def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
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HOLLY
CORPORATION
100 Crescent Court
Suite 1600
Dallas, Texas
75201-6915
March 31,
2011
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of
Stockholders of Holly Corporation (the Company) to
be held on Thursday, May 12, 2011, 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 2011, (iii) to consider and approve an
advisory vote regarding the compensation of the Companys
Named Executive Officers, (iv) to consider and act upon an
advisory vote on the frequency at which the Company should
include an advisory vote regarding the compensation of the
Companys Named Executive Officers in its proxy statement
for stockholder consideration, (v) to approve an amendment
to the Holly Corporation Long-Term Incentive Compensation Plan
(the LTIP) to extend the term of the LTIP, and our
ability to grant equity compensation awards thereunder, until
December 31, 2020, and (vi) 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 31,
2011
PLEASE TAKE NOTICE that the 2011 Annual Meeting of Stockholders
(the Annual Meeting) of Holly Corporation (the
Company) will be held on Thursday, May 12,
2011, 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 2011;
3. Approval, on an advisory basis, of the compensation of
the Companys Named Executive Officers;
4. An advisory vote on the frequency at which the Company
should include an advisory vote regarding the compensation of
the Companys Named Executive Officers in its proxy
statement for stockholder consideration;
5. Approval of an amendment to the Holly Corporation
Long-Term Incentive Compensation Plan (the LTIP) to
extend the term of the LTIP, and our ability to grant equity
compensation awards thereunder, until December 31,
2020; and
6. 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, 2010 is being distributed with this Proxy
Statement.
The close of business on March 21, 2011 (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 12,
2011:
As permitted by rules adopted by the Securities and Exchange
Commission, we are making this Proxy Statement, the proxy card
and the Companys 2010 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 31, 2011, 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 Thursday, May 12, 2011, 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 2011 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 31, 2011, 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 11, 2011. 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 53,353,449 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), Proposal 3
(Advisory Vote on the Compensation of our Named Executive
Officers), Proposal 4 (Advisory Vote on the
Frequency of Advisory Votes on the Compensation of our Named
Executive Officers) and Proposal 5 (Approval of
Amendment to the Holly Corporation Long-Term Incentive
Compensation Plan) 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.
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, R. Kevin Hardage,
Robert G. McKenzie, Jack P. Reid, and Tommy A. Valenta
as nominees for election as directors of the Company at the
Annual Meeting (each, a Nominee). All of the
Nominees, except for R. Kevin Hardage, currently serve as
directors of the Company. Paul T. Stoffel, who currently serves
as a director of the Company, is not standing for reelection at
the Annual Meeting. If elected, each Nominee will serve until
the expiration of his term at the Annual Meeting of Stockholders
in 2012 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 same may have been 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 unanimously recommends a vote FOR the
election of each of the Nominees.
PROPOSAL TWO
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG,
LLP
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 2011 and, with the endorsement of the
Board, recommends to the stockholders that they ratify that
appointment. Ernst & Young, LLP served in this
capacity in 2010. 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.
Required
Vote and Recommendation
The ratification of the appointment of Ernst & Young,
LLP requires the approval of a majority of the votes cast on the
proposal. Abstentions will not have any effect on the vote for
this proposal.
The Board and the Audit Committee unanimously recommend a
vote FOR the ratification of the Boards
selection of Ernst & Young, LLP as the Companys
auditor for 2011.
PROPOSAL THREE
ADVISORY VOTE ON THE COMPENSATION
OF OUR NAMED EXECUTIVE OFFICERS
The recently enacted Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010, or the Dodd-Frank Act,
enables our stockholders to vote to approve, on an advisory
(nonbinding) basis, the compensation of our Named Executive
Officers as disclosed in this Proxy Statement in accordance with
the SECs rules.
As described in detail under the heading Compensation
Discussion and Analysis, our executive compensation
programs are designed to attract, motivate, and retain our Named
Executive Officers, who are critical to our success. Under these
programs, compensation for our Named Executive Officers is tied
to performance, including our financial results and stockholder
value. Please read the Compensation Discussion and
Analysis beginning on page 28, and review the
compensation tables and narratives that follow, for additional
details about our executive compensation programs, including
information about the fiscal year 2010 compensation of our Named
Executive Officers.
3
Our executive compensation programs are structured to support
our business objectives and challenges in creating value for
stockholders, as evidenced by the following:
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Our compensation programs are substantially tied into our key
business objectives and the success of our stockholders. If the
value we deliver to our stockholders declines, so does the
compensation we deliver to our executives.
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We strive to maintain the highest level of corporate governance
over our executive pay programs.
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We monitor the compensation programs and pay levels of
executives from companies of similar business purpose, size and
complexity to ensure that our compensation programs are within
the norm of a range of market practices.
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This vote is not intended to address any specific item of
compensation, but rather the overall compensation of our Named
Executive Officers and the compensatory philosophy, policies and
practices described in this Proxy Statement in accordance with
the compensation disclosure rules of the SEC. Because your vote
is advisory, it will not be binding on the Compensation
Committee (the Committee), the Board, or the
Company. However, the Board and the Committee will review the
voting results and take them into consideration when making
future decisions regarding executive compensation. The Board and
the Committee value the opinions of our stockholders and to the
extent there is any significant vote against the Named Executive
Officer compensation as disclosed in this Proxy Statement, we
will consider our stockholders concerns and the Committee
will evaluate whether any actions are necessary to address those
concerns.
We ask our stockholders to vote on the following resolution at
the Annual Meeting:
RESOLVED, that the Companys stockholders approve, on
an advisory basis, the compensation of the Companys Named
Executive Officers in the Compensation Discussion and Analysis,
compensation tables and narrative discussion.
Required
Vote and Recommendation
The advisory vote on the compensation of named executive
officers requires the approval of a majority of the votes cast
on the proposal. Abstentions and broker non-votes will not have
any effect on the vote for this proposal.
The Board unanimously recommends a vote FOR the
approval of the compensation of our Named Executive Officers as
disclosed in the Compensation Discussion and
Analysis section and the accompanying compensation tables
contained in this Proxy Statement.
PROPOSAL FOUR
ADVISORY VOTE ON THE FREQUENCY OF ADVISORY VOTES
ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
The Dodd-Frank Act also enables our stockholders to indicate how
frequently we should seek an advisory vote on the compensation
of our Named Executive Officers, as disclosed pursuant to the
SECs compensation disclosure rules, such as
Proposal 3 included on page 3 of this Proxy Statement.
The Company would like to seek your input with regard to whether
you would prefer that we conduct future advisory votes on
executive compensation once every one, two or three years.
Stockholders may, if they wish, abstain from casting a vote on
this Proposal.
The Board has determined that an advisory vote on executive
compensation that occurs once every three years is the most
appropriate alternative for the Company, and therefore the Board
recommends that you vote for a three-year interval for the
advisory vote on executive compensation. In determining to
recommend that stockholders vote for a frequency of once every
three years, the Board considered how an advisory vote at this
frequency will provide our stockholders with sufficient time to
evaluate the effectiveness of our overall compensation
philosophy, policies and practices in the context of our
long-term business results for the corresponding period, while
avoiding over-emphasis on short term variations in compensation
and business results. An advisory vote occurring once every
three years will also permit our stockholders to observe and
evaluate the impact of any changes to our executive compensation
policies and practices which have occurred since the last
advisory vote on executive compensation, including changes made
in response to the outcome of a prior advisory vote on executive
compensation.
4
We will continue to engage with our stockholders regarding our
executive compensation program during the period between
advisory votes on executive compensation. We understand that our
stockholders may have different views as to what is the best
approach for the Company, and we look forward to hearing from
our stockholders on this Proposal.
The Board and the Committee will review the voting results and
take them into consideration when determining the frequency for
the advisory vote on executive compensation. However, because
this vote is advisory and not binding on the Board, the
Committee or the Company in any way, the Board may decide that
it is in the best interests of our stockholders and the Company
to hold an advisory vote on executive compensation more or less
frequently than the option approved by our stockholders.
The proxy card provides stockholders with the opportunity to
choose among four options (holding the vote every one, two or
three years, or abstaining) and, therefore, stockholders will
not be voting to approve or disapprove the recommendation of the
Board.
Required
Vote and Recommendation
Generally, approval of any matter presented to stockholders
other than the election of directors requires a majority of the
votes cast on the proposal. However, because this vote is
advisory and non-binding, if none of the frequency options being
voted on by stockholders receives a majority of the votes cast
on the proposal, the option receiving the greatest number of
votes will be considered the frequency recommended by the
Companys stockholders. Abstentions and broker non-votes
will not have any effect on the vote for this proposal.
The Board unanimously recommends a vote for the option of
once every three years as the frequency with which stockholders
are provided an advisory vote on executive compensation, as
disclosed pursuant to the compensation disclosure rules of the
SEC.
PROPOSAL FIVE
APPROVAL OF AMENDMENT TO THE HOLLY CORPORATION
LONG-TERM
INCENTIVE COMPENSATION PLAN
We are seeking stockholder approval of an amendment to the Holly
Corporation Long-Term Incentive Compensation Plan, or the
LTIP. As explained in more detail below, the purpose
of the proposed amendment is to extend the term of the LTIP, and
our ability to grant new equity awards thereunder, until
December 31, 2020. We are not requesting an increase in the
number of shares available under the LTIP above the number of
remaining shares that existed on December 31, 2010, when
the term of the LTIP expired. If the LTIP is not amended to
extend the term and our ability to grant new awards, our ability
to award equity-based compensation to our executive officers,
directors and employees will be severely curtailed and we will
be required to reconsider our executive compensation and other
compensation programs.
General
The LTIP has undergone several amendments. Initially, the LTIP
was approved by our stockholders at our annual meeting on
December 14, 2000 as the Holly Corporation 2000 Stock
Option Plan. The LTIP was then amended and restated and approved
by our stockholders at our annual meeting on December 12,
2002 as the Holly Corporation Long-Term Incentive Compensation
Plan. The LTIP was then subsequently amended, effective
May 10, 2005. The LTIP was amended and restated in its
current form, and approved by our stockholders effective
May 24, 2007. The LTIP was again amended on
December 31, 2008, effective January 1, 2005, pursuant
to the First Amendment to the Holly Corporation Long-Term
Incentive Compensation Plan.
At our annual meeting, our stockholders will be asked to approve
the Second Amendment to the LTIP (the Second
Amendment), to be effective as of January 1, 2011.
The purpose of this Second Amendment is to extend the term of
the LTIP, and our ability to grant new equity awards thereunder,
until December 31, 2020. A form of the proposed Second
Amendment to the LTIP is attached as Annex A to this Proxy
Statement.
The LTIP is a broad-based plan under which we may grant awards
to employees, directors and consultants. The use of stock-based
awards under the LTIP continues to be a key element of our
compensation program. Of the 6,000,000 shares currently
authorized for issuance under the LTIP, a total of
3,887,172 shares had been issued as of
5
March 1, 2011, after the lapse of restrictions on grants of
restricted stock and performance share units, the exercise of
stock options and the settlement of other equity-based awards.
As of March 1, 2011, 175,928 shares remained subject
to restricted stock still subject to forfeiture,
56,738 shares of common stock remained subject to
restricted stock units that have not been settled, and a total
of 224,131 performance share units were outstanding, which could
result in the issuance of no shares or as many as
448,262 shares depending on the achievement of performance
targets and our ability to settle those units in cash.
The term of the LTIP, and our ability to grant new equity
compensation awards thereunder, expired on December 31,
2010. As our equity based compensation program plays an
important role in incentivizing our executive officers,
directors and other service providers, we believe that approval
of the Second Amendment is necessary to provide us with the
flexibility to make stock-based grants over the coming years in
amounts determined appropriate by the Committee. The LTIP, as
amended, would allow us to use a variety of equity compensation
alternatives in structuring compensation arrangements for our
personnel and will allow our personnel to continue to acquire
and maintain stock ownership in us. While we are aware of the
potential dilutive effect of compensatory equity awards, we also
recognize the significant motivational and performance benefits
that may be achieved from making such awards. The proposed
Second Amendment to the LTIP will not be implemented unless
approved by our stockholders. However, since the LTIP has
expired, if the proposed Second Amendment to the LTIP is not
approved our ability to make future equity grants will be
severely curtailed.
If any shares subject to any award under the LTIP are forfeited
or cancelled, or if any such award terminates without the
delivery of shares or other consideration, the shares previously
used or reserved for such awards will be available for future
awards under the LTIP.
The following is a summary of the material features of the LTIP,
as amended, to reflect the proposed Second Amendment. The
summary does not purport to be a complete description of all
provisions of the LTIP and is qualified in its entirety by
reference to (i) the complete text of the LTIP, which is
filed as Exhibit 10.4 to our
Form 10-K
for fiscal year end December 31, 2008 (filed with the SEC
on February 27, 2009), (ii) the First Amendment to the
LTIP, which is filed as Exhibit 10.5 to our
Form 10-K
for fiscal year end December 31, 2008 (filed with the SEC
on February 27, 2009), and (iii) the form of the
proposed Second Amendment to the LTIP, which is attached as
Annex A to this Proxy Statement.
Description
of the LTIP
The purpose of the LTIP is to advance our interests by
strengthening our ability and the ability of our subsidiaries to
attract, retain and motivate able people of high caliber as
employees, directors and consultants through arrangements that
relate the compensation for such persons to our long-term
performance. The LTIP achieves this purpose by permitting grants
of (i) incentive stock options (Incentive
Options), (ii) options that do not constitute
incentive stock options (Non-Qualified Options, and
together with Incentive Options, Options),
(iii) restricted stock awards (Restricted Stock
Awards), (iv) bonus stock awards (Stock
Awards), (v) stock appreciation rights
(SARs), (vi) phantom stock awards
(Phantom Stock Awards), and (vii) performance
awards payable upon the satisfaction of performance goals, all
of which are collectively referred to as awards. See
Securities To Be Offered.
The LTIP, in part, is intended to qualify under the provisions
of Section 422 of the Internal Revenue Code (the Tax
Code). The LTIP is not subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended
(ERISA).
Administration
of the LTIP
The Board and the Committee have full and final authority to
administer the LTIP pursuant to its terms and all applicable
state, federal, or other rules or laws. The Committee has broad
discretion to administer the LTIP, interpret its provisions, and
adopt policies for implementing the LTIP. This discretion
includes the power to determine when and to whom awards will be
granted, determine the amount of such awards (measured in cash,
shares of Common Stock or as otherwise designated), prescribe
and interpret the terms and provisions of each award agreement
(the terms of which may vary), delegate duties under the LTIP,
terminate, modify or amend the LTIP, and execute all other
responsibilities permitted or required under the LTIP.
6
Persons
Who May Participate in the LTIP
Any person who is a current or proposed officer, director or key
employee or consultant whose services are deemed to be of
potential benefit to us or to any of our subsidiaries may be
granted awards under the LTIP by the Committee. An employee on
leave of absence may be considered still employed by us for
determining eligibility under the LTIP. However, Incentive
Options can be granted only to a person who is an employee of
the Company or one of our subsidiaries. Additional restrictions
would apply in the case of an Incentive Option granted to a
person owning more than 10% of the outstanding shares of our
Common Stock. Any individual who receives an award under the
LTIP will be a Participant. At the discretion of the
Committee and the Companys management, approximately
1,150 employees of the Company are eligible to receive
awards under the LTIP. For awards to be granted in 2011, six
non-employee directors, nineteen officers and
approximately 185 other employees were considered for
awards.
Maximum
Number of Shares Subject to Award
A Participant under the LTIP will be eligible to receive an
award pursuant to the terms of the LTIP and subject to any
limitations imposed by appropriate action of the Committee.
Awards to employees subject to the limitations of
Section 162(m) of the Tax Code may not receive awards
denominated in shares in excess of 600,000 shares of Common
Stock, or cash awards in excess of 600,000 shares of Common
Stock valued at the date of grant of the award. No award may be
granted if the number of shares of Common Stock to be delivered
in connection with the award exceeds the number of shares which
remain available under the LTIP minus the number of shares
issuable in settlement of or relating to outstanding awards
under the LTIP.
No
Repricing, Replacements, or Buyouts of Stock
Options/SARs
The Committee will not, without the approval of our
companys stockholders, reduce the grant price per share of
an option or a stock appreciation right after it is granted,
cancel an option or stock appreciation right when the grant
price per share exceeds the fair market value of one share in
exchange for cash or another award (other than in connection
with a change in control or a corporate transaction as provided
for in the Plan), or take any other action with respect to an
option or stock appreciation right that would be treated as a
repricing under the NYSE rules and regulations.
Securities
to be Offered
Shares Subject
to the LTIP
Assuming stockholders approve this proposal, the maximum
aggregate number of shares of Common Stock that may be granted
for any and all awards under the LTIP, since its inception,
shall not exceed 6,000,000 shares (subject to any
adjustment due to recapitalization or reorganization permitted
under the LTIP), and the total number of shares of Common Stock
received and available for delivery in connection with Incentive
Options under the LTIP, since its inception, will not exceed
6,000,000 shares. The company is not requesting any
additional shares under the LTIP. Rather, the Company desires to
extend the LTIP to use the shares remaining after the lapse of
the original term of the LTIP. Six million shares represent the
shares originally approved by our stockholders in 2000, after
adjustment to reflect stock splits. We did not request
additional shares during the initial term of the LTIP.
If Common Stock subject to any award is not issued or
transferred, or ceases to be issuable or transferable for any
reason, including (but not exclusively) because an award is
forfeited, terminated, expires unexercised, is settled in cash
in lieu of Common Stock or is otherwise terminated without a
delivery of shares to a Participant, the shares of Common Stock
that were subject to that award will again be available for
issue, transfer or exercise pursuant to awards under the LTIP to
the extent allowable by law. The Common Stock subject to awards
pursuant to the LTIP may be authorized but unissued shares,
shares held by us in treasury, or shares that have been
reacquired by us, including shares that have been bought on the
market for the purposes of the LTIP. The fair market value of a
share of Common Stock on a given date for purposes of the LTIP
will generally be the closing price of a share of Common Stock
on the date on which determination of fair market value is being
made or if no shares were traded on such date then the last
trading date prior thereto, as quoted on the NYSE.
7
Awards
Stock Options. We may grant Options to
eligible persons, including (i) Incentive Options (only to
our employees or to employees of our subsidiaries), which comply
with Section 422 of the Tax Code and
(ii) Non-Qualified Options. The exercise price of each
Option granted under the LTIP will be determined at the time the
Option is granted and may vary between individuals and between
grants; provided, however, that the exercise price per share for
an Option that is intended to be performance-based compensation
under Section 162(m)(4)(C) of the Code or an Incentive
Option under Section 422 of the Code shall not be less than
the fair market value of a share as of the effective date of
grant of the Option; provided further, however, that in the case
of an individual who owns stock possessing more than ten percent
of the total combined voting power of all classes of the Company
or any subsidiary, the exercise price per share of any Incentive
Option under Section 422 of the Code shall not be less than
110% of the fair market value of a share as of the effective
date of grant of the Incentive Option. Options may be exercised
as the Committee determines except that no Incentive Option will
be exercisable at any time after the expiration of ten years
from the date of grant. The total fair market value (determined
as of the date of grant) of shares with respect to which
Incentive Options are first exercisable by a Participant in any
one calendar year cannot exceed $100,000. The Incentive Options
granted earliest shall be applied first to the $100,000 limit.
Any Incentive Option that fails to comply with Section 422
of the Code for any reason will result in the reclassification
of the Option as a Non-Qualified Option, which will be
exercisable as such. The Committee will determine the methods
and form of payment for the exercise price of an Option
(including, in the discretion of the Committee, payment in
Common Stock, other awards, or other property) and the methods
and forms in which Common Stock (including Common Stock issuable
pursuant to the Option) will be delivered to a Participant.
SARs. An SAR is the right to receive an amount
in cash equal to the excess of the fair market value of one
share of Common Stock on the date of exercise over the grant
price of the SAR, as determined by the Committee. Our Committee
determines at the date of grant or thereafter the time or times
at which and the circumstances under which an SAR may be
exercised. The Committee also determines the method of exercise
and form of payment. SARs may be awarded in connection with or
separate from an Option. SARs awarded in connection with an
Option will entitle the holder, upon exercise, to surrender the
related Option or portion thereof relating to the number of
shares for which the SAR is exercised. The surrendered Option or
portion thereof will then cease to be exercisable. However, an
SAR awarded in connection with an Option is exercisable only to
the extent that the related Option is exercisable. SARs granted
independently of an Option will be exercisable as the Committee
determines.
Restricted Stock Awards. Restricted Stock
Awards are shares subject to such restrictions as the Committee
may impose. Except to the extent set forth in a particular
award, a person granted a Restricted Stock Award will have all
of the rights of a stockholder, including the right to vote the
restricted shares and the right, subject to possible
reinvestment conditions, to receive dividends thereon. However,
during any period that restricted shares are subject to
restrictions imposed by the Committee, the restricted shares may
not be transferred or encumbered by an award holder. Except as
determined otherwise by the Committee, upon termination of
employment during the restricted period, restricted shares will
be forfeited and reacquired by us. Certificates evidencing
restricted shares may bear a legend making reference to the
restrictions imposed on such shares. The Committee determines
the time or times at which and the circumstances under which any
restrictions imposed on the restricted shares will lapse.
Bonus Stock Awards. The Committee is
authorized to grant shares to eligible persons as a bonus. Such
a stock award will be subject to such other terms and conditions
as our Committee may determine, including such conditions
necessary to prevent any recipient of a stock award from
incurring liability under Section 16(b) of the Exchange Act.
Phantom Stock Awards. Phantom Stock Awards are
rights to receive in cash an amount equal to the market value of
a specified number of shares at the end of a specified period.
The Committee determines when imposed restrictions will lapse
and whether restrictions will lapse separately, in combination,
in installments or otherwise. All Phantom Stock Awards that are
subject to restrictions shall be forfeited upon the termination
of an award holders employment or service with us during a
restriction period to which forfeiture conditions apply, unless
such conditions are otherwise waived or modified by the
Committee. Unless otherwise determined by the Committee, amounts
equal to dividends on the specified number of shares covered by
a Phantom Stock Award will be either (i) paid with respect
to such Phantom Stock Award on the dividend payment date in cash
or in unrestricted shares
8
having a fair market value equal to the amount of such dividends
or (ii) automatically deemed reinvested in additional
Phantom Stock Awards, other awards or other investment vehicles
specified by the Committee.
Performance Awards. The Committee is
authorized to grant eligible persons rights to receive cash or
shares upon the satisfaction of performance conditions,
established by the Committee, measured over a period of not less
than six months and not more than ten years. One or more of the
following business criteria for the Company, on a consolidated
basis,
and/or for
specified subsidiaries or business or geographical units of the
Company (except with respect to the total shareholder return and
earnings per share criteria) shall be used by the Committee in
establishing performance goals for Performance Awards granted to
a covered employee: (i) earnings per share;
(ii) increase in revenues; (iii) increase in cash
flow; (iv) increase in cash flow return; (v) return on
net assets; (vi) return on assets; (vii) return on
investment; (viii) return on capital; (ix) return on
equity; (x) economic value added; (xi) gross margin;
(xii) operating income; (xiii) net income;
(xiv) pretax earnings; (xv) pretax earnings before
interest, depreciation and amortization; (xvi) pretax
operating earnings after interest expense and before incentives,
service fees, and extraordinary or special items;
(xvii) total stockholder return; (xviii) debt
reduction; (xix) net profit margin; and (xx) any of
the above goals determined on an absolute or relative basis or
as compared to the performance of a published or special index
deemed applicable by the Committee, including, but not limited
to, the Standard & Poors 500 Stock Index or a
group of comparable companies. Performance awards granted under
the LTIP have been principally performance share
units payable either in shares or in cash depending on the
terms of the particular award. In the case of awards that are
intended to qualify as performance-based
compensation to persons who are covered
persons under Section 162(m) of the Code, performance
goals are established not later than 90 days after the
beginning of the performance period applicable to such an award,
or at such other date as may be required or permitted under
Section 162(m) of the Code. All determinations by the
Committee as to the establishment, amount and achievement of
performance goals are made in writing and the Committee may not
delegate any responsibility relating to such awards granted to
covered employees under Section 162(m) of the Code. The
Committee specifies the circumstances under which awards will be
paid or forfeited if an award holder is terminated before
settlement.
