northern Mexico market. Holly's products are shipped by pipeline
from El Paso to Albuquerque via a products pipeline system owned by Chevron
Pipeline Company and from El Paso to Tucson and Phoenix via a products pipeline
system owned by Santa Fe Pacific Pipeline. Holly also conducts a small scale oil
and gas exploration and production program. Holly had revenues of $721,300,000
and net income of $13,100,000 in fiscal 1997.
35
<PAGE> 45
RECENT DEVELOPMENTS
GIANT
On February 10, 1998, Giant completed the purchase of the assets of
DeGuelle for $9,750,000. DeGuelle is a Durango, Colorado-based petroleum
marketing company. Included in the purchase were seven service
station/convenience stores, two cardlock commercial fleet fueling facilities, a
gasoline and diesel storage bulk plant and related transportation equipment. All
of the facilities are located in southwestern Colorado and will be supplied by
Giant's refineries. In 1997, DeGuelle had sales of approximately 10,000,000
gallons of gasoline and diesel fuel in addition to 35,000 gallons of lubricants.
Giant has entered into agreements to acquire 33 service station/convenience
stores from Kaibab Industries, Inc. The retail units, located throughout
Arizona, include 15 in the greater Phoenix area and 11 in the Tucson market,
with the balance located primarily in southern and eastern Arizona. Other assets
in the acquisition include fuel truck/transports, other related equipment, fuel
inventories and some undeveloped real estate. These units have had sales of
approximately 70 million gallons of refined petroleum products per year. The
acquisition is expected to close in the second quarter of 1998, subject to
customary pre-closing conditions, due diligence procedures and regulatory
approvals.
Giant previously executed an agreement to acquire the assets of Ever-Ready.
Giant terminated this agreement in April 1998 due to the exercise of rights of
first refusal in favor of third parties.
HOLLY
In April 1998, Holly agreed to purchase a 400-mile West Texas crude
gathering system from Fina for $12,000,000. In addition, Holly may pay up to
$300,000 per year for a five-year period, subject to contingencies, in
connection with the purchase. The principal business of the gathering system is
transporting locally produced sweet and sour crude oil to local trading hubs.
The purchase is expected to close in the summer of 1998, subject to customary
pre-closing conditions, reviews, and due diligence procedures.
MANAGEMENT OF THE COMBINED COMPANY
Because the Merger is a "merger of equals," certain provisions of the New
Bylaws of the Combined Company provide for Co-Chairmen of the Board and Co-Chief
Executive Officers and a Board of Directors comprised of an equal number of
directors initially designated by Giant ("G Directors") and directors initially
designated by Holly ("H Directors"). There are expected to be an equal number of
G Directors and H Directors until the termination of these provisions, which
will occur not later than December 31, 2003 unless otherwise determined by the
Board of Directors of the Combined Company. The New Bylaws also provide that
action of the Board of Directors will require a number of votes equal to the sum
of the greater of the number of G Directors or the number of H Directors voting
on the matter plus one. The Merger Agreement provides that initially there will
be five G Directors and five H Directors, that James E. Acridge, who currently
serves as Chairman of the Board and Chief Executive Officer of Giant, and Lamar
Norsworthy, who currently serves as Chairman of the Board and Chief Executive
Officer of Holly, will be Co-Chairmen of the Board and Co-Chief Executive
Officers of the Combined Company, and that the other senior officers of the
Combined Company initially will be two Executive Vice Presidents designated by
Giant and two designated by Holly. In addition, Mr. Acridge, Mr. Norsworthy,
certain other Holly stockholders, Giant and Holly have entered into the Major
Stockholders' Agreement in which, among other things, the stockholder parties,
who will initially own a total of approximately 26.8% of the Combined Company's
Common Stock, have agreed to vote their shares for directors nominated after the
Merger by the Board of Directors of the Combined Company under the New Bylaws,
and against any amendment to the New Bylaws or the New Certificate that is not
proposed by the entire Board of Directors of the Combined Company. These
provisions operate through December 31, 2003, unless they terminate earlier
pursuant to the terms of the New Bylaws and the Major Stockholders' Agreement.
See "Other Terms of the Merger and the Merger Agreement -- Major Stockholders'
Agreement," "-- New Certificate" and "-- New Bylaws."
36
<PAGE> 46
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
Pursuant to the Merger Agreement, Giant's designees to the Board of
Directors of the Combined Company are James E. Acridge, Anthony J. Bernitsky, F.
Michael Geddes, Fredric L. Holliger and Harry S. Howard, Jr., all of whom
currently serve as directors of Giant. Holly's designees to the Board of
Directors of the Combined Company are Lamar Norsworthy, Robert G. McKenzie, Jack
P. Reid, A. J. Losee and W. John Glancy, all of whom, other than Mr. Glancy,
currently serve as directors of Holly. Under the Merger Agreement, if any
designee to the Board of Directors of the Combined Company becomes unable to
serve as such prior to the Effective Time, the Company designating such person
will designate another person to serve in such person's stead.
The designees to the Board of Directors of the Combined Company will be in
the classes of directors whose terms expire at the annual meetings of the
stockholders of the Combined Company in the years indicated: 1999: Messrs.
Glancy and Howard; 2000: Messrs. Reid, Losee, Geddes and Holliger; and 2001:
Messrs. Norsworthy, McKenzie, Acridge and Bernitsky. See "Other Terms of the
Merger and the Merger Agreement -- New Certificate," "-- New Bylaws" and
"Comparison of Stockholder Rights."
The Committees of the Board of Directors of the Combined Company will be
elected by the Board in accordance with the New Bylaws. Under the New Bylaws,
there will be three standing committees: an Audit Committee, a Compensation
Committee and a Nominating Committee. The Audit Committee and the Compensation
Committee will each be composed of two G Directors and two H Directors who are
not officers or employees of the Combined Company, with the Chairman of each
such committee to be selected by the Board of Directors of the Combined Company.
The Nominating Committee will be composed of the two Co-Chief Executive Officers
(who will co-chair the committee) and two other directors, one G Director and
one H Director. See "Other Terms of the Merger and the Merger Agreement -- Major
Stockholders' Agreement," "-- New Bylaws," "-- New Certificate," and "Comparison
of Stockholder Rights."
Pursuant to the Merger Agreement, the following individuals will become
directors and executive officers of the Combined Company.
<TABLE>
<CAPTION>
POSITION WITH
NAME CURRENT POSITION WITH HOLLY OR GIANT COMBINED COMPANY
---- ------------------------------------ ----------------
<S> <C> <C>
James E. Acridge............. Chairman of the Board, President and Co-Chairman of the Board,
Chief Executive Officer of Giant Co-Chief Executive Officer
and Class III Director
Lamar Norsworthy............. Chairman of the Board and Chief Co-Chairman of the Board,
Executive Officer of Holly Co-Chief Executive Officer
and Class III Director
Matthew P. Clifton........... President of Holly Executive Vice President
Morgan Gust.................. Vice President and General Counsel, Executive Vice President
Vice President Administration and
Secretary of Giant
Fredric L. Holliger.......... Executive Vice President and Chief Executive Vice President and
Operating Officer of Giant Class II Director
Jack P. Reid................. Executive Vice President, Refining, Executive Vice President and
of Holly Class II Director
Harry S. Howard, Jr. ........ Giant Director Class I Director
W. John Glancy............... Former Holly Director Class I Director
F. Michael Geddes............ Giant Director Class II Director
A.J. Losee................... Holly Director Class II Director
Anthony J. Bernitsky......... Giant Director Class III Director
Robert G. McKenzie........... Holly Director Class III Director
</TABLE>
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The names, principal occupations and certain other information regarding
the persons who will be members of the Board of Directors and executive officers
of the Combined Company are set forth below.
JAMES E. ACRIDGE, age 58, has served as Chairman of the Board of Directors,
President and Chief Executive Officer of Giant since October 1989. Mr. Acridge
started Giant Arizona, Giant's principal wholly-owned subsidiary, in 1969 and
has served continuously as Giant Arizona's Chairman of the Board of Directors,
President and Chief Executive Officer.
LAMAR NORSWORTHY, age 51, has served as a director of Holly since 1967 and
is its Chairman of the Board and Chief Executive Officer. From 1988 to 1995 he
also was the President of Holly.
MATTHEW P. CLIFTON, age 46, has served as a director of Holly since
September 1995, has been with Holly for over fifteen years and is President of
Holly. From 1991 to 1995 he served as Senior Vice President of Holly with
responsibilities for refining operations, engineering and oil and gas
activities.
MORGAN GUST, age 51, has served as Secretary and General Counsel of Giant
since August 1990 and as Vice President since September 1990. He has served as
Vice President Administration since October 1992.
FREDRIC L. HOLLIGER, age 50, has served as a director, Executive Vice
President and Chief Operating Officer of Giant since October 1989. Mr. Holliger
joined Giant Arizona as Senior Vice President and President of the Giant
refining division in February 1989. Mr. Holliger has served as a director and
Chief Executive Officer of Phoenix Fuel since June 1997 and has served as a
director, President and Chief Executive Officer of Giant E&P since May 1993.
JACK P. REID, age 61, has served as a director of Holly since 1977, and is
its Executive Vice President, Refining.
HARRY S. HOWARD, JR., age 80, has served as a director of Giant since
January 1992. He is the retired President and Chief Operating Officer of
American Can Company.
W. JOHN GLANCY, age 56, who served as a director of Holly from 1975 until
1995, has practiced law in the Law Offices of W. John Glancy in Dallas, Texas
since March 1997 and from 1991 through early 1995. From early 1995 through early
1997, Mr. Glancy was a partner and then counsel in the Dallas office of the law
firm of Weil, Gotshal & Manges LLP.
F. MICHAEL GEDDES, age 58, has served as a director of Giant since
September 1991. He has been the Chairman and President of Geddes and Company, a
private investment and consulting firm, since October 1978. He also serves as
Chairman and Chief Executive Officer of Coe & Van Loo Consultants, Inc., an
engineering and land planning firm; CVL Consultants, Inc., a corporation engaged
in engineering and land planning; GS&B Holding, Inc., a holding company with
ownership interests in a financial futures brokerage firm; Eagle Western
Properties Company, a firm involved in real estate management and brokerage; and
Athearn, Inc., a manufacturer of HO scale model trains.
A. J. LOSEE, age 72, has served as a director of Holly 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.
ANTHONY J. BERNITSKY, age 68, has served as a director of Giant since
August 1996. Mr. Bernitsky is co-owner of Sandia Oil Company ("Sandia"), a
wholesale and retail gasoline business with service stations and convenience
stores located in New Mexico and on the Navajo Indian Reservation. Mr. Bernitsky
started Sandia in 1982 and has served continuously on its board of directors and
as its president. Mr. Bernitsky also is a director of the New Mexico Petroleum
Marketers Association.
ROBERT G. MCKENZIE, age 59, has served as a director of Holly since 1992,
and has been Executive Vice President and Chief Operating Officer of Brown
Brothers Harriman Trust Company of Texas since January 1990.
Giant has and Holly expects to have entered into employment agreements
prior to the Merger with certain of the individuals to be executive officers of
the Combined Company which will be assumed, upon consummation of the Merger, by
the Combined Company. See "The Merger -- Interests of Certain Persons in the
Merger."
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THE SPECIAL MEETINGS
DATE, TIME AND PLACE
The Giant Special Meeting will be held at at 9:00 a.m.
local time on , 1998. The Holly Special Meeting will be held at
at 9:00 a.m. local time on , 1998.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETINGS
GIANT. At the Giant Special Meeting, holders of Giant Common Stock are
being asked to adopt the Merger Agreement and to approve the Incentive Plan. See
"The Merger," "Other Terms of the Merger and the Merger Agreement" and "Approval
of the Incentive Plan." THE GIANT BOARD HAS UNANIMOUSLY DETERMINED THAT THE
MERGER, THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY
(INCLUDING THE ISSUANCE OF GIANT COMMON STOCK AND THE ADOPTION OF THE NEW
CERTIFICATE AND THE NEW BYLAWS) ARE FAIR TO AND IN THE BEST INTERESTS OF THE
STOCKHOLDERS OF GIANT, HAS APPROVED THE MERGER, THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY AND RECOMMENDS THAT GIANT STOCKHOLDERS VOTE
"FOR" ADOPTION OF THE MERGER, THE MERGER AGREEMENT, AND THE TRANSACTIONS
CONTEMPLATED THEREBY. IN ADDITION, THE GIANT BOARD HAS UNANIMOUSLY APPROVED THE
INCENTIVE PLAN AND RECOMMENDS THAT GIANT'S STOCKHOLDERS VOTE "FOR" SUCH APPROVAL
OF THE INCENTIVE PLAN.
HOLLY. At the Holly Special Meeting, holders of Holly Common Stock are
being asked to adopt the Merger Agreement. See "The Merger" and "Other Terms of
the Merger and the Merger Agreement." THE HOLLY BOARD HAS UNANIMOUSLY DETERMINED
THAT THE MERGER, THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY
ARE FAIR TO AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF HOLLY, AND HAS
APPROVED THE MERGER, THE MERGER AGREEMENT, AND THE TRANSACTIONS CONTEMPLATED
THEREBY AND RECOMMENDS THAT HOLLY STOCKHOLDERS VOTE "FOR" ADOPTION OF THE
MERGER, THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM
GIANT. Only holders of record of Giant Common Stock at the close of
business on the Record Date are entitled to receive notice of and to vote at the
Giant Special Meeting. On the Record Date, shares of Giant Common
Stock were issued and outstanding and held by approximately holders of
record. A majority of the shares of Giant Common Stock issued and outstanding
and entitled to vote on the Record Date must be represented in person or by
proxy at the Giant Special Meeting in order for a quorum to be present. In the
event that a quorum is not present at the Giant Special Meeting, or in the event
that there are not votes "FOR" the matters voted on sufficient to approve such
matters, it is expected that such meeting will be adjourned or postponed to
solicit additional proxies. Holders of record of Giant Common Stock on the
Record Date are each entitled to one vote per share on each matter to be voted
on at the Giant Special Meeting.
HOLLY. Only holders of record of Holly Common Stock at the close of
business on the Record Date are entitled to notice of and to vote at the Holly
Special Meeting. On the Record Date, shares of Holly Common Stock were
issued and outstanding and held by approximately holders of record. A
majority of the shares of Holly Common Stock issued and outstanding and entitled
to vote on the Record Date must be represented in person or by proxy at the
Holly Special Meeting in order for a quorum to be present. In the event that a
quorum is not present at the Holly Special Meeting, or in the event that there
are not votes "FOR" the matters voted on sufficient to approve such matters, it
is expected that such meeting will be adjourned or postponed to solicit
additional proxies. Holders of record of Holly Common Stock on the Record Date
are each entitled to one vote per share on each matter to be considered at the
Holly Special Meeting.
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VOTES REQUIRED
GIANT. While the adoption of the Merger Agreement requires the affirmative
vote of the holders of record of a majority of the shares of Giant Common Stock
outstanding on the Record Date, the approval of the New Certificate and the New
Bylaws requires the affirmative vote of the holders of at least 80% of Giant
Common Stock outstanding on the Record Date and is a condition to the Merger.
Therefore, adoption of the Merger Agreement will in effect require the
affirmative vote of the holders of at least 80% of Giant Common Stock
outstanding on the Record Date. The approval of the Incentive Plan requires the
affirmative vote of the holders of a majority of the shares of Giant Common
Stock present or represented at the Special Meeting and entitled to vote. The
approval of the Incentive Plan is not a condition to the Merger.
HOLLY. The adoption of the Merger, the Merger Agreement and the
transactions contemplated thereby requires the affirmative vote of the holders
of record of a majority of the shares of Holly Common Stock outstanding on the
Record Date.
SHARE OWNERSHIP OF MANAGEMENT; VOTING REQUIREMENT IN MAJOR STOCKHOLDERS'
AGREEMENT
At the close of business on February 27, 1998, directors and executive
officers of Giant and their affiliates beneficially owned 2,551,396 shares of
Giant Common Stock, which represented approximately 23.2% of the shares of Giant
Common Stock outstanding on that date. None of Holly's directors or executive
officers beneficially owned any shares of Giant Common Stock as of February 27,
1998. At the close of business on February 27, 1998, directors and executive
officers of Holly and their affiliates beneficially owned 839,363 shares of
Holly Common Stock, which represented approximately 10.2% of the shares of Holly
Common Stock outstanding on that date. Giant and Holly officers and directors
are expected to vote "FOR" adoption of the Merger, the Merger Agreement and the
transactions contemplated thereby at their respective Special Meetings. None of
Giant's directors or executive officers beneficially owned any shares of Holly
Common Stock as of February 27, 1998. Mr. Acridge, Mr. Norsworthy and certain
other Holly stockholders (collectively with Mr. Norsworthy, the "Norsworthy
Group") have agreed in the Major Stockholders' Agreement to vote their shares in
favor of the Merger and all matters that could reasonably be expected to
facilitate the Merger. Mr. Acridge owns 2,315,892 shares, or 21.1%, of the
outstanding Giant Common Stock, and the Norsworthy Group owns 2,453,983 shares,
or 29.7%, of the outstanding Holly Common Stock. See "Other Terms of the Merger
and the Merger Agreement -- Major Stockholders' Agreement."
VOTING OF PROXIES
Shares of Giant Common Stock or Holly Common Stock represented by all
properly executed proxies received in time for the Special Meetings will be
voted in the manner specified. Properly executed proxies that do not contain
voting instructions will be voted in favor of adoption of the Merger, the Merger
Agreement and the transactions contemplated thereby, including, with respect to
proxies to vote shares of Giant Common Stock, the New Certificate and the New
Bylaws and for approval of the Incentive Plan.
Shares of Giant Common Stock or Holly Common Stock represented at the
applicable Special Meeting but not voting, including shares of Giant Common
Stock or Holly Common Stock, as the case may be, for which proxies have been
received but with respect to which holders of shares have abstained on any
matter, will be treated as present at the applicable Special Meeting for
purposes of determining the presence or absence of a quorum for the transaction
of business.
For voting purposes at the Special Meetings, only shares affirmatively
voted in favor of a proposal (including properly executed proxies not containing
voting instructions) will be counted as favorable votes for such proposal. With
respect to the proposal to adopt the Merger Agreement, and, with respect to the
Giant Special Meeting, the New Certificate and the New Bylaws, the failure to
submit a proxy (or to vote in person) or the abstention from voting will have
the same effect as a vote against such proposal. In addition, under the
applicable rules of the NYSE and the ASE, brokers who hold shares in street name
for customers who are the beneficial owners of such shares are prohibited from
giving a proxy to vote such customers' shares with respect to the proposal to
adopt the Merger, the Merger Agreement and the transactions contemplated
thereby, or the proposal to approve the Incentive Plan, in the absence of
specific instructions from such customers
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("broker nonvotes"). Accordingly, broker nonvotes will also have the same effect
as votes against the proposals at the Special Meetings.
The persons named as proxies by a Giant or Holly stockholder may propose
and vote for one or more adjournments or postponements of the applicable Special
Meeting, including, without limitation, adjournments to permit further
solicitations of proxies in favor of any proposal; provided, however, that no
proxy that is voted against the proposal to adopt the Merger Agreement will be
voted in favor of any such adjournment or postponement.
REVOCABILITY OF PROXIES
The grant of a proxy on the enclosed Giant or Holly form of proxy does not
preclude a stockholder from voting in person. A stockholder may revoke a proxy
at any time prior to its exercise by filing with the Secretary of Giant (in the
case of a Giant stockholder) or the Secretary of Holly (in the case of a Holly
stockholder) a duly executed revocation of proxy, by submitting a duly executed
proxy bearing a later date, or by appearing at the applicable Special Meeting
and voting in person. Attendance at the relevant Special Meeting will not, in
and of itself, constitute revocation of a proxy.
SOLICITATION OF PROXIES
Each of Giant and Holly will bear the cost of the solicitation of proxies
from its stockholders, except that Giant and Holly will share equally the cost
of filing, printing and mailing this Joint Proxy Statement/ Prospectus and the
Registration Statement of which it is a part. In addition to solicitation by
mail, the directors, officers and employees of each Company and its subsidiaries
may solicit proxies from stockholders of such Company by telephone or telegram
or in person. Arrangements will also be made with brokerage houses and other
custodians, nominees and fiduciaries for the forwarding of solicitation material
to the beneficial owners of stock held of record by such persons, and Giant and
Holly will reimburse such custodians, nominees and fiduciaries for their
reasonable out-of-pocket expenses in connection therewith.
Corporate Investor Communications, Inc. will assist in the solicitation of
proxies by Giant and will receive customary fees for its services. Holly may
retain a proxy solicitation firm to aid in solicitation of proxies for a
customary fee.
STOCKHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXY CARDS.
THE MERGER
GENERAL
The Giant Board and the Holly Board have unanimously approved the Merger
Agreement, which provides for the Merger to occur at the Effective Time, subject
to stockholder approval and other conditions, with Giant continuing as the
surviving corporation. This section of this Joint Proxy Statement/Prospectus
describes certain aspects of the proposed Merger and the Merger Agreement. This
description does not purport to be complete, and is qualified in its entirety by
reference to the Merger Agreement, a copy of which is set forth as Appendix A
and incorporated herein by reference. All Giant stockholders and Holly
stockholders are urged to read carefully the Merger Agreement in its entirety.
STRUCTURE OF THE MERGER
Subject to the terms and conditions of the Merger Agreement and in
accordance with the DGCL, at the Effective Time Holly will merge with and into
Giant. Giant will be the surviving corporation in the Merger, and will continue
its corporate existence under Delaware law under the name "Giant Industries,
Inc." The New Certificate and the New Bylaws will be the certificate of
incorporation and bylaws of the Combined Company. See "Other Terms of the Merger
and the Merger Agreement -- New Certificate," "-- New Bylaws" and "Comparison of
Stockholder Rights."
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MERGER CONSIDERATION
Upon consummation of the Merger and subject to certain exceptions, all of
the issued and outstanding shares of Holly Common Stock will be converted, in
the aggregate, into the right to receive (i) that number of fully paid and
nonassessable shares of Giant Common Stock equal to the number of shares of
Giant Common Stock issued and outstanding immediately before the Effective Time
and (ii) cash in an amount equal to $25,000,000 multiplied by a fraction, the
numerator of which is the number of issued and outstanding shares of Holly
Common Stock immediately before the Effective Time and the denominator of which
is the sum of (A) the number of issued and outstanding shares of Holly Common
Stock immediately before the Effective Time, (B) the number of shares of Holly
Common Stock subject to Holly stock options (whether vested or unvested)
outstanding immediately before the Effective Time and (C) the number of Holly
phantom stock rights outstanding immediately before the Effective Time (with the
consideration described in clauses (i) and (ii) collectively referred to as the
"Merger Consideration"). Accordingly, each issued and outstanding share of Holly
Common Stock will be converted into the right to receive a fraction of the
Merger Consideration equal to one divided by the number of shares of Holly
Common Stock issued and outstanding immediately before the Effective Time. Based
upon the number of shares of Giant Common Stock and Holly Common Stock and the
number of Holly stock options and Holly phantom stock rights outstanding as of
the date of this Joint Proxy Statement/Prospectus, the Merger Consideration
would result in each outstanding share of Holly Common Stock being converted
into the right to receive approximately 1.33 shares of Giant Common Stock plus
$2.886 in cash. These numbers, however, are subject to adjustment prior to the
Effective Time in the event that the number of outstanding shares of Giant or
Holly or the number of outstanding options and phantom stock rights of Holly
change. The Merger Consideration was determined through arm's-length
negotiations between Giant and Holly.
As of the Effective Time, all shares of Holly Common Stock shall no longer
be outstanding and shall automatically be canceled and retired and shall cease
to exist, and each holder of a certificate representing any shares of Holly
Common Stock shall cease to have any rights in respect thereto, other than the
right to receive the Merger Consideration and any cash in lieu of fractional
shares upon the exchange of the certificate, without interest. See "Other Terms
of the Merger and the Merger Agreement -- Conversion of Shares; Procedures for
Exchange of Certificates; Fractional Shares."
EFFECTIVE TIME
The Effective Time will be the time of the filing of a certificate of
merger with the Secretary of State of the State of Delaware or such later time
as is agreed upon by Giant and Holly and specified in the certificate of merger.
The filing of the certificate of merger will occur as soon as practicable after
satisfaction or waiver of the conditions to the consummation of the Merger set
forth in the Merger Agreement, unless another date is agreed to in writing by
Holly and Giant. See "Other Terms of the Merger and the Merger Agreement --
Conditions to the Consummation of the Merger."
BACKGROUND OF THE MERGER
On June 29, 1995, a Confidentiality Agreement between Holly and Giant was
signed and from time to time in the period from June 1995 through the summer of
1997 representatives of senior management of the Companies met to discuss a
possible combination and exchanged information designed to permit each Company
to evaluate a proposed combination. These meetings included meetings between Mr.
Acridge and Mr. Norsworthy and certain other senior executives of each Company.
These meetings were held primarily in Scottsdale, Arizona or Dallas, Texas.
In late July 1997, senior executives of the two Companies, including Mr.
Acridge and Mr. Norsworthy, met and determined to commission an independent
study by PCI, an engineering consulting firm, to evaluate possible operating
synergies related to a combination of the Companies' refining operations. Each
Company independently supplied PCI with certain information relating to its
refinery operations. In connection with providing such information to PCI for
the study, executives of the two Companies met in early September in Scottsdale,
Arizona. Senior executives of each Company met in Dallas, Texas on October 7,
1997 to hear the
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results of the study by PCI. PCI identified several areas of potential cost
savings and operating synergies in combining the refinery operations. The
conclusion of the discussion in that meeting was that a combination of only the
refining operations of each Company, without the retail and other marketing
functions, was not feasible.
On October 27, 1997, Mr. Acridge and Mr. Norsworthy, along with other
senior executives from each Company, met to discuss issues relating to a
potential merger focusing on a possible strategic combination of the two
Companies. The items discussed on a preliminary basis related to control of the
Combined Company. Mr. Acridge and Mr. Norsworthy discussed board composition,
Chairman of the Board and Chief Executive Officer job functions and
responsibilities, levels of authority, location of corporate offices, board
committees and the Companies' general philosophy and business approach.
Subsequent to the October 27, 1997 meeting, Mr. Acridge and Mr. Norsworthy
corresponded and spoke by telephone several times to refine the issues discussed
at the meeting.
On November 18, 1997, Mr. Acridge and Mr. Norsworthy, along with other
senior executives from each Company, met in Scottsdale, Arizona and discussed
the computation of an exchange ratio. At the conclusion of the meeting, the
group agreed to prepare a list of matters relating to control issues, combined
pro forma income statement and balance sheet data, calculations of generally
utilized valuation methods, and lists of intangible strengths and opportunities
of each Company for consideration at a meeting on November 25. On November 25,
1997, Mr. Acridge and Mr. Norsworthy, along with other senior executives from
each Company, met in Scottsdale, Arizona and discussed control issues and
exchange value considerations.
On December 5, 1997, Mr. Acridge and Mr. Norsworthy, along with other
senior executives of the Companies, met in Albuquerque, New Mexico to continue
discussion of valuation issues. At the conclusion of the meeting, it was
determined that senior executives of the two Companies would jointly prepare
historical and projected data on the two Companies for consideration at the next
meeting. On December 23, 1997, Mr. Acridge and Mr. Norsworthy, along with other
senior executives of each Company, met in Dallas, Texas to discuss financial
analyses prepared by each Company related to a potential combination. Specific
items discussed included historical financial information, historical
information adjusted for pro-forma results of acquisitions, and projected
financial information including sensitivity cases.
On January 21, 1998, Mr. Acridge and Mr. Norsworthy, along with other
senior executives of each Company, met in Scottsdale, Arizona and a presentation
was made by Giant senior executives. Items discussed during this meeting
included future financial projections, momentum of each Company's
diversification contribution analysis, implied equity values, and earnings
accretion sharing. On February 3, 1998, Mr. Acridge and Mr. Norsworthy, along
with other senior executives of each Company, met in Dallas, Texas to discuss
Holly's reaction to Giant's January 21, 1998 presentation and to receive a
similar presentation by Holly. Items discussed included specifics related to the
January 21, 1998 presentation, revised financial projections and relative equity
values.
In February and March, 1998, Mr. Acridge and Mr. Norsworthy and other
senior executives of the two Companies had a number of telephone conversations
concerning the status of negotiations between the Companies and possible ways to
structure a transaction that would accommodate the differing views of the two
Companies with respect to relative values.
On April 1 and 2, 1998, Mr. Acridge and Mr. Norsworthy, along with other
senior executives of each Company, met in Scottsdale, Arizona to review a
proposal by Holly for the combination of the two Companies. Items discussed
included comparative business and financial characteristics of the two
Companies, the potential impact of a combination on the stockholders of each
Company, potential synergies from a business combination, and the corporate
cultures of the two Companies. At the conclusion of the April 2 meeting, it was
determined by the representatives of both Companies that a business combination
appeared to be desirable and should be expeditiously explored based on the
principles of 50% stock ownership of the Combined Company for the current
stockholders of each Company, equally shared control through Co-Chief Executive
Officers and a Board of Directors composed equally of persons designated by each
Company, and a cash payment totaling $25,000,000 to holders of Holly Common
Stock, options and phantom stock rights.
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On April 3, 1998, the Holly Board of Directors met to discuss the status of
negotiations with Giant. Based on this discussion, the Holly Board of Directors
determined that Holly senior management should continue to pursue a merger
transaction with the basic terms that had been discussed in the April 2 meeting
of the Companies' senior executives.
During the period from April 3 through April 14, financial, legal,
accounting and management representatives of the two Companies met on various
occasions to conduct due diligence reviews of the two Companies, to discuss the
financial, structural, legal and other terms of a possible "merger of equals"
transaction and to negotiate the terms of the Merger Agreement, the Major
Stockholders' Agreement, and the New Certificate and New Bylaws. On April 6,
1998, the Companies signed a new confidentiality agreement to cover a possible
business combination transaction. On April 7 and 8, 1998, senior management
teams from both Companies and investment banking and accounting firm
representatives met to exchange information regarding their respective business
operations, financial affairs, contingencies, strategies and personnel. Mr.
Acridge and Mr. Norsworthy also met separately on April 7 and 8, 1998 and
reached a preliminary consensus on various issues including composition of the
board, composition of senior management, and the principal terms of the Major
Stockholders' Agreement -- all within the context of consideration of a possible
"merger of equals" transaction and subject to completion of due diligence,
negotiation of definitive agreements and approved by the Board of Directors of
each Company. Giant retained Bear Stearns to provide a fairness opinion with
respect to a potential combination with Holly, and Holly retained DLJ to provide
a fairness opinion with respect to a potential combination with Giant.
On April 13, 1998, the Board of Directors of each Company met to review the
possible business combination transaction and specific aspects thereof. At its
April 13, 1998 meeting, the Giant Board received the written opinion of Bear
Stearns as to the fairness of the Merger Consideration from a financial point of
view to the public stockholders of Giant. On Tuesday, April 14, 1998, the Board
of Directors of each Company met separately to discuss the possible business
combination of the two Companies and to receive additional information with
respect thereto. At its April 14, 1998 meeting, the Holly Board received the
oral opinion of DLJ, which was subsequently confirmed in writing, as to the
fairness of the Merger Consideration to the holders of Holly Common Stock from a
financial point of view. At the April 14 meetings, each Board of Directors
received an oral presentation by its respective financial advisor related to the
advisor's fairness opinion and received reports by senior management on the
status of discussions and by legal counsel with respect to the terms of the
Merger Agreement, Major Stockholders' Agreement, and the New Certificate and New
Bylaws. At the conclusion of the respective meetings, each of the Giant Board
and the Holly Board unanimously approved the Merger Agreement, the Major
Stockholders' Agreement and the New Certificate and New Bylaws. The Merger
Agreement and the Major Stockholders' Agreement were signed by the parties
thereto during the evening of April 14, 1998. On April 15, 1998, the parties
jointly announced the execution of the Merger Agreement.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARD OF DIRECTORS
RECOMMENDATIONS OF THE GIANT BOARD. THE GIANT BOARD HAS UNANIMOUSLY
DETERMINED THAT THE MERGER, THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY (INCLUDING THE ISSUANCE OF GIANT COMMON STOCK AND THE
ADOPTION OF THE NEW CERTIFICATE AND NEW BYLAWS OF GIANT) ARE FAIR TO AND IN THE
BEST INTERESTS OF THE STOCKHOLDERS OF GIANT, HAS UNANIMOUSLY APPROVED THE
MERGER, THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY AND
RECOMMENDS THAT GIANT STOCKHOLDERS VOTE "FOR" ADOPTION OF THE MERGER, THE MERGER
AGREEMENT, AND THE TRANSACTIONS CONTEMPLATED THEREBY.
The decision of the Giant Board to approve the Merger, the Merger Agreement
and the transactions contemplated thereby and recommend the adoption thereof by
Giant stockholders was based upon considera-
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tion of various factors, including those mentioned in "The Merger -- Background
of the Merger," and the following:
(i) the Giant Board's understanding of the conditions in the petroleum
refining and marketing industry in North America generally and the
southwestern United States in particular, the strategic options available
to Giant, the likelihood of future consolidation in the refining and
marketing industry in North America generally and the southwestern United
States in particular, and the limitations placed on Giant's ability to take
advantage of such opportunities due to its present size and level of
leverage;
(ii) the Giant Board's consideration of Giant's strategic plan as an
independent company and the belief that Giant's ability to pursue its plan
would be enhanced by the Merger;
(iii) the Giant Board's consideration of the business, operations,
assets, financial position, prospects and personnel of Giant and Holly;
(iv) the Giant Board's consideration of information regarding the
business and financial prospects of Giant and Holly, including potential
synergies;
(v) the Giant Board's consideration of the fit between the respective
businesses of Giant and Holly and the potential to expand the Combined
Company's operations in the southwestern United States, and the belief that
the results of operations of the Combined Company would be less volatile;
(vi) the Giant Board's consideration of the commitment of Lamar
Norsworthy, Holly's Chairman and Chief Executive Officer, to continue with
the Combined Company and the compatibility and strength of the senior
management teams of the two companies;
(vii) the Giant Board's consideration of the expectation that, based
on the Merger Consideration, the Merger would be accretive to holders of
Giant Common Stock on both an earnings and cash flow basis in the first
full year following the Merger;
(viii) the Giant Board's belief that the transaction would be
accomplished on a tax-free basis for federal income tax purposes (other
than the cash component of the Merger Consideration and cash received in
lieu of fractional shares);
(ix) the Giant Board's consideration of presentations by, and
discussions with, senior executives of Giant and representatives of
Fennemore Craig, P.C. regarding the terms of the Merger Agreement, and the
results of the management's due diligence review; and
(x) the Giant Board's receipt of Bear Stearns' opinion described below
that, as of April 13, 1998, the Merger Consideration was fair from a
financial point of view to the public stockholders of Giant.
The foregoing discussion of the information and factors considered by the
Giant Board is not intended to be exhaustive. In view of the variety of factors
considered in connection with its evaluation of the Merger, the Giant Board did
not find it practicable to and did not attempt to rank or assign relative
weights to the foregoing factors. In addition, individual members of the Giant
Board may have given different weights to different factors.
RECOMMENDATION OF THE HOLLY BOARD. THE HOLLY BOARD HAS UNANIMOUSLY
DETERMINED THAT THE MERGER, THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY ARE FAIR TO AND IN THE BEST INTERESTS OF THE HOLLY
STOCKHOLDERS, AND HAS UNANIMOUSLY APPROVED THE MERGER, THE MERGER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED THEREBY AND RECOMMENDS THAT HOLLY STOCKHOLDERS
VOTE "FOR" ADOPTION OF THE MERGER, THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY.
The decision of the Holly Board to approve the Merger, the Merger Agreement
and the transactions contemplated thereby and recommend the adoption thereof by
Holly stockholders was based upon considera-
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tion of various factors, including those mentioned in "The Merger -- Background
of the Merger," and the following:
(i) The conditions in the petroleum refining and marketing industry in
North America generally and the southwestern United States in particular,
the likelihood of future consolidation in the refining and marketing
industry in North America generally and the southwestern United States in
particular, and the limitations placed on Holly's ability to take advantage
of such opportunities due to its present size;
(ii) The alternative strategic courses of action available to Holly;
(iii) The business, operations, financial position, prospects and
personnel of Giant;
(iv) Potential opportunities for greater operational efficiencies
through conducting Holly's and Giant's refining and petroleum
transportation operations as parts of a single enterprise;
(v) Potential benefits to Holly refining operations resulting from the
ability to market petroleum products through Giant retail outlets and
distribution businesses in areas that can be served by Holly's Navajo
Refinery;
(vi) The potential to expand the Combined Company's operations in the
southwestern United States;
(vii) The possibility of reducing volatility in cash flow and income
as a result of conducting refining and petroleum transportation operations
in conjunction with retail marketing and petroleum distribution businesses;
(viii) The expectation that the Merger would be accretive to Holly
stockholders on both an earnings and a cash flow basis in the first full
fiscal year following the Merger;
(ix) The structure of the transaction as a "merger of equals" and not
a sale of Holly, and the fact that Holly's stockholders would own
approximately 50% of the Combined Company;
(x) The commitment of Giant's Chairman and Chief Executive Officer,
James E. Acridge, to continue with the Combined Company and the
compatibility and strength of the senior management teams of the two
companies;
(xi) The fact that Lamar Norsworthy and James E. Acridge would be
Co-Chairmen of the Board and Co-Chief Executive Officers of the Combined
Company;
(xii) The fact that for a period after the Merger the Combined Company
would have a Board of Directors composed one-half of persons designated by
Holly or by the directors initially designated by Holly;
(xiii) The fact that the receipt by Holly stockholders of Giant Common
Stock in exchange for Holly Common Stock would be tax-free to Holly
stockholders and that only the cash portion of the Merger Consideration and
cash received in lieu of fractional share interests would be potentially
subject to federal income tax when received;
(xiv) Historical market prices and trading information with respect to
shares of Giant Common Stock and Holly Common Stock and the amounts and
terms of the Merger Consideration as provided in the Merger Agreement;
(xv) Presentations by, and discussions with, senior executives of
Holly and legal advisors regarding the terms of the Merger Agreement, the
Major Stockholders' Agreement, and the provisions of the New Certificate
and New Bylaws, and the results of management's due diligence;
(xvi) Receipt of DLJ's opinion that, as of April 14, 1998, the Merger
Consideration was fair to Holly stockholders from a financial point of
view; and
(xvii) The terms and conditions of the Merger Agreement and the Major
Stockholders' Agreement, including terms relating to the Merger
Consideration and the composition of the Board of Directors of the
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Combined Company, the forms of the New Certificate and New Bylaws for the
Combined Company, and the provisions of the Major Stockholders' Agreement
relating to voting agreements of the signatory stockholders and providing
for a deadlock resolution procedure.
The foregoing discussion of the information and factors considered by the
Holly Board is not intended to be exhaustive. In view of the variety of factors
considered in connection with its evaluation of the Merger, the Holly Board did
not find it practicable to and did not attempt to rank or assign relative
weights to the foregoing factors. In addition, individual members of the Holly
Board may have given different weights to different factors.
OPINIONS OF FINANCIAL ADVISORS
OPINION OF GIANT'S FINANCIAL ADVISOR. Giant retained Bear, Stearns & Co.
Inc. ("Bear Stearns") to render a fairness opinion as to whether the Merger
Consideration in the Merger is fair, from a financial point of view, to the
public stockholders of Giant. On April 13, 1998, in connection with the Giant
Board's evaluation of the Merger Agreement and the contemplated transaction,
Bear Stearns delivered its oral opinion, which Bear Stearns confirmed by
delivery of its written opinion dated April 13, 1998, that, as of such date and
subject to certain assumptions, factors and limitations stated therein and as
described below, the Merger Consideration in the Merger was fair, from a
financial point of view, to the public stockholders of Giant.
THE FULL TEXT OF THE OPINION OF BEAR STEARNS (THE "BEAR STEARNS OPINION"),
WHICH SETS FORTH THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED
AND QUALIFICATIONS AND LIMITATIONS ON THE REVIEW UNDERTAKEN BY BEAR STEARNS IN
RENDERING THE OPINION, IS ATTACHED AS APPENDIX E HERETO AND IS INCORPORATED IN
THIS JOINT PROXY STATEMENT/ PROSPECTUS BY REFERENCE. THE SUMMARY OF THE BEAR
STEARNS OPINION SET FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION. STOCKHOLDERS OF
GIANT ARE URGED TO READ SUCH OPINION IN ITS ENTIRETY. THE BEAR STEARNS OPINION
WAS PROVIDED TO THE GIANT BOARD FOR ITS INFORMATION IN CONNECTION WITH ITS
CONSIDERATION OF THE MERGER AND IS DIRECTED ONLY TO THE FAIRNESS, FROM A
FINANCIAL POINT OF VIEW, OF THE MERGER CONSIDERATION IN THE MERGER TO THE PUBLIC
STOCKHOLDERS OF GIANT, DOES NOT ADDRESS THE MERITS OF THE UNDERLYING DECISION BY
GIANT TO ENGAGE IN THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION TO
GIANT'S STOCKHOLDERS AS TO HOW SUCH STOCKHOLDERS SHOULD VOTE ON ADOPTION OF THE
MERGER AGREEMENT OR ANY MATTER RELATED THERETO. BEAR STEARNS EXPRESSED NO
OPINION AS TO THE PRICE OR RANGE AT WHICH THE GIANT COMMON STOCK MAY TRADE
SUBSEQUENT TO THE ANNOUNCEMENT OR CONSUMMATION OF THE MERGER.
No limitations were imposed by Giant on the scope of Bear Stearns'
investigation or the procedures to be followed by it in rendering the Bear
Stearns Opinion. Bear Stearns was not requested to and did not make any
recommendation to the Giant Board as to the form or amount of the consideration
in the Merger, which was determined through arm's length negotiations between
Giant and Holly. In arriving at the Bear Stearns Opinion, Bear Stearns did not
ascribe a specific range of values as to Giant or Holly, but made its
determination on the basis of the financial and comparative analyses summarized
below. The Bear Stearns Opinion does not address Giant's underlying business
decision to pursue the Merger.
In rendering the Bear Stearns Opinion, Bear Stearns reviewed, relied upon,
assumed the accuracy and completeness and did not assume any responsibility for
independent verification of various forecasts and estimates of revenue, earnings
and cash flow prepared by or for the managements of Giant and Holly. Bear
Stearns' analyses were based upon various assumptions as of the dates on which
such forecasts and estimates were made, and there can be no assurance that
actual results of Giant or Holly either alone or on a combined basis will not
vary materially from those forecasts and estimates. With respect to Giant's and
Holly's projected financial results that would be achieved upon consummation of
the Merger (and the potential synergies that
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could be achieved by Giant and Holly upon consummation of the Merger), Bear
Stearns assumed that such projections were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
respective senior managements of Giant and Holly as to the expected future
performance of Giant and Holly. In arriving at the Bear Stearns Opinion, Bear
Stearns did not perform or obtain any independent evaluation or appraisal of the
assets or liabilities of Giant or Holly, nor was Bear Stearns furnished with any
such appraisal. In connection with rendering the Bear Stearns Opinion, Bear
Stearns, among other things: (i) reviewed the principal financial terms of the
Merger set forth in the Merger Agreement; (ii) reviewed certain publicly
available and other related information concerning Giant; (iii) reviewed certain
operating and financial information, including projections, provided to Bear
Stearns by Giant management relating to Giant's business and prospects; (iv) met
with certain members of Giant's senior management to discuss its operations,
historical financial statements and future prospects; (v) reviewed certain
publicly available and other related information concerning Holly; (vi) reviewed
certain operating and financial information, including projections, provided to
Bear Stearns by Holly management relating to Holly's business and prospects;
(vii) met with certain members of Holly's senior management to discuss its
operations, historical financial statements and future prospects; (viii)
reviewed the amounts and timing of synergies and other benefits expected to
result from the Merger, provided to Bear Stearns by Giant management; (ix)
reviewed the historical prices, trading volumes and valuation parameters of
Giant Common Stock and Holly Common Stock; (x) reviewed certain publicly
available financial data, stock market performance data and valuation parameters
of companies which Bear Stearns deemed generally comparable to Giant and Holly;
(xi) reviewed the terms of recent transactions involving companies which Bear
Stearns deemed generally comparable to Giant and Holly and the Merger; and (xii)
conducted such other studies, analyses, inquiries and investigations as Bear
Stearns deemed appropriate. Bear Stearns assumed that the Merger would qualify
as a tax-free reorganization for U.S. federal income tax purposes. The Bear
Stearns Opinion was necessarily based on information available to Bear Stearns
and on general economic, financial, stock market, monetary and other conditions
as they existed and could be evaluated as of the date of the Bear Stearns
Opinion. Bear Stearns does not have any obligation to update, revise or reaffirm
its opinion.
In connection with its presentation to the Giant Board on April 13, 1998,
and in advising the Giant Board of its opinion, Bear Stearns performed a variety
of financial and comparative analyses, as summarized below. The preparation of a
fairness opinion involves various determinations as to the most appropriate and
relevant methods of financial analysis and the application of those methods to
the particular circumstances and, therefore, an opinion is not readily
susceptible to summary or partial description. Accordingly, Bear Stearns
believes that its analyses must be considered as a whole and that considering
any portion of such analyses and of the factors considered, without considering
all analyses and factors, could create a misleading or incomplete view of the
process underlying its analysis and the Bear Stearns Opinion. In its analyses,
Bear Stearns made numerous assumptions with respect to industry performance,
general business and economic conditions and other matters, many of which are
beyond the control of Giant and Holly. Any estimates contained in its analyses
are not necessarily indicative of actual values or predictive of future results
or values, which may be significantly more or less favorable than as set forth
therein.
Historical Stock Price Analysis. Bear Stearns reviewed the historical
trading prices of the Holly Common Stock and the Giant Common Stock for the
period April 7, 1995 through April 8, 1998. In addition, Bear Stearns compared
the historical trading prices for a share of Holly Common Stock to the Merger
Consideration to be received per share of Holly Common Stock.
Relative Contribution Analysis. Bear Stearns' analysis determined the
contribution to combined market equity value (based on share prices as of April
8, 1998) by Giant and Holly as 50.0% and 50.0%, respectively. Bear Stearns
compared the equity value contributions to the contributions of each of Giant
(pro forma to reflect the acquisitions of Kaibab and DeGuelle as of January 1,
1997) and Holly to combined net income and combined after-tax cash flow (defined
as net income less preferred stock dividends, plus deferred taxes, depreciation,
amortization and exploration expense). For the combined latest twelve months
("LTM") net income as of December 31, 1997, Bear Stearns determined that Giant
would have contributed 54.3% and Holly would have contributed 45.7%; for
combined projected calendar 1998 net income, Bear Stearns determined that Giant
would contribute 54.4% and Holly would contribute 45.6%; and for combined
projected
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calendar 1999 net income, Bear Stearns determined that Giant would contribute
53.0% and Holly would contribute 47.0%. For the combined LTM after-tax cash
flow, Bear Stearns determined that Giant would have contributed 53.5% and Holly
would have contributed 46.5%; for combined projected calendar 1998 after-tax
cash flow, Bear Stearns determined that Giant would contribute 50.9% and Holly
would contribute 49.1%; and for combined projected calendar 1999 after-tax cash
flow, Bear Stearns determined that Giant would contribute 51.5% and Holly would
contribute 48.5%.
Bear Stearns' analysis also determined the contribution to combined
Enterprise Value (defined as equity value plus debt, preferred stock and
minority interests less cash and cash equivalents) by Giant (pro forma to
include the acquisitions of Kaibab and DeGuelle) and Holly as 57.4% and 42.6%,
respectively. Bear Stearns then compared the Enterprise Value contributions to
the contributions of each of Giant and Holly to combined EBITDA (defined as
earnings before interest, income taxes, depreciation, amortization and
exploration expense) and combined EBIT (defined as earnings before interest and
taxes). For the combined LTM EBITDA, Bear Stearns determined that Giant would
have contributed 57.1% and Holly would have contributed 42.9%; for combined
projected EBITDA for calendar 1998, Bear Stearns determined that Giant would
contribute 57.8% and Holly would contribute 42.2%; and for combined projected
EBITDA for calendar 1999, Bear Stearns determined that Giant would contribute
58.5% and Holly would contribute 41.5%. For the combined LTM EBIT, Bear Stearns
determined that Giant would have contributed 60.2% and Holly would have
contributed 39.8%. For combined projected EBIT for calendar 1998, Bear Stearns
determined that Giant would contribute 60.2% and Holly would contribute 39.8%.
For combined projected EBIT for calendar 1999, Bear Stearns determined that
Giant would contribute 59.5% and Holly would contribute 40.5%.
The analyses involving projections and estimates were based upon
projections and estimates supplied to Bear Stearns by the managements of Giant
and Holly. This analysis did not assume the realization of any cost savings or
synergies from the Merger.
Relative Contribution Analysis, Including Cost Savings and Synergies. Bear
Stearns' analysis determined the contribution to combined market equity value
(based on share prices as of April 8, 1998) by Giant and Holly as 50.0% and
50.0%, respectively. Holly and Giant senior management have identified certain
expected cost savings and synergies ("Expected Synergies") related to the
Merger. Bear Stearns then determined the contribution of Expected Synergies to
combined projected net income and after-tax cash flow. Bear Stearns compared the
equity value contributions to the contributions of each of Giant (pro forma to
reflect the acquisitions of Kaibab and DeGuelle as of January 1, 1997), Holly
and Expected Synergies to combined net income and combined after-tax cash flow.
For combined projected calendar 1998 net income, Bear Stearns determined that
Giant would contribute 43.5%, Holly would contribute 36.4%, and Expected
Synergies would contribute 20.1%; and for combined projected calendar 1999 net
income, Bear Stearns determined that Giant would contribute 43.1%, Holly would
contribute 38.2%, and Expected Synergies would contribute 18.7%. For combined
projected calendar 1998 after-tax cash flow, Bear Stearns determined that Giant
would contribute 45.8%, Holly would contribute 44.3%, and Expected Synergies
would contribute 10.9%; and for combined projected calendar 1999 after-tax cash
flow, Bear Stearns determined that Giant would contribute 46.6%, Holly would
contribute 43.9%, and Expected Synergies would contribute 9.4%.
Bear Stearns' analysis also determined the contribution to combined
Enterprise Value by Giant (pro forma to include the acquisitions of Kaibab and
DeGuelle) and Holly as 57.4% and 42.6%, respectively. Bear Stearns then compared
the Enterprise Value contributions to the contributions of each of Giant (pro
forma to reflect the acquisitions of Kaibab and DeGuelle as of January 1, 1997),
Holly and Expected Synergies to combined projected EBITDA and combined projected
EBIT. For combined projected EBITDA for calendar 1998, Bear Stearns determined
that Giant would contribute 51.6%, Holly would contribute 37.7% and Expected
Synergies would contribute 10.8%; and for combined projected EBITDA for calendar
1999, Bear Stearns determined that Giant would contribute 52.4%, Holly would
contribute 37.1%, and Expected Synergies would contribute 10.4%. For combined
projected EBIT for calendar 1998, Bear Stearns determined that Giant would
contribute 51.1%, Holly would contribute 33.8%, and Expected Synergies would
contribute 15.1%; and for combined projected EBIT for calendar 1999, Bear
Stearns determined that Giant would contribute 50.9%, Holly would contribute
34.7%, and Expected Synergies would contribute 14.5%.
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The analyses involving projections and estimates were based upon
projections and estimates supplied to Bear Stearns by the managements of Giant
and Holly.
Pro Forma Merger Consequences. Bear Stearns analyzed certain pro forma
effects that could result from the Merger. In connection with such analyses,
Bear Stearns reviewed the projections provided by the managements of Giant and
Holly with respect to future financial performance of Giant and Holly for the
years 1998 through 2002. Based upon these projections and the Expected Synergies
that Giant's and Holly's managements expect to result from the Merger, Bear
Stearns examined the impact of the Merger on Giant's earnings per share ("EPS")
and after-tax cash flow per share ("CFPS") to Giant stockholders. This analysis
indicated that the Merger would be accretive to Giant's EPS by 6.1% in 1998 and
8.4% in 1999. This analysis also indicated that the Merger would be accretive to
Giant's CFPS by 8.8% in 1998 and 8.1% in 1999.
Comparable Company Analysis. As part of this analysis, Bear Stearns
compared certain financial information of Holly to a group of seven publicly
traded petroleum refining companies: Ashland Inc., Sun Company, Inc., Tosco
Corporation, Ultramar Diamond Shamrock Corporation, Valero Energy Corporation,
Crown Central Petroleum Corporation and Wainoco Oil Corporation (the "Comparable
Companies"). In an attempt to better measure trading levels of these companies
which Bear Stearns believes may be affected, in part, by their size and scale
characteristics, Bear Stearns further divided this group into a large refining
and marketing category (the "Large R&M Group") which includes Ashland Inc., Sun
Company, Inc., Tosco Corporation, Ultramar Diamond Shamrock Corporation, and
Valero Energy Corporation, and a small refining and marketing category (the
"Small R&M Group") which includes Crown Central Petroleum Corporation and
Wainoco Oil Corporation.
This comparison of financial information included analyses of multiples
such as (a) stock price to (i) the LTM EPS and to projected calendar 1998 and
1999 EPS, and (ii) the LTM CPFS and to projected calendar 1998 and 1999 CFPS,
and (b) Enterprise Value to (i) the LTM EBITDA as of December 31, 1997, and (ii)
the LTM EBIT as of December 31, 1997. Bear Stearns noted that based upon a
compilation of EPS projections obtained from equity research analysts and on
share prices as of April 8, 1998, the Small R&M Group traded at multiples of
share price to the LTM EPS in a range of 9.4 times to 17.7 times, with a
harmonic mean of 12.3 times, compared to 15.6 times the Merger Consideration per
Holly share to the LTM EPS. Bear Stearns noted that based upon a compilation of
EPS projections obtained from equity research analysts and on share prices as of
April 8, 1998, the Large R&M Group traded at multiples of share price to the LTM
EPS in a range of 10.8 times to 20.6 times, with a harmonic mean of 16.3 times,
to projected calendar 1998 EPS in a range of 12.8 to 14.8 times, with a harmonic
mean of 13.9 times and to projected calendar 1999 EPS in a range of 11.0 times
to 14.7 times, with a harmonic mean of 12.3 times, compared to 15.6 times, 12.3
times and 9.3 times the Merger Consideration per Holly share to the LTM EPS,
projected calendar 1998 EPS and projected calendar 1999 EPS, respectively.
Bear Stearns also noted that based upon a compilation of CFPS projections
obtained from equity research analysts and on share prices as of April 8, 1998,
the Small R&M Group traded at multiples of share price to the LTM CFPS in a
range of 3.0 times to 10.1 times with a harmonic mean of 4.6 times, compared to
5.4 times the Merger Consideration per Holly share to the LTM CFPS. Bear Stearns
noted that based upon a compilation of CFPS projections obtained from equity
research analysts and on share prices as of April 8, 1998, the Large R&M Group
traded at multiples of share price to the LTM CFPS in a range of 4.5 times to
9.0 times, with a harmonic mean of 6.3 times, compared to 5.4 times the Merger
Consideration per Holly share to the LTM CFPS.
In addition, Bear Stearns noted that based upon publicly available
information and implied market valuations as of April 8, 1998, the Small R&M
Group traded at multiples of Enterprise Value to the LTM EBITDA in a range of
3.7 times to 8.6 times, with a harmonic mean of 5.2 times, compared to 5.7 times
for Holly based upon the Merger Consideration. Bear Stearns also noted that
based upon publicly available information and implied market valuations as of
April 8, 1998, the Large R&M Group traded at multiples of Enterprise Value to
the LTM EBITDA in a range of 5.4 times to 8.8 times, with a harmonic mean of 7.2
times, compared to 5.7 times for Holly based upon the Merger Consideration. Bear
Stearns noted that the Small R&M Group traded at multiples of Enterprise Value
to the LTM EBIT in a range of 6.4 times to 12.3
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times, with a harmonic mean of 8.4 times, compared to 10.2 times for Holly based
upon the Merger Consideration. Bear Stearns also noted that the Large R&M Group
traded at multiples of Enterprise Value to the LTM EBIT in an indicative
multiple range of 10.7 times to 13.0 times, with a harmonic mean of 11.6 times,
compared to 10.2 times for Holly based upon the Merger Consideration.
