sv4za
As filed with the Securities
and Exchange Commission on May 13, 2011
Registration
No. 333-172978
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Amendment No. 2
to
Form S-4
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
HOLLY CORPORATION
(Exact name of registrant as
specified in its charter)
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Delaware
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2911
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75-1056913
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(State or other jurisdiction
of
Incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification No.)
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100 Crescent Court, Suite 1600
Dallas, Texas
75201-6915
(214) 871-3555
(Address, including ZIP Code,
and telephone number) Including area code, of registrants
principal executive offices)
Denise C. McWatters
Vice President, General Counsel and Secretary
Holly Corporation
100 Crescent Court, Suite 1600
Dallas, Texas
75201-6915
(214) 871-3555
(Name, address, including ZIP
code, and telephone number, Including area code, of agent for
service)
Copies to:
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Alan J. Bogdanow
Christopher R. Rowley
Vinson & Elkins LLP
2001 Ross Avenue, Suite 3700
Dallas, Texas
75201-2975
(214) 220-7700
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J. Currie Bechtol
Vice President-General Counsel and
Secretary
Frontier Oil Corporation
10000 Memorial Drive, Suite 600
Houston, Texas 77024-3411
(713) 688-9600
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Robert V. Jewell
Melinda H. Brunger
Andrews Kurth LLP
600 Travis, Suite 4200
Houston, Texas 77002
(713) 220-4200
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Approximate date of commencement of proposed sale of the
securities to the public: As soon as practicable
after this Registration Statement becomes effective and upon
completion of the merger described in the enclosed joint proxy
statement/prospectus.
If the securities being registered on this Form are being
offered in connection with the formation of a holding company
and there is compliance with General Instruction G, check
the following
box. o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
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Large
accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller
reporting
company o
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(Do not check if a smaller reporting company)
If applicable, place an X in the box to designate the
appropriate rule provision relied upon in conducting this
transaction:
o Exchange
Act
Rule 13e-4(i)
(Cross-Border Issuer Tender Offer)
o Exchange
Act
Rule 14d-1(d)
(Cross-Border Third-Party Tender Offer)
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act, or until the Registration Statement shall
become effective on such dates as the Securities and Exchange
Commission, acting pursuant to said Section 8(a), may
determine.
Information
contained herein is subject to completion or amendment. A
registration statement relating to these securities has been
filed with the Securities and Exchange Commission. These
securities may not be sold nor may offers to buy be accepted
prior to the time the registration statement becomes effective.
This joint proxy statement/prospectus shall not constitute an
offer to sell or the solicitation of an offer to buy, nor shall
there be any sale of such securities, in any jurisdiction in
which such offer, solicitation or sale would be unlawful prior
to appropriate registration or qualification under the
securities laws of such jurisdiction.
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PRELIMINARY SUBJECT
TO COMPLETION DATED MAY 13, 2011
MERGER
PROPOSED YOUR VOTE IS VERY IMPORTANT
Holly Corporation (Holly) and Frontier Oil
Corporation (Frontier) have agreed to a merger
of equals business combination (the merger)
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 Holly will merge with and into Frontier, with
Frontier surviving as a wholly owned subsidiary of Holly. Upon
completion of the merger, Holly will be the parent company of
Frontier and Hollys name will be changed to HollyFrontier
Corporation.
Upon completion of the merger, Frontier shareholders will
receive 0.4811 shares of Holly common stock for each share
of Frontier common stock that they own (the exchange
ratio). The exchange ratio is fixed and will not be
adjusted to reflect stock price changes prior to the closing of
the merger. Based on the closing price of Holly common stock on
the New York Stock Exchange (the NYSE) on
February 18, 2011, the last trading day before public
announcement of the merger, the 0.4811 exchange ratio
represented approximately $26.99 in value for each share of
Frontier common stock. Based on the closing price of Holly
common stock on the NYSE on May [ ], 2011,
the last trading day before the date of this joint proxy
statement/prospectus, the 0.4811 exchange ratio represented
approximately $[ ] in value for each share of
Frontier common stock. Holly stockholders will continue to own
their existing Holly shares. Holly common stock and Frontier
common stock are currently traded on the NYSE under the symbols
HOC and FTO, respectively. We urge
you to obtain current market quotations of Holly and Frontier
common stock.
We intend for the merger to qualify as a reorganization for
U.S. federal income tax purposes. Accordingly, Frontier
shareholders are not expected to recognize any gain or loss for
U.S. federal income tax purposes upon the exchange of
shares of Frontier common stock for shares of Holly common stock
pursuant to the merger, except with respect to cash received in
lieu of fractional shares of Holly common stock.
Based on the estimated number of shares of Holly and Frontier
common stock that will be outstanding immediately prior to the
closing of the merger, we estimate that, upon such closing,
former Holly stockholders will own approximately 51.0% of the
combined company following the merger and former Frontier
shareholders will own approximately 49.0% of the combined
company following the merger.
Holly and Frontier will each hold special meetings of their
respective stockholders in connection with the proposed merger.
At the Holly special meeting, Holly stockholders will be asked
to vote on the proposal to approve the issuance of shares of
Holly common stock to Frontier shareholders in connection with
the merger and on the proposal to approve and adopt Hollys
amended and restated certificate of incorporation to, among
other things, increase the number of authorized shares of Holly
capital stock and change the name of Holly to
HollyFrontier Corporation. At the Frontier special
meeting, Frontier shareholders will be asked to vote on the
proposal to approve the merger agreement.
We cannot complete the merger unless the Holly stockholders
approve the issuance of shares of Holly common stock to Frontier
shareholders in connection with the merger and the Frontier
shareholders approve the merger agreement, in each case as
described above. Your vote is very important, regardless of
the number of shares that you own. Whether or not you expect to
attend your special meeting in person, please submit a proxy to
vote your shares as promptly as possible so that your shares may
be represented and voted at the Holly or Frontier special
meeting, as applicable.
The Holly board of directors unanimously recommends that the
Holly stockholders vote FOR the proposal to approve
the issuance of shares of Holly common stock to Frontier
shareholders in connection with the merger, FOR the
proposal to approve and adopt Hollys amended and restated
certificate of incorporation and FOR the proposal to
approve the adjournment of the Holly special meeting, if
necessary or appropriate, to permit further solicitation of
proxies. The Frontier board of directors unanimously recommends
that the Frontier shareholders vote FOR the proposal
to approve the merger agreement and FOR the proposal
to approve the adjournment of the Frontier special meeting, if
necessary or appropriate, to permit further solicitation of
proxies.
The obligations of Holly and Frontier to complete the merger are
subject to the satisfaction or waiver of several conditions. The
accompanying joint proxy statement/prospectus contains detailed
information about Holly, Frontier, the special meetings, the
merger agreement and the merger. You should read this joint
proxy statement/prospectus carefully and in its entirety before
voting, including the section entitled Risk Factors
beginning on page 18.
We look forward to the successful combination of Holly and
Frontier.
Sincerely,
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Matthew P. Clifton
Chairman of the Board and Chief Executive Officer
Holly Corporation
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Michael C. Jennings
Chairman, President and Chief Executive Officer
Frontier Oil Corporation
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Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of the
securities to be issued under this joint proxy
statement/prospectus or determined if this joint proxy
statement/prospectus is truthful or complete. Any representation
to the contrary is a criminal offense.
This joint proxy statement/prospectus is dated
May [ ], 2011 and is first being mailed to
Holly stockholders and Frontier shareholders on or about
May [ ], 2011.
Holly
Corporation
100 Crescent Court
Suite 1600
Dallas, Texas
75201-6915
(214) 871-3555
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
To Be Held On June 28, 2011
To the Stockholders of Holly Corporation:
We are pleased to invite you to attend the special meeting of
stockholders of Holly Corporation, a Delaware corporation
(Holly), which will be held at the offices of Vinson
& Elkins LLP, 2001 Ross Avenue, 39th Floor,
Dallas, Texas 75201, on June 28, 2011, at 3:00 p.m., local
time, for the following purposes:
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to vote on a proposal to approve the issuance of shares of Holly
common stock, par value $0.01 per share, to Frontier
shareholders in connection with the merger contemplated by the
Agreement and Plan of Merger, dated February 21, 2011, by
and among Holly, Frontier Oil Corporation (Frontier)
and North Acquisition, Inc., a wholly owned subsidiary of Holly,
as it may be amended from time to time (the merger
agreement), a copy of which is included as Annex A to
the joint proxy statement/prospectus of which this notice is a
part;
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to vote on a proposal to approve and adopt Hollys amended
and restated certificate of incorporation, a copy of which is
included as Annex F to the joint proxy statement/prospectus
of which this notice is a part, to, among other things,
(i) increase the number of authorized shares of Holly
capital stock from 161 million to 325 million shares
and (ii) change the name of Holly to HollyFrontier
Corporation; and
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to vote on a proposal to approve the adjournment of the Holly
special meeting to a later date or dates, if necessary or
appropriate, to solicit additional proxies in the event there
are not sufficient votes at the time of the special meeting to
approve the first proposal listed above.
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Holly will transact no other business at the special meeting
except such business as may properly be brought before the
special meeting or any adjournment or postponement thereof.
Please refer to the joint proxy statement/prospectus of which
this notice is a part for further information with respect to
the business to be transacted at the Holly special meeting.
The Holly board of directors has fixed the close of business on
May 20, 2011 as the record date for the Holly special
meeting. Only Holly stockholders of record at that time are
entitled to receive notice of, and to vote at, the Holly special
meeting or any adjournment or postponement thereof. A complete
list of such stockholders will be available for inspection by
any Holly stockholder for any purpose germane to the special
meeting during ordinary business hours for the ten days
preceding the Holly special meeting at Hollys offices at
the address on this notice. The eligible Holly stockholder list
will also be available at the Holly special meeting for
examination by any stockholder present at such meeting.
Completion of the merger is conditioned on approval of the
issuance of shares of Holly common stock to Frontier
shareholders in connection with the merger, but it is not
conditioned on approval and adoption of Hollys amended and
restated certificate of incorporation. Approval of the issuance
of shares of Holly common stock to Frontier shareholders in
connection with the merger requires the approval of a majority
of the votes cast at the Holly special meeting, assuming a
quorum. Approval of the proposal to approve and adopt
Hollys amended and restated certificate of incorporation
requires the affirmative vote of the holders of a majority of
the shares of Holly common stock outstanding and entitled to
vote at the special meeting. Approval of the adjournment of the
Holly special
meeting to a later date or dates, if necessary or appropriate,
to permit further solicitation of proxies requires the approval
of a majority of the votes cast at the Holly special meeting.
The Holly board of directors has unanimously approved the
merger and the merger agreement and unanimously recommends that
Holly stockholders vote FOR the proposal to approve
the issuance of shares of Holly common stock to Frontier
shareholders in connection with the merger, FOR the
proposal to approve and adopt Hollys amended and restated
certificate of incorporation and FOR the proposal to
approve the adjournment of the Holly special meeting, if
necessary or appropriate, to permit further solicitation of
proxies.
Your vote is very important. Whether or not you expect to
attend the Holly special meeting in person, to ensure your
representation at the Holly special meeting, we urge you to
submit a proxy to vote your shares as promptly as possible by
(i) accessing the internet site listed on the Holly proxy
card, (ii) calling the toll-free number listed on the Holly
proxy card or (iii) submitting your Holly proxy card by
mail by using the provided self-addressed, stamped envelope.
Submitting a proxy will not prevent you from voting in
person, but it will help to secure a quorum and avoid added
solicitation costs. Any eligible holder of Holly stock who is
present at the Holly special meeting may vote in person, thereby
canceling any previous proxy. In any event, a proxy may be
revoked in writing at any time before the Holly special meeting
in the manner described in the accompanying document. If your
shares are held in the name of a bank, broker or other nominee,
please follow the instructions on the voting instruction card
furnished by the bank, broker or other nominee.
The enclosed joint proxy statement/prospectus provides a
detailed description of the merger and the merger agreement and
the other matters to be considered at the Holly special meeting.
We urge you to carefully read this joint proxy
statement/prospectus, including any documents incorporated by
reference, and the Annexes in their entirety. If you have any
questions concerning the merger or this joint proxy
statement/prospectus, would like additional copies or need help
voting your shares of Holly common stock, please contact
Hollys proxy solicitor:
Georgeson, Inc.
199 Water Street,
26th
Floor
New York, New York 10038
(866) 482-4943
By Order of the Holly Board of Directors,
Denise C. McWatters
Vice President, General Counsel and Secretary
Dallas, Texas
May [ ], 2011
Frontier
Oil Corporation
10000 Memorial Drive,
Suite 600
Houston, TX
77024-3411
(713) 688-9600
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS
To Be Held On June 28, 2011
To the Shareholders of Frontier Oil Corporation:
We are pleased to invite you to attend the special meeting of
shareholders of Frontier Oil Corporation, a Wyoming corporation
(Frontier), which will be held at the offices of
Andrews Kurth LLP, 600 Travis, Suite 4200, Houston, Texas
77002, on June 28, 2011, at 3:00 p.m., local time, for the
following purposes:
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to vote on a proposal to approve the Agreement and Plan of
Merger, dated February 21, 2011, by and among Holly
Corporation (Holly), Frontier and North Acquisition,
Inc., a wholly owned subsidiary of Holly, as it may be amended
from time to time (the merger agreement), a copy of
which is included as Annex A to the joint proxy
statement/prospectus of which this notice is a part; and
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to vote on a proposal to approve the adjournment of the Frontier
special meeting to a later date or dates, if necessary or
appropriate, to solicit additional proxies in the event there
are not sufficient votes at the time of the special meeting to
approve the foregoing proposal.
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Frontier will transact no other business at the special meeting
except such business as may properly be brought before the
special meeting or any adjournment or postponement thereof.
Please refer to the joint proxy statement/prospectus of which
this notice is a part for further information with respect to
the business to be transacted at the Frontier special meeting.
The Frontier board of directors has fixed the close of business
on May 20, 2011 as the record date for the Frontier special
meeting. Only Frontier shareholders of record at that time are
entitled to receive notice of, and to vote at, the Frontier
special meeting or any adjournment or postponement thereof. A
complete list of such shareholders will be available for
inspection by any Frontier shareholder for any purpose germane
to the special meeting during ordinary business hours for the
ten days preceding the Frontier special meeting at
Frontiers headquarters, 10000 Memorial Drive,
Suite 600, Houston, Texas 77024. The eligible Frontier
shareholder list will also be available at the Frontier special
meeting for examination by any shareholder present at such
meeting.
Approval of the merger agreement requires the approval of a
majority of the votes cast at the Frontier special meeting,
assuming a quorum. Approval of the adjournment of the Frontier
special meeting to a later date or dates, if necessary or
appropriate, to permit further solicitation of proxies requires
the approval of a majority of the votes cast at the Frontier
special meeting.
The Frontier board of directors has unanimously adopted the
merger agreement and unanimously recommends that Frontier
shareholders vote FOR the proposal to approve the
merger agreement and FOR the proposal to approve the
adjournment of the Frontier special meeting, if necessary or
appropriate, to permit further solicitation of proxies.
Your vote is very important. Whether or not you expect to
attend the Frontier special meeting in person, to ensure your
representation at the Frontier special meeting, we urge you to
submit a proxy to vote your shares as promptly as possible by
(i) accessing the internet site listed on the Frontier
proxy card, (ii) calling
the toll-free number listed on the Frontier proxy card or
(iii) submitting your Frontier proxy card by mail by using
the provided self-addressed, stamped envelope. Submitting a
proxy will not prevent you from voting in person, but it will
help to secure a quorum and avoid added solicitation costs. Any
eligible holder of Frontier stock who is present at the Frontier
special meeting may vote in person, thereby canceling any
previous proxy. In any event, a proxy may be revoked in writing
at any time before the Frontier special meeting in the manner
described in the accompanying document. If your shares are held
in a Frontier plan or in the name of a broker, bank or other
nominee, please follow the instructions on the voting
instruction card furnished by the plan trustee or administrator,
or record holder, as appropriate.
The enclosed joint proxy statement/prospectus provides a
detailed description of the merger and the merger agreement. We
urge you to carefully read this joint proxy
statement/prospectus, including any documents incorporated by
reference, and the Annexes in their entirety. If you have any
questions concerning the merger or this joint proxy
statement/prospectus, would like additional copies or need help
voting your shares of Frontier common stock, please contact
Frontiers proxy solicitor:
Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor
New York, New York 10022
(212) 750-5833
By Order of the Frontier Board of Directors,
J. Currie Bechtol
Vice President-General Counsel & Secretary
Houston, Texas
May [ ], 2011
ADDITIONAL
INFORMATION
This joint proxy statement/prospectus incorporates important
business and financial information about Holly and Frontier from
other documents that are not included in or delivered with this
joint proxy statement/prospectus. This information is available
to you without charge upon your request. You can obtain the
documents incorporated by reference into this joint proxy
statement/prospectus free of charge by requesting them in
writing or by telephone from the appropriate company at the
following addresses and telephone numbers:
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Georgeson, Inc.
199 Water Street, 26th Floor New York, New York 10038 Stockholders May Call Toll-Free: (866) 482-4943 Banks and Brokers May Call Collect: (212) 440-9800
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Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor New York, New York 10022 Stockholders May Call Toll-Free: (888) 750-5834 Banks and Brokers May Call Collect: (212) 750-5833
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Investors may also consult Hollys or Frontiers
website for more information about Holly or Frontier,
respectively. Hollys website is www.hollycorp.com.
Frontiers website is www.frontieroil.com. Information
included on these websites is not incorporated by
reference into this joint proxy statement/prospectus.
If you would like to request any documents, please do so by
June [ ], 2011 in order to receive them before
the special meetings.
For a more detailed description of the information incorporated
by reference in this joint proxy statement/prospectus and how
you may obtain it, see Where You Can Find More
Information beginning on page 133.
ABOUT
THIS JOINT PROXY STATEMENT/PROSPECTUS
This joint proxy statement/prospectus, which forms part of a
registration statement on
Form S-4
filed with the U.S. Securities and Exchange Commission (the
SEC) by Holly, constitutes a prospectus of Holly
under Section 5 of the Securities Act of 1933, as amended
(the Securities Act), with respect to the shares of
Holly common stock to be issued to Frontier shareholders in
connection with the merger. This joint proxy
statement/prospectus also constitutes a joint proxy statement
for both Holly and Frontier under Section 14(a) of the
Securities Exchange Act of 1934, as amended (the Exchange
Act). It also constitutes a notice of meeting with respect
to the special meeting of Holly stockholders and a notice of
meeting with respect to the special meeting of Frontier
shareholders.