Other
Provisions
Tax Withholding. We (or any of our
subsidiaries) are authorized to withhold from any award granted,
or any payment relating to an award under the LTIP, including
from a distribution of shares, amounts of withholding and other
taxes due or potentially payable in connection with any
transaction involving an award, and to take other action as the
Committee may deem advisable to enable us and Participants to
satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any award. This authority
includes authority to withhold or receive shares or other
property and to make cash payments in respect thereof in
satisfaction of a Participants tax obligations, either on
a mandatory or elective basis in the discretion of the Committee.
Right of Company to Terminate Awards in Event of Certain
Corporation Transactions. Unless otherwise
specifically provided in particular award agreements, the LTIP
authorizes us, in the event of an acquisition of substantially
all of the assets of the Company or of a greater than 80% stock
interest in the Company by an entity in which we do not have a
50% or greater interest prior to such acquisition or in the
event of a merger, consolidation, recapitalization or other
similar transaction involving a fundamental change in our
capital structure, to terminate some or all outstanding awards
under the LTIP, whether or not currently exercisable by or
otherwise payable to the holders of the awards, upon payment to
each holder of an award so terminated of an amount equal to the
value of the award based on the current market value of the
shares or, if applicable, the value of the award based upon the
extent to which performance criteria associated with the award
have been satisfied as of the date of termination of the award.
Alternatively, we may elect in such circumstances to cause some
or all awards to be assumed by the surviving or acquiring
corporation. In all other circumstances, the Committee may amend
or terminate any award under the LTIP provided that, and
notwithstanding any other provisions described herein, no such
Committee action may materially and adversely affect the rights
of such award holder under such award unless either the power to
take such action is reserved in the agreement granting the award
in question or the affected holder of the award consents to the
amendment or termination.
Amendment and Termination of the LTIP. The
LTIP will continue in effect, unless earlier terminated in
accordance with certain provisions of the LTIP; provided,
however, that no award shall be granted under the LTIP
9
after December 31, 2020. The Board may amend or terminate
the LTIP without the consent of stockholders or eligible
persons, except that any amendment to the LTIP will be subject
to the approval of our stockholders no later than the annual
meeting next following such Board action if such stockholder
approval is required by any federal or state law or regulation
or the rules of any stock exchange or automated quotation system
on which the shares may then be listed or quoted. The Board may,
in its discretion, submit other changes to the LTIP to
stockholders for approval. However, without the consent of an
affected award holder, no Board or stockholder action may
materially and adversely affect the rights of such award holder
under any previously granted and outstanding award.
Termination of Employment. Under the LTIP, the
effect of a Participants termination of employment on an
award is specified in the award agreement as approved by the
Committee.
Transferability of Awards. In accordance with
rules prescribed by the Committee, the Committee may permit a
person to transfer awards granted under the LTIP (other than
Incentive Options) by gift to certain permitted transferees
specified in the LTIP as well as transfers pursuant to a
domestic relations order. Otherwise, awards are not transferable
other than by will or the laws of descent and distribution.
Following the transfer of an award, the award will remain
subject to the same terms and conditions as were applicable to
the award immediately prior to the transfer, provided that the
transferee will be substituted for the transferor to the extent
appropriate to enable the transferee to exercise the transferred
award. When transferred awards are exercised by a transferee,
the shares received as a result of the exercise may be subject
to the resale restrictions specified above. Any holder of an
award desiring to transfer an award must make application for
transfer and comply with such other requirements as the
Committee may require.
Federal
Tax Consequences
The following discussion is for general information only and is
intended to summarize briefly the U.S. federal tax
consequences to Participants arising from participation in the
LTIP. This description is based on current law, which is subject
to change (possibly retroactively). The tax treatment of
Participants in the LTIP may vary depending on the particular
situation and may, therefore, be subject to special rules not
discussed below. No attempt has been made to discuss any
potential foreign, state, or local tax consequences.
Non-Qualified Options; SARs; Incentive
Options. Participants will not realize taxable
income upon the grant of a Non-Qualified Option or an SAR. Upon
the exercise of a Non-Qualified Option or SAR, a Participant
will recognize ordinary compensation income (subject to
withholding by us to the extent the Participant is an employee)
in an amount equal to the excess of (i) the amount of cash
and the fair market value of the Common Stock received, over
(ii) the exercise price (if any) paid therefor. A
Participant will generally have a tax basis in any shares of
Common Stock received pursuant to the exercise of an SAR, or
pursuant to the cash exercise of a Non-Qualified Option, that
equals the fair market value of such shares on the date of
exercise. Subject to the discussion under Tax
Code Limitations on Deductibility below, we (or a
subsidiary) will be entitled to a deduction for federal income
tax purposes that corresponds as to timing and amount with the
compensation income recognized by a Participant under the
foregoing rules.
Participants eligible to receive an Incentive Option will not
recognize taxable income on the grant of an Incentive Option.
Upon the exercise of an Incentive Option, a Participant will not
recognize taxable income, although the excess of the fair market
value of the shares of Common Stock received upon exercise of
the Incentive Option (ISO Stock) over the exercise
price will increase the alternative minimum taxable income of
the Participant, which may cause such Participant to incur
alternative minimum tax. The payment of any alternative minimum
tax attributable to the exercise of an Incentive Option would be
allowed as a credit against the Participants regular tax
liability in a later year to the extent the Participants
regular tax liability is in excess of the alternative minimum
tax for that year.
Upon the disposition of ISO Stock that has been held for the
requisite holding period (generally, at least two years from the
date of grant and one year from the date of exercise of the
Incentive Option), a Participant will generally recognize
capital gain (or loss) equal to the excess (or shortfall) of the
amount received in the disposition over the exercise price paid
by the Participant for the ISO Stock. However, if a Participant
disposes of ISO Stock that has not been held for the requisite
holding period (a Disqualifying Disposition), the
Participant will recognize ordinary compensation income in the
year of the Disqualifying Disposition in an amount equal to the
amount by
10
which the fair market value of the ISO Stock at the time of
exercise of the Incentive Option (or, if less, the amount
realized in the case of an arms length disposition to an
unrelated party) exceeds the exercise price paid by the
Participant for such ISO Stock. A Participant would also
recognize capital gain to the extent the amount realized in the
Disqualifying Disposition exceeds the fair market value of the
ISO Stock on the exercise date. If the exercise price paid for
the ISO Stock exceeds the amount realized (in the case of an
arms-length disposition to an unrelated party), such
excess would ordinarily constitute a capital loss.
We and our subsidiaries will generally not be entitled to any
federal income tax deduction upon the grant or exercise of an
Incentive Option, unless a Participant makes a Disqualifying
Disposition of the ISO Stock. If a Participant makes a
Disqualifying Disposition, we (or a subsidiary) will then,
subject to the discussion below under Tax Code
Limitations on Deductibility, be entitled to a tax
deduction that corresponds as to timing and amount with the
compensation income recognized by a Participant under the rules
described in the preceding paragraph.
Under current rulings, if a Participant transfers previously
held shares of Common Stock (other than ISO Stock that has not
been held for the requisite holding period) in satisfaction of
part or all of the exercise price of a Non-Qualified Option or
Incentive Option, no additional gain will be recognized on the
transfer of such previously held shares in satisfaction of the
Non-Qualified Option or Incentive Option exercise price
(although a Participant would still recognize ordinary
compensation income upon exercise of an Non-Qualified Option in
the manner described above). Moreover, that number of shares of
Common Stock received upon exercise which equals the number of
shares of previously held Common Stock surrendered therefor in
satisfaction of the Non-Qualified Option or Incentive Option
exercise price will have a tax basis that equals, and a capital
gains holding period that includes, the tax basis and capital
gains holding period of the previously held shares of Common
Stock surrendered in satisfaction of the Non-Qualified Option or
Incentive Option exercise price. Any additional shares of Common
Stock received upon exercise will have a tax basis that equals
the amount of cash (if any) paid by the Participant, plus the
amount of compensation income recognized by the Participant
under the rules described above.
The LTIP allows the Committee to permit the transfer of awards
in limited circumstances. See Description of the
LTIP Other Provisions Transferability of
Awards. For income and gift tax purposes, certain
transfers of Non-Qualified Options and SARs generally should be
treated as completed gifts, subject to gift taxation.
The Internal Revenue Service (the IRS) has not
provided formal guidance on the income tax consequences of a
transfer of Non-Qualified Options (other than pursuant to a
domestic relations order). However, the IRS informally has
indicated that after a transfer of stock options (other than
pursuant to a domestic relations order), the transferor will
recognize income, which will be subject to withholding, and
FICA/FUTA taxes will be collectible at the time the transferee
exercises the stock options. If Non-Qualified Options are
transferred pursuant to a domestic relations order, the
transferee will recognize ordinary income upon exercise by the
transferee which will be subject to withholding, and FICA/FUTA
taxes (attributable to and reported with respect to the
transferor) will be collectible from the transferee at such time.
In addition, if the Participant transfers a vested Non-Qualified
Option to another person and retains no interest in or power
over it, the transfer is treated as a completed gift. The amount
of the transferors gift (or generation-skipping transfer,
if the gift is to a grandchild or later generation) equals the
value of the Non-Qualified Option at the time of the gift. The
value of the Non-Qualified Option may be affected by several
factors, including the difference between the exercise price and
the fair market value of the stock, the potential for future
appreciation or depreciation of the stock, the time period of
the Non-Qualified Option and the illiquidity of the
Non-Qualified Option. The transferor will be subject to a
federal gift tax, which will be limited by (i) the annual
exclusion of $13,000 per donee for 2011, (ii) the
transferors lifetime unified credit, or (iii) the
marital or charitable deductions. The gifted Non-Qualified
Option will not be included in the Participants gross
estate for purposes of the federal estate tax or the
generation-skipping transfer tax.
This favorable tax treatment for vested Non-Qualified Options
has not been extended to unvested Non-Qualified Options. Whether
such consequences apply to unvested Non-Qualified Options is
uncertain and the gift tax implications of such a transfer is a
risk the transferor will bear upon such a disposition.
The IRS has not specifically addressed the tax consequences of a
transfer of SARs.
11
Restricted Stock Awards; Phantom Stock Awards; Stock
Awards. A Participant will not have taxable
income at the time of grant of an award in the form of a Phantom
Stock Award, but rather, will generally recognize ordinary
compensation income at the time he receives cash in satisfaction
of the Phantom Stock Award in an amount equal to the amount of
cash received. In general, a Participant will recognize ordinary
compensation income as a result of the receipt of Common Stock
pursuant to a stock award or a restricted stock award in an
amount equal to the fair market value of the Common Stock when
such stock is received; provided, however, that if the stock is
not transferable and is subject to a substantial risk of
forfeiture when received, a Participant will recognize ordinary
compensation income in an amount equal to the fair market value
of the Common Stock (i) when the Common Stock first becomes
transferable or is no longer subject to a substantial risk of
forfeiture in cases where a Participant does not make an valid
election under Section 83(b) of the Code or (ii) when
the Common Stock is received in cases where a Participant makes
a valid election under Section 83(b) of the Code.
An employee Participant will be subject to withholding for
federal, and generally for state and local, income taxes at the
time he recognizes income under the rules described above with
respect to Common Stock or cash received. Dividends that are
received by a Participant prior to the time that the Common
Stock is taxed to the Participant under the rules described in
the preceding paragraph are taxed as additional compensation,
not as dividend income. The tax basis in the Common Stock
received by a Participant will equal the amount recognized by
him as compensation income under the rules described in the
preceding paragraph, and the Participants capital gains
holding period in those shares will commence on the date of
receipt of the shares.
Subject to the discussion immediately below, we (or a
subsidiary) will be entitled to a deduction for federal income
tax purposes that corresponds as to timing and amount with the
compensation income recognized by a Participant under the
foregoing rules.
Tax Code Limitations on Deductibility. In
order for the amounts described above to be deductible by us (or
a subsidiary), such amounts must constitute reasonable
compensation for services rendered or to be rendered and must be
ordinary and necessary business expenses.
Our ability (or the ability of a subsidiary) to obtain a
deduction for future payments under the LTIP could also be
limited by the golden parachute payment rules of
Section 280G of the Code, which prevent the deductibility
of certain excess parachute payments made in connection with a
change in control of an employer-corporation.
Finally, our ability (or the ability of a subsidiary) to obtain
a deduction for amounts paid under the LTIP could be limited by
Section 162(m) of the Code, which limits the deductibility,
for federal income tax purposes, of compensation paid to certain
executive officers of a publicly traded corporation to
$1,000,000 with respect to any such officer during any taxable
year of the corporation. However, an exception applies to this
limitation in the case of certain performance-based
compensation. In order to exempt performance-based
compensation from the $1,000,000 deductibility limitation, the
grant or vesting of the award relating to the compensation must
be based on the satisfaction of one or more performance goals as
selected by the Committee. Performance-based awards may not be
granted in a given period if such awards relate to shares of
Common Stock which exceed a specified limitation or,
alternatively, the performance-based awards may not result in
compensation, for a Participant, in a given period which exceeds
a specified limitation. Although the LTIP has been drafted to
satisfy the requirements for the performance-based compensation
exception, we may determine that it is in its best interests not
to satisfy the requirements for the exception.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF
U.S. FEDERAL INCOME TAXATION WITH RESPECT TO THE GRANT,
SETTLEMENT AND EXERCISE OF AWARDS UNDER THE LTIP. IT DOES NOT
PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS THE TAX
CONSEQUENCES OF AN INDIVIDUALS DEATH OR THE PROVISIONS OF
THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN
COUNTRY IN WHICH ANY ELIGIBLE INDIVIDUAL MAY RESIDE.
12
New Plan
Benefits Table
The awards, if any, that will be made to eligible Participants
under the LTIP are subject to the discretion of the Committee;
however, on February 22, 2011, the Committee approved
certain 2011 annual equity awards to our executive officers and
employees, to be granted subject to, and at the time of,
approval by our stockholders of the Second Amendment to the
LTIP, as reflected in the table below:
|
|
|
|
|
|
|
|
|
|
|
Name and Position
|
|
|
Dollar
Value(2)
|
|
|
Number of
Shares(1)(2)
|
Matthew P. Clifton, Chairman of the Board and Chief Executive
Officer
|
|
|
|
$2,504,275
|
|
|
|
|
43,827
|
|
David L. Lamp, President
|
|
|
|
$1,389,016
|
|
|
|
|
24,309
|
|
Bruce R. Shaw, Senior Vice President and Chief Financial Officer
|
|
|
|
$438,836
|
|
|
|
|
7,680
|
|
George J. Damiris, Senior Vice President, Supply and Marketing
|
|
|
|
$585,056
|
|
|
|
|
10,239
|
|
Denise C. McWatters, Vice President, General Counsel and
Secretary
|
|
|
|
$211,532
|
|
|
|
|
3,702
|
|
Executive Officer Group (including Named Executive Officers) (19
individuals)
|
|
|
|
$8,108,337
|
|
|
|
|
141,903
|
|
Non-Executive Director Group (6 individuals)
|
|
|
|
$0
|
|
|
|
|
0
|
|
Non-Executive Officer Employee Group (185 individuals)
|
|
|
|
$3,767,126
|
|
|
|
|
65,928
|
|
Total (all executive officers, non-executive directors and
non-executive officer employees as a group)
|
|
|
|
$11,875,463
|
|
|
|
|
207,831
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes awards of restricted stock (with time-based vesting
conditions), restricted stock (with performance conditions) and
performance share units. Aggregate dollar value is computed by
multiplying the number of units awarded by the closing price of
our Common Stock on February 28, 2011, which was $57.14. |
|
(2) |
|
The values and share amounts shown in these columns assume all
performance units will be paid at the maximum payout level of
200%. For purposes of full disclosure, in the event that the
performance share units will be paid at the target payout level
of 100%, the values would be as shown in the table below: |
|
|
|
|
|
|
|
|
|
|
|
Name and Position
|
|
|
Dollar Value
|
|
|
Number of Shares
|
Matthew P. Clifton, Chairman of the Board and Chief Executive
Officer
|
|
|
|
$1,669,517
|
|
|
|
|
29,218
|
|
David L. Lamp, President
|
|
|
|
$926,011
|
|
|
|
|
16,206
|
|
Bruce R. Shaw, Senior Vice President and Chief Financial Officer
|
|
|
|
$292,557
|
|
|
|
|
5,120
|
|
George J. Damiris, Senior Vice President, Supply and Marketing
|
|
|
|
$390,038
|
|
|
|
|
6,826
|
|
Denise C. McWatters, Vice President, General Counsel and
Secretary
|
|
|
|
$141,022
|
|
|
|
|
2,468
|
|
Executive Officer Group (including Named Executive Officers)
(19 individuals)
|
|
|
|
$5,405,558
|
|
|
|
|
94,602
|
|
Non-Executive Director Group (6 individuals)
|
|
|
|
$0
|
|
|
|
|
0
|
|
Non-Executive Officer Employee Group (185 individuals)
|
|
|
|
$3,056,304
|
|
|
|
|
53,488
|
|
Total (all executive officers, non-executive directors and
non-executive officer employees as a group)
|
|
|
|
$8,461,862
|
|
|
|
|
148,090
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 1, 2011, there were no stock options
outstanding under the LTIP.
13
Required
Vote and Recommendation
The approval of the amendment to the LTIP requires the approval
of a majority of the votes cast on the proposal, provided that
the total votes cast on the proposal represent over 50% of the
voting power of the total outstanding shares of Common Stock
entitled to vote on the proposal, which is referred to as the
Outstanding Votes. Votes For, votes
Against and abstentions count as votes cast, while
broker non-votes do not count as votes cast but count as
Outstanding Votes. Thus, the total sum of votes For,
plus votes Against, plus abstentions, which is
referred to as the NYSE Votes Cast, must be greater
than 50% of the total Outstanding Votes. Further, the number of
votes For the proposal must be greater than 50% of
the NYSE Votes Cast.
The Board unanimously recommends a vote FOR the
proposal to amend the LTIP.
14
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 and each Nominee for election as a 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 unvested shares of restricted stock,
which are deemed outstanding for all purposes. Individuals
holding these unvested shares of restricted stock have the power
to vote such shares but cannot dispose of such shares until the
restrictions on the shares lapse. The number of shares
beneficially owned by a person also includes restricted stock
units that are either currently vested or which vest within
60 days after the Record Date. These restricted stock units
are 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. For a
description of restricted stock units, see the section titled
Directors Compensation of Directors.
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
53,353,449 shares of Common Stock outstanding.
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
Percent of
|
|
|
and Nature of
|
|
Common Stock
|
Name and Address of Beneficial Owner
|
|
Beneficial Ownership
|
|
Outstanding
|
|
FMR LLC
|
|
|
8,136,608
|
(1)
|
|
|
15.25
|
%
|
82 Devonshire Street
Boston, Massachusetts 02109
|
|
|
|
|
|
|
|
|
TCTC Holdings, LLC
|
|
|
7,800,749
|
(2)(3)
|
|
|
14.62
|
%
|
2626 Cole Avenue, Suite 705
Dallas, Texas 75204
|
|
|
|
|
|
|
|
|
Allianz Global Investors Capital LLC
|
|
|
3,163,400
|
(4)
|
|
|
5.93
|
%
|
680 Newport Center Drive, Suite 250
Newport Beach, California 92660
|
|
|
|
|
|
|
|
|
The Vanguard Group
|
|
|
2,714,148
|
(5)
|
|
|
5.09
|
%
|
100 Vanguard Blvd.
Malvern, Pennsylvania 19355
|
|
|
|
|
|
|
|
|
Jack P. Reid
|
|
|
593,250
|
(6)(7)(8)
|
|
|
1.11
|
%
|
Matthew P. Clifton
|
|
|
386,453
|
(6)(7)
|
|
|
*
|
|
Paul T. Stoffel
|
|
|
269,044
|
(6)
|
|
|
*
|
|
David L. Lamp
|
|
|
83,210
|
(6)(7)
|
|
|
*
|
|
Bruce R. Shaw
|
|
|
36,787
|
(6)
|
|
|
*
|
|
Robert G. McKenzie
|
|
|
26,351
|
(3)(6)(9)
|
|
|
*
|
|
George J. Damiris
|
|
|
21,903
|
(6)
|
|
|
*
|
|
Buford Berry
|
|
|
17,144
|
(6)
|
|
|
*
|
|
Leldon E. Echols
|
|
|
9,453
|
(6)
|
|
|
*
|
|
Denise C. McWatters
|
|
|
6,696
|
(6)
|
|
|
*
|
|
Tommy A. Valenta
|
|
|
4,523
|
(6)
|
|
|
*
|
|
R. Kevin Hardage
|
|
|
0
|
(3)
|
|
|
*
|
|
All directors and executive officers as a group (11 persons)
|
|
|
1,454,814
|
(6)(7)(10)
|
|
|
2.73
|
%
|
15
|
|
|
(1) |
|
FMR LLC (FMR) has filed with the SEC a
Schedule 13G, dated December 31, 2010. Based on the
Schedule 13G, FMR has sole voting power with respect to
1,503,108 shares, sole dispositive power with respect to
8,136,608 shares and no shared voting or shared dispositive
power for any shares. The Schedule 13G reported that these
shares include (i) 6,633,500 shares beneficially owned
by Fidelity Management & Research Company, a
wholly-owned subsidiary of FMR, (ii) 858,363 shares
beneficially owned by Strategic Advisors, Inc., a wholly-owned
subsidiary of FMR, (iii) 15,520 shares for which
Edward C. Johnson 3d, Chairman of FMR, has sole voting and
dispositive power, and (iv) 629,225 shares
beneficially owned by FIL Limited, which is owned in part by
partnerships controlled predominately by members of the family
of Mr. Johnson or trusts for their benefit. |
|
(2) |
|
TCTC Holdings, LLC (TCTC) has filed with the SEC a
Schedule 13G, dated December 31, 2010. Based on the
Schedule 13G, Turtle Creek Trust Company
(Trust Company) may be deemed to beneficially
own securities held in accounts over which it serves as trustee,
and Turtle Creek Management, LLC (Management) may be
deemed to beneficially own securities held in accounts in which
it has discretionary authority. Trust Company and
Management are wholly owned subsidiaries of TCTC and TCTC may be
deemed to indirectly beneficially own securities owned by
Trust Company and Management. The Schedule 13G
reported that (i) TCTC has sole voting power with respect
to 7,257,749 shares, sole dispositive power over
7,800,749 shares and no shared voting or shared dispositive
power for any shares, (ii) Trust Company has sole
voting power and sole dispositive power with respect to
7,257,449 shares and no shared voting or shared dispositive
power for any shares, and (iii) Management has sole
dispositive power over 543,300 shares and no sole voting,
shared voting or shared dispositive power for any shares. |
|
(3) |
|
Mr. McKenzie is a member of the board of directors of
Trust Company and Mr. Hardage, a Nominee for election
to the Board, is the Chief Executive Officer of
Trust Company, a portfolio manager of Management and a
non-controlling manager and member of TCTC.