No company utilized in the comparable company analysis is identical to
Giant, Holly or the Combined Company. In evaluating the Comparable Companies,
Bear Stearns made judgments and assumptions with regard to industry performance,
general business, economic, market and financial conditions and other matters,
many of which are beyond the control of Giant and Holly, such as the impact of
competition on the business of Giant and Holly and the industry generally,
industry growth and the absence of any material adverse change in the financial
condition and prospects of Giant and Holly or the industry or in financial
markets in general. An analysis of comparable companies is not purely
mathematical; rather it involves complex considerations and judgments concerning
similarities and differences in financial, operational and other characteristics
of potentially comparable companies.
Comparable Acquisitions Analysis. Bear Stearns reviewed the transaction
values in selected business combination transactions which involved certain
petroleum refining companies similar to Holly and which were announced or
completed during December 1996 and calendar 1997. Bear Stearns included in its
review the following transactions: Ultramar Diamond Shamrock Corporation/Total
Petroleum North America, Ltd., Valero Energy Corporation/Basis Petroleum, Tosco
Corporation/Unocal's refining and marketing assets and Ultramar
Corporation/Diamond Shamrock Corporation (the "Comparable Transactions"). For
purposes of this analysis, these companies' lines of business and operations, or
locations of their properties, made them, in the judgment of Bear Stearns, as
nearly comparable to Giant and Holly as practicable. Bear Stearns reviewed the
multiples in the Comparable Transactions of transaction value to the acquired
companies' respective LTM EBITDA. The range of the ratios of transaction values
to LTM EBITDA for the Comparable Transactions was 8.6 times to 11.4 times, with
a harmonic mean of 10.2 times, compared to the implied multiple for Giant/ Holly
of 5.7 times based on the Merger Consideration. Bear Stearns also reviewed the
multiples in the Comparable Transactions of equity value to the acquired
companies' respective last twelve month ended net income; this analysis resulted
in an indicative multiple range for the Comparable Transactions of 20.2 times to
28.1 times, with a harmonic mean of 23.5 times, compared to the implied multiple
for Giant/Holly of 15.6 times based on the Merger Consideration.
No transaction reviewed in the Comparable Transaction analysis is identical
to the Merger. In evaluating the Comparable Transactions, Bear Stearns made
judgments and assumptions with regard to industry performance, general business,
economic, market and financial conditions and other matters, many of which are
beyond the control of Giant and Holly, such as the impact of competition on the
business of Giant and Holly and the industry generally, industry growth and the
absence of any material adverse change in the financial condition and prospects
of Giant and Holly or the industry or in the financial markets in general. An
analysis of comparable transactions is not purely mathematical; rather it
involves complex considerations and judgments concerning similarities and
differences in financial, operational and other characteristics of potentially
comparable transactions.
Bear Stearns is an internationally recognized investment banking firm that
provides financial services in connection with a wide range of business
transactions. As part of its business, Bear Stearns regularly engages in the
valuation of companies and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and other
purposes. Giant retained Bear Stearns based on Bear Stearns' experience and
expertise in the valuation of companies and because it is familiar with Giant
and its business.
Pursuant to a letter agreement dated April 13, 1998, Giant engaged Bear
Stearns to render a fairness opinion in connection with a possible business
combination with Holly. Pursuant to the terms of the letter agreement, Giant
agreed to pay Bear Stearns $500,000 payable at the time Bear Stearns rendered
its written opinion. In addition, Giant has agreed to reimburse Bear Stearns for
out-of-pocket expenses incurred in connection with the Merger, including legal
fees, and to indemnify Bear Stearns and certain related persons against certain
liabilities and expenses, including certain liabilities under federal securities
laws.
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Current employees of Bear Stearns have previously rendered certain
investment banking services to Giant at previous places of employment, for which
their previous employers received customary compensation. In the ordinary course
of its business, Bear Stearns may actively trade the securities of Holly and
Giant for its account and for the accounts of its customers and, accordingly,
may at any time hold a long or short position in such securities.
OPINION OF HOLLY'S FINANCIAL ADVISOR. On April 9, 1998, Holly engaged DLJ
to act as its financial advisor in connection with the Merger. DLJ subsequently
delivered its written opinion to the Holly Board, dated April 14, 1998 (the "DLJ
Opinion"), to the effect that, as of such date, and based upon and subject to
the assumptions, limitations and qualifications set forth in the DLJ Opinion,
the consideration to be received by the holders of Holly Common Stock in the
Merger was fair to such holders of Holly Common Stock from a financial point of
view.
THE FULL TEXT OF THE DLJ OPINION IS SET FORTH AS APPENDIX F TO THIS JOINT
PROXY STATEMENT/PROSPECTUS AND SHOULD BE READ CAREFULLY IN ITS ENTIRETY FOR A
DISCUSSION OF THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, OTHER MATTERS
CONSIDERED AND LIMITS OF THE REVIEW BY DLJ.
The DLJ Opinion was prepared for the Holly Board and addresses only the
fairness of the Merger Consideration to the holders of Holly Common Stock from a
financial point of view and does not constitute a recommendation to any
stockholder of Holly as to how such stockholder should vote at the Holly Special
Meeting. The DLJ Opinion does not constitute an opinion as to the price at which
Giant Common Stock will actually trade at any time. The type and amount of
consideration for the Merger was determined in arm's length negotiations between
Holly and Giant. Holly did not request DLJ to, nor did DLJ, solicit the interest
of any other party in acquiring Holly.
In arriving at the DLJ Opinion, DLJ reviewed drafts of the Merger Agreement
and the exhibits thereto, the Major Stockholders' Agreement, the proposed New
Bylaws of Giant following the Merger and the proposed New Certificate of Giant
following the Merger. DLJ also reviewed financial and other information that was
publicly available or furnished to DLJ by Holly and Giant, including information
provided during discussions with their respective managements. Included in the
information provided during discussions with the respective managements were
certain financial projections of Holly for the period beginning January 1, 1998,
and ending on December 31, 2002, prepared by the management of Holly, and
financial projections of Giant for the period beginning January 1, 1998, and
ending on December 31, 2002, prepared by the management of Giant. In addition,
DLJ compared certain financial and securities data of Holly and Giant with
various other companies that DLJ deemed to be relevant whose securities are
traded in public markets, reviewed the historical stock prices and trading
volumes of Holly Common Stock and Giant Common Stock and reviewed such other
financial studies and analyses, and performed such other investigations, as DLJ
deemed appropriate for purposes of its opinion.
In rendering its opinion, DLJ relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available
from public sources, that was provided by Holly and Giant or their respective
representatives, or that was otherwise reviewed by DLJ. In particular, DLJ
relied upon the estimates of the management of Holly of the operating synergies
achievable as a result of the Merger (the "Operating Synergies"), which DLJ also
discussed with the management of Giant. With respect to the financial
projections supplied to DLJ, DLJ assumed that such projections were reasonably
prepared on the basis reflecting the best currently available estimates and
judgments of the management of Holly and Giant as to the future operating and
financial performance of Holly and Giant, respectively. DLJ did not assume any
responsibility for making an independent evaluation of Holly's assets or
liabilities or for making any independent verification of any of the information
reviewed by DLJ.
The DLJ Opinion was necessarily based on economic, market, financial and
other conditions as they existed on, and on the information made available to
DLJ as of, the date of the DLJ Opinion. The following is a summary of certain of
the analyses performed by DLJ in connection with the DLJ Opinion and included in
the presentation made by DLJ to the Holly Board at the meeting on April 14,
1998. Unless otherwise stated,
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the following analysis assumes: (i) the cash portion of the Merger Consideration
will be $2.89 per share of Holly Common Stock and (ii) the issuance of 10.99
million shares of Giant Common Stock in the Merger.
Contribution Analysis. DLJ analyzed the relative contributions of Holly
and Giant to earnings before interest, taxes, exploration, depreciation and
amortization ("EBITDA"), net income plus deferred taxes, exploration,
depreciation and amortization ("CFFO") and net income, as if Holly and Giant
were a combined entity and without giving effect to Operating Synergies. Such
analysis was calculated for various periods of time, including, among others,
for the LTM, after giving pro forma effect to Giant's Thriftway Retail, Phoenix
Fuel, Kaibab Industries, Inc. and DeGuelle Oil Co. acquisitions, as if each
acquisition had occurred on January 1, 1997 ("Pro Forma LTM 1997"), and for
projected calendar years 1998 and 1999. Based on Pro Forma LTM 1997, Holly's
EBITDA, CFFO and net income represent 44%, 49% and 51%, respectively, of the
Combined Company. Based on projected 1998, Holly's EBITDA, CFFO and net income
represent 43%, 46% and 47%, respectively, of the Combined Company. Based on
projected 1999, Holly's EBITDA, CFFO and net income represent 43%, 47% and 51%,
respectively, of the Combined Company. DLJ then compared Holly's contribution to
the combined entity to the Merger Consideration to be received by the holders of
Holly Common Stock. The shares of Giant Common Stock to be received by the
holders of Holly Common Stock in accordance with the Merger represent 50% of the
shares of Giant Common Stock to be issued and outstanding immediately following
consummation of the Merger.
Earnings Per Share Impact Analysis. DLJ analyzed the pro forma effect of
the Merger on Holly's EPS and CFFO per share, including the Operating Synergies
as forecasted by the management of Holly, for various periods of time,
including, among others, projected calendar years 1998 and 1999. This analysis
was based on a number of assumptions, including, among other things, the cost of
integrating the operations of Holly and Giant, estimated amounts and timing of
implementation of the Operating Synergies, and the projected financial
performance of Holly and Giant. The analysis indicated that the Merger is
accretive to earnings per share and CFFO per share for Holly for the first full
year following consummation of the Merger.
Analysis of Certain Other Publicly Traded Companies. To provide contextual
data and comparative market information, DLJ compared selected historical share
price, earnings and operating and financial ratios for Holly to the
corresponding data and ratios of Giant and certain other companies whose
securities are publicly traded (collectively, the "Comparable Companies"). The
Comparable Companies were chosen because they possess general business,
operating and financial characteristics representative of companies in the
industry in which Giant and Holly operate. The Comparable Companies consisted of
Crown Central Petroleum Corp., Sun Company, Inc., Tosco Corp., Valero Energy
Corp., Wainoco Oil Corp., and Ultramar Diamond Shamrock Corp. Data and ratios
included (i) Enterprise Value ("Enterprise Value" is defined as the product of
the stock price and total shares outstanding plus Net Debt ("Net Debt" is
defined as total debt less cash and cash equivalents)) as a multiple of LTM
EBITDA and projected 1998 and 1999 EBITDA, (ii) stock price as a multiple of LTM
CFFO per share and projected 1998 and 1999 CFFO per share, and (iii) stock price
as a multiple of LTM EPS and projected 1998 and 1998 EPS. The high and low
multiples of Enterprise Value to LTM EBITDA for the Comparable Companies were
8.8x and 5.2x, respectively, compared to the Enterprise Value to LTM EBITDA
multiple implied by the Merger Consideration of 6.0x. The high and low multiples
of Enterprise Value to projected 1998 EBITDA for the Comparable Companies were
8.5x and 5.5x, respectively, compared to the Enterprise Value to projected 1998
EBITDA multiple implied by the Merger Consideration of 5.0x. The high and low
multiples of Enterprise Value to projected 1999 EBITDA for the Comparable
Companies were 7.7x and 4.6x, respectively, compared to the Enterprise Value to
1999 projected EBITDA multiple implied by the Merger Consideration of 4.6x. The
high and low multiples of stock price to LTM CFFO per share for the Comparable
Companies were 12.8x and 5.4x, respectively, compared to the Merger
Consideration per Holly share to LTM CFFO per share multiple of 5.5x. The high
and low multiples of stock price to projected 1998 CFFO per share for the
Comparable Companies were 8.2x and 5.8x, respectively, compared to the Merger
Consideration per Holly share to projected 1998 CFFO per share multiple of 4.7x.
The high and low multiples of stock price to projected 1999 CFFO per share for
the Comparable Companies were 8.2x and 4.7x, respectively, compared to the
Merger Consideration per Holly share to projected 1999 CFFO per share multiple
of 4.2x. The high and low multiples of stock price to LTM EPS for the Comparable
Companies were 28.0x and 13.7x, respectively, compared to
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the Merger Consideration per Holly share to LTM EPS multiple of 16.4x. The high
and low multiples of stock price to projected 1998 EPS for the Comparable
Companies were 17.8x and 13.1x, respectively, compared to the Merger
Consideration per Holly share to projected 1998 EPS multiple of 11.5x. The high
and low multiples of stock price to projected 1999 EPS for the Comparable
Companies were 17.8x and 9.0x, respectively, compared to the Merger
Consideration per Holly share to projected 1999 EPS multiple of 9.1x.
Discounted Cash Flow Analysis. DLJ performed a discounted cash flow
("DCF") analysis for the five-year period ended December 31, 2002 on the
stand-alone, unlevered free cash flows of Holly and Holly and Giant pro forma
for the Merger, which were based upon financial projections provided by Holly's
management and Giant's management and which included the Operating Synergies.
The unlevered free cash flows were calculated for each of Holly and Holly and
Giant pro forma for the Merger based on projected EBIT minus income taxes, minus
projected capital expenditures, plus or minus projected changes in working
capital, plus projected depreciation and amortization expenses. DLJ calculated
terminal values by applying an EBITDA multiple of 5.7x to the projected calendar
year 2002 EBITDA of Holly and Giant, respectively. The equity value was
determined by discounting the unlevered free cash flows and terminal values to
the present using a range of discount rates of 10% to 16%, representing an
estimate of the weighted average cost of capital of Holly. Based on this
analysis, DLJ calculated a range of per share equity values of Holly on a
stand-alone basis of between $34.32 and $44.33 and of Holly stockholders'
interest in the pro forma Combined Company (together with the cash portion of
the Merger Consideration) of between $36.04 and $48.67.
The summary set forth above does not purport to be a complete description
of the analyses performed by DLJ, but describes, in summary form, the material
elements of the analyses performed by DLJ in connection with the DLJ Opinion and
included in the presentation made by DLJ to the Holly Board on April 14, 1998.
The preparation of a fairness opinion involves various determinations as to the
most appropriate and relevant methods of financial analysis to be applied to
particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Each of the analyses conducted by DLJ was
carried out in order to provide a different perspective on the transaction and
add to the total mix of information available. DLJ did not conclude whether any
individual analysis, considered in isolation, supported or failed to support an
opinion as to the fairness of the Merger Consideration from a financial point of
view. Rather, in reaching its conclusion, DLJ considered the results of each
analysis in light of each other and ultimately reached its opinion based on the
results of its analyses taken as a whole. DLJ did not place particular reliance
or weight on any individual analysis, but instead concluded that its analyses,
taken as a whole, supported its determination. Accordingly, notwithstanding the
separate factors summarized above, DLJ believes that its analyses must be
considered as a whole and that selecting portions of its analyses and the
factors considered by it, without considering all analyses and factors, could
create an incomplete or misleading view of the evaluation process underlying its
opinion. The analyses performed by DLJ are not necessarily indicative of actual
value or future results, which may be significantly more or less favorable than
suggested by such analyses.
Relationship Between Holly, Giant and DLJ. The Holly Board selected DLJ as
its financial advisor because DLJ is a nationally recognized investment banking
firm that has substantial experience in energy related businesses and is
familiar with Holly, Giant and their respective businesses. As part of its
investment banking business, DLJ is regularly engaged in the valuation of
businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes.
Pursuant to the letter agreement, dated April 9, 1998, between Holly and
DLJ (the "DLJ Engagement Letter"), DLJ received a fee of $500,000 at the time
Holly requested DLJ to deliver its opinion to the Holly Board. In addition,
Holly has agreed to reimburse DLJ for certain out-of-pocket expenses, and to
indemnify DLJ and certain related persons for certain liabilities and expenses
arising out of the Merger or the transactions in connection therewith, including
liabilities under the federal securities laws. The terms of the fee arrangement
with DLJ, which Holly and DLJ believe are customary in transactions of this
nature, were negotiated at arm's length between Holly and DLJ, and the Holly
Board was aware of such arrangement.
DLJ has been engaged to perform investment banking services for Holly in
the past and has been compensated for such services. DLJ has performed
investment banking services for Giant in the past and has
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been compensated for such services. Those services have included serving as
co-manager of a Senior Subordinated Notes offering of Giant in August 1997, for
which DLJ received usual and customary compensation.
In the ordinary course of business, DLJ may actively trade debt and equity
securities of Holly and Giant for its own account and for the accounts of its
customers and, accordingly, may at any time hold a long or short position in
such securities.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary discusses the principal United States federal income
tax consequences of the Merger, assuming that the Merger is consummated as
contemplated herein. This discussion is based on the Code, applicable Treasury
Regulations thereunder and administrative rulings and judicial authority as of
the date hereof. The discussion assumes that Holly Common Stock is held as a
capital asset and does not take account of rules that may apply to Holly
stockholders that are subject to special treatment under the Code (including
insurance companies, dealers in securities, certain retirement plans, financial
institutions, tax exempt organizations, foreign stockholders, stockholders who
acquired Holly Common Stock pursuant to the exercise of an employee stock option
or otherwise as compensation, persons who acquired Holly Common Stock as part of
a position in a "straddle" or as part of a "hedging" or "conversion" transaction
for federal income tax purposes, and persons with a "functional currency" other
than the U.S. dollar). Also, the discussion does not address state, local or
foreign tax consequences. Consequently, each Holly stockholder should consult
its own tax advisor as to the specific tax consequences of the Merger to that
holder. Neither Giant nor Holly has requested or will request an advance ruling
from the Internal Revenue Service as to the federal income tax consequences of
the Merger.
TAX OPINION. W. John Glancy, Esq., counsel to Holly, is of the opinion,
subject to the assumptions set forth below, that (i) the Merger will constitute
a reorganization within the meaning of Section 368(a) of the Code, (ii) Giant
and Holly will each be a party to the reorganization within the meaning of
Section 368(b) of the Code, and (iii) no gain or loss will be recognized by
Holly stockholders upon their exchange of Holly Common Stock for Giant Common
Stock in the Merger, except to the extent that a Holly stockholder receives cash
as a portion of the Merger Consideration or in lieu of a fractional share. The
foregoing opinion assumes the accuracy of certain representations made or to be
made by Giant and Holly and is based on current provisions of the Code, the
Treasury Regulations promulgated thereunder, published pronouncements of the
Internal Revenue Service and case law, any of which could be changed at any time
with retroactive effect.
The discussion below, which is based upon the foregoing opinion of W. John
Glancy, summarizes the material federal income tax consequences of the Merger.
TAX CONSEQUENCES FOR GIANT AND HOLLY. Neither Giant nor Holly will
recognize gain or loss as a consequence of the Merger. The basis to the Combined
Company of assets acquired from Holly in the Merger will be the same as Holly's
tax basis in these assets.
NO TAX CONSEQUENCES FOR GIANT STOCKHOLDERS. Under current law, the Merger
will not result in any federal income tax consequences for Giant stockholders.
GIANT STOCK RECEIVED IN THE MERGER. The receipt by Holly stockholders of
Giant Common Stock in exchange for Holly Common Stock in the Merger will not be
taxable to Holly stockholders. The tax basis of Giant Common Stock received by
Holly stockholders will be the same as the tax basis of the Holly Common Stock
exchanged for Giant Common Stock (i) reduced by an amount equal to any part of
the cash portion of the Merger Consideration that does not constitute taxable
income to the Holly stockholder under the principles discussed below and (ii)
reduced by the amount of basis allocable to a fractional share interest for
which cash is received by the stockholder. The holding period of Giant Common
Stock in the hands of Holly stockholders will include the holding period of the
Holly Common Stock exchanged in the Merger, provided such Holly Common Stock is
held as a capital asset at the Effective Time.
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CASH PORTION OF MERGER CONSIDERATION. The cash portion of the Merger
Consideration received by a Holly stockholder will be treated as taxable income
to the Holly stockholder but only to the extent that (i) the sum of (A) the fair
market value at the Effective Time of Giant Common Stock received (including any
fractional share deemed received) and (B) the cash portion of the Merger
Consideration received exceeds (ii) the stockholder's basis in the Holly Common
Stock exchanged therefor. No loss may be claimed if a Holly stockholder's tax
basis in Holly Common Stock exceeds the sum of the fair market value of Giant
Common Stock and the cash portion of the Merger Consideration. Although there is
an absence of specific authority addressing all of the circumstances involved in
the Merger, it appears that any gain with respect to the cash portion of the
Merger Consideration received by a Holly stockholder who holds Holly Common
Stock as a capital asset should be treated as capital gain rather than ordinary
income; hence such gain should be taxable for individual Holly stockholders at
lower rates applicable to long-term capital gains if the holding period for the
Holly Common Stock is in excess of one year at the Effective Time, with a lower
maximum rate applicable if such holding period exceeds 18 months. It is however
possible that the Internal Revenue Service could take the position in the case
of persons holding more than a small amount of Holly Common Stock that gain
relating to the cash portion of the Merger Consideration should be treated as a
dividend distribution taxable at ordinary income rates.
CASH RECEIVED IN LIEU OF FRACTIONAL SHARES. Holly stockholders who receive
cash in the Merger in lieu of fractional share interests in Giant Common Stock
will be treated for federal income tax purposes as receiving such fractional
share interests and then redeeming them for cash. A Holly stockholder will
recognize gain or loss as of the Effective Time in an amount equal to the
difference between the amount of cash received for the fractional share interest
and the portion of the stockholder's adjusted tax basis in the Holly Common
Stock that is allocable to the fractional share interest. Assuming the Holly
stockholder holds the Holly Common Stock as a capital asset, any such gain or
loss will be long-term capital gain or loss if the holding period for the Holly
Common Stock for which the fractional share interest was received is more than
one year at the Effective Time, with a lower maximum rate applicable if such
holding period exceeds 18 months.
TAX OPINION AS CONDITION TO CONSUMMATION OF MERGER. The obligations of
Giant and of Holly to consummate the Merger are subject to the receipt by each
of an opinion of tax counsel as outlined in "Other Terms of the Merger and the
Merger Agreement -- Conditions to the Consummation of the Merger," unless such
condition is waived.
THE PRECEDING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER AND DOES NOT PURPORT TO BE A COMPLETE
ANALYSIS OR DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT THERETO. THUS,
HOLLY STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
SPECIFIC TAX CONSEQUENCES OF THE MERGER TO THEM BASED ON THEIR PARTICULAR
CIRCUMSTANCES, INCLUDING TAX RETURN REPORTING REQUIREMENTS, THE APPLICABILITY
AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER APPLICABLE TAX LAWS, AND THE
EFFECT OF ANY PROPOSED CHANGES IN THE TAX LAWS.
ANTICIPATED ACCOUNTING TREATMENT
The Merger is expected to be accounted for as a purchase in accordance with
generally accepted accounting principles. Under this method of accounting, the
purchase price of Holly, including direct costs of the Merger, will be allocated
to assets acquired and liabilities assumed based upon their estimated fair
values, with the excess purchase consideration allocated to goodwill. The
results of Giant's operations will include the results of operations of Holly
commencing at the Effective Time. The Unaudited Pro Forma Condensed Consolidated
Financial Statements appearing elsewhere in this Joint Proxy
Statement/Prospectus are based upon certain assumptions and allocate the
purchase price to assets and liabilities based upon a preliminary allocation of
the purchase price. The unaudited pro forma adjustments and consolidated amounts
are included for informational purposes only. If the Merger is consummated,
Giant's consolidated financial statements will reflect the effects of
acquisition adjustments only from the Effective Time.
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In connection with the Merger, one-time transaction costs, which are
expected to be recorded in 1998, are estimated at $ million and one-time
integration costs, most of which are expected to be recorded in 1998, are
estimated at $ million. In addition, in connection with the preparation of
the pro forma information included elsewhere in this Joint Proxy
Statement/Prospectus, management of Giant and Holly have conformed certain
differences in accounting practice (see "Unaudited Pro Forma Condensed
Consolidated Financial Statements of the Combined Company"). Following the
Merger, management of the Combined Company will conduct a complete review of the
accounting policies employed by Giant and Holly, including the methods used to
apply such policies, in order to identify the appropriate accounting practices
to be applied by the Combined Company. Management of the Combined Company also
will review, and when appropriate conform, the methods employed to develop and
assess information used to make accounting estimates. Any adjustments or changes
that may result from such reviews are expected to be recorded during the
accounting period in which the Effective Time occurs, and may have a material
effect on the results reported during such period.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of the Boards of Directors and management of Giant and
Holly have interests in the Merger that are different from, or in addition to,
the interests of stockholders of Giant or Holly generally. Such interests relate
to or arise from, among other things, (A) the terms of the Merger Agreement
providing for, among other things, (i) the ten-member Board of Directors of the
Combined Company to consist of five members designated by each of the Companies,
(ii) certain employment agreements for executive officers of each of the
Companies, (iii) the conversion of employee stock options and other rights
granted to employees of Holly, including executive officers, and the fact that,
under the terms thereof, existing stock options, and phantom stock rights held
by executive officers of Giant become fully vested and will have certain
cash-out rights by reason of the adoption of the Merger Agreement by Giant
stockholders, (iv) the indemnification of existing directors and officers of
Holly and Giant and (v) the contemplated payment of bonuses to certain of
Giant's and Holly's executive officers and employees in amounts and forms as
agreed to by the respective Boards of Directors of the Companies, and (B), as to
Mr. Acridge and Mr. Norsworthy, the terms of the Major Stockholders' Agreement
providing for, among other things, (i) certain voting agreements with respect to
the Merger, the Board of Directors of the Combined Company, and amendments to
the New Bylaws or the New Certificate of the Combined Company, (ii) rights and
obligations applicable to affiliate transferees, and (iii) deadlock resolution
agreements. These additional interests are described below, to the extent
material, and except as described below such persons have, to the knowledge of
Giant and Holly, no material interest in the Merger apart from those of
stockholders generally. See "Other Terms of the Merger and the Merger
Agreement -- Major Stockholders' Agreement."
COMBINED COMPANY BOARD OF DIRECTORS. As of the Effective Time, the
ten-member Board of Directors of the Combined Company will consist of five G
Directors and five H Directors. See "Management of the Combined Company" for
information pertaining to the designees to the Board of Directors of the
Combined Company.
EMPLOYMENT AGREEMENTS. Giant and its three-highest ranking executive
officers are parties to existing employment agreements which provide for, among
other things, the payment of severance amounts and benefits upon certain
terminations of employment following a change of control. The Merger will
constitute a change of control under the terms of these agreements. The Merger
Agreement requires Giant to use its best efforts to cause these employment
agreements to be amended prior to the Effective Time to limit the amount of any
change of control payments thereunder so that such payments will not constitute
excess parachute payments triggering excise tax liability under the Code.
Holly's obligation to consummate the Merger is conditioned upon such amendments.
Holly currently has no employment agreements like those of Giant. However,
the Merger Agreement contemplates, and Holly expects to enter into, new
employment agreements with its three highest-ranking executives on terms no more
favorable than Giant's employment agreements (as amended as described in the
above paragraph) with Giant's three highest-ranking executives (with base
salaries equal to the executives' current base salaries or such other amounts as
approved by Giant).
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EFFECT OF THE MERGER ON EMPLOYEE BENEFIT AND STOCK PLANS. The Merger
Agreement also contemplates that certain actions will be taken in respect of
employee benefit and stock plans in which executive officers of the Companies or
the Combined Company are eligible to participate. Among other things,
immediately after the Effective Time, each of the outstanding Holly employee
stock options generally will be deemed to constitute an option to acquire (on
the same terms and conditions as were applicable under such option, including
vesting) the same Giant Common Stock portion of the Merger Consideration as the
holder of such option would have been entitled to receive pursuant to the Merger
had such holder exercised such option in full immediately before the Effective
Time, at a price per share of Giant Common Stock equal to (i) the aggregate
exercise price for the shares of Holly Common Stock pursuant to such Holly
option divided by (ii) the aggregate number of shares of Giant Common Stock that
may be purchased pursuant to such Holly option. Holly also will adjust the terms
of all outstanding Holly phantom stock rights and take all such actions as
necessary to make them obligations of Giant consistent with the above adjustment
provisions regarding options. Immediately following the Effective Time, Giant
will pay to each holder of Holly stock options before the Effective Time an
amount in cash (subject to applicable withholding) equal to the number of Holly
shares that were subject to such holder's Holly employee stock options (whether
vested or unvested) immediately before the Effective Time multiplied by $2.886,
the amount in cash paid per issued and outstanding Holly share as part of the
Merger Consideration. In addition, immediately following the Effective Time,
Giant will pay to each holder of Holly phantom stock rights immediately before
the Effective Time an amount in cash (subject to applicable withholding) equal
to the number of phantom shares held by such holder immediately before the
Effective Time multiplied by $2.886. Giant will assume Holly's obligations under
the Holly stock plan and comply with such plan so that the Holly employee stock
options which qualified as qualified stock options before the Merger will
continue to qualify as qualified options after the Merger. Giant has the right
to meet its assumption obligations by granting to the holders of Holly employee
stock options substitute options to acquire shares of Giant Common Stock on
identical terms.
Giant has certain outstanding stock options and phantom stock rights which
will become fully vested and will be required to be cashed-out as a result of
the Merger, unless such cash-out provision is waived by the holders. Giant has
agreed to offer to the holders of the Giant options and phantom stock rights the
right to waive the cash-out and continue to hold the option or phantom stock
rights, as the case may be. Holly's obligation to consummate the Merger is
conditioned upon the extension of such offer. Giant also has agreed to use (i)
reasonable efforts to cause the holders of those options to reject the cash-out
and continue to hold the options and (ii) best efforts to obtain waivers from
the holders of its phantom stock rights of the acceleration of vesting triggered
by the Merger. However, under no circumstances will Giant offer the holders of
the options and phantom stock rights any consideration or remuneration in
exchange for the holders' waiver of the cash-out provision.
INCENTIVE PLAN. Holly and Giant have agreed to develop a stock incentive
plan for the Combined Company, which may include awards such as stock options,
stock appreciation rights, restricted shares, and performance awards. On April
14, 1998, the Giant Board approved the Incentive Plan, subject to stockholder
approval. See "Approval of the Incentive Plan."
INDEMNIFICATION. The Merger Agreement provides that all rights of
indemnification and exculpation from liabilities existing in favor of the
current and former directors and officers of Holly and its subsidiaries as
provided in their respective certificates of incorporation or bylaws and
existing indemnification agreements, the existence of which does not constitute
a breach of the Merger Agreement, will survive the Merger and continue in full
force and effect in accordance with their terms. Further, the Combined Company
is required to (i) maintain in effect for not less than three years after the
Effective Time the current policies of directors' and officers' liability
insurance maintained by Holly with respect to matters occurring on or prior to
the Effective Time; provided, however, that the Combined Company may substitute
therefor policies of at least the same coverage (with carriers comparable to
Holly's existing carriers) containing terms and conditions which are not
materially less advantageous to the former or current directors or officers of
Holly and its subsidiaries and (ii) upon the request of any former or current
director or officer of Holly or any of its subsidiaries, enter into a contract
obligating the Combined Company to indemnify and exculpate such
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individual for liabilities as described in this paragraph. In addition, the
Merger Agreement provides for the Giant certificate of incorporation to be
amended to provide for the Combined Company to indemnify directors and officers
of the Combined Company to the fullest extent permitted or required by the DGCL.
See "Other Terms of the Merger and the Merger Agreement -- New Certificate."
OTHER TERMS OF THE MERGER AND THE MERGER AGREEMENT
GENERAL
The description of the Merger and the Merger Agreement contained in this
Joint Proxy Statement/Prospectus does not purport to be complete and is
qualified in its entirety by reference to the Merger Agreement, a copy of which
is set forth as Appendix A and which is incorporated herein by reference. All
Giant stockholders and Holly stockholders are urged to read carefully the Merger
Agreement in its entirety.
CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES
The conversion of Holly Common Stock into the right to receive the Merger
Consideration will occur automatically at the Effective Time. As soon as
practicable after the Effective Time, Bank of America, N.A., or another bank or
trust company mutually designated by Giant and Holly, in its capacity as
Exchange Agent (the "Exchange Agent"), will send a transmittal letter to each
former Holly stockholder. The transmittal letter will contain instructions with
respect to the surrender of certificates previously representing Holly Common
Stock to be exchanged for Giant Common Stock and cash.
HOLLY STOCKHOLDERS SHOULD NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED
PROXY. HOLLY STOCKHOLDERS SHOULD NOT FORWARD HOLLY STOCK CERTIFICATES TO THE
EXCHANGE AGENT UNTIL THEY HAVE RECEIVED TRANSMITTAL LETTERS. GIANT STOCKHOLDERS
WILL NOT BE REQUIRED TO EXCHANGE THEIR STOCK CERTIFICATES IN CONNECTION WITH THE
MERGER.
After the Effective Time, each certificate that previously represented
shares of Holly Common Stock will represent only the right to receive the Merger
Consideration and cash in lieu of fractional shares of Giant Common Stock as
described below. Holders of certificates previously representing Holly Common
Stock will not be paid dividends or distributions on the Giant Common Stock into
which such shares have been converted with a record date after the Effective
Time, and will not be paid cash in lieu of fractional shares of Giant Common
Stock, until such certificates are surrendered to the Exchange Agent for
exchange. When such certificates are surrendered, the cash portion of the Merger
Consideration, any unpaid dividends and any cash in lieu of fractional shares of
Giant Common Stock payable will be paid without interest.
In the event of a transfer of ownership of Holly Common Stock which is not
registered in the transfer records of Holly, a certificate representing the
proper number of shares of Giant Common Stock may be issued and the cash portion
of the Merger Consideration paid to a person other than the person in whose name
the certificate so surrendered is registered if such certificate shall be
properly endorsed or otherwise be in proper form for transfer and the person
requesting such issuance shall pay any transfer or other taxes required by
reason of the issuance of shares of Giant Common Stock to a person other than
the registered holder of such certificate or establish to the satisfaction of
Giant that such tax has been paid or is not applicable.
All shares of Giant Common Stock issued upon conversion of shares of Holly
Common Stock (including any cash paid in lieu of any fractional shares of Giant
Common Stock), together with the cash portion of the Merger Consideration, will
be deemed to have been issued in full satisfaction of all rights pertaining to
such shares of Holly Common Stock, subject, however, to Giant's obligation to
pay any dividends or make any other distributions with a record date prior to
the Effective Time that may have been declared or made by
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Holly on such shares of Holly Common Stock in accordance with the Merger
Agreement on or prior to the Effective Time and which remain unpaid at the
Effective Time.
No fractional shares of Giant Common Stock will be issued to any Holly
stockholder upon surrender of certificates previously representing Holly Common
Stock. For each fractional share that would otherwise be issued, Giant will make
available to such stockholders an amount in cash equal to the product obtained
by multiplying the fractional share interest to which such holder would
otherwise be entitled by the closing price for a share of Giant Common Stock on
the NYSE Composite Transaction Tape on the Closing Date.
CONDITIONS TO THE CONSUMMATION OF THE MERGER
Each of Holly's and Giant's obligation to effect the Merger is subject to
the satisfaction or waiver on or prior to the Closing Date of various
conditions, including the following:
(i) the requisite stockholder approvals by each of Giant and Holly
stockholders necessary to adopt the Merger Agreement shall have been
obtained;
(ii) the waiting period (and any extension thereof) with respect to
the Merger under the Hart-Scott Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), shall have expired or been terminated;
(iii) no judgment, order, decree, statute, law, ordinance, rule,
regulation, temporary restraining order, preliminary or permanent
injunction or other order enacted, entered, promulgated, enforced or issued
by any court or other governmental entity or other legal restraint or
prohibition (collectively, "Restraints") preventing the consummation of the
Merger shall be in effect;
(iv) there shall not be pending any suit, action or proceeding brought
by any governmental entity and (a) seeking to restrain or prohibit the
Merger or any of the other transactions contemplated by the Merger or
seeking to obtain from Holly or Giant any damages that are material in
relation to Holly and its subsidiaries or Giant and its subsidiaries, in
either case taken as a whole, (b) seeking to prohibit or limit the
ownership or operation by Holly, Giant or any of their respective
subsidiaries, of any material portion of the business or assets of Holly,
Giant or any of their respective subsidiaries or to compel Holly, Giant or
any of their respective subsidiaries to dispose of or hold separate any
material portion of the business or assets of Holly, Giant or their
respective subsidiaries, as a result of the Merger or any of the other
transactions contemplated by the Merger Agreement or (c) which otherwise
could reasonably be expected to have a material adverse effect on Holly or
Giant. In addition no Restraints shall have been enacted, entered, enforced
or promulgated that are reasonably likely to result, directly or
indirectly, in any of the consequences referred to in clauses (b) or (c) of
this clause (iv);
(v) the shares of Giant Common Stock issuable to Holly's stockholders
in connection with the Merger and under certain Holly stock plans (or the
Giant stock plan, if Giant elects to issue substitute options to the
holders of Holly stock options) shall be approved for listing on the NYSE,
subject to official notice of issuance;
(vi) holders of no more than 5% of the issued and outstanding shares
of Holly Common Stock shall have exercised their appraisal rights under the
DGCL;
(vii) the representations and warranties of the other party to the
Merger Agreement set forth in the Merger Agreement that are qualified as to
materiality shall be true and correct, and the representations and
warranties set forth in the Merger Agreement that are not so qualified
shall be true and correct in all material respects, in each case as of the
date of the Merger Agreement and as of the Closing Date, except to the
extent such representations and warranties expressly relate to an earlier
date (in which case as of such date);
(viii) the other party to the Merger Agreement shall have performed in
all material respects all obligations required to be performed by it under
the Merger Agreement at or prior to the Closing Date;
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(ix) such party shall have received from counsel reasonably acceptable
to it, on the date of this Joint Proxy Statement/Prospectus and on the
Closing Date, an opinion stating that the Merger will be treated for
federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code, that Giant and Holly will each be a party to
that reorganization within the meaning of Section 368(b) of the Code and
that no gain or loss will be recognized by the stockholders of Holly upon
their exchange of Holly Common Stock into Giant Common Stock (except to the
extent such stockholders receive cash in lieu of fractional shares and cash
as a portion of the Merger Consideration) (see "The Merger -- Certain
Federal Income Tax Consequences");
(x) such party shall have received from counsel to the other party a
customary opinion reasonably acceptable to it;
(xi) at any time after the date of the Merger Agreement and prior to
the Closing there shall not have occurred any material adverse change
relating to the other party; and
(xii) Giant and Holly shall have arranged for the Combined Company to
finance appropriately the redemption contingency that will result on
account of the Merger with respect to Giant's outstanding Notes. Such
arrangement shall be on terms and in amounts that are acceptable to each of
the Giant Board and the Holly Board.
As an additional condition to Holly's obligation to effect the Merger,
Giant shall have offered to holders of its outstanding stock options and phantom
stock rights the right to waive certain cash-out provisions of such instruments
and shall have amended its employment agreements. See "The Merger -- Interests
of Certain Person in the Merger," "-- Employment Agreements" and "-- Effect of
the Merger on Employee Benefit and Stock Plans."
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval by the Giant stockholders and Holly
stockholders: (a) by mutual written consent of Giant and Holly; (b) by either
party: (i) if the Merger has not been consummated by December 31, 1998;
provided, however, that such right to terminate the Merger Agreement will not be
available to either party whose failure to perform any of its obligations under
the Merger Agreement has resulted in the failure of the Merger to be consummated
by that date; (ii) if the Stockholder Approval has not been obtained at a
Special Meeting; or (iii) if any Restraints preventing the consummation of the
Merger shall be in effect or if any governmental entity has taken any other
action permanently enjoining, restraining or otherwise prohibiting the
consummation of the Merger or any of the transactions contemplated by the Merger
Agreement and such Restraint or other action shall have become final and
nonappealable; or (c) by either Giant, on the one hand, or Holly, on the other
hand (i) if the other party has breached or failed to perform in any material
respect any of its representations, warranties, covenants or other agreements
contained in the Merger Agreement, which breach or failure to perform would give
rise to the failure of a condition and cannot or has not been cured within 30
days after written notice of such breach (provided that the terminating party is
not then in breach), or (ii) if the board of directors of the other party or any
committee thereof (1) has withdrawn or modified in any manner adverse to such
party its approval or recommendation of the Merger Agreement or the Merger, (2)
has failed to reconfirm such recommendation within 15 business days of such
party's request, (3) has approved or recommended any Takeover Proposal (as
defined below) or (4) has resolved to take any of the actions specified in
clause (1), (2) or (3), or (iii) if, prior to the adoption of the Merger
Agreement by the holders of its Common Stock, its board of directors determines
in good faith that there is not a substantial probability that the adoption of
the Merger Agreement will be obtained due to the existence of a Superior
Proposal (as defined below) (as described under "-- No Solicitation"). A
"Takeover Proposal" is any inquiry, proposal, or offer from any person relating
to an acquisition of 35% or more of a party's and its subsidiaries' assets or
35% or more of any class of equity securities of such party or any of its
subsidiaries, any tender offer or exchange offer that if consummated would
result in any person owning 35% or more of any class of equity securities of
such party or any of its subsidiaries or any merger, consolidation, business
combination, recapitalization, liquidation, dissolution, or similar transaction
involving such party or any of its subsidiaries. A
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"Superior Proposal" is any proposal made by a third party to acquire, directly
or indirectly, for consideration consisting of cash and/or securities, more than
50% of the combined voting power of the shares of a party then outstanding or
all or substantially all of the assets of a party, on terms that the Board of
Directors of the party subject to the proposal determines in good faith (based
on the advice of a financial advisor of nationally recognized reputation) to be
more favorable to its stockholders than the Merger and for which financing, to
the extent required, is then committed or is reasonably capable of being
obtained by such third party.
TERMINATION FEES
The Merger Agreement provides that if a Takeover Proposal is made known to
any party or any of its subsidiaries or has been made directly to its
stockholders generally or any person shall have publicly announced an intention
to make a Takeover Proposal and thereafter the Merger Agreement is terminated
pursuant to the provisions described in clause (b)(i), (b)(ii) (based on the
failure of the party receiving the Takeover Proposal to obtain its Stockholder
Approval), or (c)(ii) under "-- Termination" above, then, if within 18 months of
the termination the Company that was the subject of the Takeover Proposal
consummates, or enters into an agreement to consummate, a Takeover Proposal, the
Company that was the subject of the Takeover Proposal must pay the other party a
Termination Fee of $8 million. If the Merger Agreement is terminated pursuant to
the provisions described in clause (c)(iii) under "-- Termination," then the
terminating party must pay the non-terminating party the Termination Fee,
promptly, but in no event later than two days after termination.
The Merger Agreement further provides that if one party should fail to pay
any Termination Fee due, the defaulting party must pay the costs and expenses in
connection with any action taken to collect payment, together with interest on
the amount of the Termination Fee. See "Other Terms of the Merger and the Merger
Agreement -- Expenses."
NO SOLICITATION
The Merger Agreement provides that Giant and Holly shall not, nor shall
they permit any of their respective subsidiaries, officers, directors, employees
any investment banker, financial advisor, attorney, accountant or other
representatives to, directly or indirectly through another person, (i) solicit,
initiate or encourage (including by way of furnishing information), or take any
other action designed to facilitate, any inquiries or the making of any Takeover
Proposal or (ii) participate in any discussions or negotiations regarding any
Takeover Proposal; provided, however, that if, at any time prior to the adoption
of the Merger Agreement by the stockholders of such party, the Board of
Directors of such party determines in good faith, after consultation with
outside counsel, that it is necessary to do so in order to comply with its
fiduciary duties to its stockholders under applicable law, such party may, in
response to a Takeover Proposal which was not solicited by it, (x) furnish
information with respect to it and its subsidiaries to any person pursuant to a
customary confidentiality agreement and (y) participate in negotiations
regarding such Takeover Proposal.
Except as expressly permitted by the Merger Agreement, neither the Giant
Board nor the Holly Board, nor any committee thereof, shall (i) withdraw or
modify, or propose publicly to withdraw or modify, in a manner adverse to the
other party, the approval or recommendation by such board of directors or such
committee of the Merger or the Merger Agreement, (ii) approve or recommend, or
propose publicly to approve or recommend, any Takeover Proposal, or (iii) cause
such party to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement related to any Takeover
Proposal. Notwithstanding the foregoing, in the event that prior to the adoption
of the Merger Agreement by the stockholders of such party (x) the board of
directors of such party determines in good faith, after it has received a
Superior Proposal and after consultation with outside counsel, that it is
necessary to do so in order to comply with its fiduciary duties to its
stockholders under applicable law, the board of directors of such party may
withdraw or modify its approval or recommendation of the Merger or the Merger
Agreement, or (y) the board of directors of such party determines in good faith
that there is not a substantial probability that the adoption of the Merger
Agreement by the stockholders of such party will be obtained due to the
existence of a Superior Proposal, the board of directors of such party may
approve or recommend such Superior Proposal or terminate the Merger Agreement,
but in each of the cases set forth in this clause (y) only at a time that is
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after the fifth business day following the other party's receipt of written
notice advising the other party that the board of directors of such party has
received a Superior Proposal, specifying the material terms and conditions of
such Superior Proposal and identifying the person making the Superior Proposal.
See "Other Terms of the Merger and the Merger Agreement -- Termination."
CONDUCT OF BUSINESS PENDING MERGER
Giant and Holly have each agreed to carry on their respective businesses in
the usual, regular and ordinary course in substantially the same manner as
conducted prior to the execution of the Merger Agreement. More particularly,
Giant and Holly have each agreed that, among other things and subject to certain
exceptions, neither it nor any of its subsidiaries may:
(i) (x) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any capital stock, other than regular
quarterly dividends with respect to the Giant Common Stock of $.05 per
share and $.15 per share with respect to the Holly Common Stock, or (y)
split, combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or (z) purchase, redeem or
otherwise acquire any shares of its capital stock or its significant
subsidiaries' capital stock or any rights, warrants or options to acquire
any such securities;
(ii) issue, deliver, sell, pledge or otherwise encumber any shares of
capital stock or any securities convertible into, or any rights, warrants
or options to acquire, any such shares, other than the issuance of Holly
Common Stock or Giant Common Stock, as the case may be, upon the exercise
of Giant or Holly employee stock options, respectively;
(iii) amend its certificate of incorporation, bylaws or other
comparable organizational documents (other than the amendments to the Giant
certificate of incorporation and bylaws described in this Joint Proxy
Statement/Prospectus);
(iv) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of, any business or
business organization or division thereof (except for acquisitions publicly
announced before the date of the Merger Agreement, such other acquisitions
which do not in the aggregate exceed $5 million, and purchases of
inventory, feedstock and other items in the ordinary course of business and
consistent with past practice);
(v) sell, lease, license, mortgage or otherwise encumber or subject to
a lien or otherwise dispose of any properties or assets, other than (x) in
the ordinary course of business and (y) sales of assets that in the
aggregate do not exceed $5 million;
(vi) (x) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, or sell or issue any debt securities
or warrants or other rights to acquire debt securities of Holly or any of
its subsidiaries or Giant or any of its subsidiaries, as the case may be,
guarantee any debt securities of another person, enter into any "keep well"
or other agreement to maintain any financial statement condition of another
person or enter into any arrangement having the economic effect of the
foregoing, except for short-term borrowings and guarantees of indebtedness
of its subsidiaries incurred in the ordinary course of business and
consistent with past practice, or (y) make any loans, advances or capital
contributions to, or investments in, any other person, other than to
subsidiaries or to officers and to employees for travel, business or
relocation expenses in the ordinary course of business;
(vii) make or agree to make any new capital expenditure other than as
set forth in existing operating budgets, other than capital expenditures
that do not or would not constitute a material change;
(viii) make any tax election that could reasonably be expected to have
a material adverse effect or settle or compromise any material income tax
liability;
(ix) pay, discharge, settle or satisfy any material claims,
liabilities or obligations, other than in the ordinary course of business
consistent with past practice or other than in accordance with their terms,
of liabilities reflected in certain of such Company's filings with the
Commission.
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(x) except in the ordinary course of business or except as would not
reasonably be expected to have a material adverse effect, modify, amend or
terminate any material contract or agreement or waive, release or assign
any material rights thereunder;
(xi) make any material change to accounting methods, principles or
practices, except as may be required by generally accepted accounting
principles;
(xii) except as required by law or contemplated by the Merger
Agreement, enter into, adopt or amend in any material respect or terminate
any employee benefit plan or any other plan or policy involving directors,
officers or employees, or materially change any assumption used to
calculate funding obligations under pension plans, or change the manner in
which contributions to pension plans are made; or
(xiii) except for (a) new employment agreements with Holly's three
highest-ranking executives on terms no more favorable than Giant's
employment agreements with its three highest-ranking executives (with base
salaries equal to the executives' current base salaries or such other
amounts approved by Giant), (b) bonus payments to Holly and Giant employees
in amounts and forms as agreed to by the Holly and Giant Boards of
Directors, (c) the amendments to the Giant employment agreements, and the
waivers of the cash-out provisions with respect to the stock options and
phantom stock rights described in the Merger Agreement, (d) normal
increases in the ordinary course of business that, in the aggregate, do not
materially increase benefit or compensation expenses, and (e) as
contemplated by the Merger Agreement or by the terms of any contract the
existence of which does not constitute a violation of the Merger Agreement,
increase the compensation of any director, executive officer or other key
employee.
AMENDMENT AND WAIVER
The Merger Agreement may be amended by an instrument in writing signed on
behalf of each party at any time before or after either of the Stockholder
Approvals (except that after either Stockholder Approval, no amendment may be
entered into which requires further approval by such stockholders unless such
further approval is obtained). At any time prior to the Effective Time, a party
may, by written instrument signed on behalf of such party, (a) extend the time
for performance of the obligations of the other party, (b) waive inaccuracies in
representations and warranties contained in the Merger Agreement or in any
document delivered pursuant to the Merger Agreement or (c) waive (subject to the
above parenthetical in this paragraph) compliance with any agreements or
conditions for their respective benefit contained in the Merger Agreement.
Notwithstanding the foregoing, pursuant to Section 251(d) of the DGCL, no
amendment to the Merger Agreement made subsequent to the adoption of the Merger
Agreement by the stockholders of Giant or Holly may alter or change the amount
or kind of shares, securities, cash, property and/or rights to be received by
such stockholders in the Merger, alter or change any term of the Certificate of
Incorporation of the Combined Company to be effected by the Merger or alter or
change any terms and conditions of the Merger Agreement if such alteration or
change would adversely affect the holders of any class or series of stock of
Giant or Holly, respectively.
EXPENSES
Whether or not the Merger is consummated, all fees and expenses incurred in
connection with the Merger Agreement and the transactions contemplated thereby
shall be paid by the party incurring such fees or expenses, except that: (i) if
the Merger Agreement is terminated pursuant to the provisions described in
clause (c)(ii) of "-- Termination" above, all out-of-pocket expenses (subject to
a cap of $1.5 million) incurred by the terminating party in connection with the
Merger Agreement and the transactions contemplated thereby shall be paid by the
other party, which amount will be credited against any Termination Fee if one is
payable, (ii) if a suit is filed which results in a judgment for any Termination
Fee due under the Merger Agreement, the costs and expenses relating to the suit
of the party that obtained the judgment must be paid by the other party, and
(iii) Giant and Holly will share equally the expenses incurred in connection
with filing,
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printing and mailing this Joint Proxy Statement/Prospectus and with the filings
of the premerger notification and report forms under the HSR Act. See
"-- Termination Fees."
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains customary mutual representations and
warranties relating to, among other things, (i) corporate organization and
similar corporate matters; (ii) subsidiaries; (iii) the capital structures of
each of Holly and Giant; (iv) authorization, execution, delivery, performance
and enforceability of, and required consents, approvals, orders and
authorizations of governmental authorities relating to, the Merger Agreement and
related matters; (v) documents filed by each of Giant and Holly with the
Commission, the accuracy of information contained therein and the absence of
undisclosed liabilities of each of Giant and Holly; (vi) the accuracy of
information supplied by each of Giant and Holly in connection with this Joint
Proxy Statement/Prospectus; (vii) absence of material changes or events with
respect to each of Holly and Giant; (viii) the absence of material litigation;
(ix) compliance with applicable laws; (x) retirement and other employee plans
and matters relating to the Employees Retirement Income Security Act of 1974, as
amended; (xi) filing of tax returns and payment of taxes; (xii) required
stockholder votes; (xiii) the satisfaction of certain state takeover statutes
requirements; (xiv) engagement and payment of fees of brokers, investment
bankers, finders and financial advisors; (xv) receipt of fairness opinions; and
(xvi) ownership by Holly of Giant Common Stock and by Giant of Holly Common
Stock. Giant also represents to Holly that immediately after the Effective Time,
the holders of shares of Holly Common Stock issued and outstanding immediately
before the Effective Time shall, in the aggregate, have the right to receive,
and shall receive pursuant to the exchange procedures provided in the Merger
Agreement, that number of shares of Giant Common Stock such that such holders
will own 50% of the issued and outstanding capital stock of the Combined
Company.
STOCK EXCHANGE LISTING
It is a condition to the Merger that the shares of Giant Common Stock to be
issued in the Merger and under certain Holly stock plans be approved for listing
on the NYSE, subject to official notice of issuance.
DIVIDEND COORDINATION
Each of Giant and Holly expects to continue to declare until the Effective
Time their respective regularly scheduled dividends. The Merger Agreement
requires each of Giant and Holly to coordinate with the other the payment of
dividends, and the designation of record and payment dates, relating to Giant
Common Stock and Holly Common Stock with the intent that holders of Holly Common
Stock shall not receive two dividends, or fail to receive one dividend, for any
single quarter as a result of the Merger. Dividends, if any, of the Combined
Company will be set by the Combined Company's Board of Directors. See "Risk
Factors -- Dividends" and "Market Price and Dividend Information."
REQUIRED REGULATORY APPROVALS
The HSR Act and the rules and regulations promulgated thereunder provide
that certain transactions (including the Merger) may not be consummated until
certain information has been submitted to the Antitrust Division of the
Department of Justice (the "Antitrust Division") and the Federal Trade
Commission (the "FTC") and specified HSR Act waiting period requirements have
been satisfied. On May 1, 1998, Giant and Holly filed all appropriate
notification and report forms with the Antitrust Division and the FTC with
respect to the Merger, as required by the HSR Act, and on , 1998 the
waiting period under the HSR Act expired. The expiration of the HSR Act waiting
period does not preclude the Antitrust Division, the FTC, or third parties from
challenging the Merger on antitrust grounds. Neither Giant nor Holly believes
that the Merger will violate federal antitrust laws.
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RESALE OF GIANT COMMON STOCK
The Giant Common Stock issued pursuant to the Merger will not be subject to
any restrictions on transfer arising under the Securities Act, except for shares
issued to any Holly stockholder who may be deemed to be an "affiliate" of Giant
or Holly for purposes of Rule 145 under the Securities Act. It is expected that
each such affiliate will enter into an agreement with Giant providing that such
affiliate will not transfer any Giant Common Stock received in the Merger except
in compliance with the Securities Act. This Joint Proxy Statement/Prospectus
does not cover resales of Giant Common Stock received by any person who may be
deemed to be such an affiliate of Giant or Holly.
APPRAISAL AND DISSENTERS RIGHTS
Under the DGCL, holders of Holly Common Stock are entitled to appraisal or
dissenters' rights under Section 262 of the DGCL ("Section 262") in connection
with the Merger if they comply with the applicable statutory procedures
summarized herein.
A person having a beneficial interest in shares of Holly Common Stock held
of record in the name of another person, such as a broker or nominee, must act
promptly to cause the record holder to follow the steps summarized below
properly and in a timely manner to perfect appraisal rights.
THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW PERTAINING
TO APPRAISAL RIGHTS UNDER THE DGCL AND IS QUALIFIED IN ITS ENTIRETY BY THE FULL
TEXT OF SECTION 262 WHICH IS REPRINTED IN ITS ENTIRETY AS APPENDIX D TO THIS
JOINT PROXY STATEMENT/PROSPECTUS. ALL REFERENCES IN SECTION 262 AND IN THIS
SUMMARY TO A "STOCKHOLDER" OR "HOLDER" ARE TO THE RECORD HOLDER OF THE SHARES OF
HOLLY COMMON STOCK AS TO WHICH APPRAISAL RIGHTS ARE ASSERTED.