You should rely only on the information contained in or
incorporated by reference into this joint proxy
statement/prospectus. No one has been authorized to provide you
with information that is different from that contained in, or
incorporated by reference into, this joint proxy
statement/prospectus. This joint proxy statement/prospectus is
dated May [ ], 2011. You should not assume that
the information contained in this joint proxy
statement/prospectus is accurate as of any date other than that
date. You should not assume that the information incorporated by
reference into this joint proxy statement/prospectus is accurate
as of any date other than the date of the incorporated document.
Neither our mailing of this joint proxy statement/prospectus to
Holly stockholders or Frontier shareholders nor the issuance by
Holly of shares of common stock pursuant to the merger will
create any implication to the contrary.
This joint proxy statement/prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, any
securities, or the solicitation of a proxy, in any jurisdiction
to or from any person to whom it is unlawful to make any such
offer or solicitation. Information contained in this joint proxy
statement/prospectus regarding Holly has been provided by Holly
and information contained in this joint proxy
statement/prospectus regarding Frontier has been provided by
Frontier.
All references in this joint proxy statement/prospectus to
Holly refer to Holly Corporation, a Delaware
corporation; all references in this joint proxy
statement/prospectus to Merger Sub refer to North
Acquisition, Inc., a Wyoming corporation and wholly owned
subsidiary of Holly formed for the sole purpose of effecting the
merger; all references in this joint proxy statement/prospectus
to Frontier refer to Frontier Oil Corporation, a
Wyoming corporation; unless otherwise indicated or as the
context requires, all references in this joint proxy
statement/prospectus to we, our and
us refer to Holly and Frontier collectively; and,
unless otherwise indicated or as the context requires, all
references to the merger agreement refer to the
Agreement and Plan of Merger, dated as of February 21,
2011, by and among Holly Corporation, North Acquisition, Inc.
and Frontier Oil Corporation, a copy of which is included as
Annex A to this joint proxy statement/prospectus. Holly and
Frontier, subject to and following completion of the merger, are
sometimes referred to in this joint proxy statement/prospectus
as the combined company.
TABLE OF
CONTENTS
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94
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96
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97
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98
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99
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100
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100
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101
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101
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102
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103
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ii
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104
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105
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106
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106
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120
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131
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132
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133
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Annex A Agreement and Plan of Merger, dated as
of February 21, 2011
|
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Annex B Opinion of Morgan Stanley & Co.
Incorporated
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Annex C Opinion of Deutsche Bank Securities Inc.
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Annex D Opinion of Credit Suisse Securities
(USA) LLC
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Annex E Opinion of Citigroup Global Markets Inc.
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Annex F Form of Amended and Restated
Certificate of Incorporation of HollyFrontier Corporation
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EX-23.4 |
EX-23.5 |
EX-99.1 |
EX-99.2 |
EX-99.3 |
EX-99.5 |
EX-99.6 |
iii
QUESTIONS
AND ANSWERS
The following are some questions that you, as a Holly
stockholder or a Frontier shareholder, may have regarding the
merger and the other matters being considered at the special
meetings and the answers to those questions. Holly and Frontier
urge you to carefully read the remainder of this joint proxy
statement/prospectus, including any documents incorporated by
reference, and the Annexes in their entirety because the
information in this section does not provide all of the
information that might be important to you with respect to the
merger and the other matters being considered at the special
meetings.
|
|
|
Q: |
|
Why am I receiving this joint proxy statement/prospectus? |
|
A: |
|
Holly and Frontier have agreed to a business combination
pursuant to the terms of the merger agreement that is described
in this joint proxy statement/prospectus. A copy of the merger
agreement is included in this joint proxy statement/prospectus
as Annex A. |
|
|
|
In order to complete the merger, among other things: |
|
|
|
Holly stockholders must approve the issuance of
shares of Holly common stock to Frontier shareholders in
connection with the merger; and
|
|
|
|
Frontier shareholders must approve the merger
agreement.
|
|
|
|
In addition, while not conditions to the closing of the
transactions contemplated by the merger agreement, Holly
stockholders will vote on a proposal to approve and adopt
Hollys amended and restated certificate of incorporation
to, among other things, increase the number of authorized of
shares of capital stock and change the name of Holly to
HollyFrontier Corporation. |
|
|
|
Holly and Frontier will hold separate special meetings of their
stockholders to obtain these approvals. This joint proxy
statement/prospectus, including its Annexes, contains and
incorporates by reference important information about Holly and
Frontier, the merger and the stockholder meetings of Holly and
Frontier. You should read all of the available information
carefully and in its entirety. |
|
Q: |
|
What will I receive in the merger? |
|
A: |
|
Holly Stockholders: Whether or not the merger
is completed, Holly stockholders will retain the Holly common
stock that they currently own. They will not receive any merger
consideration, and they will not receive any additional shares
of Holly common stock in the merger. |
|
|
|
Frontier Shareholders: If the merger is
completed, Frontier shareholders will receive 0.4811 shares
of Holly common stock for each share of Frontier common stock
that they hold at the effective time of the merger. Frontier
shareholders will not receive any fractional shares of Holly
common stock in the merger. Instead, Holly will pay cash in lieu
of any fractional shares of Holly common stock that a Frontier
shareholder would otherwise have been entitled to receive.
Frontier shareholders will also be entitled to any dividends
declared and paid by Holly with a record date after the
effective time of the merger after they have surrendered their
certificates representing Frontier common stock. |
|
Q: |
|
What is the value of the merger consideration? |
|
A: |
|
Because Holly will issue 0.4811 shares of Holly common
stock in exchange for each share of Frontier common stock, the
value of the merger consideration that Frontier shareholders
receive will depend on the price per share of Holly common stock
at the effective time of the merger. That price will not be
known at the time of the special meetings and may be less than
the current price or the price at the time of the special
meetings. We urge you to obtain current market quotations of
Holly common stock and Frontier common stock. See Risk
Factors. |
|
Q: |
|
When and where will the special shareholders meetings be
held? |
|
|
|
A: |
|
Holly Stockholders: The special meeting of
Holly stockholders will be held at the offices of Vinson &
Elkins LLP, 2001 Ross Avenue, 39th Floor, Dallas,
Texas 75201, on June 28, 2011, at 3:00 p.m., local time. |
|
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|
|
|
Frontier Shareholders: The special meeting of
Frontier shareholders will be held at the offices of Andrews
Kurth LLP, 600 Travis, Suite 4200, Houston, Texas 77002, on
June 28, 2011, at 3:00 p.m., local time. |
iv
|
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|
Q: |
|
Who is entitled to vote at the special stockholders
meetings? |
|
|
|
A: |
|
Holly Stockholders: The record date for the
Holly special meeting is May 20, 2011. Only record holders
of shares of Holly common stock at the close of business on such
date are entitled to notice of, and to vote at, the Holly
special meeting or any adjournment or postponement thereof. |
|
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|
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|
Frontier Shareholders: The record date for the
Frontier special meeting is May 20, 2011. Only record
holders of shares of Frontier common stock at the close of
business on such date are entitled to notice of, and to vote at,
the Frontier special meeting or any adjournment or postponement
thereof. |
|
|
|
Q: |
|
What constitutes a quorum at the special stockholders
meetings? |
|
A: |
|
Holly Stockholders: Stockholders who hold
shares representing at least a majority of the shares entitled
to vote at the Holly special meeting must be present in person
or represented by proxy to constitute a quorum. All shares of
Holly common stock represented at the Holly special meeting,
including shares that are represented but that vote to abstain,
will be treated as present for purposes of determining the
presence or absence of a quorum. Broker non-votes will not be
treated as present for purposes of determining the presence or
absence of a quorum. |
|
|
|
No business may be transacted at the Holly special meeting
unless a quorum is present. If a quorum is not present, or if
fewer shares are voted in favor of the proposal to approve the
issuance of shares of Holly common stock to Frontier
shareholders in connection with the merger than is required, if
necessary or appropriate to allow additional time for obtaining
additional proxies, the special meeting may be adjourned if the
approval of a majority of the votes cast at the special meeting
is obtained. No notice of an adjourned meeting need be given
unless the adjournment is for more than 30 days or, if
after the adjournment, a new record date is fixed for the
adjourned meeting, in which case a notice of the adjourned
meeting shall be given to each stockholder of record entitled to
vote at the meeting. At any adjourned meeting, all proxies will
be voted in the same manner as they would have been voted at the
original convening of the special meeting, except for any
proxies that have been effectively revoked or withdrawn prior to
the adjourned meeting. |
|
|
|
Frontier Shareholders: Shareholders who hold
shares representing at least a majority of the shares entitled
to vote at the Frontier special meeting must be present in
person or represented by proxy to constitute a quorum. All
shares of Frontier common stock represented at the Frontier
special meeting, including shares that are represented but that
vote to abstain, will be treated as present for purposes of
determining the presence or absence of a quorum. Broker
non-votes will not be treated as present for purposes of
determining the presence or absence of a quorum. |
|
|
|
No business may be transacted at the Frontier special meeting
unless a quorum is present. If a quorum is not present, or if
fewer shares are voted in favor of the proposal to approve the
merger agreement than is required, if necessary or appropriate
to allow additional time for obtaining additional proxies, the
special meeting may be adjourned if the approval of a majority
of the votes cast at the special meeting is obtained. No notice
of an adjourned meeting need be given unless the adjournment is
for more than 30 days or, if after the adjournment, a new
record date is fixed for the adjourned meeting, in which case a
notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the meeting. At any
adjourned meeting, all proxies will be voted in the same manner
as they would have been voted at the original convening of the
special meeting, except for any proxies that have been
effectively revoked or withdrawn prior to the adjourned meeting. |
|
Q: |
|
How do I vote if I am a stockholder of record? |
|
A: |
|
Holly Stockholders: If you were a record
holder of Holly stock at the close of business on the record
date for the Holly special meeting, you may vote in person by
attending the Holly special meeting or, to ensure that your
shares are represented at the Holly special meeting, you may
authorize a proxy to vote by: |
|
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|
|
|
accessing the internet site listed on the Holly
proxy card and following the instructions provided on that site
anytime up to 11:59 p.m., eastern time, on June 27,
2011;
|
|
|
|
|
|
calling the toll-free number listed on the Holly
proxy card and following the instructions provided in the
recorded message anytime up to 11:59 p.m., eastern time, on
June 27, 2011; or
|
|
|
|
|
|
submitting your Holly proxy card by mail by using
the provided self-addressed, stamped envelope.
|
v
|
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|
|
|
If you hold shares of Holly common stock in street
name through a stock brokerage account or through a bank
or other nominee, please follow the voting instructions provided
by your broker, bank or other nominee to ensure that your shares
are represented at the Holly special meeting. |
|
|
|
Frontier Shareholders. If you were a record
holder of Frontier stock at the close of business on the record
date for the Frontier special meeting, you may vote in person by
attending the Frontier special meeting or, to ensure that your
shares are represented at the Frontier special meeting, you may
authorize a proxy to vote by: |
|
|
|
|
|
accessing the internet site listed on the Frontier
proxy card and following the instructions provided on that site
anytime up to 11:59 p.m., eastern time, on June 27,
2011;
|
|
|
|
|
|
calling the toll-free number listed on the Frontier
proxy card and following the instructions provided in the
recorded message anytime up to 11:59 p.m., eastern time, on
June 27, 2011; or
|
|
|
|
|
|
submitting your Frontier proxy card by mail by using
the provided self-addressed, stamped envelope.
|
|
|
|
If you hold Frontier shares in street name through a
stock brokerage account or through a bank or other nominee,
please follow the voting instructions provided by your broker,
bank or other nominee to ensure that your shares are represented
at the Frontier special meeting. |
|
Q: |
|
How many votes do I have? |
|
A: |
|
Holly Stockholders: With respect to each
proposal to be presented at the Holly special meeting, holders
of Holly common stock are entitled to one vote for each share of
Holly common stock owned at the close of business on the Holly
record date. At the close of business on the Holly record date,
there were [ ] shares of Holly
common stock outstanding and entitled to vote at the Holly
special meeting. |
|
|
|
Frontier Shareholders: With respect to each
proposal to be presented at the Frontier special meeting,
holders of Frontier common stock are entitled to one vote for
each share of Frontier common stock owned at the close of
business on the Frontier record date. At the close of business
on the Frontier record date, there were
[ ] shares of Frontier common stock
outstanding and entitled to vote at the Frontier special meeting. |
|
Q: |
|
What vote is required to approve each proposal? |
|
A: |
|
Holly Stockholders: The approval of the
issuance of shares of Holly common stock to Frontier
shareholders in connection with the merger requires the approval
of a majority of the votes cast at the Holly special meeting,
assuming a quorum. Failures to vote, broker non-votes and
abstentions will have no effect on the vote for this proposal. |
|
|
|
The approval and adoption of Hollys amended and restated
certificate of incorporation requires the approval of a majority
of the outstanding shares of Holly common stock entitled to vote
at the Holly special meeting. Failures to vote, broker non-votes
and abstentions will have the same effect as a vote against this
proposal. |
|
|
|
The adjournment of the Holly special meeting, if necessary or
appropriate, to solicit additional proxies requires the approval
of a majority of the votes cast at the Holly special meeting,
regardless of whether there is a quorum. Failures to vote,
broker non-votes and abstentions will have no effect on the vote. |
|
|
|
Frontier Shareholders: The approval of the
merger agreement requires the approval of a majority of the
votes cast at the Frontier special meeting, assuming a quorum.
Failures to vote, broker non-votes and abstentions will have no
effect on the vote for this proposal. |
|
|
|
The adjournment of the Frontier special meeting, if necessary or
appropriate, to solicit additional proxies requires the approval
of a majority of the votes cast at the Frontier special meeting,
regardless of whether there is a quorum. Failures to vote,
broker non-votes and abstentions will have no effect on the vote
for this proposal. |
|
Q: |
|
How does the Holly board of directors recommend that Holly
stockholders vote? |
|
A: |
|
The Holly board of directors has unanimously determined that the
merger and the other transactions contemplated by the merger
agreement (including the issuance of shares of Holly common
stock to Frontier shareholders in connection with the merger and
the approval and adoption of Hollys amended and restated
certificate of incorporation) are in the best interests of Holly
and its stockholders. Accordingly, the Holly board |
vi
|
|
|
|
|
of directors unanimously recommends that Holly stockholders vote
FOR the proposal to approve the issuance of shares
of Holly common stock to Frontier shareholders in connection
with the merger, FOR the proposal to approve and
adopt Hollys amended and restated certificate of
incorporation and FOR the proposal to approve the
adjournment of the Holly special meeting, if necessary or
appropriate, to permit further solicitation of proxies. |
|
Q: |
|
How does the Frontier board of directors recommend that
Frontier shareholders vote? |
|
A: |
|
The Frontier board of directors has unanimously adopted the
merger agreement and determined that the merger agreement is in
the best interests of Frontier and its shareholders.
Accordingly, the Frontier board of directors unanimously
recommends that Frontier shareholders vote FOR the
proposal to approve the merger agreement and FOR the
proposal to approve the adjournment of the Frontier special
meeting, if necessary or appropriate, to permit further
solicitation of proxies. |
|
Q: |
|
My shares are held in street name by my broker,
bank or other nominee. Will my broker, bank or other nominee
automatically vote my shares for me? |
|
A: |
|
No. If your shares are held through a stock brokerage
account or a bank or other nominee, you are considered the
beneficial holder of the shares held for you in what
is known as street name. The record
holder of such shares is your broker, bank or other
nominee, and not you. If this is the case, this joint proxy
statement/prospectus has been forwarded to you by your broker,
bank or other nominee. You must provide the record holder of
your shares with instructions on how to vote your shares.
