def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ
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Definitive Proxy Statement |
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Soliciting Material Pursuant to §240.14a-12 |
Holly Corporation
(Name of Registrant as Specified In Its Charter)
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HOLLY
CORPORATION
100 Crescent Court
Suite 1600
Dallas, Texas
75201-6915
March 25,
2010
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of
Stockholders of Holly Corporation (the Company) to
be held on Wednesday, May 5, 2010, at 10:00 a.m.,
local time, at The Crescent Club, 200 Crescent Court,
17th Floor,
Dallas, Texas 75201. Please find enclosed a notice to
stockholders, a Proxy Statement describing the business to be
transacted at the meeting, a form of proxy for use in voting at
the meeting and an Annual Report for Holly Corporation.
At the Annual Meeting, you will be asked (i) to elect seven
(7) directors to the Board of Directors of the Company,
(ii) to ratify the recommendation of the Companys
Audit Committee, and endorsed by the Board of Directors, of the
selection of Ernst & Young, LLP, an independent
registered public accounting firm, as the Companys auditor
for the year 2010, and (iii) to act upon such other
business as may properly come before the Annual Meeting or any
adjournment or postponement thereof.
We hope that you will be able to attend the Annual Meeting, and
we urge you to read the enclosed Proxy Statement before you
vote. Whether or not you plan to attend, please complete, sign,
date and return the enclosed proxy card or grant your proxy by
internet or telephone, as described on the enclosed proxy card,
as promptly as possible. It is important that your shares be
represented at the meeting.
Very truly yours,
MATTHEW P. CLIFTON
Chairman of the Board and Chief Executive Officer
YOUR VOTE IS IMPORTANT
All stockholders are cordially invited to attend the Annual
Meeting in person. We urge you to access the proxy materials on
the internet or to request an electronic or a paper copy of them
as promptly as possible. Whether you plan to be present at the
Annual Meeting or not, you are requested to submit your proxy
electronically, via telephone or, if you received a paper copy,
by completing, signing, and returning the proxy card to ensure
that your shares will be represented. Returning your proxy card
or granting your proxy by the internet or by telephone will help
the Company assure that a quorum will be present at the meeting
and avoid the additional expense of duplicate proxy
solicitations. Any stockholder attending the meeting may vote in
person even if he or she has returned the proxy card or has
granted his or her proxy electronically or by telephone. When
providing your proxy, please indicate whether you plan to attend
the Annual Meeting in person. You may revoke your proxy before
the Annual Meeting as described in the Proxy Statement under the
heading Solicitation and Revocability of Proxies.
The prompt return of proxies will save the expense involved in
further communications.
TABLE OF CONTENTS
HOLLY
CORPORATION
100 Crescent Court
Suite 1600
Dallas, Texas
75201-6915
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
March 25,
2010
PLEASE TAKE NOTICE that the 2010 Annual Meeting of Stockholders
(the Annual Meeting) of Holly Corporation (the
Company) will be held on Wednesday, May 5,
2010, at 10:00 a.m. local time at The Crescent Club, 200
Crescent Court,
17th Floor,
Dallas, Texas, to consider and vote on the following matters:
1. Election of seven (7) directors to serve on the
Board of Directors (the Board) of the Company until
the Companys next annual meeting;
2. Ratification of the recommendation of the Companys
Audit Committee, endorsed by the Board, of the selection of
Ernst & Young, LLP, an independent registered public
accounting firm, as the Companys auditor for the year
2010; and
3. Such other business as may properly come before the
meeting, or any postponement or adjournment thereof.
The Companys Annual Report for the year ended
December 31, 2009 is being distributed with this Proxy
Statement.
The close of business on March 12, 2010 (the Record
Date) has been fixed as the record date for the
determination of stockholders entitled to receive notice of and
the right to vote at the Annual Meeting and any adjournment or
postponement thereof. Only holders of record of the
Companys common stock (the Common Stock) at
the close of business on the Record Date are entitled to notice
of and the right to vote at the Annual Meeting. A list of
stockholders entitled to vote at the Annual Meeting will be
available for inspection by any stockholder for any purpose
germane to the Annual Meeting during ordinary business hours for
the ten days preceding the Annual Meeting at the Companys
offices at the address on this notice and will also be available
at the Annual Meeting.
Important Notice Regarding the Availability of Proxy
Materials for the Stockholder Meeting to Be Held on May 5,
2010:
As permitted by rules adopted by the Securities and Exchange
Commission, we are making this Proxy Statement, the proxy card
and the Companys 2009 annual report (the proxy
materials) available to stockholders electronically via
the internet. We believe that this process should expedite the
receipt of proxy materials by our stockholders and lower the
costs of our Annual Meeting. Instead of a paper copy of the
proxy materials, most of our stockholders are receiving a
notice, mailed on March 25, 2010, which includes
instructions on how to access the proxy materials via the
internet, how to vote your shares and how to request a paper
copy of the proxy materials.
By Order of the Board of Directors:
DENISE C. MCWATTERS
Secretary
PROXY
STATEMENT
OF
HOLLY CORPORATION
100
Crescent Court
Suite 1600
Dallas, Texas
75201-6915
SOLICITATION
AND REVOCABILITY OF PROXIES
The Board requests your proxy for use at the Annual Meeting of
Stockholders to be held on Wednesday, May 5, 2010, and at
any adjournment or postponement thereof. By signing and
returning the proxy card, or granting your proxy via the
internet or via telephone, you authorize the persons named on
the proxy card or in your telephonically or electronically
submitted proxy (collectively, the Proxy), to
represent you and to vote your shares at the Annual Meeting.
The Company made the proxy materials available to you over the
internet or, upon your request, has delivered paper versions of
these materials to you by mail, in connection with the
solicitation of proxies by the Board for the 2010 Annual Meeting
of Stockholders. Stockholders may request to receive proxy
materials in paper form by mail or electronically by
e-mail
during the voting period. If you choose to receive future proxy
materials by
e-mail, you
will receive an
e-mail next
year with instructions containing a link to the proxy materials
and a link to the proxy voting site. Your election to receive
proxy materials by
e-mail will
remain in effect until you terminate it. Choosing to receive
your future proxy materials by
e-mail will
save the Company the cost of printing and mailing documents to
you.
On or about March 25, 2010, the Company mailed a Notice of
Internet Availability of Proxy Materials to stockholders
containing instructions on how to access the Proxy Statement and
vote online. Each registered stockholder (you own shares in your
own name on the books of our transfer agent) received one copy
of each such Notice per account even if at the same address,
unless the Company has received contrary instructions from one
or more of such stockholders, while most banks and brokers
delivered only one copy of such Notice to consenting street-name
stockholders (you own shares beneficially in the name of a bank,
broker or other holder of record on the books of our transfer
agent) who share the same address. This procedure reduces our
printing and distribution costs. Those who wish to receive
separate copies may do so by contacting their bank, broker or
other holder of record. Similarly, most street-name stockholders
who received multiple copies of the Notice at a single address
may request that only a single copy be sent to them in the
future by contacting their bank, broker or other nominee. In the
alternative, most street-name stockholders may give instructions
to receive separate copies or discontinue multiple mailings by
contacting the third party that mails annual meeting materials
for most banks and brokers by writing to Householding
Department, Broadridge, 51 Mercedes Way, Edgewood, New York
11717, or telephoning
(800) 542-1061.
Your instructions must include the name of your bank or broker
and your account number.
Officers, directors and employees of the Company may solicit
proxies personally or by telephone, electronic mail, telegram or
other forms of wire, wireless or facsimile communication. The
Company may also request banking institutions, brokerage firms,
custodians, nominees and fiduciaries forward solicitation
material to the beneficial owners of the Companys Common
Stock that those companies hold of record. The costs of the
solicitation, including reimbursement of such forwarding
expenses, will be paid by the Company.
If you attend the Annual Meeting, you may vote in person. If you
are not present at the Annual Meeting, your shares can be voted
only if you have returned a properly signed proxy card, are
represented by another proxy, or have granted your proxy by the
internet or by telephone. You may revoke your proxy, whether
granted by the internet or by telephone or by returning the
enclosed proxy card, at any time before it is exercised at the
Annual Meeting by (a) signing and submitting a later-dated
proxy to the Secretary of the Company, (b) delivering
written notice of revocation of the proxy to the Secretary of
the Company, or (c) voting in person at the Annual Meeting.
In addition, if you granted your proxy by the internet or by
telephone, you may revoke such grant by resubmitting your proxy
by the internet or by telephone at any time prior to
11:59 p.m., Eastern Daylight Time, on May 4, 2010. In
the absence of any such revocation, shares represented by the
persons named in the Proxies will be voted at the Annual Meeting.
VOTING
AND QUORUM
The only outstanding voting securities of the Company are shares
of Common Stock. As of the close of business on the Record Date,
there were 53,260,409 shares of Common Stock outstanding
and entitled to be voted at the Annual Meeting.
Each outstanding share of Common Stock is entitled to one vote.
The presence, in person or by proxy, of a majority of the shares
of Common Stock issued and outstanding and entitled to vote as
of the Record Date shall constitute a quorum at the Annual
Meeting. The holders of a majority of the Common Stock entitled
to vote who are present or represented by proxy at the Annual
Meeting have the power to adjourn the Annual Meeting from time
to time without notice, other than an announcement at the Annual
Meeting of the time and place of the holding of the adjourned
meeting, until a quorum is present. At any such adjourned
meeting at which a quorum is present, any business may be
transacted that could have been transacted at the Annual Meeting
had a quorum originally been present. Proxies solicited by this
Proxy Statement may be used to vote in favor of any motion to
adjourn the Annual Meeting. The persons named in the Proxy
intend to vote in favor of any motion to adjourn the Annual
Meeting to a subsequent day if, prior to the Annual Meeting,
such persons have not received sufficient proxies to approve the
proposals described in this Proxy Statement. If such a motion is
approved but sufficient proxies are not received by the time set
for the resumption of the Annual Meeting, this process will be
repeated until sufficient proxies to vote in favor of the
proposals described in this Proxy Statement have been received
or it appears that sufficient proxies will not be received.
If you hold your shares in street name, you will
receive instructions from your brokers or other nominees
describing how to vote your shares. If you do not instruct your
brokers or nominees how to vote your shares, they may vote your
shares as they decide as to each matter for which they have
discretionary authority under the rules of the New York Stock
Exchange (NYSE). For Proposal 2
(Ratification of the Appointment of Ernst & Young
LLP) to be voted on at the Annual Meeting, brokers and other
nominees will have discretionary authority in the absence of
timely instructions from you.
There are also non-discretionary matters for which brokers and
other nominees do not have discretionary authority to vote
unless they receive timely instructions from you. For
Proposal 1 (Election of Directors) to be voted on at
the Annual Meeting, you must provide timely instructions on how
the broker or other nominee should vote your shares. When a
broker or other nominee does not have discretion to vote on a
particular matter, you have not given timely instructions on how
the broker or other nominee should vote your shares and the
broker or other nominee indicates it does not have authority to
vote such shares on its proxy, a broker non-vote
results. Any broker non-vote will not be included in the number
of shares voting with respect to non-discretionary matters.
Abstentions and broker non-votes will count in determining if a
quorum is present at the Annual Meeting. Abstentions occur when
stockholders are present at the Annual Meeting but fail to vote
or voluntarily withhold their vote for any of the matters upon
which the stockholders are voting.
PROPOSAL ONE
ELECTION OF DIRECTORS
The Board has designated Buford P. Berry, Matthew P. Clifton,
Leldon E. Echols, Robert G. McKenzie, Jack P. Reid, Paul T.
Stoffel and Tommy A. Valenta as nominees for election as
directors of the Company at the Annual Meeting (each, a
Nominee). All of the Nominees currently serve as
directors of the Company. If elected, each Nominee will serve
until the expiration of his term at the Annual Meeting of
Stockholders in 2011 and until his successor is elected and
qualified or until his earlier death, resignation or removal
from office. For information about each Nominee, see
Directors.
Each of the Nominees has consented to be named as a Nominee. The
Board has no reason to believe that any of the Nominees will be
unable or unwilling to serve if elected. If a Nominee becomes
unable or unwilling to serve prior to the election, your proxy
will be voted for the election of a substitute nominee
recommended by the current Board, or the number of the
Companys directors will be reduced.
2
Required
Vote and Recommendation
The election of directors requires the affirmative vote of a
plurality of the shares of Common Stock present or represented
by proxy and entitled to vote at the Annual Meeting.
Accordingly, under Delaware law and the Companys Restated
Certificate of Incorporation, as amended, and Bylaws,
abstentions and broker non-votes will not have any effect on the
election of a particular director. Unless otherwise instructed
in the Proxy or unless authority to vote is withheld, the Proxy
will be voted for the election of each of the Nominees.
The Board recommends a vote FOR the election of
each of the Nominees.
PROPOSAL TWO
AUDITORS
In accordance with its charter, the Audit Committee has selected
the firm of Ernst & Young LLP, an independent
registered public accounting firm, to be the Companys
auditor for the year 2010 and, with the endorsement of the
Board, recommends to the stockholders that they ratify that
appointment. Ernst & Young LLP served in this capacity
in 2009. Its representative will be present at the Annual
Meeting and will have an opportunity to make a statement and
will be available to respond to appropriate questions.
The Audit Committee reviews and approves in advance the audit
scope, the types of non-audit services, if any, and the
estimated fees for each category for the coming year. For each
category of proposed services, Ernst & Young LLP is
required to confirm that the provision of such services does not
impair its independence. Before selecting Ernst &
Young LLP, the Audit Committee carefully considered the
firms qualifications as an independent registered public
accounting firm for the Company. This included a review of its
performance in prior years, as well as its reputation for
integrity and competence in the fields of accounting and
auditing. The Audit Committee has expressed its satisfaction
with Ernst & Young LLP in all of these respects. The
Audit Committees review included inquiry concerning any
litigation involving Ernst & Young LLP and any
proceedings by the Securities and Exchange Commission (the
SEC) against the firm. In this respect, the Audit
Committee has concluded that the ability of Ernst &
Young LLP to perform the services for the Company is in no way
adversely affected by any such litigation or other proceedings.
The Board and the Audit Committee recommend a vote
FOR the ratification of the Boards selection
of Ernst & Young LLP as the Companys auditor for
2010.
3
OWNERSHIP
OF SECURITIES
The following table and the notes thereto set forth certain
information regarding the beneficial ownership of Common Stock
as of the Record Date by (i) each current director of the
Company, (ii) the named executive officers of the Company,
(iii) all executive officers and directors of the Company
as a group and (iv) each other person known to the Company
to own beneficially more than five percent of Common Stock
outstanding on the Record Date. Unless otherwise indicated, the
address for each stockholder listed in the following table is
c/o Holly
Corporation, 100 Crescent Court, Suite 1600, Dallas, Texas
75201-6915.
The Company has determined beneficial ownership in accordance
with regulations of the SEC. The number of shares beneficially
owned by a person includes shares of Common Stock that are
subject to stock options that are either currently exercisable
or exercisable within 60 days after the Record Date. These
shares are also deemed outstanding for the purpose of computing
the percentage of outstanding shares owned by such person. These
shares are not deemed outstanding, however, for the purpose of
computing the percentage ownership of any other person. Unless
otherwise indicated, to the Companys knowledge, each
stockholder has sole voting and dispositive power with respect
to the securities beneficially owned by that stockholder. On the
Record Date, there were 53,260,409 shares of Common Stock
outstanding.
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Number of Shares
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Percent of
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and Nature of
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Common Stock
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Name and Address of Beneficial Owner
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Beneficial Ownership
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Outstanding
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TCTC Holdings, LLC
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7,212,485
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(1)
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13.54
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%
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2626 Cole Avenue, Suite 705
Dallas, Texas 75204
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Allianz Global Investors Management Partners LLC
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3,007,200
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(2)
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5.65
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%
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680 Newport Center Drive, Suite 250
Newport Beach, California 92660
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Lazard Asset Management LLC
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2,698,597
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(3)
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5.07
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%
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30 Rockefeller Plaza,
New York, New York 10112
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Jack P. Reid
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597,495
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(4)(5)(6)
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1.12
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Matthew P. Clifton
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382,579
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(4)(5)
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*
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Paul T. Stoffel
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263,288
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(4)
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*
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David L. Lamp
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94,878
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(4)(5)
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*
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Marcus R. Hickerson
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69,836
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(4)(7)
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*
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Bruce R. Shaw
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35,950
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(4)
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Thomas K. Matthews, II
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23,578
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(4)
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*
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Robert G. McKenzie
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20,528
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(4)(8)
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*
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George J. Damiris
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20,117
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(4)
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*
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Buford Berry
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14,388
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(4)
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*
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Denise C. McWatters
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5,838
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(4)
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*
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Leldon E. Echols
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3,697
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(4)
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*
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Tommy A. Valenta
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0
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All directors and executive officers as a group (13 persons)
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1,532,172
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(4)(5)(9)
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2.88
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%
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TCTC Holdings, LLC has sole voting power and sole dispositive
power with respect to 7,212,485 shares and no shared voting
power or shared dispositive power for any shares. |
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Allianz Global Investors Management Partners LLC
(AGIMP) has filed with the SEC a Schedule 13G,
dated December 31, 2009. Based on the Schedule 13G, AGIMP,
along with its wholly-owned subsidiaries Nicholas-Applegate
Capital Management LLC (NACM), Oppenheimer Capital
LLC (OpCap) and NFJ Investment Group LLC
(NFJ), share beneficial ownership with respect to
3,007,200 shares. The Schedule 13G also |
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reported that (i) NFJ has sole voting power and sole
dispositive power with respect to 3,007,200 shares and no
shared voting power or shared dispositive power for any shares,
and (ii) AGIMP, NACM and OpCap have no sole voting power,
sole dispositive power, shared voting power or shared
dispositive power for any shares. |
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Lazard Asset Management LLC has filed with the SEC a
Schedule 13G, dated January 30, 2010. Based on the
Schedule 13G, Lazard Asset Management LLC has sole voting
power with respect to 2,451,492 shares and sole dispositive
power with respect to 2,698,597 shares and no shared voting
power or shared dispositive power for any shares. |
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The number of shares beneficially owned includes unvested shares
of restricted stock (including restricted stock granted in March
2010 which (as of the Record Date) such individuals cannot
dispose of until the restrictions on these shares lapse, as
follows: 76,853 restricted shares for Mr. Clifton, 42,103
restricted shares for Mr. Lamp, 10,869 restricted shares
for Mr. Shaw, 12,070 restricted shares for
Mr. Damiris, 4,459 restricted shares for
Ms. McWatters, and 146,354 restricted shares for all
executive officers as a group. The number does not include
unvested performance share units. The number of shares
beneficially owned by Messrs. Berry, Echols, Hickerson,
Matthews, McKenzie, Reid and Stoffel includes a total of 53,905
restricted share units granted to each of these directors as
compensation between 2007 and 2009 (see description of
restricted stock units under Compensation of
Directors). This number does not include the 8,631
restricted stock units vesting May 14, 2010. |
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The number of shares beneficially owned includes shares in the
Thrift Plan for Employees of Holly Corporation, its Affiliates
and Subsidiaries. |
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(6) |
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This number includes 515,176 shares held in a family
limited partnership of which Mr. Reid is the general
partner. Mr. Reid disclaims beneficial ownership except to
the extent of his partnership interest in the family limited
partnership. |
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(7) |
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Mr. Hickerson disclaims beneficial ownership as to 16,000
of these shares, which are held in trusts for the benefit of two
of his children, of which he is the trustee. |
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(8) |
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Mr. McKenzie disclaims beneficial ownership as to 500 of
these shares, which are held as custodian for his granddaughter
under the Uniform Transfer to Minors Act. |
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(9) |
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Includes the 515,176 shares as to which Mr. Reid
disclaims beneficial ownership, the 16,000 shares as to
which Mr. Hickerson disclaims beneficial ownership, and the
500 shares as to which Mr. McKenzie disclaims
beneficial ownership. |
DIRECTORS
The following tables set forth certain information regarding the
directors of the Company in 2009 and Nominees for election in
2010. Each directors term of office expires at the Annual
Meeting.
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Name of Nominee
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Age
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Current Title
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Buford P. Berry
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74
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Director
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Matthew P. Clifton
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58
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Chief Executive Officer, Chairman of the Board
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Leldon E. Echols
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54
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Director
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*Marcus R. Hickerson
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83
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Director
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*Thomas K. Matthews, II
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84
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Director
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Robert G. McKenzie
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72
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Director
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Jack P. Reid
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73
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Director
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Paul T. Stoffel
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76
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Director
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Tommy A. Valenta (Director from February 2010 to present)
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61
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Director
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* |
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Not standing for reelection in 2010. |
The Board believes that it is necessary for each of the
Companys directors to possess many qualities and skills.
When searching for new candidates, the Nominating/Corporate
Governance Committee (the Nominating
5
Committee) considers the evolving needs of the Board and
searches for candidates that fill any current or anticipated
future needs. The Board also believes that all directors must
possess a considerable amount of business management, business
leadership and educational experience. When considering director
candidates, the Nominating Committee first considers a
candidates management experience and then considers issues
of judgment, background, stature, conflicts of interest,
integrity, ethics and commitment to the goal of maximizing
stockholder value. The Nominating Committee also focuses on
issues of diversity, such as diversity of education,
professional experience and differences in viewpoints and
skills. The Nominating Committee does not have a formal policy
with respect to diversity; however, the Board and the Nominating
Committee believe that it is essential that the Board members
represent diverse viewpoints. In considering candidates for the
Board, the Nominating Committee considers the entirety of each
candidates credentials in the context of these standards.
With respect to the nomination of continuing directors for
re-election, the individuals contributions to the Board
are also considered.
All our directors bring to the Board executive leadership
experience derived from their service in the many areas detailed
below for each director. The process undertaken by the
Nominating Committee in recommending qualified director
candidates is described below under Director Nomination
Procedures. Certain individual qualifications and skills
of our directors that contribute to the Boards
effectiveness as a whole are described in the following
paragraphs.
The names of the current directors and Nominees, along with
their present positions, their principal occupations and
directorships held with other public corporations during the
past five years, and the year first elected as a Director, are
set forth below.
Buford P. Berry, a director since May 2004, has
served as a director, an advisory committee member (which
performs audit committee functions) and compensation committee
member of Dorchester Minerals Management GP LLC, the general
partner of Dorchester Minerals LP (NASDAQ: DMLP), since February
2003. He is currently of counsel to Thompson & Knight,
L.L.P., a Texas based law firm. Mr. Berry has been an
attorney with Thompson & Knight L.L.P., serving in
various capacities since 1963, including as Managing Partner
from 1986 to 1998. While in active practice with
Thompson & Knight L.L.P., Mr. Berrys
practice focused on federal income taxation with an emphasis on
oil and gas taxation and tax litigation. Mr. Berry received
his B.B.A. in Accounting from The University of Texas at Austin,
and received his L.L.B. from The University of Texas School of
Law. The Board selected Mr. Berry to be a director because
he brings to the Board an additional perspective in dealing with
complex legal, regulatory and risk matters affecting the Company
due to his service as managing partner at a large law firm in
Texas. His service on the advisory committee for Dorchester
Minerals Management GP LLC and audit committees of other public
companies provides additional valuable experience in managing
risks.
Matthew P. Clifton, a director since 1995, has
been with the Company for over twenty-five years and was elected
as the Companys Chairman of the Board and Chief Executive
Officer in April 2007. Mr. Clifton served as Chief
Executive Officer from 2006 until April 2007. Mr. Clifton
served as President of the Company from 1995 to 2006, and since
March 2004, has served as Chairman of the Board and Chief
Executive Officer of Holly Logistic Services, L.L.C.
(HLS), the general partner of HEP Logistics
Holdings, L.P., which is the general partner of Holly Energy
Partners, L.P. (HEP), a Delaware limited
partnership. The Company currently owns a 34% interest
(including the general partner interest) in Holly Energy
Partners, L.P. Mr. Clifton received his B.S. in Accounting
and Financing from St. Josephs University.