Messrs. McKenzie and Hardage are not deemed to beneficially
own shares reported by TCTC because neither one has voting or
dispositive power for such shares. |
|
(4) |
|
Allianz Global Investors Capital LLC (AGIC) has
filed with the SEC a Schedule 13G, dated December 31,
2010. Based on the Schedule 13G, AGIC, along with its
wholly-owned subsidiary NFJ Investment Group LLC
(NFJ), share beneficial ownership with respect to
3,163,400 shares. The Schedule 13G also reported that
NFJ has sole voting power with respect to 3,142,100 shares,
sole dispositive power with respect to 3,163,400 shares and
no shared voting power or shared dispositive power for any
shares. |
|
(5) |
|
The Vanguard Group, Inc. has filed with the SEC a
Schedule 13G, dated February 9, 2011. Based on the
Schedule 13G, The Vanguard Group, Inc. has sole voting
power and shared dispositive power with respect to
35,071 shares, sole dispositive power with respect to
2,679,077 shares, and no shared voting power for any shares. |
|
(6) |
|
The number of shares beneficially owned includes unvested shares
of restricted stock which (as of the Record Date) such
individuals cannot dispose of until the restrictions on these
shares lapse, as follows: 60,389 restricted shares for
Mr. Clifton, 32,920 restricted shares for Mr. Lamp,
4,922 restricted shares for Mr. Shaw, 6,562 restricted
shares for Mr. Damiris, 2,369 restricted shares for
Ms. McWatters, and 107,162 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, McKenzie,
Reid, Stoffel and Valenta includes a total of 63,524 restricted
share units granted to each of these directors as compensation
between 2008 and 2010 (see description of restricted stock units
under Compensation of Directors). |
|
(7) |
|
The number of shares beneficially owned includes shares in the
Thrift Plan for Employees of Holly Corporation, its
Affiliates and Subsidiaries. |
|
(8) |
|
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. |
|
(9) |
|
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. |
|
(10) |
|
Includes the 515,176 shares as to which Mr. Reid
disclaims beneficial ownership, and the 500 shares as to
which Mr. McKenzie disclaims beneficial ownership. |
16
DIRECTORS
The following tables set forth certain information regarding the
directors of the Company in 2010 and Nominees for election in
2011. Each directors term of office expires at the Annual
Meeting.
|
|
|
|
|
|
|
Name of Nominee
|
|
Age
|
|
Current Title
|
|
Buford P. Berry
|
|
|
75
|
|
|
Director
|
Matthew P. Clifton
|
|
|
59
|
|
|
Chief Executive Officer, Chairman of the Board
|
Leldon E. Echols
|
|
|
55
|
|
|
Director
|
R. Kevin Hardage
|
|
|
49
|
|
|
Nominee
|
*Marcus R. Hickerson
|
|
|
84
|
|
|
Director
|
*Thomas K. Matthews, II
|
|
|
85
|
|
|
Director
|
Robert G. McKenzie
|
|
|
73
|
|
|
Director
|
Jack P. Reid
|
|
|
74
|
|
|
Director
|
**Paul T. Stoffel
|
|
|
77
|
|
|
Director
|
Tommy A. Valenta
|
|
|
62
|
|
|
Director
|
|
|
|
* |
|
Served as a director from January 1, 2010 until May 5,
2010 (the date of the 2010 Annual Stockholders Meeting at which
he did not stand for reelection) when he retired from the Board. |
|
** |
|
Not standing for reelection at the 2011 Annual Stockholders
Meeting. |
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 Corporate Governance and
Public Policy Committee (the Governance 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 Governance 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 Governance Committee also focuses on
issues of diversity, such as diversity of education,
professional experience and differences in viewpoints and
skills. The Governance Committee does not have a formal policy
with respect to diversity; however, the Board and the Governance
Committee believe that it is essential that the Board members
represent diverse viewpoints. In considering candidates for the
Board, the Governance 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
Governance 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
17
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 thirty 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 Finance 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
30 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 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 and finance
committees. Mr. Echols also serves on the board of
directors of Roofing Supply Group Holdings, Inc., a private
company. 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 in his role as the Chair of
the Audit Committee. 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.
R. Kevin Hardage, a Nominee for election to
the Board, has served as Chief Executive Officer of Turtle Creek
Trust Company, a private trust and investment management
firm in Dallas, Texas, since 2009. He is a co-founder of Turtle
Creek Management, LLC, a Dallas-based registered investment
advisory firm, and has served as its President and as a
portfolio manager since its inception in 2006. From 2002 to 2006
he served as Vice President and portfolio manager of
U.S. Trust Company, N.A., a private banking and
investment management firm. From 1998 to 2002 he served as Vice
President of Brown Brothers Harriman & Co. and head of
the firms Dallas office. From 1994 to 1998 he was engaged
in the private practice of corporate and securities law at the
firm of Locke Liddell Rain Harrell in Dallas, Texas.
Mr. Hardage received his B.A. from the University of Texas
at Austin, his M.B.A. from the University of Texas at Austin
Graduate School of Business, and his J.D. degree from Southern
Methodist University School of Law. Mr. Hardage also holds
a Chartered Financial Analyst designation from the CFA
Institute. The Board selected Mr. Hardage as a Nominee for
director because he would bring to the Board executive and
general management experience and financial expertise.
Marcus R. Hickerson retired from the Board in
2010. Certain information with respect to
Mr. Hickerson is included in this Proxy Statement due to
his service as a director from January 1, 2010 to the date
of the 2010 Annual Stockholder Meeting.
Thomas K. Matthews, II retired from the Board
in 2010. Certain information with respect to Mr. Matthews
is included in this Proxy Statement due to his service as a
director from January 1, 2010 to the date of the 2010
Annual Stockholder Meeting.
18
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
financial sophistication based upon his prior experience,
including his former 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 Corporate Governance
and 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 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. Mr. Stoffel is not standing for
reelection at the 2011 Annual Stockholders Meeting, so his
qualifications for the director election at the 2011 Annual
Stockholders Meeting are not presented.
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 or Nominees reported any litigation for
the period from 2001 to 2011 that is required to be reported in
this Proxy Statement.
19
Compensation
of Directors
For the year ended December 31, 2010, 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 and Chairman of
Corporate Governance and Public Policy Committee
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$15,000
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Special Retainer for Chairman of Compensation 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
December 31, 2010, 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 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 |
20
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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. |
In addition to the compensation arrangements described above,
the Company previously entered into Supplemental Payment
Agreements (the Supplemental Agreements) with
certain directors to provide compensation for their 2001, 2002
and/or 2003
service as directors. Under the terms of the Supplemental
Agreements, directors received an amount of phantom
shares, which are bookkeeping entries used to compute the
value of certain payments to be paid under the Supplemental
Agreements (the Phantom Shares). The Phantom Shares,
as used in computations under the Supplemental Agreements, are
considered to be equal in value to shares of our Common Stock,
except that the director does not actually have any rights with
respect to the shares.
Under the Supplemental Agreements, directors are entitled to two
types of payment: (i) interim payments and (ii) a
final payment. So long as the final payment has not been made, a
director is entitled to interim payments, from time to time with
respect to Phantom Shares, equal to the amount of the dividends
in cash or property (but not shares of our Common Stock) paid to
holders of shares of our Common Stock. Each interim payment is
paid at the same time as the payment of the dividend to which
such interim payment relates. A director is also entitled to a
final payment upon the date (the Valuation Date)
that (i) the director ceases to be a member of the Board
for any reason other than resignation or (ii) the date of
the Companys Annual Meeting of Stockholders that first
occurs after the director resigns as a member of the Board. The
final payment with respect to a Phantom Share is based upon the
Applicable Value (as defined in the Supplemental
Agreement) of a share of Common Stock, which generally is the
average daily trading price for a share of Common Stock on the
stock exchange on which the Common Stock is listed or the over
the counter market over a period of 20 trading days. The final
payment is calculated by multiplying the Applicable
Value by the number of Phantom Shares held by the director
and is paid within 40 days of the Valuation Date. Under the
Supplemental Agreements, the Company also has a right to
terminate the Phantom Shares held by a director by making a
final payment if (i) at any time the Board determines, in
reasonable judgment, that it is necessary to comply with
government regulations or facilitate a transaction that is in
the best interest of the Company or (ii) the Common Stock
permanently ceases to be traded on a national exchange or over
the counter.
During the year ended December 31, 2010, 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
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in
Cash(1)
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Awards(2)
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Compensation(3)
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Total
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Buford P. Berry
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$89,000
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$120,131
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$0
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$209,131
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Leldon E. Echols
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$84,808
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$120,131
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$0
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$204,939
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Marcus R. Hickerson*
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$25,308
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$0
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$206,387
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$231,695
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Thomas K. Matthews, II*
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$35,308
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$0
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$206,387
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$241,695
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Robert G. McKenzie
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$95,000
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$120,131
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$0
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$215,131
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Jack P. Reid
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$61,000
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$120,131
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$0
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$181,131
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Paul T. Stoffel**
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$69,000
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$120,131
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$0
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$189,131
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Tommy A. Valenta
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$63,000
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$120,131
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$0
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$183,131
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* |
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Messrs. Hickerson and Matthews did not stand for reelection
at the 2010 Annual Stockholders Meeting, but are included in
this Proxy Statement because they served as directors for the
Company from January 1, 2010 through May 5, 2010. |
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** |
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Mr. Stoffel is not standing for reelection at the 2011
Annual Stockholders Meeting. |
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(1) |
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Represents fees earned or paid in cash for services as a
director during 2010, including annual retainer fees, meeting
fees, and committee chairmanship fees. |
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(2) |
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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). See note 6 to our consolidated
financial statements for the fiscal year ended December 31,
2010 included in our Annual Report on
Form 10-K
filed with the SEC on |
21
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February 25, 2011 for a discussion of the assumptions used
in determining the FASB ASC Topic 718 grant date fair value of
these awards. Each of the 2010 directors received an award
of 4,523 restricted stock units under the Long-Term Incentive
Compensation Plan on May 5, 2010 with a grant date fair
value of $120,131 (computed using the closing price of $26.56 on
the date of grant). Of the restricted stock units granted to
each director, 25% vested on August 5, 2010, 25% vested on
November 5, 2010, 25% vested on February 5, 2011, and
the remaining 25% will vest on May 5, 2011. The fair value
of each restricted stock unit grant, modified as appropriate to
reflect the potential impact of forfeitures, is amortized over
the vesting period. As of December 31, 2010, the aggregate
number of stock awards outstanding for each director was as
follows: Messrs. Berry, McKenzie, Reid, and Stoffel each
held 12,387 restricted stock units, Mr. Echols held 9,453
restricted stock units, and Mr. Valenta held
4,523 restricted stock units. As of December 31, 2010,
the aggregate number of Phantom Units outstanding for each
director that was party to a Supplemental Agreement was as
follows: Messrs. Stoffel, McKenzie and Reid each held 7,760
Phantom Units. |
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(3) |
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Includes final payment under the Supplemental Agreements, as
applicable. As a result of Messrs. Hickersons and
Matthews cessation of service as members of the Board,
each received a final payment of $206,387 in accordance with
their respective Supplemental Agreements with respect to the
7,760 outstanding Phantom Units each held. |
Guidelines
for Stock Ownership for Outside Directors
Under the terms of the restricted stock unit awards, directors
are prohibited from selling shares for two years after vesting,
absent the occurrence of an accelerated payment event as
described above under Compensation of Directors.
Pursuant to the stock ownership guidelines approved by the Board
in 2009, each director is further 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, Robert G. McKenzie, Jack P. Reid, Paul
T. Stoffel and Tommy A. Valenta. Marcus R. Hickerson and Thomas
K. Matthews were also determined by the Board to be independent
under this standard during their service on the Board in 2010
prior to their retirement from the Board on May 5, 2010.
The Board has also determined that R. Kevin Hardage, who is a
Nominee for election as a director of the Company, is
independent under this standard.
Marcus R. Hickerson served as a director from January 1,
2010 until May 5, 2010 (the date of the 2010 Annual
Stockholders Meeting at which he did not stand for reelection)
when he retired from the Board. In determining that
Mr. Hickerson was an independent director during his
service to the Board in 2010, the Board considered the fact that
Mr. Hickersons
58-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, 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
50-year-old
son, Willie D. Reid, is employed as a Manager of Applications
Infrastructure Support of the Company. From 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)
22
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.
In determining that Mr. Hardage is independent, the Board
considered the fact that Mr. Hardages
father-in-law,
Gerard Regard, is employed as Assistant to the Chairman of the
Company. Over the last 35 years, Gerard Regard has held various
positions with the Company, and since 1979, he has been the
Assistant to the Chairman of the Board. The Boards
determination that the employment of Gerard Regard would not
interfere with Mr. Hardages ability to act
independently from the management of the Company was based
particularly on the fact that Mr. Hardage 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 Gerard Regard
and the fact that he is not an executive officer of the Company.
In determining that Mr. Hardage is independent, the Board
also considered the fact that Mr. Hardage is a
non-controlling manager and member of TCTC Holdings, LLC (which
may be deemed to beneficially own 14.62% of the Companys
Common Stock) and holds various positions with its subsidiaries.
The Board held eleven meetings during 2010. The Board has four
principal standing committees: (a) the Executive Committee,
(b) the Audit Committee, (c) the Compensation
Committee, and (d) the Corporate Governance and Public
Policy Committee. Each of the committees is appointed by the
Board. During 2010, each director attended at least 75% of the
total number of meetings of the Board. During 2010, 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 2010 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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Corporate
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Governance
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and
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Name
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Executive
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Audit
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Compensation
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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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C
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X
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Robert G. McKenzie
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X
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X
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X
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C
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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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Tommy A. Valenta
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X
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X
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* Not standing for reelection at the 2011 Annual
Stockholders Meeting.
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. The Executive committee
held no meetings during 2010.
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 2010,
the committee met in person or by telephone six 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
23
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 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. Echols satisfies the requirements of the SEC
regulations for an audit committee financial expert
and has designated Mr. Echols 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 2010, the Committee met nine 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.
On May 5, 2010, the Nominating/Corporate Governance
Committee of the Board and the Public Policy Committee of the
Board combined to create the Corporate Governance and Public
Policy Committee of the Board. The Corporate Governance and
Public Policy Committee 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.
The Corporate Governance and Public Policy Committee is also
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, and for recommending to
management and the Board the formulation or modification of
policies and procedures concerning such matters. As described
above, all members of the Corporate Governance and Public Policy
Committee have been determined to be independent as independence
is defined in Section 303A.02 of the NYSEs listing
standards. During 2010, the Corporate Governance and Public
Policy Committee met two times and, prior to the combination of
the Nominating/Corporate Governance Committee and the Public
Policy Committee, the Nominating/Corporate Governance Committee
and the Public Policy Committee each met two times. The
Corporate Governance and Public Policy Committee continues to be
governed by the charter for the Nominating/Corporate Governance
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.
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 12, 2011. 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 Corporate Governance and Public
Policy 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 Corporate
24
Governance and Public Policy Committee occasionally utilizes the
services of search firms or consultants to assist in identifying
and screening potential candidates. The Corporate Governance and
Public Policy 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 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
Corporate Governance and Public Policy 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
Corporate Governance and Public Policy Committee in the same
manner as other candidates submitted by directors, employees or
obtained through other sources, although the members of the
Corporate Governance and Public Policy Committee may prefer
candidates who are personally known to the existing directors
and whose reputations are highly regarded. In evaluating
proposed candidates, the Corporate Governance and Public Policy
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 Corporate Governance and Public Policy
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
25
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 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 Compensation 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 Corporate Governance and Public Policy
Committee manages risks associated with the independence of the
Board and potential conflicts of interest and also 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 2010:
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Title as of December 31, 2010
|
|
Matthew P. Clifton
|
|
|
59
|
|
|
Chief Executive Officer
|
David L. Lamp
|
|
|
53
|
|
|
President
|
Bruce R. Shaw
|
|
|
43
|
|
|
Senior Vice President and Chief Financial Officer
|
George J. Damiris
|
|
|
51
|
|
|
Senior Vice President, Supply and Marketing
|
Denise C. McWatters
|
|
|
51
|
|
|
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
26
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 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 2001 to 2011 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,
27
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 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 three
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, 2010. 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. The HEP equity awards made
to Messrs. Clifton and Shaw and Ms. McWatters are
described in HEPs Annual Report on
Form 10-K
for the year ended December 31, 2010.
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
|
Objectives
and Summary 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 from our
executives.
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 of our employees to verify that such policies and practices
do not create unreasonable risks for us.
28
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 Officers to exert their best efforts to maximize
long-term value for both us and our stockholders. The Committee
considers recommendations by management, its independent
compensation consultant 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 2010 year, the Committee also reviewed
the total compensation provided to each of the Named Executive
Officers during the 2009 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
Committees annual compensation review also includes an
analysis of the Named Executive Officers non-equity
compensation elements to determine if current levels are
adequately aligned with our pay philosophy and business
strategies. The Committee also takes into consideration the
compensation of similarly situated executives in comparable
businesses. These equity incentives are designed to retain the
executives and align their interests with our stockholders over
a longer-term period of time.
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 (but did provide executive and director
compensation consulting services directly to the HEP
Compensation Committee which are further described in HEPs
Annual Report on
Form 10-K
for the year ending December 31, 2010), and there are no
conflicts of interest that exist between us or the Committee and
the Compensation Consultant. While the Committee recognizes the
value of being properly informed of market trends and peer
company compensation levels when evaluating our own program, the
Committee is under no obligation to utilize the Compensation
Consultants advice or recommendations, and retains the
sole discretion to structure our program as the Committee
believes to be appropriate for us and our stockholders.
Overview
of 2010 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 2010
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 2010 were:
|
|
|
|
|
base salary
|
|
|
|
annual incentive cash bonus compensation
|
|
|
|
long-term equity incentive compensation
|
|
|
|
retirement and benefit plans
|
|
|
|
Change in Control Agreements
|
29
Base
Salary
Base salaries for the Named Executive Officers are reviewed
annually by the Committee based on each executives
position, level of responsibility, individual performance,
position relative to other executives, market practices and all
other elements of the executives compensation. The
Committee also reviews competitive market data relevant to each
position provided by the Compensation Consultant. Following a
review of these various factors, the Committee determined that
increases in the base salaries for the Named Executive Officers
were warranted, as shown in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary as of
|
|
|
Base Salary as of
|
|
|
Approximate
|
Named Executive Officer
|
|
|
December 31, 2009
|
|
|
December 31, 2010
|
|
|
Percentage of Increase
|
Bruce R. Shaw
|
|
|
$
|
325,000
|
|
|
|
$
|
386,895
|
|
|
|
|
19
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George J. Damiris
|
|
|
$
|
300,000
|
|
|
|
$
|
310,980
|
|
|
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denise C. McWatters
|
|
|
$
|
250,000
|
|
|
|
$
|
292,000
|
|
|
|
|
16
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due to a decline in the economy and its resulting effect on our
industry and our company, at the request and recommendation of
Mr. Clifton a salary increase for Messrs. Clifton and
Lamp for 2010 was not considered, despite the Committees
and the Boards positive view of their performance.
At its February 22, 2011 meeting, the Committee again
reviewed the various considerations explained above and approved
the following base salary rates for the Named Executive
Officers, to be effective February 21, 2011:
|
|
|
|
|
|
|
|
|
Base Salary as of
|
Named Executive Officer
|
|
|
February 21, 2011
|
Matthew P. Clifton
|
|
|
$
|
956,300
|
|
|
|
|
|
|
|
David L. Lamp
|
|
|
$
|
573,800
|
|
|
|
|
|
|
|
Bruce R. Shaw
|
|
|
$
|
401,100
|
|
|
|
|
|
|
|
George J. Damiris
|
|
|
$
|
342,400
|
|
|
|
|
|
|
|
Denise C. McWatters
|
|
|
$
|
299,300
|
|
|
|
|
|
|
|
Annual
Incentive Cash Bonus Compensation
Under our annual incentive program, Named Executive Officers are
eligible for cash bonuses that are intended to attract and
retain senior leadership, link bonuses to our performance versus
the industry as well as our own absolute results, align
executives interests with stockholders, and recognize the
volatility and unpredictability of the refining industry.
Annual cash incentive opportunities for our Named Executive
Officers are reviewed annually, increase with level of
responsibility, and are split between three performance
elements: net income, peer results, and individual performance.
More weight is placed on individual performance at lower levels
of responsibility, and peer results are weighted more heavily
than absolute results due to the economics of the refining
industry and inability to forecast results. Bonus opportunities
for 2010 of our Named Executive Officers are shown below as a
percentage of salary by performance element. Bonuses are capped
to avoid encouraging an excessive short-term focus at the
expense of long-term soundness.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target Non-Equity Incentive Compensation % Salary
|
|
|
|
|
|
|
|
|
|
Maximum Bonus
|
Name
|
|
|
Net Income
|
|
|
Peer Results
|
|
|
Individual
|
|
|
Total
|
|
|
% Salary
|
Matthew P. Clifton
|
|
|
|
25
|
%
|
|
|
|
75
|
%
|
|
|
|
0
|
%
|
|
|
|
100
|
%
|
|
|
|
270
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David L. Lamp
|
|
|
|
17.5
|
%
|
|
|
|
52.5
|
%
|
|
|
|
10
|
%
|
|
|
|
80
|
%
|
|
|
|
176
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce R. Shaw
|
|
|
|
7.5
|
%
|
|
|
|
22.5
|
%
|
|
|
|
20
|
%
|
|
|
|
50
|
%
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George J. Damiris
|
|
|
|
7.5
|
%
|
|
|
|
22.5
|
%
|
|
|
|
20
|
%
|
|
|
|
50
|
%
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denise C. McWatters
|
|
|
|
5
|
%
|
|
|
|
15
|
%
|
|
|
|
20
|
%
|
|
|
|
40
|
%
|
|
|
|
80
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30
Four performance criteria are used in determining the peer
results portion of the annual bonus: earnings per share
(EPS) growth, net profit margin, return on assets,
and return on investment. 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 measures are equally weighted. To facilitate the timely
determination of bonuses, the measurement period covers four
consecutive quarters starting the last quarter of the preceding
year (2009) and ending the third quarter of the current
year (2010). Our performance is compared to that of eight
publicly traded refiners: 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 2010 Incentive Award Peer
Group, which was the same for 2010 as 2009). These
companies are used in evaluating our financial results as their
collective performance reflects external economic conditions we
are facing as a company and as an industry as a whole, and they
are also companies with which both management and investment
analysts compare our financial results.
Bonus payouts to our Named Executive Officers vary based on our
net income and peer results against established standards which
were the same in 2010 as 2009, as summarized below along with
actual results for 2010. The use of this consistent and
objective approach to bonus determinations is intended to
simplify the administration of the program, facilitate
transparency and communication, and avoid the need to set
performance goals in an uncertain economic environment. The
broad range of performance over which bonuses may be paid,
coupled with the multiple performance criteria, is intended to
avoid excess or unnecessary risk-taking to achieve a specific
target with respect to a discrete financial metric.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity Incentive Compensation Target
|
|
|
Measure
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
Actual for 2010
|
Net Income (% prior
year)(4)
|
|
|
|
0
|
%
|
|
|
|
100
|
%
|
|
|
|
200%-270
|
%(1)
|
|
|
532
|
%(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peer
Results(5)
|
|
|
|
0
|
th
|
|
|
|
50
|
th
|
|
|
|
100
|
th
|
|
|
90.6
|
th(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
270% for Clifton, 220% for Lamp, 200% for other Named Executive
Officers. |
|
(2) |
|
$104.0 million for 2010 divided by $19.5 million for
2009. |
|
(3) |
|
Average of return on assets 100th, return on investment 100th,
earnings per share growth 62.5th, net profit margin 100th. |
|
(4) |
|
For net income, target bonuses will be paid for achievement of
the same level as the prior year, in accordance with the
following table (interpolated between points): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Target Earned
|
% Change in Net Income From
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
Other Named Executive
|
|
|
|
Mr. Clifton
|
|
|
Mr. Lamp
|
|
|
Officers
|
|
−100
|
%
|
|
|
|
0
|
%
|
|
|
|
0
|
%
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
−50
|
%
|
|
|
|
50
|
%
|
|
|
|
50
|
%
|
|
|
|
50
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
%
|
|
|
|
100
|
%
|
|
|
|
100
|
%
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
+50
|
%
|
|
|
|
150
|
%
|
|
|
|
150
|
%
|
|
|
|
150
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
+100
|
%
|
|
|
|
200
|
%
|
|
|
|
200
|
%
|
|
|
|
200
|
% (max)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
+120
|
%
|
|
|
|
220
|
%
|
|
|
|
220
|
% (max)
|
|
|
|
200
|
% (max)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
+170
|
%
|
|
|
|
270
|
% (max)
|
|
|
|
220
|
% (max)
|
|
|
|
200
|
% (max)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
|
|
|
(5) |
|
For the peer results component, target bonuses are paid at 50th
percentile results, in accordance with the following table
(interpolated between points): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Target Earned
|
Percentile Ranking
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Named Executive
|
|
|
|
Mr. Clifton
|
|
|
Mr. Lamp
|
|
|
Officers
|
|
0th
|
|
|
|
|
0
|
%
|
|
|
|
0
|
%
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25th
|
|
|
|
|
25
|
%
|
|
|
|
37.5
|
%
|
|
|
|
50
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50th
|
|
|
|
|
100
|
%
|
|
|
|
100
|
%
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75th
|
|
|
|
|
185
|
%
|
|
|
|
160
|
%
|
|
|
|
150
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100th
|
|
|
|
|
270
|
%
|
|
|
|
220
|
%
|
|
|
|
200
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individual performance is also evaluated in determining annual
bonuses for the Named Executive Officers other than the Chief
Executive Officer, considering various competencies such as
interpersonal effectiveness, business conduct, professional and
technical, leadership, and results orientation. The evaluation
is completely discretionary and based on a wide range of
considerations which often change over the course of the year.