Otherwise, your broker, bank or other nominee may not vote your
shares on any of the proposals to be considered at the Holly
special meeting or the Frontier special meeting, as applicable,
and a broker non-vote will result. In connection with the Holly
special meeting, broker non-votes will have (i) no effect
on the proposal to approve the issuance of shares of Holly
common stock to Frontier shareholders in connection with the
merger (assuming a quorum is present), (ii) the same effect
as a vote AGAINST the proposal to approve and adopt
Hollys amended and restated certificate of incorporation
and (iii) no effect on the proposal to approve the
adjournment of the Holly special meeting, if necessary or
appropriate, to permit further solicitation of proxies. In
connection with the Frontier special meeting, broker non-votes
will have no effect on the proposal to approve the merger
agreement or the proposal to approve the adjournment of the
Frontier special meeting, if necessary or appropriate, to permit
further solicitation of proxies. |
|
|
|
Please follow the voting instructions provided by your broker,
bank or other nominee so that it may vote your shares on your
behalf. Please note that you may not vote shares held in street
name by returning a proxy card directly to Holly or Frontier or
by voting in person at the special meeting unless you first
obtain a legal proxy from your broker, bank or other
nominee. |
|
Q: |
|
What will happen if I fail to vote or I abstain from
voting? |
|
A: |
|
Holly Stockholders: If you fail to vote or
mark your proxy or voting instructions to abstain, it will have
(i) no effect on the proposal to approve the issuance of
shares of Holly common stock to Frontier shareholders in
connection with the merger, (ii) the same effect as a vote
AGAINST the proposal to approve and adopt
Hollys amended and restated certificate of incorporation
and (iii) no effect on the proposal to approve the
adjournment of the Holly special meeting, if necessary or
appropriate, to permit further solicitation of proxies. |
|
|
|
Frontier Shareholders: If you fail to vote or
mark your proxy or voting instructions to abstain, it will have
no effect on the proposal to approve the merger agreement or the
proposal to approve the adjournment of the Frontier special
meeting, if necessary or appropriate, to permit further
solicitation of proxies. |
|
Q: |
|
What will happen if I return my proxy card without indicating
how to vote? |
|
A: |
|
Holly Stockholders: If you properly complete
and sign your proxy card but do not indicate how your shares of
Holly common stock should be voted on a proposal, the shares of
Holly common stock represented by your proxy will be voted as
the Holly board of directors recommends and, therefore,
FOR the proposal to approve the issuance of shares
of Holly common stock to Frontier shareholders in connection
with the merger, FOR the proposal to approve and
adopt Hollys amended and restated certificate of
incorporation and FOR the |
vii
|
|
|
|
|
proposal to approve the adjournment of the Holly special
meeting, if necessary or appropriate, to permit further
solicitation of proxies. |
|
|
|
Frontier Shareholders: If you fail to vote, it
will have no effect on the proposal to approve the merger
agreement or the proposal to approve the adjournment of the
Frontier special meeting, if necessary or appropriate, to permit
further solicitation of proxies. If you properly complete and
sign your proxy card but do not indicate how your shares of
Frontier common stock should be voted on a proposal, the shares
of Frontier common stock represented by your proxy will be voted
as the Frontier board of directors recommends and, therefore,
FOR the proposal to approve the merger agreement and
FOR the proposal to approve the adjournment of the
Frontier special meeting, if necessary or appropriate, to permit
further solicitation of proxies. |
|
Q: |
|
Can I change my vote or revoke my proxy after I have returned
a proxy or voting instruction card? |
|
A: |
|
Yes. |
|
|
|
If you are the record holder of either Holly or Frontier
stock: You can change your vote or revoke your
proxy at any time before your proxy is voted at the applicable
special meeting. You can do this by: |
|
|
|
timely delivering a signed written notice of
revocation;
|
|
|
|
timely delivering a new, valid proxy bearing a later
date (including by telephone or through the internet); or
|
|
|
|
attending the special meeting and voting in person,
which will automatically cancel any proxy previously given, or
revoking your proxy in person. Simply attending the Holly
special meeting or the Frontier special meeting without voting
will not revoke any proxy that you have previously given or
change your vote.
|
|
|
|
If you choose either of the first two methods, your notice of
revocation or your new proxy must be received by the Secretary
of Holly or Frontier, as applicable, no later than the beginning
of the applicable special meeting. |
|
|
|
Regardless of the method used to deliver your previous proxy,
you may revoke your proxy by any of the above methods. |
|
|
|
If you hold shares of either Holly or Frontier in
street name: If your shares are held
in street name, you must contact your broker, bank or other
nominee to change your vote. |
|
Q: |
|
What are the material U.S. federal income tax consequences of
the merger to U.S. holders of Frontier common stock? |
|
A: |
|
The merger is intended to be treated for U.S. federal income tax
purposes as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as
amended (the Code). Assuming the merger qualifies as
a reorganization, a holder of Frontier common stock generally
will not recognize any gain or loss for U.S. federal income tax
purposes upon the exchange of the holders shares of
Frontier common stock for shares of Holly common stock in
connection with the merger, except with respect to cash received
in lieu of fractional shares. |
|
Q: |
|
When do you expect the merger to be completed? |
|
|
|
A: |
|
Holly and Frontier hope to complete the merger as soon as
reasonably possible and expect the closing of the merger to
occur early in the third quarter of 2011, with a target closing
date of July 1, 2011. However, the merger is subject to various
regulatory clearances and the satisfaction or waiver of other
conditions, and it is possible that factors outside the control
of Holly and Frontier could result in the merger being completed
at an earlier time, a later time or not at all. There may be a
substantial amount of time between the Holly and Frontier
special meetings and the completion of the merger. |
|
|
|
Q: |
|
Do I need to do anything with my shares of common stock other
than voting for the proposals at the special meeting? |
|
A: |
|
Holly Stockholders: If you are a Holly
stockholder, after the merger is completed, you are not required
to take any action with respect to your shares of Holly common
stock. |
viii
|
|
|
|
|
Frontier Shareholders: If you are a Frontier
shareholder, after the merger is completed, each share of
Frontier common stock that you hold will be converted
automatically into the right to receive 0.4811 shares of
Holly common stock together with cash in lieu of any fractional
shares, as applicable. You will receive instructions at that
time regarding exchanging your shares for shares of Holly common
stock. You do not need to take any action at this time. Please
do not send your Frontier stock certificates with your
proxy card. |
|
Q: |
|
Are stockholders entitled to appraisal rights? |
|
A: |
|
No. Neither the stockholders of Holly nor the shareholders
of Frontier are entitled to appraisal rights in connection with
the merger under Delaware law or Wyoming law or under the
certificate of incorporation or bylaws of either company. |
|
Q: |
|
What happens if I sell my shares of Frontier common stock
before the Frontier special meeting? |
|
A: |
|
The record date for the Frontier special meeting is earlier than
the date of the Frontier special meeting and the date that the
merger is expected to be completed. If you transfer your
Frontier shares after the Frontier record date but before the
Frontier special meeting, you will retain your right to vote at
the Frontier special meeting, but will have transferred the
right to receive the merger consideration in the merger. In
order to receive the merger consideration, you must hold your
shares through the effective date of the merger. |
|
Q: |
|
What if I hold shares in both Holly and Frontier? |
|
A: |
|
If you are both a stockholder of Holly and a shareholder of
Frontier, you will receive two separate packages of proxy
materials. A vote cast as a Holly stockholder will not count as
a vote cast as a Frontier shareholder, and a vote cast as a
Frontier shareholder will not count as a vote cast as a Holly
stockholder. Therefore, please separately submit a proxy for
each of your Holly and Frontier shares. |
|
Q: |
|
Who can help answer my questions? |
|
A: |
|
Holly stockholders or Frontier shareholders who have questions
about the merger, the other matters to be voted on at the
special meetings, or how to submit a proxy or desire additional
copies of this joint proxy statement/prospectus or additional
proxy cards should contact: |
|
|
|
If you are a Holly stockholder:
|
|
If you are a Frontier shareholder:
|
|
|
|
Georgeson, Inc.
199 Water Street,
26th
Floor
New York, New York 10038
Stockholders May Call Toll-Free:
(866) 482-4943
Banks and Brokers May Call Collect:
(212) 440-9800
|
|
Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor
New York, New York 10022
Shareholders May Call Toll-Free: (888) 750-5834
Banks and Brokers May Call Collect: (212) 750-5833
|
ix
SUMMARY
This summary highlights information contained elsewhere in
this joint proxy statement/prospectus and may not contain all
the information that is important to you with respect to the
merger and the other matters being considered at the Holly and
Frontier special meetings. Holly and Frontier urge you to read
the remainder of this joint proxy statement/prospectus
carefully, including the attached Annexes, and the other
documents to which we have referred you. See also the section
entitled Where You Can Find More Information
beginning on page 133. We have included page references in
this summary to direct you to a more complete description of the
topics presented below.
The
Companies
Holly
Corporation
Holly Corporation, a Delaware corporation, together with its
subsidiaries, is an independent petroleum refiner in the United
States that produces high value light products such as gasoline,
diesel fuel, jet fuel, specialty lubricant products, and
specialty and modified asphalt. Holly owns and operates through
its subsidiaries a 100,000 barrels per stream day
(bpsd) refinery located in Artesia, New Mexico, a
125,000 bpsd refinery in Tulsa, Oklahoma and a
31,000 bpsd refinery in Woods Cross, Utah. Holly also owns
and operates an asphalt company, which manufactures and markets
asphalt products from various terminals in Arizona, New Mexico
and Texas. In addition, Holly owns a 75% interest in a
12-inch
refined products pipeline project from Salt Lake City, Utah to
Las Vegas, Nevada, together with terminal facilities in the
Cedar City, Utah, and North Las Vegas areas. Furthermore, a
subsidiary of Holly owns a 34% interest (including the general
partner interest) in Holly Energy Partners, L.P.
(HEP), which owns and operates logistical assets,
including approximately 2,500 miles of petroleum product
and crude oil pipelines located principally in west Texas and
New Mexico; ten refined product terminals; a jet fuel terminal;
eight refinery loading rack facilities; a refined products tank
farm facility;
on-site
crude oil tankage at Hollys refineries;
on-site
refined product tankage at Hollys Tulsa refinery, and a
25% interest in a
95-mile
crude oil pipeline joint venture. Holly offers its products
primarily in the Southwestern, Rocky Mountain, and Mid-Continent
regions of the United States. Holly was founded in 1947 and is
based in Dallas, Texas.
Hollys common stock is traded on the NYSE under the symbol
HOC.
The principal executive offices of Holly are located at 100
Crescent Court, Suite 1600, Dallas,
Texas 75201-6915,
and Hollys telephone number is
(214) 871-3555.
Additional information about Holly and its subsidiaries is
included in documents incorporated by reference into this joint
proxy statement/prospectus. See Where You Can Find More
Information on page 133.
Frontier
Oil Corporation
Frontier Oil Corporation, a Wyoming corporation, together with
its subsidiaries, engages in crude oil refining and the
wholesale marketing of refined petroleum products. Frontier
operates refineries in Cheyenne, Wyoming and El Dorado, Kansas
with a total annual average crude oil capacity of approximately
187,000 barrels per day. The Cheyenne refinery markets its
refined products primarily in the eastern slope of the Rocky
Mountain region, which encompasses eastern Colorado (including
the Denver metropolitan area), eastern Wyoming and western
Nebraska. The El Dorado refinery markets its products in
Colorado, Wyoming, Nebraska, Montana, Utah, Kansas, Oklahoma,
Iowa, Missouri, North Dakota and South Dakota. The company was
formerly known as Wainoco Oil Corporation and changed its name
to Frontier Oil Corporation in April 1998. Frontier Oil
Corporation was founded in 1949 and is headquartered in Houston,
Texas.
Frontiers common stock is traded on the NYSE under the
symbol FTO.
The principal executive offices of Frontier are located at 10000
Memorial Drive, Suite 600, Houston, Texas 77024, and
Frontiers telephone number is
(713) 688-9600.
Additional information about Frontier and its subsidiaries is
included in documents incorporated by reference into this joint
proxy statement/prospectus. See Where You Can Find More
Information on page 133.
North
Acquisition, Inc.
North Acquisition, Inc., a wholly owned subsidiary of Holly
Corporation, is a Wyoming corporation that was formed on
February 17, 2011 for the sole purpose of effecting the
merger. In the merger, North Acquisition, Inc. will be merged
with and into Frontier, with Frontier surviving as a wholly
owned subsidiary of Holly.
1
The
Merger
A copy of the merger agreement is attached as Annex A to
this joint proxy statement/prospectus. Holly and Frontier
encourage you to read the entire merger agreement carefully
because it is the principal document governing the merger. For
more information on the merger agreement, see the section
entitled The Merger Agreement beginning on
page 93.
Form of
the Merger (see page 35)
Subject to the terms and conditions of the merger agreement, at
the effective time of the merger, Merger Sub, a wholly owned
subsidiary of Holly formed for the sole purpose of effecting the
merger, will be merged with and into Frontier. Frontier will
survive the merger as a wholly owned subsidiary of Holly. Upon
completion of the merger, Hollys name will be changed to
HollyFrontier Corporation, subject to obtaining approval from
Hollys stockholders of Hollys amended and restated
certificate of incorporation. In addition, the combined company
may pursue an internal restructuring of certain legal entities
after completing the merger, which may include an internal
merger of Frontier into HollyFrontier Corporation, as described
under The Merger Structure of the Combined
Company Following the Merger. The internal restructuring
of the combined company would be subject to, among other things,
the continuing evaluation of such restructuring and the approval
of the board of directors of the combined company after the
merger.
Merger
Consideration (see page 35)
Frontier shareholders will have the right to receive
0.4811 shares of Holly common stock for each share of
Frontier common stock they hold at the effective time of the
merger (the exchange ratio). The exchange ratio is
fixed and will not be adjusted for changes in the market value
of the common stock of Frontier or Holly. As a result, the
implied value of the consideration to Frontier shareholders will
fluctuate between the date of this joint proxy
statement/prospectus and the effective date of the merger. Based
on the closing price of Holly common stock on the New York Stock
Exchange (the NYSE) on February 18, 2011, the
last trading day before public announcement of the merger, the
exchange ratio represented approximately $26.99 in value for
each share of Frontier common stock. Based on the closing price
of Holly common stock on the NYSE on May
[ ], 2011, the latest practicable
trading day before the date of this joint proxy
statement/prospectus, the exchange ratio represented
approximately $[ ] in value for each
share of Frontier common stock.
Material
U.S. Federal Income Tax Consequences of the Merger (see
page 108)
As a condition to the completion of the merger,
Vinson & Elkins L.L.P., counsel to Holly, will have
delivered an opinion, dated as of the closing date of the
merger, that the merger will be treated for U.S. federal
income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code and that each of Holly, Frontier
and Merger Sub will be a party to the reorganization within the
meaning of Section 368(b) of the Code.
Completion of the merger is also conditioned upon the receipt by
Frontier of an opinion of Andrews Kurth LLP, counsel to
Frontier, dated as of the closing date of the merger, that the
merger will be treated for U.S. federal income tax purposes
as a reorganization within the meaning of Section 368(a) of
the Code and that no gain or loss will be recognized by Frontier
or the shareholders of Frontier to the extent that they receive
Holly common stock in exchange for Frontier common stock
pursuant to the merger.
The merger is intended to be treated for U.S. federal
income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code. Assuming the merger qualifies
as a reorganization, a holder of Frontier common stock will not
recognize any gain or loss for U.S. federal income tax
purposes upon the exchange of the holders shares of
Frontier common stock for shares of Holly common stock pursuant
to the merger, except with respect to cash received in lieu of
fractional shares of Holly common stock.
The tax opinions regarding the merger will not address any
state, local or foreign tax consequences of the merger. The
opinions will be based on certain assumptions and
representations as to factual matters from Holly and Frontier,
as well as certain covenants and undertakings by Holly and
Frontier. If any of the assumptions, representations, covenants
or undertakings is incorrect, incomplete, inaccurate or is
violated in any material
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respect, the validity of the conclusions reached by counsel in
their opinions would be jeopardized and the tax consequences of
the merger could differ from those described in this joint proxy
statement/prospectus. Neither Holly nor Frontier is currently
aware of any facts or circumstances that would cause the
assumptions, representations covenants and undertakings to be
incorrect, incomplete, inaccurate or violated in any material
respect.
An opinion of counsel represents such counsels best legal
judgment but is not binding on the Internal Revenue Service (the
IRS) or any court, so there can be no certainty that
the IRS will not challenge the conclusions reflected in the
opinion or that a court would not sustain such a challenge.
You are urged to consult your own tax advisor regarding the
particular consequences to you of the merger.
Recommendation
of the Board of Directors of Holly (see page 42)
After careful consideration, the Holly board of directors
unanimously determined that the merger and the other
transactions contemplated by the merger agreement are in the
best interests of Holly and its stockholders, approved the
merger and the merger agreement and recommended to the holders
of Holly common stock the approval of the issuance of Holly
common stock to Frontier shareholders in connection with the
merger. The Holly board of directors approved and declared
advisable Hollys amended and restated certificate of
incorporation which, among other things, increases the number of
authorized shares of capital stock under its certificate of
incorporation and changes its corporate name at the effective
time of the merger, and recommends the approval and adoption of
the amended and restated certificate of incorporation to the
holders of Holly common stock. For more information regarding
the factors considered by the Holly board of directors in
reaching its decisions relating to its recommendations, see the
section entitled The Merger Hollys
Reasons for the Merger; Recommendation of the Holly Board of
Directors. The Holly board of directors unanimously
recommends that Holly stockholders vote FOR the
proposal to approve the issuance of shares of Holly common stock
to Frontier shareholders in connection with the merger,
FOR the proposal to approve and adopt Hollys
amended and restated certificate of incorporation and
FOR the proposal to approve the adjournment of the
Holly special meeting to a later date or dates, if necessary or
appropriate to solicit additional proxies in the event there are
not sufficient votes at the time of the special meeting to
approve the issuance of shares of Holly common stock.
Recommendation
of the Board of Directors of Frontier (see
page 60)
After careful consideration, the Frontier board of directors
unanimously adopted the merger agreement, determined that the
merger agreement and the transactions contemplated thereby,
including the merger, are in the best interests of
Frontiers shareholders, and recommended that the merger
agreement be approved by Frontiers shareholders. For more
information regarding the factors considered by the Frontier
board of directors in reaching its decision to recommend the
approval of the merger agreement, see the section entitled
The Merger Frontiers Reasons for the
Merger; Recommendation of the Frontier Board of Directors.
The Frontier board of directors unanimously recommends that
Frontier shareholders vote FOR the proposal to
approve the merger agreement at the Frontier special meeting and
FOR the proposal to approve the adjournment of the
Frontier special meeting to a later date or dates, if necessary
or appropriate to solicit additional proxies in the event there
are not sufficient votes at the time of the special meeting to
approve the merger agreement.
Opinions
of Hollys Financial Advisors (see page 45)
Each of Morgan Stanley & Co. Incorporated
(Morgan Stanley) and Deutsche Bank Securities Inc.
(Deutsche Bank), Hollys financial advisors,
rendered its oral opinion (subsequently confirmed in writing) to
the board of directors of Holly that, as of February 21,
2011, and based upon and subject to the various assumptions,
qualifications and limitations set forth in their respective
written opinions, the exchange ratio of 0.4811 shares of
Holly common stock to be issued in exchange for each outstanding
share of Frontier common stock pursuant to the merger was fair,
from a financial point of view, to Holly.
The full text of the written opinions of Morgan Stanley and
Deutsche Bank, both dated February 21, 2011, which set
forth the assumptions made, procedures followed, matters
considered and limitations on the review undertaken in
connection with each opinion, are included in this joint proxy
statement/prospectus as Annex B and Annex C,
respectively. Morgan Stanley and Deutsche Bank provided their
respective opinions for the
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information and assistance of Hollys board of
directors, in its capacity as such, for purposes of the Holly
board of directors evaluation of the transactions
contemplated by the merger agreement. Neither Morgan
Stanleys opinion nor Deutsche Banks opinion
constitutes a recommendation to any holder of Holly common stock
or Frontier common stock as to how any such holder should vote
with respect to the merger. In addition, neither Morgan Stanley
nor Deutsche Bank was requested to opine as to, and neither
opinion in any manner addresses, Hollys underlying
business decision to proceed with or effect the merger.
Opinions
of Frontiers Financial Advisors (see
page 63)
In connection with the Merger, Frontiers board of
directors received separate written opinions, each dated
February 21, 2011, from Credit Suisse Securities (USA) LLC
(Credit Suisse) and Citigroup Global Markets Inc.
(Citi) as to the fairness, from a financial point of
view and as of the date of the opinions, to holders of Frontier
common stock of the exchange ratio provided for in the merger
agreement. The full texts of Credit Suisses and
Citis written opinions, which are attached to this joint
proxy statement/prospectus as Annex D and Annex E,
respectively, set forth the assumptions made, procedures
followed, matters considered and limitations on the review
undertaken. Each of Credit Suisses and Citis
opinions was provided for the information of Frontiers
board of directors (in its capacity as such) in connection with
its evaluation of the exchange ratio from a financial point of
view and did not address any other aspects or implications of
the merger. Credit Suisse and Citi expressed no view as to, and
neither of their opinions addressed, the underlying business
decision of Frontier to effect the merger, the relative merits
of the merger as compared to any alternative business strategies
that might exist for Frontier or the effect of any other
transaction in which Frontier might engage. Neither Credit
Suisses opinion nor Citis opinion is intended to be
and neither constitutes a recommendation to any shareholder as
to how such shareholder should vote or act on any matters
relating to the proposed merger or otherwise.