Under the DGCL, holders of shares of Holly Common Stock ("Appraisal
Shares") who follow the procedures set forth in Section 262 will be entitled to
have their Appraisal Shares appraised by the Delaware Chancery Court and to
receive payment in cash of the "fair value" of such Appraisal Shares, exclusive
of any element of value arising from the accomplishment or expectation of the
Merger, together with a fair rate of interest, if any, as determined by such
court.
Under Section 262, where a proposed merger is to be submitted for approval
at a meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, must notify each of its stockholders who was such on the record
date for such meeting with respect to shares for which appraisal rights are
available, that appraisal rights are so available (for any or all of the Shares
of Holly Common Stock), and must include in such notice a copy of Section 262.
This Joint Proxy Statement/Prospectus constitutes such notice to the holders of
Appraisal Shares and the applicable statutory provisions of the DGCL are
attached to this Joint Proxy Statement/Prospectus as Appendix D. Any stockholder
who wishes to exercise such appraisal rights or who wishes to preserve his right
to do so should review the following discussion and Appendix D carefully,
because failure to timely and properly comply with the procedures specified will
result in the loss of appraisal rights under the DGCL.
A HOLDER OF APPRAISAL SHARES WISHING TO EXERCISE SUCH HOLDER'S APPRAISAL
RIGHTS MUST DELIVER TO HOLLY, PRIOR TO THE VOTE ON THE MERGER AGREEMENT AT THE
HOLLY SPECIAL MEETING, A WRITTEN DEMAND FOR APPRAISAL OF SUCH HOLDER'S APPRAISAL
SHARES. A PROXY OR VOTE AGAINST THE MERGER AGREEMENT WILL NOT CONSTITUTE SUCH
DEMAND. A HOLDER OF APPRAISAL SHARES WISHING TO EXERCISE SUCH HOLDER'S APPRAISAL
RIGHTS MUST BE THE RECORD HOLDER OF SUCH APPRAISAL SHARES ON THE DATE THE
WRITTEN DEMAND FOR APPRAISAL IS MADE AND MUST CONTINUE TO HOLD SUCH APPRAISAL
SHARES OF RECORD THROUGH THE EFFECTIVE DATE OF THE MERGER. ACCORDINGLY, A HOLDER
OF APPRAISAL SHARES WHO IS THE RECORD HOLDER OF APPRAISAL SHARES ON THE DATE THE
WRITTEN DEMAND FOR APPRAISAL IS MADE, BUT WHO THEREAFTER
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TRANSFERS SUCH APPRAISAL SHARES PRIOR TO THE CONSUMMATION OF THE MERGER, WILL
LOSE ANY RIGHT TO APPRAISAL IN RESPECT OF SUCH APPRAISAL SHARES.
Only a holder of record of Appraisal Shares is entitled to assert appraisal
rights for the Appraisal Shares registered in that holder's name. A demand for
appraisal should be executed by or on behalf of the holder of record, fully and
correctly, as such holder's name appears on such holder's stock certificates. If
the Appraisal Shares are owned of record in a fiduciary capacity, such as by a
trustee, guardian or custodian, execution of the demand should be made in that
capacity, and if the Appraisal Shares are owned of record by more than one
person as in a joint tenancy or tenancy in common, the demand should be executed
by or on behalf of all joint owners. An authorized agent, including one or more
joint owners, may execute a demand for appraisal on behalf of a holder of
record; however, the agent must identify the record owner or owners and
expressly disclose the fact that, in executing the demand, the agent is agent
for such owner or owners. A record holder such as a broker who holds Appraisal
Shares as nominee for several beneficial owners may exercise appraisal rights
with respect to the Appraisal Shares held for one or more beneficial owners
while not exercising such rights with respect to the Appraisal Shares held for
other beneficial owners; in such case, the written demand should set forth the
number of Appraisal Shares as to which appraisal is sought. When no number of
Appraisal Shares is expressly mentioned the demand will be presumed to cover all
Appraisal Shares held in the name of the record owner. If a stockholder holds
Appraisal Shares through a broker who in turn holds the shares through a central
securities depository nominee, such as Cede & Co., a demand for appraisal of
shares must be made by or on behalf of the depository nominee and must identify
the depository nominee as record holder. Stockholders who hold their Appraisal
Shares in brokerage accounts or other nominee forms and who wish to exercise
appraisal rights are urged to consult with their brokers to determine the
appropriate procedures for the making of a demand for appraisal by such a
nominee.
ALL WRITTEN DEMANDS FOR APPRAISAL SHOULD BE SENT OR DELIVERED TO HOLLY, AT
100 CRESCENT COURT, SUITE 1600, DALLAS, TEXAS, ATTENTION: SECRETARY.
Within 10 days after the consummation of the Merger, the Combined Company
will notify each stockholder who has properly asserted appraisal rights under
Section 262 and has not voted in favor of or consented to the Merger of the date
the Merger became effective.
Within 120 days after the Effective Date of the Merger, but not thereafter,
the Combined Company or any stockholder who has complied with the statutory
requirements summarized above may file a petition in the Delaware Chancery Court
demanding a determination of the fair value of the Appraisal Shares. The
Combined Company is under no obligation to and has no present intention to file
a petition with respect to the appraisal of the fair value of the Appraisal
Shares. Accordingly, it is the obligation of the stockholders to initiate all
necessary action to perfect their appraisal rights within the time prescribed in
Section 262.
Within 120 days after the consummation of the Merger, any stockholder who
has complied with the requirements for exercise of appraisal rights will be
entitled, upon written request, to receive from the Combined Company a statement
setting forth the aggregate number of Appraisal Shares with respect to which
demands for appraisal have been received and the aggregate number of holders of
such Appraisal Shares. Such statements must be mailed within ten days after a
written request therefor has been received by the Combined Company.
If a petition for an appraisal is timely filed, at the hearing on such
petition the Delaware Court will determine which stockholders are entitled to
appraisal rights. The Delaware Court may require the stockholders who have
demanded an appraisal for their shares and who hold stock represented by
certificates to submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal proceedings. If any
stockholder fails to comply with such direction, the Delaware Court may dismiss
the proceedings as to such stockholder.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Chancery Court will determine the stockholders entitled
to appraisal rights and will appraise the "fair value" of their Appraisal
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Shares, exclusive of any element of value arising from the accomplishment or
expectation of the Merger, together with a fair rate of interest, if any, to be
paid upon the amount determined to be the fair value. Stockholders considering
seeking appraisal should be aware that the fair value of their Appraisal Shares
as determined under Section 262 could be more than, the same as or less than the
value of the consideration they would receive pursuant to the Merger Agreement
if they did not seek appraisal of their Appraisal Shares and that investment
banking opinions as to fairness from a financial point of view are not
necessarily opinions as to fair value under Section 262.
The Delaware Chancery Court will determine the amount of interest, if any,
to be paid upon the amounts to be received by persons whose Appraisal Shares
have been appraised. The costs of the action may be determined by the Delaware
Chancery Court and taxed upon the parties as the Delaware Chancery Court deems
equitable. Upon application of a stockholder, the Delaware Chancery Court may
also order that all or a portion of the expenses incurred by any stockholder in
connection with an appraisal, including, without limitation, reasonable
attorneys' fees and the fees and expenses of experts utilized in the appraisal
proceeding, be charged pro rata against the value of all of the Appraisal Shares
entitled to appraisal.
Any holder of Appraisal Shares who has duly demanded an appraisal in
compliance with Section 262 will not, after the consummation of the Merger, be
entitled to vote the Appraisal Shares subject to such demand for any purpose or
be entitled to the payment or dividends or other distributions on those
Appraisal Shares (except dividends or other distributions payable to holders of
record of Appraisal Shares as of a record date prior to the consummation of the
Merger).
If any stockholder who properly demands appraisal of his Appraisal Shares
under Section 262 fails to perfect, or effectively withdraws or loses, his right
to appraisal, as provided in the DGCL the Appraisal Shares of such stockholder
will be converted to the right to receive the consideration receivable with
respect to such Appraisal Shares in accordance with the Merger Agreement. A
stockholder will fail to perfect, or effectively lose or withdraw, his right to
appraisal if, among other things, no petition for appraisal is filed within 120
days after the Effective Date of the Merger, or if the stockholder withdraws his
demand for appraisal. Any withdrawal attempted more than 60 days after such
Effective Date will require the written approval of the Combined Company.
Notwithstanding the foregoing, no appraisal proceeding pending in the Court of
Chancery shall be dismissed as to any stockholder without the approval of the
Court, and any such approval may be conditioned upon such terms as the Court
deems just.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 FOR PERFECTING
APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS (IN WHICH EVENT A
STOCKHOLDER WILL BE ENTITLED TO RECEIVE THE CONSIDERATION RECEIVABLE WITH
RESPECT TO SUCH APPRAISAL SHARES IN ACCORDANCE WITH THE MERGER AGREEMENT). IN
VIEW OF THE COMPLEXITIES OF THE FOREGOING PROVISIONS OF THE DGCL, HOLLY
STOCKHOLDERS WHO ARE CONSIDERING DISSENTING FROM THE MERGER MAY WISH TO CONSULT
LEGAL COUNSEL.
MAJOR STOCKHOLDERS' AGREEMENT
On April 14, 1998, Giant, Holly, Mr. Acridge, Mr. Norsworthy, Nona Barrett,
NBN Capital Limited Partnership, Betty Simmons East Texas Trust, Margaret
Simmons East Texas Trust, Suzanne Simmons East Texas Trust, Betty Simmons Nueces
County Trust, Margaret Simmons Nueces County Trust and Suzanne Simmons Nueces
County Trust (such parties other than Giant and Holly are referred to as the
"Stockholder Parties," and such parties other than Giant, Holly and Mr. Acridge
are collectively referred to as the "Norsworthy Group") entered into the Major
Stockholders' Agreement. After giving effect to the Merger, Mr. Acridge and the
Norsworthy Group will own approximately 11.8% and 15%, respectively, of the
issued and outstanding shares of capital stock of the Combined Company. Under
the Major Stockholders' Agreement, the Stockholder Parties have (a) entered into
a voting agreement with respect to the Merger and voting by the Stockholder
Parties as stockholders of the Combined Company on certain matters following the
Merger and (b) provided for a mechanism to resolve disputes, should they arise,
between Mr. Acridge, on the
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one hand, and Mr. Norsworthy, on the other hand, in the fulfillment of their
respective obligations and duties to the Combined Company.
The following is a summary only and is qualified by reference to the Major
Stockholders' Agreement, which is attached to this Joint Proxy
Statement/Prospectus as Appendix G.
VOTING AGREEMENTS UNDER THE MAJOR STOCKHOLDERS' AGREEMENT. Under the Major
Stockholders' Agreement, each Stockholder Party has agreed to vote all of the
shares of Giant Common Stock or Holly Common Stock owned by such Stockholder
Party at every meeting of stockholders of Giant or Holly (i) in favor of the
approval of the Merger and (ii) against any transaction that could reasonably be
expected to hinder the Merger or would result in a breach of any covenant
contained in the Merger Agreement. Moreover, following the Merger, each
Stockholder Party has agreed to vote such Stockholder Party's shares (i) for
each of the directors of the Combined Company nominated by the Board of
Directors in accordance with the New Bylaws of the Combined Company and (ii)
against any amendment to such New Bylaws or the New Certificate of the Combined
Company that is not proposed by the entire Board of Directors of the Combined
Company. The Stockholder Parties must require any affiliated transferee to
become a party to the Stockholder Agreement before transferring any shares of
Holly or Giant to any such affiliated transferee.
DEADLOCK RESOLUTION AGREEMENTS. Under the Major Stockholders' Agreement,
if at any time after the fifteenth month following the Effective Time, among
other things, either Mr. Acridge or Mr. Norsworthy believes that the control
arrangements are not meeting their objectives to enhance the overall competitive
and strategic position of the Combined Company and to otherwise serve the best
interests of the Combined Company and its stockholders, and they are unable to
resolve their differences through private discussions, either may call a special
meeting of the Board of Directors of the Combined Company to consider the
disputed matters. The Board of Directors will be expected to provide to Mr.
Acridge and Mr. Norsworthy its advice and recommendations or decisions. Acridge
and Norsworthy have each agreed to consider the advice, recommendations or
decisions of the Board of Directors in good faith and without any preconceived
determinations. If (i) five days following the Board of Directors' communication
to Mr. Acridge and Mr. Norsworthy, or (ii) if no special meeting is held or
within five days following such a meeting no communications are made by the
Board of Directors to Mr. Acridge or Mr. Norsworthy, and either Mr. Acridge or
Mr. Norsworthy remains dissatisfied with the disputed matter, he shall have the
right to implement the deadlock resolution proceedings.
If either Mr. Acridge or Mr. Norsworthy determines that there are disputed
matters that cannot be otherwise resolved after having submitted such matters to
the Board of Directors, he may obtain an efficient and businesslike termination
of the control arrangements through making an offer to the other that results in
a choice for the other as to the means whereby the control arrangements are
terminated. In general, the discussion set forth below describes a procedure in
which either Mr. Acridge or Mr. Norsworthy (the "Offeror") could trigger a
buy-sell agreement by giving notice to the other party (the "Offeree") and the
Combined Company. The Offeror will fix a price at which he is willing to sell
the Subject Stock Interest (as defined below) and resign from the Combined
Company or buy the Offeree Group's (as defined below) Subject Stock Interest
with the other person resigning from the Combined Company. The Offeree will then
make an election to either (i) resign all positions with the Combined Company
and cause the sale of the Subject Stock Interest, (ii) cause the purchase from
the Offeror Group (as defined below) of the Subject Stock Interest, or (iii)
resign all positions with the Combined Company and be subject to a Standstill
Agreement (as defined below).
For purposes of this discussion, the term "Offeror Group" shall, if the
offeror is Norsworthy, refer to each member of the Norsworthy Group and any
affiliate transferees having a relationship to one or more members of the
Norsworthy Group, and if the Offeror is Mr. Acridge, the term shall refer to Mr.
Acridge and any affiliated transferee having a relationship to Mr. Acridge. The
term "Offeree Group" shall, if the Offeree is Mr. Norsworthy, refer to each
member of the Norsworthy Group and any affiliated transferees having a
relationship to one or more members of the Norsworthy Group and, if the Offeree
is Mr. Acridge, such term shall refer to Acridge and any affiliated transferee
having a relationship with Mr. Acridge. If there is an election to resign all
positions then held with the Combined Company and to cause the sale of the
Subject
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Stock Interest to the Offeror Group (the "Resignation/Sale Election") or to
cause the purchase from the Offeror Group of the Subject Stock Interest (the
"Purchase Election"), the one of the Offeror Group or the Offeree Group that
becomes the purchaser as a result of that election is referred to as the
"Purchasing Group" and the one that becomes the seller as a result of such
election is referred to as the "Selling Group."
Mr. Acridge or Mr. Norsworthy may make to the Offeree an irrevocable offer
to sell or to purchase the Subject Stock Interest. That offer is described as
the "Offer to Sell or Purchase." If the Offer to Sell or Purchase is delivered
by Mr. Acridge, the stock interest he must propose to sell is the entire stock
interest then owned by Mr. Acridge and his affiliate transferees (the "Acridge
Stock Interest"), and the stock interest he must propose to purchase is the
amount equal to the lesser in number of the Acridge Stock Interest or the entire
stock interest then owned by all members of the Norsworthy Group and their
affiliate transferees (the "Norsworthy Group Stock Interest"). If the Offer to
Sell or Purchase is delivered by the Norsworthy Group, the stock interest the
Norsworthy Group must propose to sell is the amount equal to the lesser in
number of the Norsworthy Group Stock Interest or the Acridge Stock Interest, and
the stock interest the Norsworthy Group must propose to purchase is the Acridge
Stock Interest.
The Offer to Sell or Purchase shall include (i) the price per share (which
must be paid in cash at the closing) at which the Offeror offers to sell or
purchase the Subject Stock Interest (which must be the same price), (ii)
evidence of the Offeror Group's ability to fund the purchase price, including
specifically a financing commitment if the Offeror Group would borrow the
necessary funds together with documentation evidencing the escrow of funds (or
equivalent security) in an amount equal to 10% of the purchase price as earnest
money to secure the obligation to pay the purchase price, and (iii) a form of a
complete and mutual release to be delivered by the Offeror, the Offeree and the
Combined Company at the closing.
After receipt of the Offer to Sell or Purchase, the Offeree shall, within
60 days, either (i) make the Resignation/Sale Election, (ii) make the Purchase
Election or (iii) resign all positions with the Combined Company and be subject
to a standstill agreement (the "Resignation/Standstill Election"). If the
Offeree makes the Purchase Election, the Offeree's response shall include
evidence of the Offeree's ability to fund the Purchase Price, including a
financing commitment if the Offeree Group would borrow the necessary funds and
documentation evidencing the escrow of funds (or equivalent security) in an
amount equal to 10% of the purchase price as earnest money to secure the Offeree
Group's obligation to pay the purchase price. If the Offeree fails to deliver
the response within the required 60-day period, the Offeree shall be deemed to
have made the Resignation/Standstill Election. If the Offeree makes or is deemed
to have made the Resignation/Standstill Election, the control arrangements will
terminate, each member of the Offeree Group shall use his, her or its best
efforts to cause the resignation of each member of the category of directors of
which the Offeree is a member to resign, and the standstill agreement and mutual
release will become effective.
The parties to the Major Stockholders' Agreement have agreed that if the
Resignation/Standstill Election is made or is deemed to have been made, each
member of the Offeree Group shall not, and shall cause each of his affiliates
not to, directly or indirectly (among other things): (a) acquire, offer to
acquire or agree to acquire any equity securities of the Combined Company; (b)
participate in any solicitation of proxies or seek to advise, encourage or
influence any person with respect to voting any of the Combined Company's equity
securities; (c) initiate or propose any shareholder proposals; (d) form any
group for the purchase of a substantial interest in the Combined Company; (e)
otherwise act to control or seek to control the Combined Company; (f) seek the
removal of any member of the Board of Directors of the Combined Company; (g)
initiate any tender or exchange offer; or (h) serve as a member of the Board of
Directors. Routine sales of Combined Company equity securities in transactions
for purposes other than those prescribed above are not prohibited. The
standstill agreement shall cease to apply on its fifth anniversary or at such
earlier time that the Offeree Group holds less than 3% of the Combined Company's
issued and outstanding common stock.
The Stockholder Parties agree that during any Standstill Period (defined
below), they shall not, and they shall cause each of their affiliates not to,
directly or indirectly, among other things: (a) acquire, offer to acquire or
agree to acquire any equity securities of the Combined Company; (b) participate
in any solicitation of proxies or consents, or seek to advise, encourage or
influence any person with respect to voting any of the Combined Company's equity
securities, except for Mr. Acridge and Mr. Norsworthy in their respective
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capacities as members of the Board of Directors on matters approved by the
Board; (c) initiate or propose any shareholder proposals; (d) form any group for
the purchase of a substantial interest in the Combined Company; (e) otherwise
act to control or seek to control the Combined Company; (f) seek the removal of
any member of the Board of Directors of the Combined Company; or (g) initiate
any tender or exchange offers. The Merger Agreement defines a "Standstill
Period" as any period during which (a) a disputed matter is referred to the
Board of Directors pursuant to the deadlock resolution procedure, and for an
additional five days thereafter, or (b) a deadlock resolution procedure is
pending.
TERM AND TERMINATION OF MAJOR STOCKHOLDERS' AGREEMENT. The Major
Stockholders' Agreement became effective on April 14, 1998 and continues in
effect until the earlier of (i) an amendment to the section of the Merger
Agreement relating to the Merger Consideration; (ii) an amendment to certain
provisions of the New Bylaws of the Combined Company; (iii) the termination of
the Merger Agreement in accordance with its terms without consummation of the
Merger; (iv) either Mr. Acridge or the Norsworthy Group ceases to hold at least
3% of the Common Stock of the Combined Company (without consideration of any
options, warrants or other rights to acquire capital stock of the Combined
Company or any shares of the capital stock of the Combined Company allocated to
either Mr. Acridge or Mr. Norsworthy under any employee stock ownership plan);
(v) the closing of any deadlock resolution proceeding described above; (vi) the
death of Mr. Acridge or Mr. Norsworthy; or (vii) December 31, 2003. In addition,
with respect to any Stockholder Party other than Mr. Acridge or Mr. Norsworthy
who shall cease to own a stock interest in the Combined Company (other than
pursuant to certain transactions in violation of certain provisions of the Major
Stockholders' Agreement), the Major Stockholders' Agreement shall terminate as
to such Stockholder Party only at such time as such Stockholder Party ceases to
own such stock interest. Notwithstanding the termination of this Agreement,
certain standstill agreements then in effect shall continue in effect until they
expire in accordance with the terms set forth in the Major Stockholders'
Agreement.
NEW CERTIFICATE
The Merger is conditioned upon the adoption by Giant stockholders of an
amended and restated certificate of incorporation. The following discussion,
which summarizes the material changes from Giant's existing certificate of
incorporation, does not purport to be complete or comprehensive. Giant
stockholders and Holly stockholders are encouraged to review the New Certificate
attached as Appendix B in its entirety and should read "Comparison of
Stockholder Rights" regarding the differences between the New Certificate and
New Bylaws and the existing certificate of incorporation and bylaws of Holly.
SIZE AND CLASSIFICATION OF BOARD OF DIRECTORS. Section (c) of Article
FIFTH will be amended to increase the size of the Board of Directors from not
less than three to not less than six and from not more than nine to not more
than twelve directors. This change expands the minimum and maximum number of
Board of Director seats in response to the addition of five Holly designees to
the Board of Directors of the Combined Company. Article Fifth will also be
amended to modify the Giant Board of Director classification scheme for the
Combined Company in keeping with the requirements of the Merger Agreement.
Therefore, the Class I directors will have a term expiring at the Annual Meeting
of Stockholders in 1999, Class II directors will have a term expiring at the
Annual Meeting of Stockholders in 2000 and Class III directors shall have a term
expiring at the Annual Meeting of Stockholders in 2001. Further, at each meeting
of Stockholders beginning in 1999, successors to the class of directors whose
terms expire at the Annual Meeting of Stockholders shall be elected by the
holders of a majority of the stock represented and entitled to vote at that
meeting for a three-year term. Article NINTH of the New Certificate requires the
affirmative vote of the holders of at least 80% of the combined voting power of
each outstanding class of capital stock of the Combined Company before any
amendment to Article FIFTH could be accomplished.
FAIR PRICE PROTECTION. Article SEVENTH of Giant's certificate of
incorporation, which is the fair price provision, has been eliminated in the New
Certificate since Giant and Holly have concluded that the stockholders of the
Combined Company will have substantially equivalent protection from a fair price
perspective under Section 203 of the DGCL.
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INDEMNIFICATION. In addition to the existing indemnification rights set
forth in Giant's existing bylaws, certain indemnification rights have been added
to the New Certificate as Article SEVENTH. By adding such rights to the New
Certificate, such rights become subject to the supermajority provisions of
Article NINTH of the New Certificate which require the affirmative vote of the
holders of at least 80% of the combined voting power of each outstanding class
of capital stock of the Combined Company before any amendment to Article SEVENTH
could be accomplished.
NEW BYLAWS
The Merger is conditioned upon the adoption by Giant stockholders of
amended and restated bylaws. The following discussion sets forth the material
changes that will be made to Giant's bylaws. However, this discussion does not
purport to be complete nor comprehensive and therefore Giant stockholders and
Holly stockholders should read the New Bylaws attached as Appendix C in their
entirety and should read "Comparison of Stockholder Rights" regarding the
differences between the New Certificate and New Bylaws and the existing
certificate of incorporation and bylaws of Holly.
NUMBER AND ELECTION OF DIRECTORS. Section 1 of Article III of the New
Bylaws provides that one-half of the Board of Directors shall be designated "G
Directors" and one-half as "H Directors." The G Directors and the H Directors
are divided into three classes, designated Class I, Class II and Class III
directors. Class I directors have a term expiring at the Annual Meeting of
Stockholders in 1999, Class II directors shall have a term expiring at the
Annual Meeting of Stockholders in 2000 and the Class III directors have a term
expiring in 2001. Each class shall be composed equally of G Directors and H
Directors. See "Management of the Combined Company -- Board of Directors and
Executive Officers" for a list of the initial G Directors and the initial H
Directors. The New Bylaws further provide that at each Annual Meeting of
Stockholders beginning in 1999 successors to the class of directors whose term
expires at that Annual Meeting of Stockholders shall be elected for a three year
term. Any increase or decrease in the number of directors shall be apportioned
so that there will be equal numbers of G Directors and H Directors. In Section 2
of Article III, it is provided that any vacancy on the Board of Directors shall
be filled so as to restore and maintain the equality in number of G Directors
and H Directors. If a vacancy occurs such that there is less than the required
number of G Directors, the remaining G Directors shall elect an additional
director who shall fill the vacancy as a G Director. In the event a vacancy on
the Board of Directors results in there being less than the required number of H
Directors, the remaining H Directors shall elect an additional director who
shall fill the vacancy as an H Director. Vacancies that result from an increase
in the number of directors shall be filled one-half by a person or persons
elected by the G Directors and one-half by a person or person selected by the H
Directors. The designation of directors as G Directors and H Directors shall,
unless otherwise determined by the Board of Directors, cease on the Termination
Date (as defined below).
NOMINATIONS FOR ELECTION OF DIRECTORS. At stockholders' meetings at which
directors are to be elected, the Combined Company shall propose a slate of
nominees specifying one nominee for each director to be elected such that the
election of all proposed nominees would result in an equal number of G Directors
and H Directors, and nominees for G Director shall be selected by the G
Directors and nominees for H Director shall be selected by the H Directors.
SPECIAL MEETINGS OF STOCKHOLDERS; SPECIAL MEETINGS OF THE BOARD OF
DIRECTORS. Section 3 of Article II of the New Bylaws provides that special
meetings of the Stockholders may be called only by the Co-Chairmen of the Board
acting together (or the Chairman of the Board if only one is so appointed) or by
the Board of Directors pursuant to a resolution adopted by a majority of the
entire Board of Directors. Section 4 of Article III of the New Bylaws provides
that special meetings of the Board of Directors may be called by a Co-Chief
Executive Officer or by any two directors.
VOTING. Section 6 of Article III of the New Bylaws provides that the
number of affirmative votes required for any proposed action of the Board of
Directors shall be equal to the greater of the number of G Directors or the
number of H Directors voting on the matter plus one, except as otherwise
provided in the New Certificate or the New Bylaws, and that except as otherwise
specified by the Board of Directors, the requirements of Section 6 shall apply
to all voting by committees of the Board of Directors. Until the
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Termination Date, the unanimous vote of the entire Board of Directors shall be
required for the authorization of the issuance of Preferred Stock having voting
rights with respect to the election of the directors of the Combined Company.
After the Termination Date, the act of a majority of the directors present and
eligible to vote on a matter shall be the act of the Board of Directors on that
matter, except as otherwise required by law, the New Certificate or the New
Bylaws.
TERMINATION DATE. Unless otherwise determined by resolution of the Board
of Directors, the designation of directors as G Directors and H Directors and
that the Board of Directors be composed of an even number of directors shall
cease to apply upon the Termination Date, which shall be the earlier of (i) an
amendment to Article III, to Section 2 or Section 5 of Article IV, or to Article
IX of the New Bylaws; (ii) either Mr. Acridge or the Norsworthy Group, as
defined in the Major Stockholders' Agreement, ceases to hold at least a 3% Stock
Interest, as defined in the Major Stockholders' Agreement; (iii) either Acridge
or the Norsworthy Group purchases from the other the Subject Stock Interest;
(iv) the death of Acridge or Norsworthy; (v) December 31, 2003; or (vi) either
Acridge or Norsworthy resigns as Co-Chief Executive Officer and Co-Chairman of
the Board and becomes bound by the provisions of a standstill agreement;
provided, however, that if the Termination Date arises because of the death of
Acridge or Norsworthy, the remaining G Directors (in the case of Acridge's
death) and the remaining H Directors (in the case of Norsworthy's death) shall
have the power to select a director to fill the vacancy left by Acridge or
Norsworthy, as the case may be, at the next meeting of the Board of Directors.
OFFICERS. Section 1 of Article IV of the New Bylaws provides that there
shall be two Co-Chief Executive Officers who shall be directors and shall be the
Co-Chairmen of the Board of Directors. Section 2 provides that at the effective
date of the New Bylaws, the Co-Chief Executive Officers will be Acridge and
Norsworthy, who shall hold their offices until their successors are chosen and
qualified or until their earlier resignation or removal under such Bylaws. After
each Annual Meeting of Stockholders, the G Directors shall elect the Co-Chief
Executive Officer who shall occupy the position occupied by Acridge at the
Effective Time and the H Directors shall elect the Co-Chief Executive Officer
who shall occupy the position occupied by Norsworthy at the Effective Time.
Subject to the Board's authority, the two Co-Chief Executive Officers shall work
together in the Office of the Chief Executive Officer, shall have general
supervision of the Combined Company's business and shall see that all orders and
resolutions of the Board are implemented. One of the Co-Chief Executive Officers
shall be designated as the Co-Chief Executive Officer to whom all officers and
employees (excluding the other Co-Chief Executive Officer) shall, directly or
indirectly, report. Unless otherwise specified from time to time by the Board,
Acridge shall be the Co-Chief Executive Officer to whom all officers (excluding
the other Co-Chief Executive Officer) directly or indirectly report. Each of the
Co-Chief Executive Officers shall have the title of President where such an
officer is required. Either of the Co-Chief Executive Officers shall have the
authority to execute all instruments requiring a seal, except where required or
permitted by law to be otherwise signed and except that the other officers may
sign when so authorized by such Bylaws, the Board of Directors or a Co-Chief
Executive Officer. Unless otherwise determined by the vote of a majority of the
Board of Directors, the Combined Company shall cease to have Co-Chief Executive
Officers and shall have one Chief Executive Officer after the earliest to occur
of the following dates: (i) the date of the Annual Meeting of Stockholders in
2004 and (ii) the date that either Acridge or Norsworthy ceases for any reason
to be a Co-Chief Executive Officer. Under Section 5, the Co-Chief Executive
Officers, as Co-Chairmen of the Board of Directors, shall preside at all
meetings of the stockholders and of the Board of Directors.
AMENDMENTS; GREATER THAN MAJORITY VOTE REQUIRED FOR CERTAIN
AMENDMENTS. Except as otherwise provided in the New Certificate or in Section 2
of Article IX of the New Bylaws, the New Bylaws may be amended with the approval
of either the holders of a majority of the outstanding capital stock or by the
Board of Directors. Section 2 of Article IX of the New Bylaws provides that the
affirmative vote of not less than 80% of the outstanding stock of the Combined
Company or the affirmative vote of not less than 80% of the entire Board of
Directors may amend Article III of such Bylaws (on Directors), Section 1,
Section 2 and Section 5 of Article IV of such Bylaws (on officers in general,
Co-Chief Executive Officers and on Co-Chairmen of the Board of Directors) or
Article IX (on amendments to such Bylaws). Nevertheless, the New Certificate
provides that the Board of Directors alone cannot amend certain provisions of
the New Bylaws without 80%
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stockholder approval, including Sections 3 and 8 of Article II (notice
requirements to stockholders), Sections 1, 2 and 6 of Article III
(classification of G Directors and H Directors, director nominations and
required vote for Board of Director action), and Article VIII (indemnification
of directors and officers).
COMPARISON OF STOCKHOLDER RIGHTS
The following is a summary of material differences between the rights of
holders of Holly Common Stock and the rights of holders of the common stock of
the Combined Company. Each of Holly and the Combined Company is or will be
organized under the laws of Delaware. Giant's New Certificate and New Bylaws
will be the certificate of incorporation and bylaws, respectively, of the
Combined Company. Consequently, after the Effective Time, the rights of
stockholders of the Combined Company (including those who prior to the Effective
Time were stockholders of Holly) will be determined by reference to Giant's New
Certificate and New Bylaws. For a discussion of the amendments to the Giant
certificate of incorporation and the Giant bylaws, see "Other Terms of the
Merger and the Merger Agreement -- New Certificate" and "-- New Bylaws."
Stockholders are encouraged to review the New Certificate attached as Appendix B
and the New Bylaws attached as Appendix C in their entirety.
AUTHORIZED CAPITAL STOCK
Holly's certificate of incorporation, as amended and restated ("Holly's
Certificate"), authorizes Holly to issue 21,000,000 shares of its capital stock,
consisting of (a) 20,000,000 shares of common stock, par value $.01 per share,
and (b) 1,000,000 shares of preferred stock, par value $1.00 per share.
Giant's New Certificate authorizes Giant to issue 60,000,000 shares of its
capital stock, consisting of (a) 50,000,000 shares of common stock, par value
$.01 per share, and (b) 10,000,000 shares of preferred stock, par value $.01 per
share.
Both Holly's Certificate and Giant's New Certificate authorize the
respective boards of directors to, at any time and from time to time, fix the
designations, rights and preferences of any preferred stock.
NUMBER AND ELECTION OF DIRECTORS
Holly's Certificate and the bylaws of Holly ("Holly's Bylaws") provide that
the number of directors of Holly shall be not less than three nor more than
eleven, as the board of directors may determine from time to time by resolution
of the board of directors. The directors hold office until the next annual
election and until their successors are duly elected and qualified. In the event
of any increase in the number of directors, the additional directors may be
elected by the directors then in office or by the stockholders at any annual or
special meeting. At any annual or other election by the stockholders, the
directors are elected by a plurality vote of the stockholders present or
represented at the meeting. Vacancies in the board of directors created on
account of death, resignation, disqualification or other causes are filled by a
majority of the remaining directors, provided that if the remaining directors
constitute less than a majority of the whole board, upon application by a
stockholder holding at least 10% of the outstanding capital stock of Holly, an
election to fill such vacancy may be held as provided in Section 223 of the
DGCL. Directors of Holly may be removed by the stockholders with or without
cause.
Giant's New Certificate and New Bylaws provide that the board of directors
shall consist of an even number of directors, which shall be not less than six
nor more than twelve. The exact number of directors is determined from time to
time by resolution adopted by the affirmative vote of a majority of the
directors then in office. The New Bylaws provide that one half of the directors
are designated "G Directors" and one half are designated "H Directors," the G
Directors and H Directors are further divided into three classes, designated
Class I, Class II and Class III, and each class consists of an even number of
directors composed equally of G Directors and H Directors. The terms of the
Class I, Class II and Class III directors expire at the annual meetings of
stockholders in 1999, 2000 and 2001, respectively. At each annual meeting of
stockholders beginning in 1999, successors to the class of directors whose term
expires at such meeting are elected by the
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holders of a majority of the stock represented and entitled to vote thereat for
a three-year term. Each director holds office until the annual meeting of
stockholders for the year in which his term expires and until his successor is
elected, subject, however, to prior death resignation, retirement,
disqualification or removal from office. Directors of Giant may be removed by
the stockholders of Giant only for cause.
Giant's New Bylaws contemplate that there shall be an equal number of G
Directors and H Directors and that any vacancy on the board of directors shall
be filled so as to restore and maintain the equality in number of G Directors
and H Directors. In the event of a vacancy on the board of directors such that
there is less than the required number of G Directors or H Directors, the
remaining G Directors or H Directors, as the case may be, shall elect an
additional director who shall fill the vacancy. Vacancies on the board of
directors that result from an increase in the number of directors shall be
filled one-half by a person or persons elected by the G Directors and one-half
by a person or persons elected by the H Directors.
Giant's New Bylaws provide that Giant shall propose to the stockholders at
each meeting of the stockholders at which directors are to be elected a slate of
nominees such that the election of all proposed directors would result in an
equal number of G Directors and H Directors immediately after the election. The
nominees for G Director shall be selected by the then G Directors and the
nominees for H Directors shall be selected by the then H Directors.
Giant's New Bylaws further provide that unless otherwise determined by
resolution of the board of directors, the designation of directors as G
Directors and H Directors and the requirement that the board of directors be
composed on an even number of directors shall cease to apply upon the
"Termination Date," which shall occur on the earlier of the date on which (i)
any amendment to the provisions of Giant's New Bylaws relating to the directors,
Co-Chief Executive Officers or Co-Chairmen of the Board or to the provisions
governing amendment of Giant's New Bylaws is made; (ii) either Mr. Acridge or
the Norsworthy Group ceases to hold at least a 3% Stock Interest (as defined in
"Other Terms of the Merger and the Merger Agreement -- Major Stockholders'
Agreement"); (iii) either Mr. Acridge or the Norsworthy Group purchases from the
other the Subject Stock Interest (as defined in "Other Terms of the Merger and
the Merger Agreement -- Major Stockholders' Agreement"); (iv) the death of Mr.
Acridge or Mr. Norsworthy; (v) December 31, 2003; or (vi) either Mr. Acridge or
Mr. Norsworthy resigns as Co-Chief Executive Officer and Co-Chairman of the
board and becomes bound by the provisions of a standstill agreement; provided,
however, that if the Termination Date arises because of the death of Mr. Acridge
or Mr. Norsworthy, the remaining G Directors (in the case of Mr. Acridge's
death) and the remaining H Directors (in the case of Mr. Norsworthy's death)
shall have the power to select a director to fill the vacancy left by Mr.
Acridge or Mr. Norsworthy, as the case may be, at the next meeting of the board
of directors after the death.
VOTING BY DIRECTORS
Holly's Bylaws provide that one-third of the board of directors, but not
less than two directors, constitutes a quorum for the transaction of business
and that a majority of such quorum may decide any questions that come before a
meeting of Holly's directors.
Giant's New Bylaws provide that on all matters with respect to which the
board of directors shall vote, and except as may be otherwise provided in
Giant's New Certificate or Giant's New Bylaws, the number of affirmative votes
required for any proposed action of the board of directors shall be equal to the
sum of the greater of the number of G Directors or the number of H Directors
voting on the matter plus one; provided that until the Termination Date the
unanimous vote of the entire board of directors is required for the
authorization of the issuance of preferred stock having voting rights with
respect to the election of directors of Giant. After the Termination Date, the
act of a majority of the directors present and eligible to vote on a matter
shall be the act of the board of directors on that matter.
COMMITTEES
Holly's Bylaws provide that the board of directors may designate not less
than three of the directors then in office (at least one of whom shall be the
Chairman of the Board of Directors or the President of Holly) to constitute an
executive committee, which shall possess all powers of the powers of the board
of directors in the
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<PAGE> 85
management of the business and affairs of Holly. In addition, Holly's Bylaws
provide that the board of directors may provide for such other standing or
special committees as it deems reasonable.
Giant's New Bylaws provide that there shall be three standing committees of
the board of directors: an audit committee, a compensation committee and a
nominating committee. The audit committee and the compensation committee shall
each be composed of two G Directors and two H Directors who are not officers or
employees of Giant. The nominating committee shall be composed of the two
Co-Chief Executive Officers and two other directors, one a G Director and the
other an H Director.
VOTING BY STOCKHOLDERS
Holly's Bylaws provide that, except as otherwise expressly required by
statute, Holly's Certificate or Holly's Bylaws, each Holly stockholder is
entitled to one vote for each share of Holly stock. All matters properly
presented to any meeting of Holly stockholders are decided by a majority of the
votes of the stockholders entitled to vote, except that directors are elected by
a plurality vote of the stockholders present or represented at the meeting.
Giant's New Bylaws provide that, except as otherwise required by law,
Giant's New Certificate or Giant's Bylaws, each Giant stockholder is entitled to
cast one vote for each share of the capital stock held by such stockholder. Any
question brought before any meeting of stockholders shall be decided by the vote
of the holders of a majority of the stock represented and entitled to vote
thereat.
SPECIAL MEETINGS OF STOCKHOLDERS
Holly's Bylaws provide that special meetings of the stockholders may be
called by Holly's President and shall be called by the President, a Vice
President, the Secretary or an Assistant Secretary, at the request in writing of
a majority of the board of directors, or of a majority of the executive
committee, or of stockholders owning a majority of the outstanding shares having
voting power.
Giant's New Bylaws provide that special meetings of stockholders may be
called only by the Co-Chairmen of the board of directors acting together (or the
Chairman of the Board if only one is so appointed) or the board of directors
pursuant to a resolution adopted by a majority of the entire board of directors.
OFFICERS
Holly's Bylaws provide that the officers of Holly may consist of a Chairman
of the Board and Chief Executive Officer, one or more Vice Chairmen of the
Board, a President, one or more Executive Vice Presidents, Senior Vice
Presidents and Vice Presidents, a Secretary, a Controller, a Treasurer and such
Assistant Vice Presidents, Assistant Secretaries, Assistant Treasurers or other
subordinate officers as may from time to time be designated by the board of
directors.
Giant's New Certificate provides that the officers of Giant shall be chosen
by the board of directors and shall be two Co-Chief Executive Officers, a
Secretary and a Treasurer. The Co-Chief Executive Officers shall be directors of
Giant and shall be the Co-Chairmen of the board of directors. The board of
directors, in its discretion, may also choose one or more Executive Vice
Presidents, Senior Vice Presidents and Vice Presidents, Assistant Secretaries,
Assistant Treasurers and other officers.
At the effective date of the New Bylaws, Mr. Acridge and Mr. Norsworthy
shall serve as the two Co-Chief Executive Officers. Thereafter, the board of
directors at its first meeting held after each annual stockholders' meeting
shall elect the Co-Chief Executive Officers, who shall hold their officers until
their successors are chosen and qualified or until their earlier resignation or
removal pursuant to the terms of Giant's New Bylaws. The G Directors shall elect
the Co-Chief Executive Officer who shall occupy the position occupied by Mr.
Acridge at the date of the Merger and the H Directors shall elect the Co-Chief
Executive Officer who shall occupy the position occupied by Mr. Norsworthy at
the date of the Merger. Subject to the authority of the board of directors, the
two Co-Chief Executive Officers shall work together in the Office of the Chief
Executive Officer, shall have general supervision of the business of the
Combined Company, and shall see that all orders and resolutions of the board of
directors are carried into effect.
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<PAGE> 86
Mr. Acridge shall initially be designated at the Co-Chief Executive Officer to
whom all officers and employees of Giant (excluding the other Co-Chief Executive
Officer) shall, directly or indirectly, report. Each of the Co-Chief Executive
Officers shall be deemed to have the additional title of President in any
circumstance where an officer with the title of President is required. Unless
otherwise determined by a vote of a majority of the board of directors, Giant
shall cease to have Co-Chief Executive Officers and shall have one Chief
Executive Officer after the earlier to occur of the following dates: (i) the
date of Giant's annual meeting of stockholders in 2004 and (ii) the date that
either Mr. Acridge or Mr. Norsworthy ceases for any reason to be a Co-Chief
Executive Officer.
AMENDMENT OF CERTIFICATE OF INCORPORATION
Holly's Certificate does not address the respective powers of its board of
directors and stockholders to amend or repeal Holly's Certificate. Under the
DGCL, amendments to Holly's Certificate require approval of a majority of the
Holly stockholders.
Giant's New Certificate provides that Giant reserves the right to amend or
repeal any provision contained in the certificate and that all rights conferred
upon stockholders in the certificate are granted subject to such reservation;
provided, however, that certain amendments to the provisions relating to the
authorized capital stock of Giant, the directors, compromises or arrangements
between Giant and its creditors and/or between Giant and its stockholders,
indemnification of directors and officers, meetings of and action by the
stockholders, and amendment to certain provisions of the New Certificate and New
Bylaws shall require the affirmative vote of not less than 80% of the combined
voting power of each outstanding class of capital stock of Giant.
AMENDMENT OF BYLAWS
Holly's Certificate and Bylaws provide that the Holly Bylaws may be amended
by the affirmative vote of a majority of the Holly stockholders at any regular
or special meeting or by the affirmative vote of a majority of the Holly board
of directors.
Giant's New Certificate and New Bylaws provide that Giant's directors have
concurrent power with its stockholders to amend or repeal Giant's New Bylaws.
Any amendment must be approved by either the holders of a majority of the
outstanding capital stock or by the board of directors; provided, however, that
the New Bylaws provide that certain amendments to the provisions relating to the
directors, including the requirement that there be an equal number of G
Directors and H Directors, the Co-Chief Executive Officers and Co-Chairmen of
the Board and to amendment of the New Bylaws shall require the affirmative vote
of not less than 80% of the entire board of directors then in office or of the
holders of not less than 80% of the outstanding capital stock of Giant and that
the New Certificate provides that certain of such amendments may not be effected
by the Board of Directors without the affirmative vote of the holders of not
less than 80% of the outstanding capital stock of Giant. See "Other Terms of the
Merger and the Merger Agreement -- New Bylaws -- Amendments; Greater than
Majority Vote Required for Certain Amendments."
LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Holly's Certificate provides that no director of Holly shall be personally
liable to Holly or any of its stockholders for monetary damages for breach of
such director's duty as a director, except that a director shall remain liable
to the extent provided by law (i) for breach of the director's duty of loyalty
to Holly or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL, or (iv) for any transaction from which the director
derived an improper personal benefit.
Holly's Bylaws require Holly, to the fullest extent permitted by the DGCL,
to indemnify each person who is made a party to any threatened, pending or
completed proceeding by reason of the fact that he is or was a director,
officer, employee or agent of Holly, including the advancement of expenses
incurred by such person in defending such proceeding.
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<PAGE> 87
Giant's New Certificate provides that no director shall be personally
liable to Giant or any of its stockholders for monetary damages for breach of
fiduciary duty as a director, except to the extent that elimination or
limitation of liability is prohibited under the DGCL as in effect when such
liability is determined.
Giant's New Certificate and New Bylaws further provide that Giant shall, to
the fullest extent permitted by Section 145 of the DGCL, indemnify each person
who is made a party to any threatened, pending or completed proceeding (other
than an action by or in the right of Giant) by reason of the fact that he is or
was a director, officer, employee or agent of Giant, against any expenses
(including attorneys' fees) and amounts actually and reasonably incurred by him,
if he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of Giant, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. With
respect to actions by or in the right of Giant, Giant shall provide
indemnification, except that no indemnification shall be made in respect of any
claim as to which such person shall have been adjudged to be liable to Giant
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper. Giant's
indemnification obligations may include payment by Giant of expenses in
defending a proceeding in advance of the final disposition if Giant receives an
undertaking by the person indemnified to repay any payments made by Giant if it
is ultimately determined that such person is not entitled to indemnification,
which undertaking may be accepted without reference to the financial ability of
such person to make such repayments.
FISCAL YEAR
Holly's Bylaws provide that the fiscal year of Holly shall end on July 31st
of each year, or on such other day as may be fixed from time to time by the
board of directors.
Giant's New Bylaws provide that the fiscal year of Giant shall be fixed by
resolution of the board of directors. The Giant Board has fixed December 31 as
the end of Giant's fiscal year.
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<PAGE> 88
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OF THE COMBINED COMPANY
The following unaudited pro forma condensed consolidated financial
statements give effect to the Merger, which is expected to be accounted for
using the purchase method of accounting with Giant as the acquiror for financial
accounting purposes. For a description of purchase accounting with respect to
the Merger and other accounting matters, see "The Merger -- Anticipated
Accounting Treatment." The unaudited pro forma condensed consolidated balance
sheet gives effect to the Merger as if it had occurred on December 31, 1997 and
combines the historical consolidated balance sheet of Giant as of that date with
the historical consolidated balance sheet of Holly as of January 31, 1998. The
unaudited pro forma condensed consolidated statement of earnings gives effect to
the Merger as if it had occurred on January 1, 1997 and combines the historical
consolidated statement of earnings of Giant for the year ended December 31, 1997
with the historical consolidated statement of income for Holly for the twelve
months ended January 31, 1998. Holly's fiscal year end is July 31; therefore,
the historical information for Holly combines the first six months of its fiscal
year ending July 31, 1998 with the last six months of its fiscal year ended July
31, 1997.
The unaudited pro forma condensed consolidated financial statements are not
necessarily indicative of the results that actually would have occurred had the
Merger been consummated on the dates indicated or that may be obtained in the
future. The detailed assumptions used to prepare the unaudited pro forma
condensed consolidated financial statements are presented in the notes to the
unaudited pro forma condensed consolidated balance sheet and statement of
earnings. Pro forma adjustments are based upon preliminary estimates, available
information and certain assumptions that the managements of Giant and Holly deem
appropriate. Final adjustments may differ from the pro forma adjustments
presented herein.
The unaudited pro forma financial information does not give effect to the
anticipated cost savings and other synergies expected to result from the Merger
or the possible cash-out of existing stock options and phantom stock rights held
by executive officers of Giant that become fully vested by reason of the
adoption of the Merger Agreement by Giant stockholders. One-time integration
costs which may include severance and relocation expenses and any preacquisition
contingencies assumed by Giant in the Merger, if any, have not been reflected in
the pro forma financial information. Further, no pro forma adjustments or
reclassifications have been included that might be necessary should the holders
of Giant's Notes accept the Change of Control Offer required to be made pursuant
to Giant's Indentures.
The following unaudited pro forma condensed consolidated financial
statements should be read in conjunction with (i) the historical consolidated
financial statements of Giant and of Holly, including the respective notes
thereto, which are incorporated by reference in this Joint Proxy
Statement/Prospectus, and (ii) the selected consolidated historical financial
data of Giant and of Holly and the other pro forma financial data, including the
notes thereto, appearing elsewhere in this Joint Proxy Statement/Prospectus.
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<PAGE> 89
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
---------------------------
GIANT HOLLY
------------ -----------
DECEMBER 31, JANUARY 31, PRO FORMA PRO FORMA
1997 1998 ADJUSTMENTS CONSOLIDATED
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.............. $ 82,592 $ 3,177 $ (26,500)(1) $ 59,269
Accounts receivable, net............... 56,822 84,716 141,538
Income tax refunds receivable.......... 248 1,819 2,067
Inventories............................ 57,598 53,461 9,500(1) 120,559
Prepaid expenses and other............. 7,016 13,452 (6,554)(2) 13,914
Deferred income taxes.................. 2,800 2,800
-------- -------- --------- ----------
Total current assets................ 207,076 156,625 (23,554) 340,147
-------- -------- --------- ----------
Property, plant and equipment............ 402,600 300,952 95,316(1) 679,294
(143,630)(1)
24,056(2)
Less accumulated depreciation,
depletion and amortization.......... (120,773) (143,630) 143,630(1) (120,773)
-------- -------- --------- ----------
281,827 157,322 119,372 558,521
-------- -------- --------- ----------
Goodwill................................. 18,363 69,490(1) 87,853
Investment in joint venture.............. 6,371 6,129(1) 12,500
Other assets............................. 28,105 18,641 6,452(1) 34,907
(17,502)(2)
(789)(1)
-------- -------- --------- ----------
$535,371 $338,959 $ 159,598 $1,033,928
======== ======== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt...... $ 562 $ 10,775 $ 11,337
Borrowings under credit agreement...... 9,300 9,300
Accounts payable....................... 55,546 99,366 154,912
Accrued expenses....................... 39,243 14,126 $ (2,570)(1) 50,799
-------- -------- --------- ----------
Total current liabilities........... 95,351 133,567 (2,570) 226,348
-------- -------- --------- ----------
Long-term debt, net of current portion... 275,557 75,508 2,506(1) 353,571
Deferred income taxes.................... 25,887 23,012 46,669(1) 95,568
Other liabilities........................ 5,109 5,109
Stockholders' Equity:
Common stock........................... 122 87 110(1) 232
(87)(1)
Additional paid-in capital............. 72,699 6,132 219,755(1) 292,454
(6,132)(1)
Retained earnings...................... 73,256 101,222 (101,222)(1) 73,256
Treasury stock......................... (12,610) (569) 569(1) (12,610)
-------- -------- --------- ----------
133,467 106,872 112,993 353,332
-------- -------- --------- ----------
$535,371 $338,959 $ 159,598 $1,033,928
======== ======== ========= ==========
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated balance
sheet.
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<PAGE> 90
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
The following explanations describe the assumptions used in determining the
pro forma adjustments necessary to present the pro forma financial position of
the Combined Company after giving effect to the Merger.
(1) Records the Merger, which results in an excess of the purchase price
over the historical net assets acquired, which is allocated to the net assets
acquired and liabilities assumed, as follows:
<TABLE>
<S> <C>
Cash paid to Holly stockholders............................. $ 25,000
Cash paid for estimated transaction costs................... 1,500
Giant common stock (10,993,267 shares at $20 per share):
-- Par value.............................................. 110
-- Additional paid-in capital............................. 219,755
--------
Total purchase price........................................ 246,365
Elimination of historical stockholders' equity of Holly..... (106,872)
--------
Excess of purchase price over historical carrying value..... 139,493
Change in assets and liabilities resulting from preliminary
allocation of purchase price:
Estimated fair value of inventories......................... (9,500)
Estimated fair value of property, plant and equipment....... (95,316)
Estimated fair value of investment in joint venture......... (6,129)
Estimated fair value of benefit plan excess funding......... (6,452)
Elimination of deferred debt financing costs................ 789
Elimination of pension liability............................ (2,570)
Estimated fair value of long-term debt...................... 2,506
Deferred income taxes....................................... 46,669
--------
(70,003)
--------
Goodwill.................................................... $ 69,490
========
</TABLE>
(2) Records the reclassification of capitalized short-term and long-term
turnaround costs in order to conform Holly's classification to Giant's
classification of such costs in property, plant and equipment.
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS EXCEPT SHARES AND PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
------------------------- PRO FORMA PRO FORMA
GIANT HOLLY(1) ADJUSTMENTS CONSOLIDATED
----------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Net revenues.......................... $ 657,278 $ 656,204 $ (4,424)(3) $ 1,309,058
Cost of products sold................. 487,748 585,745 (73,505)(2) 995,564
(4,424)(3)
----------- ---------- ---------- -----------
Gross margin.......................... 169,530 70,459 73,505 313,494
----------- ---------- ---------- -----------
Operating expenses.................... 85,177 4,111 73,505(2) 162,793
Depreciation, depletion and
amortization........................ 23,991 21,461 (16,782)(5) 42,842
14,172(6)
Selling, general and administrative
expenses............................ 19,256 13,161 32,417
----------- ---------- ---------- -----------
Operating income...................... 41,106 31,726 2,610 75,442
Interest expense...................... (18,139) (8,845) 807(7) (26,177)
Interest and investment income........ 2,133 1,832 (1,250)(4) 2,715
Equity in earnings of joint venture... 1,323 1,323
----------- ---------- ---------- -----------
Earnings before income taxes.......... 25,100 26,036 2,167 53,303
Provision for income taxes............ 9,806 10,416 1,787(8) 22,009
----------- ---------- ---------- -----------
Net earnings.......................... $ 15,294 $ 15,620 $ 380 $ 31,294
=========== ========== ========== ===========
Earnings per common share -- basic.... $ 1.38 $ 1.89 $ 1.42
=========== ========== ===========
Weighted average number of shares
outstanding -- basic................ 11,050,853 8,253,514 2,739,753(9) 22,044,120
=========== ========== ========== ===========
Earnings per common share -- assuming
dilution............................ $ 1.37 $ 1.89 $ 1.41
=========== ========== ===========
Weighted average number of shares
outstanding -- assuming dilution.... 11,174,894 8,253,514 2,739,753(9) 22,168,161
=========== ========== ========== ===========
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated statement
of earnings.
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NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
The following explanations describe the assumptions used in determining the
pro forma adjustments necessary to present the pro forma results of operations
of the Combined Company for the year ended December 31, 1997:
(1) Represents the most recent twelve months of operations of Holly
from February 1, 1997 through January 31, 1998.
(2) Represents the reclassification of certain refinery operating
expenses included in Holly's cost of products sold to conform the financial
presentation of Giant.
(3) Represents the elimination of intercompany sales from Holly to
Giant.
(4) Represents the elimination of interest income earned on cash
equivalents used to acquire Holly.
(5) Represents the reversal of Holly's historical depreciation and
amortization expense on property, plant and equipment, excluding oil and
gas properties.