Mr. Clifton serves on the Board because he is the
Companys Chief Executive Officer and has been with the
Company for over 25 years, having started in 1980. The
Board selected Mr. Clifton to be a director because he has
extensive knowledge of operations of the Company, the refining
industry and macro-economic conditions, as well as valuable
industry relationships throughout the country. Mr. Clifton
brings a unique and valuable perspective as well as an
understanding of the Companys history, culture, vision and
strategy to the Board.
Leldon E. Echols, a director since January 2009,
is a private investor. From 2000 to 2006, Mr. Echols served
as Executive Vice President and Chief Financial Officer of
Centex Corporation. Before joining Centex Corporation,
Mr. Echols was a managing partner in Arthur Andersen
LLPs audit and business advisory practice from 1997 to
2000, and he held various other positions with the firm between
1978 and 1997. Mr. Echols received a bachelor of science
degree in accounting from Arkansas State University and is a
certified public accountant. He is currently a member of the
boards of directors of three public companies: Trinity
Industries, Inc. (NYSE: TRN), where he serves
6
on the audit and human resources (compensation) committees, and
Crosstex Energy, L.P. (NASDAQ: XTEX) and a related company,
Crosstex Energy, Inc. (NASDAQ: XTXI), where he serves on the
audit committees. Mr. Echols also serves on the boards of
directors of Roofing Supply Group Holdings, Inc. and Colemont
Corporation, two private companies. From 2005 to 2007,
Mr. Echols was a member of the board of directors of TXU
Corp., where he served on the audit and compensation committees.
Mr. Echols serves the community by serving as a board
member of the Circle Ten Council of Boy Scouts of America, the
Baylor Healthcare Foundation, and the Dallas Chapter of the
American Red Cross. The Board selected Mr. Echols to be a
director because he brings to the board executive management and
directorship experience in public companies, together with
extensive financial and management experience. Mr. Echols
also brings to the Board financial reporting expertise and a
level of financial sophistication that qualifies him as a
financial expert. Mr. Echols prior and current
service on the audit committees of other publicly traded
companies gives him a range of experiences and skills that
compliment his current committee assignments with the Company.
For purposes of the Companys succession planning, his
audit committee services also provide him with the necessary
skills and qualifications to serve as the chairman of the Audit
Committee in the future.
Marcus R. Hickerson, a director since 1960, was a
consultant to Centex Development Company from 1987 to 1999 and
has been President and Director of Waxahachie Community
Development Corporation since 1999. He has served as Director of
the Ellis County Water Control & Improvement District
since 1982. Mr. Hickerson received his B.S. in Business
Administration from North Texas State University. As one of our
longest serving independent outside directors,
Mr. Hickerson brings historical, long-term perspective and
leadership to the Board, together with knowledge of the
Companys operations and growth strategy.
Mr. Hickerson is retiring from the Board in May, 2010, so
his qualifications for the 2010 director election are not
presented.
Thomas K. Matthews, II, a director since
1978, was President of RepublicBank Houston from 1976 to 1985.
Mr. Matthews also served as Executive Director of
Republicbank Corporation from 1983 to 1985, and Vice Chairman of
First City National Bank of Houston from 1985 to 1989.
Mr. Matthews has been a financial consultant since 1989.
Mr. Matthews educational background includes
attendance at the Harvard Business School and the SMU Graduate
School of Banking. As one of our longest serving independent
outside directors, Mr. Matthews brings extensive education
and background in business and the financial industry.
Mr. Matthews is retiring from the Board in May, 2010, so
his qualifications for the 2010 director election are not
presented.
Robert G. McKenzie, a director since 1992, has
been a financial consultant since 2000. From 1985 to 1990,
Mr. McKenzie served as Executive Vice President of Republic
Bank Dallas, and he held various other positions with the
company between 1965 and 1985. From 1990 to 1999, he was
Executive Vice President and Chief Operating Officer of Brown
Brothers Harriman Trust Company of Texas. From 1999 to June
2009, Mr. McKenzie was a member of the board of directors
of Brown Brothers Harriman Trust Company of Texas. In
December 2009, he became a member of the board of directors of
Turtle Creek Trust Company. Mr. McKenzie has also
served as Chairman of the Trust Counsel committee of the
American Bankers Association (and member of its taxation
committee), Chairman of the Texas Bankers Association
Legislative Committee (and member of its Board of Directors),
and Secretary/Treasurer of the Dallas Bar Association Probate
and Trust Law Section. Mr. McKenzie was named
Outstanding Trust Banker by the Texas Bankers Association
in 1986. The Board selected Mr. McKenzie as a director
because he brings to the Board financial reporting expertise and
a level of financial sophistication that qualify him as a
financial expert in his role as the Chair of the Audit
Committee. Mr. McKenzies long history with the
Company, combined with his leadership skills and operating
experience, makes him particularly well suited to be our
Presiding Director. Due to his service on several of the
Companys committees, Mr. McKenzie possesses a broad
range of expertise and knowledge of all committee functions,
together with an invaluable overview of the Companys
businesses. Mr. McKenzie received his B.A. and M.A. in
History and his J.D. from the University of Texas.
Jack P. Reid, a director since 1977, was a
consultant to the Company from August 1999 through July 2002.
Until August 1999, Mr. Reid was Executive Vice President,
Refining, of the Company, where his duties included a wide range
of operational areas that give him a unique perspective and
operational expertise that is valuable and needed by the Board.
Mr. Reid serves on the Companys Public Policy
Committee, where his operational expertise is valuable in
reviewing, formulating and modifying the Companys policies
and procedures on matters of public and governmental concern
that significantly affect the Company. Mr. Reid received
his B.S. in Chemical
7
Engineering from Kansas University. The Board selected
Mr. Reid to be a director because, as one of our longest
serving independent outside directors, Mr. Reid brings
historical, long-term perspective and leadership to the Board,
together with extensive knowledge of the Companys refining
operations and growth strategy.
Paul T. Stoffel, a director since 2001, has been
Chairman of Triple S Capital Corp. and of Paul Stoffel
Investments since 1985, engaged in public and private equity
investments. Mr. Stoffel also serves the community as a
member of the board of directors of the Dallas Center for
Performing Arts, the Dallas Museum of Art, and the Southwestern
Medical Foundation. Mr. Stoffel received his MBA from
Harvard Business School. The Board selected Mr. Stoffel to
be a director because he brings to the Board knowledge of the
investment community and a unique shareholder perspective.
Tommy A. Valenta, a director since February 2010,
was the President, Chief Executive Officer and Director of
Chaparral Steel Company from July 2005 until September 2007,
when he retired. Prior to joining Chaparral Steel Company,
Mr. Valenta was employed at Texas Industries, Inc. for
37 years, where he was the Executive Vice-President and
Chief Operating Officer Steel from 1998 to 2005, and
held various other positions with the company between 1970 and
1988. Throughout Mr. Valentas career he has served as
a director of various industry associations including the
National Ready Mixed Concrete Association, American Institute of
Steel Construction, International Iron and Steel Institute and
the Steel Manufacturers Association. Mr. Valenta currently
serves on the boards of directors of: American Excelsior Company
(where he serves on the audit and compensation committees), the
Circle Ten Council of the Boy Scouts of America, and Cashiers
Community Fund. Mr. Valenta also serves as President of the
Corporation for the Episcopal Diocese of Dallas and is a member
of the Salesmanship Club of Dallas. Mr. Valenta received
his MBA from Southern Methodist University. The Board selected
Mr. Valenta as a director because he brings to the Board
executive and general management experience and teambuilding
leadership in a public company.
None of our directors reported any litigation for the period
from 2000 to 2010 that is required to be reported in this Proxy
Statement.
Compensation
of Directors
For the year ended December 31, 2009, directors who are not
employees of the Company or its subsidiaries were compensated as
follows:
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Annual Retainer (payable in 4 quarterly installments)
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$40,000
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Each Attended Board Meeting or Committee Meeting
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$2,000
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Telephonic Special Board or Committee Meetings (under 30 Minutes)
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$0
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Telephonic Special Board or Committee Meetings (over 30 minutes)
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$1,000
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(1)
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Annual Grant of Restricted Stock Units under the Long-Term
Incentive Compensation
Plan(2)
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$120,000
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Special Retainer for Chairman of Audit Committee
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$15,000
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Special Retainer for Chairman of Compensation, Nominating or
Public Policy Committee
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$10,000
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Employees of the Company who also serve as directors are not
entitled to any additional compensation for their services on
the Board.
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(1) |
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$2,000 may be paid for telephonic meetings of longer duration as
determined by the chairman of the meeting. As of the date of
this Proxy Statement, no telephonic meetings have resulted in
the payment of a $2,000 meeting fee. |
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(2) |
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Restricted stock unit grants are based upon the market closing
price of our Common Stock on the day of the grant. With respect
to the restricted stock units, the restrictions generally lapse
in 25% increments every three months and fully vest one year
following the date of grant provided the Director has continued
serving on the Board until the end of each three-month period.
Restricted stock units are awarded on the date of our Annual
Meeting of Stockholders. Accelerated vesting will occur upon a
Change in Control, the Directors total and permanent
disability or death, or the Directors retirement.
Settlement of the vested restricted stock units in |
8
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shares of our Common Stock will only occur upon the earlier of:
(a) the month following the Directors cessation of
service as a member of the Board for any reason, (b) within
thirty (30) days following the death of the Director,
(c) within thirty (30) days following a Change in
Control, or (d) on the third anniversary of the date of the
grant. Until such time as the awards are settled, the Director
shall be entitled to receive dividend equivalent rights, but not
voting rights, with regard to the Common Stock underlying the
awards. |
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For purposes of director restricted stock units, a Change in
Control occurs after: (i) any Person or Group acquires
stock of the Company that, together with stock held by such
Person or Group, constitutes more than 50% of the total fair
market value or total voting power of the stock of the Company
(applies only when there is a transfer of stock of the Company
(or issuance of stock of the Company) and stock in the Company
remains outstanding after the transaction); (ii) any Person
or Group acquires (or has acquired during the
12-month
period ending on the date of the most recent acquisition by such
Person or Group) ownership of stock of the Company possessing
35% or more of the total voting power of the stock of the
Company; (iii) a majority of members of the Companys
Board is replaced during any
12-month
period by directors whose appointment or election is not
endorsed by a majority of the members of the Companys
Board prior to the date of the appointment or election; or
(iv) any Person or Group acquires (or has acquired during
the 12-month
period ending on the date of the most recent acquisition by such
Person or Group) assets from the Company that have a total gross
fair market value equal to or more than 40% of the total gross
fair market value of all of the assets of the Company
immediately prior to such acquisition or acquisitions. However,
under subsection (i), if any Person or Group is considered to
own more than 50% of the total fair market value or total voting
power of the stock of the Company, the acquisition of additional
stock by the same Person or Group is not considered to cause a
Change in Control, but an increase in the percentage of stock
owned by any Person or Group as a result of a transaction in
which the Company acquires its stock in exchange for property
will be treated as an acquisition of stock for purposes of
subsection (i). Under subsection (ii), if any Person or Group is
considered to own 35% of the total voting power of the stock of
the Company, the acquisition of additional stock by the same
Person or Group is not considered to cause a Change in Control.
No Change in Control occurs occur under subsection (iv) as
a result of a transfer of assets to: (a) a shareholder of
the Company (immediately before the asset transfer) in exchange
for or with respect to its stock; (b) an entity, 50% or
more of the total value or voting power of which is owned,
directly or indirectly, by the Company; (c) a Person or
Group that owns, directly or indirectly, 50% or more of the
total value or voting power of all the outstanding stock of the
Company; or (d) an entity, at least 50% of the total value
or voting power of which is owned, directly or indirectly, by a
person described in clause (c) above. |
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For these purposes, the term Person shall mean an
individual, corporation, association, joint stock company,
business trust or other similar organization, partnership,
limited liability company, joint venture, trust, unincorporated
organization or government or agency, instrumentality or
political subdivision thereof. The term Group shall
have the meaning set forth in Treasury Regulation Section
1.409A-3(i)(5)(v)(B), or any successor thereto in effect at the
time a determination of whether a Change in Control has occurred
is being made. In addition, the provisions of
Section 318(a) of the Internal Revenue Code of 1986, as
amended (the Tax Code), regarding the constructive
ownership of stock will apply to determine stock ownership;
provided, that stock underlying unvested options (including
options exercisable for stock that is not substantially vested)
are not treated as owned by the individual who holds the option. |
9
During the year ended December 31, 2009, compensation was
provided to the Companys outside directors as set forth
below:
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Fees Earned
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or Paid
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Stock
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All Other
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Director(1)
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in
Cash(2)
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Awards(3)
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Compensation
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Total
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Buford P. Berry
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$103,000
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$119,996
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$0
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$222,996
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Leldon E. Echols
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$77,000
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$119,996
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$0
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$196,996
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Marcus R. Hickerson
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$73,000
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$119,996
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$0
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$192,996
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Thomas K. Matthews, II
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$103,000
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$119,996
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$0
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$222,996
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Robert G. McKenzie
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$108,000
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$119,996
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$0
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$227,996
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Jack P. Reid
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$63,000
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$119,996
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$0
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$182,996
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Paul T. Stoffel
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$84,000
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$119,996
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$0
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$203,996
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(1) |
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Tommy A. Valenta became a director in February 2010 and
therefore is not included in this table. |
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(2) |
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Represents fees earned or paid in cash for services as a
director during 2009, including annual retainer fees, meeting
fees, and committee chairmanship fees. |
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(3) |
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Reflects the aggregate grant date fair value of all stock awards
computed in accordance with Financial Accounting Standards Board
Accounting Standards Codification Topic 718 (formerly Statement
of Financial Accounting Standards No. 123R) (FASB ASC
718). Each of the 2009 directors received an award of
4,930 restricted stock units under the Long-Term Incentive
Compensation Plan on May 14, 2009 with a grant date fair
value of $119,996 (computed using the closing price of $24.34 on
the date of grant). Of the restricted stock units granted to
each director, 25% vested on August 14, 2009, 25% vested on
November 14, 2009, 25% vested on February 14, 2010,
and the remaining 25% will vest on May 14, 2010. The fair
value of each restricted stock unit grant is amortized over the
vesting period. As of December 31, 2009, the aggregate
number of stock awards outstanding for each director was as
follows: Messrs. Berry, Hickerson, Matthews, McKenzie, Reid
and Stoffel each held 9,601 restricted stock units, and
Mr. Echols held 4,930 restricted stock units. |
Guidelines
for Stock Ownership for Outside Directors
Pursuant to the stock ownership guidelines approved by the Board
in 2009, each director is expected to own at least
3,000 shares of our Common Stock. To the extent a director
does not meet these guidelines he will be expected to retain 25%
of the shares of Common Stock received upon settlement of his
restricted stock unit award, until such time as the stock
ownership requirement is met. Currently all of our directors are
in compliance with the stock ownership guidelines.
MEETINGS
AND COMMITTEES OF DIRECTORS
The Board is comprised of a majority of independent directors as
defined in Section 303A.02 of the New York Stock Exchange
(NYSE) listing standards. The directors determined
by the Board to be independent under this standard are Buford P.
Berry, Leldon E. Echols, Marcus R. Hickerson, Thomas K.
Matthews, II, Robert G. McKenzie, Jack P. Reid, Paul T.
Stoffel and Tommy A. Valenta.
In determining that Mr. Hickerson is an independent
director, the Board considered the fact that
Mr. Hickersons
56-year-old
son, M. Neale Hickerson, is employed as a Vice President of the
Company and certain subsidiaries, including Holly Logistic
Services, L.L.C. From January 2004 to February 2005, M. Neale
Hickersons title as an officer of the Company was Vice
President, Treasury and Investor Relations, and his current
title is Vice President, Investor Relations. The Boards
determination that the employment of M. Neale Hickerson would
not interfere with Marcus R. Hickersons ability to act
independently from the management of the Company was based
particularly on the fact that Marcus R. Hickerson satisfies all
of the independence requirements of Section 303A.02(b) of
the NYSEs listing standards. Additionally, the Board based
its determination on the role played in the Company by M. Neale
Hickerson and the fact that he is not an executive officer of
the Company.
In determining that Mr. Reid is an independent director,
the Board considered the fact that Mr. Reids
49-year-old
son, Willie D. Reid, is employed as a Manager of Applications
Infrastructure Support of the Company. From
10
May 1986 to present, Willie D. Reid has maintained various IT
positions, and his current title is Manager, Applications
Infrastructure Support of the Company. The Boards
determination that the employment of Willie D. Reid would not
interfere with Jack P. Reids ability to act independently
from the management of the Company was based particularly on the
fact that Jack P. Reid satisfies all of the independence
requirements of Section 303A.02(b) of the NYSEs
listing standards. Additionally, the Board based its
determination on the role played in the Company by Willie D.
Reid and the fact that he is not an executive officer of the
Company.
The Board held thirteen meetings during 2009. The Board has five
principal standing committees: the Executive Committee, the
Audit Committee, the Compensation Committee (the
Committee), the Nominating Committee, and the Public
Policy Committee. Each of the committees is appointed by the
Board. During 2009, each director attended at least 75% of the
total number of meetings of the Board. During 2009, each
director attended at least 75% of the meetings of each of the
committees of the Board on which that director served. The
Company does not have a policy requiring the Chairman of the
Board or other directors to attend the Companys Annual
Meeting. All of the Companys directors who were elected at
the 2009 Annual Meeting of Stockholders attended that meeting.
Committee memberships as of the date of this Proxy Statement are
set forth below:
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Nominating/
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Corporate
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Name
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Executive
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Audit
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Compensation
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Governance
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Public Policy
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Buford P. Berry
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X
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C
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X
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Matthew P. Clifton
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C
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Leldon E. Echols
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X
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X
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X
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Marcus R. Hickerson
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C
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Thomas K. Matthews, II
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X
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X
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C
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Robert G. McKenzie
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X
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C
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X
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X
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Jack P. Reid
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X
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X
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Paul T. Stoffel
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X
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X
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X
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Tommy A. Valenta
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A C indicates that the director serves as the chair
of the committee.
An X indicates membership on the committee.
The Executive Committee of the Board has the authority of the
Board, to the extent permitted by law and subject to any
limitations that may be specified from time to time by the
Board, for the management of the business and affairs of the
Company between meetings of the Board. During 2009, the
committee met in person or by telephone one time, and also took
action by unanimous written consent one time.
The Audit Committee of the Board is responsible for monitoring
the Companys internal accounting controls, selecting and
engaging independent auditors, subject to ratification by the
stockholders, reviewing quarterly and annual reports filed with
the SEC, and reviewing certain activities of the independent
auditors and their reports and conclusions. In addition, the
committee selects persons to conduct internal audits of certain
Company transactions and related financial controls and reviews
the reports developed from such internal audits. During 2009,
the committee met in person or by telephone thirteen times and
also took action by unanimous written consent one time. The
Board has adopted a written charter for the Audit Committee,
which is available on the Companys website at
www.hollycorp.com and is available in print to any stockholder
without charge upon written request to the Vice President,
Investor Relations at: Holly Corporation, 100 Crescent Court,
Suite 1600, Dallas, TX,
75201-6915.
All members of the Audit Committee have been determined to be
independent as independence is defined in Section 303A.02
of the NYSEs listing standards and of
Rule 10A-3
under the Securities Exchange Act of 1934 (the Exchange
Act). In accordance with Section 303A.07 of the
NYSEs listing standards, the Board has determined that
Mr. Echols simultaneous service as a member of the
audit committees of Trinity Industries, Inc., Crosstex Energy,
L.P. and
11
Crosstex Energy, Inc. will not impair Mr. Echols
ability to efficiently serve on the Companys Audit
Committee because of the amount of time he has to devote to this
responsibility and the expertise that he has in this area. The
Board has also determined that Mr. McKenzie satisfies the
requirements of the SEC regulations for an audit committee
financial expert and has designated Mr. McKenzie as
the Companys audit committee financial expert.
The Compensation Committee of the Board is responsible for the
oversight of compensation programs and plans for the executive
officers of the Company. The Committee determines the level of
compensation paid to the Companys Chief Executive Officer
and all other executive officers. The Committee is also
responsible for establishing and overseeing the compensation
program for non-employee directors who serve on the Board. The
Committee may delegate to its chairperson, any one of its
members or any subcommittee it may form, the responsibility and
authority for any particular matter, as it deems appropriate
from time to time under the circumstances. However,
subcommittees do not have the authority to engage independent
legal counsel and other experts and advisors unless expressly
granted such authority by the Committee. Each subcommittee is
required to keep minutes and report them to the Committee. As
described above, all members of the Committee have been
determined to be independent as independence is defined in
Section 303A.02 of the NYSEs listing standards.
During 2009, the Committee met ten times. The Board has adopted
a written charter for the Committee, which is available on the
Companys website at www.hollycorp.com and is available in
print to any stockholder without charge upon written request to
the Vice President, Investor Relations at: Holly Corporation,
100 Crescent Court, Suite 1600, Dallas, TX,
75201-6915.
The Nominating Committee of the Board is responsible for
advising the Board concerning the appropriate composition of the
Board and its committees (including identifying individuals
qualified to serve on the Board and its committees), the
selection of director nominees for each annual meeting of the
Companys stockholders, the selection of executive officers
and officers of the Company, and appropriate corporate
governance practices. As described above, all members of the
Nominating Committee have been determined to be independent as
independence is defined in Section 303A.02 of the
NYSEs listing standards. During 2009, the committee met
five times. The Board has adopted a written charter for the
Nominating Committee, which is available on the Companys
website at www.hollycorp.com and is available in print to any
stockholder without charge upon written request to the Vice
President, Investor Relations at: Holly Corporation, 100
Crescent Court, Suite 1600, Dallas,
TX, 75201-6915.
The Public Policy Committee of the Board is responsible for
reviewing the Companys policies and procedures on matters
of public and governmental concern that significantly affect the
Company, including but not limited to environmental,
occupational health and safety, and equal employment opportunity
matters. The committee is also responsible for recommending to
management and the Board the formulation or modification of
policies and procedures concerning such matters. During 2009,
the committee met four times. As described above, all members of
the Public Policy Committee have been determined to be
independent as independence is defined in Section 303A.02
of the NYSEs listing standards.
DIRECTOR
NOMINATION PROCEDURES
All of the Companys directors are elected each year by its
stockholders at the annual meeting of stockholders. The Board
has specified the number of directors to be seven (7) as of
May 5, 2010, reflecting the upcoming retirement of
Messrs. Hickerson and Matthews. The Board is responsible
for filling vacancies on the Board at any time during the year,
and for nominating director nominees to stand for election at
the annual meeting of stockholders. The Nominating Committee
reviews all potential director candidates, and recommends
potential director candidates to the full Board. Director
candidates may be identified by current directors of the
Company, employees of the Company or through other sources,
including stockholders as described below under Nomination
of Directors by Stockholders. The Nominating Committee
occasionally utilizes the services of search firms or
consultants to assist in identifying and screening potential
candidates. The Nominating Committee has an extensive diligence
process for reviewing potential candidates, including an
assessment of each candidates independence under
Section 303A.02 of the NYSEs listing standards and
Rule 10A-3
under the Exchange Act, a candidates relevant educational,
business and financial experience, ability to read and
understand financial statements, and other relevant factors, as
described under Selection of Directors
Criteria in the Companys Corporate Governance
Guidelines, which can be found on the Companys website at
www.hollycorp.com. A copy of the
12
Corporate Governance Guidelines is available in print to any
stockholder without charge upon written request to the Vice
President, Investor Relations at: Holly Corporation, 100
Crescent Court, Suite 1600, Dallas, TX,
75201-6915.
The full Board reviews and has final approval authority on all
potential director candidates being recommended to the
stockholders for election.