Further, the Committee may increase, decrease, or eliminate
awards for any Named Executive Officer as it deems appropriate
in its discretion.
The 2010 bonus attributable to objective performance standards
and actually paid to each Named Executive Officer is shown in
the table below as a percentage of salary by performance element
based on the actual financial results shown above. The actual
dollar amount of the portion tied to financial results is shown
in the Summary Compensation Table in the Non-Equity Incentive
Plan Compensation column, and the individual discretionary
portion is shown in the Bonus column (and not in the
Individual portion of the Actual Non-Equity
Compensation % Salary table below).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual Non-Equity Compensation % Salary
|
Name
|
|
|
Net Income
|
|
|
Peer Results
|
|
|
Individual(1)
|
|
|
Total
|
Matthew P. Clifton
|
|
|
|
67.5
|
%
|
|
|
|
178.5
|
%
|
|
|
|
|
|
|
|
|
246%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David L. Lamp
|
|
|
|
38.5
|
%
|
|
|
|
103.64
|
%
|
|
|
|
|
|
|
|
|
142.14%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce R. Shaw
|
|
|
|
15
|
%
|
|
|
|
40.72
|
%
|
|
|
|
|
|
|
|
|
55.72%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George J. Damiris
|
|
|
|
15
|
%
|
|
|
|
40.72
|
%
|
|
|
|
|
|
|
|
|
55.72%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denise C. McWatters
|
|
|
|
10
|
%
|
|
|
|
27.15
|
%
|
|
|
|
|
|
|
|
|
37.15%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Discretionary individual cash bonus amounts are included in the
Bonus column of the Summary Compensation Table. |
For 2011, we have not made any substantive changes to the annual
incentive cash bonus program.
Long-Term
Equity Incentive 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 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 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.
32
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 2010, 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 recommendations of the Chief
Executive Officer (except in regard to his own award). The
awards are granted annually during the first quarter of each
year.
A portion of the compensation for Messrs. Clifton and Shaw
and Ms. McWatters consists of long-term equity 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, 2010 for further
information concerning the compensation provided by HEP to
Messrs. Clifton and Shaw and Ms. McWatters.
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
and/or upon
the satisfaction of a specified service period. The Committee
has determined to grant our Named Executive Officers restricted
stock subject to performance conditions and restricted stock
subject only to time-based vesting conditions (other than
Messrs. Clifton and Lamp, who have additional performance
standards for their restricted stock), as described in greater
detail below.
Restricted Stock Subject to Performance
Conditions. In 2010, Messrs. Clifton and
Lamp were granted awards of restricted stock that will vest in
three equal annual installments, provided certain performance
requirements are achieved, 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.
The 2010 restricted stock agreements with Messrs. Clifton
and Lamp contain a Company performance standard that must be
satisfied for those awards to vest. The performance standards
applicable to the 2010 restricted stock with performance
conditions were changed from previous awards to more closely
align these awards with our other performance-based
arrangements. Under the terms of the 2010 restricted stock
awards with performance conditions, except in the case of early
termination of employment, one-third of these restricted shares
will vest in annual installments beginning January 1, 2011
if the applicable performance standard is satisfied. For
purposes of these awards, the applicable performance standard
requires, for any four consecutive quarters during the period
beginning with the quarter that begins January 1, 2010, and
ending with the quarter that ends December 31, 2013, either
(A) the sum of our net income per diluted share equals or
exceeds $0.30, or (B) we rank at or above the median of the
applicable peer group with respect to at least two out of four
following performance measures: EPS growth, net profit margin,
return on assets, and return on investment (as defined above).
Our peer group for these purposes is the 2010 Incentive Award
Peer Group. Assuming the applicable performance standard is met,
these awards will become vested on the date the Committee
certifies that we have met the applicable standards, provided
the applicable service requirement has also been met. To date,
we have achieved the applicable performance standard, which has
resulted in vesting with respect to the one-third restricted
shares that could potentially vest after December 31, 2010.
The remaining unvested shares will vest upon satisfaction of the
applicable service requirements, except as otherwise described
below in Potential Payments Upon Termination or Change in
Control.
Award recipients are stockholders with respect to all of the
shares of restricted stock. Recipients of restricted stock
subject to performance conditions granted before 2009 are
entitled to receive dividends with respect to the underlying
shares of Common Stock. For restricted stock awards with
performance conditions granted in 2009 and later years,
dividends with respect to the underlying shares will be deferred
until the applicable awards vest and such distributions will be
forfeited if such awards do not vest.
33
Restricted Stock Subject to Time-Based Vesting
Conditions. Restricted stock awards granted to
Messrs. Shaw and Damiris and Ms. McWatters during 2010
are not subject to performance conditions and vest in three
substantially equal annual installments. These restricted stock
agreements require that the award recipient be continuously
employed with us or a subsidiary through the applicable vesting
date, except as described below in Potential Payments Upon
Termination or Change in Control. The first one-third of
the restricted stock awards for Messrs. Shaw and Damiris
and Ms. McWatters vested in January 2011, and the remaining
two-thirds will vest on January 1, 2012 and January 1,
2013, provided he or she continues employment with us.
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.
Performance
Share Unit Awards
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 (weighted equally) compared to the performance of the
companies included in our performance comparison group on the
same four measures. 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.
In 2010, all of our Named Executive Officers were granted awards
of performance share units. The performance period for such
awards is from January 1, 2010 through September 30,
2012 and the Named Executive Officer must be employed by us on
December 31, 2012 to receive a settlement for the
performance share unit awards, except as described below in
Potential Payments Upon Termination or Change in
Control. A performance share unit will be earned depending
upon our performance versus that of the 2010 Incentive Award
Peer Group rather than the satisfaction of any particular value
or level of a performance target. If a member of the 2010
Incentive Award 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.
For the 2010 performance share unit awards, performance measures
will mirror the performance measures described above for our
annual incentive bonuses. The four performance measures
applicable to the 2010 awards are EPS growth, net profit margin,
return on assets, and return on investment.
The number of shares of Common Stock payable at the end of the
applicable performance period is equal to the result of
(a) multiplying (i) the number of performance share
units granted by (ii) the average percentile ranking, as
determined by adding our percentile ranking on each performance
measure over the thirty-three month performance period and
dividing the sum by four, then (b) multiplying that product
by two. The performance share unit awards do not provide for the
payment of dividends with respect to outstanding performance
share units nor do they provide for the payment of dividends at
the end of the performance period that would have been paid
during the performance period.
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. See Potential Payments Upon
Termination or Change in Control for a discussion of the
termination and change in control provisions applicable to the
performance share units.
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
34
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 2009 in order to set
2010 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 2010 Incentive Award Peer Group management
and investment analysts use to compare our financial results, as
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.
For purposes of setting 2011 compensation, the Committee made
certain changes to the benchmark group described above.
Specifically, BJ Services Company was removed from the benchmark
group because it was acquired by Baker-Hughes in 2010. Crosstex
Energy, Inc. was also removed from the benchmark group since the
Committee determined that the nature of the business in which it
is engaged did not make it an appropriate comparator company.
Sunoco, Inc. was added to the benchmark group to replace these
companies. These changes to the benchmark group had no impact on
2010 compensation.
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, including the remaining Named Executive
Officers. 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 2010, 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.
35
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 certain Named Executive Officers in excess of
$1,000,000, we have adopted a policy to provide
performance-based compensation under our LTIP 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). Performance vesting restricted stock and
performance share unit grants made to Named Executive Officers
subject to Section 162(m) in 2010 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 compensation
increases. In addition, our annual cash incentive awards,
granted under our LTIP, are subject to certain performance
conditions, and were designed in 2010 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 2010 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 titled 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
36
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. As of July 1,
2010, the plan was no longer made available to any newly hired
employees, including individuals represented under a collective
bargaining agreement. Certain participants in the plan as of
July 1, 2010 were permitted to choose to either continue
accruing benefits under the plan or freeze their benefits
effective December 31, 2010, and receive automatic Thrift
Plan contributions.
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 forth in the Tax Code and as allowed under the Holly
Retirement 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 2010, for
employees not covered by a collective bargaining agreement, we
provided (a) a 100% match of employee contributions to the
Thrift Plan up to 6% of their eligible compensation from
January 1, 2010 through May 31, 2010, and (b) a
50% match of employee contributions to the Thrift Plan up to 6%
of their eligible compensation from June 1, 2010 through
December 31, 2010. Effective January 1, 2011, we
reinstated the 100% match of employee contributions to the
Thrift Plan up to 6% of their eligible compensation. 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 in 2010 (this amount will remain
the same for the 2011 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 2011 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.
In 2010, 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.
37
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.
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
Robert G. McKenzie
38
SUMMARY
COMPENSATION TABLE
The table below summarizes the total compensation paid to,
awarded to, or earned by each of our Named Executive Officers in
2008, 2009 and 2010.
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
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Name and 2010 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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2010
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$922,500
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(6)
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$0
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$1,805,681
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$2,269,000
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$810,349
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$14,700
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$5,822,230
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Chairman of the Board and
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2009
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$919,233
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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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$4,987,075
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Chief Executive Officer
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2008
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$849,782
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$203,000
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$1,603,181
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$405,000
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$618,992
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$13,800
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$3,693,755
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David L. Lamp,
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2010
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$553,500
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(7)
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$213,255
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$1,001,290
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$786,745
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$148,596
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$14,700
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$2,718,086
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President
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2009
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$551,540
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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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$14,700
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$2,139,790
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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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$74,257
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$13,800
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$1,835,317
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Bruce R. Shaw,
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2010
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$378,077
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(8)
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$101,422
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$316,415
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$215,578
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$19,881
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$26,907
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$1,058,280
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Senior Vice President and
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2009
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$317,740
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$0
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$232,630
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$220,000
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$12,792
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$26,950
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$810,112
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Chief Financial Officer
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2008
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$256,351
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$81,500
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$660,619
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$82,500
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$2,751
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$25,300
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$1,109,021
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George J. Damiris,
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2010
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$309,416
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(9)
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$181,722
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$421,886
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$173,278
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$0
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$25,400
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$1,111,702
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Senior Vice President,
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2009
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$297,945
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$100,000
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$310,127
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$203,000
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$0
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$26,950
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$938,022
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Supply and Marketing
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2008
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$252,053
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$79,000
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$387,593
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$81,000
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$0
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$148,716
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$948,362
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Denise C. McWatters,
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2010
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$261,852
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(10)
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$107,602
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$151,940
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|
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$108,478
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$0
|
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$23,214
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|
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$653,086
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Vice President, General
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2009
|
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$247,945
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$100,000
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$150,014
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$123,000
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$0
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$26,950
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$647,909
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Counsel and Secretary
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2008
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$202,566
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$55,000
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$175,164
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$55,000
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$0
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$22,282
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$510,012
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|
(1) |
|
Annual bonuses for services performed in 2010 were paid in March
2011. Amounts in this column reflect the discretionary bonus
payable pursuant to individual performance under our annual
incentive bonus arrangement reported in the Non-Equity Incentive
Plan Compensation column. |
|
(2) |
|
Amounts reported 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, 2010 included in our Annual
Report on
Form 10-K
filed with the SEC on February 25, 2011 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 2010, the amounts in the table above were
based on an estimated payment of 125% 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%, the grant date fair value of the 2010
performance share unit awards made to each of the Named
Executive Officers would be as follows: Mr. Clifton,
$2,407,575; Mr. Lamp, $1,335,053; Mr. Shaw, $421,886;
Mr. Damiris, $562,515; and Ms. McWatters, $202,586.
With respect to the performance-based restricted stock awards
granted to Messrs. Clifton and Lamp in 2010, the amounts in
the table above were based on an estimated payment of 100% of
the award, as this is the probable payout percentage
(and the maximum potential payout level) for those awards 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. The terms of the 2010
performance share unit awards and the 2010 restricted stock
awards are provided above in the section titled
Compensation Discussion and Analysis Overview
of 2010 Compensation Components Long-Term Equity
Incentive Compensation. For additional information on
restricted stock and performance share unit awards, see below
under 2010 Outstanding Equity Awards at Fiscal Year
End. |
|
(3) |
|
The annual bonus amounts reported in the Non-Equity Incentive
Plan Compensation column for services performed in 2010 (paid in
March 2011) reflect payments with respect to the
pre-defined target percentages |
39
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|
|
that were allocated to the various performance components which
are described above in greater detail in the section titled
Compensation Discussion and Analysis Overview
of 2010 Compensation Components Annual Incentive
Cash Bonus Compensation. |
|
(4) |
|
The amounts shown in this column reflect the aggregate change in
the actuarial present value of the Named Executive
Officers respective accumulated benefits under all defined
benefit pension plans in which they participate, based on
following assumptions: |
|
|
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|
|
December 31, 2010
|
|
Discount Rate
|
|
5.65%
|
Mortality Table
|
|
RP2000 White Collar
Projected to 2020
|
Reserving Table
|
|
50% Male/50% Female
|
Retirement Age
|
|
the later of current age or
age 62
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(5) |
|
The All Other Compensation column for 2010 reflects
the following contributions made on behalf of the Named
Executive Officers: |
|
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|
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Name
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|
Automatic Thrift Plan
|
|
Employer Matching
|
|
Matthew P. Clifton
|
|
n/a
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|
$
|
14,700
|
|
David L. Lamp
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|
n/a
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|
$
|
14,700
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|
Bruce R. Shaw
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|
$12,250
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$
|
14,657
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|
George J. Damiris
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|
$12,250
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$
|
13,150
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|
Denise C. McWatters
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$12,250
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$
|
10,964
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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. The other Named Executive
Officers are not eligible to participate in the Holly Retirement
Plan (although Mr. Shaw was previously a participant in the
plan and has a Holly Retirement Plan benefit that was frozen as
of May 31, 2007), 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 2010 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). |
|
(6) |
|
As of January 1, 2010, Mr. Cliftons annual
salary was $922,500, which is equal to the actual payroll
payments he received during 2010. Due to a decline in the
economy and its resulting effect on our industry and our
company, at Mr. Cliftons request and recommendation,
the Board did not increase his annual salary during 2010,
despite the Boards positive view of
Mr. Cliftons performance. |
|
(7) |
|
As of January 1, 2010, Mr. Lamps annual salary
was $553,500, which is equal to the actual payroll payments he
received during 2010. Due to a decline in the economy and its
resulting effect on our industry and our company, at
Mr. Cliftons request and recommendation, the Board
did not increase Mr. Lamps annual salary during 2010,
despite the Boards positive view of Mr. Lamps
performance. |
|
(8) |
|
As of January 1, 2010, Mr. Shaws annual salary
was $325,000. His annual salary was increased to $386,895
effective February 22, 2010. His actual payroll payments in
2010 were $374,992 due to our bi-weekly payroll system (the
December 13, 2010 through December 26, 2010 payroll
payment was made on January 5, 2011 and the
December 27, 2010 through December 31, 2010 payroll
payment was made on January 19, 2011). Similar adjustments
were made for other mid-period pay adjustments in prior periods. |
|
(9) |
|
As of January 1, 2010, Mr. Damiris annual salary
was $300,000. His annual salary was increased to $310,980
effective February 22, 2010. His actual payroll payments in
2010 were $308,869 due to our bi-weekly payroll system (the
December 13, 2010 through December 26, 2010 payroll
payment was made on January 5, 2011 and the
December 27, 2010 through December 31, 2010 payroll
payment was made on January 19, 2011). Similar adjustments
were made for other mid-period pay adjustments in prior periods. |
40
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(10) |
|
As of January 1, 2010, Ms. McWatters annual
salary was $250,000. Her annual salary was increased to $292,000
effective September 20, 2010. Her actual payroll payments
in 2010 were $259,692 due to our bi-weekly payroll system (the
December 13, 2010 through December 26, 2010 payroll
payment was made on January 5, 2011 and the
December 27, 2010 through December 31, 2010 payroll
payment was made on January 19, 2011). Similar adjustments
were made for other mid-period pay adjustments in prior periods. |
2010
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, 2010.
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Estimated Future Payouts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts
|
|
|
|
Under Equity Incentive Plan
|
|
|
|
|
|
|
|
(k)
|
|
|
|
|
|
|
|
|
|
|
|
Under Non-Equity
|
|
|
|
Awards(2)
|
|
|
|
(i)
|
|
|
|
Grant Date
|
|
|
|
|
|
|
|
(b)
|
|
|
|
Incentive Plan
Awards(1)
|
|
|
|
|
|
|
|
|
|
|
|
(h)
|
|
|
|
All other
|
|
|
|
Fair Value
|
|
|
|
|
(a)
|
|
|
Grant
|
|
|
|
(c)
|
|
|
|
(d)
|
|
|
|
(e)
|
|
|
|
(f)
|
|
|
|
(g)
|
|
|
|
Maximum
|
|
|
|
Equity
|
|
|
|
of Stock
|
|
|
|
|
Name
|
|
|
Date
|
|
|
|
Threshold
|
|
|
|
Target
|
|
|
|
Maximum
|
|
|
|
Threshold
|
|
|
|
Target
|
|
|
|
(#)
|
|
|
|
Awards(3)
|
|
|
|
Awards(4)
|
|
|
|
|
Matthew P. Clifton
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Units
|
|
|
|
3/12/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
27,512
|
|
|
|
|
55,024
|
|
|
|
|
|
|
|
|
|
$1,003,156
|
|
|
|
|
|
Restricted Shares (Performance Based)
|
|
|
|
3/12/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,512
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$802,525
|
|
|
|
|
|
Non-Equity Incentives
|
|
|
|
|
|
|
|
|
$0
|
|
|
|
|
$922,500
|
|
|
|
|
$2,490,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David L. Lamp
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Units
|
|
|
|
3/12/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
15,256
|
|
|
|
|
30,512
|
|
|
|
|
|
|
|
|
|
$556,272
|
|
|
|
|
|
Restricted Shares (Performance Based)
|
|
|
|
3/12/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$445,018
|
|
|
|
|
|
Non-Equity Incentives
|
|
|
|
|
|
|
|
|
$0
|
|
|
|
|
$387,450
|
|
|
|
|
$852,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce R. Shaw
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Units
|
|
|
|
3/12/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
4,821
|
|
|
|
|
9,642
|
|
|
|
|
|
|
|
|
|
$175,786
|
|
|
|
|
|
Restricted Shares
|
|
|
|
3/12/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,821
|
|
|
|
|
$140,629
|
|
|
|
|
|
Non-Equity Incentives
|
|
|
|
|
|
|
|
|
$0
|
|
|
|
|
$116,069
|
|
|
|
|
$232,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George J. Damiris
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Units
|
|
|
|
3/12/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
6,428
|
|
|
|
|
12,856
|
|
|
|
|
|
|
|
|
|
$234,381
|
|
|
|
|
|
Restricted Shares
|
|
|
|
3/12/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,428
|
|
|
|
|
$187,505
|
|
|
|
|
|
Non-Equity Incentives
|
|
|
|
|
|
|
|
|
$0
|
|
|
|
|
$93,294
|
|
|
|
|
$186,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denise C. McWatters
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Units
|
|
|
|
3/12/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
2,315
|
|
|
|
|
4,630
|
|
|
|
|
|
|
|
|
|
$84,411
|
|
|
|
|
|
Restricted Shares
|
|
|
|
3/12/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,315
|
|
|
|
|
$67,529
|
|
|
|
|
|
Non-Equity Incentives
|
|
|
|
|
|
|
|
|
$0
|
|
|
|
|
$58,400
|
|
|
|
|
$116,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts shown in the Estimated Future Payouts Under
Non-Equity Incentive Plan Awards columns reflect the
threshold, target, and maximum bonus award amount for each Named
Executive Officer based on the percentages set forth above in
the section titled Annual Incentive Cash Bonus
Compensation. Amounts reported in the table above do not
include amounts potentially payable with respect to the
discretionary portion of the bonus attributable to individual
performance. |
|
(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 of restricted stock subject to performance
conditions granted to Messrs. Clifton and Lamp, as
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 subject
to performance conditions, the amount reported in column
(g) is the only payment amount possible (other than zero). |
|
(3) |
|
Amounts in column (i) are the number of shares of
restricted stock subject to time-based vesting conditions
granted to each of our Named Executive Officers (other than
Messrs. Clifton and Lamp) in 2010. The terms of these
grants are described above in the section titled
Compensation Discussion and Analysis Overview
of 2010 Compensation Components Long-Term Equity
Incentive Compensation. |
41
|
|
|
(4) |
|
Represents the full grant date fair value determined pursuant to
FASB ASC Topic 718, and as reflected in our financial
statements, based on the closing price of the Common Stock,
which was $29.17, on the date prior to the grant for both
restricted stock and performance share units. With respect to
performance share units, this amount reflects an assumed payment
of 125% 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
probable payout percentage for the restricted stock
subject to performance conditions granted to
Messrs. Clifton and Lamp is 100% of the number of shares
subject to the award. |
Narrative
Disclosure to Summary Compensation Table and Grants of
Plan-Based Awards Table
The 2010 awards of performance share units and shares of
restricted stock were issued under our LTIP.
Performance
Share Unit Agreement Terms
Under the terms of the performance share unit agreements, dated
March 12, 2010, 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.
More detailed information regarding the performance share units
can be found above under Compensation Discussion and
Analysis Overview of 2010 Executive Compensation
Components Long-Term Equity Incentive
Compensation. In addition, the termination and change in
control provisions of performance share units are described
below under Potential Payments Upon Termination or Change
in Control.
Restricted
Stock Agreement Terms
We awarded Messrs. Clifton and Lamp with restricted stock
awards subject to performance conditions for 2010, and awarded
Messrs. Shaw and Damiris and Ms. McWatters with
restricted stock awards subject to time-based vesting conditions
for 2010. More detailed information regarding the restricted
stock awards can be found above under Compensation
Discussion and Analysis Overview of 2010 Executive
Compensation Components Long-Term Equity Incentive
Compensation. In addition, 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.
Annual
Incentive Cash Bonus Compensation
The awards granted to our Named Executive Officers as annual
incentive bonuses for 2010 were based upon pre-set percentages
of salary, achieved by reaching certain target performance
levels. Additional information regarding cash bonus compensation
can be found above under Compensation Discussion and
Analysis Overview of 2010 Executive Compensation
Components Annual Incentive Cash Bonus
Compensation.