(6) Represents estimated depreciation and amortization expense of the
Combined Company arising from purchase accounting adjustments as follows:
<TABLE>
<CAPTION>
AMORTIZATION
ASSETS PERIOD
------ ------------
<S> <C> <C>
Property, plant and equipment.............. 20 to 30 years $11,872
Goodwill................................... 30 years 2,300
-------
$14,172
=======
</TABLE>
(7) Represents reduction of interest expense as a result of purchase
accounting adjustments.
(8) Represents the income tax effect on the income of the Combined
Company resulting from the Merger and the purchase accounting adjustments,
excluding the impact of nondeductible goodwill amortization, using a
blended statutory rate of 40%.
(9) Represents the effect of the exchange of each share of Holly
common stock for 1.33 shares of Giant common stock.
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APPROVAL OF THE INCENTIVE PLAN
INTRODUCTION
Holly and Giant have agreed to develop a stock incentive plan for the
Combined Company that will include awards such as stock options, stock
appreciation rights and restricted shares. On April 14, 1998, the Giant Board
approved the Incentive Plan, subject to approval by Giant's stockholders at the
Giant Special Meeting and the consummation of the Merger, as the Giant
Industries, Inc. 1998 Stock Incentive Plan. The following summary of the
Incentive Plan is qualified in its entirety by reference to the text of the
Incentive Plan, a copy of which is attached to this Joint Proxy
Statement/Prospectus as Appendix H. As of , 1998, the closing
price on the NYSE of a share of Giant Common Stock (the security underlying
awards granted under the Incentive Plan) was $ .
VOTE REQUIRED
The approval of the Incentive Plan requires the affirmative vote of the
holders of a majority of the shares of Giant Common Stock present or represented
by proxy and entitled to vote at the Giant Special Meeting. The consummation of
the Merger is not a condition to the effectiveness of the Incentive Plan.
Stockholder approval of the Incentive Plan is required to comply with the
conditions for the qualified performance-based compensation exception from
Section 162(m) of the Code, which in certain circumstances limits annual
deductible compensation to senior executive officers to $1 million, to meet NYSE
requirements and to meet the requirements for incentive stock options contained
in Section 422 of the Code. Stockholder approval of the adoption of the
Incentive Plan is not, however, a condition to the consummation of the Merger.
THE GIANT BOARD RECOMMENDS THAT GIANT STOCKHOLDERS VOTE "FOR" APPROVAL OF
THE INCENTIVE PLAN.
PURPOSE
The Incentive Plan will assist Giant (the Combined Company after the
consummation of the Merger) in the recruitment, retention and motivation of
officers and other key employees and consultants who are highly qualified and in
a position to make material contributions to its success. The Incentive Plan is
intended to offer these individuals a significant incentive through awards of
Incentive Stock Options, Nonqualified Options, Stock Appreciation Rights (tandem
and free-standing), Restricted Shares, Performance Units or Performance Shares.
SUMMARY OF THE PROVISIONS OF THE INCENTIVE PLAN
The description of the Incentive Plan set forth below is a summary only and
is qualified in its entirety by reference to the text of the Incentive Plan
attached as Appendix H to this Joint Proxy Statement/Prospectus. Capitalized
terms not otherwise defined shall have the meanings assigned to such terms in
the Incentive Plan.
ELIGIBILITY AND PARTICIPATION. Participants in the Incentive Plan are
selected by the Board of Directors or the Compensation Committee of the Board of
Directors of Giant. The Incentive Plan contemplates that awards will be granted
from time to time to officers (who may also be serving as directors), key
employees and certain consultants and advisors of Giant. The approximate number
of persons currently eligible to participate in the Incentive Plan is
employees and four directors (assuming the consummation of the Merger). Only
employees of Giant are eligible for Incentive Stock Options, but employees,
consultants and advisors of Giant are eligible for Nonqualified Options.
Usually, the only consideration received by Giant for the grant of an award will
be past services and/or the expectation of future services. The Incentive Plan
does not confer on any Participant any right with respect to continued
employment or other service to Giant and will not interfere in any manner with
the right of Giant to terminate a Participant's employment or other service at
any time.
ADMINISTRATION. The Incentive Plan is administered either by the full
Board of Directors or by the Compensation Committee of the Board. For the
purposes of this summary, the terms "Compensation Committee" and "Board" are
used interchangeably. The Compensation Committee is authorized to (i) select
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Participants in the Incentive Plan, (ii) determine the type and amount of
awards, including the number of shares of Giant Common Stock covered by any
awards, (iii) determine the vesting and exercise provisions of awards, (iv)
determine whether, when and to what extent awards are to be made, subject to the
restrictions of the Incentive Plan, (v) determine the terms and conditions of
any award, (vi) adjust the terms and conditions of any award, unless otherwise
prohibited or restricted under the Incentive Plan, (vii) prescribe forms, (viii)
issue Giant Common Stock within the provisions of the Incentive Plan, (ix)
assist any Participant in the exercise of one or more awards, (x) determine to
what extent and under what circumstances loans extended under any financial
assistance arrangement would be forgiven by Giant in whole or in part, (xi)
accelerate the benefits of an award in the event of a Corporate Transaction or
Change of Control, as defined below, or in the event of termination of
employment or consulting services by reason of death, disability, normal
retirement, early retirement with the consent of Giant, entry into public or
military service with a related leave of absence from Giant, hardship or other
special circumstances, (xii) make such adjustments in the number, option prices
and kind of shares or other rights covered by outstanding awards or otherwise
issuable under the Incentive Plan, to be equitably required in order to prevent
dilution or expansion of the rights of Participants that otherwise would result
from any stock dividend, stock split, exchange or combination of shares,
recapitalization or other change in the capital structure of Giant, merger,
consolidation, spin-off, split-off, split-up, reorganization, liquidation of
assets or issuance of warrants in any corporate transaction, (xiii) interpret
the provisions of the Incentive Plan and any award issued thereunder, and (xiv)
delegate certain decisions to officers of Giant, provided that no delegation may
be made that would cause any award to cease to be exempt from Section 16(b) of
the Exchange Act. All determinations by the Compensation Committee are final and
binding. The Board of Directors has the authority to designate a special
"Executive Compensation Committee" to administer part or all of the Incentive
Plan in place of the Compensation Committee if the Board of Directors
determines, based on advice of counsel, that such administration by an Executive
Compensation Committee is necessary to comply with the requirements of Rule
16b-3 of the Exchange Act or any successor provision.
AMENDMENT AND TERMINATION. The Compensation Committee may amend the
Incentive Plan; provided, however, that no such amendment may increase the
maximum number of shares of Giant Common Stock, Performance Units or SARs
issuable in the aggregate or to any one Participant, or cause the Incentive Plan
to cease to satisfy any applicable condition of Rule 16b-3 of the Exchange Act,
without the approval of the Stockholders. The Incentive Plan will terminate on
the earlier of the tenth anniversary of its effective date or the date on which
all awards available for issuance during the last year of the Incentive Plan
shall have been issued or canceled.
LIMITATIONS ON AWARDS. The number of shares reserved for issuance pursuant
to awards granted under the Incentive Plan during 1998 shall be 440,000 shares
of Giant Common Stock plus an additional 999,495 shares of Giant Common Stock
for the grant of substituted options to the holders of options to acquire Holly
Common Stock assumed by Giant in the Merger. Thereafter, commencing January 1,
1999 and continuing through the term of the Plan, 2% of the total number of
shares of Giant Common Stock outstanding as of the first day of each such
calendar year shall be available for grant. No grants or awards are required to
be made during any calendar year. Shares of Giant Common Stock not used for
grants or awards in any calendar year would not be carried over into the
following year. In no event shall the total number of shares of Giant Common
Stock covered by grants and awards or the number of Stock Appreciation Rights or
Performance Units to any one individual exceed 75,000 per year or 750,000 over
the term of the Incentive Plan. In addition, the total number of Performance
Units granted to all participants under the Incentive Plan may not exceed
750,000. No Incentive Stock Option, Nonqualified Option or Free-standing Stock
Appreciation Right may be exercised more than 10 years from the date of grant.
PRICING AND PAYMENT OF OPTIONS. The per-share exercise price of each stock
option granted under the Incentive Plan will be established by the Compensation
Committee at the time of award. Subject to the provisions of the Code, stock
option grants to Participants may be either Incentive Stock Options or
Nonqualified Stock Options. In the case of an Incentive Stock Option, the per
share exercise price may be no less than 100% of the fair market value of a
share of Giant Common Stock on the date of grant (110% in the case of an
optionee who owns, directly or indirectly, 10% or more of the outstanding voting
power of all classes
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of stock of Giant). In the case of a Nonqualified Stock Option, the per share
exercise price may be no less than 85% of the fair market value of the Giant
Common Stock on the date of grant. With respect to Incentive Stock Options, the
aggregate market value of the Giant Common Stock for which one or more options
granted to any optionee may become exercisable during any one calendar year may
not exceed $100,000.
Under the Incentive Plan, the purchase price of an option is payable upon
exercise (i) in cash, (ii) in nonforfeitable, unrestricted Giant Common Stock
already owned by a Participant, (iii) through a sale and remittance procedure by
which a Participant delivers concurrent written instructions to a
Company-designated brokerage firm to immediately sell the purchased Giant Common
Stock and remit to Giant sufficient funds to pay for the options exercised and
by which Giant delivers the certificates for the purchased Giant Common Stock
directly to the brokerage firm, or (iv) in any other legal consideration that
the Compensation Committee may deem appropriate. For a Nonqualified Option, a
grant may also provide that payment may be made in the form of Restricted Shares
subject to risk of forfeiture or restrictions on transfer, provided that such
risks of forfeiture and restrictions on transfer shall apply to the same number
of shares of Giant Common Stock received by the Participant as applied to the
forfeitable or restricted Giant Common Stock surrendered by the Participant.
The Compensation Committee may, in its discretion, assist any Participant
in the exercise of one or more awards under the Incentive Plan, including the
satisfaction of any federal, state, local and foreign income and employment tax
obligations arising therefrom, by extending a loan to such Participant, by
permitting the Participant to pay the exercise price in installments or by
granting a cash bonus to the Participant to permit the Participant to pay tax
obligations. Loans or installment payments may be authorized either with or
without collateral; however, the maximum loan or installment available may not
exceed the exercise price (less the par value of such Giant Common Stock) plus
applicable federal, state and local income and employment tax obligations
incurred by the Participant in connection with the acquisition. In addition, the
Compensation Committee at its discretion may forgive one or more loans extended
to a Participant (but not that portion of a loan equal to the par value of the
Giant Common Stock acquired).
Under the Incentive Plan, a stock option grant may provide for the
automatic grant to a participant of Reload Option Rights upon the exercise of
Incentive Stock Options or Nonqualified Options, provided that the term of any
Reload Option Right shall not extend beyond the term of the option originally
exercised.
Incentive Stock Options. Incentive Stock Options, within the meaning of
Section 422 of the Code ("ISOs"), may be granted at the discretion of the
Compensation Committee under the Incentive Plan. No provision of the Incentive
Plan relating to ISOs may be interpreted or authority exercised so as to
disqualify the awards or the Incentive Plan under Section 422 of the Code.
STOCK APPRECIATION RIGHTS. Stock Appreciation Rights ("SARs") may be
granted under the Incentive Plan either in tandem with an ISO or Nonqualified
Option, or free-standing. A Tandem SAR permits the Participant to receive, upon
exercise of the SAR, cash and/or Giant Common Stock at the discretion of the
Participant or Compensation Committee in accordance with the grant, equal in
value to the excess of the then per share fair market value on the date of
exercise over the per share purchase price of the ISO or Nonqualified Option to
which it relates multiplied by the number of shares as to which such SAR is
being exercised. Upon the exercise of a Tandem SAR, the related ISO or
Nonqualified Option shall be canceled to the extent of the number of shares as
to which the SAR is exercised, and upon the exercise of an ISO or Nonqualified
Option, the Tandem SAR relating to such option shall be canceled to the extent
of the number of shares as to which the ISO or Nonqualified Option is exercised.
A Free-standing SAR permits the Participant to receive, upon exercise of the
SAR, cash equal to the excess of the then per share fair market value of Giant
Common Stock over the exercise price per share, multiplied times the equivalent
number of shares covered by the SAR.
EXERCISABILITY OF ISOS, NONQUALIFIED OPTIONS AND SARS. The Compensation
Committee has the authority to determine the vesting and exercise provisions of
all awards granted under the Incentive Plan. Special exercise rules apply, as
described below, for the exercisability of Incentive Stock Options after
termination of employment or permanent and total disability.
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The Compensation Committee, in its sole discretion, may accelerate the
benefits of any award under the Incentive Plan in the event of a Corporate
Transaction or Change of Control, with such acceleration rights being granted in
connection with an award pursuant to an agreement evidencing the same or at any
time after an award has been granted to a Participant. "Corporate Transaction"
means (i) a merger or consolidation in which Giant is not the surviving entity,
except for a transaction the principal purpose of which is to change the state
in which Giant is incorporated, (ii) the sale, transfer or other disposition of
all or substantially all of the assets of Giant in complete liquidation or
dissolution of Giant, or (iii) any reverse merger in which Giant is the
surviving entity but in which securities possessing more than 50% of the total
combined voting power of Giant's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such merger. "Change of Control" means a change in
ownership or control of Giant either by (i) the direct or indirect acquisition
by any person or related group of persons other than Giant or a person that
directly or indirectly controls, is controlled by, or is under common control
with, Giant of beneficial ownership (within the meaning of Rule 13d-3 of the
Exchange Act) of securities possessing more than 50% of the total combined
voting power of Giant's outstanding securities pursuant to a tender or exchange
offer made directly to Giant's Stockholders or other transaction, in each case
which Giant's Board of Directors does not recommend such Stockholders to accept;
or (ii) a change in the composition of Giant's Board of Directors over a period
of 36 consecutive months or less such that a majority of the Board members
(rounded up to the next whole number) ceases, by reason of one or more contested
elections for Board membership, to be comprised of individuals who either have
been Board members continuously since the beginning of such period or have been
elected or nominated for election as Board members during such period by at
least a majority of the Board members continuously serving at the beginning of
such period who were still in office at the time such election or nomination was
approved by the Board.
RESTRICTED SHARES. The Incentive Plan permits the Compensation Committee
to grant or sell shares of Giant Common Stock to Participants with a
"substantial risk of forfeiture" within the meaning of Section 83 of the Code
for a period to be determined by the Compensation Committee as of the date of
the award. Each grant or sale will constitute an immediate transfer of the
ownership of Giant Common Stock to the Participant in consideration of the
performance of services, permitting such Participant to have dividend, voting
and other ownership rights, subject to the substantial risk of forfeiture and
restrictions on transfer adopted at the date of the award. The Giant Common
Stock subject to the restrictions may not be sold, assigned, transferred,
pledged or otherwise encumbered, and any dividends or other distributions paid
on the Restricted Shares will be sequestered and reinvested on an immediate or
deferred basis.
PERFORMANCE SHARES AND PERFORMANCE UNITS. Under the Incentive Plan, the
Compensation Committee may award Performance Shares and/or Performance Units,
which shall become payable to a Participant upon the achievement of specific
performance objectives established by the Compensation Committee. Each grant
shall specify the number of available Performance Shares or Performance Units, a
Performance Period and Management Objectives that must be achieved by the
Participant, which may be described in terms of Company-wide objectives or
objectives that are related to the performance of the individual Participant or
the division, business unit, subsidiary, department or function with respect to
which the Participant is employed or provides consulting services.
RESTRICTIONS ON RESALE. No person who acquires shares of Giant Common
Stock under the Incentive Plan may, during any period of time that such person
is an "affiliate" of Giant within the meaning of the rules and regulations of
the Securities and Exchange Commission under the Securities Act, offer to sell
such shares of Giant Common Stock unless such offer and sale is made (i)
pursuant to an effective registration statement under the Securities Act, or
(ii) pursuant to an appropriate exemption from the registration requirements of
the Securities Act, such as are set forth in Rule 144 promulgated thereunder.
Under Section 16 of the Exchange Act, any person who is a beneficial owner
of more than 10% of any equity security of Giant registered under the Exchange
Act (such as Giant Common Stock), or an executive officer or director of Giant,
is deemed to be an "affiliate" of Giant and may be liable to Giant for any
profit realized from any sale of Giant Common Stock or any other equity security
of Giant within a period of less than six months before or after any purchase of
an equity security of Giant, irrespective of the intention on the part of such
person in entering into the transaction.
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FEDERAL INCOME TAX CONSIDERATIONS. The discussion that follows is a
summary, based upon current law, of some of the significant federal income tax
considerations relating to awards under the Incentive Plan. The following
discussion does not address state, local or foreign tax consequences.
A Participant will not recognize taxable income upon the grant or exercise
of an ISO except under certain circumstances when the exercise price is paid
with already-owned shares of Giant Common Stock that were acquired through the
previous exercise of an ISO. However, upon the exercise of an ISO, the excess of
the fair market value of the shares received on the date of exercise over the
exercise price of the shares will be treated as a tax preference item for
purposes of the alternative minimum tax. In order for the exercise of an ISO to
qualify for the foregoing tax treatment, the Participant generally must be an
employee of Giant from the date the ISO is granted through the date three months
before the date of exercise, except in the case of death or disability, where
special rules apply. Giant will not be entitled to any deduction with respect to
the grant or exercise of an ISO.
If shares acquired upon exercise of an ISO are not disposed of by the
Participant within two years from the date of grant or within one year after the
transfer of such shares to the Participant (the "ISO Holding Period"), then (i)
no amount will be reportable as ordinary income with respect to such shares by
the Participant and (ii) Giant will not be allowed a deduction in connection
with such ISO or the Giant Common Stock acquired pursuant to the exercise of the
ISO. If a sale of such Giant Common Stock occurs after the ISO Holding Period
has expired, then any amount recognized in excess of the exercise price will be
reportable as a long-term capital gain, and any amount recognized below the
exercise price will be reportable as a long-term capital loss. The exact amount
of tax payable on a long-term capital gain will depend upon the tax rates in
effect at the time of the sale. The ability of a Participant to utilize a
long-term capital loss will depend upon the Participant's other tax attributes
and the statutory limitations on capital loss deductions not discussed herein.
To the extent that alternative minimum taxable income was recognized on exercise
of the ISO, the basis in the Giant Common Stock acquired may be higher for
determining a long-term capital gain or loss for alternative minimum tax
purposes.
A "disqualifying disposition" will result if Giant Common Stock acquired
upon the exercise of an ISO (except in the circumstances of a decedent's ISO as
described below) is sold before the ISO Holding Period has expired. In such
case, at the time of a disqualifying disposition (except in the case of a
Participant subject to restrictions under Section 16 of the Exchange Act, as
noted below), the Participant will recognize ordinary income in the amount of
the difference between the exercise price and the lesser of (i) the fair market
value on the date of exercise or (ii) the amount realized on disposition. If the
amount realized on the sale is less than the exercise price, then the
Participant will recognize no ordinary income, and the recognized loss will be
reportable as a short-term capital loss. The Participant will report as a
short-term capital gain, as applicable, any amount recognized in excess of the
fair market value on the date of exercise, and Giant will be allowed a deduction
on its federal income tax return in the year of the disqualifying disposition
equal to the ordinary income recognized by the Participant. To the extent that
alternative minimum taxable income was recognized on exercise of the ISO, the
basis in the Giant Common Stock acquired may be higher for determining a short-
term capital gain or loss for alternative minimum tax purposes.
The general rules discussed above are different if the Participant disposes
of the shares of Giant Common Stock in a disqualifying disposition in which a
loss, if actually sustained, would not be recognized by the Participant.
Examples of these dispositions include gifts or sales to related parties such as
members of the Participant's family and corporations or entities in which the
Participant owns a majority equity interest. In such circumstances, the
Participant would recognize ordinary income equal to the difference between the
exercise price of the Giant Common Stock and the fair market value of the Giant
Common Stock on the date of exercise. The amount of ordinary income would not be
limited by the price at which the Giant Common Stock was actually sold by the
Participant.
If the Participant retires or otherwise terminates employment with Giant,
other than by reason of death or permanent and total disability, an ISO must be
exercised within three months of such termination in order to be eligible for
the tax treatment of the ISOs described above, provided the ISO Holding Period
requirements are met. If a Participant terminates employment because of a
permanent and total disability, the ISO will be
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eligible for such treatment if it is exercised within one year of the date of
termination of employment, provided the ISO Holding Period requirements are met.
In the event of a Participant's death, the ISO will be eligible for such
treatment if exercised by the Participant's legatees, personal representatives
or distributees within one year from the date of death, provided that the death
occurred while the Participant was employed, within three months of the date of
termination of employment or within one year following the date of termination
of employment because of permanent and total disability.
In general, a Participant to whom a Nonqualified Option is granted will
recognize no taxable income at the time of the grant. Upon exercise of a
Nonqualified Option, the Participant will recognize ordinary income in an amount
equal to the amount by which the fair market value of the Giant Common Stock on
the date of exercise exceeds the exercise price of the Nonqualified Option, and
Giant will generally be entitled to a deduction equal to the ordinary income
recognized by the Participant in the year the Participant recognizes ordinary
income, subject to the limitations of Section 162(m) of the Code.
For purposes of the alternative minimum tax applicable to individuals, the
exercise of an ISO is treated in the same manner as the exercise of a
Nonqualified Option. Thus, a Participant must, in the year of option exercise,
include the difference between the exercise price and the fair market value of
the stock on the date of exercise in alternative minimum taxable income. The
alternative minimum tax is imposed upon an individual's alternative minimum
taxable income currently, but only to the extent that such tax exceeds the
taxpayer's regular income tax liability for the taxable year.
With regard to an SAR, a Participant will not recognize income when an SAR
is granted. Upon exercise of an SAR, the Participant will recognize as ordinary
income the amount of cash and/or the fair market value of any Giant Common Stock
received. Shares of Giant Common Stock received upon exercise of an SAR will
have a tax basis equal to their fair market value on the date received. On the
disposition of such shares, any additional gain or any loss recognized will be a
capital gain or loss, and will be a long-term gain or loss if the shares are
held for more than one year, with a lower maximum rate applicable if the holding
period exceeds 18 months.
For Performance Shares, no taxable income is recognized by the Participant
upon the grant of a Performance Share award. The Participant must recognize as
ordinary income the fair market value of any shares of Giant Common Stock
actually earned in accordance with the terms of the Performance Share award.
Special rules apply to affiliates of Giant. On the disposition by the
Participant of any Giant Common Stock received pursuant to a Performance Share
award, any additional gain or loss recognized will be a capital gain or loss,
and will be a long-term gain or loss if the shares are held for more than one
year, with a lower maximum rate applicable if the holding period exceeds 18
months.
For Performance Units, if payments are made in cash, the Participant incurs
ordinary income when payment is made, and Giant will be entitled to a deduction
equal to the ordinary income recognized by the Participant in the year the
Participant recognizes ordinary income.
With regard to Restricted Stock, neither Giant nor the Participant
receiving a Restricted Stock Award will realize any federal tax consequences at
the time the award is granted. If, however, the Participant makes a Section
83(b) election under the Code within 30 days of the date of the grant, then
special rules will apply. A Participant who is granted Restricted Stock may make
a Section 83(b) election, within 30 days of the grant, to have the grant taxed
as compensation income at the date of receipt, with the result that any future
appreciation or depreciation in the value of the shares of Giant Common Stock
granted shall be taxed as a capital gain or loss upon a subsequent sale of the
Giant Common Stock. Giant will be entitled to deduct as a compensation expense
the same amount as the Participant is required to recognize as ordinary income
in the same year as the Participant includes the amount in income for federal
tax purposes, subject to the limitations set forth in Section 162(m) of the
Code. If a Participant does not make a Section 83(b) election, then the grant
will be taxed as compensation income at the fair market value on the date the
restrictions lapse. If a Section 83(b) election is made and the Giant Common
Stock is subsequently forfeited, a loss is not allowed.
Giant is required to withhold certain income taxes from Participants upon
exercises of Nonqualified Options, SARs, Performance Shares and Performance
Units or the lapsing of restrictions or time periods for
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Restricted Shares or Deferred Shares. Giant will be entitled to a business
expense deduction for federal income tax purposes equal to the ordinary income
recognized by the Participant in the year the Participant recognizes ordinary
income from the exercise of Nonqualified Options, SARs, Performance Shares and
Performance Units.
In addition to the foregoing federal tax consequences, the exercise,
ultimate sale or other disposition of awards by Participants will in most cases
be subject to state income taxation.
NEW PLAN BENEFITS
Because awards under the Incentive Plan will be granted at the sole
discretion of the Compensation Committee, benefits under the Incentive Plan are
not determinable.
EXPERTS
The consolidated financial statements and the related financial statement
schedule incorporated in this Joint Proxy Statement/Prospectus and the
Registration Statement by reference from Giant's Annual Report on Form 10-K for
the year ended December 31, 1997, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports which are incorporated herein
by reference and have been so incorporated in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
The consolidated financial statements of Holly appearing in Holly's Annual
Report on Form 10-K for the year ended July 31, 1997, incorporated by reference
in this Joint Proxy Statement/Prospectus and the Registration Statement, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
Representatives of Deloitte & Touche LLP and Ernst & Young LLP are expected
to be present at the Giant Special Meeting and the Holly Special Meeting,
respectively, will have the opportunity to make a statement if they desire to do
so and will be available to respond to appropriate questions.
LEGAL MATTERS
The validity of the shares of Giant Common Stock being offered hereby will
be passed upon for Giant by Fennemore Craig, P.C., Phoenix, Arizona, counsel to
Giant.
Certain federal income tax consequences of the Merger will be passed upon
by W. John Glancy, Esq, Dallas, Texas, counsel to Holly and a designee of Holly
to serve on the Board of Directors of the Combined Company. Mr. Glancy owns 200
shares of Holly Common Stock. Fees for legal services provided by Mr. Glancy to
Holly during Holly's current fiscal year are expected to total approximately
$ through the date of the Merger. Mr. Glancy may render legal services
from time to time to the Combined Company after the completion of the Merger.
STOCKHOLDER PROPOSALS
Proposals of stockholders of Giant intended to be presented at Giant's
annual meeting of stockholders to be held in 1999 must be received by Giant no
later than November 30, 1998 to be considered for inclusion in the Giant proxy
statement and form of proxy related to the Giant 1999 annual meeting.
If the Merger is not consummated, proposals of stockholders of Holly
intended to be presented at Holly's next annual meeting of stockholders must be
received by Holly no later than July 6, 1998 to be considered for inclusion in
the Holly proxy statement and form of proxy related to such meeting.
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OTHER MATTERS
The managements of Holly and Giant do not know of any other matters
intended to be presented for stockholder action at their respective meetings. If
any other matter does properly come before either of the meetings and is put to
a stockholder vote, the proxies solicited hereby will be voted in accordance
with the judgment of the proxyholders named thereon.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
HOLLY CORPORATION
AND
GIANT INDUSTRIES, INC.
DATED AS OF APRIL 14, 1998
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TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C> <C>
ARTICLE I.......................................................... A-4
1.01. The Merger.................................................. A-4
1.02. Closing..................................................... A-4
1.03. Effective Time.............................................. A-4
1.04. Effects of the Merger....................................... A-4
1.05. Certificate of Incorporation and Bylaws..................... A-4
1.06. Directors and Officers...................................... A-5
ARTICLE II......................................................... A-5
2.01. Effect on Capital Stock..................................... A-5
2.02. Exchange.................................................... A-6
ARTICLE III........................................................ A-8
3.01. Representations and Warranties of Holly..................... A-8
3.02. Representations and Warranties of Giant..................... A-13
ARTICLE IV......................................................... A-18
4.01. Conduct of Business......................................... A-18
4.02. No Solicitation by Holly.................................... A-22
4.03. No Solicitation By Giant.................................... A-23
ARTICLE V.......................................................... A-25
5.01. Preparation of the Form S-4 and the Joint Proxy Statement;
Stockholders Meetings....................................... A-25
5.02. Letters of Holly's Accountants.............................. A-25
5.03. Letters of Giant's Accountants.............................. A-25
5.04. Access to Information; Confidentiality...................... A-26
5.05. Reasonable Efforts.......................................... A-26
5.06. Stock Options and Phantom Stock Rights...................... A-27
5.07. Certain Employee Matters.................................... A-29
5.08. Indemnification, Exculpation and Insurance.................. A-29
5.09. Fees and Expenses........................................... A-29
5.10. Public Announcements........................................ A-30
5.11. NYSE Listing................................................ A-30
5.12. Transfer Taxes, Etc. ....................................... A-31
5.13. Tax Treatment............................................... A-31
5.14. Indemnification Agreements.................................. A-31
5.15. Certain Tax Matters......................................... A-31
ARTICLE VI......................................................... A-31
6.01. Conditions to Each Party's Obligation to Effect the
Merger...................................................... A-31
6.02. Conditions to Obligations of Giant.......................... A-32
6.03. Conditions to Obligation of Holly........................... A-33
6.04. Frustration of Closing Conditions........................... A-33
ARTICLE VII........................................................ A-33
7.01. Termination................................................. A-33
7.02. Effect of Termination....................................... A-34
7.03. Amendment................................................... A-34
7.04. Extension; Waiver........................................... A-34
7.05. Procedure for Termination, Amendment, Extension or Waiver... A-35
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE VIII....................................................... A-35
8.01. Nonsurvival of Representations and Warranties............... A-35
8.02. Notices..................................................... A-35
8.03. Definitions................................................. A-36
8.04. Interpretation.............................................. A-38
8.05. Counterparts................................................ A-38
8.06. Entire Agreement; No Third-Party Beneficiaries.............. A-38
8.07. Governing Law............................................... A-38
8.08. Assignment.................................................. A-38
8.09. Enforcement................................................. A-38
</TABLE>
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement"), dated as of April 14,
1998, is by and between HOLLY CORPORATION, a Delaware corporation ("Holly"), and
GIANT INDUSTRIES, INC., a Delaware corporation ("Giant").
RECITALS
A. The respective Boards of Directors of Giant and Holly have approved the
merger of Holly with and into Giant (the "Merger"), upon the terms and subject
to the conditions set forth in this Agreement, whereby each issued and
outstanding share of common stock, par value $.01 per share, of Holly ("Holly
Common Stock"), other than shares owned by Giant, Holly or any of their
wholly-owned subsidiaries, will be converted into the right to receive the
Merger Consideration (as defined in Section 2.01(b)).
B. The respective Boards of Directors of Giant and Holly have each
determined that the Merger and the other transactions contemplated by this
Agreement are consistent with, and in furtherance of, their respective business
strategies and goals.
C. Giant and Holly desire to make certain representations, warranties,
covenants and agreements in connection with the Merger and also to prescribe
various conditions to the Merger.
D. For federal income tax purposes, it is intended that the Merger will
qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
AGREEMENTS
ARTICLE I
THE MERGER
1.01. The Merger. Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with the Delaware General Corporation Law
(the "DGCL"), Holly shall be merged with and into Giant at the Effective Time
(as defined in Section 1.03). Following the Effective Time, Giant shall be the
surviving corporation (the "Surviving Corporation") and shall succeed to and
assume all the rights and obligations of Holly in accordance with the DGCL.
1.02. Closing. The closing of the Merger (the "Closing") will take place
at 10:00 a.m. on a date to be specified by the parties (the "Closing Date"),
which (subject to satisfaction or waiver of the conditions set forth in Sections
6.02 and 6.03) shall be no later than the second business day after satisfaction
or waiver of the conditions set forth in Section 6.01, unless another time or
date is agreed to by the parties. The Closing will be held at such location in
the City of Phoenix, Arizona as is agreed to by the parties.
1.03. Effective Time. Subject to the provisions of this Agreement, as
soon as practicable on or after the Closing Date, the parties shall file a
certificate of merger or other appropriate documents (in any such case, the
"Certificate of Merger"), executed in accordance with the relevant provisions of
the DGCL, and shall make all other filings or recordings required under the
DGCL. The Merger shall become effective at such time as the Certificate of
Merger is duly filed with the Delaware Secretary of State, or at such subsequent
date or time as Giant and Holly shall agree and specify in the Certificate of
Merger (the time the Merger becomes effective being hereinafter referred to as
the "Effective Time").
1.04. Effects of the Merger. The Merger shall have the effects set forth
in Section 259 of the DGCL.
1.05. Certificate of Incorporation and Bylaws.
(a) The certificate of incorporation of Giant, as in effect immediately
prior to the execution of this Agreement, shall be amended and restated as of
the Effective Time as set forth in Exhibit A and, as so
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amended and restated, such certificate of incorporation shall be the certificate
of incorporation of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable law.
(b) The bylaws of Giant, as in effect immediately prior to the execution
of this Agreement, shall be amended and restated as of the Effective Time as set
forth in Exhibit B and, as so amended and restated, such bylaws shall be the
bylaws of the Surviving Corporation until thereafter changed or amended as
provided therein or by applicable law.
1.06. Directors and Officers. Giant shall cause the Board of Directors
and officers of Giant immediately prior to the effective time to resign. The
Board of Directors (including classes thereof) and senior officers of the
Surviving Corporation shall be as set forth in Exhibit C until the earlier of
the resignation or removal of any individual listed on or designated in
accordance with Exhibit C or until their respective successors are duly elected
and qualified, as the case may be, it being agreed that if any director shall be
unable to serve as a director at the Effective Time, the party which designated
such individual as indicated in Exhibit C shall designate another individual to
serve in such individual's place. If any officer listed on or appointed in
accordance with Exhibit C ceases to be a full-time employee of either Holly or
Giant prior to the Effective Time, the parties will agree upon another person to
serve in such person's stead. The committees of the Board of Directors of the
Surviving Corporation will be elected by the Board of Directors in accordance
with the bylaws as amended and restated.
1.07 Surviving Corporation's Headquarters. The Surviving Corporation's
headquarters will be in Scottsdale, Arizona. In addition, the Surviving
Corporation will maintain an office in Dallas, Texas.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.01. Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of Holly
Common Stock or on the part of the holder of any shares of common stock, par
value $.01 per share, of Giant ("Giant Common Stock"):
(a) Cancellation of Treasury Stock and Giant-Owned Stock. Each share,
if any, of Holly Common Stock that is owned by Holly or by any wholly-owned
subsidiary of Holly shall automatically be canceled and retired and shall cease
to exist, and no consideration shall be delivered in exchange therefor.
(b) Conversion of Holly Common Stock. Subject to Sections 2.02(e) and
(j), all of the issued and outstanding shares (other than shares to be canceled
in accordance with Section 2.01(a)) of Holly Common Stock shall be converted, in
the aggregate, into the right to receive (i) that number of fully paid and
nonassessable shares of Giant Common Stock equal to the number of shares of
Giant Common Stock issued and outstanding immediately before the Effective Time
and (ii) cash in an amount equal to $25,000,000 multiplied by a fraction, the
numerator of which is the number of issued and outstanding shares of Holly
Common Stock immediately before the Effective Time and the denominator of which
is the sum of (A) the number of issued and outstanding shares of Holly Common
Stock immediately before the Effective Time, (B) the number of shares of Holly
Common Stock subject to Holly stock options (whether vested or unvested)
outstanding immediately before the Effective Time and (C) the number of Holly
phantom stock rights outstanding immediately before the Effective Time (with the
consideration described in clauses (i) and (ii) collectively referred to as the
"Merger Consideration"). Accordingly, each issued and outstanding share of Holly
Common Stock (other than shares to be canceled in accordance with Section
2.01(a)) shall be converted into the right to receive a fraction of the Merger
Consideration equal to one divided by the number of shares of Holly Common Stock
(other than shares to be canceled in accordance with Section 2.01(a), and
assuming no exercise, conversion or exchange of outstanding in-the-money
options, warrants and other rights to acquire Holly Common Stock) issued and
outstanding immediately before the Effective Time. As of the Effective Time, all
such shares of Holly Common Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such shares of Holly Common Stock shall cease
to have any rights with respect thereto, except the right to receive the
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Merger Consideration and any cash in lieu of fractional shares of Giant Common
Stock to be issued or paid in consideration therefor upon surrender of such
certificate in accordance with Section 2.02, without interest.
2.02. Exchange.
(a) Exchange Agent. As of the Effective Time, Giant shall enter into an
agreement with such bank or trust company as may be designated by Giant and
Holly (the "Exchange Agent"), which shall provide that Giant shall deposit with
the Exchange Agent as of the Effective Time, for the benefit of the holders of
shares of Holly Common Stock and for exchange in accordance with this Article
II, through the Exchange Agent, the Merger Consideration (such shares of Giant
Common Stock, together with any dividends or distributions with respect thereto
with a record date after the Effective Time, any cash payable in lieu of any
fractional shares of Giant Common Stock, and the cash portion of the Merger
Consideration being hereinafter referred to as the "Exchange Fund") issuable
pursuant to Section 2.01 in exchange for issued and outstanding shares of Holly
Common Stock.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Holly Common Stock (the "Certificates") whose
shares were converted into the right to receive the Merger Consideration
pursuant to Section 2.01, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as Giant and Holly may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed, and such other documents as reasonably may be
required by the Exchange Agent, the holder of such Certificate shall be entitled
to receive in exchange therefor a certificate representing that number of whole
shares of Giant Common Stock and cash which such holder has the right to receive
pursuant to the provisions of this Article II, and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of Holly Common Stock which is not registered in the transfer records of Holly,
a certificate representing the proper number of shares of Giant Common Stock may
be issued to a person other than the person in whose name the Certificate so
surrendered is registered if such Certificate shall be properly endorsed or
otherwise be in proper form for transfer and the person requesting such issuance
shall pay any transfer or other taxes required by reason of the issuance of
shares of Giant Common Stock to a person other than the registered holder of
such Certificate or establish to the satisfaction of Giant that such tax has
been paid or is not applicable. Until surrendered as contemplated by this
Section 2.02, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the Merger
Consideration and other cash, if any, which the holder thereof has the right to
receive in respect of such Certificate pursuant to the provisions of this
Article II. No interest will be paid or will accrue on any cash payable to
holders of Certificates pursuant to the provisions of this Article II.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to Giant Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered Certificate,
and no cash payment in lieu of fractional shares shall be paid to any such
holder pursuant to Section 2.02(e), and all such dividends, other distributions
and cash in lieu of fractional shares of Giant Common Stock shall be paid by
Giant to the Exchange Agent and shall be included in the Exchange Fund, in each
case until the surrender of such Certificate in accordance with this Article II.
Subject to the effect of applicable escheat or similar laws, following surrender
of any such Certificate there shall be paid to the holder of the certificate
representing whole shares of Giant Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time previously paid
with respect to such whole shares of Giant Common Stock and the amount of any
cash payable in lieu of a fractional share of Giant Common Stock to which such
holder is entitled pursuant to Section 2.02(e) and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and with a payment date
subsequent to such surrender payable with respect to such whole shares of Giant
Common Stock
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(d) No Further Ownership Rights in Holly Common Stock. All shares of
Giant Common Stock issued and cash paid upon the surrender for exchange of
Certificates in accordance with the terms of this Article II shall be deemed to
have been issued and paid in full satisfaction of all rights pertaining to the
shares of Holly Common Stock previously represented by such Certificates,
subject, however, to the Surviving Corporation's obligation to pay any dividends
or make any other distributions with a record date prior to the Effective Time
which may have been declared or made by Holly on such shares of Holly Common
Stock which remain unpaid at the Effective Time, and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Holly Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Exchange Agent
for any reason, they shall be canceled and exchanged as provided in this Article
II, except as otherwise provided by law.
(e) No Fractional Shares.
(i) No certificates or scrip representing fractional shares of Giant
Common Stock shall be issued upon the surrender for exchange of Certificates, no
dividend or distribution of Giant shall relate to such fractional share
interests and such fractional share interests will not entitle the owner thereof
to vote or to any rights of a stockholder of Giant.
(ii) In lieu of any such fractional shares, the Surviving Corporation
shall pay each holder of Holly Common Stock an amount in cash equal to the
product obtained by multiplying (A) the fractional share interest to which such
holder (after taking into account all shares of Holly Common Stock held at the
Effective Time by such holder) would otherwise be entitled by (B) the closing
price for a share of Giant Common Stock as reported on the New York Stock
Exchange, Inc. ("NYSE") Composite Transaction Tape (as reported in the Wall
Street Journal, or, if not reported therein, any other authoritative source) on
the Closing Date.
(iii) As soon as practicable after the determination of the amount of
cash, if any, to be paid to holders of Holly Common Stock with respect to any
fractional share interests, the Exchange Agent will make available such amounts
to such holders of Holly Common Stock subject to and in accordance with the
terms of Section 2.02(b).
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of the Certificates for six months
after the Effective Time shall be delivered to Giant, upon demand, and any
holders of the Certificates who have not previously complied with this Article
II shall thereafter look only to Giant for payment of their claim for Merger
Consideration, any cash in lieu of fractional shares of Giant Common Stock and
any dividends or distributions with respect to Holly Common Stock or Giant
Common Stock.
(g) No Liability. None of Giant, Holly or the Exchange Agent shall be
liable to any person in respect of any shares of Giant Common Stock (or
dividends or distributions with respect thereto) or cash from the Exchange Fund
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law. If any Certificate shall not have been surrendered prior
to seven years after the Effective Time (or immediately prior to such earlier
date on which any Merger Consideration, any cash payable to the holder of such
Certificate representing Holly Common Stock pursuant to this Article II or any
dividends or distributions payable to the holder of such Certificate would
otherwise escheat to or become the property of any Governmental Entity (as
defined in Section 3.01(d)), any such Merger Consideration or cash, dividends or
distributions in respect of such Certificate shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interest of any person previously entitled thereto.
(h) Investment of Exchange Fund. The Exchange Agent shall invest any
cash included in the Exchange Fund, as directed by Giant, on a daily basis. Any
interest and other income resulting from such investments shall be paid to
Giant.
(i) Lost Certificates. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required
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by the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration and, if applicable, any cash in lieu of
fractional shares, and unpaid dividends and distributions on shares of Giant
Common Stock deliverable in respect thereof, pursuant to this Agreement.
(j) Dissenting Shares. Notwithstanding anything in this Agreement to
the contrary, shares of Holly Common Stock outstanding immediately prior to the
Effective Time held by a holder (if any) who is entitled to demand, and who
properly demands, appraisal for such shares in accordance with Section 262 of
the DGCL ("Dissenting Shares") shall not be converted into a right to receive
Merger Consideration unless such holder fails to perfect or otherwise loses such
holder's right to appraisal, if any. If after the Effective Time such holder
fails to perfect or loses any such right to appraisal, such Dissenting Shares
shall be treated as if they had been converted as of the Effective Time into a
right to receive Merger Consideration pursuant to Section 2.01(b). Holly shall
give prompt written notice to Giant of any demands received by Holly for
appraisal of shares of Holly Common Stock and Giant shall have the right to
participate in negotiations and proceedings with respect to such demands. Prior
to the Effective Time, Holly shall not, except with the prior written consent of
Giant, which consent shall not be unreasonably withheld, make any payment with
respect to, or settle or offer to settle, any such demands. Any Merger
Consideration that would otherwise have been allocated to the Dissenting Shares
if the holders thereof had not properly perfected their appraisal rights will
not be paid under Section 2.01(b).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01. Representations and Warranties of Holly. Except as disclosed in the
Holly Filed SEC Documents (as such term is defined in Section 3.01(g)) or as set
forth on the Disclosure Schedule delivered by Holly to Giant prior to the
execution of this Agreement, which schedule shall identify exceptions and other
information by specific Section references (the "Holly Disclosure Schedule"),
Holly represents and warrants to Giant as follows:
(a) Organization, Standing and Corporate Power. Each of Holly and its
Significant Subsidiaries is a corporation or other legal entity duly organized,
validly existing and in good standing (with respect to jurisdictions which
recognize such concept) under the laws of the jurisdiction in which it is
organized and has the requisite corporate or other power and authority to carry
on its business as now being conducted. Each of Holly and its Significant
Subsidiaries is duly qualified or licensed to do business and is in good
standing (with respect to jurisdictions which recognize such concept) in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed or to be in
good standing individually or in the aggregate would not have a material adverse
effect (as defined in Section 8.03) on Holly. Holly has delivered or made
available to Giant prior to the execution of this Agreement complete and correct
copies of its certificate of incorporation and bylaws and has made available to
Giant the certificates of incorporation and bylaws (or comparable organizational
documents) of its Significant Subsidiaries, in each case as amended to date. As
used in this Agreement, a "Significant Subsidiary" means any subsidiary of Holly
or Giant, as the case may be, that would constitute a "significant subsidiary"
of such party within the meaning of Rule 1-02 of Regulation S-X of the
Securities and Exchange Commission (the "SEC").
(b) Subsidiaries. Exhibit 21.1 to Holly's Annual Report on Form 10-K
for the fiscal year ended July 31, 1997 includes all the subsidiaries of Holly
which as of the date of this Agreement are Significant Subsidiaries. All the
outstanding shares of capital stock of, or other equity interests in, each such
Significant Subsidiary have been validly issued and are fully paid and
nonassessable and are owned directly or indirectly by Holly, free and clear of
all pledges, claims, liens, charges, encumbrances and security interests of any
kind or nature whatsoever (collectively, "Liens").
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(c) Capital Structure. The authorized capital stock of Holly consists
of 20,000,000 shares of Holly Common Stock and 1,000,000 shares of preferred
stock, par value $1.00 per share ("Holly Preferred Stock"). At the close of
business on April 14, 1998, (i) 8,253,514 shares of Holly Common Stock were
issued and outstanding, (ii) 396,768 shares of Holly Common Stock were held by
Holly in its treasury, (iii) no shares of Holly Preferred Stock were designated,
issued, outstanding or held by Holly in its treasury, and (iv) 751,500 shares of
Holly Common Stock were reserved for issuance pursuant to the Holly Corporation
Stock Option Plan (the "Holly Stock Plan"). Except as set forth above, at the
close of business on April 14, 1998: (x) no shares of capital stock or other
voting securities of Holly were issued, reserved for issuance or outstanding;
and (y) there were no outstanding stock appreciation rights (other than to the
extent Holly phantom stock rights could be deemed to constitute such rights).
The Holly Disclosure Schedule sets forth a complete and correct list, as of
April 14, 1998, of the number of shares of Holly Common Stock subject to
outstanding options under the Holly Stock Plan and the exercise prices thereof.
All outstanding shares of capital stock of Holly are, and all shares which may
be issued will be, when issued, duly authorized, validly issued, fully paid,
nonassessable and not subject to preemptive rights. As of the close of business
on April 14, 1998, there were no bonds, debentures, notes or other indebtedness
of Holly having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which stockholders of
Holly may vote. Except for options outstanding under the Holly Stock Plan, as of
the close of business on April 14, 1998, there were no outstanding securities,
options, warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which Holly or any of its subsidiaries is a party or
by which any of them is bound obligating Holly or any of its subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other voting securities of Holly or of any of its
subsidiaries or obligating Holly or any of its subsidiaries to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. As of the close of business
on April 14, 1998, there were no outstanding contractual obligations of Holly or
any of its subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of Holly or any of its wholly owned subsidiaries. As of the close
of business on April 14, 1998, there were no outstanding contractual obligations
of Holly to vote or to dispose of any shares of the capital stock of any of its
subsidiaries.
(d) Authority; Noncontravention. Holly has all requisite corporate
power and authority to enter into this Agreement and, subject to the Holly
Stockholder Approval (as defined in Section 3.01(m)), to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by Holly and the consummation by Holly of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of Holly, subject to Holly Stockholder Approval.
This Agreement has been duly executed and delivered by Holly and constitutes the
legal, valid and binding obligation of Holly, enforceable against Holly in
accordance with its terms. The execution and delivery of this Agreement do not,
and the consummation of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a material benefit under, or result in
any obligation to or result in the creation of any Lien upon any of the
properties or assets of Holly or any of its Significant Subsidiaries under, (i)
the certificate of incorporation or bylaws of Holly or the comparable
organizational documents of any of its Significant Subsidiaries, (ii) any
material loan or credit agreement, note, bond, mortgage, indenture, lease or
other material agreement, instrument, permit, concession, franchise or license
applicable to Holly or any of its Significant Subsidiaries or their respective
properties or assets, (iii) any employment, consulting or similar agreement, or
(iv) subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to Holly or any of its Significant Subsidiaries or
their respective properties or assets, other than any such conflicts,
violations, defaults, rights, losses or Liens that individually or in the
aggregate would not (x) have a material adverse effect on Holly, (y) materially
impair the ability of Holly to perform its obligations under this Agreement, or
(z) prevent or materially delay the consummation of any of the transactions
contemplated by this Agreement. No consent, approval, order or authorization of,
or registration, declaration or filing with, any federal, state, local or
foreign government or any court, administrative or regulatory agency or
commission or other governmental authority or agency (a "Governmental Entity")
is required by or with respect to Holly or any of
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its Significant Subsidiaries in connection with the execution and delivery of
this Agreement by Holly or the consummation by Holly of the transactions
contemplated by this Agreement, except for: (1) the filing of a premerger
notification and report form by Holly under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"); (2) the filing with the
SEC of (A) a proxy statement relating to the Holly Stockholders Meeting (as
defined in Section 5.01(b)) (such proxy statement, together with the proxy
statement relating to the Giant Stockholders Meeting (as defined in Section
5.01(c)), in each case as amended or supplemented from time to time, the "Joint
Proxy Statement"), and (B) such reports under Section 13(a), 13(d), 15(d) or
16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
as may be required in connection with this Agreement and the transactions
contemplated by this Agreement; (3) the filing of the Certificate of Merger with
the Delaware Secretary of State and appropriate documents with the relevant
authorities of other states in which Holly is qualified to do business; (4) such
other filings and consents as may be required under any environmental, health or
safety law or regulation pertaining to any notification, disclosure or required
approval necessitated by the Merger or the transactions contemplated by this
Agreement; and (5) such consents, approvals, orders or authorizations the
failure of which to be made or obtained would not reasonably be expected to have
a material adverse effect on Holly.
(e) SEC Documents; Undisclosed Liabilities. Holly has timely filed all
required reports, schedules, forms, statements and other documents with the SEC
since August 1, 1996 (the "Holly SEC Documents"). As of their respective dates,
the Holly SEC Documents complied in all material respects with the requirements
of the Securities Act of 1933, as amended (the "Securities Act"), or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Holly SEC Documents, and none of the
Holly SEC Documents when filed contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. Except to the extent that information
contained in any Holly SEC Document has been revised or superseded by a later
Holly Filed SEC Document, none of the Holly SEC Documents contains any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of Holly included in the Holly SEC Documents comply as to form, as of
their respective dates of filing with the SEC, in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present in all material respects the consolidated financial position of Holly
and its consolidated subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal recurring year-end audit
adjustments). Except (i) as reflected in such financial statements or in the
notes thereto, (ii) as contemplated by this Agreement, (iii) for liabilities
incurred in connection with this Agreement or the transactions contemplated by
this Agreement, and (iv) for liabilities and obligations incurred since January
31, 1998 in the ordinary course of business consistent with past practice,
neither Holly nor any of its subsidiaries has any material liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise),
including liabilities arising under any laws relating to the protection of
health, safety or the environment ("Environmental Laws") which, individually or
in the aggregate, could reasonably be expected to have a material adverse effect
on Holly.
(f) Information Supplied. None of the written information designated or
to be designated by Holly and delivered to Giant specifically for inclusion or
incorporation by reference in (i) the registration statement on Form S-4 to be
filed with the SEC by Giant in connection with the issuance of Giant Common
Stock in the Merger (the "Form S-4") will, at the time the Form S-4 is filed
with the SEC or at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, or (ii) the Joint Proxy Statement will, at the date it is first
mailed to Holly's stockholders or at the time of the Holly Stockholders Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances
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under which they are made, not misleading. The Joint Proxy Statement will comply
as to form in all material respects with the requirements of the Exchange Act
and the rules and regulations thereunder, except that no representation or
warranty is made by Holly with respect to statements made or incorporated by
reference therein based on information supplied by Giant specifically for
inclusion or incorporation by reference in the Joint Proxy Statement.
(g) Absence of Certain Changes or Events. Except (i) as disclosed in
the Holly SEC Documents filed and publicly available prior to the date of this
Agreement (as amended to the date of this Agreement, the "Holly Filed SEC
Documents"), (ii) for the transactions contemplated by this Agreement, and (iii)
for liabilities incurred in connection with or as a result of this Agreement,
since the date of the most recent financial statements included in the Holly
Filed SEC Documents, Holly has conducted its business only in the ordinary
course, and there has not been (1) any material adverse change in Holly; (2) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of Holly's capital
stock, other than regular quarterly dividends of $.15 per share on the Holly
Common Stock; (3) any split, combination or reclassification of any of Holly's
capital stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of Holly's
capital stock; (4) other than as permitted by Sections 401(a)(xiii) and 5.07,
(A) any granting by Holly or any of its Significant Subsidiaries to any
director, executive officer or other key employee of Holly of any increase in
compensation, except for normal increases in the ordinary course of business
consistent with past practice or as required under employment agreements in
effect as of the date of the most recent financial statements included in the
Holly Filed SEC Documents, (B) any granting by Holly or any of its Significant
Subsidiaries to any such director, executive officer or key employee of any
increase in severance or termination pay, except as required under any
employment, severance or termination agreements in effect as of the date of the
most recent financial statements included in the Holly Filed SEC Documents, or
(C) any entry by Holly or any of its subsidiaries into any employment, severance
or termination agreement with any such executive officer or key employee; or (5)
except insofar as may have been disclosed in the Holly Filed SEC Documents or
required by a change in generally accepted accounting principles, any change in
accounting methods, principles or practices by Holly materially affecting its
assets, liabilities or business. For purposes of this Agreement, "key employee"
means any employee whose current salary and targeted bonus exceeds $100,000 per
annum.
(h) Litigation. There is no suit, action or proceeding pending or, to
the knowledge of Holly, threatened against or affecting Holly or any of its
subsidiaries that individually or in the aggregate could reasonably be expected
to have a material adverse effect on Holly, nor is there any judgment, order or
decree of any Governmental Entity or arbitrator outstanding against Holly or any
of its subsidiaries having, or which could reasonably be expected to have, any
such effect.
(i) Compliance with Applicable Laws. Holly and its subsidiaries hold
all permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities which are material to the operation of the businesses of
Holly and its subsidiaries, taken as a whole (the "Holly Permits"). Holly and
its subsidiaries are in compliance with the terms of the Holly Permits and all
applicable statutes, laws, ordinances, rules and regulations, including
Environmental Laws, except where the failure so to comply, individually or in
the aggregate, could not reasonably be expected to have a material adverse
effect on Holly. The businesses of Holly and its subsidiaries are not being
conducted in violation of any law, ordinance or regulation of any Governmental
Entity, including Environmental Laws, except for possible violations which could
not reasonably be expected to have a material adverse effect on Holly. As of the
date of this Agreement, no action, demand, requirement or investigation by any
Governmental Entity with respect to Holly or any of its subsidiaries is pending
or, to the knowledge of Holly, threatened, other than, in each case, those the
outcome of which, individually or in the aggregate, could not reasonably be
expected to have a material adverse effect on Holly.
(j) Absence of Changes in Benefit Plans. Since the date of the most
recent financial statements included in the Holly Filed SEC Documents, there has
not been any adoption or amendment in any material respect by Holly or any of
its subsidiaries of any collective bargaining agreement or any bonus, pension,
profit sharing, deferred compensation, incentive compensation, stock ownership,
stock purchase, stock option,
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phantom stock, retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other plan, arrangement or understanding (whether or
not legally binding) providing benefits to any current or former employee,
officer or director of Holly or any of its wholly-owned subsidiaries. Except as
permitted by Sections 4.01(a)(xiii) and 5.07, since the date of the most recent
financial statements included in the Holly Filed SEC Documents, neither Holly
nor any of its wholly-owned subsidiaries has entered into any employment,
consulting, severance, termination or indemnification agreements, arrangements
or understandings with any current or former employee, officer or director of
Holly or any of its wholly-owned subsidiaries.
(k) ERISA Compliance.
(i) With respect to each employee benefit plan (including, without
limitation, any "employee benefit plan," as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) (all the
foregoing being herein called "Benefit Plans"), maintained or contributed to by
Holly or any subsidiary of Holly (the "Holly Benefit Plans"), Holly has given
Giant the opportunity to review a true and correct copy of (A) the most recent
annual report (Form 5500) filed with the IRS, (B) such Holly Benefit Plans, (C)
each trust agreement relating to such Holly Benefit Plans, (D) the most recent
summary plan description for each Holly Benefit Plan for which a summary plan
description is required, (E) the most recent actuarial report or valuation
relating to Holly Benefit Plans subject to Title IV of ERISA, and (F) the most
recent determination letter issued by the IRS with respect to any Holly Benefit
Plans qualified under Section 401(a) of the Code.