RECOMMENDATION
OF DIRECTOR CANDIDATES BY STOCKHOLDERS
The Company does not have a formal policy by which its
stockholders may recommend director candidates, but the
Nominating Committee will consider candidates recommended by
stockholders. A stockholder wishing to submit such a
recommendation should send a letter to the Secretary of the
Company at 100 Crescent Court, Suite 1600, Dallas, Texas
75201-6915.
The mailing envelope must contain a clear notation indicating
that the enclosed letter is a Director Nominee
Recommendation. The letter must identify the author as a
stockholder and provide a brief summary of the candidates
qualifications based on the criteria described above under
Director Nomination Procedures and in the
Companys Corporate Governance Guidelines, as well as
contact information for both the candidate and the stockholder.
Candidates recommended by stockholders will be evaluated by the
Nominating Committee in the same manner as other candidates
submitted by directors, employees or obtained through other
sources, although the members of the Nominating Committee may
prefer candidates who are personally known to the existing
directors and whose reputations are highly regarded. In
evaluating proposed candidates, the Nominating Committee will
consider all relevant qualifications as well as the needs of the
Company in terms of compliance with the NYSEs listing
standards and SEC rules. The Companys Bylaws provide
additional procedures and requirements for stockholders wishing
to nominate a director for election as part of the official
business to be conducted at an annual meeting of stockholders,
as described further under Stockholder Proposals.
BOARD
LEADERSHIP STRUCTURE
The Board believes that the Companys Chief Executive
Officer is best situated to serve as Chairman of the Board
because he is the director most familiar with the Companys
business and industry, and most capable of effectively
identifying strategic priorities and leading the discussion and
execution of strategy. Independent directors and management have
different perspectives and roles in strategy development. The
Companys independent directors bring experience, oversight
and expertise from outside the Company and industry, while the
Chief Executive Officer brings Company-specific experience and
expertise. The Board believes that the combined role of Chairman
of the Board and Chief Executive Officer promotes strategy
development and execution, and facilitates information flow
between management and the Board, which are essential to
effective governance of the Company.
One of the key responsibilities of the Board is to develop
strategic direction and hold management accountable for the
execution of strategy once it is developed. The Board believes
the combined role of Chairman of the Board and Chief Executive
Officer, together with a lead independent director (the
Presiding Director) having the duties described
below, is in the best interest of stockholders because it
provides the appropriate balance between strategy development
and independent oversight of management.
PRESIDING
DIRECTOR AND COMMUNICATIONS WITH THE BOARD
Robert G. McKenzie, an independent director who serves as
Chairman of the Audit Committee, was selected by the Board to
serve as the Presiding Director for all meetings of the
non-management directors held in executive session. The
Presiding Director has the responsibility of presiding at all
executive sessions of the Board, consulting with the Chairman of
the Board and Chief Executive Officer on Board and committee
meeting agendas, acting as a liaison between management and the
non-management directors, including maintaining frequent contact
with the Chairman of the Board and Chief Executive and advising
him on the efficiency of the board meetings, and facilitating
teamwork and communication between the non-management directors
and management.
Persons wishing to communicate with the non-management directors
are invited to email the Presiding Director at
presiding.director@hollycorp.com or write to: Robert G.
McKenzie, Presiding Director,
c/o Secretary,
Holly Corporation, 100 Crescent Court, Suite 1600, Dallas,
Texas
75201-6915.
Although the Company has not to date developed formal processes
by which stockholders may otherwise communicate directly with
directors, the
13
Company believes that its process with regard to communicating
with non-management directors, and its informal process under
which any communication sent to the Board in care of the Chief
Executive Officer or Secretary of the Company is forwarded to
the Board for consideration, serves the Boards and the
stockholders needs. There is no screening process, and all
stockholder communications that are received by officers for the
Boards attention are forwarded to the Board.
RISK
MANAGEMENT
The Board has an active role, as a whole and also at the
committee level, in overseeing management of the Companys
risks. The Board regularly reviews information regarding the
Companys credit, liquidity and operations, as well as the
risks associated with each. The Committee is responsible for
overseeing the management of risks relating to the
Companys executive compensation plans and arrangements.
The Audit Committee oversees management of financial risks. The
Nominating Committee manages risks associated with the
independence of the Board and potential conflicts of interest.
The Public Policy Committee oversees management of risks
associated with environmental, health and safety. While each
committee is responsible for evaluating certain risks and
overseeing the management of such risks, the entire Board is
regularly informed through committee reports about such risks.
The Audit Committee and the Board also receive input from the
Companys Risk Management Oversight Committee (the
Risk Committee), made up of management personnel
with a range of different backgrounds, skills and experiences
with regard to the operational, financial and strategic risk
profile of the Company. The Risk Committee monitors the risk
environment for the Company as a whole, and reviews the
activities that mitigate to an achievable and acceptable level
the risks that may adversely affect the Companys ability
to achieve its goals. The Risk Committee also supports the Audit
Committees efforts to monitor and evaluate guidelines and
policies to govern the process by which risk assessment and
management is undertaken.
EXECUTIVE
OFFICERS
The following table sets forth information regarding the
Executive Officers of the Company and certain of its
subsidiaries for 2009:
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Title as of December 31, 2009
|
|
Matthew P. Clifton
|
|
|
58
|
|
|
Chief Executive Officer
|
David L. Lamp
|
|
|
52
|
|
|
President
|
Bruce R. Shaw
|
|
|
42
|
|
|
Senior Vice President and Chief Financial Officer
|
George J. Damiris
|
|
|
50
|
|
|
Senior Vice President, Supply and Marketing
|
Denise C. McWatters
|
|
|
50
|
|
|
Vice President, General Counsel and Secretary
|
David L. Lamp, was appointed President of the
Company in November, 2007. Mr. Lamp joined the Company in
January 2004 as Vice President, Refining Operations and was
elected Executive Vice President, Refining and Marketing in
November 2005. From 2002 to 2004, Mr. Lamp was Vice
President of El Paso Energy Corporation
(El Paso) and General Manager of
El Pasos 250,000 barrels per day Aruba refinery.
Prior to his position with El Paso, Mr. Lamp was
employed by Koch Industries, where he served as in various
positions from 1980 to 2001. In 1998, Mr. Lamp served as
Director of Operations for a large international chemical and
fiber joint venture owned partially by Koch (KOSA).
Mr. Lamp received a Bachelor of Science degree in Chemical
Engineering from Michigan State University.
Bruce R. Shaw, was appointed Senior Vice President
and Chief Financial Officer of the Company on January 7,
2008. Between January 2007 and June 2007, Mr. Shaw was Vice
President, Corporate Development for the Company. Mr. Shaw
briefly left the Company in June 2007 and served as President of
Standard Supply and Distributing Company, Inc. and Bartos
Industries, Ltd., two companies that are affiliated with each
other in the heating, ventilation and air conditioning industry.
Mr. Shaw also served as Vice President, Special Projects
for the Company from September 2007 through December 2007. Prior
to that, Mr. Shaw served the Company in various positions
including Vice President of Crude Purchasing and Corporate
Development from February 2005 to
14
February 2006, Vice President of Corporate Development from
March 2004 to February 2005, Vice President of Marketing and
Corporate Development from November 2003 to March 2004, Vice
President of Corporate Development from October 2001 to November
2003 and Director of Corporate Development from June 1997 to
January 2000. Mr. Shaw also served as Vice President,
Corporate Development for HLS from August 2004 to January 2007
and as a director from April 2007 through April 2008.
Mr. Shaw received his undergraduate degree in Mechanical
Engineering from Texas A&M University and his MBA from
Dartmouth College.
George J. Damiris, was appointed Senior Vice
President, Supply and Marketing of the Company in January 2008.
Mr. Damiris joined the Company in June 2007 as Vice
President, Corporate Development after an
18-year
career with Koch Industries, where he was responsible for
managing various refining, chemical, trading, and financial
businesses most recently with its INVISTA subsidiary as
President of its Intermediates business from January 2006 to May
2007 and Vice President of Corporate Development from January
2004 to December 2005. Prior to INVISTA, he served as Managing
Director Capital Markets responsible for capital
market transactions, Managing Director Ventures
responsible for venture capital investments, Vice
President Refining responsible for the Corpus
Christi refining business, Vice President Chemicals
responsible for the commodity chemical business, Vice
President Supply & Trading responsible for
natural gas, chemicals, and gasoline components, and Vice
President Business Development for Refining. Prior
to Koch, Mr. Damiris was employed by British Petroleum for
8 years in various engineering, operations, and business
development positions. Mr. Damiris received his B.S. in
Chemical Engineering from Case Western Reserve University, and
his MBA from the Weatherhead School of Management at Case
Western Reserve University.
Denise C. McWatters, was appointed Vice President,
General Counsel and Secretary of the Company effective
May 8, 2008. She joined the Company in October 2007 as
Deputy General Counsel with more than 20 years of legal
experience. Ms. McWatters served as the General Counsel of
The Beck Group from 2005 through 2007. From 2002 through 2005,
Ms. McWatters practiced law in the Law Offices of Denise
McWatters. Prior to such practice, Ms. McWatters was a
shareholder in the predecessor firm to Locke Lord
Bissell & Liddell LLP, served as Counsel in the legal
department at Citigroup, N.A. and was a shareholder in the law
firm of Cox Smith Matthews Incorporated. Ms. McWatters
received her B.S. and M.A. in Psychology from Southern Methodist
University, and her J.D. from The University of Texas School of
Law.
The Executive Officers named above were elected by the Board to
serve in such capacities until their respective successors have
been duly elected and qualified, or until their earlier death,
resignation or removal from office. Biographical information on
Mr. Clifton is set forth previously in this Proxy Statement
under Directors.
None of our executive officers reported any litigation for the
period from 2000 to 2010 that is required to be reported in this
Proxy Statement.
CODE OF
BUSINESS CONDUCT AND ETHICS
The Company has adopted a Code of Business Conduct and Ethics
(the Code of Ethics) that applies to all officers,
directors and employees, including the Companys principal
executive officer, principal financial officer, principal
accounting officer and persons performing similar functions. A
copy of the Code of Ethics and a description of all amendments
adopted thereto in the last twelve months are posted on the
Companys website at www.hollycorp.com and a copy of the
Code of Ethics is available in print to any stockholder without
charge upon written request to the Vice President, Investor
Relations at: Holly Corporation, 100 Crescent Court,
Suite 1600, Dallas, TX,
75201-6915.
If ever applicable, the Company intends to satisfy the
disclosure requirement under Item 5.05 of
Form 8-K
regarding an amendment to, or waiver from, a provision of its
Code of Ethics with respect to such officers, directors and
employees by posting such information on the Companys
website.
CORPORATE
GOVERNANCE GUIDELINES
The Company has adopted Corporate Governance Guidelines (the
Governance Guidelines) to promote the functioning of
the Board and its committees and to set forth a common set of
expectations as to how the Board should perform its functions. A
copy of the Governance Guidelines is posted on the
Companys website at
15
www.hollycorp.com and is available in print to any stockholder
without charge upon written request to the Vice President,
Investor Relations at: Holly Corporation, 100 Crescent Court,
Suite 1600, Dallas, TX,
75201-6915.
COMPENSATION
DISCUSSION AND ANALYSIS
This compensation discussion and analysis
(CD&A) provides information about our
compensation objectives and policies for our principal executive
officer, our principal financial officer and our other most
highly compensated executive officers, and is intended to place
in perspective the information contained in the executive
compensation tables that follow this discussion. In this
CD&A, we provide a general description of our compensation
program and specific information about its various components.
Immediately following the CD&A is the Committee Report (the
Committee Report).
Our wholly-owned indirect subsidiary, HLS, is the general
partner of HEP Logistics Holdings, L.P., which is the general
partner of HEP, one of our consolidated subsidiaries in which we
indirectly own a 34% interest, including the 2% general partner
interest. HLS employs its own executive officers, some of whom
are also our officers. The board of directors of HLS, through
its compensation committee, makes compensation decisions with
respect to the executive officers of HLS for the services they
provide as executive officers of HLS. The compensation of the
executive officers of HLS is discussed in the Compensation
Discussion and Analysis contained in HEPs Annual Report on
Form 10-K
for the year ended December 31, 2009. Messrs. Clifton
and Shaw and Ms. McWatters also receive compensation from
HLS in the form of equity incentive plan compensation for the
services these executives perform for HLS; however, the
compensation information regarding these executives included
within this CD&A relates solely to the services these
individuals provide directly to us. Such awards made to
Messrs. Clifton and Shaw are described in HEPs Annual
Report on
Form 10-K
for the year ended December 31, 2009. The equity incentive
compensation awarded to Ms. McWatters by HLS is described
in the tables below.
Throughout this discussion, the following individuals are
referred to as the Named Executive Officers and are
included in the Summary Compensation Table:
|
|
|
|
|
Matthew P. Clifton, Chief Executive Officer and Chairman of the
Board
|
|
|
|
David L. Lamp, President
|
|
|
|
Bruce R. Shaw, Senior Vice President and Chief Financial Officer
|
|
|
|
George J. Damiris, Senior Vice President, Supply and Marketing
|
|
|
|
Denise C. McWatters, Vice President, General Counsel and
Secretary
|
The position of Senior Vice President, Supply and Marketing, has
not historically been an executive officer position; however, as
of March 23, 2009, the Board designated Mr. Damiris as
an executive officer, and we also included Mr. Damiris as
one of our Named Executive Officers for fiscal year 2008.
Objectives
of Compensation Program
Our compensation program is designed to attract and retain
talented and productive executives who are motivated to protect
and enhance our long-term value for the benefit of our
stockholders. Our objective is to be competitive with our
industry and encourage high levels of performance.
The Committee, comprised entirely of independent directors,
administers the compensation program. The Committee reviews and
approves the compensation to be paid to the Named Executive
Officers and reviews the compensation policies and practices for
all employees of the Company to verify that such policies and
practices do not create unreasonable risk for the Company.
The Committee has not adopted any formal policies for allocating
compensation among salaries, bonuses and equity compensation.
The Committee, with the assistance of management, has sought to
designate an appropriate mix of cash and long-term equity
incentive compensation with the goal of providing sufficient
current compensation to retain the Named Executive Officers,
while at the same time providing incentives to the Named
Executive
16
Officers to exert their best efforts to maximize long-term value
for both us and our stockholders. The Committee considers
recommendations by management and many other factors in deciding
on the final compensation factors that are appropriate for both
us and for each Named Executive Officer. The Committee generally
solicits the recommendations of our Chairman of the Board and
Chief Executive Officer (except with respect to his own
compensation) and of other members of management when the
Committee considers its compensation determinations. See
Role of Named Executive Officers in Determining
Compensation below.
In addition to reviewing the recommendations of management and
our Chief Executive Officer, prior to making compensation
decisions for the 2009 year, the Committee also reviewed
the total compensation provided to each of the Named Executive
Officers during the 2008 year. The Committee, with the
assistance of management, annually reviews each of the Named
Executive Officers proposed long-term incentive
compensation to determine whether the executives are being
provided with equity awards that are effective in motivating the
Named Executive Officers to create long-term value for us. The
Committee also takes into consideration the compensation of
similarly situated executives in comparable businesses. These
long-term equity incentives are designed to retain the
executives during the period of time during which their
performance is expected to impact our business and reward them
in accordance with the success of those long-term goals and
policies.
Compensation
Committee Consultant
The Committee has engaged Frederic W. Cook & Co. (the
Compensation Consultant), an outside consulting firm
specializing in executive compensation, to advise the Committee
on matters related to executive and non-employee director
compensation. The Compensation Consultant provides the Committee
with relevant market data, updates on related trends and
developments, advice on program design, and input on
compensation decisions for executive officers and non-employee
directors. The Compensation Consultant is independent, retained
directly by the Committee, and provides no other services
directly to us or to HEP (but did provide executive and director
compensation consulting services directly to the HEP
Compensation Committee).
Overview
of 2009 Executive Compensation Components
After reviewing both the internal evaluations of the Named
Executive Officers and the market data provided by the
Compensation Consultant, the Committee believes that the 2009
compensation for the Named Executive Officers reflects an
appropriate allocation of compensation between salary, bonuses
and equity compensation.
The components of compensation for the Named Executive Officers
in 2009 were:
|
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base salary
|
|
|
|
annual incentive cash bonus compensation
|
|
|
|
long-term incentive equity compensation
|
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retirement and benefit plans
|
|
|
|
Change in Control Agreements
|
Base
Salary
Base salaries for Messrs. Clifton, Lamp and Shaw for 2009
were approved in March 2009 by the Committee based on each
executives position, level of responsibility and
individual performance, our salary range for individuals at each
such executives level, and market practices. The Committee
also reviewed competitive market data relevant to each position
provided by the Compensation Consultant. This market data
analysis is discussed in detail below under the paragraph titled
Review of Market Data. Following a review of these
various factors, the Committee determined that increases in the
base salaries for Messrs. Clifton, Lamp and Shaw were
warranted. Base salaries for Mr. Damiris and
Ms. McWatters for 2009 were approved in January 2009 by
management since they were not designated as Named Executive
Officers at the time their salaries were reviewed and were later
ratified by the Committee.
17
The base salaries for the following Named Executive Officers
were increased over ten percent in 2009 so that their respective
base salaries more closely reflected the median range for their
respective peers and due to the excellent performance provided
by the Named Executive Officers in 2009:
|
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|
|
|
|
|
|
Percentage of
|
Named Executive Officer
|
|
|
Salary Increase
|
Bruce R. Shaw
|
|
|
|
18
|
%
|
|
|
|
|
|
|
George J. Damiris
|
|
|
|
11
|
%
|
|
|
|
|
|
|
Denise C. McWatters
|
|
|
|
14
|
%
|
|
|
|
|
|
|
The base salary increases received by our other Named Executive
Officers for 2009 reflected minor cost of living adjustments.
The salary amounts for each of the 2009 Named Executive Officers
are set forth in the Summary Compensation Table.
Annual
Incentive Cash Bonus Compensation
Payment with respect to any annual cash bonuses to the Named
Executive Officers is contingent upon the satisfaction of
pre-established performance criteria as they apply to each
individual Named Executive Officer. The amounts paid for 2009
are disclosed in the Summary Compensation Table and described in
greater detail in the narrative following the 2009 Grants of
Plan-Based Awards table. Generally, payment with respect to any
2009 cash bonus for Named Executive Officers is contingent upon
the satisfaction of the following criteria:
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A portion of the Named Executive Officers bonus will equal
a pre-established percentage of that executives base
salary, and is based upon the percentage that the Companys
net income for 2009 bears to the Companys net income for
2008. This earned component of the bonus will be subject to a
minimum and maximum adjustment percentage, as individually set
for each Named Executive Officer.
|
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|
A portion of the bonus is equal to a pre-established percentage
of the employees base salary, and is earned based on our
performance for the year compared to that of our peers. The
Committee determined that the following companies were the
appropriate peer group for this performance component for
calendar year 2009: Alon USA Energy, Inc., CVR Energy, Inc.,
Delek U.S. Holdings, Inc., Frontier Oil Corporation,
Sunoco, Inc., Tesoro Corporation, Valero Energy Corp. and
Western Refining Company (the 2009 Incentive Award Peer
Group). The 2009 Incentive Award Peer Group differed from
the peer group of companies that comprised the 2008 peer group
for the annual incentive performance component because it better
reflects the impact of the external economic conditions we are
facing as a company and as an industry as a whole, and are also
companies with which both management and investment analysts
compare our financial results. Our performance was compared to
the performance of the 2009 Incentive Award Peer Group based on
the following factors: earnings per share growth, net profit
margin, return on investment and return on assets. This
component of the bonus is subject to being adjusted to a minimum
amount of 0% and a maximum amount determined based on the
multiple indicated in the section below in the narrative
following the 2009 Grants of Plan-Based Awards table
titled Annual Incentive Cash Bonus Compensation
times the employees pre-established percentage.
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|
The Committee may also require that a portion of each Named
Executive Officers bonus will equal a pre-established
percentage of base salary, based upon the executives
individual performance over the year. This component of the
bonus will also be subject to a minimum and maximum adjustment
percentage, as individually set for each Named Executive
Officer. For 2009, Messrs. Lamp, Shaw and Damiris and
Ms. McWatters were subject to the individual performance
requirement, and each of the executives were evaluated through
an annual performance review completed in February 2010, which
review considered how well each individual performed various
tasks for 2009 and considered and evaluated each
individuals performance for the year.
|
18
See Annual Incentive Cash Bonus Compensation in the
narrative following the 2009 Grants of Plan-Based
Awards table for a discussion of what portion of each
Named Executive Officers bonus for 2009 is comprised of
each component.
The total bonus pool for all of our executives and
non-bargaining unit employees is typically determined by the
Committee after the end of each year or designated performance
period, calculated pursuant to the achievement of the objective
pre-established criteria described above and recommendations
from management regarding possible discretionary adjustments. In
determining the total bonus pool, the Committee reviews our
performance during the previous year and the recommendations of
management. Awards for executives for a given year are paid in
cash in the first quarter of the following year. See the
narrative following the 2009 Grants of Plan-Based
Awards table below for a more detailed description of the
actual bonuses awarded to the Named Executive Officers and
earned in 2009.
Before the end of the first calendar quarter of each year, the
Committee approves both the individual awards to be awarded for
services provided in the previous year, and performance measures
and targets to be used for the upcoming calendar year in
determining the cash bonus amounts to be paid to the Named
Executive Officers. Performance targets may be based on any
factors as the Committee may determine.
In addition to the pre-defined performance criteria, the
Committee has discretion to approve a decrease in a Named
Executive Officers bonus by using the same performance
objectives for determining a bonus award, but noting that the
objectives were not met or did not reach acceptable levels. In
the case where the Committee believes that additional
compensation is warranted to reward an executive for outstanding
performance in a particular situation, the Committee may award
additional bonuses in its discretion. In making the
determination as to whether to exercise the discretion to either
decrease an award or provide additional discretionary bonuses,
the Committee reviews recommendations from management, except in
the case of compensation for Mr. Clifton, for whom the
Committee makes its determinations without management
recommendations. For 2009, the Committee approved additional
discretionary bonuses as shown in the Summary Compensation
Table. A key factor contributing to the decision of the
Committee to award additional discretionary bonuses was the
effort and results achieved by the Named Executive Officers with
regard to the acquisitions from Sunoco, Inc. (R&M) and
Sinclair Tulsa Refining Company of two refineries located in
Tulsa, Oklahoma. All bonuses were paid in March 2010. The
adjustment of up to the multiple indicated in the section below
in the narrative following the 2009 Grants of Plan-Based
Awards table titled Annual Incentive Cash Bonus
Compensation times the employees pre-established
percentage may vary from year to year in the Committees
discretion after consideration of several factors, including
whether any performance or other goals are met. If the goals are
met, the Committee retains discretion to reduce the percentage
paid.
In making annual cash bonus awards in 2009, the Committee also
reviewed an analysis of competitive market data prepared by the
Compensation Consultant comparing compensation of our Named
Executive Officers, including the bonus payments, to our peers
and market practices (see the paragraph below titled
Review of Market Data for further discussion). As
described in greater detail below, this peer group differs from
the 2009 Incentive Award Peer Group. The annual incentive
targets were assessed on the basis of total cash, including base
salary and annual incentive payments. The Committee believes
this analysis indicates that total cash compensation to our
Named Executive Officers is appropriate for the level of
responsibility that each of these officers hold as well as in
comparison to compensation levels of comparable executives at
our peer organizations.
The targets and actual annual incentive cash bonus compensation
awarded, and subsequently earned and payable, for each of the
Named Executive Officers is described in the narrative following
the 2009 Grants of Plan-Based Awards table.
For 2010, we have not made any substantive changes to the annual
incentive cash bonus program.