Interests
of Holly Directors and Executive Officers in the Merger (see
page 78)
Certain of Hollys directors and executive officers have
financial interests in the merger that may be different from, or
in addition to, the interests of Holly stockholders generally.
As detailed below under The Merger Board of
Directors and Management Following the Merger, it is
anticipated that Matthew P. Clifton will serve as the Executive
Chairman of the board, David L. Lamp will serve as the Executive
Vice President and Chief Operating Officer, Bruce R. Shaw will
serve as the Senior Vice President of Strategy and Corporate
Development and all of the members of Hollys board of
directors immediately prior to the merger will continue to serve
as directors of the combined company upon completion of the
merger.
As detailed below under The Merger Interests
of Holly Directors and Executive Officers in the
Merger Equity Awards, all unvested restricted
stock units held by each non-employee director of Holly will
automatically vest in full upon the completion of the merger. In
addition, the vesting of certain outstanding equity awards held
by Hollys executive officers may accelerate in the event
the executive officers employment with the combined
company terminates under certain circumstances following the
completion of the merger. Messrs. Clifton, Shaw and Lamp
have each entered into a Waiver Agreement with Holly pursuant to
which each chose to waive certain rights with respect to the
accelerated vesting of outstanding equity awards held by him
upon the closing of the merger, as discussed in more detail
under The Merger Interests of Holly Directors
and Executive Officers in the Merger Waiver
Agreements.
It is anticipated that no payments or benefits will be triggered
as a result of the merger under the Change in Control Agreements
that Holly has entered into with its executive officers or under
the Retirement Restoration Plan that provides for payments to
certain executive officers.
As of May 20, 2011, the record date for the Holly special
meeting, the directors and executive officers of Holly and their
affiliates beneficially owned and were entitled to vote
[ ] shares of Holly common stock,
collectively representing approximately
[ ]% of the shares of Holly common stock
outstanding and entitled to vote.
The Holly board of directors was aware of these interests and
considered them, among other matters, in evaluating the merger
and in making its recommendations to Holly stockholders.
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Interests
of Frontier Directors and Executive Officers in the Merger (see
page 82)
Executive officers and members of Frontiers board of
directors have interests in the merger that may be different
from, or in addition to the interests of Frontier shareholders
generally. Frontiers executive officers have agreements
with Frontier that provide for severance benefits if their
employment is terminated under certain circumstances following a
change in control of Frontier, such as the merger. In addition,
following a change in control of Frontier, such as will occur
upon completion of the merger, certain of Frontiers
compensation and benefit plans and arrangements provide for
accelerated vesting of certain rights or benefits and
accelerated payment of such benefits to its executive officers
upon the termination of their employment under certain
circumstances following such a change in control.
Mr. Jennings will serve as President and Chief Executive
Officer, Mr. Aron will serve as Executive Vice President
and Chief Financial Officer and Frontiers board of
directors will continue to serve as directors of the combined
company upon completion of the merger.
Frontier has existing Change in Control Severance Agreements, or
CIC agreements, with each of its executive officers. The merger
constitutes a change in control for purposes of the CIC
agreements. If an executive officer experiences a qualifying
termination upon or following the completion of the merger, he
or she will receive: (1) a cash severance payment ranging
from one to six times the sum of the executive officers
annual base salary, (2) full vesting of any Frontier stock
options and other equity-based compensation awards, and
(3) reimbursement for certain excess tax amounts.
Frontier also has existing Executive Severance Agreements with
each of its executive officers that operate following certain
terminations of employment unrelated to a change in control.
These agreements provide for a continuation of base salary for a
period of time, payment of a pro-rated annual incentive amount
during the year of termination, payment of certain health care
premiums, outplacement assistance, and vesting of all equity
based compensation awards held by the executive with pro rata
payment of performance awards.
As discussed in more detail under The Merger
Interests of Frontier Directors and Executive Officers in the
Merger Retention and Assumption Agreements,
Messrs. Jennings and Aron entered into agreements whereby
each chose to waive upon the closing of the merger current
rights to accelerated vesting of restricted stock where such
acceleration is based solely on (1) the closing of the
merger, (2) voluntary termination of employment upon the
relocation of Frontiers headquarters to Dallas, Texas or
(3) voluntary termination of employment during the
60 days following the one year anniversary of the
mergers closing.
As of May 20, 2011, the record date for the Frontier
special meeting, the directors and executive officers of
Frontier and their affiliates beneficially owned and were
entitled to vote [ ] shares of
Frontier common stock, collectively representing approximately
[ ]% of the shares of Frontier common
stock outstanding and entitled to vote.
The Frontier board of directors was aware of these interests and
considered them, among other matters, in approving the merger
agreement and in recommending that you vote for the proposal to
approve the merger agreement.
Board of
Directors and Management Following the Merger (see
page 86)
Immediately following the effective time of the merger, the
board of directors of the combined company will consist of
fourteen members, including: (i) seven directors chosen by
the current Frontier directors (at least six of whom will be
independent for purposes of the rules of the NYSE), and
(ii) seven directors chosen by the current Holly directors
(at least six of whom will be independent for purposes of the
rules of the NYSE), with Matthew P. Clifton to become the
Executive Chairman of the board. As of the date of this joint
proxy statement/prospectus, it is anticipated that all of the
members of Hollys and Frontiers respective boards of
directors immediately prior to the merger will continue to serve
as directors of the combined company. The fees
and/or other
remuneration to be provided to the non-employee directors of the
combined company have not been determined.
Upon completion of the merger, (i) Matthew P. Clifton will
become the Executive Chairman of the board of Holly,
(ii) Michael C. Jennings will become President and Chief
Executive Officer of Holly, (iii) Doug S. Aron will
5
become the Executive Vice President and Chief Financial Officer
of Holly, (iv) David L. Lamp will become the Executive Vice
President and Chief Operating Officer of Holly, and
(v) Bruce R. Shaw will become the Senior Vice President of
Strategy and Corporate Development of Holly.
Treatment
of Frontier Stock Options and Other Long-Term Incentive Awards
(see page 88)
Stock Options. Upon completion of the merger,
each outstanding option to purchase shares of Frontier common
stock will be converted into fully vested and immediately
exercisable options to purchase shares of Holly common stock.
The number of shares of Holly common stock that will be subject
to such Holly stock options will be the number of shares of
Frontier common stock subject to each such Frontier stock option
multiplied by 0.4811, rounded down to the nearest whole share of
Holly common stock. The exercise price per share of Holly common
stock for such Holly stock option will equal the exercise price
per share of Frontier common stock for such Frontier stock
option divided by 0.4811, rounded up to the nearest whole cent.
All of the previously outstanding Frontier stock options expired
in April 2011, before the completion of the merger.
Stock Units. Upon completion of the merger,
each outstanding Frontier stock unit, other than Frontier stock
units issued in 2011, will vest and be converted into (1) a
number of shares of fully vested Holly common stock equal to
125% of the number of shares of Frontier common stock subject to
such Frontier stock units, and (2) an amount of cash equal
to the amount of cash and stock dividends and dividend
equivalents that would have been credited to the holder under
the Frontier stock plan if the Frontier stock units instead had
been issued as shares of Frontier restricted stock. Frontier
stock units issued in 2011 will convert into comparable Holly
stock units, taking into account the exchange ratio.
Restricted Stock and Restricted Stock
Units. Upon completion of the merger, each
outstanding share of Frontier restricted stock (except for
Frontier restricted stock issued in 2011 or held by
Messrs. Jennings and Aron) will vest and be converted into
the right to receive 0.4811 fully vested shares of Holly common
stock. Each outstanding Frontier restricted stock unit will vest
and be converted into the right to receive 0.4811 fully vested
shares of Holly common stock.
Retention Agreements. As discussed in more
detail under The Merger Interests of Frontier
Directors and Executive Officers in the Merger
Retention and Assumption Agreements, Messrs. Jennings
and Aron entered into agreements whereby each chose to waive
upon the closing of the merger current rights to accelerated
vesting of restricted stock where such acceleration is based
solely on (1) the closing of the merger, (2) voluntary
termination of employment upon the relocation of Frontiers
headquarters to Dallas, Texas or (3) voluntary termination
of employment during the 60 days following the one year
anniversary of the mergers closing.
Regulatory
Clearances Required for the Merger (see page 87)
Holly and Frontier have each agreed to take actions in order to
obtain regulatory clearance required to consummate the merger.
Regulatory clearance includes expiration or termination of the
required waiting period under the
Hart-Scott-Rodino
Antitrust Improvement Act of 1976, as amended, and the rules and
regulations promulgated thereunder (the HSR Act),
following required notifications with and review by the Federal
Trade Commission and the Antitrust Division of the
U.S. Department of Justice. On March 7, 2011, each of
Holly and Frontier filed its notification under the HSR Act. On
March 18, 2011, Holly and Frontier were notified of the
early termination of the pre-merger waiting period under the HSR
Act.
While Holly and Frontier expect to obtain all required
regulatory clearances, we cannot assure you that these
regulatory clearances will be obtained or that the granting of
these regulatory clearances will not involve the imposition of
additional conditions on the completion of the merger, including
the requirement to divest assets, or require changes to the
terms of the merger agreement. These conditions or changes could
result in the conditions to the merger not being satisfied.
Amended
and Restated Certificate of Incorporation of Holly (see
page 77)
The Holly board of directors has approved, subject to Holly
stockholder approval, Hollys amended and restated
certificate of incorporation which, among other things,
(i) changes Hollys name to HollyFrontier
6
Corporation and (ii) increases the number of
authorized shares of capital stock of Holly under its
certificate of incorporation. The form of Hollys amended
and restated certificate of incorporation is included in this
joint proxy statement/prospectus as Annex F. The approval
and adoption of Hollys amended and restated certificate of
incorporation by the Holly stockholders is not a condition
precedent to the closing of the merger. In the event this
proposal is approved by Holly stockholders, but the merger is
not completed, Hollys amended and restated certificate of
incorporation will not become effective.
Expected
Timing of the Merger
Holly and Frontier currently expect the closing of the merger to
occur early in the third quarter of 2011, with a target closing
date of July 1, 2011. However, the merger is subject to various
regulatory clearances and the satisfaction or waiver of other
conditions as described in the merger agreement, and it is
possible that factors outside the control of Holly and Frontier
could result in the merger being completed at an earlier time, a
later time or not at all.
Conditions
to Completion of the Merger (see page 103)
The obligations of Holly and Frontier to complete the merger are
subject to the satisfaction of the following conditions:
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approval of the merger agreement by a majority of the votes cast
at the Frontier special meeting;
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approval of the issuance of shares of Holly common stock to
Frontier shareholders in connection with the merger requires the
affirmative vote of holders of a majority of the shares present
in person or represented by proxy and entitled to vote at the
Holly special meeting, assuming a quorum;
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the expiration or earlier termination of the waiting period (and
any extension thereof) applicable to the merger under the HSR
Act;
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the expiration of any mandatory waiting period and receipt of
any required consent under any other applicable United States
federal or state antitrust laws, except where the failure to
observe such waiting period or obtain such consent would not
reasonably be expected to delay or prevent the consummation of
the merger or have a material adverse effect on the expected
benefits of the transactions contemplated by the merger
agreement to Holly;
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absence of any injunction, decree, order, statute, rule or
regulation by a court or other governmental entity that makes
unlawful or prohibits the consummation of the merger;
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effectiveness of the registration statement of which this joint
proxy statement/prospectus forms a part and the absence of a
stop order or proceedings threatened or initiated by the SEC for
that purpose;
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authorization for the listing on the NYSE of the shares of Holly
common stock to be issued in connection with the merger and upon
conversion of the Frontier restricted stock and the shares of
Holly common stock reserved for issuance pursuant to Holly stock
options, subject to official notice of issuance; and
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the entry into and effectiveness of a new credit facility, on
the terms as set forth in the merger agreement and the schedules
thereto, subject only to the consummation of the merger.
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In addition, each of Hollys and Frontiers
obligations to effect the merger is subject to the satisfaction
or waiver of the following additional conditions:
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the representations and warranties of the other party, other
than the representations related to the shares of capital stock
authorized, issued and outstanding or reserved for issuance and
the absence of any outstanding voting debt, (i) to the
extent qualified by material adverse effect, will be true and
correct, and (ii) to the extent not qualified by material
adverse effect, will be true and correct except where the
failure to be true and correct, individually or in the
aggregate, has not had, and would not reasonably be expected to
have, a material adverse effect on such party as of the date of
the merger agreement and as of the closing date (other than
those representations and warranties that were made only as of a
specified date, which need only be true and correct as of such
specified date);
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the representations and warranties of the other party relating
to the shares of capital stock authorized, issued and
outstanding or reserved for issuance and the absence of any
outstanding voting debt will be true and correct in all respects
(other than de minimis inaccuracies) as of the date of the
merger agreement and as of the closing date (except to the
extent such representations or warranties were made only as of a
specified date, in which case, as of such specified date);
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the other party having performed, in all material respects, its
covenants and agreements under the merger agreement required to
be performed on or prior to the closing date;
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receipt of a certificate executed by the other partys
chairman of the board, president and chief executive officer as
to the satisfaction of the conditions described in the preceding
three bullets; and
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receipt of a tax opinion from the partys tax counsel as
described in the section titled The Merger
Agreement Conditions to Completion of the
Merger, including an opinion that the merger will be
treated as a reorganization within the meaning of
Section 368(a) of the Code.
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No
Solicitation of Alternative Proposals (see
page 97)
The merger agreement precludes Holly and Frontier from
soliciting or engaging in discussions or negotiations with a
third party with respect to a proposal for an acquisition
proposal. However, if Holly or Frontier receives an unsolicited
acquisition proposal from a third party, and Hollys or
Frontiers board of directors, as applicable, among other
things, determines in good faith (after consultation with its
legal and financial advisors) that (i) such unsolicited
proposal is a superior proposal to the merger, and (ii) the
failure to enter into discussions regarding such proposal would
be inconsistent with its fiduciary obligations under applicable
law, Holly or Frontier, as applicable, may furnish non-public
information to and enter into discussions with, and only with,
that third party regarding such acquisition proposal.
Termination
of the Merger Agreement (see page 104)
Holly and Frontier may mutually agree to terminate the merger
agreement at any time, notwithstanding approval of the merger by
stockholders. Either company may also terminate the merger
agreement if the merger is not consummated by September 30,
2011, subject to certain exceptions. See the section entitled
The Merger Agreement Termination of the Merger
Agreement for a discussion of these and other rights of
each of Holly and Frontier to terminate the merger agreement.
Termination
Fees and Expenses (see page 105)
Generally, all fees and expenses incurred in connection with the
merger agreement and the transactions contemplated by the merger
agreement will be paid by the party incurring those expenses,
subject to the specific exceptions discussed in this joint proxy
statement/prospectus where Holly or Frontier, as the case may
be, may be required to pay a termination fee of $80 million
and an expense reimbursement up to $12 million. See the
section entitled The Merger Agreement Expenses
and Termination Fees; Liability for Breach for a
discussion of the circumstances under which such termination fee
will be required to be paid.
Accounting
Treatment (see page 110)
Holly prepares its financial statements in accordance with
accounting principles generally accepted in the United States of
America, which is referred to as GAAP. The merger will be
accounted for using the acquisition method of accounting. Holly
will be treated as the acquirer for accounting purposes.
No
Appraisal Rights (see page 130)
Neither the holders of shares of Holly common stock nor the
holders of shares of Frontier common stock are entitled to
appraisal rights in connection with the merger in accordance
with Delaware or Wyoming law, respectively, nor do the
certificate of incorporation or bylaws of either company confer
such appraisal rights.
8
Comparison
of Stockholder Rights and Corporate Governance Matters (see
page 120)
Frontier shareholders receiving merger consideration will have
different rights once they become stockholders of the combined
company due to differences between the governing corporate
documents of Frontier and the proposed governing corporate
documents of the combined company. These differences are
described in detail under the section entitled Comparison
of Rights of Holly Stockholders and Frontier Shareholders.
Listing
of Shares of Holly Common Stock; Delisting and Deregistration of
Shares of Frontier Common Stock (see page 91)
It is a condition to the completion of the merger that the
shares of Holly common stock to be issued to Frontier
shareholders pursuant to the merger and the shares of Holly
common stock reserved for issuance pursuant to Holly stock
options (including those shares of Holly common stock to be
issued upon conversion of the Frontier restricted stock) be
authorized for listing on the NYSE at the effective time of the
merger, subject to official notice of issuance. Upon completion
of the merger, shares of Frontier common stock currently listed
on the NYSE will cease to be listed on the NYSE and will be
subsequently deregistered under the Exchange Act.
The
Meetings
The Holly
Special Meeting (see page 27)
The special meeting of Holly stockholders will be held at the
offices of Vinson & Elkins LLP, 2001 Ross Avenue,
39th Floor, Dallas, Texas 75201, on June 28, 2011, at
3:00 p.m., local time. The special meeting of Holly
stockholders is being held to consider and vote on:
|
|
|
|
|
a proposal to approve the issuance of shares of Holly common
stock to Frontier shareholders in connection with the merger;
|
|
|
|
a proposal to approve and adopt Hollys amended and
restated certificate of incorporation to, among other things,
increase the number of authorized shares of Holly capital stock
and change the name of Holly to HollyFrontier
Corporation; and
|
|
|
|
a proposal to approve the adjournment of the Holly special
meeting to a later date or dates, if necessary or appropriate,
to solicit additional proxies in the event there are not
sufficient votes at the time of the special meeting to approve
the first proposal listed above.
|
Completion of the merger is conditioned on approval of the
issuance of shares of Holly common stock to Frontier
shareholders in connection with the merger.
Only record holders of shares of Holly common stock at the close
of business on May 20, 2011, the record date for the Holly
special meeting, are entitled to receive notice of, and to vote
at, the Holly special meeting or any adjournment or postponement
thereof. At the close of business on the record date, the only
outstanding voting securities of Holly were common stock, and
[ ] shares of Holly common stock were
issued and outstanding, approximately [ ]% of
which were owned and entitled to be voted by Holly directors and
executive officers
and/or their
affiliates. We currently expect that Holly directors and
executive officers and their affiliates will vote their shares
in favor of each Holly proposal listed above, but none of them
has entered into any agreement obligating him or her to do so.