(ii) With respect to the Holly Benefit Plans, individually and in the
aggregate, no event has occurred and, to the knowledge of Holly, there exists no
condition or set of circumstances, in connection with which Holly or any of its
subsidiaries could be subject to any liability that is reasonably likely to have
a material adverse effect on Holly (except liability for benefits claims and
funding obligations payable in the ordinary course) under ERISA, the Code or any
other applicable law.
(iii) Each Holly Benefit Plan has been administered in accordance
with its terms except for any failures so to administer any Holly Benefit Plan
as would not individually or in the aggregate have a material adverse effect on
Holly. Holly, its subsidiaries and all the Holly Benefit Plans are in compliance
with the applicable provisions of ERISA, the Code and all other applicable laws
and the terms of all applicable collective bargaining agreements, except for any
failures to be in such compliance as would not individually or in the aggregate
have a material adverse effect on Holly.
(iv) No employee of Holly will be entitled to any additional benefits
or any acceleration of the time of payment or vesting of any benefits under any
Holly Benefit Plan as a result of the transactions contemplated by this
Agreement.
(l) Taxes.
(i) Each of Holly and its subsidiaries has filed all tax returns and
reports required to be filed by it or requests for extensions to file such
returns or reports have been timely filed, granted and have not expired, except
to the extent that such failures to file or to have extensions granted that
remain in effect individually or in the aggregate would not have a material
adverse effect on Holly. Holly and each of its subsidiaries has paid (or Holly
has paid on its behalf) all taxes shown as due on such returns, and the most
recent financial statements contained in the Holly Filed SEC Documents reflect
an adequate reserve for all taxes payable by Holly and its subsidiaries for all
taxable periods and portions thereof accrued through the date of such financial
statements.
(ii) No deficiencies for any taxes have been proposed, asserted or
assessed against Holly or any of its subsidiaries that are not adequately
reserved for, except for deficiencies that individually or in the aggregate
would not have a material adverse effect on Holly.
(iii) Neither Holly nor any of its subsidiaries has taken any action
that is reasonably likely to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
(iv) As used in this Agreement, "taxes" shall include all federal,
state and local income, property, sales, excise and other taxes or similar
governmental charges.
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(m) Voting Requirements. The affirmative vote of the holders of a
majority of the voting power of all outstanding shares of Holly Common Stock,
voting as a single class, at the Holly Stockholders Meeting (the "Holly
Stockholder Approval") to adopt this Agreement is the only vote of the holders
of any class or series of Holly's capital stock necessary to approve and adopt
this Agreement.
(n) State Takeover Statutes. The Board of Directors of Holly has
approved the terms of this Agreement and the consummation of the Merger and the
other transactions contemplated by this Agreement and such approval constitutes
approval of the Merger and the other transactions contemplated by this Agreement
by the Holly Board of Directors under the provisions of Section 203 of the DGCL.
(o) Brokers. Except for Donaldson, Lufkin & Jenrette Securities
Corporation, no broker, investment banker, financial advisor or other person is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Holly.
(p) Opinion of Financial Advisor. Holly has received the opinion of
Donaldson, Lufkin & Jenrette Securities Corporation dated the date of this
Agreement, to the effect that, as of such date, the Merger Consideration is fair
to Holly's stockholders from a financial point of view, a signed copy of which
opinion has been delivered to Giant.
(q) Ownership of Giant Common Stock. Neither Holly nor, to its
knowledge, any of its affiliates, (i) beneficially owns (as such term is defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, or (ii) is party
to any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of, in each case, shares of capital stock of Giant.
3.02. Representations and Warranties of Giant. Except as disclosed in the
Giant Filed SEC Documents (as such term is defined in Section 3.02(g)) or as set
forth on the Disclosure Schedule delivered by Giant to Holly prior to the
execution of this Agreement, which schedule shall identify exceptions and other
information by specific Section references (the "Giant Disclosure Schedule"),
Giant represents and warrants to Holly as follows:
(a) Organization, Standing and Corporate Power. Each of Giant and its
Significant Subsidiaries is a corporation or other legal entity duly organized,
validly existing and in good standing (with respect to jurisdictions which
recognize such concept) under the laws of the jurisdiction in which it is
organized and has the requisite corporate or other power and authority to carry
on its business as now being conducted. Each of Giant and its Significant
Subsidiaries is duly qualified or licensed to do business and is in good
standing (with respect to jurisdictions which recognize such concept) in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed or to be in
good standing individually or in the aggregate would not have a material adverse
effect on Giant. Giant has delivered or made available to Holly prior to the
execution of this Agreement complete and correct copies of its certificate of
incorporation and bylaws and has made available to Holly the certificates of
incorporation and bylaws (or comparable organizational documents) of its
Significant Subsidiaries, in each case as amended to date.
(b) Subsidiaries. Exhibit 21 to Giant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997 includes all the subsidiaries of Giant
which as of the date of this Agreement are Significant Subsidiaries. All the
outstanding shares of capital stock of, or other equity interests in, each such
Significant Subsidiary have been validly issued and are fully paid and
nonassessable and are owned directly or indirectly by Giant, free and clear of
all Liens.
(c) Capital Structure. The authorized capital stock of Giant consists
of 50,000,000 shares of Giant Common Stock and 10,000,000 shares of preferred
stock, par value $.01 per share, of Giant ("Giant Preferred Stock"). At the
close of business on April 14, 1998, (i) 10,993,267 shares of Giant Common Stock
were issued and outstanding, (ii) 1,239,100 shares of Giant Common Stock were
held by Giant in its treasury, (iii) no shares of Giant Preferred Stock were
designated, issued, outstanding or held by Giant in its treasury, and (iv)
421,550 shares of Giant Common Stock were reserved for issuance pursuant to
Giant's 1989 Stock Incentive Plan (the "Giant Stock Plan"). Except as set forth
above, at the close of business on April 14, 1998:
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(x) no shares of capital stock or other voting securities of Giant were issued,
reserved for issuance or outstanding; and (y) there were no outstanding stock
appreciation rights (other and to the extent that Giant phantom stock rights
would be deemed to constitute such rights). The Giant Disclosure Schedule sets
forth a complete and correct list, as of April 14, 1998, of the number of shares
of Giant Common Stock subject to outstanding options under the Giant Stock Plan
and the exercise prices thereof. All outstanding shares of capital stock of
Giant are, and all shares which may be issued will be, when issued, duly
authorized, validly issued, fully paid, nonassessable and not subject to
preemptive rights. As of the close of business on April 14, 1998, there were no
bonds, debentures, notes or other indebtedness of Giant having the right to vote
(or convertible into, or exchangeable for, securities having the right to vote)
on any matters on which stockholders of Giant may vote. Except for options
outstanding under the Giant Stock Plan, as of the close of business on April 14,
1998, there were no outstanding securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which Giant
or any of its subsidiaries is a party or by which any of them is bound
obligating Giant or any of its subsidiaries to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of capital stock or other
voting securities of Giant or of any of its subsidiaries or obligating Giant or
any of its subsidiaries to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or undertaking.
As of the close of business on April 14, 1998, there were no outstanding
contractual obligations of Giant or any of its subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock of Giant or any of its
wholly owned subsidiaries. As of the close of business on April 14, 1998, there
were no outstanding contractual obligations of Giant to vote or to dispose of
any shares of the capital stock of any of its subsidiaries.
(d) Authority; Noncontravention. Giant has all requisite corporate
power and authority to enter into this Agreement and, subject to the Giant
Stockholder Approval (as defined in Section 3.02(m)), to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by Giant and the consummation by Giant of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of Giant, subject to Giant Stockholder Approval.
This Agreement has been duly executed and delivered by Giant and constitutes the
legal, valid and binding obligation of Giant, enforceable against Giant in
accordance with its terms. The execution and delivery of this Agreement do not,
and the consummation of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a material benefit under, or result in
any obligation to or result in the creation of any Lien upon any of the
properties or assets of Giant or any of its Significant Subsidiaries under, (i)
the certificate of incorporation or bylaws of Giant or the comparable
organizational documents of any of its Significant Subsidiaries, (ii) any
material loan or credit agreement, note, bond, mortgage, indenture, lease or
other material agreement, instrument, permit, concession, franchise or license
applicable to Giant or any of its Significant Subsidiaries or their respective
properties or assets, (iii) any employment, consulting or similar agreement, or
(iv) subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to Giant or any of its Significant Subsidiaries or
their respective properties or assets, other than any such conflicts,
violations, defaults, rights, losses or Liens that individually or in the
aggregate would not (x) have a material adverse effect on Giant, (y) materially
impair the ability of Giant to perform its obligations under this Agreement, or
(z) prevent or materially delay the consummation of any of the transactions
contemplated by this Agreement. No consent, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Entity is required
by or with respect to Giant or any of its Significant Subsidiaries in connection
with the execution and delivery of this Agreement by Giant or the consummation
by Giant of the transactions contemplated by this Agreement, except for (1) the
filing of a premerger notification and report form by Giant under the HSR Act;
(2) the filing with the SEC of (A) the Joint Proxy Statement relating to the
Giant Stockholders Meeting (as defined in Section 5.01(c)), (B) the Form S-4 and
(C) such reports under Section 13(a), 13(d), 15(d) or 16(a) of the Exchange Act
as may be required in connection with this Agreement and the transactions
contemplated by this Agreement; (3) the filing of the Certificate of Merger with
the Delaware Secretary of State and appropriate documents with the relevant
authorities of other states in which Giant is qualified to do business; (4)
filings with Governmental Entities to satisfy any applicable
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requirements of state securities or "blue sky" laws; (5) such filings with and
approvals of the NYSE to permit the shares of Giant Common Stock that are to be
issued in the Merger to be listed on the NYSE; (6) such other filings and
consents as may be required under any environmental, health or safety law or
regulation pertaining to any notification, disclosure or required approval
necessitated by the Merger or the transactions contemplated by this Agreement;
and (7) such consents, approvals, orders or authorizations the failure of which
to be made or obtained would not reasonably be expected to have a material
adverse effect on Giant.
(e) SEC Documents; Undisclosed Liabilities. Giant has timely filed all
required reports, schedules, forms, statements and other documents with the SEC
since January 1, 1997 (the "Giant SEC Documents"). As of their respective dates,
the Giant SEC Documents complied in all material respects with the requirements
of the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Giant SEC
Documents, and none of the Giant SEC Documents when filed contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Except to the
extent that information contained in any Giant SEC Document has been revised or
superseded by a later Giant Filed SEC Document, none of the Giant SEC Documents
contains any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of Giant included in the Giant SEC
Documents comply as to form, as of their respective dates of filing with the
SEC, in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles (except, in
the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present in all material respects the consolidated
financial position of Giant and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
recurring year-end audit adjustments). Except (i) as reflected in such financial
statements or in the notes thereto, (ii) as contemplated by this Agreement,
(iii) for liabilities incurred in connection with this Agreement or the
transactions contemplated by this Agreement, and (iv) for liabilities and
obligations incurred since December 31, 1997 in the ordinary course of business
consistent with past practice, neither Giant nor any of its subsidiaries has any
material liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise), including liabilities arising under any Environmental
Laws which, individually or in the aggregate, could reasonably be expected to
have a material adverse effect on Giant.
(f) Information Supplied. None of the information supplied or to be
supplied by Giant specifically for inclusion or incorporation by reference in
(i) the Form S-4 will, at the time the Form S-4 is filed with the SEC or at the
time it becomes effective under the Securities Act, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, or (ii) the
Joint Proxy Statement will, at the date it is first mailed to Giant's
stockholders or at the time of the Giant Stockholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The Joint
Proxy Statement will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder,
except that no representation or warranty is made by Giant with respect to
statements made or incorporated by reference therein based on information
supplied by Holly specifically for inclusion or incorporation by reference in
the Joint Proxy Statement.
(g) Absence of Certain Changes or Events. Except (i) as disclosed in
the Giant SEC Documents filed and publicly available prior to the date of this
Agreement (as amended to the date of this Agreement, the "Giant Filed SEC
Documents"), (ii) for the transactions provided for herein, and (iii) for
liabilities incurred in connection with or as a result of this Agreement, since
the date of the most recent financial statements included in the Giant Filed SEC
Documents, Giant has conducted its business only in the ordinary course, and
there has not been (1) any material adverse change in Giant; (2) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of
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Giant's capital stock, other than regular quarterly dividends of $.05 per share
on the Giant Common Stock; (3) any split, combination or reclassification of any
of Giant's capital stock or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for shares of
Giant's capital stock; (4) other than as permitted by Sections 4.01(b)(xiii) and
5.07, (A) any granting by Giant or any of its Significant Subsidiaries to any
director, executive officer or other key employee of Giant of any increase in
compensation, except for normal increases in the ordinary course of business
consistent with past practice or as required under employment agreements in
effect as of the date of the most recent financial statements included in the
Giant Filed SEC Documents, (B) any granting by Giant or any of its Significant
Subsidiaries to any such director, executive officer or key employee of any
increase in severance or termination pay, except as required under any
employment, severance or termination agreements in effect as of the date of the
most recent financial statements included in the Giant Filed SEC Documents, or
(C) any entry by Giant or any of its subsidiaries into any employment, severance
or termination agreement with any such executive officer or key employee; or (5)
except insofar as may have been disclosed in the Giant Filed SEC Documents or
required by a change in generally accepted accounting principles, any change in
accounting methods, principles or practices by Giant materially affecting its
assets, liabilities or business.
(h) Litigation. There is no suit, action or proceeding pending or, to
the knowledge of Giant, threatened against or affecting Giant or any of its
subsidiaries that individually or in the aggregate could reasonably be expected
to have a material adverse effect on Giant, nor is there any judgment, order or
decree of any Governmental Entity or arbitrator outstanding against Giant or any
of its subsidiaries having, or which could reasonably be expected to have, any
such effect.
(i) Compliance with Applicable Laws. Giant and its subsidiaries hold
all permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities which are material to the operation of the businesses of
Giant and its subsidiaries, taken as a whole (the "Giant Permits"). Giant and
its subsidiaries are in compliance with the terms of the Giant Permits and all
applicable statutes, laws, ordinances, rules and regulations, including
Environmental Laws, except where the failure so to comply, individually or in
the aggregate, could not reasonably be expected to have a material adverse
effect on Giant. The businesses of Giant and its subsidiaries are not being
conducted in violation of any law, ordinance or regulation of any Governmental
Entity, including Environmental Laws, except for possible violations which could
not reasonably be expected to have a material adverse effect on Giant. As of the
date of this Agreement, no action, demand, requirement or investigation by any
Governmental Entity with respect to Giant or any of its subsidiaries is pending
or, to the knowledge of Giant, threatened, other than, in each case, those the
outcome of which, individually or in the aggregate could not reasonably be
expected to have a material adverse effect on Giant.
(j) Absence of Changes in Benefit Plans. Since the date of the most
recent financial statements included in the Giant Filed SEC Documents, there has
not been any adoption or amendment in any material respect by Giant or any of
its subsidiaries of any collective bargaining agreement or any bonus, pension,
profit sharing, deferred compensation, incentive compensation, stock ownership,
stock purchase, stock option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, medical or other plan, arrangement
or understanding (whether or not legally binding) providing benefits to any
current or former employee, officer or director of Giant or any of its
wholly-owned subsidiaries. Except as permitted by Sections 4.01(b)(xiii) and
5.07, since the date of the most recent financial statements included in the
Giant Filed SEC Documents, neither Giant nor any of its wholly-owned
subsidiaries has entered into any employment, consulting, severance, termination
or indemnification agreements, arrangements or understandings with any current
or former employee, officer or director of Giant or any of its wholly-owned
subsidiaries.
(k) ERISA Compliance.
(i) With respect to Benefit Plans maintained or contributed to by
Giant or any subsidiary of Giant (the "Giant Benefit Plans"), Giant has given
Holly the opportunity to review a true and correct copy of (A) the most recent
annual report (Form 5500) filed with the IRS, (B) such Giant Benefit Plans, (C)
each trust agreement relating to such Giant Benefit Plans, (D) the most recent
summary plan description for each Giant Benefit Plan for which a summary plan
description is required, (E) the most recent actuarial report or
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valuation relating to Giant Benefit Plans subject to Title IV of ERISA, and (F)
the most recent determination letter issued by the IRS with respect to any Giant
Benefit Plans qualified under Section 401(a) of the Code.
(ii) With respect to the Giant Benefit Plans, individually and in the
aggregate, no event has occurred and, to the knowledge of Giant, there exists no
condition or set of circumstances, in connection with which Giant or any of its
subsidiaries could be subject to any liability that is reasonably likely to have
a material adverse effect on Giant (except liability for benefits claims and
funding obligations payable in the ordinary course) under ERISA, the Code or any
other applicable law.
(iii) Each Giant Benefit Plan has been administered in accordance
with its terms, except for any failures so to administer any Giant Benefit Plans
as would not individually or in the aggregate have a material adverse effect on
Giant. Giant, its subsidiaries and all the Giant Benefit Plans are in compliance
with the applicable provisions of ERISA, the Code and all other applicable laws
and the terms of all applicable collective bargaining agreements, except for any
failures to be in such compliance as would not individually or in the aggregate
have a material adverse effect on Giant.
(iv) No employee of Giant will be entitled to any additional benefits
or any acceleration of the time of payment or vesting of any benefits under any
Giant Benefit Plan as a result of the transactions contemplated by this
Agreement.
(l) Taxes.
(i) Each of Giant and its subsidiaries has filed all tax returns and
reports required to be filed by it or requests for extensions to file such
returns or reports have been timely filed, granted and have not expired, except
to the extent that such failures to file or to have extensions granted that
remain in effect individually or in the aggregate would not have a material
adverse effect on Giant. Giant and each of its subsidiaries has paid (or Giant
has paid on its behalf) all taxes shown as due on such returns, and the most
recent financial statements contained in the Giant Filed SEC Documents reflect
an adequate reserve for all taxes payable by Giant and its subsidiaries for all
taxable periods and portions thereof accrued through the date of such financial
statements.
(ii) No deficiencies for any taxes have been proposed, asserted or
assessed against Giant or any of its subsidiaries that are not adequately
reserved for, except for deficiencies that individually or in the aggregate
would not have a material adverse effect on Giant.
(iii) Neither Giant nor any of its subsidiaries has taken any action
that is reasonably likely to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
(m) Voting Requirements. The affirmative vote of the holders of a
majority of the voting power of all outstanding shares of Giant Common Stock,
voting as a single class, at the Giant Stockholders Meeting to adopt this
Agreement is the only vote of the holders of any class or series of Giant's
capital stock necessary to approve and adopt this Agreement and to issue the
Merger Consideration; provided, however, that the affirmative vote of the
holders of 80% of all outstanding shares of Giant Common Stock, voting as a
single class, at the Giant Stockholders Meeting is required to approve certain
of the amendments to Giant's certificate of incorporation and bylaws
contemplated by Exhibits A and B, respectively. For purposes of this Agreement,
the "Giant Stockholder Approval" means the majority and 80% votes described
above in this Section 3.02(m) as are necessary to adopt this Agreement and the
amendments to the Giant certificate of incorporation and bylaws contemplated
hereby.
(n) State Takeover Statutes. The Board of Directors of Giant has
approved the terms of this Agreement and the consummation of the Merger and the
other transactions contemplated by this Agreement and such approval constitutes
approval of the Merger and the other transactions contemplated by this Agreement
by the Giant Board of Directors under the provisions of Section 203 of the DGCL.
(o) Brokers. Except for Bear, Stearns & Co. Inc., no broker, investment
banker, financial advisor or other person is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Giant.
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(p) Opinion of Financial Advisor. Giant has received the opinion of
Bear, Stearns & Co. Inc., dated the date of this Agreement, to the effect that,
as of such date, the Merger Consideration is fair to Giant and, accordingly, to
Giant's stockholders from a financial point of view, a signed copy of which
opinion has been delivered to Holly.
(q) Ownership of Holly Common Stock. Neither Giant nor, to its
knowledge, any of its affiliates, (i) beneficially owns (as such term is defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, or (ii) is party
to any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of, in each case, shares of capital stock of Holly.
(r) Ownership of Giant Common Stock Upon Exchange. Immediately after
the Effective Time, the holders of shares of Holly Common Stock issued and
outstanding immediately before the Effective Time shall, in the aggregate, have
the right to receive, and shall receive pursuant to the provisions of Article
II, that number of shares of Giant Common Stock such that such holders shall own
fifty percent (50%) of the issued and outstanding capital stock of the Surviving
Corporation.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.01. Conduct of Business.
(a) Conduct of Business by Holly. Except as contemplated by this
Agreement or as set forth in the Holly Disclosure Schedule, during the period
from the date of this Agreement to the Effective Time, Holly shall, and shall
cause its subsidiaries to, carry on their respective businesses in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted and in compliance in all material respects with all applicable laws
and regulations and, to the extent consistent therewith, use all reasonable
efforts to preserve intact their current business organizations, use reasonable
efforts to keep available the services of their current officers and other key
employees and preserve their relationships with those persons having business
dealings with them to the end that their goodwill and ongoing businesses shall
be unimpaired at the Effective Time, except such impairment as would not have a
material adverse effect on Holly. Except as set forth in the Holly Disclosure
Schedule, without limiting the generality of the foregoing, during the period
from the date of this Agreement to the Effective Time, Holly shall not, and
shall not permit any of its subsidiaries to:
(i) other than dividends and distributions (including liquidating
distributions) by a direct or indirect wholly-owned subsidiary of Holly to its
parent, or by a subsidiary that is partially-owned by Holly or any of its
subsidiaries, provided that Holly or any such subsidiary receives or is to
receive its proportionate share thereof, and other than the regular quarterly
dividends of $.15 per share with respect to the Holly Common Stock, (x) declare,
set aside or pay any dividends on, or make any other distributions in respect
of, any of its capital stock, (y) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock, or
(z) purchase, redeem or otherwise acquire any shares of capital stock of Holly
or any of its Significant Subsidiaries or any other securities thereof or any
rights, warrants or options to acquire any such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber any shares of
its capital stock, any other voting securities or any securities convertible
into, or any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities (other than the issuance of Holly Common
Stock upon the exercise of Holly Employee Stock Options outstanding on the date
of this Agreement and in accordance with their present terms);
(iii) amend its certificate of incorporation, bylaws or other
comparable organizational documents;
(iv) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other manner,
any business or any corporation, limited liability
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company, partnership, joint venture, association or other business organization
or division thereof, except for (x) acquisitions publicly announced before the
date of this Agreement, (y) such acquisitions which do not in the aggregate
exceed $5,000,000 and (z) purchases of inventory, feedstock and other items in
the ordinary course of business consistent with past practice;
(v) sell, lease, license, mortgage or otherwise encumber or subject
to any Lien or otherwise dispose of any of its properties or assets, other than
(x) in the ordinary course of business consistent with past practice and (y)
sales of assets which do not individually or in the aggregate exceed $5,000,000;
(vi) (x) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of Holly or any of its
wholly-owned subsidiaries, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having the
economic effect of any of the foregoing, except for short-term borrowings and
guarantees of indebtedness of its subsidiaries incurred in the ordinary course
of business consistent with past practice, or (y) make any loans, advances or
capital contributions to, or investments in, any other person, other than to
Holly or any direct or indirect subsidiary of Holly or to officers and employees
of Holly or any of its subsidiaries for travel, business or relocation expenses
in the ordinary course of business;
(vii) make or agree to make any capital expenditure or capital
expenditures other than capital expenditures set forth in the operating budget
of Holly previously furnished to Giant, the relevant portions of which are set
forth in the Holly Disclosure Schedule, other than capital expenditures that do
not or would not constitute a material change;
(viii) make any tax election that could reasonably be expected to
have a material adverse effect on Holly or settle or compromise any material
income tax liability;
(ix) pay, discharge, settle or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement or
satisfaction, in the ordinary course of business consistent with past practice
or in accordance with their terms, of liabilities reflected or reserved against
in, or contemplated by, the most recent consolidated financial statements (or
the notes thereto) of Holly included in the Holly Filed SEC Documents, incurred
since the date of such financial statements in the ordinary course of business
consistent with past practice or which do not in the aggregate have a material
adverse effect on Holly;
(x) except in the ordinary course of business or except as would not
reasonably be expected to have a material adverse effect on Holly, modify, amend
or terminate any material contract or agreement to which Holly or any subsidiary
is a party or waive, release or assign any material rights or claims thereunder;
(xi) make any material change to its accounting methods, principles
or practices, except as may be required by generally accepted accounting
principles;
(xii) except as required by law or contemplated by this Agreement,
enter into, adopt or amend in any material respect or terminate any Holly
Benefit Plan or any other agreement, plan or policy involving Holly or its
subsidiaries and one or more of their directors, officers or employees, or
materially change any actuarial or other assumption used to calculate funding
obligations with respect to any Holly pension plans, or change the manner in
which contributions to any Holly pension plans are made or the basis on which
such contributions are determined;
(xiii) except for (a) new employment agreements with Holly's three
highest-ranking executives on terms no more favorable than Giant's employment
agreements (as amended pursuant to Section 5.06(g)) with its three
highest-ranking executives (with base salaries equal to the executives' current
base salaries or such other amounts approved by Giant), (b) bonus payments to
Holly employees in amounts and forms as agreed to by the Holly and Giant Boards
of Directors prior to the effective date of the S-4 and to be paid at or before
the Closing, (c) normal increases in the ordinary course of business consistent
with past practice that, in the aggregate, do not materially increase benefits
or compensation expenses of Holly or its subsidiaries, and (d) as contemplated
hereby or by the terms of any contract the existence of which does not
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constitute a violation of this Agreement, increase the compensation of any
director, executive officer or other key employee of Holly or pay any benefit or
amount not required by a plan or arrangement as in effect on the date of this
Agreement to any such person; or
(xiv) authorize, or commit or agree to take, any of the foregoing
actions.
(b) Conduct of Business by Giant. Except as contemplated by this
Agreement or as set forth in the Giant Disclosure Schedule, during the period
from the date of this Agreement to the Effective Time, Giant shall, and shall
cause its subsidiaries to, carry on their respective businesses in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted and in compliance in all material respects with all applicable laws
and regulations and, to the extent consistent therewith, use all reasonable
efforts to preserve intact their current business organizations, use reasonable
efforts to keep available the services of their current officers and other key
employees and preserve their relationships with those persons having business
dealings with them to the end that their goodwill and ongoing businesses shall
be unimpaired at the Effective Time, except such impairment as would not have a
material adverse effect on Giant. Except as set forth in the Giant Disclosure
Schedule, without limiting the generality of the foregoing, during the period
from the date of this Agreement to the Effective Time, Giant shall not, and
shall not permit any of its subsidiaries to:
(i) other than dividends and distributions (including liquidating
distributions) by a direct or indirect wholly-owned subsidiary of Giant to its
parent, or by a subsidiary that is partially-owned by Giant or any of its
subsidiaries, provided that Giant or any such subsidiary receives or is to
receive its proportionate share thereof, and other than the regular quarterly
dividends of $.05 per share with respect to the Giant Common Stock, (x) declare,
set aside or pay any dividends on, or make any other distributions in respect
of, any of its capital stock, (y) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock, or
(z) purchase, redeem or otherwise acquire any shares of capital stock of Giant
or any of its Significant Subsidiaries or any other securities thereof or any
rights, warrants or options to acquire any such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber any shares of
its capital stock, any other voting securities or any securities convertible
into, or any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities (other than the issuance of Giant Common
Stock upon the exercise of Giant Employee Stock Options outstanding on the date
of this Agreement and in accordance with their present terms);
(iii) except as contemplated by this Agreement, amend its certificate
of incorporation, bylaws or other comparable organizational documents;
(iv) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other manner,
any business or any corporation, limited liability company, partnership, joint
venture, association or other business organization or division thereof, except
for (x) acquisitions publicly announced before the date of this Agreement, (y)
such other acquisitions which do not in the aggregate exceed $5,000,000 and (z)
purchases of inventory, feedstock and other items in the ordinary course of
business consistent with past practice;
(v) sell, lease, license, mortgage or otherwise encumber or subject
to any Lien or otherwise dispose of any of its properties or assets, other than
(x) in the ordinary course of business consistent with past practice and (y)
sales of assets which do not individually or in the aggregate exceed $5,000,000;
(vi) except as contemplated by Section 4.01(f) of this Agreement, (x)
incur any indebtedness for borrowed money or guarantee any such indebtedness of
another person, issue or sell any debt securities or warrants or other rights to
acquire any debt securities of Giant or any of its wholly-owned subsidiaries,
guarantee any debt securities of another person, enter into any "keep well" or
other agreement to maintain any financial statement condition of another person
or enter into any arrangement having the economic effect of any of the
foregoing, except for short-term borrowings and guarantees of indebtedness of
its subsidiaries incurred in the ordinary course of business consistent with
past practice, or (y) make any loans, advances or
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capital contributions to, or investments in, any other person, other than to
Giant or any direct or indirect subsidiary of Giant or to officers and employees
of Giant or any of its subsidiaries for travel, business or relocation expenses
in the ordinary course of business;
(vii) make or agree to make any capital expenditure or capital
expenditures other than capital expenditures set forth in the operating budget
of Giant previously furnished to Holly, the relevant portions of which are set
forth in the Giant Disclosure Schedule, other than capital expenditures that do
not or would not constitute a material change;
(viii) make any tax election that could reasonably be expected to
have a material adverse effect on Giant or settle or compromise any material
income tax liability;
(ix) pay, discharge, settle or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement or
satisfaction, in the ordinary course of business consistent with past practice
or in accordance with their terms, of liabilities reflected or reserved against
in, or contemplated by, the most recent consolidated financial statements (or
the notes thereto) of Giant included in the Giant Filed SEC Documents, incurred
since the date of such financial statements in the ordinary course of business
consistent with past practice or which do not in the aggregate have a material
adverse effect on Giant;
(x) except in the ordinary course of business or except as would not
reasonably be expected to have a material adverse effect on Giant, modify, amend
or terminate any material contract or agreement to which Giant, any subsidiary
is a party or waive, release or assign any material rights or claims thereunder;
(xi) make any material change to its accounting methods, principles
or practices, except as may be required by generally accepted accounting
principles;
(xii) except as required by law or contemplated by this Agreement,
enter into, adopt or amend in any material respect or terminate any Giant
Benefit Plan or any other agreement, plan or policy involving Giant or its
subsidiaries and one or more of their directors, officers or employees, or
materially change any actuarial or other assumption used to calculate funding
obligations with respect to any Giant pension plans, or change the manner in
which contributions to any Giant pension plans are made or the basis on which
such contributions are determined;
(xiii) except for (a) bonus payments to Giant employees in amounts
and forms as agreed to by the Giant and Holly Boards of Directors prior to the
effective date of the Form S-4 and to be paid at or before the Closing, (b) the
amendments to the Giant employment agreements, stock options and phantom stock
rights described in Section 5.06(g), (c) normal increases in the ordinary course
of business consistent with past practice that, in the aggregate, do not
materially increase benefits or compensation expenses of Giant or its
subsidiaries, and (d) as contemplated hereby or by the terms of any contract the
existence of which does not constitute a violation of this Agreement, increase
the compensation of any director, executive officer or other key employee of
Giant or pay any benefit or amount not required by a plan or arrangement as in
effect on the date of this Agreement to any such person; or
(xiv) authorize, or commit or agree to take, any of the foregoing
actions.
(c) Coordination of Dividends. Each of Giant and Holly shall coordinate
with the other regarding the declaration and payment of dividends in respect of
the Giant Common Stock and the Holly Common Stock and the record dates and
payment dates relating thereto, it being the intention of Giant and Holly that
any holder of Holly Common Stock shall not receive two dividends, or fail to
receive one dividend, for any single calendar quarter with respect to its shares
of Holly Common Stock and/or any shares of Giant Common Stock any such holder
receives in exchange therefor pursuant to the Merger.
(d) Other Actions. Except as required by law, Holly and Giant shall
not, and shall not permit any of their respective subsidiaries to, voluntarily
take any action that would, or that could reasonably be expected to, result in
(i) any of the representations and warranties of such party set forth in this
Agreement that are qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that are not so
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qualified becoming untrue in any material respect, or (iii) any of the
conditions to the Merger set forth in Article VI not being satisfied.
(e) Advice of Changes. Holly and Giant shall promptly advise the other
party orally and in writing of (i) any representation or warranty made by it
contained in this Agreement that is qualified as to materiality becoming untrue
or inaccurate in any respect or any such representation or warranty that is not
so qualified becoming untrue or inaccurate in any material respect, (ii) the
failure by it to comply in any material respect with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement, or (iii) any change or event having, or which, insofar
as can reasonably be foreseen, could reasonably be expected to have, a material
adverse effect on such party or on the truth of their respective representations
and warranties or the ability of the conditions set forth in Article VI to be
satisfied; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
(f) Financing Arrangement. Giant and Holly shall have arranged for the
Surviving Corporation to finance appropriately the redemption contingency that
will result on account of the Merger with respect to Giant's outstanding 9%
Senior Subordinated Notes due 2007 ($150,000,000 aggregate principal amount) and
its outstanding 9 3/4% Senior Subordinated Notes due 2003 ($100,000,000
aggregate principal amount). Such arrangement shall be on terms and in amounts
that are acceptable to each of the Giant Board of Directors and the Holly Board
of Directors.
4.02. No Solicitation by Holly.
(a) Holly shall not, nor shall it permit any of its subsidiaries to, nor
shall it authorize or permit any of its officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its subsidiaries to, directly or
indirectly through another person, (i) solicit, initiate or encourage (including
by way of furnishing information), or take any other action designed to
facilitate, any inquiries or the making of any proposal which constitutes any
Holly Takeover Proposal (as hereinafter defined) or (ii) participate in any
discussions or negotiations regarding any Holly Takeover Proposal; provided,
however, that if, at any time prior to the adoption of this Agreement by the
holders of Holly Common Stock, the Board of Directors of Holly determines in
good faith, after consultation with outside counsel, that it is necessary to do
so in order to comply with its fiduciary duties to Holly's stockholders under
applicable law, Holly may, in response to a Holly Takeover Proposal which was
not solicited by it or which did not otherwise result from a breach of this
Section 4.02(a), and subject to compliance with Section 4.02(c), (x) furnish
information with respect to Holly and its subsidiaries to any person pursuant to
a customary confidentiality agreement (as determined by Holly after consultation
with its outside counsel) and (y) participate in negotiations regarding such
Holly Takeover Proposal. For purposes of this Agreement, "Holly Takeover
Proposal" means any inquiry, proposal or offer from any person relating to any
direct or indirect acquisition or purchase of 35% or more of the assets of Holly
and its subsidiaries or 35% or more of any class of equity securities of Holly
or any of its subsidiaries, any tender offer or exchange offer that if
consummated would result in any person beneficially owning 35% or more of any
class of equity securities of Holly or any of its subsidiaries, or any merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving Holly or any of its subsidiaries, other than
the transactions contemplated by this Agreement.
(b) Except as expressly permitted by this Section 4.02, neither the
Board of Directors of Holly nor any committee thereof shall (i) withdraw or
modify, or propose publicly to withdraw or modify, in a manner adverse to Giant,
the approval or recommendation by such Board of Directors or such committee of
the Merger or this Agreement, (ii) approve or recommend, or propose publicly to
approve or recommend, any Holly Takeover Proposal, or (iii) cause Holly to enter
into any letter of intent, agreement in principle, acquisition agreement or
other similar agreement (each, a "Holly Acquisition Agreement") related to any
Holly Takeover Proposal. Notwithstanding the foregoing, in the event that prior
to the adoption of this Agreement by the holders of Holly Common Stock: (x) the
Board of Directors of Holly determines in good faith, after it has received a
Holly Superior Proposal (as defined below) and after consultation with outside
counsel, that it is necessary to do so in order to comply with its fiduciary
duties to Holly's stockholders under
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applicable law, the Board of Directors of Holly may (subject to this and the
following sentences) withdraw or modify its approval or recommendation of the
Merger or this Agreement; or (y) the Board of Directors of Holly determines in
good faith that there is not a substantial probability that the adoption of this
Agreement by holders of Holly Common Stock will be obtained due to the existence
of a Holly Superior Proposal, the Board of Directors of Holly may (subject to
this and the following sentences) approve or recommend such Holly Superior
Proposal or terminate this Agreement (and concurrently with or after such
termination, if it so chooses, cause Holly to enter into any Holly Acquisition
Agreement with respect to any Holly Superior Proposal), but in each of the cases
set forth in this clause (y), only at a time that is after the fifth business
day following Giant's receipt of written notice advising Giant that the Board of
Directors of Holly has received a Holly Superior Proposal, specifying the
material terms and conditions of such Holly Superior Proposal and identifying
the person making such Holly Superior Proposal. For purposes of this Agreement,
a "Holly Superior Proposal" means any proposal made by a third party to acquire,
directly or indirectly, for consideration consisting of cash and/or securities,
more than 50% of the combined voting power of the shares of Holly Common Stock
then outstanding or all or substantially all the assets of Holly and otherwise
on terms which the Board of Directors of Holly determines in its good faith
judgment (based on the advice of a financial advisor of nationally recognized
reputation) to be more favorable to Holly's stockholders than the Merger and for
which financing, to the extent required, is then committed or which, in the good
faith judgment of the Board of Directors of Holly, is reasonably capable of
being obtained by such third party.
(c) In addition to the obligations of Holly set forth in paragraphs (a)
and (b) of this Section 4.02, Holly shall immediately advise Giant orally and in
writing of any request for information or of any Holly Takeover Proposal, the
material terms and conditions of such request or Holly Takeover Proposal and the
identity of the person making such request or Holly Takeover Proposal. Holly
will keep Giant reasonably informed of the status and details (including
amendments or proposed amendments) of any such request or Holly Takeover
Proposal.
(d) Nothing contained in this Section 4.02 shall prohibit Holly from
taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to
Holly's stockholders if, in the good faith judgment of the Board of Directors of
Holly, after consultation with outside counsel, failure so to disclose would be
inconsistent with its fiduciary duties to Holly's stockholders under applicable
law; provided, however, that neither Holly nor its Board of Directors nor any
committee thereof shall, except as permitted by Section 4.02(b), withdraw or
modify, or propose publicly to withdraw or modify, its position with respect to
this Agreement or the Merger or approve or recommend, or propose publicly to
approve or recommend, a Holly Takeover Proposal.
4.03. No Solicitation By Giant.
(a) Giant shall not, nor shall it permit any of its subsidiaries to, nor
shall it authorize or permit any of its officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its subsidiaries to, directly or
indirectly through another person, (i) solicit, initiate or encourage (including
by way of furnishing information), or take any other action designed to
facilitate, any inquiries or the making of any proposal which constitutes any
Giant Takeover Proposal (as hereinafter defined) or (ii) participate in any
discussions or negotiations regarding any Giant Takeover Proposal; provided,
however, that if, at any time prior to the adoption of this Agreement by the
holders of Giant Common Stock, the Board of Directors of Giant determines in
good faith, after consultation with outside counsel, that it is necessary to do
so in order to comply with its fiduciary duties to Giant's stockholders under
applicable law, Giant may, in response to a Giant Takeover Proposal which was
not solicited by it or which did not otherwise result from a breach of this
Section 4.03(a), and subject to compliance with Section 4.03(c), (x) furnish
information with respect to Giant and its subsidiaries to any person pursuant to
a customary confidentiality agreement (as determined by Giant after consultation
with its outside counsel) and (y) participate in negotiations regarding such
Giant Takeover Proposal. For purposes of this Agreement, "Giant Takeover
Proposal" means any inquiry, proposal or offer from any person relating to any
direct or indirect acquisition or purchase of 35% or more of the assets of Giant
and its subsidiaries or 35% or more of any class of equity securities of Giant
or any of its subsidiaries, any tender offer or exchange offer that if
consummated would result in any person beneficially owning 35% or more of any
class of equity
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securities of Giant or any of its subsidiaries, or any merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving Giant or any of its subsidiaries, other than the
transactions contemplated by this Agreement.
(b) Except as expressly permitted by this Section 4.03, neither the
Board of Directors of Giant nor any committee thereof shall (i) withdraw or
modify, or propose publicly to withdraw or modify, in a manner adverse to Holly,
the approval or recommendation by such Board of Directors or such committee of
the Merger, this Agreement or the issuance of Giant Common Stock in connection
with the Merger, (ii) approve or recommend, or propose publicly to approve or
recommend, any Giant Takeover Proposal, or (iii) cause Giant to enter into any
letter of intent, agreement in principle, acquisition agreement or other similar
agreement (each, a "Giant Acquisition Agreement") related to any Giant Takeover
Proposal. Notwithstanding the foregoing, in the event that prior to the adoption
of this Agreement by the holders of Giant Common Stock: (x) the Board of
Directors of Giant determines in good faith, after it has received a Giant
Superior Proposal (as defined below) and after consultation with outside
counsel, that it is necessary to do so in order to comply with its fiduciary
duties to Giant's stockholders under applicable law, the Board of Directors of
Giant may (subject to this and the following sentences) withdraw or modify its
approval or recommendation of the Merger, this Agreement or the issuance of
Giant Common Stock in connection with the Merger; or (y) the Board of Directors
of Giant determines in good faith that there is not a substantial probability
that the adoption of this Agreement by holders of Giant Common Stock will be
obtained due to the existence of a Giant Superior Proposal, the Board of
Directors of Giant may (subject to this and the following sentences) approve or
recommend such Giant Superior Proposal or terminate this Agreement (and
concurrently with or after such termination, if it so chooses, cause Giant to
enter into any Giant Acquisition Agreement with respect to any Giant Superior
Proposal), but in each of the cases set forth in this clause (y), only at a time
that is after the fifth business day following Holly's receipt of written notice
advising Holly that the Board of Directors of Giant has received a Giant
Superior Proposal, specifying the material terms and conditions of such Giant
Superior Proposal and identifying the person making such Giant Superior
Proposal. For purposes of this Agreement, a "Giant Superior Proposal" means any
proposal made by a third party to acquire, directly or indirectly, for
consideration consisting of cash and/or securities, more than 50% of the
combined voting power of the shares of Giant Common Stock then outstanding or
all or substantially all the assets of Giant and otherwise on terms which the
Board of Directors of Giant determines in its good faith judgment (based on the
advice of a financial advisor of nationally recognized reputation) to be more
favorable to Giant's stockholders than the Merger and for which financing, to
the extent required, is then committed or which, in the good faith judgment of
the Board of Directors of Giant, is reasonably capable of being obtained by such
third party.
(c) In addition to the obligations of Giant set forth in paragraphs (a)
and (b) of this Section 4.03, Giant shall immediately advise Holly orally and in
writing of any request for information or of any Giant Takeover Proposal, the
material terms and conditions of such request or Giant Takeover Proposal and the
identity of the person making such request or Giant Takeover Proposal. Giant
will keep Holly reasonably informed of the status and details (including
amendments or proposed amendments) of any such request or Giant Takeover
Proposal.
(d) Nothing contained in this Section 4.03 shall prohibit Giant from
taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to
Giant's stockholders if, in the good faith judgment of the Board of Directors of
Giant, after consultation with outside counsel, failure so to disclose would be
inconsistent with its fiduciary duties to Giant's stockholders under applicable
law; provided, however, that neither Giant nor its Board of Directors nor any
committee thereof shall, except as permitted by Section 4.03(b), withdraw or
modify, or propose publicly to withdraw or modify, its position with respect to
this Agreement, the Merger, the issuance of Giant Common Stock in connection
with the Merger, or approve or recommend, or propose publicly to approve or
recommend, a Giant Takeover Proposal.
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ARTICLE V
ADDITIONAL AGREEMENTS
5.01. Preparation of the Form S-4 and the Joint Proxy Statement;
Stockholders Meetings.
(a) As soon as practicable following the date of this Agreement, Holly
and Giant shall prepare and file with the SEC the Joint Proxy Statement and
Giant shall prepare and file with the SEC the Form S-4, in which the Joint Proxy
Statement will be included as a prospectus. Each of Holly and Giant shall use
all reasonable efforts to have the Form S-4 declared effective under the
Securities Act as promptly as practicable after such filing. Holly will use all
reasonable efforts to cause the Joint Proxy Statement to be mailed to Holly's
stockholders, and Giant will use all reasonable efforts to cause the Joint Proxy
Statement to be mailed to Giant's stockholders, in each case as promptly as
practicable after the Form S-4 is declared effective under the Securities Act.
Giant also shall take any action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified or to file a general consent to
service of process) required to be taken under any applicable state securities
laws in connection with the issuance of Giant Common Stock in the Merger and
Holly shall furnish all information concerning Holly and the holders of Holly
Common Stock as may be reasonably requested in connection with any such action.
(b) Holly will, as soon as practicable following the date of this
Agreement, duly call, give notice of, convene and hold a meeting of its
stockholders (the "Holly Stockholders Meeting") for the purpose of obtaining the
Holly Stockholder Approval. Without limiting the generality of the foregoing but
subject to Section 4.02(b), Holly agrees that its obligations pursuant to the
first sentence of this Section 5.01(b) shall not be affected by the
commencement, public proposal, public disclosure or communication to Holly of
any Holly Takeover Proposal. Holly will, through its Board of Directors,
recommend to its stockholders the approval and adoption of this Agreement, the
Merger and the other transactions contemplated by this Agreement, except to the
extent that the Board of Directors of Holly shall have withdrawn or modified its
approval or recommendation of this Agreement or the Merger and terminated this
Agreement in accordance with Section 4.02(b).
(c) Giant will, as soon as practicable following the date of this
Agreement, duly call, give notice of, convene and hold a meeting of its
stockholders (the "Giant Stockholders Meeting") for the purpose of obtaining the
Giant Stockholder Approval. Without limiting the generality of the foregoing but
subject to Section 4.03(b), Giant agrees that its obligations pursuant to the
first sentence of this Section 5.01(c) shall not be affected by the
commencement, public proposal, public disclosure or commencement to Giant of any
Giant Takeover Proposal. Giant will, through its Board of Directors, recommend
to its stockholders the approval and adoption of this Agreement, the Merger and
the other transactions contemplated by this Agreement, except to the extent that
the Board of Directors of Giant shall have withdrawn or modified its
recommendation and terminated this Agreement in accordance with Section 4.03(b).
(d) Giant and Holly will use reasonable efforts to hold the Holly
Stockholders Meeting and the Giant Stockholders Meeting on the same date and as
soon as practicable after the date hereof.
5.02. Letters of Holly's Accountants. Holly shall use reasonable efforts
to cause to be delivered to Giant two letters from Ernst & Young LLP, Holly's
independent accountants, one dated a date within two business days before the
date on which the Form S-4 shall become effective and one dated a date within
two business days before the Closing Date, each addressed to Giant, in form and
substance reasonably satisfactory to Giant and customary in scope and substance
for comfort letters delivered by independent public accountants in connection
with registration statements similar to the Form S-4.
5.03. Letters of Giant's Accountants. Giant shall use reasonable efforts
to cause to be delivered to Holly two letters from Deloitte & Touche LLP,
Giant's independent accountants, one dated a date within two business days
before the date on which the Form S-4 shall become effective and one dated a
date within two business days before the Closing Date, each addressed to Holly,
in form and substance reasonably satisfactory to Holly and customary in scope
and substance for comfort letters delivered by independent public accountants in
connection with registration statements similar to the Form S-4.
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5.04. Access to Information; Confidentiality. Subject to the
Confidentiality Agreement (as defined below), each of Holly and Giant shall, and
shall cause each of its respective subsidiaries to, afford to the other party
and to the officers, employees, accountants, counsel, financial advisors and
other representatives of such other party, reasonable access during normal
business hours during the period prior to the Effective Time to all their
respective properties, books, contracts, commitments, personnel and records and,
during such period, each of Holly and Giant shall, and shall cause each of its
respective subsidiaries to, furnish promptly to the other party (a) a copy of
each report, schedule, registration statement and other document filed by it
during such period pursuant to the requirements of federal or state securities
laws and (b) all other information concerning its business, properties and
personnel as such other party may reasonably request. Each of Holly and Giant
will hold, and will cause its respective officers, employees, accountants,
counsel, financial advisors and other representatives and affiliates to hold,
any nonpublic information in accordance with the terms of the Confidentiality
Agreement dated April 6, 1998 between Giant and Holly (the "Confidentiality
Agreement").
5.05. Reasonable Efforts.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including (i) the obtaining of all necessary actions, waivers,
consents and approvals from Governmental Entities and the making of all
necessary registrations and filings (including filings with Governmental
Entities, such as those referred to in Sections 3.01(d)(1)-(4) and
3.02(d)(1)-(6)) and the taking of all reasonable steps as may be necessary to
obtain an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity, (ii) the obtaining of all necessary actions, waivers,
consents and approvals from third parties, (iii) the defending of any lawsuits
or other legal proceedings, whether judicial or administrative, challenging this
Agreement or the consummation of the transactions contemplated by this
Agreement, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Entity vacated or reversed, and (iv)
the execution and delivery of any additional instruments necessary to consummate
the transactions contemplated by, and to fully carry out the purposes of, this
Agreement. Nothing set forth in this Section 5.05(a) will limit or affect
actions permitted to be taken pursuant to Sections 4.02 and 4.03.
(b) In connection with and without limiting the foregoing, each of Holly
and Giant shall (i) take all action necessary to ensure that no state takeover
statute or similar statute or regulation is or becomes applicable to the Merger,
this Agreement or any of the other transactions contemplated by this Agreement,
and (ii) if any state takeover statute or similar statute or regulation becomes
applicable to the Merger, this Agreement or any other transaction contemplated
by this Agreement, take all action necessary to ensure that the Merger and the
other transactions contemplated by this Agreement may be consummated as promptly
as practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Merger and the other
transactions contemplated by this Agreement.
(c) In connection with and without limiting the foregoing, each of Holly
and Giant shall (i) promptly make or cause to be made the filings required of
such party or any of its affiliates or subsidiaries under the HSR Act with
respect to the Merger, (ii) comply at the earliest practicable date with any
request under the HSR Act for additional information, documents, or other
material received by such party or any of its affiliates or subsidiaries from
the Federal Trade Commission or the Department of Justice or other Governmental
Entity in respect of such filings, the Merger or such other transactions, and
(iii) cooperate with the other party in connection with any such filing and in
connection with resolving any investigation or other inquiry of any such agency
or other Governmental Entity under the HSR Act, the Sherman Act, as amended, the
Clayton Act, as amended, the Federal Trade Commission Act, as amended, and any
other federal, state or foreign statutes, rules, regulations, or orders that are
designed to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade (collectively, the "Antitrust Laws")
with respect to any such filing, the Merger, or any such other transaction. Each
party shall promptly inform the other party of any material communication with,
and any proposed understanding, undertaking, or agreement with, any Governmental
Entity regarding any such filings, the Merger, or any such other transactions.
Neither party
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shall participate in any meeting with any Governmental Entity in respect of any
such filings, investigation, or other inquiry without giving the other party
notice of the meeting and, to the extent permitted by such Governmental Entity,
the opportunity to attend and participate.
(d) In connection with and without limiting the foregoing, each of Holly
and Giant shall use its reasonable efforts to resolve such objections, if any,
as may be asserted by any Governmental Entity with respect to the Merger or any
other transactions provided for in this Agreement under the Antitrust Laws. In
connection therewith, if any administrative or judicial action or proceeding is
instituted (or threatened to be instituted) challenging the transaction as
violative of any Antitrust Law, and, if by mutual agreement, Holly and Giant
decide that litigation is in their best interests, each of Holly and Giant shall
cooperate and use reasonable efforts vigorously to contest and resist any such
action or proceeding and to have vacated, lifted, reversed, or overturned any
order that is in effect and that prohibits, prevents, or restricts consummation
of the Merger. Each of Holly and Giant shall use its reasonable efforts to take
such action as may be required to cause the expiration of the notice periods
under the HSR Act or other Antitrust Laws with respect to the Merger as promptly
as possible after the execution of this Agreement. Notwithstanding anything to
the contrary in this Section 5.05, neither Holly nor Giant shall be required to
divest any of its businesses, product lines, or assets, or to take or agree to
take any other action or agree to any limitation that would have a material
adverse effect on such party.
5.06. Stock Options and Phantom Stock Rights.
(a) As soon as practicable following the date of this Agreement, the
Board of Directors of Holly (or, if appropriate, any committee administering the
Holly Stock Plan) shall adopt such resolutions or take such other actions as may
be required to effect the following:
(i) adjust the terms of all outstanding Holly Employee Stock Options
granted under the Holly Stock Plan, whether vested or unvested, as necessary to
provide that, immediately after the Effective Time, each Holly Employee Stock
Option outstanding immediately prior to the Effective Time shall be deemed to
constitute an option to acquire, on the same terms and conditions as were
applicable under such Holly Employee Stock Option, including vesting, the same
Giant Common Stock portion of the Merger Consideration the holder of such Holly
Employee Stock Option would have been entitled to receive pursuant to the Merger
had such holder exercised such Holly Employee Stock Option in full immediately
prior to the Effective Time, at a price per share of Giant Common Stock equal to
(a) the aggregate exercise price for the shares of Holly Common Stock pursuant
to such Holly Employee Stock Option divided by (b) the aggregate number of
shares of Giant Common Stock that may be purchased pursuant to such Holly
Employee Stock Option (each, as so adjusted, an "Adjusted Option"); provided,
however, that in the case of any option to which Section 421 of the Code applies
by reason of its qualification under any of Sections 422 through 424 of the Code
("qualified stock options"), the option price, the number of shares purchasable
pursuant to such option and the terms and conditions of exercise of such option
shall be determined in order to comply with Section 424 of the Code;
(ii) make such other changes to the Holly Stock Plan as Holly and
Giant may agree are appropriate to give effect to the Merger; and
(iii) adjust the terms of all outstanding Holly phantom stock rights
and take all such actions as necessary to make them obligations of Giant
consistent with the adjustment provisions of Section 5.06(a)(i) regarding
options.
Immediately following the Effective Time, Giant shall pay to each holder
of Holly Employee Stock Options immediately before the Effective Time an amount
in cash (subject to applicable withholding) equal to the number of Holly shares
that were subject to such holder's Holly stock options (whether vested or
unvested) immediately before the Effective Time times the amount in cash paid
per issued and outstanding Holly share as part of the Merger Consideration
pursuant to Section 2.01(b). In addition, immediately following the Effective
Time, Giant shall pay to each holder of Holly phantom share rights immediately
before the Effective Time an amount in cash (subject to applicable withholding)
equal to the number of phantom shares held by such holder immediately before the
Effective Time times the amount in cash paid per Holly
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share as part of the Merger Consideration pursuant to Section 2.01(b). This
provision shall be interpreted so that the sum of the total cash Merger
Consideration payable at the Effective Time under Section 2.01(b) (whether or
not actually paid) and the total of the cash payments (including applicable
withholding) required to be made under this Section 5.06(a) shall in all cases
equal but not exceed $25,000,000, subject to the provisions of Section 2.01(j).
Such payments shall be in lieu of any other payment or adjustment to any holder
of a Holly Employee Stock Option or Holly phantom share right relating to the
cash portion of the Merger Consideration.
(b) As soon as practicable after the Effective Time, Giant shall deliver
to the holders of Holly Employee Stock Options appropriate notices setting forth
such holders' rights pursuant to the Holly Stock Plan and the agreements
evidencing the grants of such Holly Employee Stock Options and that such Holly
Employee Stock Options and agreements shall be assumed by Giant and shall
continue in effect on the same terms and conditions (subject to the adjustments
required by this Section 5.06 after giving effect to the Merger). Giant shall
comply with the terms of the Holly Stock Plan and ensure, to the extent required
by and subject to the provisions of such Holly Stock Plan, that the Holly
Employee Stock Options which qualified as qualified stock options prior to the
Effective Time continue to qualify as qualified stock options after the
Effective Time.