Long-Term
Incentive Equity Compensation
Long-term equity compensation is the cornerstone of the total
compensation program for our Named Executive Officers, and
generally receives the heaviest weighting of all compensation
elements, which is in line with our philosophy that an
executives compensation should create long-term incentives
and generate value for our
19
stockholders. The long-term equity incentive compensation we
provide is intended to be a key element in driving the creation
of value for investors and in attracting and retaining
executives capable of effectively executing our business
strategies. Equity awards are provided under the Long-Term
Incentive Compensation Plan (the LTIP) that was
adopted by the Board in October 2002 and approved by our
stockholders at the December 2002 Annual Meeting and as amended
and restated and approved by our stockholders at the May 2007
Annual Meeting. The LTIP was also amended in 2008, retroactively
effective to January 1, 2005, to reflect that the operation
of the LTIP was in compliance with Section 409A of the Tax
Code.
While the LTIP permits awards of options, restricted stock,
bonus stock, stock appreciation rights, phantom stock and
performance shares, our long-term equity incentive program
currently consists of granting primarily restricted stock and
performance share unit awards to our Named Executive Officers as
described in more detail below. In 2009, the value of the total
long-term incentive award made to each of our Named Executive
Officers was equally split 50% in restricted stock and 50% in
performance share units.
In determining the appropriate amount and type of long-term
equity incentive awards to be made, the Committee considers the
Named Executive Officers position, scope of
responsibility, base salary, performance and market compensation
information for executives in similar positions in similar
companies, prior year awards, and recommendation of the Chief
Executive Officer (except in regard to his own award). The
awards are granted annually during the first quarter of each
year. Our goal is to reward the creation of value and high
performance with variable compensation dependent on that
performance; thus the market data we have accumulated for use in
determining other areas of compensation is used subjectively
(and not as an objective factor) to confirm that our executives
are paid appropriately relative to comparable executives of
other similar companies. The peer data allows the Committee to
verify that the compensation paid to executives is appropriate.
The total compensation may be adjusted if the Committee observes
a material variation from the market data; however, no specific
formula is used to benchmark this data.
Messrs. Clifton and Shaw and Ms. McWatters also
receive long-term incentive compensation from HEP, in which we
own a 34% interest (including the general partner interest).
Please refer to Item 11 of HEPs
Form 10-K
for the fiscal year ended December 31, 2009 for further
information concerning the compensation provided by HEP to
Messrs. Clifton and Shaw.
Restricted
Stock Awards
A restricted stock award is an award of shares of Common Stock
which is subject to forfeiture upon termination of employment
prior to the vesting of the award. The Committee may approve
grants on the terms that it determines, including the period
during which the award will vest. Under the LTIP, the Committee
may condition vesting upon the achievement of specified
financial objectives. The restricted stock will vest upon our
change of control, unless provided otherwise by the Committee in
the agreement governing the award. Named Executive Officers
holding restricted stock have all the rights of a stockholder
with respect to such restricted stock, including the right to
receive all dividends paid with respect to such restricted stock
and the right to vote with respect to the restricted stock,
subject to limitations on transfer and disposition of the
restricted stock during the restricted period. Restricted stock
is subject to forfeiture in the event that the executives
employment or service relationship terminates, unless and to the
extent that the Committee provides otherwise.
In 2009, Messrs. Clifton and Lamp were granted awards of
restricted stock that will vest in three equal annual
installments, and the awards also included performance
requirements, one effect of which is to preserve the tax
deductibility of the awards, under Section 162(m) of the
Tax Code, as described in the Tax and Accounting
Implications section below. Our other Named Executive
Officers also received restricted stock awards in 2009; however,
performance requirements were not placed on the restricted stock
granted to any other Named Executive Officer largely because the
compensation paid to those officers did not exceed the
limitations imposed by Section 162(m) of the Tax Code.
Other specific terms for the restricted stock grants provided to
each Named Executive Officer are described in the narrative
following the 2009 Grants of Plan-Based Awards table.
The Committee determined that, beginning with the 2009
restricted stock grants, dividends to recipients of restricted
stock grants with performance standards will be deferred until
the applicable awards vest and such dividends shall be forfeited
if such awards do not vest.
20
Performance
Share Unit Awards
A performance share unit is a notional phantom unit that
entitles the executive to receive, as may be provided in the
applicable agreement governing the award, Common Stock or a cash
amount equal to the value of the Common Stock upon the vesting
of the performance share units. A performance share unit will be
earned depending upon our performance versus that of the 2009
Incentive Award Peer Group. The terms of an award are determined
by the Committee at the time of the award, including the number
of units in each grant, the performance targets, the method of
determining the amounts payable for different levels of
performance, and the nature and timing of payment. The specific
goals for the awards granted for the 2009 year are
specified below in the footnotes to the tables titled 2009
Grants of Plan-Based Awards and Outstanding Equity
Awards at Fiscal Year End. Performance share units will
vest upon a change of control and be paid at the performance
percentage determined following the conclusion of the
performance period, unless provided otherwise by the Committee.
Performance share units are also subject to forfeiture in the
event that the executives employment or service
relationship terminates, unless and to the extent that the
Committee provides otherwise.
In 2009, all of our Named Executive Officers were granted awards
of performance share units. The performance period for such
awards will be from January 1, 2009 through
September 30, 2011 and the Named Executive Officer must be
employed by us on December 31, 2011 to receive a settlement
for the performance share unit awards, except as provided
otherwise in the award agreements governing the awards. Other
specific terms of the awards, including the performance criteria
and goals, are described in the narrative in the section below
titled 2009 Grants of Plan-Based Awards.
Review of
Market Data
Market pay practices are one of many factors considered by the
Committee in setting compensation for the Named Executive
Officers. We regularly compare our compensation program with
market information regarding salary and annual incentive levels,
long-term incentive award levels, and short and long term
incentive programs. The purpose of this analysis is to provide a
frame of reference in evaluating the reasonableness and
competitiveness of compensation with the energy industry and to
ensure that our compensation is generally comparable to
companies of similar size and scope of operations. Market pay
levels are obtained from various sources including published
compensation surveys and information taken from the SEC filings
of a number of similarly situated companies as compiled by our
Compensation Consultant. The Committee reviews and discusses
market data and recommendations provided by the Compensation
Consultant, and the Committee retains the final decision making
authority on all compensation decisions. The benchmark group
that the Committee reviewed in the fall of 2008 in order to set
2009 compensation was comprised of BJ Services Company, Cameron
International Corporation, Crosstex Energy, Inc., CVR Energy,
Inc., El Paso Corp., Exterran Energy Corp., FMC
Technologies, Inc., Frontier Oil Corporation, Murphy Oil
Corporation, Spectra Energy Corp., Tesoro Corporation, Western
Refining, Inc. and Williams Companies, Inc. This peer group is
different than the 2009 Incentive Award Peer Group because the
performance component utilized for purposes of our annual
incentive cash bonuses and performance share unit awards is not
properly reflected solely through the companies utilized for
total compensation purposes. The additional companies comprising
the 2009 Incentive Award Peer Group are companies with which
both management and investment analysts compare our financial
results; however, those companies are often too large in size
(as with Valero Energy Corp.) or significantly differ in
ownership and management composition from us (as with Alon USA
Energy, Inc.) for the Committee to include them as suitable
comparisons when considering total compensation packages. For
purposes of determining overall compensation for our executives,
a central objective is to position pay levels at approximately
the middle range of market compensation. As noted, however,
market pay levels are only one factor considered, with pay
decisions ultimately reflecting an evaluation of individual
contribution and value to us.
As discussed above, the Compensation Consultant does not have
approval authority for the ultimate compensation that is
provided to employees, including Named Executive Officers.
Instead, the Compensation Consultant provides information and
recommendations to the Committee and identifies the areas that
do not appear to be consistent with the general practice of our
peer group of companies (without setting specific benchmarks and
using a discretionary standard). During 2009, the Compensation
Consultant provided information and recommendations regarding
compensation to management and to the Committee prior to the
meetings when salaries were
21
approved, bonuses were awarded and equity compensation was
established. See Compensation Committee Consultant
above.
Role of
Named Executive Officers in Determining Executive
Compensation
In making executive compensation decisions, the Committee
solicits the recommendations of our Chief Executive Officer
(except with respect to his own compensation) and various other
members of management. Management facilitates the
Committees consideration of compensation for the Named
Executive Officers by providing data for the Committees
review. This data includes, but is not limited to, our financial
performance for the current year compared to our financial
performance for the preceding year, our financial performance
versus that of our peers, performance evaluations of the Named
Executive Officers (other than for the Chief Executive Officer
and Chairman of the Board, who is evaluated by the Committee),
compensation provided to the Named Executive Officers in
previous years, and tax and accounting related considerations.
Management provides the Committee with guidance as to how such
data impacts pre-determined performance goals set by the
Committee. When management considers a discretionary bonus to be
appropriate for a Named Executive Officer (other than for the
Chief Executive Officer and Chairman of the Board), it will
recommend an amount and provide the Committee with
managements rationale for such bonus. Given the day-to-day
familiarity that management has with the work performed by the
Named Executive Officers, the Committee values managements
recommendations. However, the Committee makes all final
decisions as to the compensation of the Named Executive
Officers. For 2009, after consideration of managements
recommendations regarding discretionary increases in the
bonuses, and discussion regarding such increases, the Committee
approved discretionary increases in some bonuses as shown in the
column titled Bonus in the Summary Compensation
Table.
Guidelines
for Stock Ownership for Executives
Under our stock ownership guidelines approved by the Board in
2009, each Named Executive Officer is expected to retain
twenty-five percent (25%) of the shares received from the
settlement of restricted share and performance share units
awards granted under the LTIP until his or her ownership equals
the following levels:
|
|
|
|
|
Executive
|
|
Shares Required
|
|
|
Matthew P. Clifton
|
|
|
120,000 Shares
|
|
David L. Lamp
|
|
|
40,000 Shares
|
|
Bruce R. Shaw
|
|
|
20,000 Shares
|
|
George J. Damiris
|
|
|
20,000 Shares
|
|
Denise C. McWatters
|
|
|
10,000 Shares
|
|
Shares owned from any source count toward meeting the
guidelines, but shares relating to unexercised stock options, if
any, and unvested restricted shares
and/or
performance share units do not count. Currently all of our Named
Executive Officers are in compliance with the stock ownership
guidelines.
Tax and
Accounting Implications
We account for the equity compensation expense for our employees
and executive officers, including our Named Executive Officers,
under the rules of FASB ASC Topic 718, which requires us to
estimate and record an expense for each award of long-term
incentive compensation over the vesting period of the award.
Accounting rules also require us to record cash compensation as
an expense at the time the obligation is accrued.
With respect to Section 162(m) of the Tax Code and
underlying regulations pertaining to the deductibility of
compensation to Named Executive Officers in excess of
$1,000,000, we have adopted a policy to provide
performance-based compensation that is exempt from
such limitations to the extent practicable. The LTIP has been
approved by our stockholders. As a result, certain elements of
the LTIP are designed to provide performance-based incentive
compensation which would be fully deductible under
Section 162(m). Restricted stock and performance share unit
grants made to Named Executive Officers in 2009 are intended to
be fully deductible under Section 162(m); however, some
Named Executive Officers received restricted stock awards that
do not contain performance-based incentives and may not be
deductible under Section 162(m) if their respective
22
compensation increases. Although our annual cash incentive
awards are subject to certain performance conditions, they were
not designed in 2009 to be compliant with Section 162(m)
requirements. However, the Committee has determined that some
flexibility is required, notwithstanding the statutory and
regulatory provisions, in negotiating and implementing our
incentive compensation programs. It has, therefore, retained the
discretion to award some bonus payments based on
non-quantitative performance measurements and other criteria
that it may determine, in its discretion, from time to time. We
did not pay any compensation in 2009 that was nondeductible
under Section 162(m).
In addition, Section 280G of the Tax Code prohibits the
deduction of any excess parachute payment. Benefits
payable under the Change in Control Agreements entered into with
certain of our executives as well as accelerated vesting under
restricted stock and performance share awards could result in
excess parachute payments that are not deductible by
us. Amounts payable and benefits available upon the occurrence
of certain change in control transactions are described below in
the section title Potential Payments Upon Termination or
Change in Control.
Retirement
and Benefit Plans
The Holly
Retirement Plan
The Holly Retirement Plan, our tax-qualified defined benefit
retirement plan, is described below in the narrative
accompanying the Pension Benefits table. As of January 1,
2007, this plan was no longer made available to newly hired
employees who were not represented under a collective bargaining
agreement. Instead, as of January 1, 2007, new employees
who were not represented under a collective bargaining agreement
were automatically enrolled in our Thrift Plan to which we make
an automatic contribution of 5% of the employees eligible
compensation on an annual basis, in addition to making matching
contributions as described below. Most employees who are not
represented by a collective bargaining agreement and were hired
prior to January 1, 2007, were provided with a one-time
choice to either continue earning benefits in the Holly
Retirement Plan or to freeze benefits in the Holly Retirement
Plan and begin receiving the 5% automatic Thrift Plan
contribution. Regardless of their choice, these employees are
eligible for matching contributions under the Thrift Plan, if
they participate therein.
Retirement
Restoration Plan
We have an unfunded Retirement Restoration Plan that provides
for additional payments from us so that total retirement plan
benefits for certain executives are not limited to the maximums
set in the Tax Code and as allowed under the Thrift Plan. The
Retirement Restoration Plan and the applicable Tax Code
restrictions are more particularly described below in the
section titled Pension Benefits.
Thrift
Plan for Employees of Holly Corporation, its Affiliates and
Subsidiaries
Our Thrift Plan, which is a tax-qualified defined contribution
plan, is offered to all our employees. Employees may, at their
election, contribute to the Thrift Plan amounts from 0% up to a
maximum of 75% of their eligible compensation. In 2009, for
employees not covered by a collective bargaining agreement, we
matched employee contributions to the Thrift Plan of up to 6% of
each employees eligible compensation (increased on
January 1, 2007 from 4%). Eligible employees were also
allowed to participate in the automatic Thrift Plan contribution
feature, where 5% of eligible compensation, subject to the
applicable Tax Code limits, is contributed each year in addition
to the employee deferrals and employer matching contributions
for that employee. Employee contributions that were made on a
tax-deferred basis were generally limited to $16,500 per year
through the 2009 year (this amount will remain the same for
the 2010 year), with employees over 50 years of age
able to make additional tax-deferred contributions of $5,500
(this amount will remain the same for the 2010 year).
Employees may direct that Company matching contributions be
invested in Common Stock. Prior to 2007, our contributions in
the Thrift Plan did not vest until the earlier of three years of
credited service or termination of employment due to retirement,
disability or death. Beginning in 2007, matching contributions
to employees not represented by a collective bargaining
agreement vest immediately upon contribution to their accounts.
The automatic Thrift Plan contribution is subject to a
three-year cliff vesting period.
23
In 2009, each of the Named Executive Officers participated in
the Thrift Plan and received matching contributions from us.
These amounts are further described in the Summary
Compensation Table.
Employee
Stock Ownership Plan
Many of our employees and eligible affiliates with at least one
year of service, other than employees covered by collective
bargaining agreements, participated in an Employee Stock
Ownership Plan (ESOP) established in 1985. For the
1987 through the 1996 fiscal years, shares of Common Stock held
by the ESOP were allocated to the accounts of participants for
each fiscal year on the basis of payments of principal on the
ESOPs ten-year installment note issued to us in connection
with the ESOPs purchase of Common Stock from us. Shares
were allocated to participants based on their eligible
compensation. Participants shares vested upon the earlier
of five years credited service or termination of
employment due to retirement, disability or death. Effective
August 1, 1999, the ESOP was merged into the Thrift Plan
and each participants ESOP account became a Company Stock
ESOP Account in the Thrift Plan. Over the twelve months ending
October 2002, shares in our Stock ESOP Account for each
participant were gradually shifted to each participants
regular Thrift Plan account and consequently became subject to
the participants directions as to holding or selling such
shares. Mr. Clifton is the only Named Executive Officer to
have had an account under the previous ESOP that is now merged
into the Thrift Plan.
ESOP
Restoration Plan
We adopted an ESOP Restoration Plan to provide additional
benefits to executives whose allocations of shares of Common
Stock from the ESOP for the 1995 and 1996 fiscal years were
reduced because of the application of limitations of the Tax
Code. The ESOP Restoration Plan provides for the grant to
participants after the end of the 1995 and 1996 fiscal years of
phantom shares equal in number to the number of
shares not allocated to participants because of the limitations
of the Tax Code. The phantom shares under the plan are unsecured
rights to cash payments based on dividends paid on shares of
Common Stock and on the market value of such shares at future
dates. Payments based on market value of Common Stock are
generally due 40 days after termination of employment or
the date of final distribution to the officer under the ESOP
unless the officer elects to defer payments to future dates that
may not be later than 60 days after the officers
death or permanent disability.
A total of 61,880 phantom shares were granted to participants
for the 1995 and 1996 fiscal years. The ESOP Restoration Plan
was terminated effective January 3, 2009 and all
outstanding balances were distributed in cash. Mr. Clifton
was the only Named Executive Officer who received a payout upon
the termination of the ESOP Restoration Plan, as more
particularly described below in the section entitled
Nonqualified Deferred Compensation.
Change
in Control Agreements
We have entered into Change in Control Agreements with our Named
Executive Officers to provide for management continuity in the
event of a change in control, and to assist in the recruitment
and retention of executives. The Committee has determined that
it is in the best interest of the stockholders to maintain these
agreements in light of the depth of knowledge and experience of
the Named Executive Officers and the need to ensure stable
management during any potential change in control. The Change in
Control Agreements are designed to provide benefits only in the
event of a termination of employment following a change in
control transaction, and do not provide any benefits without
such a termination. The Committee believes that the agreements
will permit our Named Executive Officers to focus their
attention and energy on our business without any distractions
regarding the effects of a change in control. The benefits
contemplated by the agreements maximize stockholder value by
allowing our Named Executive Officers to participate in an
objective review of any proposed transaction. The material terms
and a quantification of the potential amount payable under the
Change in Control Agreements with the Named Executive Officers
are set forth below in the section titled Potential
Payments Upon Termination or Change in Control.
We have not entered into any employment or severance agreements
with any of the Named Executive Officers other than these Change
in Control Agreements.
24
COMPENSATION
COMMITTEE REPORT
The Compensation Committee of the Holly Corporation Board of
Directors has reviewed and discussed the Compensation Discussion
and Analysis required by Item 402(b) of
Regulation S-K
with management and, based on such review and discussion, the
Compensation Committee recommended to the Board that the
Compensation Discussion and Analysis be included in this Proxy
Statement.
Members of the Compensation Committee:
Buford P. Berry,
Chairman
Leldon E. Echols
Thomas K. Matthews, II
Robert G. McKenzie
25
SUMMARY
COMPENSATION TABLE
The table below summarizes the total compensation paid to,
awarded to, or earned by each of our Named Executive Officers in
2007, 2008 and 2009.
Summary
Compensation Table
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Change in
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Pension
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Value and
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Nonqualified
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Non-Equity
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Deferred
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Incentive Plan
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Compensation
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All Other
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Salary
|
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Bonus
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Stock Awards
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Compensation
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Earnings
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Compensation
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Total
|
Name and 2009 Principal Position
|
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Year
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($)
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($)(1)
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($)(2)
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($)(3)
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($)(4)
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($)(5)
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|
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($)
|
Matthew P. Clifton,
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2009
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$922,500
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(6)
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$0
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$1,500,107
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$1,760,000
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$793,035
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$14,700
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$4,990,342
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Chairman of the Board and
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2008
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$849,782
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$203,000
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|
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$1,603,181
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|
|
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$405,000
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|
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$618,992
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$13,800
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|
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$3,693,755
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Chief Executive Officer
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2007
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$727,833
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$0
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$1,517,105
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|
|
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$2,008,000
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|
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$375,390
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$13,500
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$4,641,828
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David L. Lamp,
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2009
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$553,500
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(7)
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$0
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$800,039
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$661,000
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$112,511
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|
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$14,700
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|
|
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$2,141,750
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President
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2008
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$510,649
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$108,000
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$912,611
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$216,000
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|
|
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$74,257
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$13,800
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$1,835,317
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2007
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$373,644
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|
|
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$0
|
|
|
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$852,435
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|
|
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$653,877
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|
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$41,546
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|
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$13,500
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|
|
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$1,935,002
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Bruce R. Shaw,
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2009
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|
$325,000
|
(8)
|
|
|
|
$0
|
|
|
|
|
$232,630
|
|
|
|
|
$220,000
|
|
|
|
|
$12,792
|
|
|
|
|
$26,950
|
|
|
|
|
$817,372
|
|
Senior Vice President and
|
|
|
2008
|
|
|
|
|
$256,351
|
|
|
|
|
$81,500
|
|
|
|
|
$660,619
|
|
|
|
|
$82,500
|
|
|
|
|
$2,751
|
|
|
|
|
$25,300
|
|
|
|
|
$1,109,021
|
|
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George J. Damiris,
|
|
|
2009
|
|
|
|
|
$300,000
|
(9)
|
|
|
|
$100,000
|
|
|
|
|
$310,127
|
|
|
|
|
$203,000
|
|
|
|
|
$0
|
|
|
|
|
$26,950
|
|
|
|
|
$940,077
|
|
Senior Vice President,
|
|
|
2008
|
|
|
|
|
$252,053
|
|
|
|
|
$79,000
|
|
|
|
|
$387,593
|
|
|
|
|
$81,000
|
|
|
|
|
$0
|
|
|
|
|
$148,716
|
|
|
|
|
$948,362
|
|
Supply and Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denise C. McWatters,
|
|
|
2009
|
|
|
|
|
$250,000
|
(10)
|
|
|
|
$100,000
|
|
|
|
|
$150,014
|
|
|
|
|
$123,000
|
|
|
|
|
$0
|
|
|
|
|
$26,950
|
|
|
|
|
$649,964
|
|
Vice President, General
|
|
|
2008
|
|
|
|
|
$202,566
|
|
|
|
|
$55,000
|
|
|
|
|
$175,164
|
|
|
|
|
$55,000
|
|
|
|
|
$0
|
|
|
|
|
$22,282
|
|
|
|
|
$510,012
|
|
Counsel and Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Annual bonuses for services performed in 2009 were paid in March
2010. Amounts in this column reflect the discretionary bonus
payable pursuant to our annual incentive bonus arrangement
reported in the Non-Equity Incentive Plan Compensation column. |
|
(2) |
|
Amounts reported for stock awards in each of the 2009, 2008 and
2007 years represent the aggregate grant date fair value
computed in accordance with FASB ASC Topic 718, including the
amount recognized with respect to the bonus stock award of
8,200 shares granted to Mr. Shaw in 2008. See
note 6 to our consolidated financial statements for the
fiscal year ended December 31, 2009 included in our Annual
Report on
Form 10-K
filed with the SEC on February 26, 2010 for a discussion of
the assumptions used in determining the FASB ASC Topic 718 grant
date fair value of these awards. With respect to performance
share units awarded in 2009, the amounts in the table above were
based on an estimated payment of 100% of the award, as this is
the probable payout percentage for the performance
share units and is consistent with the estimate of aggregate
compensation cost to be recognized over the service period
determined as of the grant date under FASB ASC Topic 718,
excluding the effect of estimated forfeitures; however, assuming
that the performance share units will be paid out at the maximum
payout level of 200%, each of the Named Executive Officers would
receive the following amounts: Mr. Clifton, $2,250,160;
Mr. Lamp, $1,200,058; Mr. Shaw, $348,944;
Mr. Damiris, $464,283; and Ms. McWatters, $168,752.