With respect to each Holly proposal listed above, Holly
stockholders may cast one vote for each share of Holly common
stock that they own. The proposal to approve the issuance of
shares of Holly common stock to Frontier shareholders in
connection with the merger requires the approval of a majority
of the votes cast at the Holly special meeting, assuming a
quorum. The proposal to approve and adopt Hollys amended
and restated certificate of incorporation requires the approval
of a majority of the outstanding shares of Holly common stock
entitled to vote at the Holly special meeting. No business may
be transacted at the Holly special meeting unless a quorum is
present. If a quorum is not present, or if fewer shares are
voted in favor of the proposal to approve the issuance of shares
of Holly common stock to Frontier shareholders in connection
with the merger than is required, to allow additional time for
obtaining additional proxies, the special meeting may be
adjourned if the approval of a majority of the votes
9
cast at the special meeting is obtained. No notice of an
adjourned meeting need be given unless the adjournment is for
more than 30 days or, if after the adjournment, a new
record date is fixed for the adjourned meeting, in which case a
notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
The
Frontier Special Meeting (see page 31)
The special meeting of Frontier shareholders will be held at the
offices of Andrews Kurth LLP, 600 Travis, Suite 4200,
Houston, Texas 77002, on June 28, 2011, at 3:00 p.m.,
local time. The special meeting of Frontier shareholders is
being held in order to consider and vote on:
|
|
|
|
|
a proposal to approve the merger agreement, which is further
described in the sections titled The Merger and
The Merger Agreement, beginning on pages 35 and
93, respectively; and
|
|
|
|
|
|
a proposal to approve the adjournment of the Frontier special
meeting to a later date or dates, if necessary or appropriate,
to solicit additional proxies in the event there are not
sufficient votes at the time of the special meeting to approve
the foregoing proposal.
|
Only record holders of shares of Frontier common stock at the
close of business on May 20, 2011, the record date for the
Frontier special meeting, are entitled to notice of, and to vote
at, the Frontier special meeting or any adjournment or
postponement thereof. At the close of business on the record
date, the only outstanding voting securities of Frontier were
common stock, and [ ] shares of Frontier
common stock were issued and outstanding, approximately
[ ]% of which were owned and entitled to be
voted by Frontier directors and executive officers
and/or their
affiliates. We currently expect that Frontier directors and
executive officers and their affiliates will vote their shares
in favor of both Frontier proposals listed above, but none of
them has entered into any agreement obligating him or her to do
so.
With respect to each Frontier proposal listed above, Frontier
shareholders may cast one vote for each share of Frontier common
stock that they own. The proposal to approve the merger
agreement requires the approval of a majority of the votes cast
at the Frontier special meeting, assuming a quorum. No business
may be transacted at the Frontier special meeting unless a
quorum is present. If a quorum is not present, or if fewer
shares are voted in favor of the proposal to approve the merger
agreement than is required, to allow additional time for
obtaining additional proxies, the special meeting may be
adjourned if the approval of a majority of the votes cast at the
special meeting is obtained. No notice of an adjourned meeting
need be given unless the adjournment is for more than
30 days or, if after the adjournment, a new record date is
fixed for the adjourned meeting, in which case a notice of the
adjourned meeting shall be given to each shareholder of record
entitled to vote at the meeting.
10
Summary
Historical Consolidated Financial Data
Summary
Consolidated Historical Financial Data of Holly
The following statement of income data for the years ended
December 31, 2010, 2009 and 2008 and the balance sheet data
as of December 31, 2010 and 2009 have been derived from the
audited consolidated financial statements of Holly contained in
its Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010, which is
incorporated into this document by reference. The statement of
income data for the years ended December 31, 2007 and 2006
and the balance sheet data as of December 31, 2008, 2007
and 2006 have been derived from Hollys audited
consolidated financial statements for such years, which have not
been incorporated into this document by reference.
The statement of income data for the three months ended March
31, 2011 and 2010, and the balance sheet data as of
March 31, 2011 have been derived from Hollys
unaudited interim consolidated financial statements contained in
its Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 2011, which is incorporated into this document by
reference. The balance sheet data as of March 31, 2010 has been
derived from Hollys unaudited interim consolidated
financial statements contained in its Quarterly Report on
Form 10-Q for the quarterly period ended March 31,
2010, which has not been incorporated into this document by
reference. These financial statements are unaudited, but, in the
opinion of Hollys management, contain all adjustments
necessary to present fairly Hollys financial position and
results of operations for the periods indicated.
You should read this summary financial data together with the
financial statements that are incorporated by reference into
this document and their accompanying notes and managements
discussion and analysis of financial condition and results of
operations of Holly contained in such reports. See Where
You Can Find More Information beginning on page 133.
Statement
of Income Data of Holly
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
March 31,
|
|
|
Years Ended December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In millions, except per share data)
|
|
|
Sales and other revenues
|
|
$
|
2,327
|
|
|
$
|
1,874
|
|
|
$
|
8,323
|
|
|
$
|
4,834
|
|
|
$
|
5,860
|
|
|
$
|
4,791
|
|
|
$
|
4,023
|
|
Total operating costs and expenses
|
|
|
2,167
|
|
|
|
1,897
|
|
|
|
8,060
|
|
|
|
4,754
|
|
|
|
5,665
|
|
|
|
4,325
|
|
|
|
3,661
|
|
Operating income (loss)
|
|
|
159
|
|
|
|
(23
|
)
|
|
|
263
|
|
|
|
80
|
|
|
|
196
|
|
|
|
466
|
|
|
|
362
|
|
Interest expense
|
|
|
16
|
|
|
|
18
|
|
|
|
74
|
|
|
|
40
|
|
|
|
24
|
|
|
|
1
|
|
|
|
1
|
|
Income tax provision (benefit)
|
|
|
49
|
|
|
|
(17
|
)
|
|
|
59
|
|
|
|
7
|
|
|
|
64
|
|
|
|
165
|
|
|
|
137
|
|
Income (loss) from continuing operations
|
|
|
91
|
|
|
|
(23
|
)
|
|
|
133
|
|
|
|
36
|
|
|
|
124
|
|
|
|
334
|
|
|
|
247
|
|
Net income (loss)
|
|
|
91
|
|
|
|
(23
|
)
|
|
|
133
|
|
|
|
53
|
|
|
|
127
|
|
|
|
334
|
|
|
|
267
|
|
Net income (loss) attributable to Holly Corporation stockholders
|
|
$
|
85
|
|
|
$
|
(28
|
)
|
|
$
|
104
|
|
|
$
|
20
|
|
|
$
|
121
|
|
|
$
|
334
|
|
|
$
|
267
|
|
Earnings (loss) per share attributable to Holly Corporation
stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
$
|
1.59
|
|
|
$
|
(0.53
|
)
|
|
$
|
1.95
|
|
|
$
|
0.39
|
|
|
$
|
2.40
|
|
|
$
|
6.09
|
|
|
$
|
4.68
|
|
Diluted:
|
|
$
|
1.58
|
|
|
$
|
(0.53
|
)
|
|
$
|
1.94
|
|
|
$
|
0.39
|
|
|
$
|
2.38
|
|
|
$
|
5.98
|
|
|
$
|
4.58
|
|
11
Balance
Sheet Data of Holly
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31,
|
|
|
As of December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In millions)
|
|
|
Cash and cash equivalents
|
|
$
|
224
|
|
|
$
|
93
|
|
|
$
|
229
|
|
|
$
|
125
|
|
|
$
|
41
|
|
|
$
|
94
|
|
|
$
|
154
|
|
Total assets
|
|
|
3,990
|
|
|
|
3,382
|
|
|
|
3,701
|
|
|
|
3,146
|
|
|
|
1,874
|
|
|
|
1,664
|
|
|
|
1,238
|
|
Long-term debt(1)
|
|
|
834
|
|
|
|
821
|
|
|
|
811
|
|
|
|
707
|
|
|
|
342
|
|
|
|
|
|
|
|
|
|
Total Holly Corporation stockholders equity
|
|
|
774
|
|
|
|
583
|
|
|
|
697
|
|
|
|
619
|
|
|
|
542
|
|
|
|
594
|
|
|
|
466
|
|
|
|
|
(1) |
|
Includes long-term debt of HEP of $506 million and
$492 million as of March 31, 2011 and 2010, respectively,
and $482 million, $379 million and $342 million
as of December 31, 2010, 2009 and 2008, respectively, which
is
non-recourse
to Holly. |
Summary
Consolidated Historical Financial Data of Frontier
The following statement of operations data for the years ended
December 31, 2010, 2009 and 2008 and the balance sheet data
as of December 31, 2010 and 2009 have been derived from the
audited consolidated financial statements of Frontier contained
in its Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010, which is
incorporated into this document by reference. The statement of
operations data for the years ended December 31, 2007 and
2006 and the balance sheet data as of December 31, 2008,
2007 and 2006 have been derived from Frontiers audited
consolidated financial statements for such years, which have not
been incorporated into this document by reference.
The statement of operations data for the three months ended
March 31, 2011 and 2010, and the balance sheet data as of
March 31, 2011 have been derived from Frontiers unaudited
interim consolidated financial statements contained in its
Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 2011, which is incorporated into this document by
reference. The balance sheet data as of March 31, 2010 has
been derived from Frontiers unaudited interim consolidated
financial statements contained in its Quarterly Report on
Form 10-Q for the quarterly period ended March 31,
2010, which has not been incorporated into this document by
reference. These financial statements are unaudited, but, in the
opinion of Frontiers management, contain all adjustments
necessary to present fairly Frontiers financial position
and results of operations for the periods indicated.
You should read this summary financial data together with the
financial statements that are incorporated by reference into
this document and their accompanying notes and managements
discussion and analysis of financial condition and results of
operations of Frontier contained in such reports. See
Where You Can Find More Information beginning on
page 133.
12
Statement
of Operations Data of Frontier
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
|
|
|
Ended
|
|
|
|
|
|
|
March 31,
|
|
|
Years Ended December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In millions, except per share data)
|
|
|
As Adjusted(1)
|
|
|
Revenues
|
|
$
|
1,909
|
|
|
$
|
1,272
|
|
|
$
|
5,885
|
|
|
$
|
4,237
|
|
|
$
|
6,499
|
|
|
$
|
5,189
|
|
|
$
|
4,796
|
|
Operating costs and expenses
|
|
|
1,680
|
|
|
|
1,330
|
|
|
|
5,801
|
|
|
|
4,343
|
|
|
|
6,147
|
|
|
|
4,589
|
|
|
|
4,229
|
|
Operating income (loss)
|
|
|
229
|
|
|
|
(58
|
)
|
|
|
84
|
|
|
|
(105
|
)
|
|
|
351
|
|
|
|
600
|
|
|
|
567
|
|
Interest expense and other financing costs, net of interest and
investment income
|
|
|
8
|
|
|
|
7
|
|
|
|
30
|
|
|
|
26
|
|
|
|
10
|
|
|
|
(13
|
)
|
|
|
(6
|
)
|
Provision (benefit) for income taxes
|
|
|
81
|
|
|
|
(25
|
)
|
|
|
16
|
|
|
|
(48
|
)
|
|
|
116
|
|
|
|
211
|
|
|
|
198
|
|
Net income (loss)
|
|
$
|
140
|
|
|
$
|
(40
|
)
|
|
$
|
38
|
|
|
$
|
(84
|
)
|
|
$
|
226
|
|
|
$
|
402
|
|
|
$
|
375
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
$
|
1.34
|
|
|
$
|
(0.39
|
)
|
|
$
|
0.36
|
|
|
$
|
(0.81
|
)
|
|
$
|
2.19
|
|
|
$
|
3.77
|
|
|
$
|
3.36
|
|
Diluted:
|
|
$
|
1.32
|
|
|
$
|
(0.39
|
)
|
|
$
|
0.36
|
|
|
$
|
(0.81
|
)
|
|
$
|
2.18
|
|
|
$
|
3.73
|
|
|
$
|
3.33
|
|
Balance
Sheet Data of Frontier
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31,
|
|
|
As of December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In millions)
|
|
|
Cash and cash equivalents
|
|
$
|
685
|
|
|
$
|
447
|
|
|
$
|
559
|
|
|
$
|
425
|
|
|
$
|
484
|
|
|
$
|
297
|
|
|
$
|
405
|
|
Total assets
|
|
|
2,386
|
|
|
|
2,148
|
|
|
|
2,169
|
|
|
|
2,148
|
|
|
|
2,006
|
|
|
|
1,706
|
|
|
|
1,463
|
|
Total long-term debt
|
|
|
348
|
|
|
|
348
|
|
|
|
348
|
|
|
|
347
|
|
|
|
347
|
|
|
|
150
|
|
|
|
150
|
|
Shareholders equity
|
|
|
1,091
|
|
|
|
905
|
|
|
|
987
|
|
|
|
944
|
|
|
|
1,039
|
|
|
|
881
|
|
|
|
715
|
|
|
|
|
(1) |
|
In the fourth quarter of 2009, Frontier adopted a change in
accounting principle for inventory from a FIFO (first-in,
first-out) basis to a LIFO (last-in, last-out) basis. The prior
period presented has been adjusted to reflect the period
specific effects of applying the new accounting principle. |
13
The following table presents selected unaudited pro forma
combined financial information about Hollys consolidated
balance sheet and statements of income, after giving effect to
the merger with Frontier. The information under Statement
of Income Data in the table below gives effect to the
merger as if it had been consummated on January 1, 2010,
the beginning of the earliest period presented. The information
under Balance Sheet Data in the table below assumes
the merger had been consummated on March 31, 2011. This
unaudited pro forma combined financial information was prepared
using the acquisition method of accounting with Holly considered
the acquirer of Frontier. See Accounting Treatment
on page 110.
In addition, the unaudited pro forma combined financial
information includes adjustments which are preliminary and will
likely be revised. There can be no assurance that such revisions
will not result in material changes. The unaudited pro forma
combined financial information is presented for illustrative
purposes only and does not indicate the financial results of the
combined company.
The information presented below should be read in conjunction
with the historical consolidated financial statements of Holly
and Frontier, including the related notes, filed by each of them
with the SEC, and with the pro forma condensed combined
financial statements of Holly and Frontier, including the
related notes, appearing elsewhere in this document. See
Where You Can Find More Information beginning on
page 133 and Unaudited Pro Forma Condensed Combined
Financial Information beginning on page 111. The
unaudited pro forma condensed combined financial data are not
necessarily indicative of results that actually would have
occurred or that may occur in the future had the merger been
completed on the dates indicated.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Year Ended
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
|
(In millions, except per
|
|
|
|
share data)
|
|
|
Statement of Income Data:
|
|
|
|
|
|
|
|
|
Sales and other revenues
|
|
$
|
4,235
|
|
|
$
|
14,208
|
|
Income from operations
|
|
$
|
406
|
|
|
$
|
395
|
|
Income tax provision
|
|
$
|
138
|
|
|
$
|
95
|
|
Net income attributable to common stockholders
|
|
$
|
239
|
|
|
$
|
174
|
|
Earnings per share attributable to common
stockholders basic
|
|
$
|
2.28
|
|
|
$
|
1.66
|
|
Earnings per share attributable to common
stockholders diluted
|
|
$
|
2.27
|
|
|
$
|
1.65
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
|
(In millions)
|
|
|
Balance Sheet Data:
|
|
|
|
|
Cash, cash equivalents and investments in marketable securities
|
|
$
|
961
|
|
Total assets
|
|
$
|
8,782
|
|
Long-term debt(1)
|
|
$
|
1,209
|
|
Total stockholders equity
|
|
$
|
3,766
|
|
|
|
|
(1) |
|
Includes $506 million in long-term debt of HEP which is
non-recourse to Holly. |
Unaudited
Comparative Per Share Data
Presented below are Hollys and Frontiers historical
per share data for the three months ended March 31, 2011
and the year ended December 31, 2010 and unaudited pro
forma combined per share data for the three months ended
March 31, 2011 and the year ended December 31, 2010.
This information should be read together with the consolidated
financial statements and related notes of Holly and Frontier
that are incorporated by reference into this joint proxy
statement/prospectus and with the unaudited pro forma combined
financial data included under Unaudited Pro Forma
Condensed Combined Financial Information beginning on
page 111. The pro forma information is presented for
illustrative purposes only and is not necessarily indicative of
the operating results or financial position that would have
occurred if the merger had been completed as of the beginning of
the period
14
presented, nor is it necessarily indicative of the future
operating results or financial position of the combined company.
The historical book value per share is computed by dividing
total stockholders equity by the number of shares of
common stock outstanding at the end of the period. The pro forma
earnings per share of the combined company is computed by
dividing the pro forma income by the pro forma weighted average
number of shares outstanding. The pro forma book value per share
of the combined company is computed by dividing total pro forma
stockholders equity by the pro forma number of shares of
common stock outstanding at the end of the respective periods.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Year Ended
|
|
Holly Historical
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.59
|
|
|
$
|
1.95
|
|
Diluted
|
|
$
|
1.58
|
|
|
$
|
1.94
|
|
Book value per share of common stock
|
|
$
|
14.51
|
|
|
$
|
13.09
|
|
Cash dividends
|
|
$
|
0.15
|
|
|
$
|
0.60
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Year Ended
|
|
Frontier Historical
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.34
|
|
|
$
|
0.36
|
|
Diluted
|
|
$
|
1.32
|
|
|
$
|
0.36
|
|
Book value per share of common stock
|
|
$
|
10.25
|
|
|
$
|
9.33
|
|
Cash dividends
|
|
$
|
0.34
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Year Ended
|
|
Holly Unaudited Pro Forma Combined Amounts
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
2.28
|
|
|
$
|
1.66
|
|
Diluted
|
|
$
|
2.27
|
|
|
$
|
1.65
|
|
Pro forma book value per share of common stock
|
|
$
|
35.95
|
|
|
|
n/a
|
|
Cash dividends
|
|
$
|
0.15
|
|
|
$
|
0.60
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Year Ended
|
|
Frontier Unaudited Pro Forma Equivalent Per Share Data(a)
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.10
|
|
|
$
|
0.80
|
|
Diluted
|
|
$
|
1.09
|
|
|
$
|
0.79
|
|
Pro forma book value per share of common stock
|
|
$
|
17.30
|
|
|
|
n/a
|
|
Cash dividends
|
|
$
|
0.07
|
|
|
$
|
0.29
|
|
|
|
|
(a) |
|
The Frontier unaudited pro forma equivalent per share financial
information is computed by multiplying the Holly unaudited pro
forma combined amounts by the exchange ratio (0.4811 shares
of Holly common stock for each share of Frontier common stock)
so that the per share amounts are equated to the respective
values for one share of Frontier common stock. |
15
Comparative
Market Prices
The following table shows the closing sale prices of Holly and
Frontier common stock as reported on the NYSE as of
February 18, 2011, the last trading day before public
announcement of the merger, and as of
May [ ], 2011, the last trading day before
the date of this joint proxy statement/prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Implied Value for
|
|
|
|
|
|
|
|
|
|
Each Share of
|
|
|
|
Holly Common
|
|
|
Frontier Common
|
|
|
Frontier Common
|
|
|
|
Stock
|
|
|
Stock
|
|
|
Stock
|
|
|
February 18, 2011
|
|
$
|
56.11
|
|
|
$
|
28.12
|
|
|
$
|
26.99
|
|
May [ ], 2011
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
The market price of Holly common stock and Frontier common
stock will fluctuate prior to the merger. Holly stockholders and
Frontier shareholders are urged to obtain current market
quotations for the shares prior to making any decision with
respect to the merger.