(c) Giant shall take such actions as are necessary for the assumption of
the Holly Stock Plan pursuant to Section 5.06(a), including the reservation,
issuance and listing of Giant Common Stock as is necessary to effectuate the
transactions contemplated by Section 5.06(a). As soon as reasonably practicable
after the Effective Time, Giant shall prepare and file with the SEC a
registration statement on Form S-8 or other appropriate form with respect to
shares of Giant Common Stock subject to Holly Employee Stock Options issued
under the Holly Stock Plan and shall use all reasonable efforts to maintain the
effectiveness of a registration statement or registration statements covering
such Holly Employee Stock Options (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as such Holly Employee
Stock Options remain outstanding. With respect to those individuals, if any, who
subsequent to the Effective Time will be subject to the reporting requirements
under Section 16(a) of the Exchange Act, where applicable, Giant shall use all
reasonable efforts to administer the Holly Stock Plan assumed pursuant to
Section 5.06(b) in a manner that complies with Rule 16b-3 promulgated under the
Exchange Act to the extent the Holly Stock Plan complied with such rule prior to
the Merger.
(d) A holder of an Adjusted Option may exercise such Adjusted Option in
whole or in part in accordance with its terms by delivering a properly executed
notice of exercise to Giant, together with the consideration therefor and the
federal withholding tax information, if any, required in accordance with the
Holly Stock Plan.
(e) Except as otherwise contemplated by this Section 5.06, all
restrictions or limitations on transfer and vesting with respect to Holly
Employee Stock Options awarded under the Holly Stock Plan or any other plan,
program or arrangement of Holly or any of its subsidiaries, to the extent that
such restrictions or limitations shall not have already lapsed, shall remain in
full force and effect with respect to such options after giving effect to the
Merger and the assumption by Giant as set forth above.
(f) Giant shall have the right to meet its obligation to assume the
Holly Employee Stock Options under this Section 5.06 by granting to the holder
of Holly Employee Stock Options as soon as practicable after the Effective Time
substitute options to acquire shares of Giant Common Stock on identical terms as
prescribed herein.
(g) Giant has certain outstanding stock options and phantom stock rights
which will become fully vested and will unless amended be required to be
cashed-out as a result of the Merger. Giant shall amend such options to provide
the holders thereof with the right to elect to be cashed out or to reject the
cash-out and continue to hold the option, as the case may be. Giant shall use
its reasonable efforts to cause the holders of such options, prior to the
Effective Time, to reject the cash-out and continue to hold the options. Giant
shall use its best efforts to obtain, prior to the Effective Time, waivers from
the holders of its phantom stock rights of the acceleration of vesting triggered
by the Merger (and, accordingly, any cash-out rights associated with the
accelerated vesting). Giant also has certain employment agreements that include
change of control
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provisions that may be triggered on account of the Merger. Giant shall use its
best efforts to cause such employment agreements to be amended prior to the
Effective Time to limit the change of control payments thereunder so that such
payments will not constitute excess parachute payments triggering excise tax
liability under the Code.
5.07. Certain Employee Matters. Following the Effective Time, Giant, as
the Surviving Corporation in the Merger, will honor all obligations under
employment agreements of Holly or Giant the existence of which does not
constitute a violation of this Agreement (including those agreements entered
into by Holly pursuant to Section 4.01(a)(xiii)) in accordance with the terms
thereof.
5.08. Indemnification, Exculpation and Insurance.
(a) Giant agrees that all rights to indemnification and exculpation from
liabilities for acts or omissions occurring at or prior to the Effective Time
now existing in favor of the current or former directors or officers of Holly
and its subsidiaries as provided in their respective certificates of
incorporation or bylaws (or comparable organizational documents) and any
indemnification agreements of Holly, the existence of which does not constitute
a breach of this Agreement, shall be assumed by Giant, as the Surviving
Corporation in the Merger, without further action, as of the Effective Time and
shall survive the Merger and shall continue in full force and effect in
accordance with their terms. The Surviving Corporation shall (i) maintain in
effect for not less than three years after the Effective Time the current
policies of directors' and officers' liability insurance maintained by Holly
with respect to matters occurring on or prior to the Effective Time; provided,
however, that the Surviving Corporation may substitute therefor policies of at
least the same coverage (with carriers comparable to Holly's existing carriers)
containing terms and conditions which are not materially less advantageous to
the former or current (immediately prior to the Effective Time) directors or
officers of Holly and its subsidiaries and (ii) upon the request of any former
or current (immediately prior to the Effective Time) director or officer of
Holly or any of its subsidiaries, enter into a contract obligating the Surviving
Corporation to indemnify and exculpate such individual for liabilities as
described in this Section 5.08. In addition, from and after the Effective Time,
directors and officers of Holly who become directors or officers of Giant will
be entitled to the same indemnity rights and protections as are afforded to
other directors and officers of Giant.
(b) In the event that Giant or any of its successors or assigns (i)
consolidates with or merges into any other person and is not the continuing or
surviving corporation or entity of such consolidation or merger or (ii)
transfers or conveys all or substantially all of its properties and assets to
any person, then, and in each such case, proper provision will be made so that
the successors and assigns of Giant assume the obligations set forth in this
Section.
(c) The provisions of this Section 5.08 (i) are intended to be for the
benefit of, and will be enforceable by, each indemnified party, his or her heirs
and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.
5.09. Fees and Expenses.
(a) Except as set forth in this Section 5.09, all fees and expenses
incurred in connection with the Merger, this Agreement and the transactions
contemplated by this Agreement shall be paid by the party incurring such fees or
expenses, whether or not the Merger is consummated, except that each of Giant
and Holly shall bear and pay one-half of the costs and expenses incurred in
connection with (i) the filing, printing and mailing of the Form S-4 and the
Joint Proxy Statement (including SEC filing fees) and (ii) the filings of the
premerger notification and report forms under the HSR Act (including filing
fees).
(b) In the event that (i) a Holly Takeover Proposal shall have been made
known to Holly or any of its subsidiaries or has been made directly to its
stockholders generally or any person shall have publicly announced an intention
(whether or not conditional) to make a Holly Takeover Proposal and thereafter
this Agreement is terminated by either Giant or Holly pursuant to Section
7.01(b)(i) or (ii), or (ii) this Agreement is terminated (x) by Holly pursuant
to Section 7.01(g) or (y) by Giant pursuant to Section 7.01(e), then Holly shall
promptly, but in no event later than two days after the date of such
termination,
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pay Giant a fee equal to $8,000,000 (the "Termination Fee"), payable by wire
transfer of same day funds; provided, however, that no Termination Fee shall be
payable to Giant pursuant to clause (i) of this paragraph (b) or pursuant to a
termination by Giant pursuant to Section 7.01(e) unless and until within 18
months of such termination Holly or any of its subsidiaries enters into any
Holly Acquisition Agreement or consummates any Holly Takeover Proposal (for the
purposes of the foregoing proviso the terms "Holly Acquisition Agreement" and
"Holly Takeover Proposal" shall have the meanings assigned to such terms in
Section 4.02). Holly acknowledges that the agreements contained in this Section
5.09(b) are an integral part of the transactions contemplated by this Agreement,
and that, without these agreements, Giant would not enter into this Agreement.
Accordingly, if Holly fails promptly to pay the amount due pursuant to this
Section 5.09(b), and, in order to obtain such payment, Giant commences a suit
which results in a judgment against Holly for the fee set forth in this Section
5.09(b), Holly shall pay to Giant its costs and expenses (including attorneys'
fees and expenses) in connection with such suit, together with interest on the
amount of the fee at the prime rate of Bank of America, N.A. in effect on the
date such payment was required to be made. In the event of a termination by
Giant pursuant to Section 7.01(e), Holly shall promptly pay upon Giant's request
all out-of-pocket expenses incurred by Giant in connection with this Agreement
and the transactions contemplated by this Agreement in an amount not to exceed
$1,500,000, which payments shall be credited against any Termination Fee that
may subsequently become payable.
(c) In the event that (i) a Giant Takeover Proposal shall have been made
known to Giant or any of its subsidiaries or has been made directly to its
stockholders generally or any person shall have publicly announced an intention
(whether or not conditional) to make a Giant Takeover Proposal and thereafter
this Agreement is terminated by either Giant or Holly pursuant to Section
7.01(b)(i) or (iii), or (ii) this Agreement is terminated (x) by Giant pursuant
to Section 7.01(d) or (y) by Holly pursuant to Section 7.01(h), then Giant shall
promptly, but in no event later than two days after the date of such
termination, pay Holly the Termination Fee, payable by wire transfer of same day
funds; provided, however, that no Termination Fee shall be payable to Holly
pursuant to clause (i) of this paragraph (c) or pursuant to a termination by
Holly pursuant to Section 7.01(h) unless and until within 18 months of such
termination Giant or any of its subsidiaries enters into any Giant Acquisition
Agreement or consummates any Giant Takeover Proposal (for the purposes of the
foregoing proviso the terms "Giant Acquisition Agreement" and "Giant Takeover
Proposal" shall have the meanings assigned to such terms in Section 4.03. Giant
acknowledges that the agreements contained in this Section 5.09(c) are an
integral part of the transactions contemplated by this Agreement, and that,
without these agreements, Holly would not enter into this Agreement.
Accordingly, if Giant fails promptly to pay the amount due pursuant to this
Section 5.09(c), and, in order to obtain such payment, Holly commences a suit
which results in a judgment against Giant for the fee set forth in this Section
5.09(c), Giant shall pay to Holly its costs and expenses (including attorneys'
fees and expenses) in connection with such suit, together with interest on the
amount of the fee at the prime rate of Bank of America, N.A. in effect on the
date such payment was required to be made. In the event of a termination by
Holly pursuant to Section 7.01(h), Giant shall promptly pay upon Holly's request
all out-of-pocket expenses incurred by Holly in connection with this Agreement
and the transactions contemplated by this Agreement in an amount not to exceed
$1,500,000 which payments shall be credited against any Termination Fee that may
subsequently become payable.
5.10. Public Announcements. Giant and Holly will consult with each other
before issuing, and provide each other the opportunity to review, comment upon
and concur with, any press release or other public statements with respect to
the transactions contemplated by this Agreement, and shall not issue any such
press release or make any such public statement prior to such consultation,
except as either party may determine is required by applicable law, court
process or by obligations pursuant to any listing agreement with any national
securities exchange. The parties agree that the initial press release to be
issued with respect to the transactions contemplated by this Agreement shall be
in the form previously agreed to by the parties.
5.11. NYSE Listing. Giant shall use best efforts to cause the shares of
Giant Common Stock to be issued in the Merger and under the Holly Stock Plan (or
Giant Stock Plan, if Giant elects to issue substitute options to the holders of
Holly Employee Stock Options) to be approved for listing on the NYSE, subject to
official notice of issuance, prior to the Closing Date.
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5.12. Transfer Taxes, Etc. The Surviving Corporation shall pay the Merger
Consideration to the holders of Holly Common Stock without deduction or
withholding therefrom for transfer taxes, transfer fees, stamp fees, recording
fees, or other similar taxes or fees that may become payable in connection with
the Merger, all of which shall be paid by the Surviving Corporation.
5.13. Tax Treatment. Each of Giant and Holly shall use reasonable efforts
to cause the Merger to qualify as a reorganization under the provisions of
Section 368 of the Code and to obtain the opinions of counsel referred to in
Sections 6.02 and 6.03.
5.14. Indemnification Agreements. Giant and Holly agree that as soon as
practicable after the Effective Time, the Surviving Corporation will enter into
indemnification agreements with the directors and officers of the Surviving
Corporation providing for indemnification on the terms set forth in the bylaws
of the Surviving Corporation, as amended pursuant to Section 1.05, and as
otherwise provided for under this Agreement.
5.15. Certain Tax Matters. Giant and Holly agree that they will not treat
the Merger as a change in the ownership or effective control of Giant or a
change in the ownership of a substantial portion of the assets of Giant, each
within the meaning of Section 280G of the Code, unless otherwise required by a
determination (as defined in Section 1313 of the Code).
5.16 Affiliate Agreements. Holly shall, no later than two (2) days prior
to the Closing, cause to be delivered to Giant a list, reviewed by its counsel
and reasonably satisfactory to Giant, identifying all persons who are, in its
opinion, at the time of the meeting of the Holly's stockholders to be held to
approve the Merger, "affiliates" of Holly for purposes of Rule 145 under the
Securities Act. Holly shall furnish such information and documents as Giant may
reasonably request for the purpose of reviewing such list. Holly shall use its
reasonable efforts to cause each person who is identified as an "affiliate" in
the list furnished pursuant to this Section 5.16 to execute a written agreement
on or prior to the Closing, in a form satisfactory to Giant (an "Affiliate
Agreement"), that such person shall not offer or sell or otherwise dispose of
any of the shares of Giant Common Stock issued to such person pursuant to the
Merger in violation of the Securities Act or the rules and regulations
promulgated by the SEC thereunder.
ARTICLE VI
CONDITIONS PRECEDENT
6.01. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approvals. Each of the Holly Stockholder Approval and
the Giant Stockholder Approval shall have been obtained.
(b) HSR Act. The waiting period (and any extension thereof) applicable
to the Merger under the HSR Act shall have been terminated or shall have
expired.
(c) No Injunctions or Restraints. No judgment, order, decree, statute,
law, ordinance, rule, regulation, temporary restraining order, preliminary or
permanent injunction or other order enacted, entered, promulgated, enforced or
issued by any court of competent jurisdiction or other Governmental Entity or
other legal restraint or prohibition (collectively, "Restraints") preventing the
consummation of the Merger shall be in effect; provided, however, that each of
the parties shall have used reasonable efforts to prevent the entry of any such
Restraints and to appeal as promptly as possible any such Restraints that may be
entered.
(d) No Litigation. There shall not be pending any suit, action or
proceeding, in each case brought by any Governmental Entity and (i) seeking to
restrain or prohibit the consummation of the Merger or any of the other
transactions contemplated by this Agreement or seeking to obtain from either of
Holly or Giant any damages that are material in relation to Holly and its
subsidiaries taken as a whole or Giant and its subsidiaries taken as a whole, as
applicable, (ii) seeking to prohibit or limit the ownership or operation by
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Holly, Giant or any of their respective subsidiaries of any material portion of
the business or assets of Holly, Giant or any of their respective subsidiaries,
or to compel Holly, Giant or any of their respective subsidiaries to dispose of
or hold separate any material portion of the business or assets of Holly, Giant
or any of their respective subsidiaries, as a result of the Merger or any of the
other transactions contemplated by this Agreement or (iii) which otherwise could
reasonably be expected to have a material adverse effect on Holly or Giant, as
applicable. In addition, there shall not be any Restraint enacted, entered,
enforced or promulgated that is reasonably likely to result, directly or
indirectly, in any of the consequences referred to in clauses (ii) or (iii)
above.
(e) Form S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order.
(f) NYSE Listing. The shares of Giant Common Stock issuable to Holly's
stockholders pursuant to this Agreement and under the Holly Stock Plan (or Giant
Stock Plan, if Giant elects to issue substitute options to the holders of Holly
Employee Stock Options) shall have been approved for listing on the NYSE,
subject to official notice of issuance.
(g) Major Stockholders' Agreement. The parties to such agreement shall
have executed a Major Stockholders' Agreement substantially in the form attached
as Exhibit D.
(h) Dissenters' Rights. Dissenters' rights of appraisal under the DGCL
shall not have been exercised with respect to more than 5% of the issued and
outstanding shares of Holly Common Stock.
6.02. Conditions to Obligations of Giant. The obligation of Giant to
effect the Merger is further subject to satisfaction or waiver of the following
conditions:
(a) Representations and Warranties. The representations and warranties
of Holly set forth in this Agreement that are qualified as to materiality shall
be true and correct, and the representations and warranties of Holly set forth
in this Agreement that are not so qualified shall be true and correct in all
material respects, in each case as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date, except to the extent
such representations and warranties expressly relate to an earlier date (in
which case as of such date), and Giant shall have received a certificate signed
on behalf of Holly by the chief executive officer and the chief financial
officer of Holly to such effect.
(b) Performance of Obligations of Holly. Holly shall have performed in
all material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and Giant shall have received a
certificate signed on behalf of Holly by the chief executive officer and the
chief financial officer of Holly to such effect.
(c) Tax Opinion. Giant shall have received from counsel reasonably
acceptable to Giant, on the date of the Joint Proxy Statement and on the Closing
Date, opinions, in each case dated as of such respective dates and stating that
the Merger will be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code, that Giant and Holly will each
be a party to that reorganization within the meaning of Section 368(b) of the
Code and that no gain or loss will be recognized by the stockholders of Holly
upon their exchange of Holly stock for Giant stock (except to the extent such a
stockholder receives cash as a portion of the Merger Consideration or in lieu of
fractional shares). In rendering such opinions, such counsel shall be entitled
to rely upon customary representations.
(d) Opinion of Holly Counsel. Giant shall have received from counsel to
Holly an opinion, in form and substance reasonably acceptable to Giant, dated as
of the Closing Date and addressing such matters as are customary in connection
with transactions such as the Merger.
(e) No Material Adverse Change. At any time after the date of this
Agreement there shall not have occurred any material adverse change relating to
Holly.
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6.03. Conditions to Obligation of Holly. The obligation of Holly to
effect the Merger is further subject to satisfaction or waiver of the following
conditions:
(a) Representations and Warranties. The representations and warranties
of Giant set forth in this Agreement that are qualified as to materiality shall
be true and correct, and the representations and warranties of Giant set forth
in this Agreement that are not so qualified shall be true and correct in all
material respects, in each case as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date, except to the extent
such representations expressly relate to an earlier date (in which case as of
such date), and Holly shall have received a certificate signed on behalf of
Giant by the chief executive officer and the chief financial officer of Giant to
such effect.
(b) Performance of Obligations of Giant. Giant shall have performed in
all material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and Holly shall have received a
certificate signed on behalf of Giant by the chief executive officer and the
chief financial officer of Giant to such effect.
(c) Tax Opinion. Holly shall have received from counsel reasonably
acceptable to Holly, on the date of the Joint Proxy Statement and on the Closing
Date, opinions, in each case dated as of such respective dates and stating that
the Merger will be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code, that Giant and Holly will each
be a party to that reorganization within the meaning of Section 368(b) of the
Code and that no gain or loss will be recognized by the stockholders of Holly
upon their exchange of Holly stock for Giant stock (except to the extent such a
stockholder receives cash as a portion of the Merger Consideration or in lieu of
fractional shares). In rendering such opinions, such counsel shall be entitled
to rely upon customary representations.
(d) Opinion of Giant Counsel. Holly shall have received from counsel to
Giant an opinion, in form and substance reasonably acceptable to Holly, dated as
of the Closing Date and addressing such matters as are customary in connection
with transactions such as the Merger.
(e) No Material Adverse Change. At any time after the date of this
Agreement there shall not have occurred any material adverse change relating to
Giant.
(f) Amendments to Options, Phantom Stock Rights and Employment
Agreements. Giant shall have amended its outstanding stock options, phantom
stock rights and employment agreements as provided in Section 5.06(g) to the
reasonable satisfaction of Holly's Board of Directors.
6.04. Frustration of Closing Conditions. Neither Giant nor Holly may rely
on the failure of any condition set forth in Section 6.01, 6.02 or 6.03, as the
case may be, to be satisfied if such failure was caused by such party's failure
to use reasonable efforts to consummate the Merger and the other transactions
contemplated by this Agreement, as required by and subject to Section 5.05.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.01. Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after the Holly Stockholder Approval or
the Giant Stockholder Approval:
(a) by mutual written consent of Giant and Holly;
(b) by either Giant or Holly:
(i) if the Merger shall not have been consummated by December 31,
1998; provided, however, that the right to terminate this Agreement pursuant to
this Section 7.01(b)(i) shall not be available to any party whose action or
failure to act has been the cause or resulted in the failure of the Merger to be
consummated by such date;
(ii) if the Holly Stockholder Approval shall not have been obtained
at a Holly Stockholders Meeting duly convened therefor or at any adjournment or
postponement thereof;
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(iii) if the Giant Stockholder Approval shall not have been obtained
at a Giant Stockholders Meeting duly convened therefor or at any adjournment or
postponement thereof; or
(iv) if any Governmental Entity shall have issued a Restraint or
taken any other action permanently enjoining, restraining or otherwise
prohibiting the consummation of the Merger or any of the other transactions
contemplated by this Agreement and such Restraint or other action shall have
become final and nonappealable;
(c) by Giant, if Holly shall have breached or failed to perform in any
material respect any of its representations, warranties, covenants or other
agreements contained in this Agreement, which breach or failure to perform (A)
would give rise to the failure of a condition set forth in Section 6.02(a) or
(b), and (B) cannot be or has not been cured within 30 days after the giving of
written notice to Holly of such breach (a "Holly Material Breach") (provided
that Giant is not then in Giant Material Breach (as defined in Section 7.01(f))
of any representation, warranty, covenant or other agreement contained in this
Agreement);
(d) by Giant in accordance with Section 4.03(b), provided that it has
complied with all provisions thereof, including the notice provisions thereof,
and that it complies with applicable requirements of Section 5.09;
(e) by Giant if (i) the Board of Directors of Holly or any committee
thereof shall have withdrawn or modified in a manner adverse to Giant its
approval or recommendation of the Merger or this Agreement or failed to
reconfirm its recommendation within 15 business days after a written request to
do so, or approved or recommended any Holly Takeover Proposal or (ii) the Board
of Directors of Holly or any committee thereof shall have resolved to take any
of the foregoing actions;
(f) by Holly, if Giant shall have breached or failed to perform in any
material respect any of its representations, warranties, covenants or other
agreements contained in this Agreement, which breach or failure to perform (A)
would give rise to the failure of a condition set forth in Section 6.03(a) or
(b), and (B) cannot be or has not been cured within 30 days after the giving of
written notice to Giant of such breach (a "Giant Material Breach") (provided
that Holly is not then in Holly Material Breach of any representation, warranty,
covenant or other agreement contained in this Agreement);
(g) by Holly in accordance with Section 4.02(b), provided that it has
complied with all provisions thereof, including the notice provisions therein,
and that it complies with applicable requirements of Section 5.09; or
(h) by Holly if (i) the Board of Directors of Giant or any committee
thereof shall have withdrawn or modified in a manner adverse to Holly its
approval or recommendation of the Merger or this Agreement or failed to
reconfirm its recommendation within 15 business days after a written request to
do so, or approved or recommended any Giant Takeover Proposal or (ii) the Board
of Directors of Giant or any committee thereof shall have resolved to take any
of the foregoing actions.
7.02. Effect of Termination. In the event of termination of this
Agreement by either Holly or Giant as provided in Section 7.01, this Agreement
shall forthwith become void and have no effect, without any liability or
obligation on the part of Giant or Holly, other than the provisions of Section
3.01(o), Section 3.02(o), the last sentence of Section 5.04, Section 5.09, this
Section 7.02 and Article VIII and except to the extent that such termination
results from the willful and material breach by a party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement, in which case the non-breaching party shall have all rights and
remedies available to it at law or in equity as a result of such willful and
material breach.
7.03. Amendment. This Agreement may be amended by the parties at any time
before or after the Holly Stockholder Approval or the Giant Stockholder
Approval; provided, however, that after any such approval, there shall not be
made any amendment that by law requires further approval by the stockholders of
Holly or Giant without the further approval of such stockholders. This Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties.
7.04. Extension; Waiver. At any time prior to the Effective Time, a party
may (a) extend the time for the performance of any of the obligations or other
acts of the other party, (b) waive any inaccuracies in the
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representations and warranties of the other party contained in this Agreement or
in any document delivered pursuant to this Agreement or (c) subject to the
proviso of Section 7.03, waive compliance by the other party with any of the
agreements or conditions contained in this Agreement. Any agreement on the part
of a party to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
7.05. Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 7.01, an extension or waiver
pursuant to Section 7.04 and any amendment to this Agreement shall, in order to
be effective, require, in the case of Giant or Holly, action by its Board of
Directors.
ARTICLE VIII
GENERAL PROVISIONS
8.01. Nonsurvival of Representations and Warranties. Except for the
representation made by Giant pursuant to Section 3.02(r), which shall survive
for a period of twelve months following the Effective Time, none of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 8.01
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
8.02. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given on the date of delivery, if delivered personally or telecopied (and
confirmed) during normal business hours, or on the following day if sent by
overnight courier (providing proof of delivery), in each case to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to Giant, to:
Giant Industries, Inc.
23733 North Scottsdale Road
Scottsdale, Arizona 85255
Telecopy No.: (602) 585-8985
Attention: Corporate Secretary
with a copy to:
Fennemore Craig, P.C.
3003 North Central Avenue, Suite 2600
Phoenix, Arizona 85012
Telecopy No.: (602) 916-5507
Attention: Karen C. McConnell
(b) if to Holly, to
Holly Corporation
100 Crescent Court, Suite 1600
Dallas, Texas 75201-6927
Telecopy No.: (214) 871-3578
Attention: Lamar Norsworthy
with a copy to:
W. John Glancy, Esq.
Suite 202, One Glen Lakes
8140 Walnut Hill Lane
Telecopy No.: (214) 361-9247
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8.03. Definitions. For purposes of this Agreement:
(a) "Adjusted Option" has the meaning set forth in Section 5.06(a)(i);
(b) "Agreement" has the meaning set forth in the first paragraph of this
Agreement;
(c) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person;
(d) "Benefit Plans" has the meaning set forth in Section 3.01(k)(i);
(e) "Certificates" has the meaning set forth in Section 2.02(b);
(f) "Certificate of Merger" has the meaning set forth in Section 1.03;
(g) "Closing" has the meaning set forth in Section 1.02;
(h) "Closing Date" has the meaning set forth in Section 1.02;
(i) "Code" has the meaning set forth in paragraph D of the Recitals;
(j) "Confidentiality Agreement" has the meaning set forth in Section
5.04;
(k) "DGCL" has the meaning set forth in Section 1.01;
(l) "ERISA" has the meaning set forth in Section 3.01(k)(i);
(m) "Effective Time" has the meaning set forth in Section 1.03;
(n) "Environmental Laws" has the meaning set forth in Section 3.01(e);
(o) "Exchange Act" has the meaning set forth in Section 3.01(d);
(p) "Exchange Agent" has the meaning set forth in Section 2.02(a);
(q) "Exchange Fund" has the meaning set forth in Section 2.02(a);
(r) "Form S-4" has the meaning set forth in Section 3.01(f);
(s) "Giant" has the meaning set forth in the first paragraph of this
Agreement;
(t) "Giant Acquisition Agreement" has the meaning set forth in Section
4.03(b);
(u) "Giant Benefit Plans" has the meaning set forth in Section
3.02(k)(i);
(v) "Giant Common Stock" has the meaning set forth in Section 2.01;
(w) "Giant Filed SEC Documents" has the meaning set forth in Section
3.02(g);
(x) "Giant Material Breach" has the meaning set forth in Section
7.01(f);
(y) "Giant Permits" has the meaning set forth in Section 3.02(i);
(z) "Giant Preferred Stock" has the meaning set forth in Section
3.02(c);
(a-1) "Giant SEC Documents" has the meaning set forth in Section
3.02(e);
(a-2) "Giant Stock Plan" has the meaning set forth in Section 3.02(c);
(a-3) "Giant Stockholder Approval" has the meaning set forth in Section
3.02(m);
(a-4) "Giant Stockholders Meeting" has the meaning set forth in Section
5.01(c);
(a-5) "Giant Superior Proposal" has the meaning set forth in Section
4.03(b);
(a-6) "Giant Takeover Proposal" has the meaning set forth in Section
4.03(a);
(a-7) "Governmental Entity" has the meaning set forth in Section
3.01(d);
(a-8) "HSR Act" has the meaning set forth in Section 3.01(d);
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(a-9) "Holly" has the meaning set forth in the first paragraph of this
Agreement;
(a-10) "Holly Acquisition Agreement" has the meaning set forth in
Section 4.02(b);
(a-11) "Holly Benefit Plans" has the meaning set forth in Section
3.01(k)(i);
(a-12) "Holly Common Stock" has the meaning set forth in paragraph A of
the Recitals;
(a-13) "Holly Disclosure Schedule" has the meaning set forth in Section
3.01;
(a-14) "Holly Filed SEC Documents" has the meaning set forth in Section
3.01(g);
(a-15) "Holly Material Breach" has the meaning set forth in Section
7.01(c);
(a-16) "Holly Permits" has the meaning set forth in Section 3.01(i);
(a-17) "Holly Preferred Stock" has the meaning set forth in Section
3.01(c);
(a-18) "Holly SEC Documents" has the meaning set forth in Section
3.01(e);
(a-19) "Holly Stock Plan" has the meaning set forth in Section 3.01(c);
(a-20) "Holly Stockholder Approval" has the meaning set forth in Section
3.01(m);
(a-21) "Holly Stockholders Meeting" has the meaning set forth in Section
5.01(b);
(a-22) "Holly Superior Proposal" has the meaning set forth in Section
4.02(b);
(a-23) "Holly Takeover Proposal" has the meaning set forth in Section
4.02(a);
(a-24) "Joint Proxy Statement" has the meaning set forth in Section
3.01(d);
(a-25) "key employee" has the meaning set forth in Section 3.01(g);
(a-26) "knowledge" of any person which is not an individual means the
knowledge of such person's executive officers after reasonable inquiry.
(a-27) "Liens" has the meaning set forth in Section 3.01(b);
(a-28) "material adverse change" or "material adverse effect" means,
when used in connection with Holly or Giant, any change, effect, event or
occurrence that is materially adverse to the business, financial condition or
results of operations of such party and its subsidiaries taken as a whole other
than any change, effect, event or occurrence relating to the United States
economy in general or to the petroleum refining and marketing industry in
general, and not specifically relating to Holly or Giant or their respective
subsidiaries, and the terms "material" and "materially" have correlative
meanings;
(a-29) "Merger has the meaning set forth in paragraph A of the Recitals;
(a-30) "Merger Consideration" has the meaning set forth in Section
2.01(b);
(a-31) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity;
(a-32) "qualified stock options" has the meaning set forth in Section
5.06(a)(i);
(a-33) "SEC" has the meaning set forth in Section 3.01(a);
(a-34) "Securities Act" has the meaning set forth in Section 3.01(e);
(a-35) "Significant Subsidiary" has the meaning set forth in Section
3.01(a);
(a-36) a "subsidiary" of any person means another person, an amount of
the voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
person;
(a-37) "Surviving Corporation" has the meaning set forth in Section
1.01;
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(a-38) "taxes" has the meaning set forth in Section 3.01(l)(iv); and
(a-39) "Termination Fee" has the meaning set forth in Section 5.09(b).
8.04. Interpretation. When a reference is made in this Agreement to an
Article, Section or Exhibit, such reference shall be to an Article or Section
of, or an Exhibit to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. All terms defined in this
Agreement shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is referred
to herein means such agreement, instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a person are also to its
permitted successors and assigns.
8.05. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
8.06. Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) and the
Confidentiality Agreement (a) constitute the entire agreement, and supersede all
prior agreements and understandings, both written and oral, between the parties
with respect to the subject matter of this Agreement and (b) except for the
provisions of Article II, Section 5.06 and Section 5.08, are not intended to
confer upon any person other than the parties any rights or remedies.
8.07. Governing Law. Except to the extent that the laws of the State of
Delaware are mandatorily applicable to the Merger, this Agreement shall be
governed by, and construed in accordance with, the laws of the State of Arizona,
regardless of the laws that might otherwise govern under applicable principles
of conflict of laws thereof.
8.08. Assignment. Neither this Agreement nor any of the rights, interests
or obligations under this Agreement shall be assigned, in whole or in part, by
operation of law or otherwise by either of the parties hereto without the prior
written consent of the other party. Any assignment in violation of the preceding
sentence shall be void. Subject to the preceding sentence, this Agreement will
be binding upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and assigns.
8.09. Enforcement. The parties agree that irreparable damage would occur
and that the parties would not have any adequate remedy at law in the event that
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
of this Agreement in any federal court located in the State of Arizona or in
Arizona state court, this being in addition to any other remedy to which they
are entitled at law or in equity. In addition, each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any federal court
located in the State of Arizona or any Arizona state court in the event any
dispute arises out of this Agreement or any of the transactions contemplated by
this Agreement, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
and (c) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated by this Agreement in any court other than a
federal court sitting in the State of Arizona or an Arizona state court.
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IN WITNESS WHEREOF, Giant and Holly have caused this Agreement to be signed
by their respective duly authorized officers, all as of the date first written
above.
HOLLY CORPORATION
By: /s/ LAMAR NORSWORTHY
------------------------------------
Name: Lamar Norsworthy
Title: Chairman of the Board and
Chief Executive Officer
GIANT INDUSTRIES, INC.
By: /s/ JAMES E. ACRIDGE
------------------------------------
Name: James E. Acridge
Title: Chairman of the Board,
President and Chief
Executive Officer
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<PAGE> 140
EXHIBIT A
AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION OF SURVIVING CORPORATION
[Included as Appendix B to the Joint Proxy Statement/Prospectus]
A-1
<PAGE> 141
EXHIBIT B
AMENDED AND RESTATED BYLAWS
OF SURVIVING CORPORATION
[Included as Appendix C to the Joint Proxy Statement/Prospectus]
B-1
<PAGE> 142
EXHIBIT C
BOARD OF DIRECTORS AND OFFICERS
OF SURVIVING CORPORATION
BOARD OF DIRECTORS DESIGNEES AND CLASSES
<TABLE>
<CAPTION>
H DIRECTORS G DIRECTORS
----------- -----------
<S> <C> <C>
Class III Lamar Norsworthy James E. Acridge
Robert G. McKenzie Anthony J. Bernitsky
Class II Jack P. Reid F. Michael Geddes
A. J. Losee Fredric L. Holliger
Class I W. John Glancy Harry S. Howard, Jr.
</TABLE>
OFFICERS
<TABLE>
<CAPTION>
NAME OFFICE
---- ------
<S> <C>
James E. Acridge............................................ Co-Chairman of the Board and
Co-Chief Executive Officer
Lamar Norsworthy............................................ Co-Chairman of the Board and
Co-Chief Executive Officer
Matthew P. Clifton.......................................... Executive Vice President
Morgan Gust................................................. Executive Vice President
Fredric L. Holliger......................................... Executive Vice President
Jack P. Reid................................................ Executive Vice President
</TABLE>
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<PAGE> 143
EXHIBIT D
MAJOR STOCKHOLDERS' AGREEMENT
[Included as Appendix G to the Joint Proxy Statement/Prospectus]
D-1
<PAGE> 144
APPENDIX B
RESTATED
CERTIFICATE OF INCORPORATION
OF
GIANT INDUSTRIES, INC.
------------------------
PURSUANT TO SECTIONS 242 AND 245 OF
THE GENERAL CORPORATION LAW OF
THE STATE OF DELAWARE
------------------------
Giant Industries, Inc., a Delaware corporation organized under the name
Giant Oil Industries, Inc. on September 21, 1989, hereby amends and restates its
Certificate of Incorporation to read in its entirety as set forth below. This
Restated Certificate of Incorporation supersedes in its entirety the Restated
Certificate of Incorporation of Giant Industries, Inc. dated December 8, 1989.
FIRST: The name of the Corporation is Giant Industries, Inc. (hereinafter
the "Corporation").
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, in the City of Wilmington, County of
New Castle. The name of its registered agent at that address is The Corporation
Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware as set forth in Title 8 of the Delaware Code (the
"DGCL").
FOURTH: The total number of shares which the Corporation shall have
authority to issue is 60,000,000 shares, consisting of (a) 50,000,000 shares of
common stock, par value $.01 per share (the "Common Stock"), and (b) 10,000,000
shares of preferred stock, par value $.01 per share (the "Preferred Stock").
The Board of Directors of the Corporation (the "Board of Directors") is
expressly authorized, at any time and from time to time, to fix, by resolution
or resolutions, the following provisions for shares of any class or classes of
Preferred Stock of the Corporation or any series of any class of Preferred
Stock:
(a) the designation of such class or series, the number of shares to
constitute such class or series and the stated value thereof if different from
the par value thereof;
(b) whether the shares of such class or series shall have voting rights,
in addition to any voting rights provided by law, and, if so, the terms of such
voting rights, which may (i) be general or limited, (ii) subject to applicable
law or regulation, including without limitation the rules of any securities
exchange on which securities of any class of the Corporation may be listed,
permit more than one vote per share, or (iii) vary among stockholders of the
same class based upon such factors as the Board of Directors may determine
including, without limitation, the size of a stockholder's position and/or the
length of time with respect to which such position has been held;
(c) the dividends, if any, payable on such class or series, whether any
such dividends shall be cumulative, and, if so, from what dates, the conditions
and dates upon which such dividends shall be payable, and the preference or
relation which such dividends shall bear to the dividends payable on any shares
of stock of any other class or any other series of the same class;
(d) whether the shares of such class or series shall be subject to
redemption by the Corporation, and, if so, the times, prices and other
conditions of such redemption;
(e) the amount or amounts payable upon shares of such series upon, and
the rights of the holders of such class or series in, the voluntary or
involuntary liquidation, dissolution or winding up, or upon any distribution of
the assets, of the Corporation;
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(f) whether the shares of such class or series shall be subject to the
operation of a retirement or sinking fund and, if so, the extent to and manner
in which any such retirement or sinking fund shall be applied to the purchase or
redemption of the shares of such class or series for retirement or other
corporate purposes and the terms and provisions relative to the operation
thereof;
(g) whether the shares of such class or series shall be convertible
into, or exchangeable for, shares of stock of any other class or any other
series of the same class or any other securities (including Common Stock) and,
if so, the price or prices or the rate or rates of conversion or exchange and
the method, if any, of adjusting the same, and any other terms and conditions of
conversion or exchange;
(h) the limitations and restrictions, if any, to be effective while any
shares of such class or series are outstanding upon the payment of dividends or
the making of other distributions on, and upon the purchase, redemption or other
acquisition by the Corporation of, the Common Stock or shares of stock of any
other class or any other series of the same class;
(i) the conditions or restrictions, if any, upon the creation of
indebtedness of the Corporation or upon the issue of any additional stock,
including additional shares of such class or series or of any other series of
the same class or of any other class;
(j) the ranking (be it pari passu, junior or senior) of each class or
series vis-a-vis any other class or series of any class of Preferred Stock as to
the payment of dividends, the distribution of assets and all other matters; and
(k) any other powers, preferences and relative, participating, optional
and other special rights, and any qualifications, limitations and restrictions
thereof, insofar as they are not inconsistent with the provisions of this
Restated Certificate of Incorporation, to the full extent permitted in
accordance with the laws of the State of Delaware.
The powers, preferences and relative, participating, optional and other
special rights of each class or series of Preferred Stock, and the
qualifications, limitations or restrictions thereof, if any, may differ from
those of any and all other series at any time outstanding.
FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(a) The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors.
(b) The directors shall have concurrent power with the stockholders to
make, alter, amend, change, add to or repeal the bylaws of the Corporation.
(c) The business and affairs of the Corporation shall be managed by or
under the direction of a Board of Directors consisting of not less than six nor
more than twelve directors. The exact number of directors shall be determined
from time to time by resolution adopted by the affirmative vote of a majority of
the directors then in office. The Directors shall be divided into three classes,
designated Class I, Class II and Class III. Class I directors shall have a term
expiring at the Annual Meeting of Stockholders in 1999, Class II directors shall
have a term expiring at the Annual Meeting of Stockholders in 2000, and Class
III directors shall have a term expiring at the Annual Meeting of Stockholders
in 2001. At each Annual Meeting of Stockholders beginning in 1999, successors to
the class of directors whose term expires at the Annual Meeting of Stockholders
shall be elected by the holders of a majority of the stock represented and
entitled to vote thereat for a three-year term. A director shall hold office
until the Annual Meeting of Stockholders for the year in which his term expires
and until his successor shall be elected and shall qualify, subject, however, to
prior death, resignation, retirement, disqualification or removal from office.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the Corporation, if any, shall
have the right, voting separately by class or series, to elect directors at an
annual or special meeting of stockholders, the election, term of office, filling
of vacancies and
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<PAGE> 146
other features of such directorships shall be governed by the terms of this
Restated Certificate of Incorporation applicable thereto, and such directors so
elected shall not be divided into classes pursuant to this Article FIFTH unless
expressly provided by such terms.
(d) Directors of the Corporation may be removed by stockholders of the
Corporation only for cause.
(e) No director shall be personally liable to the Corporation or any of
its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent that elimination or limitation of liability is
prohibited under the DGCL as in effect when such liability is determined. Any
repeal or modification of this Article FIFTH by the stockholders of the
Corporation shall not deprive a director of the benefits hereof with respect to
acts or omissions occurring prior to such repeal or modification.
(f) In addition to the powers and authority hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation, subject, nevertheless, to the provisions of the DGCL, this
Restated Certificate of Incorporation, and any bylaws adopted by the
stockholders; provided, however, that no bylaws hereafter adopted by the
stockholders shall invalidate any prior act of the directors which would have
been valid if such bylaws had not been adopted.
SIXTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of the DGCL or on the application of trustees in
dissolution or of any receiver or receivers appointed for the Corporation under
the provisions of Section 279 of the DGCL, order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing seventy-five percent (75%) in
value of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of the Corporation, as the case may be, agree to any
compromise or arrangement and to any reorganization of the Corporation as a
consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the creditors or
class of creditors, and/or on all the stockholders or class of stockholders, of
the Corporation, as the case may be, and also on the Corporation.
SEVENTH: The Corporation shall, to the fullest extent permitted by Section
145 of the Delaware GCL, as amended from time to time, or any successor section,
indemnify each person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
is or was a director or officer of the Corporation, or is or was serving at the
request of the Corporation, as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding and any appeal therefrom.
Indemnification may include payment by the Corporation of expenses in
defending an action or proceeding in advance of the final disposition of such
action or proceeding upon receipt of an undertaking by the person indemnified to
repay such payment if it is ultimately determined that such person is not
entitled to indemnification under this Article, which undertaking may be
accepted without reference to the financial ability of such person to make such
repayments.
The Corporation shall not indemnify any such person seeking indemnification
in connection with a proceeding (or part thereof) initiated by such person
unless the initiation thereof was approved by the Board of Directors of the
Corporation.
The indemnification rights provided in this Article SEVENTH (i) shall not
be deemed exclusive of any other rights to which those indemnified may be
entitled under any law, agreement or vote of stockholders or disinterested
directors or otherwise, and (ii) shall inure to the benefit of the heirs,
executors and administra-
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tors of such persons. The Corporation may, to the extent authorized from time to
time by its Board of Directors, grant indemnification rights to other employees
or agents of the Corporation or other persons serving the Corporation and such
rights may be equivalent to, or greater or less than, those set forth in this
Article SEVENTH.
EIGHTH: Any action required or permitted to be taken by the stockholders
of the Corporation must be effected at an annual or special meeting of
stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders. Unless otherwise required by law, special meetings
of stockholders of the Corporation may be called only by the Co-Chairmen of the
Board acting together, or the Chairman of the Board if only one is so appointed,
or the Board of Directors pursuant to a resolution adopted by a majority of the
entire Board of Directors. Written notice of a special meeting stating the
place, date and hour of the meeting and the purpose or purposes for which the
meeting is called shall be given not less than ten (10) nor more than sixty (60)
days before the date of the meeting to each stockholder entitled to vote at such
meeting.
NINTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Restated Certificate of Incorporation or
in the bylaws of the Corporation, in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders herein are granted subject
to this reservation; provided, however, that subject to the powers and rights
provided for herein with respect to Preferred Stock issued by the Corporation,
if any, but notwithstanding anything else contained in this Restated Certificate
of Incorporation to the contrary, the affirmative vote of the holders of at
least eighty percent (80%) of the combined voting power of each outstanding
class of capital stock shall be required to alter, amend, rescind or repeal (i)
Article FOURTH, Article FIFTH, Article SIXTH, Article SEVENTH, Article EIGHTH,
or this Article NINTH or to adopt any provision inconsistent therewith and (ii)
Sections 3 and 8 of Article II, Sections 1, 2 and 6 of Article III and Article
VIII of the Bylaws of the Corporation or to adopt any provision inconsistent
therewith.
The foregoing provisions of this Restated Certificate of Incorporation were
duly adopted in accordance with the provisions of Sections 242 and 245 of the
DGCL.
IN WITNESS WHEREOF, Giant Industries, Inc. has caused this Restated
Certificate of Incorporation to be duly executed in its corporate name this
day of , 1998.
GIANT INDUSTRIES, INC.
By:
--------------------------------------
James E. Acridge
President
ATTEST:
By:
- ----------------------------------------------------
Morgan Gust
Secretary
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APPENDIX C
AMENDED AND RESTATED BYLAWS
OF
GIANT INDUSTRIES, INC.
(HEREINAFTER CALLED THE "CORPORATION")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware, as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The Annual Meetings of Stockholders shall be
held on such date and at such time as shall be designated from time to time by
the Board of Directors and stated in the notice of the meeting, at which
meetings the stockholders shall elect, in accordance with Section 1 of Article
III of these Bylaws, by the vote of the holders of a majority of the stock
represented and entitled to vote thereat, those Directors belonging to the class
or classes of directors to be elected at such meeting, and transact such other
business as may properly be brought before the meeting. Written notice of the
Annual Meeting stating the place, date and hour of the meeting shall be given to
each stockholder entitled to vote at such meeting not less than ten (10) nor
more than sixty (60) days before the date of the meeting.
Section 3. Special Meetings. Unless otherwise prescribed by law or by the
Restated Certificate of Incorporation, Special Meetings of Stockholders may be
called only by the Co-Chairmen of the Board acting together (or the Chairman of
the Board if only one is so appointed) or the Board of Directors pursuant to a
resolution adopted by a majority of the entire board of directors. Written
notice of a Special Meeting stating the place, date and hour of the meeting and
the purpose or purposes for which the meeting is called shall be given not less
than ten (10) nor more than sixty (60) days before the date of the meeting to
each stockholder entitled to vote at such meeting. Business transacted at all
special meetings shall be confined to the objects stated in the call.
Section 4. Quorum. Except as otherwise provided by law or by the Restated
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. If the adjournment is for more than thirty (30) days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder entitled to
vote at the meeting.
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Section 5. Voting. Unless otherwise required by law, the Restated
Certificate of Incorporation or these Bylaws, (i) any question brought before
any meeting of stockholders shall be decided by the vote of the holders of a
majority of the stock represented and entitled to vote thereat and (ii) each
stockholder represented at a meeting of stockholders shall be entitled to cast
one vote for each share of the capital stock entitled to vote thereat held by
such stockholder. Such votes may be cast in person or by proxy but no proxy
shall be voted on or after three years from its date, unless such proxy provides
for a longer period. The Board of Directors, in its discretion, or the officer
of the Corporation presiding at a meeting of stockholders, in his discretion,
may require that any votes cast at such meeting shall be cast by written ballot.
Section 6. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
Section 7. Stock Ledger. The stock ledger of the Corporation shall be the
only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 6 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
Section 8. Notice of Business. At any meeting of stockholders, only such
business shall be conducted as shall have been brought before the meeting (a) by
or at the direction of the Board of Directors or (b) by any stockholder of the
Corporation who is a stockholder of record at the time of giving of the notice
provided for in this Section 8 of this Article II, who shall be entitled to vote
at such meeting and who complies with the notice procedures set forth in this
Section 8 of this Article II. For business to be properly brought before a
meeting of stockholders by a stockholder, the stockholder shall have given
timely notice thereof in writing to the Secretary of the Corporation. To be
timely, a stockholder's notice shall be delivered to or mailed and received at
the principal executive offices of the Corporation not less than ninety (90)
days nor more than 120 days prior to the meeting; provided, however, that in the
event that less than 100 days' notice or prior public disclosure of the date of
the meeting is given or made to stockholders, notice by the stockholder to be
timely must be so received not later than the close of business on the tenth day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made, whichever first occurs. Such stockholder's
notice to the Secretary shall set forth as to each matter the stockholder
proposes to bring before the meeting (a) a brief description of the business
desired to be brought before the meeting, the reasons for conducting such
business at the meeting and, in the event that such business includes a proposal
to amend either the Restated Certificate of Incorporation or Bylaws of the
Corporation, the language of the proposed amendment, (b) the name and address,
as they appear on the Corporation's books, of the stockholder proposing such
business, (c) the class and number of shares of capital stock of the Corporation
which are beneficially owned by such stockholder and (d) any material interest
of such stockholder in such business. Notwithstanding anything in the Bylaws to
the contrary, no business shall be conducted at a stockholder meeting except in
accordance with the procedures set forth in this Section 8 of this Article II.
The Chairman of the meeting shall, if the facts warrant, determine and declare
to the meeting that business was not properly brought before the meeting and in
accordance with the provisions of the Bylaws, and if he should so determine, he
shall so declare to the meeting and any such business not properly brought
before the meeting shall not be transacted. Notwithstanding the foregoing
provisions of this Section 8 of this Article II, a stockholder shall also comply
with all applicable requirements of the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder with respect to the matters
set forth in this Section 8 of this Article II.
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ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. The business and affairs of
the Corporation shall be managed by or under the direction of a Board of
Directors consisting of an even number of directors totaling not less than six
nor more than twelve. The exact number of directors shall be determined from
time to time by resolution adopted by the affirmative vote of a majority of the
directors then in office. One half of the directors shall be designated "G
Directors" and one half shall be designated "H Directors." The G Directors and H
Directors shall be divided into three classes, designated Class I, Class II and
Class III. Class I directors shall have a term expiring at the Annual Meeting of
Stockholders in 1999, Class II directors shall have a term expiring at the
Annual Meeting of Stockholders in 2000, and Class III directors shall have a
term expiring at the Annual Meeting of Stockholders in 2001. Each class shall
consist of an even number of directors composed equally of G Directors and H
Directors. At each Annual Meeting of Stockholders beginning in 1999, successors
to the class of directors whose term expires at that Annual Meeting of
Stockholders shall be elected for a three-year term. If the number of directors
is changed, any increase or decrease shall be apportioned so that there will be
equal numbers of G Directors and H Directors and so as to maintain the number of
directors in each class as nearly equal as possible, but in no case shall a
decrease in the number of directors shorten the term of any incumbent director.
A director shall hold office until the Annual Meeting of Stockholders for the
year in which his term expires and until his successor shall be elected and
shall qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office.
Directors of the Corporation may be removed by stockholders of the
Corporation only for cause.
Section 2. Vacancies. It is intended that there shall be an equal number
of G Directors and H Directors and that any vacancy on the Board of Directors
shall be filled so as to restore and maintain the equality in number of G
Directors and H Directors. In the event of a vacancy on the Board of Directors
such that there is less than the required number of G Directors, the remaining G
Directors shall elect an additional director who shall fill the vacancy as a G
Director; in the event that a vacancy on the Board of Directors results in there
being less than the required number of H Directors, the remaining H Directors
shall elect an additional director who shall fill the vacancy as an H Director.
Vacancies on the Board of Directors that result from an increase in the number
of directors shall be filled one-half by a person or persons elected by the G
Directors and one-half by a person or persons elected by the H Directors.
Any director of any class elected to fill a vacancy resulting from an
increase in the number of directors in such class shall hold office for a term
that shall coincide with the remaining term of that class. Any director elected
to fill a vacancy not resulting from an increase in the number of directors
shall have the same remaining term as that of his predecessor.
Section 3. Duties and Powers. The business of the Corporation shall be
managed by or under the direction of the Board of Directors which may exercise
all such powers of the Corporation and do all lawful acts and things as are not
by statute or by the Restated Certificate of Incorporation or by these Bylaws
directed or required to be exercised or done by the stockholders.
Section 4. Meetings. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without notice
at such time and at such place as may from time to time be determined by the
Board of Directors. Special meetings of the Board of Directors may be called by
a Co-Chief Executive Officer or by any two directors. Notice thereof stating the
place, date, and hour of the meeting shall be given to each director either by
mail not less than forty-eight (48) hours before the date of the meeting or by
telephone, electronic facsimile or telegram on twenty-four (24) hours' notice.
All notices of meetings shall be given to the extent reasonably possible so that
all directors shall have the opportunity to attend either in person or by means
of conference telephone. Any director who does not attend a special meeting of
the Board of Directors shall be promptly informed of all action taken by the
Board of Directors at the special meeting.
Section 5. Quorum. Except as may be otherwise specifically provided by
law, the Restated Certificate of Incorporation or these Bylaws, at all meetings
of the Board of Directors, a majority of the entire Board of
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Directors shall constitute a quorum for the transaction of business. If a quorum
shall not be present at any meeting of the Board of Directors, the directors
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present.
Section 6. Voting. On all matters with respect to which the Board of
Directors shall vote, except as may be otherwise provided in the Restated
Certificate of Incorporation or these Bylaws, the number of affirmative votes
required for any proposed action of the Board of Directors shall be equal to the
sum of (i) the greater of the number of G Directors or the number of H Directors
voting on the matter plus (ii) one. Except as otherwise specified by the Board
of Directors, the requirements of this Section 6 shall also apply to all voting
by committees of the Board of Directors.
At all times until the occurrence of the Termination Date as defined in
Section 13 of this Article III, the unanimous vote of the entire Board of
Directors shall be required for the authorization of the issuance of Preferred
Stock having voting rights with respect to the election of directors of the
Corporation.
Except as may be otherwise specifically provided by law, the Restated
Certificate of Incorporation or these Bylaws, after the occurrence of the
Termination Date as defined in Section 13 of this Article III, the act of a
majority of the directors present and eligible to vote on a matter shall be the
act of the Board of Directors on that matter.
Section 7. Actions of the Board. Unless otherwise provided by the
Restated Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all the members of the
Board of Directors or committee, as the case may be, consent thereto in writing,
and the writing or writings are filed with the minutes of proceedings of the
Board of Directors or committee.
Section 8. Meetings by Means of Conference Telephone. Unless otherwise
provided by the Restated Certificate of Incorporation or these Bylaws, members
of the Board of Directors of the Corporation, or any committee designated by the
Board of Directors, may participate in a meeting of the Board of Directors or
such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this Section 8 of this
Article III shall constitute presence in person at such meeting.
Section 9. Committees. There shall be three standing committees of the
Board of Directors: an Audit Committee, a Compensation Committee and a
Nominating Committee. The Audit Committee and the Compensation Committee shall
each be composed of two G Directors and two H Directors who are not officers or
employees of the Corporation. The chairman of the Audit Committee and the
chairman of the Compensation Committee shall be selected by the Board of
Directors. The Nominating Committee shall be composed of the two Co-Chief
Executive Officers (who shall act as co-chairmen of the committee) and two other
directors, one a G Director and the other an H Director. The requirements of
Section 6 of this Article III shall apply to all votes of the standing
committees. The Board of Directors may, by resolution passed by a majority of
the entire Board of Directors, designate one or more additional committees, each
such additional committee to be composed of one or more of the directors of the
Corporation. Unless otherwise specifically provided by the Board of Directors,
each additional committee of the Board of Directors shall be composed of an
equal number of G Directors and H Directors and the requirements of Section 6
hereof shall apply to all votes of each such committee. The chairmen of each
standing committee and of any additional committees shall have the right to vote
on their respective committees. Subject to the other requirements of these
Bylaws, the Board of Directors may designate one or more directors as alternate
members of any standing or additional committee, who may replace any absent or
disqualified member at any meeting of any such committee. Any committee of the
Board of Directors, to the extent allowed by law and provided in the resolution
establishing such committee, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation. Each committee shall keep regular minutes and report
to the Board of Directors when requested.
Section 10. Compensation. The directors may be paid their expenses, if
any, of attendance at each meeting of the Board of Directors and may be paid a
fixed sum for attendance at each meeting of the Board of
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Directors and a stated salary as director. No such payment shall preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
Section 11. Interested Directors. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors (subject to the
requirements of Section 6 of this Article III), even though the disinterested
directors be less than a quorum; or (ii) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the stockholders;
or (iii) the contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified, by the Board of Directors, a
committee thereof or the stockholders. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee which authorizes the contract or transaction.
Section 12. Nominations for Elections of Directors. For each meeting of
the stockholders at which directors of the Corporation are to be elected, the
Corporation shall propose to the stockholders a slate of nominees specifying one
nominee for each director to be elected by the stockholders at such meeting. The
Corporation's slate of nominees for director shall include the number of
nominees for G Director and for H Director such that the election of all
proposed nominees would result in an equal number of G Directors and H Directors
immediately after the election. The Corporation's nominee or nominees for G
Director shall be selected by the persons then serving as G Directors and the
Corporation's nominee or nominees for H Director shall be selected by the
persons then serving as H Directors.