The terms of the 2009 performance share unit awards and the 2009
restricted stock awards are provided below in the narrative
following the 2009 Grants of Plan-Based Awards
table. For additional information on restricted stock and
performance share unit awards, see below under 2009
Outstanding Equity Awards at Fiscal Year End. With respect
to the 1,610 restricted common units of HEP described in
footnote (5) to the 2009 Grants of Plan-Based Awards Table,
see note 7 to the consolidated financial statements of HEP
included in HEPs Annual Report on
Form 10-K
filed with the SEC on February 16, 2010 for a discussion of
the assumptions used in determining the FASB ASC Topic 718 grant
date fair value of these awards. |
|
(3) |
|
The annual bonus amounts for services performed in 2009 (paid in
March 2010) reflect the pre-defined target percentages that
were allocated to the components which are described below in
greater detail in the narrative following the 2009 Grants
of Plan-Based Awards table. |
26
|
|
|
(4) |
|
The amounts shown in this column reflect the following
assumptions: |
|
|
|
|
|
|
|
|
|
December 31, 2007
|
|
December 31, 2008
|
|
December 31, 2009
|
|
Discount Rate
|
|
6.40%
|
|
6.50%
|
|
6.20%
|
|
|
|
|
|
|
|
Mortality Table
|
|
RP2000 White Collar Projected to 2020
|
|
RP2000 White Collar Projected to 2020
|
|
RP2000 White Collar Projected to 2020
|
|
|
|
|
|
|
|
Reserving Table
|
|
50% Male/50% Female
|
|
50% Male/50% Female
|
|
50% Male/50% Female
|
|
|
|
|
|
|
|
Retirement Age
|
|
the later of current age or age 62
|
|
the later of current age or age 62
|
|
the later of current age or age 62
|
|
|
|
(5) |
|
For Messrs. Clifton and Lamp, this reflects the employer
matching contribution to the Thrift Plan which was subject to a
tax code maximum limit of $14,700. Since Mr. Shaw was
rehired by the Company after January 1, 2007, his Holly
Retirement Plan benefit was frozen as of May 31, 2007 when
his employment ceased. Mr. Shaw was required to become a
participant in the Automatic Thrift Plan Contribution feature of
the Thrift Plan when he resumed employment with us. Both
Ms. McWatters and Mr. Damiris were originally hired by
the Company after January 1, 2007, and were therefore never
eligible to participate in the Holly Retirement Plan, but
instead participate in the Automatic Thrift Plan Contribution
feature of the Thrift Plan. For Messrs. Shaw and Damiris
and Ms. McWatters, this reflects the contribution made in
2009 by us to the Automatic Thrift Plan (subject to the tax code
maximum limit of $12,250) and includes employer matching
contributions (subject to a tax code maximum limit of $14,700).
The 2009 Summary Compensation Table reflects the
following contributions: |
|
|
|
|
|
|
|
Name
|
|
Automatic Thrift Plan
|
|
Employer Matching
|
|
Matthew P. Clifton
|
|
n/a
|
|
|
$14,700
|
|
David L. Lamp
|
|
n/a
|
|
|
$14,700
|
|
Bruce R. Shaw
|
|
$12,250
|
|
|
$14,700
|
|
George J. Damiris
|
|
$12,250
|
|
|
$14,700
|
|
Denise C. McWatters
|
|
$12,250
|
|
|
$14,700
|
|
|
|
|
(6) |
|
As of January 1, 2009, Mr. Cliftons annual
salary was $900,000. His annual salary was increased to $922,500
effective February 23, 2009. Mr. Cliftons annual
base salary as of December 31, 2009 is reported in the
table, but his actual payroll payments are $918,173 due to our
bi-weekly payroll system (the December 14, 2009 through
December 27, 2009 payroll payment was made on
January 5, 2010 and the December 28, 2009 through
December 31, 2009 payroll payment was made on
January 19, 2010). Similar adjustments were made for other
mid-period pay adjustments in prior periods. |
|
(7) |
|
As of January 1, 2009, Mr. Lamps annual salary
was $540,000. His annual salary was increased to $553,500
effective February 23, 2009. Mr. Lamps annual
base salary as of December 31, 2009 is reported in the
table, but his actual payroll payments are $550,904 due to our
bi-weekly payroll system (the December 14, 2009 through
December 27, 2009 payroll payment was made on
January 5, 2010 and the December 28, 2009 through
December 31, 2009 payroll payment was made on
January 19, 2010). Similar adjustments were made for other
mid-period pay adjustments in prior periods. |
|
(8) |
|
As of January 1, 2009, Mr. Shaws annual salary
was $275,000. His annual salary was increased to $325,000
effective February 23, 2009. Mr. Shaws annual
base salary as of December 31, 2009 is reported in the
table, but his actual payroll payments are $319,231 due to our
bi-weekly payroll system (the December 14, 2009 through
December 27, 2009 payroll payment was made on
January 5, 2010 and the December 28, 2009 through
December 31, 2009 payroll payment was made on
January 19, 2010). Similar adjustments were made for other
mid-period pay adjustments in prior periods. |
|
(9) |
|
As of January 1, 2009, Mr. Damiris annual salary
was $270,000. His annual salary was increased to $300,000
effective January 26, 2009, at which time Mr. Damiris
was not a named executive officer and, therefore, the salary
increase did not require board approval. Mr. Damiris
annual base salary as of December 31, 2009 is reported in
the table, but his actual payroll payments are $296,538 due to
our bi-weekly payroll system (the December 14, 2009 through
December 27, 2009 payroll payment was made on
January 5, 2010 and the |
27
|
|
|
|
|
December 28, 2009 through December 31, 2009 payroll
payment was made on January 19, 2010). Similar adjustments
were made for other mid-period pay adjustments in prior periods. |
|
(10) |
|
As of January 1, 2009, Ms. McWatters annual
salary was $220,000. Her annual salary was increased to $250,000
effective January 26, 2009, at which time
Ms. McWatters was not a named executive officer and,
therefore, the salary increase did not require board approval.
Ms. McWatters annual base salary as of
December 31, 2009 is reported in the table, but her actual
payroll payments are $246,539 due to our bi-weekly payroll
system (the December 14, 2009 through December 27,
2009 payroll payment was made on January 5, 2010 and the
December 28, 2009 through December 31, 2009 payroll
payment was made on January 19, 2010). Similar adjustments
were made for other mid-period pay adjustments in prior periods. |
2009
Grants of Plan-Based Awards
The following table sets forth, for each Named Executive
Officer, information about awards under our equity and
non-equity incentive plans made during the year ending
December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts
|
|
|
|
Under Equity Incentive Plan
|
|
|
|
|
|
|
|
(j)
|
|
|
|
(k)
|
|
|
|
|
|
|
|
|
Under Non-Equity
|
|
|
|
Awards(2)
|
|
|
|
(i)
|
|
|
|
Base
|
|
|
|
Grant Date
|
|
|
|
|
(b)
|
|
|
|
Incentive Plan
Awards(1)
|
|
|
|
|
|
|
|
|
|
|
|
(h)
|
|
|
|
All other
|
|
|
|
Price of
|
|
|
|
Fair Value
|
|
(a)
|
|
|
Grant
|
|
|
|
(c)
|
|
|
|
(d)
|
|
|
|
(e)
|
|
|
|
(f)
|
|
|
|
(g)
|
|
|
|
Maximum
|
|
|
|
Equity
|
|
|
|
Awards
|
|
|
|
of Stock
|
|
Name
|
|
|
Date
|
|
|
|
Threshold
|
|
|
|
Target
|
|
|
|
Maximum
|
|
|
|
Threshold
|
|
|
|
Target
|
|
|
|
(#)
|
|
|
|
Awards(3)
|
|
|
|
($/Unit)
|
|
|
|
Awards(4)
|
|
Matthew P. Clifton
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Units
|
|
|
|
2/25/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
33,042
|
|
|
|
|
66,084
|
|
|
|
|
|
|
|
|
|
n/a
|
|
|
|
|
$750,053
|
|
Restricted Shares
|
|
|
|
2/25/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
n/a
|
|
|
|
|
$750,053
|
|
Non-Equity Incentives
|
|
|
|
|
|
|
|
|
$0
|
|
|
|
|
$922,500
|
|
|
|
|
$2,490,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David L. Lamp
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Units
|
|
|
|
2/25/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
17,622
|
|
|
|
|
35,244
|
|
|
|
|
|
|
|
|
|
n/a
|
|
|
|
|
$400,019
|
|
Restricted Shares
|
|
|
|
2/25/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
n/a
|
|
|
|
|
$400,019
|
|
Non-Equity Incentives
|
|
|
|
|
|
|
|
|
$0
|
|
|
|
|
$442,800
|
|
|
|
|
$974,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce R. Shaw
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Units
|
|
|
|
2/25/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
5,124
|
|
|
|
|
10,248
|
|
|
|
|
|
|
|
|
|
n/a
|
|
|
|
|
$116,315
|
|
Restricted Shares
|
|
|
|
2/25/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,124
|
|
|
|
|
n/a
|
|
|
|
|
$116,315
|
|
Non-Equity Incentives
|
|
|
|
|
|
|
|
|
$0
|
|
|
|
|
$162,500
|
|
|
|
|
$325,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George J. Damiris
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Units
|
|
|
|
2/25/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
6,831
|
|
|
|
|
13,622
|
|
|
|
|
|
|
|
|
|
n/a
|
|
|
|
|
$155,064
|
|
Restricted Shares
|
|
|
|
2/25/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,831
|
|
|
|
|
n/a
|
|
|
|
|
$155,064
|
|
Non-Equity Incentives
|
|
|
|
|
|
|
|
|
$0
|
|
|
|
|
$150,000
|
|
|
|
|
$300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denise C. McWatters
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Units
|
|
|
|
2/25/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
2,478
|
|
|
|
|
4,956
|
|
|
|
|
|
|
|
|
|
n/a
|
|
|
|
|
$56,251
|
|
Restricted Shares
|
|
|
|
2/25/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,478
|
|
|
|
|
n/a
|
|
|
|
|
$56,251
|
|
HEP Restricted
Units(5)
|
|
|
|
3/03/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,610
|
|
|
|
|
n/a
|
|
|
|
|
$37,513
|
|
Non-Equity Incentives
|
|
|
|
|
|
|
|
|
$0
|
|
|
|
|
$100,000
|
|
|
|
|
$200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts shown in the Estimated Future Payouts Under
Non-Equity Incentive Plan Awards columns reflect a
threshold, target, and maximum bonus award amount for each Named
Executive Officer equal to the percentages set forth below in
the section titled Annual Incentive Cash Bonus
Compensation. |
|
(2) |
|
Amounts shown in the Estimated Future Payouts Under Equity
Incentive Plan Awards columns reflect the Committees
grant of performance share units as described below in the
section titled Performance Share Unit Agreement
Terms and restricted stock subject to performance
conditions granted to Messrs. Clifton and Lamp described
below in the section titled Restricted Stock Agreement
Terms. With respect to performance share units, the amount
shown in column (f) reflects the minimum payment amount of
0%, the amount shown in column (g) reflects the target
amount of 100% and, for disclosure purposes only, the amount
shown in column (h) reflects the maximum payment level of
200%. With respect to restricted stock awards, the amount
reported in column (g) is the only payment amount possible
(other than zero). |
28
|
|
|
(3) |
|
The amounts in column (i) are the number of shares of
restricted stock granted to each of our Named Executive Officers
in 2009. The terms of the grants are described below in the
section titled Restricted Stock Agreement Terms. |
|
(4) |
|
Except for the HEP restricted units granted to
Ms. McWatters, represents the full grant date fair value
determined pursuant to FASB ASC Topic 718 and as reflected in
our financial statements, based on the number of shares subject
to the award and the closing price of the Common Stock, which
was $22.70, on the date prior to the grant for both restricted
stock and performance share units. With respect to performance
share units and restricted stock granted to Messrs. Clifton
and Lamp, this reflects an assumed payment of 100% of the number
of shares under the performance share unit award, as this is the
probable payout percentage for the performance share
units and is consistent with the estimate of aggregate
compensation cost to be recognized over the service period
determined as of the grant date under FASB ASC Topic 718,
excluding the effect of estimated forfeitures. The grant date
fair value of the award of HEP restricted units to
Ms. McWatters is reflected in the financial statements of
HEP and based on the closing price of the HEP common units,
which was $23.30, on the date prior to the grant. |
|
(5) |
|
Represents restricted units of HEP awarded to Ms. McWatters
by HLS for services performed on behalf of HEP. These restricted
unit awards are described in HEPs Annual Report on
Form 10-K
for the year ended December 31, 2009. Messrs. Clifton
and Shaw also received equity awards of HEP units as more
particularly described in the HEP Annual Report on
Form 10-K
for the year ended December 31, 2009. |
The 2009 awards of performance share units and shares of
restricted stock were issued under our Long-Term Incentive
Compensation Plan. The material terms of these awards are
described below. Defined terms impacting the accelerated
settlement or vesting of these awards can be found below in
Potential Payments Upon Termination or Change in
Control.
Performance
Share Unit Agreement Terms
Under the terms of the performance share unit agreements, dated
February 25, 2009, that each of our Named Executive
Officers executed pursuant to the LTIP, recipients of
performance share units may earn from 0% to 200% of the number
of units awarded. The performance share units represent an award
for a designated performance and related service period. At the
end of the required periods, recipients are entitled to a number
of shares of Common Stock equal to a percentage of the awarded
units as determined by reference to our performance on four
performance measures compared to the performance by our defined
peer group on the same four measures.
The four performance measures are earnings per share
(EPS) growth, net profit margin, return on assets,
and return on investment. Our performance comparison group is
the 2009 Incentive Award Peer Group described above in the
CD&A. If a member of the peer group ceases to be a public
company during the performance period (whether by merger,
consolidation, liquidation or otherwise) or it fails to file
financial statements with the SEC in a timely manner, it will be
treated as if it had not been a peer group member for the entire
performance period.
EPS growth means the compound annual growth rate in
earnings per share before extraordinary items and discontinued
operations, and after the effect of conversion of convertible
preferred stock, convertible debentures, and options and
warrants that have been identified as common stock equivalents.
Net profit margin means net income before
extraordinary items and dividends on common and preferred stock,
divided by net sales. Return on assets means the net
income before extraordinary items, divided by total assets
(i.e., the sum of current assets, net plant, and other
non-current assets). Return on investment means the
net income before extraordinary items, divided by the sum of
long-term debt, preferred stock and total common equity. Each of
these performance measures shall exclude unusual or
non-recurring items and the cumulative effect of tax and
accounting changes.
The number of shares of Common Stock payable is equal to the
result of (i) multiplying the number of performance share
units granted by (ii) the average as determined by adding
our percentile ranking on each performance measure and dividing
the sum by four.
The performance period runs from January 1, 2009 until
September 30, 2011. If an award recipients employment
terminates prior to December 31, 2011 due to a voluntary
separation (including retirement but not including a resignation
in connection with a Special Involuntary
Termination) or Cause, as those terms are
29
defined below, he or she will forfeit his or her award. In the
event of an award recipients death or total and permanent
disability (as determined by the Committee in its sole
discretion) the recipient shall forfeit a number of performance
share units equal to the percentage that (i) the number of
full months in the period beginning on the date of termination
due to death or total and permanent disability and ending on
December 31, 2011 (ii) bears to 36. Any remaining
units that are not vested will become vested, and the amount
payable to the recipient shall be equal to the result of
multiplying the number of remaining performance share units by
the Peer Group Performance Percentage as of December 31,
2011. In the event of an award recipients death or total
and permanent disability, the Committee, in its sole discretion,
may make a payment assuming a performance percentage of up to
200% instead of the Peer Group Performance Percentage as of
December 31, 2011.
If an award recipients employment is terminated due to a
Special Involuntary Termination, before December 31, 2011,
the award recipient shall remain eligible to receive full
payment of the performance share units at the normal vesting
date (i.e., he or she shall be treated as remaining continuously
employed through December 31, 2011). Special
Involuntary Termination means the occurrence of either of
the following within 60 days prior to or at any time after
a change in control: (i) termination of the
award recipients employment for any reason other than
Cause; and (ii) resignation by the award recipient within
90 days after an Adverse Change (as defined
below) in the terms of the award recipients employment.
Cause and Adverse Change are defined
below under Potential Payments Upon Termination or Change
in Control in the discussion of long-term equity incentive
awards.
The change in control provisions of performance share units are
described below under Potential Payments Upon Termination
or Change in Control.
Additional information regarding the performance share units can
be found above under Compensation Discussion and
Analysis Overview of 2009 Executive Compensation
Components Long-Term Incentive Equity
Compensation.
Restricted
Stock Agreement Terms
The 2009 restricted stock agreements contain a Company
performance standard that applies only to Messrs. Clifton
and Lamp. Restricted stock awards granted to Ms. McWatters
and Messrs. Shaw and Damiris are not subject to performance
conditions and vest in three substantially equal annual
installments. The restricted stock agreements require that the
award recipient be continuously employed with us or a subsidiary
through the applicable vesting date, except as provided below.
The first one-third of the restricted stock awards for
Ms. McWatters and Messrs. Shaw and Damiris vested in
January 2010, and the remaining two-thirds will vest on
January 1, 2011 and January 1, 2012, provided he or
she continues employment with us.
Except in the case of early termination of employment, under the
terms of the 2009 restricted stock agreements for
Messrs. Clifton and Lamp, (i) after December 31,
2009, one-third of these restricted shares will vest if our
average Quarterly Adjusted Net Income (defined
below) per diluted share is at least $0.25 for the period
beginning October 1, 2009 and ending at the end of the
quarter being considered (with the earliest possible ending
quarter being the fourth quarter of 2009 and the last possible
ending quarter being the fourth quarter of 2012) (ii) after
December 31, 2010, another one-third of these restricted
shares will vest if our average Quarterly Adjusted Net
Income (defined below) per diluted share is at least $0.25
for the period beginning October 1, 2009 and ending at the
end of the quarter being considered (with the earliest possible
ending quarter being the fourth quarter of 2010 and the last
possible ending quarter being the fourth quarter of 2012), and
(iii) after December 31, 2011, the remaining one-third
of the restricted stock will vest if our average Quarterly
Adjusted Net Income per diluted share is at least $0.25 for the
period beginning October 1, 2009 and ending at the end of
the quarter being considered (with the earliest possible ending
quarter being the fourth quarter of 2011 and the last possible
ending quarter being the fourth quarter of 2012). Quarterly
Adjusted Net Income means net income for a quarter, as reported
by us in our filings with the SEC, adjusted to exclude the
effects of recoveries or liabilities resulting from litigation
and administrative proceedings involving us and our
subsidiaries. Distributions for recipients of restricted stock
agreement grants with performance standards will be deferred
until the applicable awards vest and such distributions will be
forfeited if such awards do not vest. Assuming the Quarterly
Adjusted Net Income standard is met as set forth in each case
above, the awards that are subject to performance conditions
will become vested on the
30
date that the Committee certifies that we have met the
applicable standards. To date, we have not met the applicable
performance standard for vesting of the one-third of the
restricted shares that could potentially vest after
December 31, 2009 and these shares will be reevaluated each
quarter for potential vesting until either (i) vesting
occurs or (ii) forfeiture occurs if vesting has not
occurred following the fourth quarter of 2012.
In the event of an award recipients death, total and
permanent disability (as determined by the Committee in its sole
discretion) or, as to Ms. McWatters and Messrs. Shaw
and Damiris only, retirement after attaining age 62 (or
retirement after attaining an earlier retirement age approved by
the Committee in its sole discretion), the recipient shall
forfeit a number of shares of restricted stock equal to
(i) the total number of shares of restricted stock
initially subject to the award times (ii) the percentage
that the period of full months beginning on the first calendar
month following the date of death, disability or retirement and
ending on December 31, 2011 bears to 36. Any remaining
shares of restricted stock that are not vested will become
vested, but any fractional shares will be forfeited. In its sole
discretion, the Committee may decide to vest all of the shares
of restricted stock in lieu of the prorated number. Award
recipients are stockholders with respect to all of the shares of
restricted stock. Ms. McWatters and Messrs. Shaw and
Damiris have the right to receive all dividends and other
distributions paid with respect to such shares of restricted
stock. As described above, Messrs. Clifton and Lamp
received restricted stock grants with performance standards, and
distributions on their restricted stock grants will be deferred
until the applicable awards vest.
As to Ms. McWatters and Messrs. Shaw and Damiris only,
pursuant to their respective restricted stock agreements, in the
event his or her employment is terminated due to a Special
Involuntary Termination before the lapse of all restrictions on
the restricted stock award, all restrictions shall lapse and the
shares shall become fully vested and delivered to the recipient
as soon as practicable thereafter. Under
Ms. McWatters and Messrs. Shaws and
Damiris restricted stock agreements, Special Involuntary
Termination has the same meaning as defined above under
Performance Share Unit Agreement Terms, except the
term Adverse Change means (i) a change in the
city in which the award recipient is required to work regularly,
(ii) a substantial increase in travel requirements of
employment, (iii) a substantial reduction in duties of the
type previously performed by the recipient, or (iv) a
significant reduction in compensation or benefits that does not
apply generally to executives.
As to Messrs. Clifton and Lamp, pursuant to their
respective restricted stock agreements, in the event his
employment is terminated due to a Special Involuntary
Termination (as defined above under Performance Share Unit
Agreement Terms) before the lapse of all restrictions on
the restricted stock award, the recipient shall remain eligible
to vest in all remaining shares of restricted stock (whether or
not the continuous employment requirement has been satisfied),
provided that such shares of restricted stock shall only become
actually vested if we achieve the performance standard during
the applicable period. Any shares of restricted stock that
remain eligible to vest as of the recipients termination
of employment, but that have not vested as of December 31,
2012, shall be forfeited. In the event his employment is
terminated for any other reason before the lapse of all
restrictions on the restricted stock award, the recipient shall
remain eligible to vest in any shares of restricted stock with
respect to which the continuous employment requirement has been
satisfied. In addition, the recipient shall also remain eligible
to vest in a number of shares of restricted stock equal to the
product of one-third of the shares awarded pursuant to the
agreement, times a fraction, the numerator of which is the
number of full months the recipient was employed during the year
of termination (counting the month of termination as a full
month) and the denominator of which is 12, provided the
performance standard is met during the applicable period. The
shares of restricted stock not eligible to vest shall be
forfeited.
The termination and change in control provisions of restricted
stock awards are described below under the section titled
Potential Payments Upon Termination or Change in
Control.
Additional information regarding the restricted stock awards can
be found above under Compensation Discussion and
Analysis Overview of 2009 Executive Compensation
Components Long-Term Incentive Equity
Compensation.
31
Annual
Incentive Cash Bonus Compensation
The bonuses that are available to our Named Executive Officers
as annual incentive bonuses are based upon pre-set percentages
of salary, achieved by reaching certain target performance
levels. A description of the pre-established performance
criteria utilized in 2009 can be found above in the CD&A
under the section titled Annual Incentive Cash Bonus
Compensation. The following chart reflects the target and
maximum percentages that were set for our Named Executive
Officers and the actual percentages awarded to each individual.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
|
|
|
Percent of Salary
|
|
|
Percent of
|
|
|
Maximum
|
|
|
Percent of Salary
|
|
|
|
Based on
|
|
|
Based
|
|
|
Salary Based on
|
|
|
Multiplier
|
|
|
Maximum
|
|
|
|
Companys
|
|
|
on Peer Financial
|
|
|
Individual
|
|
|
(multiple of
|
|
|
Possible Incentive
|
Name
|
|
|
Net Income
|
|
|
Results
|
|
|
Performance
|
|
|
target)
|
|
|
Compensation(1)
|
Matthew P. Clifton
|
|
|
25%
Actual 4.0%
|
|
|
75%
Actual 186.8%
|
|
|
0%
|
|
|
2.7x
|
|
|
270%
|
David L. Lamp
|
|
|
17.5%
Actual 2.8%
|
|
|
52.5%
Actual 106%
|
|
|
10%
Actual 10%
|
|
|
2.2x
|
|
|
176%
|
Bruce R. Shaw
|
|
|
8%
Actual 1.3%
|
|
|
22%
Actual 41%
|
|
|
20%
Actual 25%
|
|
|
2x
|
|
|
100%
|
George J. Damiris
|
|
|
8%
Actual 1.3%
|
|
|
22%
Actual 41%
|
|
|
20%
Actual 25%
|
|
|
2x
|
|
|
100%
|
Denise C. McWatters
|
|
|
5%
Actual 0.8%
|
|
|
15%
Actual 28.2%
|
|
|
20%
Actual 20%
|
|
|
2x
|
|
|
80%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
As described above, the Committee has discretion to award more
or less than the maximum possible incentive compensation by
either reducing the maximum percentage or by awarding additional
bonus amounts in addition to the incentive cash compensation. |
Additional information regarding cash bonus compensation can be
found above under Compensation Discussion and
Analysis Overview of 2009 Executive Compensation
Components Annual Incentive Cash Bonus
Compensation.