42
2010
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, 2010, including awards that were granted prior
to 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
(a)
|
|
|
(f)
|
|
|
|
(g)
|
|
|
|
(h)
|
|
|
|
(i)
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
|
Equity Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
Market or
|
|
|
|
|
|
|
|
|
Market Value of
|
|
|
|
Unearned Shares,
|
|
|
|
Payout Value
|
|
|
|
|
Number of Shares
|
|
|
|
Shares or Units
|
|
|
|
Units or Other
|
|
|
|
of Unearned Shares,
|
|
|
|
|
or Units of Stock
|
|
|
|
of Stock That
|
|
|
|
Rights That
|
|
|
|
Units or Other
|
|
|
|
|
that Have Not
|
|
|
|
Have Not
|
|
|
|
Have Not
|
|
|
|
Rights That Have
|
|
Name
|
|
|
Vested
(#)(1)
|
|
|
|
Vested
($)(2)
|
|
|
|
Vested
(#)(3)(4)
|
|
|
|
Not Vested
($)(5)
|
|
Matthew P. Clifton,
|
|
|
|
n/a
|
|
|
|
|
n/a
|
|
|
|
|
224,979
|
|
|
|
|
$9,172,394
|
|
Chief Executive Officer and
Chairman of the Board
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David L. Lamp,
|
|
|
|
n/a
|
|
|
|
|
n/a
|
|
|
|
|
123,239
|
|
|
|
|
$5,024,454
|
|
President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce R. Shaw,
|
|
|
|
10,869
|
|
|
|
|
$443,129
|
|
|
|
|
24,788
|
|
|
|
|
$1,010,607
|
|
Senior Vice President and Chief
Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George J. Damiris,
|
|
|
|
12,070
|
|
|
|
|
$492,094
|
|
|
|
|
33,050
|
|
|
|
|
$1,347,449
|
|
Senior Vice President,
Supply and Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denise C. McWatters,
|
|
|
|
4,459
|
|
|
|
|
$181,793
|
|
|
|
|
12,538
|
|
|
|
|
$511,174
|
|
Vice President, General
Counsel and Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The following chart sets forth by grant date the number of
unvested restricted stock awards (subject to time-based vesting
conditions) awarded to our Named Executive Officers that
remained outstanding as of December 31, 2010: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 2007
|
|
|
|
March 2008
|
|
|
|
February 2009
|
|
|
|
March 2010
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
|
|
|
|
Restricted
|
|
|
|
Restricted
|
|
|
|
Restricted
|
|
|
|
|
|
|
|
|
Name
|
|
|
Stock(a)
|
|
|
|
Stock(b)
|
|
|
|
Stock(c)
|
|
|
|
Stock(d)
|
|
|
|
Total
|
|
|
|
|
Matthew P. Clifton
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David L. Lamp
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce R. Shaw
|
|
|
|
1,815
|
|
|
|
|
817
|
|
|
|
|
3,416
|
|
|
|
|
4,821
|
|
|
|
|
10,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George J. Damiris
|
|
|
|
0
|
|
|
|
|
1,088
|
|
|
|
|
4,554
|
|
|
|
|
6,428
|
|
|
|
|
12,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denise C. McWatters
|
|
|
|
0
|
|
|
|
|
492
|
|
|
|
|
1,652
|
|
|
|
|
2,315
|
|
|
|
|
4,459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
An award of restricted stock (subject to time-based vesting
conditions) was made to Mr. Shaw in December 2007.
One-third of those restricted shares vested on January 1,
2009, and an additional one-third of those restricted shares
vested on January 1, 2010. The remaining one-third of the
restricted shares (which are reflected in the table) vested on
January 1, 2011. |
|
(b) |
|
Restricted stock awards (subject to time-based vesting
conditions) were made in March 2008. Pursuant to the terms of
the grants, one-third of the restricted shares vested on
January 1, 2009, one-third of the restricted shares vested
on January 1, 2010, and the remaining one-third of the
restricted shares (which are reflected in the table) vested on
January 1, 2011. |
|
(c) |
|
Restricted stock awards (subject to time-based vesting
conditions) were made in February 2009. Pursuant to the terms of
the grants, one-third of the restricted shares vested on
January 1, 2010. An additional one-third of the restricted
shares (which are reflected in the table) vested on
January 1, 2011 and, except in the case of early
termination, the remaining one-third of the restricted shares
(which are reflected in the table) will vest on January 1,
2012. |
43
|
|
|
(d) |
|
Restricted stock awards (subject to time-based vesting
conditions) were made in March 2010. The vesting dates for these
awards are described above in Narrative Disclosure to
Summary Compensation Table and Grants of Plan-Based Awards
Table Restricted Stock Agreement Terms. |
|
|
|
(2) |
|
Based upon the closing market price of our Common Stock on
December 31, 2010, which was $40.77 per share. |
|
(3) |
|
For purposes of the Outstanding Equity Awards at Fiscal Year End
table, all performance share unit awards have been calculated
assuming the maximum threshold (200%) is reached. Shares with
respect to restricted stock subject to performance conditions
have been calculated at 100%. |
|
(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, 2010: |
Restricted
Stock and Performance Share Unit Grants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 2007
|
|
|
|
March 2008
|
|
|
|
February 2009
|
|
|
|
March 2010
|
|
|
|
|
Restricted
|
|
|
|
Restricted
|
|
|
|
Performance
|
|
|
|
Restricted
|
|
|
|
Performance
|
|
|
|
Restricted
|
|
|
|
Performance
|
|
|
|
|
Stock
|
|
|
|
Stock
|
|
|
|
Share Units
|
|
|
|
Stock
|
|
|
|
Share Units
|
|
|
|
Stock
|
|
|
|
Share Units
|
|
Name
|
|
|
(a)
|
|
|
|
(b)
|
|
|
|
(c)
|
|
|
|
(d)
|
|
|
|
(e)
|
|
|
|
(f)
|
|
|
|
(g)
|
|
Matthew P. Clifton
|
|
|
|
7,293
|
|
|
|
|
9,006
|
|
|
|
|
13,509
|
|
|
|
|
33,042
|
|
|
|
|
33,042
|
|
|
|
|
27,512
|
|
|
|
|
27,512
|
|
|
David L. Lamp
|
|
|
|
4,098
|
|
|
|
|
5,127
|
|
|
|
|
7,690
|
|
|
|
|
17,622
|
|
|
|
|
17,622
|
|
|
|
|
15,256
|
|
|
|
|
15,256
|
|
|
Bruce R. Shaw
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
2,449
|
|
|
|
|
0
|
|
|
|
|
5,124
|
|
|
|
|
0
|
|
|
|
|
4,821
|
|
|
George J. Damiris
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
3,266
|
|
|
|
|
0
|
|
|
|
|
6,831
|
|
|
|
|
0
|
|
|
|
|
6,428
|
|
|
Denise C. McWatters
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
1,476
|
|
|
|
|
0
|
|
|
|
|
2,478
|
|
|
|
|
0
|
|
|
|
|
2,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
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). 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
termination and 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, 2010, the
quarterly adjusted net income standard had not been met. |
|
(b) |
|
Restricted stock awards with a performance standard were granted
in March 2008. Pursuant to the terms of the grants, one-third of
the restricted shares 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 shares (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 shares (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).
The individual will be a stockholder with respect to all of the
restricted shares and will have the right to receive all
dividends paid with respect to such restricted shares. The
termination and change in |
44
|
|
|
|
|
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. To date, neither the
2010 shares nor the 2011 shares have vested. |
|
(c) |
|
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 as disclosed in the Outstanding
Equity Awards at Fiscal Year End table. The performance
goals associated with these awards are the same as described
above with respect to the 2010 performance share unit awards in
Narrative Disclosure to Summary Compensation Table and
Grants of Plan-Based Awards Table Performance Share
Unit Agreement Terms. 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. |
|
(d) |
|
Restricted stock awards with a performance standard were granted
in February 2009. Except in the case of early termination of
employment, (i) after December 31, 2009, one-third of
the restricted shares (the 2010 shares) will
vest if our average quarterly adjusted net income per diluted
share is at least $0.25 for the period from October 1, 2009
through the end of the 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 2012),
(ii) after December 31, 2010, another one-third of the
restricted shares (the 2011 shares) will vest
if our average quarterly adjusted net income per diluted share
is at least $0.25 for the period from October 1, 2009
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
2012) and (ii) after December 31, 2011, the
remaining one-third of the restricted shares (the
2012 shares) will vest if our average quarterly
adjusted net income per diluted share is at least $0.25 for the
period from October 1, 2009 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 2012). The individual will be a
stockholder with respect to all of the restricted shares and
will have the right to receive all dividends paid with respect
to such restricted shares. 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. Assuming the quarterly adjusted net income
standard is met as set forth in each case above, the
2010 shares, the 2011 shares and/or the
2012 shares, as the case may be, will become vested on the
date that our Committee certifies that we have met the
applicable standards. To date, none of the shares subject to
this award have vested. |
|
(e) |
|
Performance share units were awarded in February 2009. 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 September 30, 2011. 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 disclosed in the Outstanding Equity
Awards at Fiscal Year End table. The performance goals
associated with these awards are the same as described above
with respect to the 2010 performance share unit awards in
Narrative Disclosure to Summary Compensation Table and
Grants of Plan-Based Awards Table Performance Share
Unit Agreement Terms. The impact on these awards of a
change in control or the awardees termination of
employment under various circumstances prior to
December 31, 2011 are described below in the section titled
Potential Payments upon Termination or Change in
Control. |
|
(f) |
|
Restricted stock awards with a performance standard were made in
March 2010. The vesting dates for these awards are described
above in Narrative Disclosure to Summary Compensation
Table and Grants of
Plan-Based
Awards Table Restricted Stock Agreement Terms. |
|
(g) |
|
Performance share units were awarded in March 2010. The number
of shares disclosed above in the chart in this footnote
(4) represents the number of units subject to the award,
rather than the number of shares |
45
|
|
|
|
|
potentially payable in the event the maximum performance
threshold is attained disclosed in the Outstanding Equity
Awards at Fiscal Year End table. Additional information
regarding these performance share units is provided above in
Narrative Disclosure to Summary Compensation Table and
Grants of Plan-Based Awards Table Performance Share
Unit Agreement Terms. |
|
|
|
(5) |
|
Based upon the closing market price of our Common Stock on
December 31, 2010, which was $40.77 per share. |
2010
Option Exercises and Stock Vested
The following table provides information about our Named
Executive Officers related to restricted stock
and/or
performance share unit awards that became vested during the 2010
fiscal year.
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
Number of Shares
|
|
|
Value Realized
|
|
|
|
Acquired on Vesting
|
|
|
Upon Vesting
|
|
Name
|
|
(#)
|
|
|
($)(1)
|
|
Matthew P. Clifton
|
|
|
24,967(2
|
)
|
|
|
$676,782
|
|
Chief Executive Officer and
Chairman of the Board
|
|
|
|
|
|
|
|
|
|
David L. Lamp
|
|
|
11,907(3
|
)
|
|
|
$318,710
|
|
President
|
|
|
|
|
|
|
|
|
|
Bruce R. Shaw
|
|
|
12,866(4
|
)
|
|
|
$337,228
|
|
Senior Vice President and
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
George J. Damiris
|
|
|
8,396(5
|
)
|
|
|
$220,583
|
|
Senior Vice President, Supply and
Marketing
|
|
|
|
|
|
|
|
|
|
Denise C. McWatters
|
|
|
1,318(6
|
)
|
|
|
$33,780
|
|
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 an award of 6,150 shares of
restricted stock (as adjusted for the June 2006 stock split)
subject to performance conditions in February 2005 that vested
on February 23, 2010 when the closing price of the
Companys Common Stock was $27.71 per share. |
|
|
|
Mr. Clifton was also granted 10,940 performance share units
in February 2007 that vested on January 18, 2010 following
the Committees certification that the applicable
performance standards were met. Those performance share units
were paid at 18,817 shares of Common Stock (which
represents the number of units subject to the award, multiplied
by a 172% Performance Percentage) with an applicable market
price of $26.91 on the date of vesting. |
|
(3) |
|
Mr. Lamp was granted an award of 1,334 shares of
restricted stock (as adjusted for the June 2006 stock split)
subject to time-based vesting conditions in February 2005 that
vested on January 1, 2010 when the closing price of the
Companys Common Stock was $25.63 per share (which was the
closing price per share of our Common Stock on December 31,
2009 since January 1, 2010 was not a trading date). |
|
|
|
Mr. Lamp was also granted 6,147 performance share units in
February 2007 that vested on January 18, 2010 following the
Committees certification that the applicable performance
standards were met. Those performance share units were paid at
10,573 shares of Common Stock (which represents the number
of units subject to the award, multiplied by a 172% Performance
Percentage) with an applicable market price of $26.91 on the
date of vesting. |
46
|
|
|
(4) |
|
Mr. Shaw was granted the following awards that vested on
January 1, 2010 when the closing price of our Common Stock
was $25.63 (which was the closing price per share of our Common
Stock on December 31, 2009 since January 1, 2010 was
not a trading date): (a) 4,504 shares of restricted
stock granted in December 2007, (b) 816 shares of
restricted stock granted in March 2008, and
(c) 1,708 shares of restricted stock granted in
February 2009. |
|
|
|
|
|
Mr. Shaw was also granted 3,394 performance share units in
December 2007 that vested on January 18, 2010 following the
Committees certification that the applicable performance
standards were met. Those performance share units were paid at
5,838 shares of Common Stock (which represents the number
of units subject to the award, multiplied by a 172% Performance
Percentage) with an applicable market price of $26.91 on the
date of vesting. |
|
(5) |
|
Mr. Damiris was granted the following awards that vested on
January 1, 2010 when the closing price of our Common Stock
was $25.63 (which was the closing price per share of our Common
Stock on December 31, 2009 since January 1, 2010 was
not a trading date): (a) 816 shares of restricted
stock granted in June 2007, (b) 1,089 shares of
restricted stock granted in March 2008, and
(c) 2,277 shares of restricted stock granted in
February 2009. |
|
|
|
Mr. Damiris was also granted 2,450 performance share units
in June 2007 that vested on January 18, 2010 following the
Committees certification that the applicable performance
standards were met. Those performance share units were paid at
4,214 shares of Common Stock (which represents the number
of units subject to the award, multiplied by a 172% Performance
Percentage) with an applicable market price of $26.91 on the
date of vesting. |
|
(6) |
|
Ms. McWatters was granted the following awards that vested
on January 1, 2010 when the closing price of our Common
Stock was $25.63 (which was the closing price per share of our
Common Stock on December 31, 2009 since January 1,
2010 was not a trading date): (a) 492 shares of
restricted stock granted in March 2008, and
(b) 826 shares of restricted stock granted in February
2009. |
Pension
Benefits
Certain of our Named Executive Officers participate in our
Retirement Plan (the Qualified Retirement Plan),
which generally provides a defined benefit to participants
following their retirement. In addition, since the 1995 fiscal
year, we have also sponsored and maintained our Retirement
Restoration Plan (the Retirement Restoration Plan)
that provides additional benefits such that the total pension
benefits for specified executives will be maintained at the
levels contemplated in the Qualified Retirement Plan before
application of the Tax Code limitations. The table below sets
forth an estimate of the pension benefits payable to our Named
Executive Officers at normal retirement age under the Qualified
Retirement Plan and the Retirement Restoration Plan
(collectively, the Retirement Plans).
47
Pension
Benefits Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Years
|
|
Present Value of
|
|
Payments During
|
Name
|
|
Plan Name
|
|
Credited Service
|
|
Accumulated Benefit
|
|
Last Fiscal Year
|
(a)
|
|
(b)
|
|
(#) (c)
|
|
($) (d)
|
|
($) (e)
|
Matthew P. Clifton,
|
|
Qualified Retirement Plan
|
|
|
30.17
|
|
|
|
$1,093,312
|
|
|
|
$0
|
|
Chief Executive Officer and
|
|
Retirement Restoration Plan
|
|
|
30.17
|
|
|
|
$3,285,052
|
|
|
|
$0
|
|
Chairman of the Board
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David L. Lamp,
|
|
Qualified Retirement Plan
|
|
|
7.0
|
|
|
|
$184,005
|
|
|
|
$0
|
|
President
|
|
Retirement Restoration Plan
|
|
|
7.0
|
|
|
|
$255,858
|
|
|
|
$0
|
|
|
Bruce R. Shaw
|
|
Qualified Retirement Plan
|
|
|
8.25
|
|
|
|
$109,211
|
|
|
|
$0
|
|
Senior Vice President and
|
|
Retirement Restoration Plan
|
|
|
8.25
|
|
|
|
$5,772
|
|
|
|
$0
|
|
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George J. Damiris,
|
|
Qualified Retirement Plan
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
$0
|
|
Senior Vice President,
|
|
Retirement Restoration Plan
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
$0
|
|
Supply and Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denise C. McWatters,
|
|
Qualified Retirement Plan
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
$0
|
|
Vice President, General Counsel
|
|
Retirement Restoration Plan
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
$0
|
|
and Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2010, included in our annual
report on
Form 10-K,
were 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:
|
|
|
Discount Rate
|
|
5.65%
|
Mortality Table
|
|
RP2000 White Collar Projected to 2020 (50% male/50% female)
|
Retirement Age
|
|
the later of current age or age 62
|
Effective January 1, 2007, participation in the Retirement
Plans was closed to non-union new hires and, effective
July 1, 2010, participation in the plan was closed as to
all new hires. Non-union 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 2010, 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.
48
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 2010,
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 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, 2010. His early retirement benefits
potentially payable beginning January 1, 2011 are estimated
to be $8,635.15 per month payable for his lifetime or $1,309,392
payable as a lump sum from the Qualified Retirement Plan and
$25,945.86 per month payable for his lifetime or $3,934,301
payable as a lump sum from the Retirement Restoration Plan. A
portion of the $25,945.86 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, 2010. 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 closed to non-union new hires.
Nonqualified
Deferred Compensation
During 2010, we did not sponsor or maintain any defined
contribution or other plan that provided for the deferral of
compensation on a basis that is not tax-qualified. We previously
sponsored an ESOP Restoration Plan that was terminated effective
January 3, 2009, and all amounts held thereunder were
distributed on January 6, 2009.
Potential
Payments Upon Termination or Change in Control
Employment
and Severance Agreements
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.
Change
in Control Agreements
We have entered into Change in Control Agreements with each of
our Named Executive Officers. All agreements follow the policy
that was approved in February 2008 (approximately three months
prior to the 2008
49
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 original term of each Change in Control Agreement ended on
May 15, 2010 (regardless of the date the officer entered
into the agreement) but was automatically extended for an
additional year on that same date. The Change in Control
Agreements will continue to be automatically extended for an
additional year on each May 15th hereafter unless a
cancellation notice is given by the Company 60 days prior
to the applicable May 15 expiration date (as extended from time
to time).
While the Long Term Incentive Compensation Plan provides for
automatic vesting of awards upon a Change in Control
(single-trigger acceleration) unless specifically
provided otherwise in an award agreement, the award agreements
governing our outstanding long-term equity awards only provide a
benefit to the Named Executive Officers if there is both a
Change in Control and a termination of the executives
employment under certain circumstances
(double-trigger acceleration). More specifically,
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.
|
|
|
|
|
|
|
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
complete liquidation or dissolution of us or an agreement for
the sale or disposition of all or substantially all of our
assets.
50
(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 during his employment
with us and thereafter. Violation of the confidentiality
provisions entitles us to complete relief, including injunctive
relief. Further, in the event of a breach of the confidentiality
covenants in the Change in Control Agreements during the
executives employment with us, 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%.
Long-Term
Equity Incentive Awards
Change in Control. Like the payments and
benefits provided under the Change in Control Agreements and
described above, the outstanding long-term equity incentive
awards held by our Named Executive Officers also require a
double-trigger to accelerate vesting of the awards in
conjunction with a Change in Control. Specifically, under the
terms of the long-term equity incentive awards (which includes
time based restricted stock, performance-based restricted stock,
and performance share units), 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
(each, a Special Involuntary Termination), then the
Named Executive Officer will be eligible to receive accelerated
vesting of the award in accordance with the terms of the
applicable award agreement. The terms of the Special Involuntary
Termination acceleration are described in greater detail below.
Performance Share Units upon Termination. If a
Named Executive Officers employment terminates prior to
the end of either performance period 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
defined below, the executive will forfeit his or her award. In
the event of an executives death or total and permanent
disability (as determined by the Committee in its sole
discretion), or the executives termination other than for
Cause, due to a voluntary resignation or due to a
Special Involuntary Termination, the executive shall become
vested in a number of performance share units equal to
(i) the total number of unvested performance share units
for each performance period multiplied by (ii) a fraction
equal to the number of full months that the executive was
employed during the performance period (for purposes of this
calculation, assume that the applicable performance period ends
on December 31, rather than September 30, and assume
that the month of termination counts as a full month), divided
by 36. In the event of executives 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 the end
of the performance period.
51
If an award recipients employment is terminated due to a
Special Involuntary Termination, before the end of the
performance period, the award recipient shall remain eligible to
receive payment of the performance share units at the normal
vesting date based upon achievement of the performance criteria
without pro ration (i.e., he or she shall be treated as
remaining continuously employed through the end of the
performance period).
Restricted Stock (time-based vesting) upon
Termination. In the event of an award
recipients death, total and permanent disability (as
determined by the Committee in its sole discretion) or,
retirement after attaining age 62 (or retirement after
attaining an earlier retirement age approved by the Committee in
its sole discretion), the recipient shall become vested in a
number of shares of restricted stock equal to (i) the total
number of shares of restricted stock initially subject to each
award multiplied by (ii) a fraction equal to the number of
full months that the executive was employed (counting the month
of death, disability or retirement as a full month) from the
first day of the year in which the award was granted until
death, disability, or retirement, divided by 36. In its sole
discretion, the Committee may decide to vest all of the shares
of restricted stock in lieu of the prorated number.
In the event the Named Executive Officers 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. For purposes of these awards, 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.
Restricted Stock (performance-based
vesting). In the event of an award
recipients death or disability, the recipient shall become
vested in a number of shares of restricted stock equal to
(i) the total number of shares of restricted stock
initially subject to each award multiplied by (ii) a
fraction equal to the number of full months that the executive
was employed (counting the month of death or disability as a
full month) from the first day of the year in which the award
was granted until death or disability, divided by 36. In its
sole discretion, the Committee may decide to vest all of the
shares of restricted stock in lieu of the prorated number.
In the event the Named Executive Officers employment is
terminated due to a Special Involuntary Termination 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 the last possible vesting date, shall be
forfeited. In the event the recipients 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 (such periods being through the end of the first year
of the award for the first third, the second year of the award
for the second third, and third year of the award for the final
third). 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.
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
52
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 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.
Impact of Merger with Frontier on Equity
Awards. We have agreed to a merger of
equals business combination (the merger) with
Frontier Oil Corporation (Frontier) and have entered
into an Agreement and Plan of Merger, dated as of
February 21, 2011 (the merger agreement).
Pursuant to the terms of the merger agreement, a wholly owned
subsidiary of the Company will merge with and into Frontier,
with Frontier surviving as a wholly owned subsidiary of the
Company. Upon completion of the merger, the Company will be the
parent company of Frontier and the Companys name will be
changed to HollyFrontier Corporation. The merger will constitute
a Change in Control for purposes of the long-term equity
incentive awards held by our Named Executive Officers.
Following the merger, certain of our Named Executive Officers
will receive different titles and will serve in different
positions with the combined company, as shown in the table below:
|
|
|
|
|
|
|
Name
|
|
|
Current Title
|
|
|
Post-Merger Title
|
Matthew P. Clifton
|
|
|
Chairman of the Board and Chief Executive Officer
|
|
|
Executive Chairman of the Board
Chairman of the Board and Chief Executive Officer of HEP
|
David L. Lamp
|
|
|
President
|
|
|
Executive Vice President and Chief Operating Officer
|
Bruce R. Shaw
|
|
|
Senior Vice President and Chief Financial Officer
|
|
|
Senior Vice President of Strategy and Corporate Development
|
|
|
|
|
|
|
|
Each of these executive officers has entered into a Waiver
Agreement pursuant to which each such executive officer agrees
that neither the change in title, nor any associated changes in
the executive officers employment authority, duties or
responsibilities following the completion of the merger that are
consistent with such change in title, will constitute a material
reduction or other change in the executive officers
authority, duties or responsibilities for purposes of the
definition of Adverse Change contained in any award agreement
governing an outstanding equity award held by the executive
officer under our Long-Term Incentive Compensation Plan.