Section 13. Termination of Designations of G Directors and H
Directors. Unless otherwise determined by resolution of the Board of Directors,
the designation of directors of the Corporation as G Directors and H Directors
and the requirement that the Board of Directors be composed of an even number of
directors shall cease to apply upon the Termination Date, which shall be the
earlier of (i) an amendment to Article III, to Section 2 or Section 5 of Article
IV, or to Article IX of these Bylaws; (ii) either James E. Acridge ("Acridge")
or the Norsworthy Group (which Norsworthy Group consists of Lamar Norsworthy
("Norsworthy"), Nona Barrett, NBN Capital Limited Partnership, a Texas limited
partnership, Betty Simmons East Texas Trust, Margaret Simmons East Texas Trust,
Suzanne Simmons East Texas Trust, Betty Simmons Nueces County Trust, Margaret
Simmons Nueces County Trust and Suzanne Simmons Neuces County Trust) ceases to
hold at least a 3% Stock Interest (as defined below); (iii) either Acridge or
the Norsworthy Group purchases from the other the Subject Stock Interest (as
defined below); (iv) the death of Acridge or Norsworthy; (v) December 31, 2003;
or (vi) either Acridge or Norsworthy resigns as Co-Chief Executive Officer and
Co-Chairman of the Board and becomes bound by the provisions of a standstill
agreement; provided, however, that, if the Termination Date arises because of
the death of Acridge or Norsworthy, the remaining G Directors (in the case of
Acridge's death) and the remaining H Directors (in the case of Norsworthy's
death) shall have the power to select a director to fill the vacancy left by
Acridge or Norsworthy, as the case may be, at the next meeting of the Board of
Directors after the death.
For purposes of these Bylaws, (i) "Acridge Stock Interest" means the entire
Stock Interest (as defined below) owned at the relevant time by Acridge and his
Affiliate Transferees (as defined below); (ii) "Norsworthy Group Stock Interest"
means the entire Stock Interest owned at the relevant time by all members of the
Norsworthy Group and its Affiliate Transferees; (iii) "Stock Interest" means the
entire right, title and interest of a party in and to any equity securities of
the Corporation, including shares of common stock or preferred stock held or
otherwise beneficially owned from time to time by a party and any other
securities convertible into or exchangeable for equity securities of the
Corporation, but shall not include any
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unexercised options, warrants or similar rights or any equity securities
allocated to the account of a party under an employee stock ownership plan
unless the same may be distributed to the party upon his resignation as an
officer and director of the Corporation without penalty under the Internal
Revenue Code or other applicable laws; (iv) "Subject Stock Interest" means if
Acridge is the purchaser the Stock Interest which is the lesser in number of the
Acridge Stock Interest or the Norsworthy Group Stock Interest, and if the
Norsworthy Group is the purchaser, the "Subject Stock Interest" means the amount
of the Acridge Stock Interest; and (v) "Affiliate Transferee" means with respect
to any transferor (a) any person directly or indirectly controlling, controlled
by or under common control with such transferor ("Control Persons"); (b)
individuals ("Family Members") who are related by blood or marriage to the
transferor or a Control Person of the transferor; (c) entities that are
controlled by any such Family Member; and (d) entities in which the transferor,
one or more Control Persons, or one or more Family Members have a material
interest, but shall not include the Corporation with respect to any treasury
stock acquired from any person.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be chosen by
the Board of Directors and shall be two Co-Chief Executive Officers, a Secretary
and a Treasurer. The Co-Chief Executive Officers shall be directors of the
Corporation and shall be the Co-Chairmen of the Board of Directors. The Board of
Directors, in its discretion, may also choose one or more Executive Vice
Presidents, Senior Vice Presidents and Vice Presidents, Assistant Secretaries,
Assistant Treasurers and other officers. Any number of offices may be held by
the same person, unless otherwise prohibited by law, the Restated Certificate of
Incorporation or these Bylaws. The officers of the Corporation need not be
stockholders of the Corporation nor, except in the case of the Co-Chief
Executive Officers, need such officers be directors of the Corporation.
Section 2. Co-Chief Executive Officers. At the effective date of these
Bylaws, the Co-Chief Executive Officers of the Corporation shall be James E.
Acridge and Lamar Norsworthy. The Board of Directors at its first meeting held
after each Annual Meeting of Stockholders shall elect as hereinafter provided
the Co-Chief Executive Officers, who shall hold their offices until their
successors are chosen and qualified or until their earlier resignation or
removal pursuant to the terms of these Bylaws. In the election of the Co-Chief
Executive Officers after each Annual Meeting of Stockholders, the G Directors
shall elect the Co-Chief Executive Officer who shall occupy the position
occupied by James E. Acridge at the date of the merger of the Corporation and
Holly Corporation and the H Directors shall elect the Co-Chief Executive Officer
who shall occupy the position occupied by Lamar Norsworthy at the date of the
merger of the Corporation and Holly Corporation. Subject to the authority of the
Board of Directors, the two Co-Chief Executive Officers shall work together in
the Office of the Chief Executive Officer, shall have general supervision of the
business of the Corporation, and shall see that all orders and resolutions of
the Board of Directors are carried into effect. One of the Co-Chief Executive
Officers shall be designated as the Co-Chief Executive Officer to whom all
officers and employees of the Corporation (excluding the other Co-Chief
Executive Officer) shall, directly or indirectly, report; unless otherwise
specified from time to time by the Board of Directors, James E. Acridge shall be
the Co-Chief Executive Officer to whom all officers (excluding the other
Co-Chief Executive Officer) directly or indirectly report. Each of the Co-Chief
Executive Officers shall be deemed to have the additional title of President of
the Corporation in any circumstance where an officer of the Corporation with the
title of President is required. Either of the Co-Chief Executive Officers shall
have the authority to execute all bonds, mortgages, contracts and other
instruments of the Corporation requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except that the other officers of the Corporation may sign and
execute documents when so authorized by these Bylaws, the Board of Directors or
a Co-Chief Executive Officer. The Co-Chief Executive Officers shall also perform
such other duties and may exercise such other powers as from time to time may be
assigned to them by these Bylaws or by the Board of Directors. The salaries of
the Co-Chief Executive Officers shall be determined pursuant to applicable
employment contracts between the Corporation and each Co-Chief Executive
Officer, which contracts shall be subject to the authority of the Compensation
Committee of the Board of Directors.
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Unless otherwise determined by vote of a majority of the Board of
Directors, the Corporation shall cease to have Co-Chief Executive Officers and
shall have one Chief Executive Officer after the earlier to occur of the
following dates: (i) the date of the Corporation's Annual Meeting of
Stockholders in 2004 and (ii) the date that either James E. Acridge or Lamar
Norsworthy ceases for any reason to be a Co-Chief Executive Officer of the
Corporation. When the Corporation has one Chief Executive Officer pursuant to
the preceding sentence of this Section 2 of this Article IV, all references in
these Bylaws to Co-Chief Executive Officers shall refer to the Chief Executive
Officer.
Section 3. Election of Other Officers. The Board of Directors at its
first meeting held after each Annual Meeting of Stockholders shall elect the
officers of the Corporation (other than the Co-Chief Executive Officers whose
elections shall be as provided in Section 2 of this Article IV), who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the Board of Directors; and
all such officers of the Corporation shall hold office until their successors
are chosen and qualified, or until their earlier resignation or removal. Any
officer subject to this section may be removed at any time by the affirmative
vote of a majority of the Board of Directors. Any vacancy occurring in any
office of the Corporation subject to this section shall be filled by the Board
or Directors. The salaries of all officers of the Corporation subject to this
section shall be fixed by the Board of Directors or by the Compensation
Committee.
Section 4. Voting Securities Owned by the Corporation. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by one of the Co-Chief Executive Officers or by
any Vice President and any such officer may, in the name of and on behalf of the
Corporation, take all such action as any such officer may deem advisable to vote
in person or by proxy at any meeting of security holders of any corporation in
which the Corporation may own securities and at any such meeting shall possess
and may exercise any and all rights and powers incident to the ownership of such
securities and which, as the owner thereof, the Corporation might have exercised
and possessed if present. The Board of Directors may, by resolution, from time
to time confer like powers upon any other person or persons.
Section 5. Co-Chairmen of the Board of Directors. The Co-Chief Executive
Officers, as Co-Chairmen of the Board of Directors, shall preside at all
meetings of the stockholders and of the Board of Directors.
Section 6. Executive Vice Presidents, Senior Vice Presidents and Vice
Presidents. Each Executive Vice President, Senior Vice President, or Vice
President shall exercise general supervision and have executive control of such
departments of the Corporation's business, or perform such other executive
duties as shall from time to time be assigned to him by the Board of Directors.
The Board of Directors shall have the power to designate particular areas of
authority and responsibility of an Executive Vice President, Senior Vice
President or Vice President and to indicate such designation in such officer's
title.
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in the Corporation
shall be entitled to have a certificate signed, in the name of the Corporation
(i) by either Co-Chairman of the Board of Directors, either Co-Chief Executive
Officer or a Vice President and (ii) by the Treasurer or an Assistant Treasurer,
or the Secretary or an Assistant Secretary of the Corporation, certifying the
number of shares owned by him in the Corporation.
Section 2. Signatures. Where a certificate is countersigned by (i) a
transfer agent other than the Corporation or its employee, or (ii) a registrar
other than the Corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such Officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such Officer, transfer agent or registrar at the date of issue.
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Section 3. Lost Certificates. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to advertise the same in such manner
as the Board of Directors shall require and/or to give the Corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be transferable in
the manner prescribed by law and in these Bylaws. Transfers of stock shall be
made on the books of the Corporation only by the person named in the certificate
or by his attorney lawfully constituted in writing and upon the surrender of the
certificate therefor, which shall be cancelled before a new certificate shall be
issued.
Section 5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board of Directors may fix, in advance, a record
date, which shall not be more than sixty (60) days nor less than ten (10) days
before the date of such meeting, nor more than sixty (60) days prior to any
other action. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
Section 6. Beneficial Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
law.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by law, the
Restated Certificate of Incorporation or these Bylaws, to be given to any
director, member of a committee or stockholder, such notice may be given by
mail, addressed to such director, member of a committee or stockholder, at his
address as it appears on the records of the Corporation, with postage thereon
prepaid, and such notice shall be deemed to be given at the time when the same
shall be deposited in the United States mail. Written notice may also be given
personally or by electronic facsimile, telegram, telex or cable.
Section 2. Waivers of Notice. Whenever any notice is required by law, the
Restated Certificate of Incorporation or these Bylaws, to be given to any
director, member of a committee or stockholder, a waiver thereof in writing,
signed, by the person or persons entitled to said notice, whether before or
after the time stated therein, shall be deemed equivalent thereto.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Restated Certificate of
Incorporation, if any, may be declared by the Board of Directors at any regular
or special meeting, and may be paid in cash, in property, or in shares of the
capital stock. Before payment of any dividend, there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the Board
of Directors from time to time, in its absolute discretion, deems proper as a
reserve or reserves to
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meet contingencies, or for equalizing dividends, or for repairing or maintaining
any property of the Corporation, or for any proper purpose, and the Board of
Directors may modify or abolish any such reserve.
Section 2. Disbursements. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such other person
or persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be fixed
by resolution of the Board of Directors.
Section 4. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware." The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or Proceedings other Than
Those by or in the Right of the Corporation. Subject to Section 3 of this
Article VIII, the Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director or officer of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
Section 2. Power to Indemnify in Actions, Suits or Proceedings by or in
the Right of the Corporation. Subject to Section 3 of this Article VIII, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director or officer, of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 3. Authorization of Indemnification. Any indemnification under
this Article VIII (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the circumstances
because he has met the applicable standard of conduct set forth in Section 1 or
Section 2 of this Article VIII, as the case may be. Subject to Section 6 of
Article III, such determination shall be made (i) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to such
action suit or proceeding, or (ii) if such a quorum is not obtainable, or, even
if obtainable, a quorum of disinterested directors so directs, by
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independent legal counsel in a written opinion, or (iii) by the stockholders. To
the extent, however, that a director or officer of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding described above, or in defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith, without the necessity of
authorization in the specific case.
Section 4. Good Faith Defined. For purposes of any determination under
Section 3 of this Article VIII, a person shall be deemed to have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was unlawful,
if his action is based on the records or books of account of the Corporation or
another enterprise, or on information supplied to him by the officers of the
Corporation or another enterprise in the course of their duties, or on the
advice of legal counsel for the Corporation or another enterprise or on
information or records given or reports made to the Corporation or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Corporation or another
enterprise. The term "another enterprise" as used in this Section 4 of this
Article VIII shall mean any other corporation or any partnership, joint venture,
trust, employee benefit plan or other enterprise of which such person is or was
serving at the request of the Corporation as a director, officer, employee or
agent. The provisions of this Section 4 of this Article VIII shall not be deemed
to be exclusive or to limit in any way the circumstances in which a person may
be deemed to have met the applicable standard of conduct set forth in Section 1
or Section 2 of this Article VIII, as the case may be.
Section 5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VIII, and
notwithstanding the absence of any determination thereunder, any director or
officer may apply to any court of competent jurisdiction in the State of
Delaware for indemnification to the extent otherwise permissible under Sections
1 and 2 of this Article VIII. The basis of such indemnification by a court shall
be a determination by such court that indemnification of the director or officer
is proper in the circumstances because he has met the applicable standards of
conduct set forth in Section 1 or Section 2 of this Article VIII, as the case
may be. Neither a contrary determination in the specific case under Section 3 of
this Article VIII nor the absence of any determination thereunder shall be a
defense to such application or create a presumption that the director or officer
seeking indemnification has not met any applicable standard of conduct. Notice
of any application for indemnification pursuant to this Section 5 of this
Article VIII shall be given to the Corporation promptly upon the filing of such
application. If successful in whole or in part, the director or officer seeking
indemnification shall also be entitled to be paid the expense of prosecuting
such application.
Section 6. Expenses Payable in Advance. Expenses incurred by a director
or officer in defending or investigating a threatened or pending action, suit or
proceeding shall be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall ultimately
be determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article VIII.
Section 7. Nonexclusivity of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by or
granted pursuant to this Article VIII shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any Bylaw, agreement, contract, vote of stockholders or
disinterested directors or pursuant to the direction (howsoever embodied) of any
court of competent jurisdiction or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office, it
being the policy of the Corporation that indemnification of the persons
specified in Sections 1 and 2 of this Article VIII shall be made to the fullest
extent permitted by law. The provisions of this Article VIII shall not be deemed
to preclude the indemnification of any person who is not specified in Section 1
or Section 2 of this Article VIII but whom the Corporation has the power or
obligation to indemnify under the provisions of the General Corporation Law of
the State of Delaware, or otherwise.
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Section 8. Insurance. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director or officer of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power or the obligation to
indemnify him against such liability under the provisions of this Article VIII.
Section 9. Certain Definitions. For purposes of this Article VIII,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors and officers, so that any person who is or was a director or officer
of such constituent corporation, or is or was a director or officer of such
constituent corporation serving at the request of such constituent corporation
as director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, shall stand in
the same position under the provisions of this Article VIII with respect to the
resulting or surviving corporation as such indemnification relates to his acts
while serving in any of the foregoing capacities, of such constituent
corporation, as he would have with respect to such constituent corporation if
its separate existence had continued. For purposes of this Article VIII,
references to "fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to "serving at the request
of the Corporation" shall include any service as a director or officer of the
Corporation which imposes duties on, or involves services by, such director or
officer with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this Article
VIII.
Section 10. Survival of Indemnification and Advancement of Expenses. The
indemnification and advancement of expenses provided by, or granted pursuant to,
this Article VIII shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director or officer and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
Section 11. Limitation on Indemnification. Notwithstanding anything
contained in this Article VIII to the contrary, except for proceedings to
enforce rights to indemnification (which shall be governed by Section 5 of this
Article VIII), the Corporation shall not be obligated to indemnify any director
or officer in connection with a proceeding (or part thereof) initiated by such
person unless such proceeding (or part thereof) was authorized or consented to
by the Board of Directors of the Corporation.
Section 12. Indemnification of Employees and Agents. The Corporation may,
to the extent authorized from time to time by the Board of Directors, provide
rights to indemnification and to the advancement of expenses to employees and
agents of the Corporation similar to those conferred in this Article VIII to
directors and officers of the Corporation.
ARTICLE IX
AMENDMENTS
Section 1. In General. Except as otherwise provided in the Restated
Certificate of Incorporation or in Section 2 of this Article IX, these Bylaws
may be amended, in whole or in part, or new Bylaws may be adopted by the
stockholders or by the Board of Directors, provided, however, that notice of
such amendment or adoption of new Bylaws be contained in the notice of such
meeting of stockholders or Board of Directors as the case may be. Except as
otherwise provided in the Restated Certificate of Incorporation or in Section 2
of this Article IX, all such amendments must be approved by either the holders
of a majority of the outstanding capital stock or by a majority of the entire
Board of Directors then in office.
Section 2. Greater Than Majority Vote Required for Certain
Amendments. Any amendment to any provision of Article III of these Bylaws, to
Section 1, Section 2 and Section 5 of Article IV of these Bylaws, or to this
Article IX of these Bylaws shall require the affirmative vote of not less than
eighty percent (80%) of
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the entire Board of Directors then in office or the affirmative vote of the
holders of not less than eighty percent (80%) of the outstanding capital stock
of the Corporation.
Section 3. Entire Board of Directors. As used in this Article IX and in
these Bylaws generally, the term "entire Board of Directors" means the total
number of directors which the Corporation would have if there were no vacancies.
ARTICLE X
EFFECTIVE DATE
Section 1. Effective Date. These Amended and Restated Bylaws were adopted
and approved by the Board of Directors and the stockholders of the Corporation,
are effective as of , 1998, and supersede in their entirety all
prior Bylaws adopted by the Corporation.
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APPENDIX D
SECTION 262. APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec. 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; and words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251 (other than a merger effected pursuant to sec.
251(g) of this title), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263 or sec.
264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sec.sec. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate
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of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to sec. 228
or sec. 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section, provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise
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entitled to appraisal rights, may file a petition in the Court of Chancery
demanding a determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
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(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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APPENDIX E
April 13, 1998
Board of Directors
Giant Industries, Inc.
23733 North Scottsdale Road
Scottsdale, Arizona 85255
Attention: James E. Acridge, President and Chief Executive Officer
Gentlemen:
We understand that Giant Industries, Inc. ("Giant") and Holly Corporation
("Holly") have entered into an Agreement and Plan of Merger dated April 14,
1998, (the "Merger Agreement") pursuant to which Holly will merge with and into
Giant (the "Merger"). The Merger Agreement provides, among other things, that at
the effective time of the Merger all of the issued and outstanding shares of
Holly Common Stock shall be converted, in the aggregate, into the right to
receive (i) the number of shares of Giant Common Stock then issued and
outstanding (the "Stock Consideration") and (ii) cash equal to $25 million
multiplied by a fraction the numerator of which is the number of shares of Holly
Common Stock then issued and outstanding and the denominator of which is the sum
of (A) the number of shares of Holly Common Stock then issued and outstanding,
(B) the number of shares of Holly Common Stock subject to Holly stock options
then outstanding and (C) the number of Holly phantom stock rights then
outstanding (the "Cash Consideration") (the Stock Consideration and Cash
Consideration are collectively referred to herein as the "Merger
Consideration").
You have asked us to render our opinion as to whether the Merger
Consideration to be issued to the holders of Holly Common Stock in the Merger is
fair, from a financial point of view, to the public shareholders of Giant.
In the course of our analyses for rendering this opinion, we have:
1. reviewed the Merger Agreement;
2. reviewed Giant's Annual Reports to Shareholders and Annual Reports
on Form 10-K for the fiscal years ended December 31, 1995 through 1997 and
its Offering Memorandum dated August 21, 1997 for the issuance of $150
million in Senior Subordinated Notes;
3. reviewed certain operating and financial information, including
projections, provided to us by Giant management relating to Giant's
business and prospects;
4. met with certain members of Giant's senior management to discuss
its operations, historical financial statements and future prospects;
5. reviewed Holly's Annual Reports to Shareholders and Annual Reports
on Form 10-K for the fiscal years ended July 31, 1995 through 1997, and its
Quarterly Report on Form 10-Q for the period ended January 31, 1998;
6. reviewed certain operating and financial information, including
projections, provided to us by Holly management relating to Holly's
business and prospects;
7. met with certain members of Holly's senior management to discuss
its operations, historical financial statements and future prospects;
8. reviewed the amounts and timing of synergies and other benefits
resulting from the Merger, provided to us by Giant management;
9. reviewed the historical prices, trading volumes and valuation
parameters of Giant Common Stock and Holly Common Stock;
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10. reviewed certain publicly available financial data, stock market
performance data and valuation parameters of companies which we deemed
generally comparable to Giant and Holly;
11. reviewed the terms of recent transactions involving companies
which we deemed generally comparable to Giant and Holly and the Merger; and
12. conducted such other studies, analyses, inquiries and
investigations as we deemed appropriate.
In the course of our review, we have relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other projections provided to us by Giant and Holly. With respect to Giant's and
Holly's projected financial results and potential synergies that could be
achieved upon consummation of the Merger, we have assumed that they have been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the senior managements of Giant and Holly as to the expected
future performance of Giant and Holly, respectively. We have not assumed any
responsibility for the independent verification of any such information or of
the projections provided to us and we have further relied upon the assurances of
the senior managements of Giant and Holly that they are unaware of any facts
that would make the information or projections provided to us incomplete or
misleading. In arriving at our opinion, we have not performed or obtained any
independent appraisal of the assets or liabilities of Giant and Holly, nor have
we been furnished with any such appraisals. Our opinion is necessarily based on
economic, market and other conditions, and the information made available to us,
as of the date hereof. We have assumed that the Merger will qualify as a
tax-free "reorganization" within the meaning of Section 368(a) of the Code.
In the ordinary course of business, Bear Stearns may actively trade the
equity securities of Giant and Holly for its own account and for the account of
its customers and, accordingly, may at any time hold a long or short position in
such securities.
It is understood that this letter is intended for the benefit and use of
the Board of Directors of Giant and does not constitute a recommendation to the
Board of Directors of Giant or any holders of Giant Common Stock as to how to
vote in connection with the Merger. This opinion does not address Giant's
underlying business decision to pursue the Merger. We express no opinion as to
the future trading values of the Giant Common Stock or Holly Common Stock. This
letter is not to be used for any other purpose, or reproduced, disseminated,
quoted to or referred to at any time, in whole or in part, without our prior
written consent; provided, however, that this letter may be included in its
entirety in any joint proxy statement/prospectus to be distributed to the
holders of Giant Common Stock in connection with the Merger.
Based on and subject to the foregoing, it is our opinion that the Merger
Consideration to be issued to the holders of Holly Common Stock in the Merger is
fair, from a financial point of view, to the public shareholders of Giant.
Very truly yours,
BEAR, STEARNS & CO. INC.
By: /s/
------------------------------------
Senior Managing Director
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APPENDIX F
April 14, 1998
Board of Directors
Holly Corporation
100 Crescent Court
Suite 1600
Dallas, TX 75201
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to the holders of common stock, par value $.01 per share ("Holly Common
Stock"), of Holly Corporation (the "Company") of the Merger Consideration (as
defined below) to be received by such holders pursuant to the terms of the
Agreement and Plan of Merger, dated as of April 14, 1998 (the "Agreement"), by
and between the Company and Giant Industries, Inc. ("Giant") pursuant to which
the Company will be merged (the "Merger") with and into Giant.
Pursuant to the Agreement, all of the issued and outstanding shares of
Holly Common Stock will be converted, in the aggregate, into the right to
receive (i) that number of shares of common stock, par value $.01 per share
("Giant Common Stock"), of Giant issued and outstanding immediately prior to the
consummation of the Merger and (ii) cash in an amount equal to $25,000,000 minus
amounts payable to the holders of outstanding Company stock options and Company
phantom stock rights, in each case, as contemplated by the Agreement (such
amount set forth in clauses (i) and (ii), the "Merger Consideration").
In arriving at our opinion, we have reviewed the draft dated April 13, 1998
of the Agreement and the exhibits thereto, the drafts dated April 13, 1998 of
the Major Stockholders Agreement, the proposed Bylaws of Giant following the
Merger and the proposed Restated Certificate of Incorporation of Giant following
the Merger. We have also reviewed financial and other information that was
publicly available or furnished to us by the Company and Giant including
information provided during discussions with their respective managements.
Included in the information provided during discussion with the respective
managements were certain financial projections of the Company for the period
beginning January 1, 1998 and ending December 31, 2002 prepared by the
management of the Company and certain financial projections of Giant for the
period beginning January 1, 1998 and ending December 31, 2002 prepared by the
management of Giant. In addition, we have compared certain financial and
securities data of the Company and Giant with various other companies whose
securities are traded in public markets, reviewed the historical stock prices
and trading volumes of Holly Common Stock and Giant Common Stock, reviewed
prices paid in certain other business combinations and conducted such other
financial studies, analyses and investigations as we deemed appropriate for
purposes of this opinion. We were not requested to, nor did we, solicit the
interest of any other party in acquiring the Company.
In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
us from public sources, that was provided to us by the Company and Giant, or
their respective representatives, or that was otherwise reviewed by us. In
particular, we have relied upon the estimates of the management of the Company
of the operating synergies achievable as a result of the Merger and upon our
discussion of such synergies with the management of Giant and upon the estimates
of the management of the Company as to the amounts payable to holders of
outstanding Company stock options and Company phantom stock rights as described
above. With respect to the financial projections supplied to us, we have assumed
that they have been reasonably prepared on the basis reflecting the best
currently available estimates and judgments of the management of the Company and
Giant as to the future operating and financial performance of the Company and
Giant, respectively. We have not assumed any responsibility for making an
independent evaluation of any assets or liabilities or for making any
independent verification of any of the information reviewed by us.
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Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion or otherwise comment upon any events occurring
after the date hereof. We are expressing no opinion herein as to the prices at
which Giant Common Stock will actually trade at any time. Our opinion does not
address the relative merits of the Merger and the other business strategies
being considered by the Company's Board of Directors, nor does it address the
Board's decision to proceed with the Merger. Our opinion does not constitute a
recommendation to any stockholder as to how such stockholder should vote on the
proposed transaction.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. DLJ has performed investment
banking and other services for the Company and Giant in the past and has been
compensated for such services.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the Merger Consideration is fair in the aggregate to holders
of Holly Common Stock from a financial point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ MARTIN C. MURRER
------------------------------------
Martin C. Murrer
Managing Director
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APPENDIX G
MAJOR STOCKHOLDERS' AGREEMENT
THIS MAJOR STOCKHOLDERS' AGREEMENT (the "Agreement") is made and entered
into this 14th day of April, 1998, by and among Giant Industries, Inc., a
Delaware corporation ("Giant"), Holly Corporation, a Delaware corporation
("Holly"), James E. Acridge ("Acridge"), Lamar Norsworthy ("Norsworthy"), Nona
Barrett, NBN Capital Limited Partnership, a Texas limited partnership, Betty
Simmons East Texas Trust, Margaret Simmons East Texas Trust, Suzanne Simmons
East Texas Trust, Betty Simmons Nueces County Trust, Margaret Simmons Nueces
County Trust and Suzanne Simmons Neuces County Trust (such parties other than
Giant and Holly are collectively referred to as the "Stockholder Parties," and
such parties other than Giant, Holly and Acridge are collectively referred to as
the "Norsworthy Group").
RECITALS
A. Giant and Holly have simultaneously entered into an Agreement and Plan
of Merger, dated April 14, 1998 (such agreement as it hereafter may be amended
in accordance with its terms, the "Merger Agreement"), pursuant to which Holly
has agreed to merge with and into Giant with Giant as the surviving corporation
(the "Surviving Corporation") on the terms and subject to the conditions set
forth therein (the "Merger").
B. Each of the Stockholder Parties owns shares of the common stock of Holly
or Giant, as the case may be, equal to more than 1% of the respective issued and
outstanding shares of the common stock of Holly or Giant, which ownership is
reflected on Schedule I attached hereto.
C. After giving effect to the Merger, Acridge and the Norsworthy Group will
own approximately 11.8% and 15.0%, respectively, of the issued and outstanding
capital stock of the Surviving Corporation without consideration of any options,
warrants or other rights to acquire capital stock of the Surviving Corporation.
In addition, among other things, (i) Acridge and Norsworthy will serve as
Co-Chairmen of the Board and be Co-Chief Executive Officers acting together as
the Office of the Chief Executive Officer, and (ii) there will be an equal
number of G Directors and H Directors on the Surviving Corporation's Board of
Directors pursuant to the Surviving Corporation's Bylaws.
D. As a condition to the Merger, the parties desire to (i) enter into a
binding voting agreement among the Stockholder Parties with respect to the
Merger and concerning voting by the Stockholder Parties as stockholders of the
Surviving Corporation on certain matters following the Merger, and (ii) provide
for a mechanism to resolve any deadlocked disputes between Acridge, on the one
hand, and Norsworthy, on the other hand, in the fulfillment of their respective
obligations and duties to the Surviving Corporation.
E. This Agreement is the Major Stockholders' Agreement referenced in the
Merger Agreement.
NOW, THEREFORE, in consideration of the Merger and the mutual promises and
covenants contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
TERMS AND CONDITIONS
SECTION 1
DEFINITIONS
1.01 DEFINITIONS. In addition to the various words and phrases defined
throughout this Agreement, the following terms shall have the meanings set forth
in this Section 1.01:
(a) "Acridge Stock Interest" means the entire Stock Interest owned at
the relevant time by Acridge and his Affiliate Transferees.
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(b) "Affiliate Transferee" means with respect to any transferor (i) any
person directly or indirectly controlling, controlled by or under common control
with such transferor ("Control Persons"); (ii) individuals ("Family Members")
who are related by blood or marriage to the transferor or a Control Person of
the transferor; (iii) entities that are controlled by any such Family Member;
and (iv) entities in which the transferor, one or more Control Persons, or one
or more Family Members have a material interest, but shall not include Giant,
Holly or the Surviving Corporation with respect to any treasury stock acquired
from any person.
(c) "Control Arrangements" means: (i) the establishment of the positions
for Acridge and Norsworthy of Co-Chairmen of the Board and the designation of
each as Co-Chief Executive Officer acting together as the Office of the Chief
Executive Officer; (ii) the equal number of G Directors and H Directors on the
Surviving Corporation's Board of Directors; (iii) the voting agreements
described in Section 2 of this Agreement; and (iv) the provisions of the
Restated Certificate of Incorporation and Bylaws of the Surviving Corporation
reflecting any of the foregoing.
(d) "Deadlock Resolution Proceedings" means the proceedings described in
Section 3.02 hereof.
(e) "Disputed Matter" means any matter upon which Acridge and Norsworthy
are unable to agree and which causes either of them to believe that the Control
Arrangements are not meeting their objectives to enhance the overall competitive
and strategic position of the Surviving Corporation and to otherwise serve the
best interests of the Surviving Corporation and its stockholders.
(f) "Effective Date" means the date of this Agreement.
(g) "Norsworthy Group Stock Interest" means the entire Stock Interest
owned at the relevant time by all members of the Norsworthy Group and his
Affiliate Transferees.
(h) "Purchase Price" of the Subject Stock Interest shall mean the per
share price set forth in the Offer to Sell or Purchase, multiplied by the number
of shares of equity securities comprising the Subject Stock Interest to be sold
or purchased as provided in Section 3.02 hereof.
(i) "Standstill Period" means any period during which (i) a Disputed
Matter is referred to the Board of Directors as provided in Section 3.01 hereof,
and for an additional five days thereafter, or (b) a Deadlock Resolution
Proceeding is pending pursuant to Section 3.02 hereof.
(j) "Stock Interest" means the entire right, title and interest of a
party in and to any equity securities of the Surviving Corporation, including
shares of common stock or preferred stock held or otherwise beneficially owned
from time to time by a party and any other securities convertible into or
exchangeable for equity securities of the Surviving Corporation, but shall not
include any unexercised options, warrants or similar rights or any equity
securities allocated to the account of a party under an employee stock ownership
plan unless the same may be distributed to the party upon his resignation as an
officer and director of the Surviving Corporation without penalty under the
Internal Revenue Code or other applicable laws.
(k) "Subject Stock Interest" means the number of shares of the stock of
the Surviving Corporation required to be purchased or sold as determined
pursuant to Section 3.02(b).
SECTION 2
VOTING AGREEMENTS
2.01 VOTE WITH RESPECT TO MERGER. Each Stockholder Party shall vote all
of the shares of the common stock of Giant or Holly, as the case may be, owned
by such Stockholder Party at every meeting of stockholders of Giant or Holly, as
the case may be, and at every adjournment thereof, (i) in favor of approval of
the Merger and any matter that could reasonably be expected to facilitate the
Merger and (ii) against any proposal for any recapitalization, merger, sale of
assets or business combination (other than the Merger) or any other action or
agreement that could reasonably be expected to hinder the Merger or would result
in a breach of any covenant contained in the Merger Agreement. Nothing herein
limits the exercise of fiduciary duties of a Stockholder Party in his or her
capacity as a director of Giant or Holly.
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2.02 VOTE WITH RESPECT TO DIRECTORS AND AMENDMENTS TO BYLAWS. After the
Effective Time (as defined in the Merger Agreement), each Stockholder Party
shall vote all of the stock of the Surviving Corporation owned by such
Stockholder Party whether acquired before, pursuant to or after the Merger at
each stockholders meeting of the Surviving Corporation (i) for each of the
directors of the Surviving Corporation who is nominated by the Board of
Directors of the Surviving Corporation pursuant to the terms of Section 12 of
Article III of the Surviving Corporation s Bylaws as in effect as of the
Effective Time and (ii) against any amendment to the Bylaws or the Certificate
of Incorporation of the Surviving Corporation that is not proposed by the
"entire Board of Directors," as such term is defined in Section 3 of Article IX
of the Bylaws of the Surviving Corporation as in effect as of the Effective
Time.
2.03. RIGHTS AND OBLIGATIONS APPLICABLE TO AFFILIATE TRANSFEREES. Any
Stockholder Party proposing to transfer shares of Holly or Giant currently owned
or shares of the Surviving Corporation after the Effective Time to an Affiliate
Transferee shall notify the proposed Affiliate Transferee of the terms of this
Agreement, shall promptly notify all other parties to this Agreement of the
proposed transfer and shall, prior to the proposed transfer, require such
Affiliate Transferee to sign an addendum to this Agreement becoming a party
hereto. Holly and Giant will use their best efforts to cause the Surviving
Corporation to not recognize any proposed transfer on the books and records of
the Surviving Corporation made in contravention to this Section 2.03 and any
such proposed transfer shall be deemed ineffective. The terms of this Agreement,
including provisions of this Section 2.03 with respect to subsequent transfers
and rights to notice of transfers, shall apply fully to any person who is an
Affiliate Transferee. Except as set forth in the preceding sentences of this
Section 2.03, parties to this Agreement and Affiliate Transferees shall not be
restricted by this Agreement with respect to any transfer (including any pledge)
to any person of shares of the stock of Holly, Giant or the Surviving
Corporation.
SECTION 3
DEADLOCK RESOLUTION AGREEMENTS
3.01 ADVICE OF THE BOARD. If, at any time after the 15th month following
the Effective Time, either Acridge or Norsworthy believes that the Control
Arrangements are not meeting their objectives to enhance the overall competitive
and strategic position of the Surviving Corporation and to otherwise serve the
best interests of the Surviving Corporation and its stockholders, and they are
unable to resolve their differences through private discussion, either may call
a special meeting of the Board of Directors (the "Special Meeting") for the sole
purpose of considering the Disputed Matters.
(a) Procedures. Notwithstanding the provisions of the Surviving
Corporation s Bylaws: (i) the notice for the Special Meeting shall be given at
least 10 days prior to the meeting, (ii) the notice shall specifically state
that the meeting is being called to discuss one or more Disputed Matters, (iii)
a quorum for the meeting shall be at least three of the H Directors and three of
the G Directors, and (iv) the meeting shall be chaired jointly by a
representative of each such category of directors. Acridge and Norsworthy may,
but are not obligated to, reduce the nature of any Disputed Matter to writing
and provide the same to the Board of Directors in advance of the Special
Meeting; provided that if either elects to do so, he shall provide a copy of
such writing in advance to the other at least two days before sending the same
to the other members of the Board.
(b) Presentations by Acridge and Norsworthy. At the Special Meeting,
both Acridge and Norsworthy shall have the opportunity to present fully and
fairly the Disputed Matters for consideration by the Board of Directors. The
Board of Directors shall discuss the Disputed Matters in good faith and
consistent with its fiduciary obligations, and may meet to do so privately,
without Acridge and Norsworthy or without either of them. The Board of Directors
may continue the Special Meeting one or more times if necessary for adequate
deliberation of any Disputed Matter for any reasonable period of time.
(c) Board Action. At the Special Meeting or any continuation thereof
permitted by Section 3.01(b), the Board shall provide to Acridge and Norsworthy
its advice and recommendations or decisions, and, if the Board is unable to
agree on a recommended course of action, it shall so state and the individual
members of the Board shall each inform Acridge and Norsworthy of their opinion
on the Disputed Matters.
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(d) Intent. It is the intent of Acridge and Norsworthy that the process
described in this Section 3.01 be conducted in a fair and impartial manner with
the best interests of the Surviving Corporation and its stockholders as the
guiding factor. To that end, if a Disputed Matter is submitted to the Board,
Acridge and Norsworthy agree that they will not contact or communicate with the
other Board members ex parte or outside of the contacts and communications
contemplated by this Section 3.01 unless either believes in his good faith
judgment that such contacts or other communications are required in the exercise
of his fiduciary duties. Further, to ensure the maximum effectiveness of this
process, the Board may adopt whatever procedures and may consult with whatever
professionals and advisers it deems necessary or appropriate to provide informed
advice and decisions and to make informed recommendations to Acridge and
Norsworthy.
(e) Consideration of Board Action. Acridge and Norsworthy each agree to
consider the advice, recommendations or decisions of the Board in good faith and
without any pre-conceived determinations. Notwithstanding the foregoing, (i)
after five days following the communications described in Section 3.01(c), or
(ii) if no Special Meeting is in fact held as provided in Section 3.01(a) or
within five days following the Special Meeting no communications under Section
3.01(c) are made by the Board to Acridge and Norsworthy, and either of them in
his sole discretion remains dissatisfied with the Disputed Matter, he shall have
the right to implement the Deadlock Resolution Proceedings described in Section
3.02.
(f) Successive Application. Unless the Deadlock Resolution Proceedings
are invoked with respect to any Disputed Matter, the provisions of this Section
3.01 shall apply successively to all Disputed Matters whenever arising.
3.02 DEADLOCK RESOLUTION PROCEEDINGS.
(a) Purpose. This Section 3.02 sets forth a procedure pursuant to which
either Acridge or Norsworthy can, if either determines that there are Disputed
Matters that cannot be otherwise resolved, obtain an efficient and businesslike
termination of the Control Arrangements through making an offer to the other
that results in a choice for such other as to the means whereby the Control
Arrangements are terminated. For purposes of this Section 3.02, the term
"Offeror Group" shall, if the Offeror (as defined in Section 3.02(b)) is
Norsworthy, refer to each member of the Norsworthy Group and any Affiliate
Transferees having a relationship to one or more members of the Norsworthy Group
and, if the Offeror is Acridge, such term shall refer to Acridge and any
Affiliate Transferee having a relationship to Acridge. The term "Offeree Group"
shall, if the Offeree (as defined in Section 3.02(b)) is Norsworthy, refer to
each member of the Norsworthy Group and any Affiliate Transferees having a
relationship to one or more members of the Norsworthy Group and, if the Offeree
is Acridge, such term shall refer to Acridge and any Affiliate Transferee having
a relationship with Acridge. If there is an election under clause (i) or clause
(ii) of Section 3.02(d) below, the one of the Offeror Group or the Offeree Group
that becomes the purchaser as a result of such election is referred to as the
"Purchasing Group," and the one of the Offeror Group or the Offeree Group that
becomes the seller as a result of such election is referred to as the "Selling
Group."
(b) Offer to Sell or Purchase. At any time after the time period set
forth in Section 3.01(e), either Acridge or Norsworthy (the "Offeror") may make
to the other (the "Offeree") an offer to sell or to purchase a Stock Interest as
set forth in this Section 3.02. The offer described in this Section 3.02(b) is
referred to hereinafter as an "Offer to Sell or Purchase." If the Offer to Sell
or Purchase is delivered by Acridge, the Stock Interest he must propose to sell
is the Acridge Stock Interest, and the Stock Interest he must propose to
purchase is the amount equal to the lesser in number of the Acridge Stock
Interest or the Norsworthy Group Stock Interest. If the Offer to Sell or
Purchase is delivered by the Norsworthy Group, the Stock Interest the Norsworthy
Group must propose to sell is the amount equal to the lesser in number of the
Norsworthy Group Stock Interest or the Acridge Stock Interest, and the Stock
Interest the Norsworthy Group must propose to purchase is the Acridge Stock
Interest. The Offer to Sell or Purchase shall simultaneously be delivered by the
Offeror to the Offeree, the Surviving Corporation by delivery of the same to the
corporate secretary and to each member of the Board of Directors at his or her
last known address in the records of the Surviving Corporation. Once given, the
Offer to Sell or Purchase may not be revoked or altered by the Offeror.
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(c) Contents of Offer to Sell or Purchase. The Offer to Sell or
Purchase shall include the following:
(i) The per share price (which must be paid in full in cash at the
closing) at which the Offeror offers to sell or purchase the Subject Stock
Interest (which must be the same price);
(ii) Evidence of the Offeror Group s ability to fund the Purchase
Price, assuming that as a result of the Offer to Sell or Purchase the Offeror
Group was required to purchase the Subject Stock Interest from the Offeree
Group, including specifically a financing commitment if the Offeror Group would
borrow the necessary funds together with documentation evidencing the escrow of
funds (or equivalent security in the form of an irrevocable letter of credit or
other comparable instrument) in an amount equal to ten percent (10%) of the
Purchase Price (the "Earnest Money Deposit") as earnest money to secure the
Offeror Group s obligation to pay the Purchase Price in the event that the
Offeree Group elects to sell the Subject Stock Interest to the Offeror Group
pursuant to the Offer to Sell or Purchase;
(iii) A form of a complete and mutual release to be delivered by the
Offeror, the Offeree and the Surviving Corporation at closing of a purchase
transaction; and
(iv) Such other material terms for the purchase and sale of the
Subject Stock Interest deemed relevant by the Offeror and not inconsistent with
this Agreement.
Each of the instruments and documents referred to above shall be in commercially
reasonable form and shall be prepared in good faith by the Offeror. The Offer to
Sell or Purchase may not require performance by any person other than Acridge
and the Norsworthy Group, any Affiliate Transferees, and any party required to
act under the Earnest Money Deposit arrangement. The Selling Group shall be
obligated to convey the Subject Stock Interest to the Purchasing Group free and
clear of any liens, claims or encumbrances and the Offer to Sell or Purchase
shall so provide.
(d) Response. The Offeree shall elect in writing, as soon as reasonably
possible but not more than 60 days after his receipt of the Offer to Sell or
Purchase, either:
(i) To resign all positions then held with the Surviving Corporation,
including as a director, effective as of the closing and to cause the sale of
the Subject Stock Interest to the Offeror Group in accordance with the terms of
the Offer to Sell or Purchase; or
(ii) To cause the purchase from the Offeror Group of the Subject
Stock Interest in accordance with the terms of the Offer to Sell or Purchase; or
(iii) To resign all positions then held with the Surviving
Corporation, including as a director, and be subject to a Standstill Agreement
(as defined below) with the Surviving Corporation.
The Offeree's election pursuant to this Section 3.02(d) is referred to
hereinafter as the "Response." If issued pursuant to Section 3.02(d)(ii), the
Response shall include evidence of the Offeree's ability to fund the Purchase
Price, including specifically a financing commitment if the Offeree Group would
borrow the necessary funds together with documentation evidencing the escrow of
funds (or equivalent security in the form of an irrevocable letter of credit or
other comparable instrument) in an amount equal to ten percent (10%) of the
Purchase Price as the Earnest Money Deposit to secure the Offeree Group's
obligation to pay the Purchase Price to the Offeror Group pursuant to the
Response. The Response shall be delivered simultaneously to the Offeror and to
the Surviving Corporation by copy to the corporate secretary and to each member
of the Board of Directors. If the Offeree fails to deliver the Response within
the required 60-day period, the Offeree shall be deemed to have given the
Response on the last day of such period, electing under clause (iii) above to
resign his positions, including as a director, and be subject to the Standstill
Agreement with the Surviving Corporation as provided in Sections 3.02(e) and
(f).
(e) Election or Deemed Election Under Section 3.02(d)(iii). If the
Offeree makes the election under Section 3.02(d)(iii) or is deemed to have made
such election if no Response is delivered by the Offeree within the required
60-day period as provided in Section 3.02(d), a closing will be held on the
fifth day following such election or deemed election, as the case may be, at the
offices of the Surviving Corporation. At
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the closing, (i) the Offeree shall deliver his resignation as to all positions
in the Surviving Corporation, including as a director, then held by the Offeree,
(ii) the Control Arrangements shall terminate, (iii) each member of the Offeree
Group shall use his, her or its best efforts to cause each member of the
category of directors (G or H) of which the Offeree is a member to resign, and
(iv) a Standstill Agreement and mutual release as provided in Section 3.02(f)
shall become effective.
(f) Standstill Agreement and Mutual Release. The parties hereby agree
that, if the election under Section 3.02(d)(iii) is made or is deemed to have
been made if no Response is made by the Offeree within the 60-day period as
provided in Section 3.02(d), each member of the Offeree Group shall be subject
to the following obligations (the "Standstill Agreement"): each such member
shall not, and he, she or it shall cause each of his, her or its affiliates not
to, directly or indirectly: (a) acquire, offer to acquire or agree to acquire
any equity securities of the Surviving Corporation, except by way of stock
dividends or other distributions or offerings made available to all stockholders
of the Surviving Corporation or pursuant to the exercise of outstanding options,
warrants or other rights; (b) make or otherwise participate in any solicitation
of proxies or consents, or seek to advise, encourage or influence any person
with respect to voting any of the Surviving Corporation s equity securities; (c)
initiate or propose any shareholder proposals, or induce any other person to
initiate a shareholder proposal; (d) form or cause the formation of any "group"
(within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended); (e) otherwise act to control or seek to control the Surviving
Corporation; (f) seek the removal of any member of the Board; (g) initiate or
propose any tender or exchange offers; or (h) serve as a member of the Board;
provided, however, that the foregoing shall not prevent the members of the
Offeree Group from effecting routine sales of Surviving Corporation equity
securities in transactions for purposes other than those prescribed above. The
applicable obligations of the members of the Offeree Group under the Standstill
Agreement as provided by this Section 3.02(f) shall cease to apply on the fifth
anniversary of the Standstill Agreement or at such earlier time that the Offeree
Group holds less than 3% of the Surviving Corporation's issued and outstanding
common stock. Each of the parties hereby agrees that, if the Standstill
Agreement as provided in this Section 3.02(f) becomes effective, he, she or its
shall release all other parties to this Agreement with respect to any and all
claims and causes of action arising under or pursuant to or in connection with
this Agreement and shall execute a document confirming such mutual release.
(g) Adjustment to Offer to Sell or Purchase for Tax Purposes. At the
request of the Selling Group, the Purchasing Group agrees to use reasonable
efforts to structure the purchase and sale transaction to minimize the income
tax liabilities of the Selling Group, notwithstanding the express terms of the
Offer to Sell or Purchase; provided that: (i) such structure will not delay the
closing under Section 3.02(h); (ii) any transaction costs incurred in such
structuring are deducted from the Purchase Price; (iii) such structure will not
increase the risks to the Purchasing Group; and (iv) the Selling Group agrees in
writing to indemnify, defend and hold the Purchasing Group harmless from any
liability on account of such structure.
(h) Closing for Purchase Transaction. Closing of the transfer of the
Selling Group's Subject Stock Interest pursuant to Section 3.2(d)(i) or (ii)
shall take place as soon as reasonably possible, but not more than 30 days after
the delivery of the Response, at the offices of the Surviving Corporation, and
on the specific date selected by the Purchasing Group.
(i) Closing Procedure for Purchase Transaction. At the closing, (i) the
Purchasing Group shall pay the Purchase Price to the Selling Group in
immediately available funds, (ii) the Selling Group shall deliver the stock
certificates representing the Subject Stock Interest to the Purchasing Group,
with duly executed stock powers bearing medallion signature guarantees, (iii)
the members of the Selling Group holding positions in the Surviving Corporation
shall resign all such positions, including as directors, (iv) the Control
Arrangements shall terminate, (v) the Selling Group will use best efforts to
cause the category of directors (G or H) of which any member of the Selling
Group is a member to resign, and (vi) the parties shall execute and deliver all
documents and instruments required under the terms of the Offer to Sell or
Purchase.
(j) Closing Adjustments. If, at the closing, the Selling Group's Stock
Interest in the Surviving Corporation is subject to any lien, claim or
encumbrance, the Purchasing Group shall at the reasonable request of the Selling
Group cause the Purchase Price (or a portion thereof) to be applied to discharge
such
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lien, claim or encumbrance; provided that (i) such arrangement will not delay
the closing; (ii) any transaction costs incurred in such arrangement are
deducted from the Purchase Price; (iii) such arrangement will not prevent the
acquisition of the Subject Stock Interest by the Purchasing Group free and clear
of all liens, claims and encumbrances; and (iv) the Selling Group agrees in
writing to indemnify, defend and hold the Purchasing Group harmless from any
liability on account of such arrangement.
(k) Failure to Close. If the Purchasing Group fails for any reason to
close such purchase (a "Breaching Group") by no later than the closing date
specified in Section 3.02(h), it shall be liable to the Selling Group for all
costs (including without limitation attorneys' fees) incurred by the Selling
Group in connection with the proceedings under this Section 3.02. The Selling
Group shall be entitled to the Earnest Money Deposit and shall have, in addition
to all other rights and remedies, the option, exercisable within 60 days after
the closing date specified in Section 3.02(h), to purchase the Breaching Group's
Subject Stock Interest in the Surviving Corporation, on the terms and conditions
set forth in the Offer to Sell or Purchase and this Section 3.02. If the Selling
Group does not elect the option described in the preceding sentence, the
Breaching Group shall be required to take the actions specified in Section
3.02(d)(iii). If the Selling Group elects the option to purchase the Subject
Stock Interest of the Breaching Stockholder, it shall close the purchase of the
Subject Stock Interest as soon as reasonably possible but not more than 30 days
after exercise of such option.
(l) Other Matters. For all purposes under this Section 3.02, the
members of the Norsworthy Group hereby irrevocably appoint Norsworthy to act as
the exclusive representative of members of the Norsworthy Group and their
Affiliate Transferees on all matters set forth herein. The obligations of the
Norsworthy Group under this Agreement are joint and several. In the event that
part or all of the Acridge Stock Interest is owned by Affiliate Transferees from
Acridge, Acridge will be the exclusive representative of all holders of the
Acridge Stock Interest. The obligations of Acridge and his Affiliate Transferees
shall be joint and several.
3.03 STANDSTILL. The Stockholder Parties agree that during any Standstill
Period hereunder, they shall not, and they shall cause each of their affiliates
not to, directly or indirectly:
(a) acquire, offer to acquire or agree to acquire any equity securities of the
Surviving Corporation, except by way of stock dividends or other distributions
or offerings made available to all stockholders of the Surviving Corporation or
pursuant to the exercise of outstanding options, warrants or other rights; (b)
make or otherwise participate in any solicitation of proxies or consents, or
seek to advise, encourage or influence any person with respect to voting any of
the Surviving Corporation's equity securities, except for Acridge and Norsworthy
in their respective capacities as members of the Board of Directors on matters
approved by the Board; (c) initiate or propose any shareholder proposals, or
induce any other person to initiate a shareholder proposal; (d) form or cause
the formation of any "group" (within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended); (e) otherwise act to control or
seek to control the Surviving Corporation; (f) seek the removal of any member of
the Board; or (g) initiate or propose any tender or exchange offers; provided,
however, that the foregoing shall not prevent the Stockholder Parties from
effecting routine sales of Surviving Corporation equity securities in
transactions for purposes other than those prescribed above.
3.04 INTENT. The parties acknowledge that the subject matter of this
Section 3 is complicated, and agree that it is not possible to foresee or
prudent to predict all of the possible Disputed Matters or other factors or
circumstances that might arise in the future and affect the provisions of this
Section 3 and the procedures established herein. The parties further acknowledge
that the purpose of this Section 3 is to provide a mechanism to deal with
Disputed Matters in an efficient and businesslike manner so as not to unduly
disrupt or damage the Surviving Corporation or the interests of its
stockholders. Accordingly, it is the express intent of the parties that the
provisions hereof and the procedures established herein be interpreted and
conducted with the overriding interests of the Surviving Corporation and its
stockholders in mind at all times; provided that the foregoing shall not affect
the implementation of the Deadlock Resolution Proceedings set forth in Section
3.02 hereof.
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SECTION 4
TERM AND TERMINATION
4.01 TERM AND TERMINATION. This Agreement shall become effective on the
Effective Date, and shall continue in effect until the earlier of (i) an
amendment to Section 2.01 of the Merger Agreement; (ii) an amendment to Article
III, to Section 2 or Section 5 of Article IV, or to Article IX of the proposed
Bylaws of the Surviving Corporation attached as Exhibit B to the Merger
Agreement; (iii) the termination of the Merger Agreement in accordance with its
terms without consummation of the Merger; (iv) either Acridge or the Norsworthy
Group ceases to hold at least 3% of the common stock of the Surviving
Corporation (without consideration of any options, warrants or other rights to
acquire Capital Stock of the Surviving Corporation or any shares of the capital
stock of the Surviving Corporation allocated to either Acridge or Norsworthy
under any employee stock ownership plan); (v) the closing of any Deadlock
Resolution Proceeding under Section 3 hereof; (vi) the death of Acridge or
Norsworthy; or (vii) December 31, 2003. In addition, with respect to any
Stockholder Party other than Acridge or Norsworthy who shall cease to own a
Stock Interest in the Surviving Corporation (other than pursuant to a
transaction in violation of Section 2.03 of this Agreement), this Agreement
shall terminate as to such Stockholder Party only at such time as such
Stockholder Party ceases to own such Stock Interest. Notwithstanding the
termination of this Agreement as provided in this Section 4.01, any Standstill
Agreement then in effect as provided in Section 3.02(f) shall continue in effect
until it expires in accordance with the terms set forth in Section 3.02(f).
SECTION 5
REPRESENTATIONS AND WARRANTIES
5.01 REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER PARTIES. Each
Stockholder Party represents to each party hereto: (i) at the date hereof, the
Stockholder Party owns the number of shares of stock of Giant or Holly set forth
opposite his, her or its name on Schedule I attached hereto and such Stockholder
Party has sole power of disposition, sole power of conversion, sole power to
demand appraisal rights, and sole power to vote or otherwise agree to all
matters set forth in this Agreement, with no limitations, qualifications, or
restrictions on such rights, subject to applicable securities laws, the terms of
this Agreement and normal rights under trust agreements and pledge agreements
which do not circumvent the purpose or intent of this Agreement; (ii) each
Stockholder Party has the legal capacity, power, and authority to enter into and
perform all of his, her or its obligations under this Agreement; (iii) the
execution, delivery and performance of this Agreement by such Stockholder Party
do not require the consent of any other person which has not been obtained on
the date hereof and will not violate any other agreement to which such
Stockholder Party is a party, including, without limitation, any voting
agreement, stockholders' agreement or voting trust; and (iv) this Agreement has
been duly executed and delivered by such Stockholder Party and constitutes the
legal, valid and binding obligation of such Stockholder Party, enforceable
against such Stockholder Party in accordance with its terms.