32
2009
Outstanding Equity Awards at Fiscal Year End
The following table reflects outstanding performance share units
and restricted stock held by our Named Executive Officers as of
December 31, 2009, including awards that were granted prior
to 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
(a)
|
|
|
(f)
|
|
|
|
(g)
|
|
|
|
(h)
|
|
|
|
(i)
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
Incentive Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
Market
|
|
|
|
Number
|
|
|
|
Market or
|
|
|
|
|
Number of
|
|
|
|
Value of
|
|
|
|
of Unearned
|
|
|
|
Payout Value
|
|
|
|
|
Shares or
|
|
|
|
Shares or
|
|
|
|
Shares,
|
|
|
|
of Unearned
|
|
|
|
|
Units of
|
|
|
|
Units of
|
|
|
|
Units or Other
|
|
|
|
Shares, Units
|
|
|
|
|
Stock that
|
|
|
|
Stock That
|
|
|
|
Rights That
|
|
|
|
or Other Rights
|
|
|
|
|
Have Not
|
|
|
|
Have Not
|
|
|
|
Have Not
|
|
|
|
That Have
|
|
|
|
|
Vested
|
|
|
|
Vested
|
|
|
|
Vested
|
|
|
|
Not Vested
|
|
Name
|
|
|
(#)(1)
|
|
|
|
($)(2)
|
|
|
|
(#)(3)(4)
|
|
|
|
($)(5)
|
|
Matthew P. Clifton,
|
|
|
|
n/a
|
|
|
|
|
n/a
|
|
|
|
|
170,473
|
|
|
|
|
$4,369,223
|
|
Chief Executive Officer and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chairman of the Board
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David L. Lamp,
|
|
|
|
1,334
|
|
|
|
|
$34,190
|
|
|
|
|
89,765
|
|
|
|
|
$2,300,677
|
|
President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce R. Shaw,
|
|
|
|
13,076
|
|
|
|
|
$335,138
|
|
|
|
|
21,934
|
|
|
|
|
$562,168
|
|
Senior Vice President and Chief
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George J. Damiris,
|
|
|
|
9,824
|
|
|
|
|
$251,789
|
|
|
|
|
25,094
|
|
|
|
|
$643,159
|
|
Senior Vice President,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supply and Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denise C. McWatters,
|
|
|
|
5,072
|
|
|
|
|
$152,873
|
|
|
|
|
7,908
|
|
|
|
|
$202,682
|
|
Vice President, General
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Counsel and Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The following chart sets forth by grant date the number of
unvested restricted stock awards (with no performance standards)
awarded to our Named Executive Officers that remained
outstanding as of December 31, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 2005
|
|
|
|
June 2007
|
|
|
|
December 2007
|
|
|
|
March 2008
|
|
|
|
February 2009
|
|
|
|
|
|
|
|
|
Restricted
|
|
|
|
Restricted
|
|
|
|
Restricted
|
|
|
|
Restricted
|
|
|
|
Restricted
|
|
|
|
|
|
Name
|
|
|
Stock(a)
|
|
|
|
Stock(b)
|
|
|
|
Stock(c)
|
|
|
|
Stock(d)
|
|
|
|
Stock(e)
|
|
|
|
Total
|
|
Matthew P. Clifton
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
David L. Lamp
|
|
|
|
1,334
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
1,334
|
|
Bruce R. Shaw
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
6,319
|
|
|
|
|
1,633
|
|
|
|
|
5,124
|
|
|
|
|
13,076
|
|
George J. Damiris
|
|
|
|
0
|
|
|
|
|
816
|
|
|
|
|
0
|
|
|
|
|
2,177
|
|
|
|
|
6,831
|
|
|
|
|
9,824
|
|
Denise C. McWatters(f)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
984
|
|
|
|
|
2,478
|
|
|
|
|
3,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Restricted stock awards with no performance standards (as
adjusted for the June 2006 stock split) were made in February
2005. Pursuant to the terms of the grants, one-third of the
restricted stock vested in January 2008, and an additional
one-third of the restricted stock vested in January 2009. The
remaining one-third of the restricted stock vested immediately
after December 31, 2009. |
|
(b) |
|
An award of 2,450 shares of restricted stock was made in
June 2007 following the commencement of Mr. Damiris
employment with the Company. Pursuant to the terms of the grant,
one-third of the restricted stock vested in January 2008, and an
additional one-third of the restricted stock vested in January
2009. The remaining one-third of the restricted stock vested
immediately after December 31, 2009. |
33
|
|
|
(c) |
|
An award of 5,380 shares of restricted stock (with no
performance standards) was made to Mr. Shaw in December
2007. One-half of those restricted shares vested on
January 1, 2009, and the remaining one-half of the
restricted shares vested immediately after December 31,
2009. A second award of 5,444 shares of restricted stock
(with no performance standards) was also made to Mr. Shaw
in December 2007. One-third of those 5,444 restricted shares
vested on January 1, 2009, and an additional one-third of
those restricted shares vested immediately after
December 31, 2009. Except in the case of early termination,
the remaining one-third of the 5,444 restricted shares will vest
on January 1, 2011. |
|
(d) |
|
Restricted stock awards with no performance standards were made
in March 2008. Pursuant to the terms of the grants, one-third of
the restricted stock vested in January 2009, and an additional
one-third of the restricted stock vested immediately after
December 31, 2009. Except in the case of early termination,
the remaining one-third of the restricted stock will vest
immediately after December 31, 2010. |
|
(e) |
|
Restricted stock awards with no performance standards were made
in February 2009. The vesting dates for these awards are
described above in the narrative disclosures in the section
titled Restricted Stock Agreement Terms. |
|
(f) |
|
This supplemental table does not include the 1,610 HEP
restricted units granted to Ms. McWatters. The first
one-third of the 1,610 HEP restricted units granted to
Ms. McWatters by HLS vested immediately following
December 31, 2009. The remaining two-thirds will vest in
substantially equal installments immediately following
December 31, 2010 and 2011. Other than due to a defined
change-in-control
event, death, disability or retirement, if
Ms. McWatters employment relationship with HLS is
terminated prior to one of the vesting dates specified above,
all unvested restricted units will be forfeited. In the event of
Ms. McWatters death, total and permanent disability
as determined by the Compensation Committee of HLS in its sole
discretion, or upon either of Ms. McWatters
retirement with HLS after attaining age 62 or an earlier
retirement age approved by the Compensation Committee of HLS in
its sole discretion, Ms. McWatters shall forfeit a number
of units equal to (i) the total number of units initially
subject to the award times (ii) the percentage that the
period of full months beginning on the first calendar month
following the date of death, disability or retirement and ending
on December 31, 2011 bears to 36. Any remaining units that
are not vested will become vested. In its sole discretion, the
Compensation Committee of HLS may decide to vest all of the
units in lieu of the prorated number. Ms. McWatters is a
unitholder with respect to all of the restricted units and has
the right to receive all distributions paid with respect to such
restricted units. The termination and
change-in-control
provisions of this award are described below in the section
titled Potential Payments upon Termination or Change in
Control. These restricted unit awards are described in
detail in HEPs Annual Report on
10-K for the
year ended December 31, 2009. |
|
|
|
(2) |
|
Based upon the closing market price of our Common Stock or HEP
common units, as applicable, on December 31, 2009, which
was $25.63 per share for our Common Stock and $39.84 for the HEP
common units. |
|
(3) |
|
For purposes of the Outstanding Equity Awards at Fiscal Year End
table, all performance awards have been calculated assuming the
maximum threshold is reached because target was obtained in 2009. |
|
(4) |
|
The following chart sets forth by grant date the number of
equity incentive plan awards awarded to our Named Executive
Officers that remained outstanding and unvested as of
December 31, 2009: |
Restricted
Stock and Performance Share Unit Grants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 2005
|
|
|
|
February 2007
|
|
|
|
June 2007
|
|
|
|
December 2007
|
|
|
|
March 2008
|
|
|
|
February 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
|
|
|
|
Performance
|
|
|
|
Performance
|
|
|
|
|
|
|
|
Performance
|
|
|
|
|
|
|
|
Performance
|
|
|
|
|
Restricted
|
|
|
|
Restricted
|
|
|
|
Share
|
|
|
|
Share
|
|
|
|
Share
|
|
|
|
Restricted
|
|
|
|
Share
|
|
|
|
Restricted
|
|
|
|
Share
|
|
Name
|
|
|
Stock(a)
|
|
|
|
Stock(b)
|
|
|
|
Units(c)
|
|
|
|
Units(d)
|
|
|
|
Units(e)
|
|
|
|
Stock(f)
|
|
|
|
Units(g)
|
|
|
|
Stock(h)
|
|
|
|
Units(i)
|
|
Matthew P. Clifton
|
|
|
|
6,150
|
|
|
|
|
7,293
|
|
|
|
|
10,940
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
9,006
|
|
|
|
|
13,509
|
|
|
|
|
33,042
|
|
|
|
|
33,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David L. Lamp
|
|
|
|
0
|
|
|
|
|
4,098
|
|
|
|
|
6,147
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
5,127
|
|
|
|
|
7,690
|
|
|
|
|
17,622
|
|
|
|
|
17,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce R. Shaw
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
3,394
|
|
|
|
|
0
|
|
|
|
|
2,449
|
|
|
|
|
0
|
|
|
|
|
5,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George J. Damiris
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
2,450
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
3,266
|
|
|
|
|
0
|
|
|
|
|
6,831
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denise C. McWatters
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
1,476
|
|
|
|
|
0
|
|
|
|
|
2,478
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Restricted stock awards with a performance standard (as adjusted
for the June 2006 stock split) were made in February 2005.
Pursuant to the terms of the grant, one-third of the restricted
stock became fully vested |
34
|
|
|
|
|
and non-forfeitable in February 2008, and an additional
one-third of the restricted stock became fully vested and
non-forfeitable in February 2009. The remaining one-third of the
restricted stock vested in February 2010 upon the certification
by the Committee that our average quarterly adjusted net income
per diluted share is at least $0.12 for the period from
October 1, 2004 through the quarter ending on
December 31, 2009. |
|
(b) |
|
Restricted stock awards with a performance standard were granted
in February, 2007. Pursuant to the terms of the grants,
one-third of the restricted stock became fully vested and
non-forfeitable in February 2008. Except in the case of early
termination of employment, (i) after December 31,
2008, another one-third of the restricted stock (the
2009 shares) will vest if our average quarterly
adjusted net income per diluted share is at least $0.68 for the
period from October 1, 2007 through the end of period being
measured (with the earliest possible ending quarter being the
fourth quarter of 2008 and the last possible ending quarter
being the fourth quarter of 2010) and (ii) after
December 31, 2009, the remaining one-third of the
restricted stock (the 2010 shares) will vest if
our average quarterly adjusted net income per diluted share is
at least $0.68 for the period from October 1, 2007 through
the end of period being measured (with the earliest possible
ending quarter being the fourth quarter of 2009 and the last
possible ending quarter being the fourth quarter of 2010). In
the event of the individuals death, total and permanent
disability (as determined by our Committee in its sole
discretion), or retirement after attaining age 62 (or some
earlier retirement age approved by our Committee in its sole
discretion), the individual shall forfeit a number of shares
equal to (i) the total shares originally subject to the
award, times (ii) the percentage that the period of full
months beginning on the first calendar month following the date
of death, disability or retirement and ending on
December 31, 2009, bears to 36, and any remaining shares
that are not vested will become vested, except that in its sole
discretion, our Committee may decide to vest all of the shares
in lieu of the prorated number. The individual will be a
stockholder with respect to all of the restricted shares and
will have the right to receive all distributions paid with
respect to such restricted shares. The change in control
provisions of this award are described below in the section
titled Potential Payments upon Termination or Change in
Control. Assuming the quarterly adjusted net income
standard is met as set forth in each case above, the
2009 shares and/or the 2010 shares, as the case may
be, will become vested on the date that our Committee certifies
that we have met the applicable standards. As of
December 31, 2009, the quarterly adjusted net income
standard had not been met for the 2009 shares. |
|
(c) |
|
Performance share units were awarded in February 2007. Pursuant
to the terms of the grants, the individual may earn from 0% to
200% of the performance share units for the designated
performance period. The performance period for these awards ends
on December 31, 2009. The number of shares disclosed in the
above chart in this footnote (4) represents the number of
units subject to the award, rather than the number of shares
potentially payable in the event the maximum performance
threshold is attained. At the end of the performance period, the
individual is entitled to a number of shares of Common Stock
equal to a percentage of the awarded units as determined by
reference to our performance on three performance measures
compared to the performance by members of our defined peer group
on the same three measures. The three measures are earnings per
share growth, return on assets, and return on investment. The
relevant peer group was Alon USA Energy, Inc., Cameron
International Corporation, Crosstex Energy, Inc., El Paso
Corporation, FMC Technologies, Inc., Frontier Oil Corporation,
Giant Industries Inc., Hanover Compressor Company, Marathon Oil
Corporation, Maverick Tube Corporation, Murphy Oil Corporation,
Sunoco, Inc., Tesoro Corporation, Valero Energy Corp., Western
Gas Resources, Inc. and The Williams Companies, Inc. The number
of shares of our Common Stock payable is equal to the result of
multiplying the number of performance share units granted by the
average of the percentile ranking of our performance on the
performance measures over the performance period as compared to
the peer groups performance on such measures over the
performance period, multiplied by two. The average is determined
by adding our percentile ranking on each performance measure and
dividing the sum by three. The impact on these awards of a
change in control or the awardees termination of
employment under various circumstances prior to
December 31, 2009 are the same as described for the 2009
performance share unit awards in the previous section of this
Proxy Statement titled Performance Share Unit Agreement
Terms. |
|
(d) |
|
Performance share units were granted to Mr. Damiris on
June 29, 2007. The terms and conditions of the performance
share units granted by us to other Named Executive Officers in
February 2007 (see note (c) of this footnote (4)) govern
these 2,450 performance share units. |
35
|
|
|
(e) |
|
Performance share units were granted to Mr. Shaw on
December 17, 2007. The terms and conditions of the
performance share units granted by us to other Named Executive
Officers in February 2007 (see note (c) of this footnote
(4)) govern these 3,394 performance share units. |
|
(f) |
|
Restricted stock awards with a performance standard were granted
in March, 2008. Pursuant to the terms of the grants, one-third
of the restricted stock became fully vested and non-forfeitable
in February 2009. Except in the case of early termination of
employment, (i) after December 31, 2009, another
one-third of the restricted stock (the
2010 shares) will vest if our average quarterly
adjusted net income per diluted share is at least $1.00 for the
period from October 1, 2008 through the end of period being
measured (with the earliest possible ending quarter being the
fourth quarter of 2009 and the last possible ending quarter
being the fourth quarter of 2011) and (ii) after
December 31, 2010, the remaining one-third of the
restricted stock (the 2011 shares) will vest if
our average quarterly adjusted net income per diluted share is
at least $1.00 for the period from October 1, 2008 through
the end of period being measured (with the earliest possible
ending quarter being the fourth quarter of 2010 and the last
possible ending quarter being the fourth quarter of 2011). In
the event of the individuals death or total and permanent
disability (as determined by our Committee in its sole
discretion), the individual shall forfeit a number of shares
equal to (i) the total shares originally subject to the
award, times (ii) the percentage that the period of full
months beginning on the first calendar month following the date
of death or disability and ending on December 31, 2010,
bears to 36, and any remaining shares that are not vested will
become vested, except that in its sole discretion, our Committee
may decide to vest all of the shares in lieu of the prorated
number. The individual will be a stockholder with respect to all
of the restricted shares and will have the right to receive all
distributions paid with respect to such restricted shares. The
change in control provisions of this award are described below
in the section titled Potential Payments upon Termination
or Change in Control. Assuming the quarterly adjusted net
income standard is met as set forth in each case above, the
2010 shares and/or the 2011 shares, as the case may
be, will become vested on the date that our Committee certifies
that we have met the applicable standards. |
|
(g) |
|
Performance share units were awarded in March 2008. Pursuant to
the terms of the grants, the individual may earn from 0% to 200%
of the performance share units for the designated performance
period. The performance period for these awards ends on
December 31, 2010. The number of shares disclosed in the
above chart in this footnote (4) represents the number of
units subject to the award, rather than the number of shares
potentially payable in the event the maximum performance
threshold is attained. The performance goals associated with
these awards are the same as described above in note (c) of
this footnote (4). The impact on these awards of a change in
control or the awardees termination of employment under
various circumstances prior to December 31, 2010 are the
same as described for the 2010 performance share unit awards in
the previous section of this Proxy Statement titled
Performance Share Unit Agreement Terms. |
|
(h) |
|
Restricted stock awards with a performance standard were made in
February 2009. The vesting dates for these awards are described
above in the narrative disclosures in the section titled
Restricted Stock Agreement Terms. |
|
(i) |
|
Performance share units were awarded in February 2009. The
number of shares disclosed in the chart above in this footnote
(4) represents the number of units subject to the award,
rather than the number of shares potentially payable in the
event the maximum performance threshold is attained. Additional
information regarding these performance share units is provided
above in the narrative disclosures in the section titled
Performance Share Unit Agreement Terms under the
2009 Grants of Plan-Based Awards table. |
|
|
|
(5) |
|
Based upon the closing market price of our Common Stock on
December 31, 2009, which was $25.63 per share. |
36
2009
Option Exercises and Stock Vested
The following table provides information about our Named
Executive Officers related to stock options exercised and
restricted share
and/or
performance share unit awards that became vested during the 2009
fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
Number of Shares
|
|
Value Realized
|
|
Number of Shares
|
|
Value Realized
|
|
|
|
Acquired on Exercise
|
|
Upon Exercise
|
|
Acquired on Vesting
|
|
Upon Vesting
|
|
Name
|
|
(#)
|
|
($)
|
|
(#)
|
|
($)(1)
|
|
Matthew P. Clifton
|
|
n/a
|
|
n/a
|
|
|
62,094(2)
|
|
|
|
$1,365,860
|
|
Chief Executive Officer and
Chairman of the Board
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David L. Lamp
|
|
n/a
|
|
n/a
|
|
|
23,276(3)
|
|
|
|
$473,458
|
|
President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce R. Shaw
|
|
n/a
|
|
n/a
|
|
|
11,588(4)
|
|
|
|
$220,275
|
|
Senior Vice President and Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George J. Damiris
|
|
n/a
|
|
n/a
|
|
|
1906(5)
|
|
|
|
$34,746
|
|
Senior Vice President, Supply and Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denise C. McWatters
|
|
n/a
|
|
n/a
|
|
|
492(6)
|
|
|
|
$8,969
|
|
Vice President, General Counsel and Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Value realized from the vesting of restricted stock and/or
performance share unit awards is equal to the closing price of
our Common Stock on the vesting date (or, if the vesting date is
not a trading date, on the trading date immediately prior to the
date of vesting) multiplied by the number of vested shares
(calculated before payment of any applicable withholding or
other income taxes). |
|
(2) |
|
Mr. Clifton was granted the following awards that vested on
February 18, 2009 following the Committees
certification of the applicable performance standards when the
applicable market price of the Companys stock was $23.48:
(a) 22,034 shares (as adjusted for the August 2004 and
June 2006 stock splits) of restricted stock with a performance
standard in May 2004, (b) 6,150 shares (as adjusted
for the June 2006 stock split) of restricted stock with a
performance standard in February 2005,
(c) 5,232 shares (as adjusted for the June 2006 stock
split) of restricted stock with a performance standard in
February 2006, and (d) 4,503 shares of restricted
stock with a performance standard in March 2008. |
|
|
|
Mr. Clifton also was granted 15,698 performance share units
(as adjusted for the June 2006 stock split) in February 2006
that vested on January 12, 2009 following the
Committees certification that the applicable performance
standards were met. Those performance share units were paid at
24,175 shares of common stock (which represents the number
of units subject to the award multiplied by a 154% performance
percentage) with an applicable market price of $19.67 on the
date of vesting. |
|
(3) |
|
Mr. Lamp was granted the following awards that vested on
the indicated dates: (a) 2,534 shares of restricted
stock (as adjusted for the August 2004 and June 2006 stock
splits) granted in May 2004 and vested on January 1, 2009
when the market price of the Companys stock was $18.23,
the closing price per share of our Common Stock on
December 31, 2008, (b) 1,333 shares of restricted
stock (as adjusted for the June 2006 stock split) granted in
February 2005 and vested on January 1, 2009 when the
applicable market price of the Companys stock was $18.23,
(c) 2,998 shares of restricted stock with a
performance standard (as adjusted for the June 2006 stock split)
granted in February 2006 and vested on February 18, 2009
following the Committees certification of the applicable
performance standards when the applicable market price of the
Companys stock was $23.48, and (d) 2,563 shares
of restricted stock with a performance standard granted in March
2008 and vested on February 18, 2009 following the
Committees certification of the applicable performance
standards when the applicable market price of the Companys
stock was $23.48. |
|
|
|
Mr. Lamp also was granted 8,992 performance share units (as
adjusted for the June 2006 stock split) in February 2006 that
vested on January 12, 2009 following the Committees
certification that the applicable performance |
37
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|
standards were met. Those performance share units were paid at
13,848 shares of Common Stock (which represents the number
of units subject to the award, multiplied by a 154% Performance
Percentage) with an applicable market price of $19.67 on the
date of vesting. |
|
(4) |
|
Mr. Shaw was granted the following awards that vested on
January 1, 2009 when the market price of the Companys
stock was $18.23, the closing price per share of our common
stock on December 31, 2008: (a) 4,504 shares of
restricted stock granted in December 2007, and
(b) 816 shares of restricted stock granted in March
2008. Mr. Shaw was also granted 4,070 performance share
units in December 2007 that vested on January 12, 2009
following the Committees certification that the applicable
performance standards were met. Those performance share units
were paid at 6,268 shares of Common Stock (which represents
the number of units subject to the award, multiplied by a 154%
Performance Percentage) with an applicable market price of
$19.67 on the date of vesting. |
|
(5) |
|
Mr. Damiris was granted the following awards that vested on
January 1, 2009 when the market price of the Companys
stock was $18.23, the closing price per share of our common
stock on December 31, 2008: (a) 817 shares of
restricted stock granted in June 2007, and
(b) 1,089 shares of restricted stock granted in March
2008. |
|
(6) |
|
Ms. McWatters was granted an award of 492 shares of
restricted stock in March 2008 that vested on January 1,
2009 when the applicable market price of the Companys
stock was $18.23. |
Pension
Benefits
Our Named Executive Officers participate in our Retirement Plan
(the Qualified Retirement Plan), which generally
provides a defined benefit to participants following their
retirement. In addition, since the 1995 fiscal year, we have
also sponsored and maintained our Retirement Restoration Plan
(the Retirement Restoration Plan) that provides
additional benefits such that the total pension benefits for
specified executives will be maintained at the levels
contemplated in the Qualified Retirement Plan before application
of the Tax Code limitations. The table below sets forth an
estimate of the pension benefits payable to our Named Executive
Officers at normal retirement age under the Qualified Retirement
Plan and the Retirement Restoration Plan (collectively, the
Retirement Plans).