However, each such executive officer could still incur an
adverse change (and hence a Special Involuntary
Termination entitling him to accelerated vesting as discussed
above) in the event of any material reduction in salary,
benefits, bonus targets
and/or
long-term incentive grants that does not apply generally to
executives of the Company and its subsidiaries (including,
following the completion of the merger, Frontier and its
subsidiaries). The remainder of the Named Executive Officers are
not anticipated to have any changes in title or
responsibilities. No early vestings of equity awards are
expected to occur for our Named Executive Officers in connection
with the merger.
53
Double
Trigger Payments: Potential Payments under Change in Control
Agreements and Long-Term Incentive Awards
The following table reflects the estimated payments and other
benefits due as of December 31, 2010 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, 2010. We believe that these double-trigger
arrangements will help to eliminate, or at least reduce, any
reluctance on the part of our Named Executive Officers to pursue
potential corporate transactions that may be in the best
interest of our shareholders, but that may have resulting
adverse consequences to the employment of our Named Executive
Officers. Our executives may also be entitled to payments or
benefits under the Retirement Restoration Plan as further
described both below under Single Trigger Payments:
Potential Payments under the Retirement Restoration Plan.
For purposes of the table below, the per-share price of our
Common Stock was assumed to be $40.77, which was the closing
price of our shares on December 31, 2010. The amounts below
have been calculated using assumptions that we believe are
reasonable, such as the assumption that all reimbursable
expenses were current as of December 31, 2010. Accrued
vacation is not allowed to be carried over to a subsequent year,
so we assumed all accrued vacation for the 2010 year was
taken prior to December 31, 2010. Employees accrue vacation
in 2010 for use in 2011, so we included the value of the
vacation accrued in 2010 but unused. 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 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,
|
|
|
$7,253,843
|
|
|
|
$52,875
|
|
|
|
$9,172,394
|
|
|
|
$0
|
|
|
|
$16,479,112
|
|
Chief Executive Officer and Chairman of the Board
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David L. Lamp,
|
|
|
$2,243,722
|
|
|
|
$35,250
|
|
|
|
$5,024,454
|
|
|
|
$2,828,327
|
|
|
|
$10,131,753
|
|
President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce R. Shaw,
|
|
|
$1,291,598
|
|
|
|
$35,250
|
|
|
|
$1,454,837
|
|
|
|
$0
|
|
|
|
$2,781,685
|
|
Senior Vice President and Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George J. Damiris,
|
|
|
$1,186,138
|
|
|
|
$35,250
|
|
|
|
$1,839,542
|
|
|
|
$1,025,966
|
|
|
|
$4,086,896
|
|
Senior Vice President, Supply and Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denise C. McWatters,
|
|
|
$482,690
|
|
|
|
$17,625
|
|
|
|
$692,968
|
|
|
|
$359,967
|
|
|
|
$1,553,250
|
|
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, 2010 and (ii) the average of the annual
cash bonus paid for 2007, 2008 and 2009. 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 ($110,342) and
(b) three (3) times the sum of his base salary
($922,500) and average bonus ($1,458,667). |
|
|
|
The total for Mr. Lamp was calculated by calculating the
sum of (a) the value of his accrued vacation ($44,138)and
(b) two (2) times the sum of his base salary
($553,500) and average bonus ($546,292). |
|
|
|
The total for Mr. Shaw was calculated by calculating the
sum of (a) the value of his accrued vacation ($30,854) and
(b) two (2) times the sum of his base salary
($386,895) and average bonus ($243,477). |
54
|
|
|
|
|
The total for Mr. Damiris was calculated by calculating the
sum of (a) the value of his accrued vacation ($26,338)and
(b) two (2) times the sum of his base salary
($310,980) and average bonus ($268,920). |
|
|
|
The total for Ms. McWatters was calculated by calculating
the sum of (a) the value of her accrued vacation ($23,023)
and (b) one (1) times the sum of her base salary
($292,000) and average bonus ($167,667). |
|
(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. |
|
(3) |
|
These amounts were calculated as follows using the stock price
as of market close on December 31, 2010 ($40.77): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Restricted
|
|
|
|
|
|
|
|
|
|
|
Shares Plus
|
|
|
|
|
|
|
|
|
Maximum
|
|
Maximum
|
|
|
|
|
Restricted
|
|
Performance
|
|
Performance
|
|
Performance
|
|
Value as of
|
Named Executive Officer
|
|
Shares
|
|
Units
|
|
Units Awarded
|
|
Units
|
|
12/31/2010
|
Matthew P. Clifton
|
|
|
76,853
|
|
|
|
74,063
|
|
|
|
148,126
|
|
|
|
224,979
|
|
|
|
$9,172,394
|
|
David L. Lamp
|
|
|
42,103
|
|
|
|
40,568
|
|
|
|
81,136
|
|
|
|
123,239
|
|
|
|
$5,024,454
|
|
Bruce R. Shaw
|
|
|
10,896
|
|
|
|
12,394
|
|
|
|
24,788
|
|
|
|
35,684
|
|
|
|
$1,454,837
|
|
George J. Damiris
|
|
|
12,070
|
|
|
|
16,525
|
|
|
|
33,050
|
|
|
|
45,120
|
|
|
|
$1,839,542
|
|
Denise C. McWatters
|
|
|
4,459
|
|
|
|
6,269
|
|
|
|
12,538
|
|
|
|
16,997
|
|
|
|
$692,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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) |
|
As applicable, reflects the amount of the Tax Code
Section 280G Gross Up payment or the amount subject to the
Section 280G Cut Back. To determine the amount of the Gross
Up payment or whether any Cut Back applies, as applicable, the
base amount for each Named Executive Officer was
calculated using the five-year average of each officers
compensation for the years
2005-2009.
In the case of Mr. Damiris and Ms. McWatters, the
amount is calculated using each officers annualized
compensation for 2007, 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
2005-2009
(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 are
considered excess parachute payments 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
payments 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, 2010,
(b) the closing price of our Common Stock was $40.77 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 March 2010 equity awards granted were contingent upon a
change of control could be rebutted, (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, and (h) all
performance share units and restricted stock subject to
performance conditions would ultimately be paid at the maximum
applicable level. |
55
Single
Trigger Payments on a Change in Control: Potential Payments
under the Retirement Restoration Plan
Finally, we have also sponsored the Retirement Restoration Plan
since fiscal year 1995 that provides for single-trigger benefits
to participants. 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 transfer of the annuity contract and the
payment). Although we typically believe that double-trigger
arrangements more effectively advance the interests of our
shareholders in the face of a potential Change in Control, we
have elected to maintain the historical terms of the Retirement
Restoration Plan with respect to these retirement benefits held
by our long-time executives. Further, in light of the
double-trigger arrangements described above, we believe our
Named Executive Officers are adequately incentivized to remain
employed by us (or our successor) following a corporate
transaction, unless and until they are terminated without
Cause or due to a constructive termination. The
Retirement Restoration Plan is the only arrangement in our
current compensation program that provides for single-trigger
Change in Control benefits.
The value of the annuity contract and the estimated cash payment
that would be made to each of our 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, 2010, are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Restoration Plan
|
|
|
Retirement Restoration Plan
|
|
|
|
|
Name
|
|
Annuity Contract
|
|
|
Cash
Payment(1)
|
|
|
Total Cost to Company
|
|
|
Matthew P. Clifton
|
|
|
$2,135,284
|
|
|
|
$1,149,768
|
|
|
|
$3,285,052
|
|
David L. Lamp
|
|
|
$166,308
|
|
|
|
$89,550
|
|
|
|
$255,858
|
|
Bruce R. Shaw
|
|
|
$3,752
|
|
|
|
$2,020
|
|
|
|
$5,772
|
|
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 2010
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, performance goals
reflect our past performance and market conditions affecting our
industry. 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-share 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.
56
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Board during
the year ending December 31, 2010 were Messrs. Berry
(Chairman), Echols and McKenzie. Mr. Matthews was a member
of the Compensation Committee prior to his retirement from the
Board in May 2010. 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, 2010 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, 2010 and has discussed with
representatives of Ernst & Young, LLP, the
Companys independent auditors for the year ended
December 31, 2010, the matters required to be discussed by
Statement on Auditing Standards No. 61, Communications with
Audit Committees (SAS 61), as amended and as adopted by the
Public Company Accounting Oversight Board in Rule 3200T14.
The Audit Committee has received the written disclosures and the
letter from the independent auditors required by Rule 3256
of the Public Company Accounting Oversight Board,
Communication with Audit Committees Governing
Independence, 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, 2010 be included in the Companys Annual
Report on
Form 10-K
for the year ended December 31, 2010 for filing with the
SEC.
Audit
Committee of the Board of Directors
|
|
|
Leldon E. Echols,
Chairman
|
|
Buford P. Berry
Robert G. McKenzie
Paul T. Stoffel
Tommy A. Valenta
|
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 2011 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.
57
AUDIT
FEES
The following table sets forth the fees paid to
Ernst & Young, LLP for services provided during 2010
and 2009. All of the fees paid were approved by the Audit
Committee:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Audit
Fees(1)
|
|
|
$1,361,000
|
|
|
|
$1,503,000
|
|
Audit-Related
Fees(2)
|
|
|
$74,000
|
|
|
|
$263,000
|
|
Tax
Fees(3)
|
|
|
$861,000
|
|
|
|
$161,000
|
|
All Other Fees
|
|
|
$0
|
|
|
|
$0
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$2,296,000
|
|
|
|
$1,927,000
|
|
|
|
|
(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 various accounting
related issues and our 2009 note offerings. |
|
(3) |
|
Represents fees for professional services in connection with tax
compliance and planning. For 2009, this number includes $12,000
paid by us for tax services provided to HEP. Effective
January 1, 2010, HEP pays all fees related to tax services
provided to it by Ernst & Young, LLP. |
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.
EQUITY
COMPENSATION PLAN TABLE
The following table summarizes information about our long-term
incentive compensation plans as of December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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(1)
|
|
|
and Rights
|
|
|
Compensation Plans
|
|
|
Equity compensation plans approved by stockholders
|
|
|
511,184
|
|
|
|
|
|
|
|
1,601,644
|
|
Equity compensation plans not approved by stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
511,184
|
|
|
|
|
|
|
|
1,601,644
|
|
|
|
|
(1) |
|
There were no stock options outstanding under our Long-Term
Equity Incentive Compensation Plan as of December 31, 2010.
The number of shares reported in this column represent the
number of shares (a) subject to outstanding restricted
stock unit awards granted to our directors and (b) subject
to outstanding performance share unit awards granted to our key
employees. |
For more information about our Long-Term Equity Incentive
Compensation Plan, see information provided under the heading
Long-Term Equity Incentive Compensation in the
Compensation Discussion and Analysis section of this Proxy
Statement.
58
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 former director of the Company who retired from the
Board in May 2010. Neale Hickerson was paid cash compensation in
the amount of $262,165 (representing $189,165 in salary and a
bonus of $73,000) for services rendered during 2010. 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 1,440
Restricted Stock Awards and 1,440 Performance Share Units in
calendar year 2010 with a grant date fair value of $84,010 based
upon the closing price of $29.17 per share on the day prior to
the grant. The total stock award value, calculated assuming
performance shares will vest at their maximum of 200%, of all
unvested equity awards held by Neale Hickerson on
December 31, 2010 (including awards granted prior to 2010
and calculated using the closing price of our Common Stock on
such date of $40.77 per share) was $396,407.
Gerard Regard, who is employed by the Company as Assistant to
the Chairman, is the
father-in-law
of R. Kevin Hardage, a Nominee for election to the Board. Gerard
Regard was paid cash compensation in the form of annual salary
in the amount of $187,928 (with no bonus or stock awards) for
services rendered during 2010. Gerard Regard would not report to
Mr. Hardage if Mr. Hardage is elected to the Board. Gerard
Regard is anticipated to retire from the Company on May 31,
2011.
Michael P. Clifton, who was employed by the Company as Sr.
Manager, Residual Oils for the Companys asphalt operations
until his resignation in February 2011, 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
$156,766 (representing $116,766 in salary and a bonus of
$40,000) for services rendered during 2010. Michael Clifton did
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 858 Restricted Stock Awards
in calendar year 2010 with a grant date fair value of $25,028
based upon the closing price of $29.17 per share on the day
prior to the grant. The total stock award value, calculated
assuming performance shares will vest at their maximum of 200%,
of unvested equity awards held by Michael Clifton on
December 31, 2010 (including awards granted prior to 2010
and calculated using the closing price of our Common Stock on
such date of $40.77 per share) was $79,542. Following Michael
Cliftons resignation from the Company in February 2011,
Michael Clifton is no longer an employee of the Company and is
no longer receiving any compensation from the Company.
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 $142,885 (representing $119,485 in
salary and a bonus of $23,400) for services rendered during
2010. 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
515 shares of bonus stock in calendar year 2010 with a
grant date fair value of $15,023 based upon the closing price of
$29.17 per share on the day prior to the grant. The total stock
award value, calculated as performance shares will vest at their
maximum of 200%, of unvested equity awards held by Willie Reid
on December 31, 2010 (including awards granted prior to
2010 and calculated using the closing price of our Common Stock
on such date of $40.77 per share) was $8,032.
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 cash compensation in the amount of
$53,073 (representing $49,573 in salary and a bonus of $3,500)
for services rendered during 2010. 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
59
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.
60
ADDITIONAL
INFORMATION
Stockholder
Proposals
Proposals of stockholders to be considered for presentation at
the Companys 2012 Annual Meeting pursuant to
Rule 14a-8
of the Securities Exchange Act of 1934 should be received by the
Company by December 2, 2011, in order to be considered for
inclusion in the Proxy Statement for that meeting.
Pursuant to the Companys Bylaws, in order for a
stockholder proposal to be brought before the Companys
2012 Annual Meeting, 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 release to stockholders in connection with the
prior years Annual Meeting. However, if the date of the
Companys 2012 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 2012 Annual Meeting.
In accordance with these provisions, stockholders must deliver
notice to the Company no earlier than November 2, 2011 and
no later than December 2, 2011 for stockholder proposals to
be considered at the Companys 2012 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 12, 2012 and
no later than February 11, 2012 for stockholder nominations
of directors to be considered at the Companys 2012 Annual
Meeting.
With respect to Proxies submitted for the 2012 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 2010 Annual Report containing the
audited consolidated balance sheet at December 31, 2010,
and the related consolidated statements of income, cash flows,
stockholders equity and comprehensive income for the year
ended December 31, 2010, 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.
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
61
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 11, 2011. 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
62
ANNEX
A
FORM
OF
SECOND AMENDMENT TO THE
HOLLY CORPORATION
LONG-TERM INCENTIVE COMPENSATION PLAN
THIS SECOND AMENDMENT (the Second Amendment)
to the Holly Corporation Long-Term Incentive Compensation Plan,
as amended from time to time (the Plan), is
effective January 1, 2011, subject to approval by the
Companys stockholders (the Effective
Date), and is made by Holly Corporation (the
Company).
W I T
N E S S E T
H:
WHEREAS, the Company previously adopted the Plan, under
which the Company is authorized to grant equity-based incentive
awards to certain employees and service providers of the Company
and its subsidiaries;
WHEREAS, the overall and per person share limitations set
forth in the Plan have not been previously updated to reflect
the Companys stock splits that occurred in August 2004 and
June 2006 (which resulted in the automatic adjustment of such
share limitations in accordance with Section 10(c)
thereof); provided that, for the avoidance of doubt, the number
of shares of the Companys common stock available under the
Plan on and after the Effective Date of this Second Amendment
pursuant to the overall and per person share limitations shall
be 6,000,000 shares and 600,000 shares, respectively,
as set forth in greater detail below, which, in each case, is
the same as the number of shares available under the Plan
immediately prior to the Effective Date;
WHEREAS, Section 10(f) of the Plan provides that the
Companys board of directors (the Board)
may amend the Plan from time to time, including to extend the
duration of the Plan with the approval of the Companys
stockholders not later than the annual meeting next following
such Board action; and
WHEREAS, the Companys compensation committee
recommended to the Board, and the Board has determined that it
is desirable, to amend the Plan in the manner contemplated
hereby, subject to approval by the Companys stockholders
at the Companys upcoming annual meeting to be held on
May 12, 2011.
NOW, THEREFORE, the Plan shall be amended as of the
Effective Date, as set forth below.
1. Section 4(a) of the Plan is hereby deleted and
replaced in its entirety with the following:
(a) Overall Number of Shares Available for
Delivery. Subject to adjustment in a manner
consistent with any adjustment made pursuant to Section 10
of the Plan, the total number of Shares that may be delivered in
connection with Awards under the Plan shall not exceed
6,000,000, including all Shares delivered with respect to
Options granted under the Plan prior to the Amendment Effective
Date.
2. Section 5 of the Plan is hereby deleted and
replaced in its entirety with the following:
5. Eligibility; Per Person Award Limitations. Awards
may be granted under the Plan only to Eligible Persons. In each
fiscal year or
12-month
period, as applicable, during any part of which the Plan is in
effect, an Eligible Person may not be granted (a) Awards,
provided for in Sections 6 and 7 of the Plan, relating to
more than 600,000 Shares, subject to adjustment in a manner
consistent with any adjustment made pursuant to Section 10
of the Plan, or (b) Awards, provided for in Section 8
of the Plan, with a value at the time of payment which exceeds
the Fair Market Value of 600,000 Shares as of the date of
grant of the Award.
3. The last sentence of Section 6(a)(iii) of the Plan
is hereby deleted in its entirety and replaced with the
following new sentence:
No Incentive Stock Option may be granted after December 31,
2020.
4. Section 10(m) of the Plan is hereby deleted and
replaced in its entirety with the following:
(m) Plan Effective Date, Stockholder Approval and Plan
Duration. The Plan has been adopted by the Board
and approved by stockholders originally effective as of
January 1, 2001. The Plan was most recently
A-1
amended and restated as of May 24, 2007, and was
subsequently amended on December 31, 2008, effective
January 1, 2005, pursuant to the First Amendment to the
Holly Corporation Long-Term Incentive Compensation Plan. No
Award shall be granted under the Plan after December 31,
2020.
5. Except as set forth above, the Plan shall continue to
read in its current state.
IN WITNESS WHEREOF, the Company has caused the execution
of this Second Amendment by its duly authorized officer,
effective as of the Effective Date.
HOLLY CORPORATION
By:
Date:
, 2011
A-2
APPENDIX
I
HOLLY CORPORATION
LONG-TERM INCENTIVE COMPENSATION PLAN
As Amended and Restated as of May 24, 2007
(Formerly designated the Holly Corporation 2000 Stock Option Plan)
1. Purpose. The purpose of the Holly Corporation Long-Term Incentive Compensation Plan as
amended and restated as of May 24, 2007 (formerly designated the Holly Corporation 2000 Stock
Option Plan) (the Plan) is to advance the interests of Holly Corporation (the Company) by
strengthening the ability of the Company and its subsidiaries to attract, retain and motivate able
people of high caliber as employees, directors and consultants through arrangements that relate the
compensation for such persons to the long-term performance of the Company. Accordingly, the Plan
provides for granting Incentive Stock Options, Non-Qualified Stock Options, Restricted Stock
Awards, Bonus Stock Awards, Stock Appreciation Rights, Phantom Stock Awards, Performance Awards or
any combination of the foregoing, as the Committee shall determine.
2. Definitions. For purposes of the Plan, the following terms shall be defined as set forth
below, in addition to such terms defined in Section 1 hereof:
(a) Amendment Effective Date means December 12, 2002. The Plan prior to amendment was
effective January 1, 2001.
(b) Award means any Option, Restricted Stock Award, Bonus Stock Award, Stock Appreciation
Right, Phantom Stock Award, or Performance Award, together with any other right or interest granted
to a Participant under the Plan.
(c) Beneficiary means one or more persons, trusts or other entities that have been
designated by a Participant in his or her most recent written beneficiary designation filed with
the Committee to receive the benefits specified under the Plan upon such Participants death or to
which Awards or other rights are transferred if and to the extent permitted under Section 10(d)
hereof. If, upon a Participants death, there is no designated Beneficiary or surviving designated
Beneficiary, then the term Beneficiary means the persons, trusts or other entities entitled by will
or the laws of descent and distribution to receive such benefits.
(d) Board means the Companys board of directors.
(e) Bonus Stock Award means Shares granted to a Participant under Section 6(c) hereof.
(f) Code means the Internal Revenue Code of 1986, as amended from time to time, including
regulations thereunder and successor provisions and regulations thereto.
(g) Committee means a committee of two or more directors designated by the Board to administer the
Plan; provided, however, that, unless otherwise determined by the Board, the Committee shall
consist solely of two or more directors, each of whom shall be (i) a nonemployee director within
the meaning of Rule 16b-3 under the Exchange Act, and (ii) an
outside director as defined under Section 162(m) of the Code, unless administration of the
Plan by outside directors is not then required in order to qualify for tax deductibility under
Section 162(m) of the Code.
(h) Covered Employee means an Eligible Person who is a Covered Employee as specified in
Section 8(b)(vi) of the Plan.
(i) Disability means, as determined by the Board in the sole discretion exercised in good
faith of the Board, a physical or mental impairment of sufficient severity that either the
Participant is unable to continue performing the duties he performed before such impairment or the
Participants condition entitles him to disability benefits under any insurance or employee benefit
plan of the Company or its Subsidiaries and that impairment or condition is cited by the Company as
the reason for termination of the Participants employment or participation as a member of the
Board.
(j) Eligible Person means any current or proposed officer, director, or key employee or
consultant whose services are deemed to be of potential benefit to the Company or any of its
Subsidiaries. An employee on leave of absence may be considered as still in the employ of the
Company or a Subsidiary for purposes of eligibility for participation in the Plan.
(k) Exchange Act means the Securities Exchange Act of 1934, as amended from time to time,
including rules thereunder and successor provisions and rules relating thereto.
(l) Fair Market Value means the fair market value as determined by the Committee. Unless
otherwise determined by the Committee, the Fair Market Value of a Share shall be the closing price
of a Share, on the date on which the determination of Fair Market Value is being made or if no
Shares were traded on such date then the last trading date prior thereto, as quoted on the
composite transactions table for the American Stock Exchange or, if the Shares are not then subject
to trading on the American Stock Exchange, then as quoted in a comparable manner on any other
national stock exchange or, if not so quoted, then as reported for the over-the-counter market on
which the largest volume of trading of Shares has occurred in the 30 trading days prior to the date
for which a determination is made.
(m) Incentive Stock Option means any Option intended to be and designated as an incentive
stock option within the meaning of Section 422 of the Code or any successor provision thereto.
(n) Non-Qualified Stock Option means any Option that does not constitute an Incentive Stock
Option.
(o) Option means a right granted to a Participant under Section 6(a) hereof to purchase
Shares or other Awards at a specified price during specified time periods.
(p) Participant means a person who has been granted an Award under the Plan which remains
outstanding, including a person who is no longer an Eligible Person.
(q) Performance Award means a right granted to a Participant under Section 8 hereof to
receive cash and/or other consideration other than Shares based on performance
conditions, as provided in Section 8, measured over a period of not less than six months nor
more than ten years.
2
(r) Phantom Stock Award means a right granted to a Participant under Section 7(b) hereof.
(s) Qualified Member means a member of the Committee who is a Non-Employee Director within
the meaning of Rule 16b-3(b)(3) and an outside director within the meaning of regulation 1.162-27
under Section 162(m) of the Code.
(t) Restricted Stock Award means Shares granted to a Participant under Section 6(b) hereof
that are subject to certain restrictions and to a risk of forfeiture.
(u) Rule 16b-3 means Rule 16b-3, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act, as from time to time in effect and applicable to the Plan and
Participants.
(v) Securities Act means the Securities Act of 1933 and the rules and regulations
promulgated thereunder, or any successor law, as it may be amended from time to time.
(w) Shares means shares of the Companys common stock, par value $.01 per share, and such
other securities as may be substituted (or resubstituted) for shares of the Companys common stock,
par value $.01 per share, pursuant to Section 10 hereof.