SECTION 6
GENERAL PROVISIONS
6.01 GENERAL
(a) Non-Frustration. The parties agree that they shall not take any
actions during the term of this Agreement that would have the effect of
frustrating or circumventing the purpose and intent of this Agreement; provided,
however, that the foregoing shall not prevent the Stockholder Parties from
effecting routine sales of Surviving Corporation equity securities in
transactions (subject to securities laws restrictions) for purposes other than
those prescribed in Section 3.03 and elsewhere in this Agreement.
(b) Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given on the date of delivery, if delivered personally or telecopied (and
confirmed) during normal business hours, or on the following business day, if
sent by overnight courier
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(providing proof of delivery), in each case to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(i) if to the Surviving Corporation, to:
Giant Industries, Inc.
23733 North Scottsdale Road
Scottsdale, Arizona 85255
Telecopy No.: (602) 585-8985
Attention: Corporate Secretary
(ii) if to Giant, to:
23733 North Scottsdale Road
Scottsdale, Arizona 85255
Telecopy No.: (602) 585-8985
Attention: Corporate Secretary
(iii) if to Holly, to:
Holly Corporation
100 Crescent Court
Suite 1600
Dallas, Texas 75201-6927
Telecopy No.: (214) 871-3578
Attention: Lamar Norsworthy
(iv) if to Acridge, to
23733 North Scottsdale Road
Scottsdale, Arizona 85255
Telecopy No.: (602) 585-8894
Attention: James E. Acridge
(v) if to the Norsworthy Group, to:
100 Crescent Court, Suite 1600
Dallas, Texas 75201-6927
Telecopy No.: (214) 871-3578
Attention: Lamar Norsworthy
Any Affiliate Transferee shall promptly give notice of that person's
address for purposes of this Section 6.01(b) to all of the other parties and
Affiliate Transferees.
(c) Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties. Facsimile copies with signatures
of the parties to this Agreement, or their duly authorized representatives,
shall be legally binding and enforceable. All such facsimile copies are declared
to be originals and accordingly admissible in any jurisdiction or tribunal
having jurisdiction over any matter relating to this Agreement.
(d) Entire Agreement; No Third-Party Beneficiaries. This Agreement (i)
constitutes the entire agreement, and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement, and (ii) is not intended to confer upon any
person other than the parties any rights or remedies.
(e) Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflict of laws
thereof.
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(f) Assignment. Except as otherwise expressly set forth herein,
neither this Agreement nor any of the rights, interests or obligations under
this Agreement shall be assigned, in whole or in part, by operation of law or
otherwise by the parties hereto without the prior written consent of the other
parties. Any assignment in violation of the preceding sentence shall be void.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
(g) Enforcement. The parties agree that irreparable damage would occur
and that the parties would not have any adequate remedy at law in the event that
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
of this Agreement in any federal court located in the State of Delaware or in
Delaware state court, this being in addition to any other remedy to which they
are entitled at law or in equity. In addition, each of the parties hereto (i)
consents to submit itself to the personal jurisdiction of any federal court
located in the State of Delaware or any Delaware state court in the event any
dispute arises out of this Agreement or any of the transactions contemplated by
this Agreement, (ii) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
and (iii) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated by this Agreement in any court other than a
federal court sitting in the State of Delaware or a Delaware state court. Each
party to this Agreement, including Giant, Holly and the Surviving Corporation,
and each Affiliate Transferee shall, so long as that person holds stock of
Giant, Holly or the Surviving Corporation, have the right to seek, against any
person subject to this Agreement, enforcement of any obligations under the terms
of this Agreement. Any party breaching any provision of this Agreement shall be
liable to each other party for that party's reasonable attorneys fees incurred
in enforcing the terms of this Agreement against the breaching party.
(h) Descriptive Headings. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(i) Amendments and Waivers. No amendment of this Agreement shall be
effective unless it is in writing and is signed by all parties hereto, and no
waiver of any provision of this Agreement or consent to any departure by any
party from the terms hereof shall in any event be effective unless in writing
and signed by the party or parties against whom such waiver or consent is
asserted, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose recited therein.
(j) Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision or provisions shall be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision or provisions were so excluded and shall be
enforceable in accordance with its terms.
(k) Schedule 13D Filing. The Stockholder Parties will cooperate in the
preparation and filing with the Securities and Exchange Commission, the New York
Stock Exchange and the American Stock Exchange of a Schedule 13D within ten days
following the date of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered as of the date first written above.
Giant Industries, Inc.
By: /s/ JAMES E. ACRIDGE
------------------------------------
Name: James E. Acridge
Title: President and Chief Executive
Officer
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Holly Corporation
By: /s/ LAMAR NORSWORTHY
------------------------------------
Name: Lamar Norsworthy
Title: Chairman of the Board
/s/ JAMES E. ACRIDGE
--------------------------------------
James E. Acridge
/s/ LAMAR NORSWORTHY
--------------------------------------
Lamar Norsworthy
/s/ NONA BARRETT
--------------------------------------
Nona Barrett
NBN Capital Limited Partnership
By: NBN Assets Management Company,
L.L.C.
By: /s/ ROBERT G. MCKENZIE
------------------------------------
Robert G. McKenzie,
Manager
Betty Simmons East Texas Trust
By: Brown Brothers Harriman Trust
Company
of Texas, Trustee
By: /s/ ROBERT G. MCKENZIE
------------------------------------
Robert G. McKenzie, Executive
Vice President
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Margaret Simmons East Texas Trust
By: Brown Brothers Harriman Trust
Company
of Texas, Trustee
By: /s/ ROBERT G. MCKENZIE
------------------------------------
Robert G. McKenzie, Executive
Vice President
Suzanne Simmons East Texas Trust
By: Brown Brothers Harriman Trust
Company
of Texas, Trustee
By: /s/ ROBERT G. MCKENZIE
------------------------------------
Robert G. McKenzie, Executive
Vice President
Betty Simmons Nueces County Trust
By: Brown Brothers Harriman Trust
Company
of Texas, Trustee
By: /s/ ROBERT G. MCKENZIE
------------------------------------
Robert G. McKenzie, Executive Vice
President
Margaret Simmons Nueces County Trust
By: Brown Brothers Harriman Trust
Company of
Texas, Trustee
By: /s/ ROBERT G. MCKENZIE
------------------------------------
Robert G. McKenzie, Executive
Vice President
Suzanne Simmons Nueces County Trust
By:
Brown Brothers Harriman Trust
Company of Texas, Trustee
By: /s/ ROBERT G. MCKENZIE
------------------------------------
Robert G. McKenzie, Executive
Vice President
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<PAGE> 180
SCHEDULE I
SHARES HELD BY THE STOCKHOLDER PARTIES
ACRIDGE
<TABLE>
<CAPTION>
NUMBER OF GIANT INDUSTRIES
SHARES OWNED
--------------------------
<S> <C>
James E. Acridge 2,315,892
</TABLE>
NORSWORTHY GROUP
<TABLE>
<CAPTION>
NUMBER OF HOLLY CORPORATION
SHARES OWNED
---------------------------
<S> <C>
Lamar Norsworthy 328,859
Nona Barrett 328,132
NBN Capital Limited Partnership 285,856
Betty Simmons East Texas Trust 263,242
Margaret Simmons East Texas Trust 263,242
Suzanne Simmons East Texas Trust 263,242
Betty Simmons Nueces County Trust 240,470
Margaret Simmons Neuces County Trust 240,470
Suzanne Simmons Neuces County Trust 240,470
</TABLE>
G-13
<PAGE> 181
APPENDIX H
GIANT INDUSTRIES, INC.
1998 STOCK INCENTIVE PLAN
1. PURPOSES. The purposes of this Plan are to attract, retain and
motivate officers and other key employees of and consultants to Giant
Industries, Inc. (the "Corporation") and its Subsidiaries and to provide such
persons with incentives and rewards for superior performance linked to the
profitability of the Corporation's business and increases in stockholder value.
2. DEFINITIONS. As used in this Plan,
"APPRECIATION RIGHT" means a right granted pursuant to Section 5 of this
Plan, including a Free-standing Appreciation Right and a Tandem Appreciation
Right.
"BASE PRICE" means the price to be used as the basis for determining the
Spread upon the exercise of a Free-standing Appreciation Right.
"BOARD" means the Board of Directors of the Corporation.
"CHANGE OF CONTROL" means a change in ownership or control of the
Corporation effected through either of the following transactions:
(a) the direct or indirect acquisition by any person or related group of
persons (other than the Corporation or a person that directly or indirectly
controls, is controlled by, or is under common control with, the Corporation) of
beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of
securities possessing more than 50% of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange offer made
directly to the Corporation's stockholders or other transaction, in each case
which the Board does not recommend such stockholders to accept; or
(b) a change in the composition of the Board over a period of 36
consecutive months or less such that a majority of the Board members (rounded up
to the next whole number) ceases, by reason of one or more contested elections
for Board membership, to be comprised of individuals who either (i) have been
Board members continuously since the beginning of such period or (ii) have been
elected or nominated for election as Board members during such period by at
least a majority of the Board members described in clause (i) who were still in
office at the time such election or nomination was approved by the Board.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
"COMMITTEE" means the committee described in Section 14(a) of this Plan.
"COMMON SHARES" means (i) shares of the Common Stock, par value $.01 per
share, of the Corporation and (ii) any security into which Common Shares may be
converted by reason of any transaction or event of the type referred to in
Section 10 of this Plan.
"CORPORATE TRANSACTION" means any of the following stockholder-approved
transactions to which the Corporation is a party:
(a) a merger or consolidation in which the Corporation is not the
surviving entity, except for a transaction the principal purpose of which is to
change the state in which the Corporation is incorporated,
(b) the sale, transfer or other disposition of all or substantially all
of the assets of the Corporation in complete liquidation or dissolution of the
Corporation, or
(c) any reverse merger in which the Corporation is the surviving entity
but in which securities possessing more than 50% of the total combined voting
power of the Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately prior to
such merger.
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<PAGE> 182
"DATE OF GRANT" means the date specified by the Committee on which a grant
of Option Rights, Appreciation Rights, Performance Shares or Performance Units
or a grant or sale of Restricted Shares shall become effective, which shall not
be earlier than the date on which the Committee takes action with respect
thereto.
"EFFECTIVE DATE" means the effective date of this Plan as provided in
Section 17(a).
"FREE-STANDING APPRECIATION RIGHT" means an Appreciation Right granted
pursuant to Section 5 of this Plan that is not granted in tandem with an Option
Right or similar right.
"HOLLY" means Holly Corporation, a Delaware corporation.
"INCENTIVE STOCK OPTION" means an Option Right that is intended to qualify
as an "incentive stock option" under Section 422 of the Code or any successor
provision thereto.
"MANAGEMENT OBJECTIVES" means the achievement or performance objectives
established pursuant to this Plan for Participants who have received grants of
Performance Shares or Performance Units or, when so determined by the Committee,
Restricted Shares.
"MARKET VALUE PER SHARE" means the fair market value of the Common Shares
as determined by the Committee in accordance with the following provisions:
(a) If the Common Shares are at the time listed or admitted to trading
on any national securities exchange, then the Market Value per Share shall be
the closing selling price per share on the date in question on the securities
exchange determined by the Committee to be the primary market for the Common
Shares, as such price is officially quoted in the composite tape of transactions
on such exchange. If there is no reported sale of Common Shares on such exchange
on the date in question, then the Market Value per Share shall be the closing
selling price on the exchange on the last preceding date for which such
quotation exists.
(b) If the Common Shares are on the date in question neither listed nor
admitted to trading on any national securities exchange, then the Market Value
per Share on such date shall be determined by the Committee after taking into
account such factors as the Committee shall deem appropriate.
"MERGER" has the meaning set forth in the Merger Agreement.
"MERGER AGREEMENT" means the Agreement and Plan of Merger, dated as of
April 13, 1998, between the Company and Holly.
"1934 ACT" means the Securities Exchange Act of 1934, as amended.
"NONQUALIFIED OPTION" means an Option Right that is not intended to qualify
as a Tax-qualified Option.
"OPTIONEE" means the person so designated in an agreement evidencing an
outstanding Option Right.
"OPTION PRICE" means the purchase price payable upon the exercise of an
Option Right.
"OPTION RIGHT" means the right to purchase Common Shares from the
Corporation upon the exercise of a Nonqualified Option or a Tax-qualified Option
granted pursuant to Section 4 of this Plan.
"PARTICIPANT" means a person who is selected by the Committee to receive
benefits under this Plan and (i) is at that time an officer, including without
limitation an officer who may also be a member of the Board, or other key
employee of or a consultant to the Corporation or any Subsidiary or (ii) has
agreed to commence serving in any such capacity.
"PERFORMANCE PERIOD" means, in respect of a Performance Share or
Performance Unit, a period of time established pursuant to Section 7 of this
Plan within which the Management Objectives relating thereto are to be achieved.
"PERFORMANCE SHARE" means a bookkeeping entry that records the equivalent
of one Common Share awarded pursuant to Section 7 of this Plan.
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"PERFORMANCE UNIT" means a bookkeeping entry that records a unit equivalent
to $1.00 awarded pursuant to Section 7 of this Plan.
"PRIOR PLAN" means the Holly Corporation Stock Option Plan.
"RELOAD OPTION RIGHTS" means additional Option Rights automatically granted
to an Optionee upon the exercise of Option Rights pursuant to Section 4(g) of
this Plan.
"RESTRICTED SHARES" means Common Shares granted or sold pursuant to Section
6 of this Plan as to which neither the substantial risk of forfeiture nor the
restrictions on transfer referred to in Section 6 hereof has expired.
"RULE 16b-3" means Rules 16b-3, as promulgated and amended from time to
time by the Securities and Exchange Commission under the 1934 Act, or any
successor rule to the same effect.
"SPREAD" means, in the case of a Free-standing Appreciation Right, the
amount by which the Market Value per Share on the date when the Appreciation
Right is exercised exceeds the Base Price specified therein or, in the case of a
Tandem Appreciation Right, the amount by which the Market Value per Share on the
date when the Appreciation Right is exercised exceeds the Option Price specified
in the related Option Right.
"SUBSIDIARY" means a corporation, partnership, joint venture, limited
liability company, unincorporated association or other entity in which the
Corporation has a direct or indirect ownership or other equity interest;
provided, however, for purposes of determining whether any person may be a
Participant for purposes of any grant of Incentive Stock Options, "Subsidiary"
means any corporation in which the Corporation owns or controls directly or
indirectly more than 50% of the total combined voting power represented by all
classes of stock issued by such corporation at the time of the grant.
"SUBSTITUTED STOCK OPTIONS" means options to purchase Common Shares that
will be granted at the effective time of the Merger in substitution for options
that were granted under the Prior Plan.
"TANDEM APPRECIATION RIGHT" means an Appreciation Right granted pursuant to
Section 5 of this Plan that is granted in tandem with an Option Right or any
similar right granted under any other plan of the Corporation.
"TAX-QUALIFIED OPTION" means an Option Right that is intended to qualify
under particular provisions of the Code, including without limitation an
Incentive Stock Option.
3. SHARES AND PERFORMANCE UNITS AVAILABLE UNDER THE PLAN.
(a) Subject to adjustment as provided in Section 10 of this Plan, the
total number of Common Shares available for grant under the Plan during 1998
shall be 440,000 Common Shares, plus an additional 999,495 Common Shares for the
grant of Substituted Stock Options. Thereafter, commencing January 1, 1999 and
continuing through the term of the Plan, 2% of the total number of Common Shares
outstanding as of the first day of each such calendar year shall be available
for grant; provided, however, that any Common Shares available for grant in any
particular calendar year which are not, in fact, granted in such year shall not
be added to the Common Shares available for grant in any subsequent calendar
year. In no event shall the aggregate number of Common Shares covered by grants
and awards to any one individual participating in the Plan exceed 75,000 shares
per year. Common Shares awarded under this Plan may be Common Shares of original
issuance or Common Shares held in treasury or a combination thereof. For the
purposes of this Section 3(a):
(i) Upon payment in cash of the benefit provided by any award granted
under this Plan, any Common Shares that were covered by that award shall again
be available for issuance or transfer hereunder.
(ii) Common Shares covered by any award granted under this Plan shall
be deemed to have been issued or transferred, and shall cease to be available
for future issuance or transfer in respect of any other award granted hereunder,
at the earlier of the time when they are actually issued or transferred or the
time when dividends or dividend equivalents are paid thereon; provided, however,
that Restricted Shares shall be
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deemed to have been issued or transferred at the earlier of the time when they
cease to be subject to a substantial risk of forfeiture or the time when
dividends are paid thereon.
(b) In no event shall the aggregate Appreciation Rights which may be
granted to any one individual participating in the Plan exceed 75,000
Appreciation Rights per year.
(c) The number of Performance Units that may be granted under this Plan
shall not in the aggregate exceed 750,000. Performance Units that are granted
under this Plan and are paid in Common Shares or are not earned by the
Participant at the end of the Performance Period shall be available for future
grants of Performance Units hereunder.
4. OPTION RIGHTS. The Committee may from time to time authorize grants to
Participants of options to purchase Common Shares, including Substituted Stock
Options, upon such terms and conditions as the Committee may determine in
accordance with the following provisions:
(a) Each grant shall specify the number of Common Shares to which it
pertains; provided, however, that no Participant shall be granted Option Rights
for more than 75,000 Common Shares in any one fiscal year of the Corporation,
subject to adjustment as provided in Section 10 of this Plan.
(a) Each grant shall specify an Option Price per Common Share, which, in
the case of Incentive Stock Options, shall be equal to or greater than the
Market Value per Share on the Date of Grant and which, in the case of
Nonqualified Options, shall be equal to or greater than 85% of the Market Value
per Share on the Date of Grant.
(b) With respect to Incentive Stock Options, the aggregate Market Value
(determined as of the respective Date or Dates of Grant) of the Common Shares
for which one or more options granted to any Optionee under this Plan may for
the first time become exercisable as Incentive Stock Options under the federal
tax laws during any one calendar year shall not exceed $100,000. To the extent
that the Optionee holds two or more such options which become exercisable for
the first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Stock Options under the federal tax
laws shall be applied on the basis of the order in which such options are
granted. Should the number of Common Shares for which any Incentive Option first
becomes exercisable in any calendar year exceed the applicable $100,000
limitation, then that option may nevertheless be exercised in such calendar year
for the excess number of shares as a Nonqualified Option under the federal tax
laws. In addition, if any individual to whom an Incentive Stock Option is
granted is the owner of stock (as determined under Section 424(d) of the Code)
possessing 10% or more of the total combined voting power of all classes of
stock of the Corporation or any Subsidiary, then the exercise price per share
shall not be less than 110% of the Market Value per Share on the Date of Grant,
and the option term shall not exceed five years, measured from the Date of
Grant.
(c) Each grant shall specify the form of consideration to be paid in
satisfaction of the Option Price and the manner of payment of such
consideration, which may include (i) cash in the form of currency or check or
other cash equivalent acceptable to the Corporation, (ii) nonforfeitable,
unrestricted Common Shares, which are already owned by the Optionee and have a
value at the time of exercise that is equal to the Option Price, (iii) any other
legal consideration that the Committee may deem appropriate, including without
limitation any form of consideration authorized under Section 4(d) below, on
such basis as the Committee may determine in accordance with this Plan, and (iv)
any combination of the foregoing.
(d) Any grant of a Nonqualified Option may provide that payment of the
Option Price also may be made in whole or in part in the form of Restricted
Shares or other Common Shares that are subject to risk of forfeiture or
restrictions on transfer. Unless otherwise determined by the Committee on or
after the Date of Grant, whenever any Option Price is paid in whole or in part
by means of any of the forms of consideration specified in this Section 4(d),
the Common Shares received by the Optionee upon the exercise of the Nonqualified
Option shall be subject to the same risks of forfeiture or restrictions on
transfer as those that applied to the consideration surrendered by the Optionee;
provided, however, that such risks of forfeiture and restrictions on transfer
shall apply only to the same number of Common Shares received by the Optionee as
applied to the forfeitable or restricted Common Shares surrendered by the
Optionee.
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(e) Each grant shall provide for deferred payment of the Option Price
through a sale and remittance procedure by which a Participant shall provide
concurrent irrevocable written instructions to (i) a Corporation-designated
brokerage firm to effect the immediate sale of the purchased Common Shares and
remit to the Corporation, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate Option Price payable for the
purchased Common Shares, and (ii) the Corporation to deliver the certificates
for the purchased Common Shares directly to such brokerage firm to complete the
sale transaction.
(f) Any grant may provide for the automatic grant to the Optionee of
Reload Option Rights upon the exercise of Option Rights, including Reload Option
Rights for Common Shares or any other noncash consideration authorized under
Section 4(d) above; provided, however, that the term of any Reload Option Right
shall not extend beyond the term of the Option Right originally exercised.
(g) Successive grants may be made to the same Optionee regardless of
whether any Option Rights previously granted to the Optionee remain unexercised.
(h) Each grant shall specify any period or periods of continuous
employment, or continuous engagement of the consulting services, of the Optionee
by the Corporation or any Subsidiary that are necessary before the Option Rights
or installments thereof shall become exercisable.
(i) Option Rights granted pursuant to this Section 4 may be Nonqualified
Options or Tax-qualified Options or combinations thereof.
(j) Any grant of a Nonqualified Option may provide for the payment to
the Optionee of dividend equivalents thereon in cash or Common Shares on a
current, deferred or contingent basis, or the Committee may provide that any
dividend equivalents shall be credited against the Option Price.
(k) No Option Right granted pursuant to this Section 4 may be exercised
more than 10 years from the Date of Grant.
(l) An Optionee shall have no stockholder rights with respect to Common
Shares covered by any option until such person shall have exercised the option
and paid the exercise price for the purchased shares.
(m) The Committee shall have the authority to effect, at any time and
from time to time, with the consent of the affected Participant, the
cancellation of any or all outstanding Option Rights under this Section 4 and
grant in substitution new Option Rights under the Plan covering the same or
different numbers of Common Shares but with an exercise price not less than (i)
85% of the Market Value per Share on the new Date of Grant or (ii) 100% of the
Market Value per Share on the new Date of Grant in the case of Incentive Stock
Options.
(n) Each grant shall be evidenced by an agreement, which shall be
executed on behalf of the Corporation by any officer thereof and delivered to
and accepted by the Optionee and shall contain such terms and provisions as the
Committee may determine consistent with this Plan.
(o) The Committee shall have the right to issue Substituted Stock
Options at the effective time of the Merger, in each case on the terms and
conditions set forth in Section 5.06 of the Merger Agreement.
5. APPRECIATION RIGHTS. The Committee also may authorize grants to
Participants of Appreciation Rights. An Appreciation Right shall be a right of
the Participant to receive from the Corporation an amount, which shall be
determined by the Committee and shall be expressed as a percentage (not
exceeding 100%) of the Spread at the time of the exercise of an Appreciation
Right. Any grant of Appreciation Rights under this Plan shall be upon such terms
and conditions as the Committee may determine in accordance with the following
provisions:
(a) Any grant may specify that the amount payable upon the exercise of
an Appreciation Right may be paid by the Corporation in cash, Common Shares or
any combination thereof and may (i) either grant to the Participant or reserve
to the Committee the right to elect among those alternatives or (ii) preclude
the right of the Participant to receive and the Corporation to issue Common
Shares or other equity securities in lieu of cash; provided, however, that no
form of consideration or manner of payment that would cause Rule 16b-3 to cease
to apply to this Plan shall be permitted.
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(b) Any grant may specify that the amount payable upon the exercise of
an Appreciation Right shall not exceed a maximum specified by the Committee on
the Date of Grant.
(c) Any grant may specify (i) a waiting period or periods before
Appreciation Rights shall become exercisable and (ii) permissible dates or
periods on or during which Appreciation Rights shall be exercisable.
(d) Any grant may specify that an Appreciation Right may be exercised
only in the event of a Change of Control of the Corporation, Corporate
Transaction or other similar transaction or event.
(e) Any grant may provide for the payment to the Participant of dividend
equivalents thereon in cash or Common Shares on a current, deferred or
contingent basis.
(f) Each grant shall be evidenced by an agreement, which shall be
executed on behalf of the Corporation by any officer thereof and delivered to
and accepted by the Participant and shall describe the subject Appreciation
Rights, identify any related Option Rights, state that the Appreciation Rights
are subject to all of the terms and conditions of this Plan and contain such
other terms and provisions as the Committee may determine consistent with this
Plan.
(g) Regarding Tandem Appreciation Rights only: Each grant shall provide
that a Tandem Appreciation Right may be exercised only (i) at a time when the
related Option Right (or any similar right granted under any other plan of the
Corporation) is also exercisable and the Spread is positive and (ii) by
surrender of the related Option Right (or such other right) for cancellation.
(h) Regarding Free-standing Appreciation Rights only:
(i) Each grant shall specify in respect of each Free-standing
Appreciation Right a Base Price per Common Share, which shall be equal to or
greater than the Market Value per Share on the Date of Grant;
(ii) Successive grants may be made to the same Participant regardless
of whether any Free-standing Appreciation Rights previously granted to the
Participant remain unexercised;
(iii) Each grant shall specify the period or periods of continuous
employment, or continuous engagement of the consulting services, of the
Participant by the Corporation or any Subsidiary that are necessary before the
Free-standing Appreciation Rights or installments thereof shall become
exercisable; and
(iv) No Free-standing Appreciation Right granted under this Plan may
be exercised more than 10 years from the Date of Grant.
6. RESTRICTED SHARES. The Committee also may authorize grants or sales to
Participants of Restricted Shares upon such terms and conditions as the
Committee may determine in accordance with the following provisions:
(a) Each grant or sale shall constitute an immediate transfer of the
ownership of Common Shares to the Participant in consideration of the
performance of services, entitling such Participant to dividend, voting and
other ownership rights, subject to the substantial risk of forfeiture and
restrictions on transfer hereinafter referred to.
(b) Each grant or sale may be made without additional consideration from
the Participant or in consideration of a payment by the Participant that may be
less than, equal to or greater than the Market Value per Share on the Date of
Grant.
(c) Each grant or sale shall provide that the Restricted Shares covered
thereby shall be subject to a "substantial risk of forfeiture" within the
meaning of Section 83 of the Code for a period to be determined by the Committee
on the Date of Grant.
(d) Each grant or sale shall provide that, during the period for which
substantial risk of forfeiture is to continue, the transferability of the
Restricted Shares shall be prohibited or restricted in the manner and to the
extent prescribed by the Committee on the Date of Grant. Such restrictions may
include without limitation rights of repurchase or first refusal in the
Corporation or provisions subjecting the Restricted Shares to a continuing
substantial risk of forfeiture in the hands of any transferee.
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(e) Any grant or sale may require that any or all dividends or other
distributions paid on the Restricted Shares during the period of such
restrictions be automatically sequestered and reinvested on an immediate or
deferred basis in additional Common Shares, which may be subject to the same
restrictions as the underlying award or such other restrictions as the Committee
may determine.
(f) Successive grants or sales may be made to the same Participant
regardless of whether any Restricted Shares previously granted or sold to a
Participant remain restricted.
(g) Each grant or sale shall be evidenced by an agreement, which shall
be executed on behalf of the Corporation by any officer thereof and delivered to
and accepted by the Participant and shall contain such terms and provisions as
the Committee may determine consistent with this Plan. Unless otherwise directed
by the Committee, all certificates representing Restricted Shares, together with
a stock power that shall be endorsed in blank by the Participant with respect to
the Restricted Shares, shall be held in custody by the Corporation until all
restrictions thereon lapse.
7. PERFORMANCE SHARES AND PERFORMANCE UNITS. The Committee also may
authorize grants of Performance Shares and Performance Units, which shall become
payable to the Participant upon the achievement of specified Management
Objectives, upon such terms and conditions as the Committee may determine in
accordance with the following provisions:
(a) Each grant shall specify the number of Performance Shares or
Performance Units to which it pertains, which may be subject to adjustment to
reflect changes in compensation or other factors.
(b) The Performance Period with respect to each Performance Share or
Performance Unit shall be determined by the Committee on the Date of Grant.
(c) Each grant shall specify the Management Objectives that are to be
achieved by the Participant, which may be described in terms of Corporation-wide
objectives or objectives that are related to the performance of the individual
Participant or the Subsidiary, division, department or function within the
Corporation or Subsidiary in which the Participant is employed or with respect
to which the Participant provides consulting services.
(d) Each grant shall specify in respect of the specified Management
Objectives a minimum acceptable level of achievement below which no payment will
be made and shall set forth a formula for determining the amount of any payment
to be made if performance is at or above the minimum acceptable level but falls
short of full achievement of the specified Management Objectives.
(e) Each grant shall specify the time and manner of payment of
Performance Shares or Performance Units that shall have been earned, and any
grant may specify that any such amount may be paid by the Corporation in cash,
Common Shares or any combination thereof and may either grant to the Participant
or reserve to the Committee the right to elect among those alternatives;
provided, however, that no form of consideration or manner of payment that would
cause Rule 16b-3 to cease to apply to this Plan shall be permitted.
(f) Any grant of Performance Shares may specify that the amount payable
with respect thereto may not exceed a maximum specified by the Committee on the
Date of Grant. Any grant of Performance Units may specify that the amount
payable, or the number of Common Shares issued, with respect thereto may not
exceed maximums specified by the Committee on the Date of Grant.
(g) On or after the Date of Grant of Performance Shares, the Committee
may provide for the payment to the Participant of dividend equivalents thereon
in cash or additional Common Shares on a current, deferred or contingent basis.
(h) The Committee may adjust Management Objectives and the related
minimum acceptable level of achievement if, in the sole judgment of the
Committee, events or transactions have occurred after the Date of Grant that are
unrelated to the performance of the Participant and result in distortion of the
Management Objectives or the related minimum acceptable level of achievement.
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(i) Successive grants may be made to the same Participant regardless of
whether any Performance Shares or Performance Units granted to any Participant
have vested.
(j) Each grant shall be evidenced by an agreement, which shall be
executed on behalf of the Corporation by any officer thereof and delivered to
and accepted by the Participant and shall contain such terms and provisions as
the Committee may determine consistent with this Plan.
8. CORPORATE TRANSACTION OR CHANGE OF CONTROL. In order to preserve a
Participant's rights under an award granted pursuant to this Plan in the event
of a Change of Control of or Corporate Transaction with respect to the
Corporation, the Committee in its discretion may, at the time an award is made
or at any time thereafter, take one or more of the following actions: (a)
provide for the acceleration of any time period or vesting relating to the
exercise or realization of the award, (b) provide for the purchase of the award
upon the Participant's request for an amount of cash or the property that could
have been received upon the exercise or realization of the award had the award
been currently exercisable or payable, (c) adjust the terms of the award in a
manner determined by the Committee to reflect the Change of Control or Corporate
Transaction, (d) cause the award to be assumed, or new rights substituted
therefor, by another entity, or (e) make such other provision as the Committee
may consider equitable and in the best interests of the Corporation.
9. TRANSFERABILITY. Any grant made under this Plan may provide that all
or any part of the Common Shares that are to be issued or transferred by the
Corporation upon the exercise of Option Rights or Appreciation Rights or in
payment of Performance Shares or Performance Units, or are no longer subject to
the substantial risk of forfeiture and restrictions on transfer referred to in
Section 6 of this Plan, shall be subject to further restrictions upon transfer.
10. ADJUSTMENTS. The Committee may make or provide for such adjustments
in the number of Common Shares covered by outstanding Option Rights,
Appreciation Rights, and Performance Shares granted hereunder, the Option Prices
per Common Share or Base Prices per Common Share applicable to any such Option
Rights and Appreciation Rights, and the kind of shares (including shares of
another issuer) covered thereby, as the Committee may in good faith determine to
be equitably required in order to prevent dilution or expansion of the rights of
Participants that otherwise would result from (a) any stock dividend, stock
split, combination of shares, recapitalization or other change in the capital
structure of the Corporation or (b) any Corporate Transaction, merger,
consolidation, spin-off, split-off, split-up, reorganization, partial or
complete liquidation or other distribution of assets, issuance of warrants or
other rights to purchase securities or any other corporate transaction or event
having an effect similar to any of the foregoing. The Committee may also make or
provide for such adjustments in the maximum number of Common Shares specified in
Section 3(a) of this Plan, the maximum number of Appreciation Rights specified
in Section 3(b) of this Plan and the maximum number of Common Shares specified
in Section 4(a) of this Plan as the Committee may in good faith determine to be
appropriate in order to reflect any transaction or event described in this
Section 10.
11. FRACTIONAL SHARES. The Corporation shall not be required to issue any
fractional Common Shares pursuant to this Plan. The Committee may provide for
the elimination of fractions or for the settlement thereof in cash.
12. WITHHOLDING TAXES. To the extent that the Corporation is required to
withhold federal, state, local or foreign taxes in connection with any payment
made or benefit realized by a Participant or other person under this Plan, and
the amounts available to the Corporation for the withholding are insufficient,
it shall be a condition to the receipt of any such payment or the realization of
any such benefit that the Participant or such other person make arrangements
satisfactory to the Corporation for payment of the balance of any taxes required
to be withheld. At the discretion of the Committee, any such arrangements may
without limitation include relinquishment of a portion of any such payment or
benefit or the surrender of outstanding Common Shares. The Corporation and any
Participant or such other person may also make similar arrangements with respect
to the payment of any taxes with respect to which withholding is not required.
13. CERTAIN TERMINATIONS OF EMPLOYMENT OR CONSULTING SERVICES, HARDSHIP
AND APPROVED LEAVES OF ABSENCE. Notwithstanding any other provision of this
Plan to the contrary, in the event of termination of employment or consulting
services by reason of death, disability, normal retirement, early retirement
with the
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consent of the Corporation, termination of employment or consulting services to
enter public or military service with the consent of the Corporation or leave of
absence approved by the Corporation, or in the event of hardship or other
special circumstances, of a Participant who holds an Option Right or
Appreciation Right that is not immediately and fully exercisable, any Restricted
Shares as to which the substantial risk of forfeiture or the prohibition or
restriction on transfer has not lapsed, any Performance Shares or Performance
Units that have not been fully earned, or any Common Shares that are subject to
any transfer restriction pursuant to Section 9 of this Plan, the Committee may
take any action that it deems to be equitable under the circumstances or in the
best interests of the Corporation, including without limitation waiving or
modifying any limitation or requirement with respect to any award under this
Plan.
14. ADMINISTRATION OF THE PLAN.
(a) This Plan shall be administered by the Board or by the Compensation
Committee of the Board, which shall be composed of not less than two members of
the Board, each of whom shall be a "non-employee director" within the meaning of
Rule 16b-3. For purposes of grants and awards pursuant to, and administration
of, this Plan, the terms "Committee" and "Board" are used interchangeably.
(b) The interpretation and construction by the Committee of any
provision of this Plan or any agreement, notification or document evidencing the
grant of Option Rights, Appreciation Rights, Restricted Shares, Performance
Shares or Performance Units, and any determination by the Committee pursuant to
any provision of this Plan or any such agreement, notification or document,
shall be final and conclusive. No member of the Committee shall be liable for
any such action taken or determination made in good faith.
(c) The Committee may delegate to an officer of the Corporation the
authority to make decisions pursuant to this Plan provided that no such
delegation may be made that would cause any award or other transaction under the
Plan to cease to be exempt from Section 16(b) of the 1934 Act. The Committee may
authorize any one or more of its members or any officer of the Company to
execute and deliver documents on behalf of the Committee.
15. LOANS OR INSTALLMENT PAYMENTS; BONUSES.
(a) The Committee may, in its discretion, assist any Participant in the
exercise of one or more awards under the Plan, including the satisfaction of any
federal, state, local and foreign income and employment tax obligations arising
therefrom, by (i) authorizing the extension of a loan from the Corporation to
such Participant; or (ii) permitting the Participant to pay the exercise price
or purchase price for the purchased shares in installments over a period of
years; or (iii) granting a cash bonus to the Participant to enable the
Participant to pay federal, state, local and foreign income and employment tax
obligations arising from an award. Any loan or installment method of payment
(including the interest rate and terms of repayment) shall be upon such terms as
the Committee specifies in the applicable option or issuance agreement or
otherwise deems appropriate under the circumstances. Loans or installment
payments may be authorized with or without security or collateral. However, the
maximum credit available to the Participant may not exceed the exercise or
purchase price of the acquired shares (less the par value of such shares) plus
any federal, state and local income and employment tax liability incurred by the
Participant in connection with the acquisition of such shares. The amount of any
bonus shall be determined by the Committee in its sole discretion under the
circumstances.
(b) The Committee may, in its absolute discretion, determine that one or
more loans extended under this financial assistance program shall be subject to
forgiveness by the Corporation in whole or in part upon such terms and
conditions as the Committee may deem appropriate; provided, however, that the
Committee shall not forgive that portion of any loan owed to cover the par value
of the Common Shares.
16. AMENDMENTS AND OTHER MATTERS.
(a) This Plan may be amended from time to time by the Committee
consistent with the requirements of Rule 16b-3 and the Code.
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(b) The Committee may condition the grant of any award or combination of
awards authorized under this Plan on the surrender or deferral by the
Participant of his or her right to receive a cash bonus or other compensation
otherwise payable by the Corporation or a Subsidiary to the Participant.
(c) This Plan shall not confer upon any Participant any right with
respect to continued employment or other service with the Corporation or any
Subsidiary and shall not interfere in any way with any right that the
Corporation or any Subsidiary would otherwise have to terminate any
Participant's employment or other service at any time. Nothing contained in the
Plan shall prevent the Corporation or any Subsidiary from adopting other or
additional compensation arrangements for its employees.
(d) To the extent that any provision of this Plan would prevent any
Option Right that was intended to qualify as a Tax-qualified Option from so
qualifying, any such provision shall be null and void with respect to any such
Option Right; provided, however, that any such provision shall remain in effect
with respect to other Option Rights, and there shall be no further effect on any
provision of this Plan.
(e) The provisions of the Plan relating to the grant, vesting and
exercise of awards hereunder shall be governed by the laws of the State of
Arizona without resort to that State's conflict-of-laws rules, as such laws are
applied to contracts entered into and performed in such State. The forum for
resolving controversies respecting the Plan shall be in Maricopa County,
Arizona.
(f) The provisions of the Plan shall inure to the benefit of, and be
binding upon, the Corporation and its successors or assigns, and the
Participants, their legal representatives, their heirs or legatees and their
permitted assignees.
(g) With respect to persons subject to Section 16 of the 1934 Act,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the 1934 Act. To the extent any
provisions of the Plan or action by the Committee fails to so comply, it shall
be deemed null and void, to the extent permitted by law and deemed advisable by
the Committee.
17. EFFECTIVE DATE AND TERM OF PLAN.
(a) This Plan shall become effective as of , 1998 (the
"Effective Date"). Awards may be made under the Plan from and after the
Effective Date. However, no grants or awards under the Plan shall become
exercisable, and no Common Shares issued under the Plan shall vest, unless and
until the Plan is approved by the stockholders of the Corporation. Should such
stockholder approval not be obtained, then grants and awards made under this
Plan shall terminate and cease to remain outstanding, and no further grants or
awards shall be made under the Plan.
(b) The Plan shall terminate upon the earlier of (i) the tenth
anniversary of the Effective Date or (ii) the date on which all awards available
for issuance in the last year of the Plan shall have been issued or cancelled.
Upon termination of the Plan, no further awards may be granted, but all grants
outstanding on such date shall thereafter continue to have force and effect in
accordance with the provisions of the agreements evidencing such grants.
18. USE OF PROCEEDS. Any cash proceeds received by the Corporation from
the sale of Common Shares under the Plan shall be used for general corporate
purposes.
19. REGULATORY APPROVALS.
(a) The implementation of the Plan, the granting of any awards under the
Plan and the issuance of any Common Shares shall be subject to the Corporation's
procurement of all approvals and permits required by regulatory authorities
having jurisdiction over the Plan, the awards granted under it and the Common
Shares issued pursuant to it.
(b) No Common Shares or other assets shall be issued or delivered under
this Plan unless and until there shall have been compliance with all applicable
requirements of federal and state securities laws, including the filing and
effectiveness of a Form S-8 registration statement for the Common Shares
issuable under the Plan, and all applicable listing requirements of any
securities exchange on which the Common Shares are then listed for trading.
H-10
<PAGE> 191
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Giant has purchased insurance on behalf of its directors and officers
against certain liabilities that may be asserted against such persons in
connection with any actual or alleged Wrongful Act (as defined in the policy) in
their capacities as directors and officers of Giant, including certain
liabilities under the federal and state securities laws, except to the extent
that Giant has indemnified the directors and officers.
The following contains summaries of certain circumstances in which
indemnification is provided pursuant to Giant's existing certificate of
incorporation and bylaws. Such summaries are qualified in their entirety by
reference to such certificate of incorporation and bylaws.
As permitted by the Delaware General Corporation law (the "DGCL"), Giant's
restated certificate of incorporation provides that a director of Giant shall
not be liable to Giant or its stockholders for monetary damages for breach of
fiduciary duty as a director, including grossly negligent business judgments
made in good faith, except for liability (i) for breach of the duty of loyalty
to Giant or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL (governing distributions to stockholders), or (iv) for
any transaction for which a director derives an improper personal benefit. In
addition, Section 145 of the DGCL and Giant's bylaws, under certain
circumstances, provide for the indemnification of Giant's officers, directors,
employees, and agents against liabilities which they may incur in such
capacities.
In general, any officer, director, employee or agent may be indemnified
against expenses including attorneys fees, fines, settlements or judgments which
were actually and reasonably incurred in connection with a legal proceeding,
other than one brought by or on behalf of Giant, to which he was a party as a
result of such relationship, if he acted in good faith, and in the manner he
believed to be in Giant's best interest and not unlawful. If the action is
brought by or on behalf of Giant, the person to be indemnified must have acted
in good faith in a manner he believed to have been in Giant's best interest and
generally must not have been adjudged liable to Giant.
No person seeking indemnification may be denied indemnification unless the
Board of Directors or the stockholders of the Company determine in good faith,
or independent legal counsel for the Company opines in writing, that the
standards for indemnification have not been met. A successful defense is deemed
conclusive evidence of a person's right to be indemnified against expenses.
Giant may advance funds to pay the expenses of any person involved in such
action provided that Giant receives an undertaking that the person will repay
the advanced funds unless it is ultimately determined that he is not entitled to
indemnification.
Indemnification may also be granted pursuant to provisions of bylaws which
may be adopted in the future, pursuant to the terms of agreements which may be
entered into in the future or pursuant to a vote of stockholders or
disinterested directors.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of Giant
pursuant to the foregoing provisions, or otherwise, Giant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) FINANCIAL STATEMENT SCHEDULES
Not applicable.
II-1
<PAGE> 192
(b) INDEX TO EXHIBITS
Definitions:
Amendment No. 3 -- Refers to the Amendment No. 3 to Form S-1 Registration
Statement under the Securities Act of 1933 as filed December 12, 1989, File No.
33-31584.
Form S-3 -- Refers to the Form S-3 Registration Statement under the
Securities Act of 1933 as filed September 22, 1993, File No. 33-69252.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
2.1* Agreement and Plan of Merger, dated April 14, 1998, between
Giant and Holly (included as Appendix A to the Joint
Proxy/Prospectus which is part of this Registration
Statement).
2.2* Major Stockholders Agreement, dated April 14, 1998, among
Giant, Holly and certain stockholders thereof (included as
Appendix G to the Joint Proxy Statement/Prospectus which is
part of this Registration Statement).
2.2 Purchase and Sale Agreement, dated August 8, 1995, among
Bloomfield Refining Company and Gary-Williams Energy
Corporation, as Sellers, and Giant Industries Arizona, Inc.
("Giant Arizona"), as Buyer. Incorporated by reference to
Exhibit 2.1 to Giant's Report on Form 8-K for the period
October 4, 1995, File No. 1-10398.
2.3 First Amendment, dated September 29, 1995, to Purchase and
Sale Agreement, dated August 8, 1995, among Bloomfield
Refining Company and Gary-Williams Energy Corporation, as
Sellers, and Giant Industries Arizona, Inc., as Buyer.
Incorporated by reference to Exhibit 2.2 to Giant's Report
on Form 8-K for the period October 4, 1995, File No.
1-10398.
2.4 Second Amendment, dated October 2, 1995, to Purchase and
Sale Agreement, dated August 8, 1995, among Bloomfield
Refining Company and Gary-Williams Energy Corporation, as
Sellers, and Giant Arizona, as Buyer. Incorporated by
reference to Exhibit 2.3 to Giant's Report on Form 8-K for
the period October 4, 1995, File No. 1-10398.
2.5 Definitive Agreement, dated April 18, 1997, by and between
Giant Four Corners, Inc., as "Buyer", and Thriftway
Marketing Corp. and Clayton Investment Company,
collectively, as "Seller". Incorporated by reference to
Exhibit 2.1 to Giant's Report on Form 8-K for the period May
28, 1997, File No. 1-10398.
2.6 Stock Purchase Agreement, dated April 30, 1997, by and among
Phoenix Fuel Co., Inc., (the "Company", J. W. Wilhoit, as
Trustee of the Wilhoit Trust Agreement Dated 12/26/74,
Katherine C. Lahowetz, as Trustee of the Theresa Ann Wilhoit
Grantor Retained Annuity Trust Dated 4/4/97, Katherine C.
Lahowetz, and Katherine C. Lahowetz, as Custodian for the
Benefit of Emily Lahowetz, a minor (collectively, the
"Shareholders") and Giant Industries Arizona, Inc., (the
"Purchaser"). Incorporated by reference to Exhibit 2.1 to
Giant's Report on Form 8-K for the period June 3, 1997, File
No. 1-10398.
3.1 Restated Certificate of Incorporation of Giant. Incorporated
by reference to Exhibit 3.1 to Amendment No. 3.
3.2 Bylaws of Giant, as amended. Incorporated by reference to
Exhibit 3 to Amendment No. 3.
3.3* Restated Certificate of Incorporation of Giant (included as
Appendix B to the Joint Proxy Statement/Prospectus which is
part of this Registration Statement).
3.4* Amended and Restated Bylaws of Giant (included as Appendix C
to the Joint Proxy Statement/ Prospectus which is part of
this Registration Statement).
4.1 Indenture, dated as of November 29, 1993 among Giant, as
Issuer, the Subsidiary Guarantors, as guarantors, and NBD
Bank, National Association, as Trustee, relating to
$100,000,000 of 9 3/4% Senior Subordinated Notes due 2003.
Incorporated by reference to Exhibit 4.1 to Giant's Report
on Form 8-K for the period November 29, 1993, File No.
1-10398.
</TABLE>
II-2
<PAGE> 193
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
4.2 Indenture, dated August 26, 1997, among Giant, as Issuer,
the Subsidiary Guarantors, as guarantors, and The Bank of
New York, as Trustee, relating to $150,000,000 of 9% Senior
Subordinated Notes due 2007. Incorporated by reference to
Exhibit 4.8 to Giant's Registration Statement on Form S-4
under the Securities Act of 1933 as filed October 9, 1997,
File No. 333-37561.
5.1** Opinion of Fennemore Craig regarding the legality of
securities being issued.
8.1** Opinion of W. John Glancy, Esq., as to tax matters.
23.1* Consent of Deloitte & Touche LLP.
23.2* Consent of Ernst & Young LLP.
23.3** Consent of Fennemore Craig, P.C. (contained in Exhibit 5.1).
23.4** Consent of W. John Glancy, Esq. (contained in Exhibit 8.1).
99.1* Consents of persons named to become directors of the
Combined Company who have not signed the Registration
Statement.
99.2* Opinion of Bear Stearns & Co. Inc. (included as Appendix E
to the Joint Proxy Statement/ Prospectus which is a part of
this Registration Statement).
99.3* Opinion of Donaldson, Lufkin & Jenrette Securities
Corporation (included as Appendix F to the Joint Proxy
Statement/Prospectus which is a part of this Registration
Statement).
99.4* Form of Proxy for the Special Meeting of Stockholders of
Giant.
99.5* Form of Proxy for the Special Meeting of Stockholders of
Holly.
</TABLE>
- ---------------
* Filed herewith.
** To be filed by amendment.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3 or Form S-8 or Form F-3,
and the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed with or
furnished to
II-3
<PAGE> 194
the Commission by the registrant pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in
the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(e) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(f) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE> 195
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Scottsdale, State of
Arizona on May 4, 1998.
GIANT INDUSTRIES, INC.
/s/ JAMES E. ACRIDGE
--------------------------------------
James E. Acridge,
Chairman of the Board, President
Chief Executive Officer and Director
POWER OF ATTORNEY
Each of the undersigned hereby appoints James E. Acridge, Fredric L.
Holliger, A. Wayne Davenport, Morgan Gust and each of them, with full power to
act alone, as attorney and agents for the undersigned, with full power of
substitution, for and in the name, place and stead of the undersigned, to sign
and file with the Commission under the Securities Act any and all amendments and
exhibits to this Registration Statement and any and all applications,
instruments and other documents to be filed with the Commission pertaining to
the registration of the securities covered hereby, with full power and authority
to do and perform any and all acts and things whatsoever requisite or desirable.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on May 4, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ JAMES E. ACRIDGE Chairman of the Board, President, Chief
- ----------------------------------------------------- Executive Officer and Director (Principal
James E. Acridge Executive Officer)
/s/ FREDRIC L. HOLLIGER Executive Vice President, Chief Operating
- ----------------------------------------------------- Officer and Director
Fredric L. Holliger
/s/ A. WAYNE DAVENPORT Vice President and Chief Financial Officer
- ----------------------------------------------------- (Principal Financial Officer and Principal
A. Wayne Davenport Accounting Officer)
/s/ ANTHONY J. BERNITSKY Director
- -----------------------------------------------------
Anthony J. Bernitsky
/s/ F. MICHAEL GEDDES Director
- -----------------------------------------------------
F. Michael Geddes
Director
- -----------------------------------------------------
Richard T. Kalen, Jr.
/s/ HARRY S. HOWARD, JR. Director
- -----------------------------------------------------
Harry S. Howard, Jr.
</TABLE>
II-5
<PAGE> 196
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of April 14, 1998,
between Giant and Holly (included as Appendix A to the Joint
Proxy/Prospectus which is part of this Registration
Statement).
3.3 Restated Certificate of Incorporation of Giant (included as
Appendix B to the Joint Proxy Statement/Prospectus which is
part of this Registration Statement).
3.4 Amended and Restated Bylaws of Giant (included as Appendix C
to the Joint Proxy Statement/Prospectus which is part of
this Registration Statement).
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Ernst & Young LLP.
99.1 Consents of persons named to become directors of the
Combined Company who have not signed the Registration
Statement.
99.2 Opinion of Bear Stearns & Co. Inc. (included as Appendix E
to the Joint Proxy Statement/ Prospectus which is a part of
this Registration Statement).
99.3 Opinion of Donaldson, Lufkin & Jenrette Securities
Corporation (included as Appendix F to the Joint Proxy
Statement/Prospectus which is a part of this Registration
Statement).
99.4 Form of Proxy for the Special Meeting of Stockholders of
Giant.
99.5 Form of Proxy for the Special Meeting of Stockholders of
Holly.
</TABLE>
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Giant Industries, Inc. on Form S-4 of our reports dated March 2, 1998,
appearing in the Annual Report on Form 10-K of Giant Industries, Inc. for the
year ended December 31, 1997, and to the reference to us under the heading
"Experts" in the Joint Proxy Statement/Prospectus, which is part of this
Registration Statement.
DELOITTE & TOUCHE LLP
/s/ DELOITTE & TOUCHE LLP
- --------------------------------------
Phoenix, Arizona
May 1, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Joint Proxy Statement/Prospectus
of Giant Industries, Inc. for the registration of 11,050,000 shares of its
common stock and to the incorporation by reference therein of our report dated
September 23, 1997, with respect to the consolidated financial statements of
Holly Corporation included in its Annual Report (Form 10-K) for the year ended
July 31, 1997, filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
/s/ ERNST & YOUNG LLP
May 1, 1998
Dallas, Texas
<PAGE> 1
EXHIBIT 99.1
May 4, 1998
Giant Industries, Inc.
23733 North Scottsdale Road
Scottsdale, Arizona 85255
Re: Form S-4 Registration Statement of Giant Industries, Inc.
Ladies and Gentlemen:
Each of the undersigned hereby consents to the use in the Form S-4
Registration Statement (the "Registration Statement") of Giant Industries, Inc.
of his name as a director of the Combined Company following the Merger (each as
defined in the Registration Statement).
Very truly yours,
/s/ LAMAR NORSWORTHY
--------------------------------------
Lamar Norsworthy
/s/ ROBERT G. MCKENZIE
--------------------------------------
Robert G. McKenzie
/s/ JACK P. REID
--------------------------------------
Jack P. Reid
/s/ A. J. LOSEE
--------------------------------------
A. J. Losee
/s/ W. JOHN GLANCY
--------------------------------------
W. John Glancy
<PAGE> 1
Exhibit 99.4
PROXY
GIANT INDUSTRIES, INC.
23773 NORTH SCOTTSDALE ROAD, SCOTTSDALE AZ 85255
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned appoints James E. Acridge, Fredric L. Holliger, A. Wayne
Davenport and Morgan Gust, and each of them, as proxies, each with the power of
substitution, and authorizes them to represent and vote, as designated on the
reverse side hereof, all shares of Common Stock of Giant Industries, Inc. held
by the undersigned on May 21, 1998, at the Special Meeting of Stockholders to
be held on , 1998, and at any adjournment or postponement of the
meeting. In their discretion, the proxies are authorized to vote such shares
upon such other business as may properly come before the Special Meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE LISTED PROPOSALS.
Please mark boxes X in blue or black ink.
MERGER BETWEEN GIANT INDUSTRIES, INC. ("GIANT") AND HOLLY CORPORATION ("HOLLY"):
The Board of Directors unanimously recommends a vote FOR each of the proposals
listed below. You may vote on each proposal individually, or you may vote on
all proposals as a group as described below. More detailed information
concerning each of the proposals is provided in the Joint Proxy
Statement/Prospectus of Giant and Holly, dated , 1998.
1. Approval of Proposals 2, 3, 4, and 5 below relating to the merger (the
"Merger") of Holly with and into Giant (a vote "for" or "against" or an
"abstain" on this Proposal 1 is a vote "for" or "against" or an "abstain" on
each of the Proposals 2, 3, 4, and 5 below).
/ / FOR / / AGAINST / / ABSTAIN
IF YOU MARKED ANY BOX ON PROPOSAL 1 ABOVE
DO NOT MARK ANY BOX ON PROPOSALS 2, 3, 4 OR 5 BELOW.
If you marked any box on Proposal 1 above and also mark any box on Proposals
2, 3, 4 or 5 below, your vote on Proposal 2, 3, 4 or 5 below will, to the
extent inconsistent with your vote on Proposal 1, take precedence over your
vote on Proposal 1.
2. Approval of the Merger, the Merger Agreement and the transactions
contemplated thereby.
/ / FOR / / AGAINST / / ABSTAIN
3. Approval of the proposal to amend and restate Giant's certificate of
incorporation in its entirety.
/ / FOR / / AGAINST / / ABSTAIN
4. Approval of the proposal to amend and restate Giant's bylaws in their
entirety.
/ / FOR / / AGAINST / / ABSTAIN
5. Approval of the proposal to issue authorized but unissued Common Stock of
Giant in accordance with the terms of the Merger Agreement.
/ / FOR / / AGAINST / / ABSTAIN
GIANT 1998 STOCK INCENTIVE PLAN:
The Board of Directors unanimously recommends a vote FOR the proposal listed
below. More detailed information concerning the proposal is provided in the
Joint Proxy Statement/Prospectus of Giant and Holly, dated , 1998.
6. Approval of the proposal to adopt the Giant 1998 Stock Incentive Plan.
/ / FOR / / AGAINST / / ABSTAIN
<PAGE> 1
Exhibit 99.5
HOLLY CORPORATION
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS ______________, 1998
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
P Lamar Norsworthy, Gerald L. Regard and Jack P. Reid, or any of them or
their substitutes, are hereby appointed proxies to represent and to vote
R the stock of Holly Corporation standing in the name(s) of the undersigned
at Special Meeting of Stockholders to be held __________________ on
O _____________, 1998 and at all adjournments thereof.
X TO VOTE IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF
DIRECTORS MARK THE BOX LABELED "FOR" ADOPTION OF THE MERGER, THE MERGER
Y AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, DATE AND SIGN ON THE
REVERSE SIDE.
-----------
SEE REVERSE
SIDE
-----------