Pension
Benefits Table
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Number of Years
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Present Value of
|
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Payments During
|
Name
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Plan Name
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Credited Service
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Accumulated Benefit
|
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Last Fiscal Year
|
(a)
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(b)
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(#) (c)
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($) (d)
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($) (e)
|
Matthew P. Clifton,
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|
Qualified Retirement Plan
|
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29.17
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$918,681
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$0
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Chief Executive Officer and
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Retirement Restoration Plan
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29.17
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$2,649,334
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$0
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Chairman of the Board
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|
|
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|
|
|
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David L. Lamp,
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Qualified Retirement Plan
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6.0
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$131,831
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$0
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President
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Retirement Restoration Plan
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6.0
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$159,436
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$0
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Bruce R. Shaw
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Qualified Retirement Plan
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|
8.25
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$90,328
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$0
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Senior Vice President and
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Retirement Restoration Plan
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8.25
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$4,774
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$0
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Chief Financial Officer
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George J. Damiris,
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Qualified Retirement Plan
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n/a
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n/a
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$0
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Senior Vice President,
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Retirement Restoration Plan
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n/a
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n/a
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$0
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Supply and Marketing
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Denise C. McWatters,
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Qualified Retirement Plan
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n/a
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n/a
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$0
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Vice President, General Counsel
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Retirement Restoration Plan
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n/a
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n/a
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$0
|
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and Secretary
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In quantifying the present value of the current accrued benefit
under the Retirement Plans for our Named Executive Officers
indicated above, the valuation method and assumptions discussed
in Note 16 to our Consolidated Financial Statements for the
fiscal year ended December 31, 2009, included in our annual
report on
Form 10-K
were
38
utilized assuming benefits begin at the first age the
participant is eligible for an unreduced benefit (age 62 or
current age if later). The material assumptions used include the
following:
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Discount Rate
|
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6.20%
|
Mortality Table
|
|
RP2000 White Collar Projected to 2020 (50% male/50% female)
|
Retirement Age
|
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the later of current age or age 62
|
Effective January 1, 2007, participation in the Retirement
Plans was frozen to non-union new hires. Employees hired before
2007 generally became eligible to participate in our Qualified
Retirement Plan after completing one year of service with us or
any of our affiliates. The amount of benefits accrued under the
Qualified Retirement Plan is based upon a participants
compensation, age and length of service. The compensation taken
into account under our Qualified Retirement Plan is a
participants average monthly compensation, which includes
base salary or base pay and any quarterly bonuses, during the
highest consecutive
36-month
period of employment for each employee (Plan
Compensation). No quarterly bonuses were provided to our
Named Executive Officers in 2009, but quarterly bonuses were
paid to some non-executive union employees.
Our Qualified Retirement Plan provides for benefits upon normal
retirement, early retirement, and late retirement, as well as
providing accelerated deferred vested benefits, disability
benefits and death benefits. Upon normal retirement following a
participants attainment of age 65, a participant is
entitled to a life annuity with monthly pension payments equal
to (a) 1.6% of the participants average monthly Plan
Compensation multiplied by the participants total years of
credited benefit service, minus (b) 1.5% of the
participants primary Social Security benefit multiplied by
the participants total years of credited service (but not
to exceed 45% of such Social Security benefits). In addition, a
participant who (i) has attained age 50 and completed
at least 10 years of service, or (ii) has attained
age 55 and completed at least 3 years of service may
elect to terminate employment and begin receiving benefits under
our Qualified Retirement Plan. If such a participant begins
receiving benefits under our Qualified Retirement Plan on or
after the date the participant attains age 60 but before he
reaches age 62, such benefits will be reduced by
1/12th of
21/2%
for each full month that such benefits begin before age 62.
If benefits begin before age 60, the participants
Qualified Retirement Plan benefits will be reduced by
1/12th of 5% for each full month that such benefits begin
before age 60.
The normal form of benefits under our Qualified Retirement Plan
is a life annuity or, if a participant is married, a qualified
joint and survivor annuity (unless properly waived). Our
Qualified Retirement Plan also permits participants to elect to
receive their benefits in the form of a single life annuity for
a 5- or
10-year term
certain, a reduced pension for the joint lives of the
participant and a co-annuitant (with a 100%, 75%, 66.66%, or 50%
survivor percentage) or a lump sum. If the participant dies
before his Qualified Retirement Plan benefits have commenced,
his surviving spouse will be entitled to a benefit for life
equal to the amount that would have been paid as a survivor
benefit under the 100% joint and survivor annuity option. If the
participant is not married on the date of his death or waived
the surviving spouse benefit, such benefit will be paid to his
beneficiary in the form of monthly payments for life or a term
certain or in the form of a lump sum, as elected by the
beneficiary.
Benefits up to limits set by the Tax Code are funded by our
contributions to the Qualified Retirement Plan, with the annual
contribution amounts determined on an actuarial basis. In 2009,
the Tax Code limited the annual benefit that could be paid from
our Qualified Retirement Plan to $195,000 per year (subject to
increases for future years based on price level changes) and
limited the compensation that could be taken into account in
computing such benefit to $245,000 per year (subject to certain
upward adjustments for future years).
For certain executives including our Named Executive Officers
whose benefits under our Qualified Retirement Plan are limited
as a result of the limitations described in the preceding
paragraph, we have granted participation in our Retirement
Restoration Plan, which provides additional pension benefits so
that the total retirement benefits for specified executives will
be maintained at the levels contemplated in our Qualified
Retirement Plan before application of the Tax Code limitations.
Specifically, the amount of benefits payable under our
Retirement Restoration Plan is equal to a participants
benefit payable in the form of a life annuity calculated under
the Qualified Retirement Plan without regard to the Tax Code
limitations less the amount of the Qualified Retirement Plan
benefit that can be paid under the Qualified Retirement Plan
after application of the Tax Code limits. Benefits under our
Retirement Restoration Plan are generally payable in the same
form and at the same time as the
39
participants benefits under the Qualified Retirement Plan
for benefits earned through 2004 (Pre-409A benefits) and as a
lump sum, and no earlier than 6 months following the Named
Executive Officers separation from service for benefits
earned after 2004 (Post-409A benefits).
Since Mr. Clifton was over age 50 and had more than
10 years of service, he was eligible for early retirement
on December 31, 2009. His early retirement benefits
potentially payable beginning January 1, 2010 are estimated
to be $7,004 per month payable for his lifetime or $1,167,244
payable as a lump sum from the Qualified Retirement Plan and
$20,198 per month payable for his lifetime or $3,366,150 payable
as a lump sum from the Retirement Restoration Plan. A portion of
the $20,198 monthly benefit payable to Mr. Clifton
under the Retirement Restoration Plan is attributable to
Post-409A benefits and, therefore, will paid in a lump sum and
not as a monthly benefit. Messrs. Lamp and Shaw were not
eligible to commence benefits as of December 31, 2009.
Mr. Damiris and Ms. McWatters are not eligible to
participate in the Qualified Retirement Plan and the Retirement
Restoration Plan because they were hired after the Plan was
frozen to non-union new hires.
Nonqualified
Deferred Compensation
We sponsored an ESOP Restoration Plan that was terminated
effective January 3, 2009 and all amounts held thereunder
were distributed on January 6, 2009. At the termination of
the ESOP Restoration Plan the only Named Executive Officer who
had an account balance was Mr. Clifton. The following table
provides information about participation in our ESOP Restoration
Plan for the year ending December 31, 2000:
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Executive
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Registrant
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Aggregate
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Aggregate
|
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|
Contributions
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|
Contributions
|
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|
Earnings
|
|
|
Withdrawals/
|
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Aggregate
|
|
|
|
|
|
in Last FY
|
|
|
in Last FY
|
|
|
in Last FY
|
|
|
Distributions
|
|
|
Balance at Last FYE
|
|
|
Name
|
|
|
($)
|
|
|
($)
|
|
|
($)(1)
|
|
|
($)(2)
|
|
|
($)
|
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|
Matthew P. Clifton,
|
|
|
|
n/a
|
|
|
|
|
n/a
|
|
|
|
|
$(4,384
|
)
|
|
|
|
$191,042
|
|
|
|
|
$0
|
|
|
|
|
|
Chairman of the Board and Chief Executive Officer
|
|
|
|
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(1) |
|
Amounts reported as earnings in this table are not preferential
(and historically have not been preferential) and therefore are
not reported in the Summary Compensation Table and have not been
reported in the Summary Compensation Table in prior years. This
amount is the difference between the aggregate balance of
Mr. Cliftons ESOP Restoration account on
December 31, 2008, which was $195,426, and the aggregate
distribution paid to Mr. Clifton in January 2009. The
aggregate balance of Mr. Cliftons ESOP Restoration
account on December 31, 2008 was calculated by multiplying
the closing market price of our Common Stock on
December 31, 2008 of $18.23 per share by the 10,720 phantom
shares held in Mr. Cliftons account on that date. |
|
(2) |
|
Of this amount, $189,434 represents the 10,720 phantom shares
awarded under the ESOP Restoration Plan and held by
Mr. Clifton as of January 2, 2009 multiplied by the
average of the market closing prices for our Common Stock for
the thirty day period ending January 2, 2009, which was
$17.67 per share. Included in the amount reported in the table
is the distribution received by Mr. Clifton on
January 6, 2009 of $1,608 in dividends with respect to the
10,720 shares of our Common Stock held in his account as of
December 31, 2008. |
We adopted the ESOP Restoration Plan to provide additional
benefits to executives whose allocations of shares of our Common
Stock under our Employee Stock Ownership Plan were reduced
because of limitations imposed by the Tax Code for the 1995 and
1996 fiscal years. Pursuant to the terms of the ESOP Restoration
Plan, eligible participants received, after the end of the 1995
and 1996 fiscal years, grants of phantom shares
equal in number to the number of shares of our Common Stock that
they were unable to receive under our ESOP due to Tax Code
limitations for such fiscal years. Employee contributions were
not allowed under the ESOP Restoration Plan. A total of 61,880
phantom shares were granted to participants under the ESOP
Restoration Plan for the 1995 and 1996 fiscal years.
The phantom shares awarded under the ESOP Restoration Plan
represent unsecured rights to cash payments based on dividends
paid on shares of our Common Stock and on the market value of
such shares on future dates. Payments based on the market value
of Common Stock are generally paid 40 days following an
executive officers termination of employment or the date
of final distribution to the officer under the ESOP, unless the
officer elects to defer payment to a future date not later than
60 days after the officers death or permanent
disability. The ESOP
40
Restoration Plan was terminated effective January 2, 2009
and all outstanding account balances were paid in cash to the
three individuals who had balances at that time (only
Mr. Clifton is a Named Executive Officer).
Potential
Payments Upon Termination or Change in Control
There are no employment agreements currently in effect between
us and any Named Executive Officer, and the Named Executive
Officers are not covered under any general severance plan.
We have entered into Change in Control Agreements with our Named
Executive Officers. All agreements follow the policy that was
approved in February 2008 (approximately three months prior to
the 2008 Annual Meeting of Stockholders) and are on the form
that was approved in February 2008. No subsequent changes or
amendments have been made to our Change in Control Agreement
form.
The term of each Change in Control Agreement ends on
May 15, 2010 regardless of the date the officer enters into
the agreement, with an automatic one year extension on
May 15, 2010 (and on each May 15th thereafter)
unless a cancellation notice is given 60 days prior to the
applicable May 15 expiration date (as extended from time to
time). The Change in Control Agreements provide that if, in
connection with or within two years after a Change in
Control, the executive is terminated without
Cause, leaves voluntarily for Good
Reason, or is terminated as a condition of the occurrence
of the transaction constituting the Change in
Control, then the executive will receive the following
cash severance amounts: (i) a cash payment, paid within
10 days following the executives termination, equal
to his accrued and unpaid salary, reimbursement of expenses and
accrued vacation pay, and (ii) a lump sum amount, paid
within 15 days following the executives termination,
equal to the multiple specified in the table below for such
executive times: (A) his annual base salary as of his date
of termination or the date immediately prior to the Change
in Control, whichever is greater, plus (B) his or her
annual bonus amount, calculated as the average annual bonus paid
to him or her for the prior three years. In addition, the
executive (and his dependents, as applicable) will receive the
continuation of their medical and dental benefits for the number
of years indicated in the table below for such executive.
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|
Cash Severance
|
|
Years for Continuation of
|
Named Executive Officer
|
|
Multiplier
|
|
Medical and Dental Benefits
|
|
Matthew P. Clifton
|
|
3X
|
|
3
|
David L. Lamp
|
|
2X
|
|
2
|
Bruce R. Shaw
|
|
2X
|
|
2
|
George J. Damiris
|
|
2X
|
|
2
|
Denise C. McWatters
|
|
1X
|
|
1
|
For purposes of the Change in Control Agreements, the following
terms have been given the meanings set forth below:
(a) Cause means an executives
(i) engagement in any act of willful gross negligence or
willful misconduct on a matter that is not inconsequential, as
reasonably determined by our Board of Directors in good faith,
or (ii) conviction of a felony.
(b) Change in Control means, subject to certain
specific exceptions set forth in the Change in Control
Agreements: (i) a person or group of persons (other than
Holly, HLS, HEP, or any employee benefit plan of any of the
three entities or its affiliates) becomes the beneficial owner
of more than 50% of the combined voting power of our then
outstanding securities or more than 50% of our outstanding
Common Stock, (ii) a majority of the members of our Board
of Directors is replaced during a 12 month period by
directors who were not endorsed by a majority of the board
members prior to their appointment, (iii) the consummation
of a merger or consolidation of us or one of our subsidiaries
other than (A) a merger or consolidation resulting in our
voting securities outstanding immediately prior to the
transaction continuing to represent at least 50% of the combined
voting power of our voting securities or the voting securities
of the surviving entity outstanding immediately after the
transaction, or (B) a merger or consolidation effected to
implement a recapitalization of us in which no person or group
becomes the beneficial owner of our securities representing more
than 50% of the combined voting power of our then outstanding
securities, or (iv) our stockholders approve a plan of
41
complete liquidation or dissolution of us or an agreement for
the sale or disposition of all or substantially all of our
assets.
(c) Good Reason means, without the express
written consent of the executive: (i) a material reduction
in the executives (or his supervisors) authority,
duties or responsibilities, (ii) a material reduction in
the executives base compensation, or (iii) the
relocation of the executive to an office or location more than
50 miles from the location at which the executive normally
performed the executives services, except for travel
reasonably required in the performance of the executives
responsibilities. The executive must provide notice to us of the
alleged Good Reason event within 90 days of its occurrence
and we have the opportunity to remedy the alleged Good Reason
event within 30 days from receipt of the notice of such
allegation.
All payments and benefits due under the Change in Control
Agreements will be conditioned on the execution and
nonrevocation by the executive of a release for our benefit and
the benefit of our related entities and agents. The Change in
Control Agreements also contain confidentiality provisions
pursuant to which each executive agrees not to disclose or
otherwise use our confidential information. Violation of the
confidentiality provisions entitles us to complete relief,
including injunctive relief. Further, in the event of a breach
of the confidentiality covenants, the executive could be
terminated for Cause (provided the breach
constituted willful gross negligence or misconduct that is not
inconsequential). The Change in Control Agreements do not
prohibit the waiver of a breach of these covenants.
If amounts payable to an executive under a Change in Control
Agreement (together with any other amounts that are payable by
us as a result of a change in ownership or control)
(collectively, the Payments) exceed the amount
allowed under section 280G of the Tax Code for such
executive (thereby subjecting the executive to an excise tax as
described in further detail below) by 10% or more, we will pay
the executive a tax gross up (a Gross Up) in an
amount necessary to allow the executive to retain (after all
regular income and section 280G taxes) a net amount equal
to the total present value of the Payments on the date they are
to be paid (after all regular income taxes but without reduction
for section 280G taxes). Conversely, the Payments will be
reduced to the level at which no excise tax applies, but only to
the extent they exceed the section 280G limit for the
executive by less than 10%.
In addition, under the terms of the long-term equity incentive
awards described above, if, within 60 days prior to or at
any time after a Change in Control, (i) a Named
Executive Officers employment is terminated by us, other
than for Cause or (ii) he resigns within
90 days after an Adverse Change has occurred,
then all restrictions on the award will lapse, the restricted
shares or performance units subject to the award will become
vested and Common Stock or a cash payment (in the case of
certain performance share unit awards) will be delivered to the
Named Executive Officer as soon as practicable, though in no
event following two and one-half months following the end of the
year in which the involuntary termination occurred. The
performance share unit award agreements provide that the
performance percentage is deemed to be 200% upon the occurrence
of a Change in Control (see the footnotes to the Outstanding
Equity Awards at Fiscal Year End table for a description of the
Performance Percentage).
For purposes of the long-term equity incentive awards, the
following terms have been given the meanings set forth below:
(a) Adverse Change means without the consent of
the executive, (i) a material change in the geographic
location at which the executive is required to work regularly,
(ii) a material reduction in the duties performed by the
executive, or (iii) a material reduction in the
executives base compensation (other than bonuses and other
forms of discretionary compensation, or a general reduction
applicable generally to executives).
(b) Cause means (i) an act of dishonesty
constituting a felony or serious misdemeanor and resulting (or
intended to result in) personal gain or enrichment to the
executive at the Companys expense, (ii) gross or
willful and wanton negligence in the performance of the
executives material duties, or (iii) conviction of a
felony involving moral turpitude. The existence of Cause is
determined by the Committee in its sole discretion.
(c) Change in Control means, subject to certain
specific exceptions set forth in the long-term equity incentive
awards: (i) a person or group of persons becomes the
beneficial owner of more than 40% of the combined voting power
of our then outstanding securities, (ii) a majority of the
members of our Board of Directors is replaced by directors who
were not endorsed by two-thirds of our board members prior to
their
42
appointment, (iii) the consummation of a merger or
consolidation of us or any of our subsidiaries other than
(A) a merger or consolidation resulting in our voting
securities outstanding immediately prior to the transaction
continuing to represent at least 60% of the combined voting
power of our voting securities or the voting securities of the
surviving entity outstanding immediately after the transaction,
or (B) a merger or consolidation effected to implement a
recapitalization of us in which no person or group becomes the
beneficial owner of our securities representing more than 40% of
the combined voting power of our then outstanding securities, or
(iv) our stockholders approve a plan of complete
liquidation or dissolution or an agreement for the sale or
disposition of all or substantially all of our assets.
In the event of a Named Executive Officers (i) death,
(ii) total and permanent disability as determined by the
Committee, (iii) retirement after attaining age 62 or
an earlier retirement age approved by the Committee,
and/or
(iv) separation from employment for any reason other than
voluntary termination or Cause (as defined in the
applicable award agreement), certain of the restricted share and
performance unit agreements provide that a Named Executive
Officer will forfeit a number of restricted shares or
performance units equal to (A) the number of restricted
shares or performance units awarded, multiplied by (B) the
percentage specified in the applicable award agreement. After
that number of restricted shares or performance units is
forfeited, any shares or performance units that remain unvested
will become immediately vested. The Committee also has
discretion in the case of death, disability or retirement to
fully vest restricted shares and performance share units.
In addition, under the terms of the 1,610 HEP restricted unit
awards granted to Ms. McWatters by HLS if, in the event of
a change in control, either sixty days prior to the change in
control event or following such event,
(i) Ms. McWatters employment is terminated,
other than for cause, or (ii) she resigns within ninety
days following an adverse change, then all restrictions on the
units will lapse, the units will become vested and the vested
units will be delivered to Ms. McWatters as soon as
practicable. The terms change in control,
cause, and adverse change are
substantially similar to the defined terms above with respect to
our long-term equity incentive awards except that the definition
of change in control includes changes with respect
to HLS, HEP Logistics Holdings, L.P., or HEP and the service
relationship contemplated is with HLS.
The following table reflects the estimated payments and other
benefits due as of December 31, 2009 pursuant to the Change
in Control Agreements and the accelerated vesting of long-term
equity incentive awards of each of our Named Executive Officers,
assuming, as applicable, that a Change in Control
occurred and such executives were terminated effective
December 31, 2009; our executives may also be entitled to
payments or benefits under other plans or arrangements as
further described both below and in other sections of this
disclosure. For purposes of the table below, the per share price
of our Common Stock was assumed to be $25.63, which is the
closing price on December 31, 2009. The amounts below have
been calculated using numerous assumptions that we believe are
reasonable, such as the assumption that all reimbursable
expenses were current as of December 31, 2009. Accrued
vacation is not allowed to be carried over to a subsequent year,
so we assumed all accrued vacation for the 2009 year was
taken prior to December 31, 2009. Employees accrue vacation
in 2009 for use in 2010, so we included the value of the 2010
accrued but unused vacation. However, any actual payments that
may be made pursuant to the agreements described above are
dependent on various factors, which may or may not exist at the
time a Change in
43
Control actually occurs
and/or the
Named Executive Officer is actually terminated. Therefore, such
amounts and disclosures should be considered forward
looking statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accelerated Vesting
|
|
|
|
|
|
|
|
|
|
|
of Equity Awards on
|
|
|
|
|
|
|
|
|
Value of
|
|
a Change in Control
|
|
280G Excise Tax
|
|
|
|
|
Cash
|
|
Welfare
|
|
and Certain
|
|
Gross Up or Cut
|
|
|
Name
|
|
Payments(1)
|
|
Benefits(2)
|
|
Termination
Events(3)
(4)
|
|
Back(5)
|
|
Total
|
Matthew P. Clifton,
|
|
|
$7,236,842
|
|
|
|
$52,164
|
|
|
|
$4,369,223
|
|
|
|
$0
|
|
|
|
$11,658,229
|
|
Chief Executive Officer and Chairman of the Board
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David L. Lamp,
|
|
|
$2,165,495
|
|
|
|
$34,776
|
|
|
|
$2,354,867
|
|
|
|
$1,509,919
|
|
|
|
$6,065,057
|
|
President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce R. Shaw,
|
|
|
$1,157,286
|
|
|
|
$34,776
|
|
|
|
$897,306
|
|
|
|
$0
|
|
|
|
$2,089,368
|
|
Senior Vice President and Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George J. Damiris,
|
|
|
$1,126,837
|
|
|
|
$34,776
|
|
|
|
$894,948
|
|
|
|
$665,855
|
|
|
|
$2,722,416
|
|
Senior Vice President, Supply and Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denise C. McWatters,
|
|
|
$409,231
|
|
|
|
$17,388
|
|
|
|
$355,555
|
|
|
|
$0
|
|
|
|
$782,174
|
|
Vice President, General Counsel, and Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents cash payments equal to the sum of (a) accrued
vacation plus (b) the multiplier identified above times the
sum of (i) the executives base salary as of
December 31, 2009 and (ii) the average of the annual
cash bonus paid for 2006, 2007 and 2008. The 2007 bonus for
Mr. Damiris and Ms. McWatters representing partial
year compensation was annualized for this calculation. The total
for Mr. Clifton was calculated by calculating the sum of
(a) the value of his accrued vacation ($106,442) and
(b) three (3) times the sum of his base salary
($922,500) and average bonus ($1,454,300). |
The total for Mr. Lamp was calculated by calculating the
sum of (a) the value of his accrued vacation ($42,577) and
(b) two (2) times the sum of his base salary
($553,500) and average bonus ($507,959). The total for
Mr. Shaw was calculated by calculating the sum of
(a) the value of his accrued vacation ($25,000) and
(b) two (2) times the sum of his base salary
($325,000) and average bonus ($214,143). The total for
Mr. Damiris was calculated by calculating the sum of
(a) the value of his accrued vacation ($23,077) and
(b) two (2) times the sum of his base salary
($300,000) and average bonus ($251,880). The total for
Ms. McWatters was calculated by calculating the sum of
(a) the value of her accrued vacation ($19,230) and
(b) one (1) times the sum of her base salary
($250,000) and average bonus ($140,001).
|
|
|
(2) |
|
Represents the value of the continuation of medical and dental
benefits for each executive (and, as applicable, his spouse and
dependents) for the length of one year multiplied by the
applicable multiplier identified above with respect to such
executive. The amount was determined based upon the applicable
COBRA rates for the employees benefits. The value of the
benefits was determined by using the current monthly premium
amount for a similarly situated employee electing COBRA
continuation coverage. |
44
|
|
|
(3) |
|
Except as provided below, these amounts were calculated as
follows using the stock price as of market close on
December 31, 2009 ($25.63): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Restricted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Plus
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum
|
|
|
Maximum
|
|
|
|
|
|
|
Restricted
|
|
|
Performance
|
|
|
Performance
|
|
|
Performance
|
|
|
Value as of
|
|
Named Executive Officer
|
|
Shares(a)
|
|
|
Units
|
|
|
Units Awarded
|
|
|
Units
|
|
|
12/31/2009(b)
|
|
Matthew P. Clifton
|
|
|
55,491
|
|
|
|
57,491
|
|
|
|
114,982
|
|
|
|
170,473
|
|
|
|
$4,369,223
|
|
David L. Lamp
|
|
|
28,181
|
|
|
|
31,459
|
|
|
|
62,918
|
|
|
|
91,099
|
|
|
|
$2,354,867
|
|
Bruce R. Shaw
|
|
|
13,076
|
|
|
|
10,967
|
|
|
|
21,934
|
|
|
|
35,010
|
|
|
|
$897,306
|
|
George J. Damiris
|
|
|
9,824
|
|
|
|
12,547
|
|
|
|
25,094
|
|
|
|
34,918
|
|
|
|
$894,948
|
|
Denise C. McWatters
|
|
|
5,072
|
|
|
|
3,954
|
|
|
|
7,908
|
|
|
|
12,980
|
|
|
|
$355,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Includes the 1,610 HEP restricted units granted to
Ms. McWatters by HLS. |
|
(b) |
|
HEP restricted units held by Ms. McWatters were valued
using the closing price of the units on December 31, 2009,
which was $39.84. |
|
|
|
(4) |
|
Although the award agreements explicitly provide for certain
pro-rata vesting upon termination due to death, disability,
retirement, and termination of employment other than due to
voluntary resignation or termination for Cause, the
Committee has the discretion to vest awards in full upon such
termination events. For purposes of this disclosure only, we
assumed the Committee exercised its discretion to allow full
vesting. In the event of an actual termination pursuant to one
of these events the Committee is under no obligation to actually
exercise such discretion. |
|
(5) |
|
Represents the amount of the Tax Code Section 280G Gross Up
payment. To determine the amount of the Gross Up payment, the
base amount for Messrs. Lamp and Damiris was
calculated using the five-year average of each officers
compensation for the years
2004-2008.