(x) Stock Appreciation Right means a right granted to a Participant under Section 7(a)
hereof.
(y) Subsidiary means with respect to the Company, any corporation or other entity of which
at least 50% of the voting power of the voting equity securities or equity interest is owned,
directly or indirectly, by the Company or any other entity determined by the Committee to
constitute a Subsidiary due to its relationship to the Company.
3. Administration.
(a) Authority of the Committee. The Plan shall be administered by the Committee
except to the extent the Board elects to administer all or part of the Plan or except to the extent
the Board appoints a separate committee other than the Committee to administer all or part of the
Plan, in which case references herein to the Committee shall be deemed to include references to
the Board and/or such additional committee, as applicable. To the extent a portion of the Plan is
administered by the Committee, and another portion of the Plan is administered by the Board and/or
a separate committee, references herein to Committee shall be deemed to be references to the
Board or such additional committee, as applicable, but only to the extent the Board or additional
committee administers a portion of the Plan and only with respect to those portions of the Plan
that the Board has elected to administer or over which the separate committee has been delegated
authority. Subject to the express provisions of the Plan and Rule 16b-3, the Committee shall have
the authority, in its sole and absolute discretion, to (i) adopt, amend, and rescind administrative
and interpretive rules and regulations relating to the
3
Plan; (ii) determine the Eligible Persons to whom, and the time or times at which, Awards
shall be granted; (iii) determine the amount of cash and the number of Options, Restricted Stock
Awards, Bonus Stock Awards, Stock Appreciation Rights, Phantom Stock Awards, or Performance Awards,
or any combination thereof, that shall be the subject of each Award; (iv) determine the terms and
provisions of each Award agreement (which need not be identical), including provisions defining or
otherwise relating to (A) the term and the period or periods and extent of exercisability of
Options, (B) the extent to which the transferability of Shares and Awards is restricted, (C) the
effect of termination of employment of a Participant on the Award, and (D) the effect of approved
leaves of absence (consistent with any applicable regulations of the Internal Revenue Service); (v)
accelerate the time of exercisability of any Option that has been granted; (vi) construe the
respective Award agreements and the Plan; (vii) make determinations of the Fair Market Value of the
Shares pursuant to the Plan; (viii) delegate its duties under the Plan to such agents as it may
appoint from time to time, provided that the Committee may not delegate its duties with respect to
making Awards to, or otherwise with respect to Awards granted to, Eligible Persons who are subject
to Section 16(b) of the Exchange Act or Section 162(m) of the Code; (ix) subject to ratification by
the Board, terminate, modify, or amend the Plan; and (x) make all other determinations, perform all
other acts, and exercise all other powers and authority necessary or advisable for administering
the Plan, including the delegation of those ministerial acts and responsibilities as the Committee
deems appropriate. Subject to Rule 16b-3 and Section 162(m) of the Code, the Committee may correct
any defect, supply any omission, or reconcile any inconsistency in the Plan, in any Award, or in
any Award agreement in the manner and to the extent it deems necessary or desirable to carry the
Plan into effect, and the Committee shall be the sole and final judge of that necessity or
desirability. The determinations of the Committee on the matters referred to in this Section 3(a)
shall be final and conclusive.
(b) Manner of Exercise of Committee Authority. At any time that a member of the
Committee is not a Qualified Member, any action of the Committee relating to an Award granted or to
be granted to a Participant who is then subject to Section 16 of the Exchange Act in respect of the
Company, or relating to an Award intended by the Committee to qualify as performance-based
compensation within the meaning of Section 162(m) of the Code and regulations thereunder, may be
taken either (i) by a subcommittee, designated by the Committee, composed solely of two or more
Qualified Members, or (ii) by the Committee but with each such member who is not a Qualified Member
abstaining or recusing himself or herself from such action; provided, however, that, upon such
abstention or recusal, the Committee remains composed solely of two or more Qualified Members. Such
action, authorized by such a subcommittee or by the Committee upon the abstention or recusal of
such non-Qualified Member(s), shall be the action of the Committee for purposes of the Plan. Any
action of the Committee shall be final, conclusive and binding on all persons, including the
Company, its Subsidiaries, stockholders, Participants, Beneficiaries, and transferees under Section
10(d) hereof or other persons claiming rights from or through a Participant. The express grant of
any specific power to the Committee, and the taking of any action by the Committee, shall not be
construed as limiting any power or authority of the Committee. The Committee may delegate to
officers or managers of the Company or any Subsidiary, or committees thereof, the authority,
subject to such terms as the Committee shall determine, to perform such functions, including
administrative functions, as the Committee may determine, to the extent that such delegation will
not result in the loss of an exemption under Rule 16b-3(d)(1) for Awards granted to Participants
subject to
4
Section 16 of the Exchange Act in respect of the Company and will not cause Awards intended to
qualify as performance-based compensation under Section 162(m) of the Code to fail to so qualify.
The Committee may appoint agents to assist it in administering the Plan.
(c) Limitation of Liability. The Committee and each member thereof shall be entitled
to, in good faith, rely or act upon any report or other information furnished to him or her by any
officer or employee of the Company or a Subsidiary, the Companys legal counsel, independent
auditors, consultants or any other agents assisting in the administration of the Plan. Members of
the Committee and any officer or employee of the Company or a Subsidiary acting at the direction or
on behalf of the Committee shall not be personally liable for any action or determination taken or
made in good faith with respect to the Plan, and shall, to the fullest extent permitted by law, be
indemnified and held harmless by the Company with respect to any such action or determination.
4. Shares Subject to Plan.
(a) Overall Number of Shares Available for Delivery. Subject to adjustment in a
manner consistent with any adjustment made pursuant to Section 10 of the Plan, the total number of
Shares that may be delivered in connection with Awards under the Plan shall not exceed 1,500,000,
including all Shares delivered with respect to Options granted under the Plan prior to the
Amendment Effective Date.
(b) Application of Limitation to Grants of Awards. No Award may be granted if (i) the
number of Shares to be delivered in connection with such Award exceeds (ii) the number of Shares
remaining available under the Plan minus the number of Shares issuable in settlement of or relating
to then-outstanding Awards. The Committee may adopt reasonable counting procedures to ensure
appropriate counting, avoid double counting (as, for example, in the case of tandem or substitute
awards) and make adjustments if the number of Shares actually delivered differs from the number of
Shares previously counted in connection with an Award.
(c) Availability of Shares Not Delivered under Awards. Shares subject to an Award
under the Plan that expires or is canceled, forfeited, settled in cash or otherwise terminated
without a delivery of Shares to the Participant, including (i) the number of Shares withheld in
payment of any exercise price of an Award or taxes relating to Awards, and (ii) the number of
Shares surrendered in payment of any exercise price of an Award or taxes relating to any Award,
will again be available for Awards under the Plan, except that if any such Shares could not again
be available for Awards to a particular Participant under any applicable law or regulation, such
Shares shall be available exclusively for Awards to Participants who are not subject to such
limitation.
(d) Shares Offered. The Shares to be delivered under the Plan shall be made available
from (i) authorized but unissued Shares, or (ii) previously issued Shares reacquired by the
Company.
5. Eligibility; Per Person Award Limitations. Awards may be granted under the Plan only to
Eligible Persons. In each fiscal year or 12-month period, as applicable, during any part of which
the Plan is in effect, an Eligible Person may not be granted (a) Awards, provided
5
for in Sections 6 and 7 of the Plan, relating to more than 150,000 Shares, subject to
adjustment in a manner consistent with any adjustment made pursuant to Section 10 of the Plan, or
(b) Awards, provided for in Section 8 of the Plan, with a value at the time of payment which
exceeds the Fair Market Value of 150,000 Shares as of the date of the grant of the Award.
6. Options, Restricted Stock and Bonus Stock.
(a) Options. The Committee is authorized to grant Options to Participants on the
following terms and conditions:
(i) Exercise Price. The exercise price or prices for Shares under each Option
shall be determined by the Committee at the time the Option is granted, and may be less
than, equal to or greater than, the Fair Market Value of the Shares at the time of the
granting of the Option, provided that the exercise price per Share for any Option that is
intended to be performance-based compensation under Section 162(m)(4)(C) of the Code or an
Incentive Stock Option under Section 422 of the Code shall not be less than the Fair Market
Value of a Share as of the effective date of grant of the Option; provided, however, that in
the case of an individual who owns stock possessing more than ten percent of the total
combined voting power of all classes of stock of the Company or its parent or any
Subsidiary, the exercise price per Share of any Incentive Stock Option under Section 422 of
the Code shall not be less than 110% of the Fair Market Value of a Share as of the effective
date of grant of the Incentive Stock Option.
(ii) Time and Method of Exercise. The Committee shall determine the time or
times at which or the circumstances under which an Option may be exercised in whole or in
part (including based on achievement of performance goals and/or future service
requirements), the methods by which such exercise price may be paid or deemed to be paid,
the form of such payment, including, without limitation, cash, Shares, other Awards or
awards granted under other plans of the Company or any Subsidiary, or other property
(including notes, to the extent permitted under applicable law, or other contractual
obligations of Participants to make payment on a deferred basis), and the methods by or
forms in which Shares will be delivered or deemed to be delivered to Participants,
including, but not limited to, the delivery of Restricted Stock Awards subject to Section
6(b) hereof. In the case of an exercise whereby the exercise price is paid with Shares, the
value of such Shares for purposes of calculating the exercise price paid shall be the Fair
Market Value. Notwithstanding anything to the contrary herein, unless otherwise provided in
any agreement evidencing an Option, in the event of the death of a Participant while in the
employ of the Company or one of its Subsidiaries, an Option theretofore granted to the
Participant shall be exercisable within the year succeeding such death (even if the Option
would otherwise expire prior to one year from the date of death) but only to the extent that
the optionee was entitled to exercise the Option as of the date of death.
(iii) Incentive Stock Options. The terms of any Incentive Stock Option granted
under the Plan shall comply in all respects with the provisions of Section 422 of the Code.
Anything in the Plan to the contrary notwithstanding, no term of the Plan relating to
Incentive Stock Options (including any Stock Appreciation Right in tandem
6
therewith) shall be interpreted, amended or altered, nor shall any discretion or
authority granted under the Plan be exercised, so as to disqualify either the Plan or any
Incentive Stock Option under Section 422 of the Code, unless the Participant has first
requested the change that will result in such disqualification. Incentive Stock Options
shall not be granted more than ten years after the earlier of the adoption of the Plan or
the approval of the Plan by the Companys stockholders. Notwithstanding the foregoing, the
Fair Market Value of Shares subject to an Incentive Stock Option and the aggregate Fair
Market Value of shares of stock of any parent or Subsidiary corporation (within the meaning
of Sections 424(e) and (f) of the Code) subject to any other incentive stock option (within
the meaning of Section 422 of the Code) of the Company or a parent or Subsidiary corporation
(within the meaning of Sections 424(e) and (f) of the Code) that first becomes purchasable
by a Participant in any calendar year may not (with respect to that Participant) exceed
$100,000, or such other amount as may be prescribed under Section 422 of the Code or
applicable regulations or rulings from time to time. As used in the previous sentence, Fair
Market Value shall be determined as of the date the Incentive Stock Options are granted.
Failure to comply with this provision shall not impair the enforceability or exercisability
of any Option, but shall cause the excess amount of Shares to be reclassified in accordance
with the Code. No Incentive Stock Option may be granted after December 13, 2010.
(b) Restricted Stock Awards. The Committee is authorized to grant Restricted Stock
Awards to Participants on the following terms and conditions:
(i) Grant and Restrictions. Restricted Stock Awards shall be subject to such
restrictions on transferability, risk of forfeiture and other restrictions, if any, as the
Committee may impose, which restrictions may lapse separately or in combination at such
times, under such circumstances (including based on achievement of performance goals and/or
future service requirements), in such installments or otherwise, as the Committee may
determine at the date of grant or thereafter. Except to the extent restricted under the
terms of the Plan and any Award agreement relating to the Restricted Stock Award, a
Participant granted a Restricted Stock Award shall have all of the rights of a stockholder,
including the right to vote the Restricted Stock Award and the right to receive dividends
thereon (subject to any mandatory reinvestment or other requirement imposed by the
Committee). During the restricted period applicable to the Restricted Stock Award, the
Restricted Stock Award may not be sold, transferred, pledged, hypothecated, margined or
otherwise encumbered by the Participant.
(ii) Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment during the applicable restriction period, Restricted Stock Awards
that are at that time subject to restrictions shall be forfeited and reacquired by the
Company; provided that the Committee may provide, by rule or regulation or in any Award
agreement, or may determine in any individual case, that restrictions or forfeiture
conditions relating to Restricted Stock Awards shall be waived in whole or in part in the
event of terminations resulting from specified causes, and the Committee may in other cases
waive in whole or in part the forfeiture of Restricted Stock Awards.
7
(iii) Certificates for Shares. Restricted Stock Awards granted under the Plan
may be evidenced in such manner as the Committee shall determine. If certificates for Shares
relating to Restricted Stock Awards are registered in the name of the Participant, the
Committee may require that such certificates bear an appropriate legend referring to the
terms, conditions and restrictions applicable to such Restricted Stock Awards, that the
Company retain physical possession of the certificates, and that the Participant deliver a
stock power to the Company, endorsed in blank, relating to such Shares.
(iv) Dividends and Splits. As a condition to the grant of a Restricted Stock
Award, the Committee may require or permit a Participant to elect that any cash dividends
paid on a Share related to the Restricted Stock Award be automatically reinvested in
additional Shares related to the Restricted Stock Award or applied to the purchase of
additional Awards under the Plan. Unless otherwise determined by the Committee, Shares
distributed in connection with a stock split or stock dividend, and other property
distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the
same extent as the Restricted Stock Award with respect to which such Shares or other
property has been distributed.
(c) Bonus Stock Awards. The Committee is authorized to grant Awards of Shares as
bonuses, provided that, in the case of Participants subject to Section 16 of the Exchange Act, the
amount of such grants remains within the discretion of the Committee to the extent necessary to
ensure that such Awards are exempt from liability under Section 16(b) of the Exchange Act. Bonus
Stock Awards shall be subject to such other terms as shall be determined by the Committee.
(d) Performance Goals. To the extent the Committee determines that any Award granted
pursuant to this Section 6 shall constitute performance-based compensation for purposes of Section
162(m) of the Code, the grant or settlement of the Award shall, in the Committees discretion, be
subject to the achievement of performance goals determined and applied in a manner consistent with
Section 8(b).
7. Stock Appreciation Rights and Phantom Stock.
(a) Stock Appreciation Rights. The Committee is authorized to grant Stock
Appreciation Rights to Participants on the following terms and conditions:
(i) Right to Payment. A Stock Appreciation Right shall confer on the
Participant to whom it is granted a right to receive, upon exercise thereof, the excess of
(A) the Fair Market Value of one Share on the date of exercise over (B) the grant price of
the Stock Appreciation Right as determined by the Committee.
(ii) Rights Related to Options. A Stock Appreciation Right granted in
connection with an Option shall entitle a Participant, upon exercise thereof, to surrender
that Option or any portion thereof, to the extent unexercised, and to receive payment of an
amount computed pursuant to Subsection 7(a)(i) hereof. That Option shall then cease to be
exercisable to the extent surrendered. A Stock Appreciation Right granted in
8
connection with an Option shall be exercisable only at such time or times and only to
the extent that the related Option is exercisable and shall not be transferable except to
the extent that the related Option is transferable.
(iii) Right Without Option. A Stock Appreciation Right granted independent of
an Option shall be exercisable as determined by the Committee and set forth in the Award
agreement governing the Stock Appreciation Right.
(iv) Terms. The Committee shall determine at the date of grant the time or
times at which and the circumstances under which a Stock Appreciation Right may be exercised
in whole or in part (including based on achievement of performance goals and/or future
service requirements), the method of exercise, whether or not a Stock Appreciation Right
shall be in tandem or in combination with any other Award, and any other terms and
conditions of any Stock Appreciation Right.
(b) Phantom Stock Awards. The Committee is authorized to grant Phantom Stock Awards
to Participants, which are rights to receive cash at the end of a specified deferral period,
subject to the following terms and conditions:
(i) Award and Restrictions. Satisfaction of a Phantom Stock Award shall occur
upon expiration of the deferral period specified for such Phantom Stock Award by the
Committee (or, if permitted by the Committee, as elected by the Participant). In addition,
Phantom Stock Awards shall be subject to such restrictions (which may include a risk of
forfeiture), if any, as the Committee may impose, which restrictions may lapse at the
expiration of the deferral period or at earlier specified times (including based on
achievement of performance goals and/or future service requirements), separately or in
combination, in installments or otherwise, as the Committee may determine.
(ii) Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment during the applicable deferral period or portion thereof to which
forfeiture conditions apply (as provided in any Award agreement evidencing the Phantom Stock
Awards), all Phantom Stock Awards that are at that time subject to deferral (other than a
deferral at the election of the Participant) shall be forfeited; provided that the Committee
may provide, by rule or regulation or in any Award agreement, or may determine in any
individual case, that restrictions or forfeiture conditions relating to Phantom Stock Awards
shall be waived in whole or in part in the event of terminations resulting from specified
causes, and the Committee may in other cases waive in whole or in part the forfeiture of
Phantom Stock Awards.
(c) Performance Goals. To the extent the Committee determines that any Award granted
pursuant to this Section 7 shall constitute performance-based compensation for purposes of Section
162(m) of the Code, the grant or settlement of the Award shall, in the Committees discretion, be
subject to the achievement of performance goals determined and applied in a manner consistent with
Section 8(b).
9
8. Performance Awards.
(a) Performance Awards. The Committee may grant Performance Awards based on
performance criteria measured over a period of not less than six months and not more than ten
years. The Committee may use such business criteria and other measures of performance as it may
deem appropriate in establishing any performance conditions, and may exercise its discretion to
increase the amounts payable under any Award subject to performance conditions except as limited
under Section 8(b) in the case of a Performance Award granted to a Covered Employee.
(b) Performance Goals. The grant and/or settlement of a Performance Award shall be
contingent upon terms set forth in this Section 8(b).
(i) General. The performance goals for Performance Awards shall consist of one
or more business criteria and a targeted level or levels of performance with respect to each
of such criteria, as specified by the Committee. In the case of any Award granted to a
Covered Employee, performance goals shall be designed to be objective and shall otherwise
meet the requirements of Section 162(m) of the Code and regulations thereunder (including
Treasury Regulation §1.162-27 and successor regulations thereto), including the requirement
that the level or levels of performance targeted by the Committee are such that the
achievement of performance goals is substantially uncertain at the time of grant. The
Committee may determine that such Performance Awards shall be granted and/or settled upon
achievement of any one performance goal or that two or more of the performance goals must be
achieved as a condition to the grant and/or settlement of such Performance Awards.
Performance goals may differ among Performance Awards granted to any one Participant or for
Performance Awards granted to different Participants.
(ii) Business Criteria. One or more of the following business criteria for the
Company, on a consolidated basis, and/or for specified Subsidiaries, divisions or business
or geographical units of the Company (except with respect to the total stockholder return
and earnings per share criteria), shall be used by the Committee in establishing performance
goals for Performance Awards granted to a Covered Employee: (A) earnings per share; (B)
increase in revenues; (C) increase in cash flow; (D) increase in cash flow return; (E)
return on net assets; (F) return on assets; (G) return on investment; (H) return on capital;
(I) return on equity; (J) economic value added; (K) gross margin; (L) net income; (M) pretax
earnings; (N) pretax earnings before interest, depreciation and amortization; (O) pretax
operating earnings after interest expense and before incentives, service fees, and
extraordinary or special items; (P) operating income; (Q) total stockholder return; (R) debt
reduction; (S) net profit margin; and (T) any of the above goals determined on an absolute
or relative basis or as compared to the performance of a published or special index deemed
applicable by the Committee including, but not limited to, the Standard & Poors 500 Stock
Index or a group of comparable companies.
10
(iii) Performance Period; Timing for Establishing Performance Goals.
Achievement of performance goals in respect of Performance Awards shall be measured
over a performance period of not less than one year and not more than ten years, as
specified by the Committee. Performance goals in the case of any Award granted to a Covered
Employee shall be established not later than 90 days after the beginning of any performance
period applicable to such Performance Awards, or at such other date as may be required or
permitted for performance-based compensation under Section 162(m) of the Code.
(iv) Settlement of Performance Awards; Other Terms. After the end of each
performance period, the Committee shall determine the amount, if any, of Performance Awards
payable to each Participant based upon achievement of business criteria over a performance
period. The Committee may not exercise discretion to increase any such amount payable in
respect of a Performance Award designed to comply with Section 162(m) of the Code. The
Committee shall specify the circumstances in which such Performance Awards shall be paid or
forfeited in the event of termination of employment by the Participant prior to the end of a
performance period or settlement of Performance Awards.
(v) Written Determinations. All determinations by the Committee as to the
establishment of performance goals, the amount of any Performance Award, and the achievement
of performance goals relating to Performance Awards shall be made in writing in the case of
any Award granted to a Covered Employee. The Committee may not delegate any responsibility
relating to such Performance Awards.
(vi) Status of Performance Awards under Section 162(m) of the Code. It is the
intent of the Company that Performance Awards granted to persons who are designated by the
Committee as likely to be Covered Employees within the meaning of Section 162(m) of the Code
and regulations thereunder (including Treasury Regulation §1.162-27 and successor
regulations thereto) shall, if so designated by the Committee, constitute performance-based
compensation within the meaning of Section 162(m) of the Code and regulations thereunder.
Accordingly, the terms of this Section 8(b) shall be interpreted in a manner consistent with
Section 162(m) of the Code and regulations thereunder. The foregoing notwithstanding,
because the Committee cannot determine with certainty whether a given Participant will be a
Covered Employee with respect to a fiscal year that has not yet been completed, the term
Covered Employee as used herein shall mean only a person designated by the Committee, at the
time of grant of a Performance Award, who is likely to be a Covered Employee with respect to
that fiscal year. If any provision of the Plan as in effect on the date of adoption or any
agreements relating to Performance Awards that are designated as intended to comply with
Section 162(m) of the Code does not comply or is inconsistent with the requirements of
Section 162(m) of the Code or regulations thereunder, such provision shall be construed or
deemed amended to the extent necessary to conform to such requirements.
9. Certain Provisions Applicable to All Awards.
(a) General. Awards may be granted on the terms and conditions set forth in Sections
6, 7 and 8 hereof and this Section 9. In addition, the Committee may impose on any Award or the
exercise thereof, such additional terms and conditions, not inconsistent with the
11
provisions of the Plan, as the Committee shall determine, including terms requiring forfeiture
of Awards in the event of termination of employment by the Participant and terms permitting a
Participant to make elections relating to his or her Award. The Committee shall retain full power
and discretion to accelerate or waive, at any time, any term or condition of an Award that is not
mandatory under the Plan; provided, however, that the Committee shall not have any discretion to
accelerate or waive any term or condition of an Award that is intended to qualify as
performance-based compensation for purposes of Section 162(m) of the Code if such discretion
would cause the Award not to so qualify. Except in cases in which the Committee is authorized to
require other forms of consideration under the Plan, or to the extent other forms of consideration
must be paid to satisfy the requirements of the Delaware General Corporation Law, no consideration
other than services may be required for the grant of any Award.
(b) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards granted under the
Plan may, in the discretion of the Committee, be granted either alone or in addition to, in tandem
with, or in substitution or exchange for, any other Award or any award granted under another plan
of the Company, any Subsidiary, or any business entity to be acquired by the Company or a
Subsidiary, or any other right of a Participant to receive payment from the Company or any
Subsidiary. Such additional, tandem and substitute or exchange Awards may be granted at any time.
If an Award is granted in substitution or exchange for another Award, the Committee shall require
the surrender of such other Award in consideration for the grant of the new Award. In addition,
Awards may be granted in lieu of cash compensation, including in lieu of cash amounts payable under
other plans of the Company or any Subsidiary.