16
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This joint proxy statement/prospectus and the documents
incorporated by reference into this joint proxy
statement/prospectus contain forward-looking statements within
the meaning of the federal securities laws that are not limited
to historical facts, but reflect Hollys
and/or
Frontiers current beliefs, expectations or intentions
regarding future events. Words such as may,
will, could, should,
expect, plan, project,
intend, anticipate, believe,
estimate, predict,
potential, pursue, target,
continue, and similar expressions are intended to
identify such forward-looking statements. These forward-looking
statements include, without limitation, Hollys and
Frontiers expectations with respect to the synergies,
costs and other anticipated financial impacts of the proposed
transaction; future financial and operating results of the
combined company; the combined companys plans, objectives,
expectations and intentions with respect to future operations
and services; approval of the proposed transaction by
stockholders and by governmental regulatory authorities; the
satisfaction of the closing conditions to the proposed
transaction; and the timing of the completion of the proposed
transaction.
All forward-looking statements involve significant risks and
uncertainties that could cause actual results to differ
materially from those in the forward-looking statements, many of
which are generally outside the control of Holly and Frontier
and are difficult to predict. These risks and uncertainties also
include those set forth under Risk Factors,
beginning on page 18, as well as, among others, risks and
uncertainties relating to:
|
|
|
|
|
the actions of actual or potential competitive suppliers of
refined petroleum products in our markets;
|
|
|
|
the demand for and supply of crude oil and refined products;
|
|
|
|
the spread between market prices for refined products and market
prices for crude oil;
|
|
|
|
the possibility of constraints on the transportation of refined
products;
|
|
|
|
the possibility of inefficiencies, curtailments or shutdowns in
refinery operations or pipelines;
|
|
|
|
effects of governmental and environmental regulations and
policies;
|
|
|
|
the availability and cost of our financing;
|
|
|
|
the effectiveness of our capital investments and marketing
strategies;
|
|
|
|
our efficiency in carrying out construction projects;
|
|
|
|
our ability to acquire refined product operations or pipeline
and terminal operations on acceptable terms and to integrate any
existing or future acquired operations;
|
|
|
|
the possibility of terrorist attacks and the consequences of any
such attacks;
|
|
|
|
general economic conditions;
|
|
|
|
the proposed merger, including the ability to complete the
merger in the anticipated timeframe or at all, the diversion of
management in connection with the merger and our ability to
realize fully or at all the anticipated benefits of the
merger; and
|
|
|
|
other financial, operational and legal risks and uncertainties
detailed from time to time in our SEC filings.
|
Holly and Frontier caution that the foregoing list of factors is
not exclusive. Additional information concerning these and other
risk factors is contained in Hollys and Frontiers
most recently filed Annual Reports on
Form 10-K,
subsequent Quarterly Reports on
Form 10-Q,
recent Current Reports on
Form 8-K,
and other SEC filings. All subsequent written and oral
forward-looking statements concerning Holly, Frontier, the
proposed transaction or other matters and attributable to Holly
or Frontier or any person acting on their behalf are expressly
qualified in their entirety by the cautionary statements above.
The forward-looking statements speak only as of the date made
and, other than as required by law, neither Holly nor Frontier
undertake any obligation to update publicly or revise any of
these forward-looking statements, whether as a result of new
information, future events or otherwise.
17
RISK
FACTORS
In addition to the other information included and
incorporated by reference into this joint proxy
statement/prospectus, including the matters addressed in the
section entitled Special Note Regarding Forward-Looking
Statements, you should carefully consider the following
risks before deciding whether to vote for the proposal to
approve the issuance of shares of Holly common stock to Frontier
shareholders in connection with the merger and the proposal to
approve and adopt Hollys amended and restated certificate
of incorporation, in the case of Holly stockholders, or for the
proposal to approve the merger agreement, in the case of
Frontier shareholders. In addition, you should read and consider
the risks associated with each of the businesses of Holly and
Frontier because these risks will also affect the combined
company following the merger. These risks can be found in the
Annual Reports on
Form 10-K
for the fiscal year ended December 31, 2010 for each of
Holly and Frontier, as such risks may be updated or supplemented
in each companys subsequently filed Quarterly Reports on
Form 10-Q
or Current Reports on
Form 8-K,
to the extent incorporated by reference into this joint proxy
statement/prospectus. You should also read and consider the
other information in this joint proxy statement/prospectus and
the other documents incorporated by reference into this joint
proxy statement/prospectus. See the section entitled Where
You Can Find More Information beginning on
page 133.
Risk
Factors Relating to the Merger
The
exchange ratio is fixed and will not be adjusted in the event of
any change in either Hollys or Frontiers stock
price.
Upon closing of the merger, each share of Frontier common stock
will be converted into the right to receive 0.4811 shares
of Holly common stock. This exchange ratio will not be adjusted
for changes in the market price of either Holly common stock or
Frontier common stock between the date of signing the merger
agreement and completion of the merger. Changes in the price of
Holly common stock prior to the merger will affect the value of
Holly common stock that Frontier common shareholders will
receive on the date of the merger. The exchange ratio will be
adjusted appropriately to fully reflect the effect of any
reorganization, reclassification, recapitalization, stock split,
split-up,
stock dividend or stock distribution (including any dividend or
distribution of securities convertible into Holly common stock
or Frontier common stock), combination or exchange of shares
with respect to, or rights issued in respect of, Holly common
stock or Frontier common stock between the date of signing the
merger agreement and completion of the merger.
The prices of Holly common stock and Frontier common stock at
the closing of the merger may vary from their prices on the date
the merger agreement was executed, on the date of this joint
proxy statement/prospectus and on the date of each stockholders
meeting. As a result, the value represented by the exchange
ratio will also vary. For example, based on the range of closing
prices of Holly common stock during the period from
February 18, 2011, the last trading day before public
announcement of the merger, through
May [ ], 2011, the latest practicable
trading date before the date of this joint proxy
statement/prospectus, the exchange ratio represented a value
ranging from a high of $[ ] to a low of
$[ ] for each share of Frontier common stock.
In addition, the merger might not be completed until a
significant period of time has passed after the respective
special stockholder meetings. Because the exchange ratio will
not be adjusted to reflect any changes in the market value of
Holly common stock or Frontier common stock, the market value of
the Holly common stock issued in connection with the merger and
the Frontier common stock surrendered in connection with the
merger may be higher or lower than the values of those shares on
earlier dates. Stock price changes may result from, among other
things, changes in the business, operations or prospects of
Holly or Frontier prior to or following the merger, litigation
or regulatory considerations, general business, market, industry
or economic conditions and other factors both within and beyond
the control of Holly and Frontier. Neither Holly nor Frontier is
permitted to terminate the merger agreement solely because of
changes in the market price of either companys common
stock.
Current
Holly and Frontier stockholders will have a reduced ownership
and voting interest in the combined company after the
merger.
Based on the estimated number of shares of Frontier common stock
and Frontier equity awards that will be outstanding immediately
prior to the closing of the merger, we estimate that Holly will
issue or reserve for issuance
18
approximately 51,608,956 million shares of Holly common
stock to Frontier shareholders in the merger (including shares
of Holly common stock to be issued in connection with
outstanding Frontier equity awards). As a result of these
issuances, current Holly and Frontier stockholders are expected
to hold approximately 51% and 49%, respectively, of the combined
companys outstanding common stock immediately following
completion of the merger.
Holly and Frontier stockholders currently have the right to vote
for their respective directors and on other matters affecting
the applicable company. When the merger occurs, each Frontier
shareholder that receives shares of Holly common stock will
become a stockholder of Holly (proposed to be renamed
HollyFrontier Corporation) with a percentage ownership of the
combined company that will be smaller than the
shareholders percentage ownership of Frontier.
Correspondingly, each Holly stockholder will remain a
stockholder of Holly (proposed to be renamed HollyFrontier
Corporation) with a percentage ownership of the combined company
that will be smaller than the stockholders percentage of
Holly prior to the merger. As a result of these reduced
ownership percentages, Holly stockholders will have less voting
power in the combined company than they now have with respect to
Holly, and Frontier shareholders will have less voting power in
the combined company than they now have with respect to Frontier.
The
merger is subject to the receipt of consents and clearances from
regulatory authorities that may impose conditions that could
have an adverse effect on Holly, Frontier or the combined
company or, if not obtained, could prevent completion of the
merger.
Before the merger may be completed, applicable waiting periods
must expire or terminate under antitrust and competition laws.
In deciding whether to grant antitrust or regulatory clearances,
the relevant governmental entities will consider the effect of
the merger on competition within their relevant jurisdiction.
The terms and conditions of the approvals that are granted may
impose requirements, limitations or costs or place restrictions
on the conduct of the combined companys business. The
merger agreement may require Holly
and/or
Frontier to comply with conditions imposed by regulatory
entities and, in certain circumstances, either company may
refuse to close the merger on the basis of those regulatory
conditions. There can be no assurance that regulators will not
impose conditions, terms, obligations or restrictions and that
such conditions, terms, obligations or restrictions will not
have the effect of delaying completion of the merger or imposing
additional material costs on or materially limiting the revenues
of the combined company following the merger. In addition,
neither Holly nor Frontier can provide assurance that any such
conditions, terms, obligations or restrictions will not result
in the delay or abandonment of the merger. For a more detailed
description of the regulatory review process, see the section
entitled The Merger Regulatory Clearances
Required for the Merger beginning on page 87.
Uncertainties
associated with the merger may cause a loss of management
personnel and other key employees, which could adversely affect
the future business and operations of the combined
company.
Holly and Frontier are dependent on the experience and industry
knowledge of their officers and other key employees to execute
their business plans. The combined companys success after
the merger will depend in part upon the ability of Holly and
Frontier to retain key management personnel and other key
employees. Current and prospective employees of Holly and
Frontier may experience uncertainty about their roles within the
combined company following the merger, which may have an adverse
effect on the ability of each of Holly and Frontier to attract
or retain key management and other key personnel. Accordingly,
no assurance can be given that the combined company will be able
to attract or retain key management personnel and other key
employees of Holly and Frontier to the same extent that Holly
and Frontier have previously been able to attract or retain
their own employees.
Holly
and Frontier may be unable to obtain in the anticipated
timeframe, or at all, an acceptable credit facility in an amount
sufficient to fund the combined business after the
merger.
Completion of the merger is contingent upon, among other things,
the combined company being able to enter into a credit facility,
on the terms as set forth in the merger agreement and the
schedules thereto, to be effective immediately following
consummation of the merger. Holly and Frontier can provide no
assurance that acceptable debt financing will be obtained on
reasonable terms or at all or that the financing will not
contain terms, conditions
19
or restrictions that would be detrimental to the combined
company after completion of the merger. Obtaining the financing
is dependent on numerous factors, including market conditions,
credit availability from financial institutions and both
companies financial performance. See The
Merger Credit Agreements beginning on
page 89.
Satisfying
the conditions to, and completion of, the merger may take longer
than, and could cost more than, Holly and Frontier expect. Any
delay in completing or any additional conditions imposed in
order to complete the merger may materially and adversely affect
the synergies and other benefits that Holly and Frontier expect
to achieve from the merger and the integration of their
respective businesses.
In addition to the required regulatory clearances, the merger is
subject to a number of other conditions beyond Hollys and
Frontiers control that may prevent, delay or otherwise
materially adversely affect its completion. We cannot predict
whether and when these other conditions will be satisfied.
Furthermore, the requirements for obtaining the required
clearances and approvals could delay the completion of the
merger for a significant period of time or prevent it from
occurring. Any delay in completing the merger could cause the
combined company not to realize some or all of the synergies
that we expect to achieve if the merger is successfully
completed within its expected time frame. See The Merger
Agreement Conditions to Completion of the
Merger beginning on page 103.
Failure
to complete the merger could negatively impact the future
business and financial results of Holly and
Frontier.
Neither Holly nor Frontier can make any assurances that it will
be able to satisfy all of the conditions to the merger or
succeed in any litigation brought in connection with the merger.
If the merger is not completed, the financial results of Holly
and/or
Frontier may be adversely affected and Holly
and/or
Frontier will be subject to several risks, including but not
limited to:
|
|
|
|
|
being required to pay a termination fee of $80 million
under certain circumstances provided in the merger agreement;
|
|
|
|
payment of costs relating to the merger, such as legal,
accounting, financial advisor and printing fees, whether or not
the merger is completed;
|
|
|
|
having had the focus of each companys management on the
merger instead of on pursuing other opportunities that could
have been beneficial to each company; and
|
|
|
|
|
|
being subject to litigation related to any failure to complete
the merger. See The Merger Litigation Relating
to the Merger on page 91.
|
If the merger is not completed, Frontier and Holly cannot assure
their stockholders that these risks will not materialize and
will not materially and adversely affect the business, financial
results and stock prices of Frontier or Holly.
Several
lawsuits have been filed against Holly and Frontier challenging
the merger, and an adverse ruling may prevent the merger from
being completed.
Frontier and the members of Frontiers board of directors
were named as defendants, and in some cases Holly and Merger Sub
were named as aiders and abetters, in several lawsuits brought
by Frontier shareholders challenging the proposed merger and
seeking, among other things, injunctive relief to enjoin the
defendants from completing the merger on the
agreed-upon
terms, compensatory damages, and costs and disbursements
relating to the lawsuits. To date, such shareholder actions have
been filed in Harris County, Texas, Laramie County, Wyoming, the
U.S. District Court for the Northern District of Texas and
the U.S. District Court for the Southern District of Texas.
On March 25, 2011, the lawsuits pending in the District
Courts of Harris County, Texas were consolidated, and interim
class counsel was appointed on April 12, 2011.
One of the conditions to the closing of the merger is that no
decree, order or injunction shall be in effect that prevents
completion of the merger. Consequently, if a settlement or other
resolution is not reached in the lawsuits
20
referenced above and the plaintiffs secure injunctive or other
relief prohibiting, delaying or otherwise adversely affecting
the defendants ability to complete the merger, then such
injunctive or other relief may prevent the merger from becoming
effective within the expected timeframe or at all. See The
Merger Litigation Related to the Merger
beginning on page 91.
If the
merger does not qualify as a reorganization under
Section 368(a) of the Code, the shareholders of Frontier
may be required to pay substantial U.S. federal income
taxes.
As a condition to the completion of the merger, each of
Vinson & Elkins L.L.P, tax counsel to Holly, and
Andrews Kurth LLP, tax counsel to Frontier, will have delivered
the tax opinion described in the section titled The Merger
Agreement Conditions to Completion of the
Merger, dated as of the closing date of the merger,
including an opinion that the merger will be treated for
U.S. federal income tax purposes as a
reorganization within the meaning of
Section 368(a) of the Code. These opinions will be based on
certain assumptions and representations as to factual matters
from Holly and Frontier, as well as certain covenants and
undertakings by Holly and Frontier. If any of the assumptions,
representations, covenants or undertakings is incorrect,
incomplete, inaccurate or is violated in any material respect,
the validity of the conclusions reached by counsel in their
opinions would be jeopardized. In addition, an opinion of
counsel represents counsels best legal judgment but is not
binding on the IRS or any court, so there can be no certainty
that the IRS will not challenge the conclusions reflected in the
opinions or that a court will not sustain such a challenge. If
the IRS or a court determines that the merger should not be
treated as a reorganization, a holder of Frontier
common stock would recognize taxable gain or loss upon the
exchange of Frontier common stock for Holly common stock
pursuant to the merger. See Material U.S. Federal
Income Tax Consequences beginning on page 108.
The
merger agreement contains provisions that could discourage a
potential competing acquiror of either Holly or
Frontier.
The merger agreement contains no shop provisions
that, subject to limited exceptions, restrict each of
Hollys and Frontiers ability to solicit, initiate,
or knowingly induce, encourage or facilitate competing
third-party proposals for the acquisition of their
companys stock or assets. In addition, the other party
generally has an opportunity to offer to modify the terms of the
merger in response to any competing acquisition proposals before
the board of directors of the company that has received a
third-party proposal may withdraw or qualify its recommendation
with respect to the merger. In some circumstances, upon
termination of the merger agreement, one of the parties will be
required to pay a termination fee of $80 million to the
other party. See The Merger Agreement No
Solicitation of Alternative Proposals beginning on
page 97, The Merger Agreement Termination
of the Merger Agreement beginning on page 104 and
The Merger Agreement Expenses and Termination
Fees; Liability for Breach beginning on page 105.
These provisions could discourage a potential third-party
acquiror that might have an interest in acquiring all or a
significant portion of Holly or Frontier from considering or
proposing that acquisition, even if it were prepared to pay
consideration with a higher per share cash or market value than
the market value proposed to be received or realized in the
merger or might result in a potential third-party acquiror
proposing to pay a lower price to the stockholders than it might
otherwise have proposed to pay because of the added expense of
the $80 million termination fee that may become payable in
certain circumstances.
If the merger agreement is terminated and either Holly or
Frontier determines to seek another business combination, it may
not be able to negotiate a transaction with another party on
terms comparable to, or better than, the terms of the merger.
Hollys
and Frontiers executive officers and directors have
interests in the merger that may be different from, or in
addition to, the interests of Holly and Frontier stockholders
generally.