In the case of Mr. Damiris and Ms. McWatters, the
amount is calculated using each officers annualized
compensation for 2007 and 2008, as such officers
employment with the Company commenced in June and October 2007,
respectively. In the case of Mr. Shaw, the amount is
calculated using the five year average of his compensation for
the years
2004-2008
(his 2007 compensation is annualized because he left employment
in May 2007 and returned in September 2007). The payments
received in connection with the change of control in excess of a
Named Executive Officers base amount is
considered an excess parachute payment as provided
by Section 280G of the Tax Code. If the total of all
parachute payments is equal to or greater than three
times the base amount, the amount of the excess parachute
payment will be subject to the excise tax. In making the
calculation, the following assumptions were used: (a) the
change of control occurred on December 31, 2009,
(b) the closing price of our Common Stock was $25.63 on
such date, (c) the excise tax rate under Section 4999
of the Tax Code is 20%, the federal income tax rate is 35%, the
Medicare rate is 1.45%, the adjustment to reflect the phase-out
of itemized deductions is 1.05%, and there are no state or local
income taxes, (d) no amounts will be discounted as
attributable to reasonable compensation, (e) all cash
severance payments are contingent upon a change of control,
(f) the presumption required under applicable regulations
that the February 2009 equity awards granted were contingent
upon a change of control could be rebutted, and (g) the
value received under the Retirement Restoration Plan upon a
change in control is equal to the present value of the benefit
that would otherwise be received upon normal retirement
calculated using the prescribed Applicable Federal Rate. |
Finally, in the event of a Change in Control (as
defined in our Retirement Restoration Plan) each
participants (or surviving spouses or
beneficiarys) benefit under the Retirement Restoration
Plan will be paid immediately after such Change in
Control in the form of an annuity contract issued by a
legal reserve life insurance company and a cash payment. The
annuity contract will be for an amount equal to the benefits
otherwise due the recipient under the Retirement Restoration
Plan reduced by the amount of the cash payment, which will equal
the reasonable estimate of the federal income tax liability
resulting from the annuity contract and the payment. The value
of the annuity contract and the estimated cash payment that
would be made to each of our
45
Named Executive Officers under the Retirement Restoration Plan
in the event of a Change in Control (as defined in
the Retirement Restoration Plan) on December 31, 2009, are
set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Restoration Plan
|
|
|
Retirement Restoration Plan
|
|
|
|
|
Name
|
|
Annuity Contract
|
|
|
Cash
Payment(1)
|
|
|
Total Cost to Company
|
|
|
Matthew P. Clifton
|
|
|
$1,722,067
|
|
|
|
$927,267
|
|
|
|
$2,649,334
|
|
David L. Lamp
|
|
|
$103,633
|
|
|
|
$55,803
|
|
|
|
$159,436
|
|
Bruce R. Shaw
|
|
|
$3,103
|
|
|
|
$1,671
|
|
|
|
$4,774
|
|
George J. Damiris
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Denise C. McWatters
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
|
(1) |
|
The estimated federal income tax liability for each Named
Executive Officer is calculated above using the highest 2009
marginal federal income tax rates. |
Compensation
Practices as They Related to Risk Management
Although the majority of the compensation provided to the Named
Executive Officers is performance-based, we believe our
compensation programs do not encourage excessive and unnecessary
risk taking by executive officers (or other employees) because
these programs are designed to encourage employees to remain
focused on both our short and long term operational and
financial goals.
While annual cash-based incentive bonus awards play an
appropriate role in the executive compensation program, the
Committee believes that payment should be determined based on an
evaluation of Company performance on a wide variety of measures,
as compared to our past performance and the performance of our
peers, which mitigates excessive risk-taking that could produce
unsustainable gains in one area of performance at the expense of
our overall long term interests. In addition, we set performance
goals that we believe are reasonable in light of our past
performance and market conditions. An appropriate part of total
compensation is fixed for the Named Executive Officers, while
another portion is variable and linked to performance. A portion
of the variable compensation we provide is comprised of long
term incentives. A portion of the long term incentives we
provide is in the form of restricted stock subject to time based
vesting conditions, which retains value even in a depressed
market, so executives are less likely to take unreasonable
risks. With respect to our performance-based equity incentives,
assuming achievement of at least a minimum level of performance,
payouts result in some compensation at levels below full target
achievement, in lieu of an all or nothing approach.
Further, our stock ownership guidelines require our executives
to hold certain levels of stock (in addition to unvested and
unsettled equity-based awards), which aligns an appropriate
portion of their personal wealth to our long term performance
and the interests of our stockholders.
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Board during
the year ending December 31, 2009 were Messrs. Berry
(Chairman), Echols, Matthews and McKenzie. Mr. Echols was
appointed to the Compensation Committee in May 2009. None of the
members of the Compensation Committee was an employee of the
Company or any of its subsidiaries during the year ending
December 31, 2009 and no member of the Compensation
Committee has ever been an officer of the Company or any of its
subsidiaries. No executive officer of the Company served as a
member of the compensation committee of another entity that had
an executive officer serving as a member of the Board or the
Compensation Committee.
AUDIT
COMMITTEE REPORT
The Audit Committee of the Board has reviewed and discussed with
management the audited financial statements of the Company for
the year ended December 31, 2009 and has discussed with
representatives of Ernst & Young LLP, the
Companys independent auditors for the year ended
December 31, 2009, the matters required to be discussed by
Statement of Auditing Standards No. 61, as currently in
effect. The Audit Committee has received the written disclosures
and the letter from the independent auditors required by
Independence Standards Board
46
Standard No. 1, as currently in effect, and has discussed
with representatives of Ernst & Young LLP the
independence of Ernst & Young LLP. The Audit Committee
has also considered whether the independent auditors
provision of non-audit services to the Company is compatible
with the auditors independence. Based on the review and
discussions referred to above, the Audit Committee recommended
to the Board that the audited financial statements for the year
ended December 31, 2009 be included in the Companys
Annual Report on
Form 10-K
for the year ended December 31, 2009 for filing with the
SEC.
Audit
Committee of the Board of Directors
|
|
|
Robert G. McKenzie,
Chairman
|
|
Buford P. Berry
Leldon E. Echols
Thomas K. Matthews, II
Paul T. Stoffel
|
The Audit Committee Report will not be deemed proxy soliciting
material and will not be incorporated by reference in any filing
by the Company under the Securities Act of 1933 or the Exchange
Act except to the extent that the Company specifically
incorporates such report by reference.
RELATIONSHIP
WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee of the Board has recommended stockholder
ratification of the selection of Ernst & Young LLP, an
independent registered public accounting firm, to audit the
books, records and accounts of the Company and its consolidated
subsidiaries for the 2010 calendar year. Ernst & Young
LLP has conducted such audits since 1977. It is expected that a
representative of such firm will be present in person or by
conference telephone at the Annual Meeting, will have an
opportunity to make a statement if the representative so
desires, and will be available to respond to appropriate
questions.
EQUITY
COMPENSATION PLAN TABLE
The following table summarizes information about our long-term
incentive compensation plan as of December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares to
|
|
|
|
|
|
|
be Issued Upon
|
|
Weighted-Average
|
|
Number of Shares
|
|
|
Exercise of
|
|
Exercise Price of
|
|
Remaining Available
|
|
|
Outstanding
|
|
Outstanding
|
|
for Future Issuance
|
|
|
Options, Warrants
|
|
Options, Warrants
|
|
Under Equity
|
|
|
and Rights
|
|
and Rights
|
|
Compensation Plans
|
|
Equity compensation plans approved by stockholders
|
|
|
40,200
|
|
|
$
|
2.98
|
|
|
|
1,932,278
|
|
Equity compensation plans not approved by stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
40,200
|
|
|
$
|
2.98
|
|
|
|
1,932,278
|
|
For more information about our Long-Term Incentive Equity
Compensation Plan, see information provided under the heading
Long-Term Incentive Equity Compensation in the
Compensation Discussion and Analysis section of this Proxy
Statement.
47
AUDIT
FEES
The following table sets forth the fees paid to
Ernst & Young LLP for services provided during 2009
and 2008. All of the fees paid were approved by the Audit
Committee:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Audit
Fees(1)
|
|
|
$1,503,000
|
|
|
|
$1,306,000
|
|
Audit-Related
Fees(2)
|
|
|
$263,000
|
|
|
|
$124,000
|
|
Tax
Fees(3)
|
|
|
$161,000
|
|
|
|
$515,000
|
|
All Other Fees
|
|
|
$0
|
|
|
|
$0
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$1,927,000
|
|
|
|
$1,945,000
|
|
|
|
|
(1) |
|
Represents fees for professional services provided in connection
with the audit of the Companys annual financial statements
and internal control over financial reporting, review of the
Companys quarterly financial statements and audits
performed as part of registration statement filings of the
Company and its affiliates. |
|
(2) |
|
Represents fees for consultations related to the SECs
comment letter related to our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008, and comfort
letters related to our 2009 note offerings and various
accounting related issues. |
|
(3) |
|
Represents fees for professional services in connection with tax
compliance and planning. Includes $12,000 and $212,000 for tax
services provided to HEP in the years ended December 31,
2009 and 2008, respectively, as tax services are among the
administrative services that the Company provides to HEP under
the Omnibus Agreement. In 2009, HEP began paying all fees
related to its partnership K-1s and one-half of fees
related to tax services provided to them. |
The Company has a policy whereby the Audit Committee is required
to pre-approve the audit and non-audit services performed by the
independent auditor to assure that performing such services does
not impair the auditors independence. The Audit Committee
has a policy whereby it may delegate its pre-approval authority,
up to $75,000, to one or more of the Audit Committees
members or to the Companys Chief Accounting Officer, and
any decisions made under such delegation are required to be
reported to the Audit Committee.
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Specific
Transactions.
M. Neale Hickerson, who is employed by the Company as Vice
President, Investor Relations, is the son of Marcus R.
Hickerson, a director of the Company. Neale Hickerson was paid
cash compensation in the amount of $255,404.60 (representing
$182,404.60 in salary and a bonus of $73,000) for services
rendered during 2009. Neale Hickerson does not report to Marcus
R. Hickerson and his compensation is consistent with our
policies that apply to all employees with equivalent
qualifications, experience and responsibilities. In addition,
Neale Hickerson received 1,542 Restricted Stock Awards and 1,542
Performance Share Units in calendar year 2009 with a grant date
fair value of $70,007 based upon the closing price of $22.70 per
share on the day prior to the grant. The total stock award
value, calculated as set forth in footnote 2 to the 2009 Summary
Compensation Table above, of all unvested equity awards held by
Neale Hickerson on December 31, 2009 (including awards
granted prior to 2009) was $71,775.
Michael P. Clifton, who is employed by the Company as Sr.
Manager, Residual Oils for the Companys asphalt
operations, is the son of Matthew P. Clifton, the Chairman of
the Board and Chief Executive Officer. Michael Clifton was paid
cash compensation in the amount of $136,600 (representing
$108,200.00 in salary and a bonus of $28,400) for services
rendered during 2009. Michael Clifton does not report to Matthew
P. Clifton and his compensation is consistent with our policies
that apply to all employees with equivalent qualifications,
experience and responsibilities. In addition, Michael Clifton
received 795 Restricted Stock Awards in calendar year 2009 with
a grant date fair value of $18,047 based upon the closing price
of $22.70 per share on the day prior to the grant. The total
stock award value, calculated as set forth in footnote 2 to the
2009 Summary Compensation Table above, of unvested equity awards
held by Michael Clifton on December 31, 2009 (including
awards granted prior to 2009) was $20,165.
48
Willie D. Reid, who is employed by the Company as Manager,
Applications Infrastructure Support and is the son of Jack P.
Reid, a director of the Company. Willie Reid was paid cash
compensation in the amount of $133,597.14 (representing
$111,497.14 in salary and a bonus of $22,100) for services
rendered during 2009. Willie Reid does not report to Jack P.
Reid and his compensation is consistent with our policies that
apply to all employees with equivalent qualifications,
experience and responsibilities. In addition, Willie Reid
received 309 shares of bonus stock in calendar year 2009
with a grant date fair value of $6,517 based upon the closing
price of $21.09 per share on the day of the grant. The total
stock award value, calculated as set forth in footnote 2 to the
2009 Summary Compensation Table above, of unvested equity awards
held by Willie Reid on December 31, 2009 (including awards
granted prior to 2009) was $6,756.
Patricia C. Williams, who is employed by the Company as Contract
and Pricing Associate III, is the sister of Matthew P. Clifton,
the Chairman of the Board and Chief Executive Officer.
Ms. Williams was paid a base salary and bonus of less than
$50,000 in 2009. Ms. Williams does not report to
Mr. Clifton and her compensation is consistent with our
policies that apply to all employees with equivalent
qualifications, experience and responsibilities.
Review,
Approval or Ratification of Transactions with Related
Persons.
The disclosure, review and approval of any transactions between
the Company and related persons is governed by the Code of
Ethics, which provides guidelines for disclosure, review and
approval of any transaction that creates a conflict of interest
between the Company and its employees, officers or directors and
members of their immediate family. Conflict of interest
transactions may be authorized if they are found to be in the
best interest of the Company based on all relevant facts.
Pursuant to the Code of Ethics, conflicts of interest are to be
disclosed to and reviewed by a superior employee to the related
person who does not have a conflict of interest, and
additionally, if more than trivial size, by the superior of the
reviewing person. Conflicts of interest involving directors are
reviewed by the full Board or by a committee of the Board on
which the director does not serve. Related party transactions
required to be disclosed in the Companys SEC reports are
reported through its disclosure controls and procedures.
The transactions disclosed in this section entitled
Certain Relationships and Related Party
Transactions Specific Transactions
(a) were not required to be reviewed, ratified or approved
pursuant to the Code of Ethics and (b) comply with the
Companys policies and procedures with respect to conflicts
of interest.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the
Companys directors, executive officers and holders of more
than 10% of its shares of Common Stock to file with the SEC and
the NYSE initial reports of ownership of shares of Common Stock
and reports of changes in such ownership. The Commissions
rules require such persons to furnish the Company with copies of
all Section 16(a) reports that they file. Based on a review
of these reports, other information available to the Company,
and written representations from reporting persons that no other
reports were required, all such reports concerning beneficial
ownership were filed in a timely manner by reporting persons
with the following exceptions which were due to administrative
oversights: three Form 4 reports relating to three
transactions in our Common Stock were filed late for
Mr. Scott Surplus, who became our principal accounting
officer on July 1, 2008.
49
ADDITIONAL
INFORMATION
Stockholder
Proposals
Proposals of stockholders to be considered for presentation at
the Companys 2011 Annual Meeting pursuant to
Rule 14a-8
of the Securities Exchange Act of 1934 should be received by the
Company by November 25, 2010, in order to be considered for
inclusion in the Proxy Statement for that meeting. Pursuant to
the Companys Bylaws, a stockholder must deliver notice,
mailed to and received at the principle executive offices of the
Company, not less than 120 calendar days nor more than 150
calendar days before the anniversary date of the Companys
Proxy Statement released to stockholders in connection with the
prior years Annual Meeting. However, if the date of the
Companys 2010 Annual Meeting has been changed by more than
30 days from the date contemplated at the time of the prior
years Proxy Statement, a stockholders notice must be
received by the Secretary of the Company not later than
60 days before the date the Company commences mailing of
its proxy materials in connection with the 2010 Annual Meeting.
In accordance with these provisions, stockholders must deliver
notice to the Company no earlier than October 26, 2010 and
no later than November 25, 2010 for stockholder proposals
to be considered at the Companys 2011 Annual Meeting.
In addition to the requirements in the Companys Bylaws
regarding stockholder proposals generally, the Bylaws also
provide that a stockholder may nominate a person for election to
the Board by delivering timely notice in writing to the
Secretary of the Company. To be timely, a stockholders
notice must be delivered to, or mailed and received at, the
principal executive offices of the Company not less than
90 days nor more than 120 days prior to the
anniversary date of the prior years Annual Meeting. Such
stockholders notice to the Secretary of the Company shall
set forth (i) as to each person whom the stockholder
proposes to nominate for election or re-election as a director,
all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors,
or is otherwise required, pursuant to Regulation 14A under
the Exchange Act (including such persons written consent
to being named in the Proxy Statement as a nominee and to serve
as a director if elected), and (ii) as to the stockholder
giving the notice (a) the name and address, as they appear
on the Companys books, of such stockholder and
(b) the class and number of shares of voting stock of the
Company which are beneficially owned by such stockholder. In
accordance with these provisions, stockholders must deliver
notice to the Company no earlier than January 5, 2011 and
no later than February 4, 2011 for stockholder nominations
of directors to be considered at the Companys 2011 Annual
Meeting.
With respect to Proxies submitted for the 2011 Annual Meeting,
the Company management will have discretionary authority to vote
on any matter for which the Company does not receive notice by
the date specified in the advance notice provisions of the
Companys Bylaws described above, pursuant to
Rule 14a-4(c)(1)
of the Exchange Act.
Other
Matters
The Board of the Company does not know of any other matters to
be acted upon at the meeting. However, if any other matter
properly comes before the meeting, the persons voting the
proxies will vote them in accordance with their best judgment.
Financial
Statements Available
A copy of the Companys 2009 Annual Report containing the
audited consolidated balance sheet at December 31, 2009,
and the related consolidated statements of income, cash flows,
stockholders equity and comprehensive income for the year
ended December 31, 2009, will be furnished at no charge to
each person to whom a Notice of Internet Delivery of Proxy
Materials is delivered upon the written request of such person
addressed to Denise C. McWatters, Vice President, Secretary and
General Counsel, Holly Corporation, 100 Crescent Court,
Suite 1600, Dallas, TX,
75201-6915.
The Annual Report does not constitute a part of the proxy
solicitation material unless and only to the extent specifically
referred to in this Proxy Statement.
50
Voting
Via the Internet or By Telephone
If you have shares registered directly with the Companys
transfer agent, you may choose to vote those shares via the
internet or by telephone. Specific instructions for registered
stockholders interested in voting via the internet or by
telephone are set forth on the enclosed proxy card. If you hold
shares with a broker or bank, you may also be eligible to vote
via the internet or by telephone if your broker or bank
participates in the proxy voting program provided by ADP
Investor Communication Services. If your bank or brokerage firm
is participating in ADPs program, your voting form will
provide instructions.
Votes submitted via the internet or by telephone must be
received by the transfer agent by 11:59 p.m., Eastern
Daylight Time, on May 4, 2010. Submitting your proxy via
the internet or by telephone will not affect your right to vote
in person should you decide to attend the Annual Meeting. The
telephone and internet voting procedures are designed to
authenticate stockholders identities, to allow
stockholders to give their voting instructions and to confirm
that stockholders instructions have been recorded
properly. A stockholder voting via the internet should
understand that there may be costs associated with electronic
access, such as usage charges from internet access providers and
telephone companies, that must be borne by the stockholder.
DENISE C. MCWATTERS
Secretary
51
HOLLY CORPORATION
ATTN: LEGAL DEPARTMENT
100 CRESCENT COURT SUITE 1600
DALLAS, TX 75201-6915
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M.
Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web
site and follow the instructions to obtain your records and to create an electronic voting instruction form.
Electronic Delivery of Future PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent
to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the
Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet
and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the
day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow
the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way,
Edgewood, NY 11717.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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KEEP THIS PORTION FOR YOUR RECORDS |
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DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN
SIGNED AND DATED.
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For All |
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To withhold authority to vote for any individual |
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All |
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nominee(s), mark For
All Except and write the |
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number(s) of the nominee(s) on the line below. |
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The Board of Directors recommends
that you vote FOR the following: |
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01 |
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Buford P. Berry 02
Matthew P. Clifton 03
Leldon E. Echols 04
Robert G. McKenzie 05
Jack P. Reid |
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Paul T. Stoffel 07
Tommy A. Valenta |
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The Board of Directors recommends you vote FOR the following proposal(s): |
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Abstain |
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Ratification of the
recommendation of the Companys Audit Committee, endorsed by the Board, of the
selection of Ernst & Young, LLP, an independent registered public accounting firm, as the Companys auditor for the year 2010.
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NOTE: You may also be asked
to act upon such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.
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Yes |
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No |
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Please indicate if you plan to attend this meeting.
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Please sign exactly as your name(s)
appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such.
Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign
in full corporate or partnership name, by authorized officer. |
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Signature [PLEASE SIGN WITHIN BOX]
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Signature (Joint Owners) |
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Important Notice Regarding the Availability of
Proxy Materials for the Annual Meeting: The Notice & Proxy Statement, Annual Report is/are
available at www.proxyvote.com.
HOLLY CORPORATION
Annual Meeting of Stockholders
May 5, 2010 10:00 AM
This proxy is solicited by the Board of Directors
The stockholder(s) hereby appoint(s) Matthew P. Clifton, Bruce R. Shaw and
Denise C. McWatters, or any of them, as proxies, each with the power to appoint his/her
substitute, and hereby authorizes them to represent and to vote, as designated on the reverse
side of this ballot, all of the shares of common stock of HOLLY
CORPORATION that the stockholder(s) is/are entitled to vote at the
Annual Meeting of Stockholder(s) to be held at 10:00 AM CDT on May 5, 2010 at
The Crescent Club, 200 Crescent Court, 17th Floor, Dallas, Texas 75201, and any
adjournment or postponement thereof.
This proxy, when properly executed,
will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in
accordance with the Board of Directors recommendations.
Continued and to be signed on reverse side