(c) Term of Awards. The term of each Award shall be for such period as may be
determined by the Committee; provided that in no event shall the term of any Option or Stock
Appreciation Right exceed a period of ten years (or such shorter term as may be required in respect
of an Incentive Stock Option under Section 422 of the Code).
(d) Form and Timing of Payment under Awards; Deferrals. Subject to the terms of the
Plan and any applicable Award agreement, payments to be made by the Company or a Subsidiary upon
the exercise of an Option or other Award or settlement of an Award may be made in a single payment
or transfer, in installments, or on a deferred basis. The settlement of any Award may, subject to
any limitations set forth in the Award agreement, be accelerated and cash paid in lieu of Shares in
connection with such settlement, in the discretion of the Committee or upon occurrence of one or
more specified events. In the discretion of the Committee, Awards granted pursuant to Sections 7 or
8 of the Plan may be payable in Shares to the extent permitted by the terms of the applicable Award
agreement. Installment or deferred payments may be required by the Committee (subject to Section
10(f) of the Plan, including the consent provisions thereof in the case of any deferral of an
outstanding Award not provided for in the original Award agreement) or permitted at the election of
the Participant on terms and conditions established by the Committee. Payments may include, without
limitation, provisions for the payment or crediting of reasonable interest on installment or
deferred payments or the grant or crediting of amounts in respect of installment or deferred
payments denominated in Shares. Any deferral shall only be allowed as is provided in a separate
deferred compensation plan adopted by the Company. The Plan shall not constitute an employee
benefit plan for purposes of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended.
12
(e) Exemptions from Section 16(b) Liability. It is the intent of the Company that the
grant of any Awards to or other transaction by a Participant who is subject to Section 16 of the
Exchange Act shall be exempt from Section 16(b) of the Exchange Act pursuant to an applicable
exemption (except for transactions acknowledged by the Participant in writing to be non-exempt).
Accordingly, if any provision of this Plan or any Award agreement does not comply with the
requirements of Rule 16b-3 as then applicable to any such transaction, such provision shall be
construed or deemed amended to the extent necessary to conform to the applicable requirements of
Rule 16b-3 so that such Participant shall avoid liability under Section 16(b) of the Exchange Act.
10. General Provisions.
(a) Companys Right to Terminate or Modify Awards in Certain Circumstances. Except to
the extent that an Award agreement provides otherwise with specific reference to this Section
10(a), in the event of (i) an acquisition of substantially all of the assets of the Company or of a
greater than 80% stock interest in the Company by an entity in which the Company does not have a
50% or greater interest prior to such acquisition, or (ii) a merger, consolidation, or
recapitalization involving a fundamental change in the capital structure of the Company, the
Company shall have the right to terminate any Award upon the payment of an amount equal to the then
value of the Award, without regard to vesting or forfeiture provisions of the Award, as determined
by the Committee, taking into account to the extent determined by the Committee to be appropriate
the Fair Market Value of Shares at the time of termination and the performance of the Company up to
the time of termination. Upon tender of payment by the Company to a holder of the amount determined
by the Committee pursuant to this provision, the Award held by such holder shall automatically
terminate. Alternatively, in such circumstances, the Company, in the discretion of the Board, may
make arrangements for the acquiring or surviving corporation to assume any or all outstanding
Awards and substitute on equitable terms Awards relating to the stock or performance of such
acquiring or surviving corporation. The determinations of the Board and/or the Committee pursuant
to this Section 10(a) shall be final, binding and conclusive.
(b) No Limitation on Other Company Transactions. The existence of the Plan and the
Awards granted hereunder shall not affect in any way the right or power of the Board or the
stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization
or other change in the Companys capital structure or its business, any merger or consolidation of
the Company, any issue of debt or equity securities affecting Shares or the rights thereof, the
dissolution or liquidation of the Company or any sale, lease, exchange or other disposition of all
or any part of its assets or business or any other corporate act or proceeding.
(c) Dilution or Other Adjustments. In the event that there is any change in the
Shares through merger, consolidation, reorganization or recapitalization or in the event of any
stock split or dividend to holders of Shares payable in Shares or the issuance to such holders of
rights to subscribe to Shares, or in the event of any change in the capital structure of the
Company, the Board shall, subject to any requirements of applicable law, regulations and rules,
make such adjustments with respect to any provision or provisions of the Plan, including but not
limited to the limitations on Awards that may be granted under the Plan as set forth in Sections 4
and 5, and with respect to Awards theretofore granted under the Plan as the Board deems
13
appropriate to prevent dilution or enlargement of Award rights. The determinations of the
Board pursuant to this Section 10(b) shall be final, binding and conclusive. Except as hereinbefore
expressly provided, the issuance by the Company of shares of stock of any class or securities
convertible into shares of stock of any class, for cash, property, labor or services, upon direct
sale, upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares
or obligations of the Company convertible into such shares or other securities, and in any case
whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number of Shares relating to Awards theretofore granted or the exercise price
per Share in the case of Options.
(d) Transferability.
(i) Permitted Transferees. The Committee may, in its discretion, permit a
Participant to transfer all or any portion of an Award or authorize all or a portion of an
Award to be granted to an Eligible Person on terms which permit transfer by such
Participant; provided that, in either case a transferee may only be a child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law,
including adoptive relationships, in each case with respect to the Participant, a trust in
which these persons have more than fifty percent of the beneficial interest, a foundation in
which these persons (or the Participant) control the management of assets, and any other
entity in which these persons (or the Participant) own more than fifty percent of the voting
interests (collectively, Permitted Transferees); provided further that, (A) there may be
no consideration for any such transfer and (B) subsequent transfers of Awards transferred as
provided above shall be prohibited except subsequent transfers back to the original holder
of the Award and transfers to other Permitted Transferees of the original holder. Agreements
evidencing Awards with respect to which such transferability is authorized at the time of
grant must be approved by the Committee, and must expressly provide for transferability in a
manner consistent with this Subsection 10(d)(i).
(ii) Qualified Domestic Relations Orders. An Award may be transferred, to a
Permitted Transferee, pursuant to a domestic relations order entered or approved by a court
of competent jurisdiction upon delivery to the Company of written notice of such transfer
and a certified copy of such order.
(iii) Other Transfers. Except as expressly permitted by Subsections 10(d)(i)
and 10(d)(ii) above, Awards shall not be transferable other than by will or the laws of
descent and distribution. Notwithstanding anything to the contrary in this Section 10, an
Incentive Stock Option shall not be transferable other than by will or the laws of descent
and distribution.
(iv) Effect of Transfer. Following the transfer of any Award as contemplated
by Subsections 10(d)(i), 10(d)(ii) and 10(d)(iii) above, (A) such Award shall continue to be
subject to the same terms and conditions as were applicable immediately prior to transfer,
provided that the term Participant shall be deemed to refer to the Permitted Transferee,
the recipient under a qualified domestic relations order,
14
the estate or heirs of a deceased Participant, or other transferee, as applicable, to
the extent appropriate to enable the Permitted Transferee to exercise the transferred Award
in accordance with the terms of the Plan and applicable law and (B) the provisions of the
Award relating to exercisability thereof shall continue to be applied with respect to the
original Participant and, following the occurrence of any such events described therein, the
Awards shall be exercisable by the Permitted Transferee, the recipient under a qualified
domestic relations order, the estate or heirs of a deceased Participant, or other
transferee, as applicable, only to the extent and for the periods that would have been
applicable in the absence of the transfer.
(v) Procedures and Restrictions. Any Participant desiring to transfer an Award
as permitted under Subsections 10(d)(i), 10(d)(ii) or 10(d)(iii) above shall make
application therefor in the manner and time specified by the Committee and shall comply with
such other requirements as the Committee may require to assure compliance with all
applicable securities laws. The Committee shall not give permission for such a transfer if
(A) it would give rise to short-swing liability under Section 16(b) of the Exchange Act or
(B) it may not be made in compliance with all applicable federal, state and foreign
securities laws.
(vi) Registration. To the extent the issuance to any Permitted Transferee of
any Shares issuable pursuant to Awards transferred as permitted in this Section 10(d) is not
registered pursuant to the effective registration statement of the Company generally
covering the Shares to be issued pursuant to the Plan to initial holders of Awards, the
Company shall not have any obligation to register the issuance of any such Shares to any
such transferee.
(e) Taxes. The Company and any Subsidiary are authorized to withhold from any Award
granted, or any payment relating to an Award under the Plan, including from a distribution of
Shares, amounts of withholding and other taxes due or potentially payable in connection with any
transaction involving an Award, and to take such other action as the Committee may deem advisable
to enable the Company and Participants to satisfy obligations for the payment of withholding taxes
and other tax obligations relating to any Award. This authority shall include authority to withhold
or receive Shares or other property and to make cash payments in respect thereof in satisfaction of
a Participants tax obligations, either on a mandatory or elective basis in the discretion of the
Committee.
(f) Changes to the Plan and Awards. The Board may amend, alter, suspend, discontinue
or terminate the Plan or the Committees authority to grant Awards under the Plan without the
consent of stockholders or Participants, except that any amendment or alteration to the Plan,
including any increase in any Share limitation, shall be subject to the approval of the Companys
stockholders not later than the annual meeting next following such Board action if such stockholder
approval is required by any federal or state law or regulation or the rules of any stock exchange
or automated quotation system on which the Shares may then be listed or quoted, and the Board may
otherwise, in its discretion, determine to submit other such changes in this Plan to stockholders
for approval; provided that, without the consent of an affected Participant, no such Board action
may materially and adversely affect the rights of such Participant under any previously granted and
outstanding Award. The Committee may waive any conditions or
15
rights under, or amend, alter, suspend, discontinue or terminate any Award theretofore granted
and any Award agreement relating thereto, except as otherwise provided in the Plan; provided that,
without the consent of an affected Participant, no such Committee action may materially and
adversely affect the rights of such Participant under such Award.
(g) Limitation on Rights Conferred under Plan. Neither the Plan nor any action taken
hereunder shall be construed as (i) giving any Eligible Person or Participant the right to continue
as an Eligible Person or Participant or in the employ or service of the Company or a Subsidiary,
(ii) interfering in any way with the right of the Company or a Subsidiary to terminate any Eligible
Persons or Participants employment or service at any time, (iii) giving an Eligible Person or
Participant any claim to be granted any Award under the Plan or to be treated uniformly with other
Participants and employees, or (iv) conferring on a Participant any of the rights of a stockholder
of the Company unless and until the Participant is duly issued or transferred Shares in accordance
with the terms of an Award.
(h) Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board nor its
submission to the stockholders of the Company for approval shall be construed as creating any
limitations on the power of the Board or a committee thereof to adopt such other incentive
arrangements as it may deem desirable, including incentive arrangements and awards which do not
qualify under Section 162(m) of the Code. Nothing contained in the Plan shall be construed to
prevent the Company or any Subsidiary from taking any corporate action which is deemed by the
Company or such Subsidiary to be appropriate or in its best interest, whether or not such action
would have an adverse effect on the Plan or any Award made under the Plan. No employee, beneficiary
or other person shall have any claim against the Company or any Subsidiary as a result of any such
action.
(i) Payments in the Event of Forfeitures; Fractional Shares; Share Allotments. Unless
otherwise determined by the Committee, in the event of a forfeiture of an Award with respect to
which a Participant paid cash or other consideration to the Company in exchange for such Award, the
Participant shall be repaid the amount of such cash or other consideration. Unless otherwise
determined by the Committee, no fractional Shares, or Shares in lots of less than 100 Shares, shall
be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether
cash, other Awards or other property shall be issued or paid in lieu of such fractional Shares, or
lots of less than 100 Shares, and whether fractional Shares or any rights thereto shall be
forfeited or otherwise eliminated.
(j) Severability. If any provision of the Plan is held to be illegal or invalid for
any reason, the illegality or invalidity shall not affect the remaining provisions hereof, but such
provision shall be fully severable and the Plan shall be construed and enforced as if the illegal
or invalid provision had never been included herein. If any of the terms or provisions of the Plan
or any Award agreement conflict with the requirements of Rule 16b-3 (as those terms or provisions
are applied to Eligible Persons who are subject to Section 16(b) of the Exchange Act) or Section
422 of the Code (with respect to Incentive Stock Options), then those conflicting terms or
provisions shall be deemed inoperative to the extent they so conflict with the requirements of Rule
16b-3 (unless the Board or the Committee, as appropriate, has expressly determined that the Plan or
such Award should not comply with Rule 16b-3) or Section 422 of the Code. With respect to Incentive
Stock Options, if the Plan does not contain any provision required to be
16
included herein under Section 422 of the Code, that provision shall be deemed to be
incorporated herein with the same force and effect as if that provision had been set out at length
herein; provided, further, that, to the extent any Option that is intended to qualify as an
Incentive Stock Option cannot so qualify, such Option (to that extent) shall be deemed a
Non-Qualified Stock Option for all purposes of the Plan.
(k) Governing Law. All questions arising with respect to the provisions of the Plan
and Awards shall be determined by application of the laws of the State of Texas, without giving
effect to any conflict of law provisions thereof, except to the extent Texas law is preempted by
federal law or where the law of the state of incorporation of the Company shall be mandatorily
applied. The obligation of the Company to sell and deliver Shares hereunder is subject to
applicable federal and state laws and to the approval of any governmental authority required in
connection with the authorization, issuance, sale, or delivery of such Shares.
(l) Conditions to Delivery of Shares. Nothing herein or in any Award granted
hereunder or any Award agreement shall require the Company to issue any Shares with respect to any
Award if that issuance would, in the opinion of counsel for the Company, constitute a violation of
the Securities Act or any similar or superseding statute or statutes, any other applicable statute
or regulation, or the rules of any applicable securities exchange or securities association, as
then in effect. At the time of any exercise of an Option or Stock Appreciation Right, or at the
time of any grant of a Restricted Stock Award, Bonus Stock Award or Phantom Stock Award, the
Company may, as a condition precedent to the exercise of such Option or Stock Appreciation Right,
vesting of any Restricted Stock Award or Phantom Stock Award, or grant of any Bonus Stock Award,
require from the Participant (or in the event of his death, his legal representatives, heirs,
legatees, or distributees) such written representations, if any, concerning the holders intentions
with regard to the retention or disposition of the Shares being acquired pursuant to the Award and
such written covenants and agreements, if any, as to the manner of disposal of such Shares as, in
the opinion of counsel to the Company, may be necessary to ensure that any disposition by that
holder (or in the event of the holders death, his legal representatives, heirs, legatees, or
distributees) will not involve a violation of the Securities Act or any similar or superseding
statute or statutes, any other applicable state or federal statute or regulation, or any rule of
any applicable securities exchange or securities association, as then in effect.
(m) Plan Effective Date, Stockholder Approval and Plan Duration. The Plan has been
adopted by the Board originally effective as of January 1, 2001 and as amended and restated
effective as of December 12, 2002 contingent upon the approval of the stockholders of the Company.
If the stockholders of the Company do not approve the Plan as amended and restated, the Plan shall
continue in effect as originally adopted effective January 1, 2001. No Award, other than an
Incentive Stock Option, shall be granted under the Plan after December 31, 2010 and no Incentive
Stock Option shall be granted under the Plan after December 13, 2010.
17
Appendix
II
FIRST AMENDMENT TO THE
HOLLY CORPORATION
LONG-TERM INCENTIVE COMPENSATION PLAN
As Amended and Restated as of May 24, 2007
(Formerly designated the Holly Corporation 2000 Stock Option Plan)
THIS FIRST AMENDMENT is effective January 1, 2005 (the Effective Date) and is made by Holly
Corporation, a Delaware corporation (the Company).
W
I T N E S S E
T H:
WHEREAS, the board of directors of the Company (the Board) previously adopted the Holly
Corporation Long-Term Incentive Compensation Plan, as amended and restated as of May 24, 2007
(formerly designated the Holly Corporation 2000 Stock Option Plan) (the Plan);
WHEREAS, Section 10(f) of the Plan provides that the Plan may be amended by the Board without
approval of the stockholders of the Company, except that any amendment to the Plan of which
approval of the stockholders is required by any federal or state law or regulation or the rules of
any stock exchange on which the shares of the Company are listed or quoted must be approved by the
stockholders of the Company; and
WHEREAS, the Board has determined that it is desirable to amend the Plan, in accordance with
the final regulations promulgated under section 409A of the Internal Revenue Code of 1986, as
amended (the Code), to ensure that, to the extent subject to Code section 409A, the payments and
other benefits provided under the Plan comply therewith and to avoid the imposition of any adverse
tax consequences under section 409A of the Code.
NOW, THEREFORE, the Plan shall be amended as of the Effective Date as set forth below:
1. The following sentence shall be added to the end of Section 2(i) of the Plan:
Notwithstanding anything to the contrary herein or in any Award agreement, any Award
that constitutes a deferral of compensation (within the meaning of Section 409A of
the Code and the regulations and other authoritative guidance promulgated thereunder
(collectively, the Nonqualified Deferred Compensation Rules)), and that is not
exempt from Section 409A of the Code pursuant to an applicable exemption (any such
Award, a 409A Award) shall not become exercisable, be settled or otherwise trigger
a payment or distribution upon a Participants Disability pursuant to the Plan or
the applicable Award agreement controlling such 409A Award unless the Disability
incurred by the Participant constitutes a Disability within the meaning of the
Nonqualified Deferred Compensation Rules.
2. Section 9(d) of the Plan shall be deleted in its entirety and shall be replaced with the
following:
(d) Form and Timing of Payment under Awards; Deferrals. Subject to the terms
of the Plan and any applicable Award agreement, payments to be made by the Company
or a Subsidiary upon the exercise of an Option or other Award or settlement of an
Award may be made in a single payment or transfer, in installments, or on a deferred
basis. The settlement of any Award may, subject to any limitations set forth in the
Award agreement, be accelerated and cash paid in lieu of Shares in connection with
such settlement, in the discretion of the Committee or upon occurrence of one or
more specified events. Notwithstanding anything to the contrary herein or in any
applicable Award agreement, no 409A Award shall be exercisable, be settled or
otherwise trigger a payment or distribution upon the occurrence of any event that
does not qualify as a permissible time of distribution in respect of such 409A Award
under the Nonqualified Deferred Compensation Rules; except that, to the extent
permitted under the Nonqualified Deferred Compensation Rules, the time of exercise,
payment or settlement of a 409A Award shall be accelerated, or payment shall be made
under the Plan in respect of such Award, as determined by the Committee in its
discretion, to the extent necessary to pay income, withholding, employment or other
taxes imposed on such 409A Award. In the event any 409A Award is designed to be
paid or distributed upon a Participants termination of employment, such payment or
distribution shall not occur in the event the Participant holding such 409A Award
continues to provide or, in the 12 month period following such termination of
employment, is expected to provide, sufficient services to the Company that, under
the Companys applicable policies regarding what constitutes a separation from
service for purposes of Section 409A of the Code, such Participant does not incur a
separation from service for purposes of Section 409A of the Code on the date of
termination of the employment relationship. To the extent any 409A Award does not
become exercisable or is not settled or otherwise payable upon a Participants
termination of employment or upon the occurrence of some other event provided in the
Plan or the Award agreement as a result of the limitations described in the
preceding provisions hereof, such Award shall become exercisable or be settled or
payable upon the occurrence of an event that qualifies as a permissible time of
distribution in respect of such 409A Award under the Nonqualified Deferred
Compensation Rules. In the discretion of the Committee, Awards granted pursuant to
Sections 7 or 8 of the Plan may be payable in Shares to the extent permitted by the
terms of the applicable Award Agreement. Installment or deferred payments may be
required by the Committee (subject to Section 10(f) of the Plan, including the
consent provisions thereof in the case of any deferral of an outstanding Award not
provided for in the original Award agreement) or permitted at the election of the
Participant on terms and conditions established by the Committee. Payments may
include, without limitation, provisions for the payment or crediting of amounts in
respect of installment or deferred payments denominated in Shares. Any deferral
shall only be allowed as is provided in a separate deferred compensation plan
adopted by the Company. The Plan shall not constitute an employee benefit
plan for purposes of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended.
3. Section 10(a) shall be deleted in its entirety and shall be replaced with the following:
(a) Companys Right to Terminate or Modify Awards in Certain Circumstances.
Except to the extent that an Award Agreement provides otherwise with specific
reference to this Section 10(a), in the event of (i) an acquisition of substantially
all of the assets of the Company or of a greater than 80% stock interest in the
Company by an entity in which the Company does not have a 50% or greater interest
prior to such acquisition, or (ii) a merger, consolidation, or recapitalization
involving a fundamental change in the capital structure of the Company, the Company
shall have the right to terminate any Award upon the payment of an amount equal to
the then value of the Award, without regard to vesting or forfeiture provisions of
the Award, as determined by the Committee, taking into account to the extent
determined by the Committee to be appropriate the Fair Market Value of Shares at the
time of termination and the performance of the Company up to the time of
termination; provided that no 409A Award shall be terminated and paid as described
above unless the event triggering clause (i) or (ii) of this Section 10(a) also
constitutes a change in the ownership or effective control or in the ownership of
a substantial portion of the assets of the Company within the meaning of the
Nonqualified Deferred Compensation Rules. Upon tender of the payment by the Company
to a holder of the amount determined by the Committee pursuant to the foregoing
provision, the Award held by such holder shall automatically terminate.
Alternatively, in such circumstances, the Company, in the discretion of the Board,
may make arrangements for the acquiring or surviving corporation to assume any or
all outstanding Awards and substitute on equitable terms Awards relating to the
stock or performance of such acquiring or surviving corporation; provided, that in
no event will any action so taken result in the creation of deferred compensation
within the meaning of the Nonqualified Deferred Compensation Rules. The
determinations of the Board and/or the Committee pursuant to this Section 10(a)
shall be final, binding and conclusive.
4. The following Section 10(n) shall be added to the Plan to read as follows:
(m) Compliance with Section 409A of the Code. This Plan is intended to comply
and shall be administered in a manner that is intended to comply with Section 409A
of the Code and shall be construed and interpreted in accordance with such intent.
Payment under this Plan shall be made in a manner that will comply with Section 409A
of the Code, including regulations or other guidance issued with respect thereto,
except as otherwise determined by the Committee. The applicable provisions of
Section 409A of the Code are hereby incorporated by reference and shall control over
any contrary provisions herein that conflict therewith.
NOW, THEREFORE, be it further provided that, except as set forth above, the Plan shall
continue to read in its current state.
IN WITNESS WHEREOF, the Company has caused the execution of this First Amendment by its duly
authorized officer, effective as of the Effective Date.
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HOLLY CORPORATION |
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By:
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/s/ Matthew P. Clifton |
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Name:
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Matthew P. Clifton |
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Title:
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Chief Executive Officer |
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Date:
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December 31, 2008 |
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HOLLY CORPORATION
ATTN: LEGAL DEPARTMENT
100 CRESCENT COURT SUITE 1600
DALLAS, TX 75201-6915
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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 |
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For All |
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To withhold authority to vote for any individual
nominee(s), mark For All Except and write the
number(s) of the nominee(s) on the line below. |
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All |
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All |
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Except |
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The Board of Directors recommends you vote FOR the following: |
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¨ |
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1. |
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Election of Directors |
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Nominees |
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01 Buford P. Berry
02 Matthew P. Clifton
03 Leldon E. Echols
04 R. Kevin Hardage
05 Robert G. McKenzie
06 Jack P. Reid
07 Tommy A. Valenta |
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The Board of Directors
recommends you vote FOR |
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The Board of Directors recommends you vote FOR |
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proposals 2 and 3. |
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For |
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the following proposal: |
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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 2011.
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Amendment to the Holly Corporation Long-Term
Incentive Compensation Plan (the LTIP) to
extend the term of the LTIP, and our ability to
grant equity compensation awards thereunder,
until December 31, 2020.
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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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Advisory vote on compensation of
our named executive officers. |
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The Board of Directors recommends you |
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vote 3 YEARS on the following proposal: |
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3 years |
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2 years |
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1 year |
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Abstain |
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4 |
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Advisory vote on the frequency of the
advisory vote on compensation of our
named executive officers.
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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 12, 2011 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 12, 2011 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