Hollys and Frontiers executive officers and
directors have interests in the merger that may be different
from, or in addition to, the interests of Holly and Frontier
stockholders generally. Hollys executive officers and
Frontiers executive officers negotiated the terms of the
merger agreement. The executive officers of Holly and Frontier
have arrangements with Holly or Frontier, as applicable, that
provide for severance benefits if their employment is
21
terminated under certain circumstances following the completion
of the merger. In addition, certain of Hollys and
Frontiers compensation and benefit plans and arrangements
provide for payment or accelerated vesting or distribution of
certain rights or benefits upon completion of the merger.
Executive officers and directors of Frontier also have rights to
indemnification and directors and officers liability
insurance that will survive completion of the merger.
Upon completion of the merger, Mr. Clifton will serve as
Executive Chairman of the board of directors of the combined
company, Mr. Jennings will serve as the President and Chief
Executive Officer of the combined company, and Mr. Aron
will serve as the Executive Vice President and Chief Financial
Officer of the combined company. Immediately following the
effective time of the merger, the board of directors of the
combined company will consist of fourteen members, including the
current seven directors of Holly and the current seven directors
of Frontier.
The Holly and Frontier boards of directors were aware of these
interests at the time each approved the merger and the
transactions contemplated by the merger agreement. These
interests may cause Hollys and Frontiers directors
and executive officers to view the merger proposal differently
and more favorably than you may view it. See The
Merger Interests of Holly Directors and Executive
Officers in the Merger and The Merger
Interests of Frontier Directors and Executive Officers in the
Merger beginning on pages 78 and 82, respectively,
for more information.
Risk
Factors Relating to the Combined Company Following the
Merger
The
failure to integrate successfully the businesses of Holly and
Frontier in the expected time frame would adversely affect the
combined companys future results following the
merger.
The merger involves the integration of two companies that have
previously operated independently. The success of the merger
will depend, in large part, on the ability of the combined
company following the merger to realize the anticipated
benefits, including synergies, cost savings, innovation and
operational efficiencies, from combining the businesses of Holly
and Frontier. To realize these anticipated benefits, the
businesses of Holly and Frontier must be successfully
integrated. This integration will be complex and time-consuming.
The failure to integrate successfully and to manage successfully
the challenges presented by the integration process may result
in the combined company not achieving the anticipated benefits
of the merger.
Potential difficulties that may be encountered in the
integration process include the following:
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the inability to successfully integrate the businesses of Holly
and Frontier in a manner that permits the combined company to
achieve the full revenue and cost savings anticipated to result
from the merger;
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complexities associated with managing the larger, more complex,
combined business;
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integrating personnel from the two companies while maintaining
focus on providing consistent, high-quality products;
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potential unknown liabilities and unforeseen expenses, delays or
regulatory conditions associated with the merger;
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performance shortfalls at one or both of the companies as a
result of the diversion of managements attention caused by
completing the merger and integrating the companies
operations; and
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the disruption of, or the loss of momentum in, each
companys ongoing business or inconsistencies in standards,
controls, procedures and policies.
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In addition, in connection with planning the integration of the
businesses of Holly and Frontier after completing the merger,
the management teams of Frontier and Holly have been evaluating
and expect to continue evaluating an internal restructuring of
certain Holly and Frontier legal entities after completing the
merger, which may include an internal merger of Frontier into
HollyFrontier Corporation. Although the internal restructuring
is not required to complete the merger, the management of each
of Holly and Frontier currently believes that implementing the
internal restructuring as soon as possible following completion
of the merger could better facilitate a successful integration
of Holly and Frontier. Such internal restructuring would be
subject to the continuing evaluation of such restructuring and
the approval of the board of directors of HollyFrontier
Corporation
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following the merger. In order to facilitate the internal
restructuring, among other matters, Frontier has commenced
consent solicitations to amend the indentures governing
Frontiers senior notes, as described under The
Merger Treatment of Other Debt. The consent of
holders representing not less than a majority of the outstanding
aggregate principal amount of each series of the Frontier senior
notes is required to approve the proposed amendments. If the
requisite consents in the consent solicitations are not
obtained, the combined company may be unable to consummate some
or all of the internal restructuring while the Frontier senior
notes remain outstanding, in which case the combined company may
pursue an alternative structure, may effect some but not all of
the internal restructuring or may not undergo an internal
restructuring.
Any of these difficulties in successfully integrating the
businesses of Holly and Frontier, or any delays in the
integration process, could adversely affect the combined
companys ability to achieve the anticipated benefits of
the merger and could adversely affect the combined
companys business, financial results, financial condition
and stock price. Even if the combined company is able to
integrate the business operations of Holly and Frontier
successfully, there can be no assurance that this integration
will result in the realization of the full benefits of
synergies, cost savings, innovation and operational efficiencies
that Holly and Frontier currently expect from this integration
or that these benefits will be achieved within the anticipated
time frame.
The
future results of the combined company will suffer if the
combined company does not effectively manage its expanded
operations following the merger.
Following the merger, the size of the business of the combined
company will increase significantly beyond the current size of
either Hollys or Frontiers business. The combined
companys future success depends, in part, upon its ability
to manage this expanded business, which will pose substantial
challenges for management, including challenges related to the
management and monitoring of new operations and associated
increased costs and complexity. There can be no assurances that
the combined company will be successful or that it will realize
the expected operating efficiencies, cost savings, revenue
enhancements and other benefits currently anticipated from the
merger.
The
combined company is expected to incur substantial expenses
related to the merger and the integration of Holly and
Frontier.
The combined company is expected to incur substantial expenses
in connection with the merger and the integration of Holly and
Frontier. There are a large number of processes, policies,
procedures, operations, technologies and systems that must be
integrated, including purchasing, accounting and finance, sales,
billing, payroll, pricing, revenue management, maintenance,
marketing and benefits. While Holly and Frontier have assumed
that a certain level of expenses would be incurred, there are
many factors beyond their control that could affect the total
amount or the timing of the integration expenses. Moreover, many
of the expenses that will be incurred are, by their nature,
difficult to estimate accurately. These expenses could,
particularly in the near term, exceed the savings that the
combined company expects to achieve from the elimination of
duplicative expenses and the realization of economies of scale
and cost savings. These integration expenses likely will result
in the combined company taking significant charges against
earnings following the completion of the merger, and the amount
and timing of such charges are uncertain at present.
Uncertainty
about the merger and diversion of management could harm the
combined company following the merger.
The merger could result in current and prospective employees
experiencing uncertainty about their future with the combined
company following the merger. These uncertainties may impair the
ability of the combined company to retain, recruit or motivate
key personnel. In addition, completion of the merger and
integrating the companies operations will require a
significant amount of time and attention from management of the
two companies. The diversion of managements attention away
from ongoing operations could adversely affect business
relationships of the combined company following the merger.
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Covenants
in the debt agreements of Holly and Frontier contain, and any
future financing agreements of the combined company may contain,
operating and financial restrictions that might constrain the
business and financing activities of the combined company
following the merger.
The operating and financial restrictions and covenants in
Hollys and Frontiers debt agreements, including
Hollys and Frontiers senior notes, and any future
financing agreements of the combined company following the
merger, including the new revolving credit facility to be
entered into simultaneously with the closing of the merger,
could adversely affect the combined companys ability to
finance future operations or capital needs or to engage, expand
or pursue its business activities. The terms of the new
revolving credit facility (including with respect to interest
rates, collateral, restrictive covenants, events of default,
guarantees and prepayment provisions) will be negotiated and are
not currently known. Depending upon the terms of the new credit
facility, if the combined company fails to satisfy the covenants
set forth in the new credit facility or another event of default
occurs under the facility, the maturity of the loans outstanding
thereunder could be accelerated or the combined company could be
prohibited from borrowing for its future working capital needs
and issuing letters of credit. The combined company might not
have, or be able to obtain, sufficient funds to make these
immediate payments. Should the combined company desire to
undertake a transaction that is prohibited by the covenants in
its new credit facility, senior notes or other debt agreements,
the combined company will need to obtain consent under such debt
agreements or refinance them. Such refinancing may not be
possible or may not be available on commercially acceptable
terms. In addition, although the terms of the new revolving
credit facility will be negotiated and are not currently known,
the combined companys obligations under the new credit
facility are anticipated to be secured by certain assets of the
combined company. If the combined company is unable to repay its
indebtedness under the new credit facility when due, the lenders
could seek to foreclose on such assets. Any of these outcomes
could have a material adverse effect on the business, financial
condition and results of operations of the combined company.
The
application of the acquisition method of accounting may result
in the combined company following the merger recording a
material amount of goodwill, which could result in material
future impairment charges and negatively affect the combined
companys financial results.
As discussed further under Accounting Treatment,
applicable acquisition accounting rules require that, to the
extent the purchase price exceeds the net fair value of
Frontiers tangible and intangible assets and liabilities,
the combined company would record such excess as goodwill on its
consolidated balance sheet. Goodwill is not amortized, but is
tested for impairment at least annually. Impairment charges
could be recorded in the combined companys results of
operations as a result of, among other items, a significant
decline in the fair value of certain tangible or intangible
assets, unfavorable trends in forecasted results of operations
and cash flows and the uncertain economic environment, as well
as other uncertainties. There can be no assurance that a
material impairment charge will not occur in one or more future
periods. Any such charges may materially and negatively affect
the combined companys financial results.
The
combined companys ability to use Frontiers state net
operating loss carryforwards and state tax credits to offset
future taxable income for certain state income tax purposes may
be limited as a result of the merger, or if taxable income does
not reach sufficient levels.
As of December 31, 2010, Frontier had estimated remaining
state NOLs of approximately $143.1 million in Kansas (of
which $23.5 million expires after 2018 and the remainder
after 2019), $47.1 million in Colorado (of which
$6.8 million expires after 2028 and the remainder after
2029) and $11.1 million in Nebraska (of which
$2.1 million expires after 2013 and the remainder after
2014), each of which is anticipated to be carried forward to
reduce income taxes payable in future years. The state of
Colorado has placed a limit on the amount of NOLs that can be
utilized in each of the years 2011, 2012 and 2013 to $250,000.
As of December 31, 2010, Frontier had approximately
$30.9 million of Kansas income tax credits available to be
taken over the years 2011 through 2019.
The combined companys ability to utilize the Frontier NOLs
and tax credits may be further limited if Frontier undergoes an
ownership change, as defined in Section 382 of
the Code and as such term is used in Section 383 of the
Code (each of Kansas, Colorado and Nebraska state laws
incorporate the Section 382 limitations, relating to
limitations of NOLs, and Kansas state law incorporates the
Section 383 limitations relating to limitations of tax
credits). An ownership change could be triggered by substantial
changes in the ownership of the outstanding stock
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of Frontier. An ownership change would occur if certain
shareholders increase their aggregate percentage ownership of
Frontier stock by more than 50 percentage points over their
lowest percentage ownership at any time during the testing
period, which is generally the three-year period preceding any
potential ownership change. The merger is currently expected to
result in an ownership change of Frontier for purposes of
Section 382 and Section 383 of the Code.
Section 382 of the Code imposes an annual limitation on the
amount of post-ownership change taxable income that may be
offset with pre-ownership change NOLs of the corporation that
experiences an ownership change. The limitation imposed by
Section 382 of the Code for any post-ownership change year
generally would be determined by multiplying the value of such
corporations stock immediately before the ownership change
by the applicable long-term tax-exempt rate. Any unused annual
limitation may, subject to certain limits, be carried over to
later years, and the limitation may under certain circumstances
be increased by built-in gains or reduced by built-in losses in
the assets held by such corporation at the time of the ownership
change. The combined companys use of NOLs arising after
the date of an ownership change would not be limited unless the
combined company were to experience a subsequent ownership
change.
Section 383 of the Code generally limits certain tax
credits to an amount determined on the basis of the tax
liability that is attributable to the portion of taxable income
that does not exceed, generally, the Section 382 limitation.
The combined companys ability to use the NOLs will also
depend on the amount of taxable income generated in future
periods. As discussed above, the NOLs may expire before the
combined company can generate sufficient taxable income to
utilize the NOLs.
Other
Risk Factors Relating to Holly and Frontier
Hollys and Frontiers businesses are and will be
subject to the risks described above. In addition, Holly and
Frontier are, and will continue to be, subject to the risks
described in Hollys and Frontiers Annual Reports on
Form 10-K
for the fiscal year ended December 31, 2010, as such risks
may be updated or supplemented in each companys
subsequently filed Quarterly Reports on
Form 10-Q
or Current Reports on
Form 8-K,
to the extent incorporated by reference into this joint proxy
statement/prospectus. See Where You Can Find More
Information beginning on page 133.
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THE
COMPANIES
Holly
Corporation
Holly Corporation, a Delaware corporation, together with its
subsidiaries, is an independent petroleum refiner in the United
States that produces high value light products such as gasoline,
diesel fuel, jet fuel, specialty lubricant products, and
specialty and modified asphalt. Holly owns and operates through
its subsidiaries a 100,000 bpsd refinery located in
Artesia, New Mexico, a 125,000 bpsd refinery in Tulsa,
Oklahoma and a 31,000 bpsd refinery in Woods Cross, Utah.
Holly also owns and operates an asphalt company, which
manufactures and markets asphalt products from various terminals
in Arizona, New Mexico and Texas. In addition, Holly owns a 75%
interest in a
12-inch
refined products pipeline project from Salt Lake City, Utah to
Las Vegas, Nevada, together with terminal facilities in the
Cedar City, Utah, and North Las Vegas areas. Furthermore, a
subsidiary of Holly owns a 34% interest (including the general
partner interest) in HEP, which owns and operates logistical
assets, including approximately 2,500 miles of petroleum
product and crude oil pipelines located principally in west
Texas and New Mexico; ten refined product terminals; a jet
fuel terminal; eight refinery loading rack facilities; a refined
products tank farm facility;
on-site
crude oil tankage at Hollys refineries;
on-site
refined product tankage at Hollys Tulsa refinery, and a
25% interest in a
95-mile
crude oil pipeline joint venture. Holly offers its products
primarily in the Southwestern, Rocky Mountain, and Mid-Continent
regions of the United States. Holly was founded in 1947 and is
based in Dallas, Texas.
Hollys common stock is traded on the NYSE under the symbol
HOC.
The principal executive offices of Holly are located at 100
Crescent Court, Suite 1600, Dallas,
Texas 75201-6915,
and Hollys telephone number is
(214) 871-3555.
Additional information about Holly and its subsidiaries is
included in documents incorporated by reference into this joint
proxy statement/prospectus. See Where You Can Find More
Information on page 133.
Frontier
Oil Corporation
Frontier Oil Corporation, a Wyoming corporation, together with
its subsidiaries, engages in crude oil refining and the
wholesale marketing of refined petroleum products. Frontier
operates refineries in Cheyenne, Wyoming and El Dorado, Kansas
with a total annual average crude oil capacity of approximately
187,000 barrels per day. The Cheyenne refinery markets its
refined products primarily in the eastern slope of the Rocky
Mountain region, which encompasses eastern Colorado (including
the Denver metropolitan area), eastern Wyoming and western
Nebraska. The El Dorado refinery markets its products in
Colorado, Wyoming, Nebraska, Montana, Utah, Kansas, Oklahoma,
Iowa, Missouri, North Dakota and South Dakota. The company was
formerly known as Wainoco Oil Corporation and changed its name
to Frontier Oil Corporation in April 1998. Frontier Oil
Corporation was founded in 1949 and is headquartered in Houston,
Texas.
Frontiers common stock is traded on the New York Stock
Exchange under the symbol FTO.
The principal executive offices of Frontier are located at 10000
Memorial Drive, Suite 600, Houston, Texas 77024, and
Frontiers telephone number is
(713) 688-9600.
Additional information about Frontier and its subsidiaries is
included in documents incorporated by reference into this joint
proxy statement/prospectus. See Where You Can Find More
Information on page 133.
North
Acquisition, Inc.
North Acquisition, Inc., a wholly owned subsidiary of Holly
Corporation, is a Wyoming corporation that was formed on
February 17, 2011 for the sole purpose of effecting the
merger. In the merger, North Acquisition, Inc. will be merged
with and into Frontier, with Frontier surviving as a wholly
owned subsidiary of Holly.
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THE HOLLY
SPECIAL MEETING
This joint proxy statement/prospectus is being provided to
the Holly stockholders as part of a solicitation of proxies by
the Holly board of directors for use at the Holly special
meeting to be held at the time and place specified below and at
any properly convened meeting following an adjournment or
postponement thereof. This joint proxy statement/prospectus
provides Holly stockholders with information they need to know
to be able to vote or instruct their vote to be cast at the
Holly special meeting.
Date,
Time and Place
The special meeting of Holly stockholders will be held at the
offices of Vinson & Elkins LLP, 2001 Ross Avenue,
39th Floor, Dallas, Texas 75201, on June 28, 2011, at
3:00 p.m., local time.
Purpose
of the Holly Special Meeting
At the Holly special meeting, Holly stockholders will be asked
to consider and vote on the following:
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a proposal to approve the issuance of shares of Holly common
stock to Frontier shareholders in connection with the merger;
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a proposal to approve and adopt Hollys amended and
restated certificate of incorporation to, among other things,
(i) increase the number of authorized shares of Holly
capital stock from 161 million to 325 million shares
and (ii) change the name of Holly to HollyFrontier
Corporation; and
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a proposal to approve the adjournment of the Holly special
meeting to a later date or dates, if necessary or appropriate,
to solicit additional proxies in the event there are not
sufficient votes at the time of the special meeting to approve
the first proposal listed above.
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Completion of the merger is conditioned on approval of the
issuance of shares of Holly common stock to Frontier
shareholders in connection with the merger, but it is not
conditioned on approval and adoption of Hollys amended and
restated certificate of incorporation.
Recommendation
of the Holly Board of Directors
At a special meeting held on February 21, 2011, the Holly
board of directors determined that the merger and the other
transactions contemplated by the merger agreement, including the
issuance of shares of Holly common stock to Frontier
shareholders in connection with the merger and the approval and
adoption of Hollys amended and restated certificate of
incorporation, are in the best interests of Holly and its
stockholders. Accordingly, the Holly board of directors
unanimously recommends that Holly stockholders vote
FOR the proposal to approve the issuance of shares
of Holly common stock to Frontier shareholders in connection
with the merger, FOR the proposal to approve and
adopt Hollys amended and restated certificate of
incorporation and FOR the proposal to approve the
adjournment of the Holly special meeting, if necessary or
appropriate, to permit further solicitation of proxies.
Holly stockholders should carefully read this joint proxy
statement/prospectus, including any documents incorporated by
reference, and the Annexes in their entirety for more detailed
information concerning the merger and the transactions
contemplated by the merger agreement.
Holly
Record Date; Stockholders Entitled to Vote
The record date for the Holly special meeting is May 20,
2011. Only record holders of shares of Holly common stock at the
close of business on such date are entitled to notice of, and to
vote at, the Holly special meeting or any adjournment or
postponement thereof. At the close of business on the record
date, the only outstanding voting securities of Holly were
common stock, and [ ] shares of Holly
common stock were issued and outstanding. A list of the Holly
stockholders of record who are entitled to vote at the Holly
special meeting will be available for inspection by any Holly
stockholder for any purpose germane to the special meeting
during ordinary business hours for the ten days preceding the
Holly special meeting at Hollys executive offices at 100
Crescent Court, Suite 1600,
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Dallas, Texas 75201 and will also be available at the Holly
special meeting for examination by any stockholder present at
such meeting.
Each share of Holly common stock outstanding on the record date
of the Holly special meeting is entitled to one vote on each
proposal and any other matter coming before the Holly special
meeting.
Voting by
Hollys Directors and Executive Officers
At the close of business on the record date of the Holly special
meeting, Holly directors and executive officers and their
affiliates were entitled to
vote [ ] shares of Holly common stock
or approximately [ ]% of the shares of Holly
common stock outstanding on that date. We currently expect that
Holly directors and executive officers and their affiliates will
vote their shares in favor of all Holly proposals, but none of
them has entered into any agreement obligating him or her to do
so.
Quorum
No business may be transacted at the Holly special meeting
unless a quorum is present. Stockholders who hold shares
representing at least a majority of the shares entitled to vote
at the Holly special meeting must be present in person or
represented by proxy to constitute a quorum. If a quorum is not
present, or if fewer shares are voted in favor of the proposal
to approve the issuance of shares of Holly common stock to
Frontier shareholders in connection with the merger than is
required, to allow additional time for obtaining additional
proxies, the special meeting may be adjourned if the approval of
a majority of the votes cast at the special meeting is obtained.
No notice of an adjourned meeting need be given unless the
adjournment is for more than 30 days or, if after the
adjournment, a new record date is fixed for the adjourned
meeting, in which case a notice of the adjourned meeting shall
be given to each stockholder of record entitled to vote at the
meeting. At any adjourned meeting, all proxies will be voted in
the same manner as they would have been voted at the original
convening of the special meeting, except for any proxies that
have been effectively revoked or withdrawn prior to the
adjourned meeting.
All shares of Holly common stock represented at the Holly
special meeting, including shares that are represented but that
vote to abstain, will be treated as present for purposes of
determining the presence or absence of a quorum. Broker
non-votes will have no effect on determining the presence or
absence of a quorum.
Required
Vote
The required votes to approve the Holly proposals are as follows:
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The issuance of shares of Holly common stock to Frontier
shareholders in connection with the merger requires the approval
of a majority of the votes cast at the Holly special meeting,
assuming a quorum. Failures to vote, broker non-votes and
abstentions will have no effect on the vote for the proposal.
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The approval and adoption of Hollys amended and restated
certificate of incorporation to, among other things, increase
the number of authorized shares of Holly capital stock requires
the approval of a majority of the outstanding shares of Holly
common stock entitled to vote at the Holly special meeting.
Failures to vote, broker non-votes and abstentions will have the
same effect as a vote against the proposal.
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The adjournment of the Holly special meeting, if necessary or
appropriate, to solicit additional proxies requires the approval
of a majority of the votes cast at the Holly special meeting,
regardless of whether there is a quorum. Failures to vote,
broker non-votes and abstentions will have no effect on the vote
for the proposal.
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Voting of
Proxies by Holders of Record
If you were a record holder of Holly stock at the close of
business on the record date of the Holly special meeting, a
proxy card is enclosed for your use. Holly requests that you
vote your shares as promptly as possible by (i) accessing
the internet site listed on the Holly proxy card,
(ii) calling the toll-free number listed on the Holly proxy
card or (iii) submitting your Holly proxy card by mail by
using the provided self-addressed, stamped envelope. Information
and applicable deadlines for voting through the internet or by
telephone are set forth on the
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enclosed proxy card. When the accompanying proxy is returned
properly executed, the shares of Holly common stock represented
by it will be voted at the Holly special meeting or any
adjournment or postponement thereof in accordance with the
instructions contained in the proxy card. Your internet or
telephone vote authorizes the named proxies to vote your shares
in the same manner as if you had marked, signed and returned a
proxy card.
If a proxy is returned without an indication as to how the
shares of Holly common stock represented are to be voted with
regard to a particular proposal, the Holly common stock
represented by the proxy will be voted in accordance with the
recommendation of the Holly board of directors and, therefore,
FOR the proposal to approve the issuance of shares
of Holly common stock to Frontier shareholders in connection
with the merger, FOR the proposal to approve and
adopt Hollys amended and restated certificate of
incorporation and FOR the proposal to adjourn the
Holly special meeting, if necessary or appropriate, to permit
further solicitation of proxies.
At the date hereof, the Holly board of directors has no
knowledge of any business that will be presented for
consideration at the Holly special meeting and that would be
required to be set forth in this joint proxy
statement/prospectus or the related proxy card other than the
matters set forth in Hollys Notice of Special Meeting of
Stockholders. If any other matter is properly presented at the
Holly special meeting for consideration, it is intended that the
persons named in the enclosed form of proxy and acting
thereunder will vote in accordance with their best judgment on
such matter.
Your vote is important. Accordingly, if you were a record
holder of Holly common stock on the record date of the Holly
special meeting, please sign and return the enclosed proxy card
or vote via the internet or telephone whether or not you plan to
attend the Holly special meeting in person. Proxies submitted
through the specified internet website or by phone must be
received by 11:59 p.m., eastern time, on June 27,
2011.
Shares Held
in Street Name
If you hold shares of Holly common stock through a stock
brokerage account or a bank or other nominee, you are considered
the beneficial holder of the shares held for you in
what is known as street name. The record
holder of such shares is your broker, bank or other
nominee, and not you, and you must provide the record holder of
your shares with instructions on how to vote your shares. Please
follow the voting instructions provided by your broker, bank or
other nominee. Please note that you may not vote shares held in
street name by returning a proxy card directly to Holly or by
voting in person at the Holly special meeting unless you have a
legal proxy, which you must obtain from your broker,
bank or other nominee. Furthermore, brokers, banks or other
nominees who hold shares of Holly common stock on behalf of
their customers may not give a proxy to Holly to vote those
shares without specific instructions from their customers.
If you are a Holly stockholder and you do not instruct your
broker, bank or other nominee on how to vote your shares, your
broker, bank or other nominee may not vote your shares on any of
the Holly proposals.
Voting in
Person
If you plan to attend the Holly special meeting and wish to vote
in person, you will be given a ballot at the special meeting. If
you are a registered stockholder, please be prepared to provide
proper identification, such as a drivers license, at the
Holly special meeting. If your shares are held in street
name, you must bring to the special meeting a proxy
executed in your favor from the record holder (your broker, bank
or other nominee) of the shares authorizing you to vote at the
special meeting.
Revocation
of Proxies
If you are the record holder of Holly common stock, you can
change your vote or revoke your proxy at any time before your
proxy is voted at the special meeting. You can do this by:
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timely delivering a signed written notice of revocation;
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timely delivering a new, valid proxy bearing a later date
(including by telephone or through the internet); or
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attending the Holly special meeting and voting in person, which
will automatically cancel any proxy previously given, or
revoking your proxy in person. Simply attending the Holly
special meeting without voting will not revoke any proxy that
you have previously given or change your vote.
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A registered stockholder may revoke a proxy by any of these
methods, regardless of the method used to deliver the
stockholders previous proxy.
Written notices of revocation and other communications with
respect to the revocation of proxies should be addressed as
follows:
Holly Corporation
100 Crescent Court, Suite 1600
Dallas, Texas 75201
Attention: Secretary
If your shares are held in street name through a
broker, bank or other nominee, you may change your vote by
submitting new voting instructions to your broker, bank or
nominee in accordance with its established procedures. If your
shares are held in the name of a broker, bank or other nominee
and you decide to change your vote by attending the special
meeting and voting in person, your vote in person at the special
meeting will not be effective unless you have obtained and
present an executed proxy issued in your name from the record
holder (your broker, bank or nominee).
Tabulation
of Votes
Holly has appointed Broadridge Financial Solutions, Inc.
(Broadridge) to serve as the Inspector of Election
for the Holly special meeting. Broadridge will independently
tabulate affirmative and negative votes and abstentions.
Solicitation
of Proxies
Holly is soliciting proxies for the Holly special meeting from
its stockholders. In accordance with the merger agreement, Holly
will pay its own cost of soliciting proxies, including the cost
of mailing this joint proxy statement/prospectus, from its
stockholders. In addition to solicitation of proxies by mail,
proxies may be solicited by Hollys officers, directors and
regular employees, without additional remuneration, by personal
interview, telephone or other means of communication.
Holly will make arrangements with brokerage houses, custodians,
nominees and fiduciaries to forward proxy solicitation materials
to beneficial owners of Holly common stock. Holly may reimburse
these brokerage houses, custodians, nominees and fiduciaries for
their reasonable expenses incurred in forwarding the proxy
materials.
To help assure the presence in person or by proxy of the largest
number of stockholders possible, we have engaged Georgeson,
Inc., a proxy solicitation firm (Georgeson), to
solicit proxies on Hollys behalf. We have agreed to pay
Georgeson a proxy solicitation fee not to exceed $12,500. We
will also reimburse Georgeson for its reasonable
out-of-pocket
costs and expenses.
Adjournments
Any adjournment of the Holly special meeting may be made from
time to time if the approval of the holders of a majority of the
votes cast at the Holly special meeting is obtained, whether or
not a quorum exists, without further notice other than by an
announcement made at the special meeting (unless the adjournment
is for more than 30 days or if a new record date is fixed).
If a quorum is not present at the special meeting, or if a
quorum is present at the special meeting but there are not
sufficient votes at the time of the special meeting to approve
the proposal to issue shares of Holly common stock in connection
with the merger, then Holly stockholders may be asked to vote on
a proposal to adjourn the Holly special meeting so as to permit
the further solicitation of proxies.
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THE
FRONTIER SPECIAL MEETING
This joint proxy statement/prospectus is being provided to
the Frontier shareholders as part of a solicitation of proxies
by the Frontier board of directors for use at the Frontier
special meeting to be held at the time and place specified below
and at any properly convened meeting following an adjournment or
postponement thereof. This joint proxy statement/prospectus
provides Frontier shareholders with information they need to
know to be able to vote or instruct their vote to be cast at the
Frontier special meeting.
Date,
Time and Place
The special meeting will be held at the offices of Andrews Kurth
LLP, 600 Travis, Suite 4200, Houston, Texas 77002, on
June 28, 2011, at 3:00 p.m., local time.
Purpose
of the Frontier Special Meeting
At the Frontier special meeting, Frontier shareholders will be
asked to consider and vote on the following:
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a proposal to approve the merger agreement, which is further
described in the sections titled The Merger and
The Merger Agreement, beginning on pages 35 and
93, respectively; and
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a proposal to approve the adjournment of the Frontier special
meeting to a later date or dates, if necessary or appropriate,
to solicit additional proxies in the event there are not
sufficient votes at the time of the special meeting to approve
the foregoing proposal.
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Recommendation
of the Board of Directors of Frontier
At a special meeting held on February 21, 2011, the
Frontier board of directors unanimously adopted the merger
agreement and the transactions contemplated thereby and
determined that the merger and the other transactions
contemplated thereby are in the best interests of Frontier and
its shareholders. Accordingly, the Frontier board of
directors unanimously recommends that Frontier shareholders vote
FOR the proposal to approve the merger agreement and
FOR the proposal to approve adjournment of the
Frontier special meeting, if necessary or appropriate, to permit
further solicitation of proxies.
Frontier shareholders should carefully read this joint proxy
statement/prospectus, including any documents incorporated by
reference, and the Annexes in their entirety for more detailed
information concerning the merger and the transactions
contemplated by the merger agreement.
Frontier
Record Date; Shareholders Entitled to Vote
The record date for the Frontier special meeting is May 20,
2011. Only record holders of shares of Frontier common stock at
the close of business on such date are entitled to notice of,
and to vote at, the Frontier special meeting or any adjournment
or postponement thereof. At the close of business on the record
date, the only outstanding voting securities of Frontier were
common stock, and [ ] shares of Frontier
common stock were issued and outstanding. A list of the Frontier
shareholders of record who are entitled to vote at the Frontier
special meeting will be available for inspection by any Frontier
shareholder for any purpose germane to the special meeting
during ordinary business hours for the ten days preceding the
Frontier special meeting at Frontiers executive offices
and principal place of business at 10000 Memorial Drive,
Suite 600, Houston, Texas 77024 and will also be available
at the Frontier special meeting for examination by any
shareholder present at such meeting.
Each share of Frontier common stock outstanding on the record
date of the Frontier special meeting is entitled to one vote on
each proposal and any other matter coming before the Frontier
special meeting.
Voting by
Frontiers Directors and Executive Officers
At the close of business on the record date of the Frontier
special meeting, Frontier directors and executive officers and
their affiliates were entitled to
vote [ ] shares of Frontier common
stock or approximately [ ]% of the shares of
Frontier common stock outstanding on that date. We currently
expect that Frontier directors and
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executive officers and their affiliates will vote their shares
in favor of both Frontier proposals, but none of them has
entered into any agreement obligating him or her to do so.
Quorum
No business may be transacted at the Frontier special meeting
unless a quorum is present. Shareholders who hold shares
representing at least a majority of the shares entitled to vote
at the Frontier special meeting must be present in person or
represented by proxy to constitute a quorum. If a quorum is not
present, or if fewer shares are voted in favor of the proposal
to approve the merger agreement than is required, to allow
additional time for obtaining additional proxies, the special
meeting may be adjourned if the approval of a majority of the
votes cast at the special meeting is obtained. No notice of an
adjourned meeting need be given unless the adjournment is for
more than 30 days or, if after the adjournment, a new
record date is fixed for the adjourned meeting, in which case a
notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the meeting. At any
adjourned meeting, all proxies will be voted in the same manner
as they would have been voted at the original convening of the
special meeting, except for any proxies that have been
effectively revoked or withdrawn prior to the adjourned meeting.
Shares of Frontier common stock represented at the Frontier
special meeting, including shares that are represented but that
vote to abstain, will be treated as present for purposes of
determining the presence or absence of a quorum. Broker
non-votes will have no effect on determining the presence or
absence of a quorum.
Required
Vote
The required votes to approve the Frontier proposals are as
follows:
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Approval of the merger agreement requires the approval of a
majority of the votes cast at the Frontier special meeting,
assuming a quorum. Failures to vote, broker non-votes and
abstentions will have no effect on the proposal.
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The adjournment of the Frontier special meeting, if necessary or
appropriate, to solicit additional proxies requires the approval
of a majority of the votes cast at the Frontier special meeting,
regardless of whether there is a quorum. Failures to vote,
broker non-votes and abstentions will have no effect on the vote
for the proposal.
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Voting of
Proxies by Holders of Record
If you were a record holder of Frontier stock at the close of
business on the record date of the Frontier special meeting, a
proxy card is enclosed for your use. Frontier requests that you
vote your shares as promptly as possible by (i) accessing
the internet site listed on the Frontier proxy card,
(ii) calling the toll-free number listed on the Frontier
proxy card or (iii) submitting your Frontier proxy card by
mail by using the provided self-addressed, stamped envelope.
Information and applicable deadlines for voting through the
internet or by telephone are set forth on the enclosed proxy
card. When the accompanying proxy is returned properly executed,
the shares of Frontier common stock represented by it will be
voted at the Frontier special meeting or any adjournment or
postponement thereof in accordance with the instructions
contained in the proxy card. Your internet or telephone vote
authorizes the named proxies to vote your shares in the same
manner as if you had marked, signed and returned a proxy card.
If a proxy is returned without an indication as to how the
shares of Frontier common stock represented are to be voted with
regard to a particular proposal, the Frontier common stock
represented by the proxy will be voted in accordance with the
recommendation of the Frontier board of directors and,
therefore, FOR the proposal to approve the merger
agreement and FOR the proposal to adjourn the
Frontier special meeting, if necessary or appropriate, to permit
further solicitation of proxies.
At the date hereof, the Frontier board of directors has no
knowledge of any business that will be presented for
consideration at the Frontier special meeting and that would be
required to be set forth in this joint proxy
statement/prospectus or the related proxy card other than the
matters set forth in Frontiers Notice of Special Meeting
of Shareholders. If any other matter is properly presented at
the Frontier special meeting for consideration, it is
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intended that the persons named in the enclosed form of proxy
and acting thereunder will vote in accordance with their best
judgment on such matter.
Your vote is important. Accordingly, if you were a record
holder of Frontier common stock on the record date of the
Frontier special meeting, please sign and return the enclosed
proxy card or vote via the internet or telephone whether or not
you plan to attend the Frontier special meeting in person.
Proxies submitted through the specified internet website or by
phone must be received by 11:59 p.m., eastern time, on
June 27, 2011.
Shares Held
in Street Name
If you hold shares of Frontier common stock through a stock
brokerage account or a bank or other nominee, you are considered
the beneficial holder of the shares held for you in
what is known as street name. The record
holder of such shares is your broker, bank or other
nominee, and not you, and you must provide the record holder of
your shares with instructions on how to vote your shares. Please
follow the voting instructions provided by your broker, bank or
other nominee. Please note that you may not vote shares held in
street name by returning a proxy card directly to Frontier or by
voting in person at the Frontier special meeting unless you have
a legal proxy, which you must obtain from your
broker, bank or other nominee. Furthermore, brokers, banks or
other nominees who hold shares of Frontier common stock on
behalf of their customers may not give a proxy to Frontier to
vote those shares without specific instructions from their
customers.
If you are a Frontier shareholder and you do not instruct your
broker, bank or other nominee on how to vote your shares, your
broker, bank or other nominee may not vote your shares on any of
the Frontier proposals.
Voting in
Person
If you plan to attend the Frontier special meeting and wish to
vote in person, you will be given a ballot at the special
meeting. If you are a registered shareholder, please be prepared
to provide proper identification, such as a drivers
license, at the Frontier special meeting. If your shares are
held in street name, you must bring to the special
meeting a proxy executed in your favor from the record holder
(your broker, bank or other nominee) of the shares authorizing
you to vote at the special meeting.
Revocation
of Proxies
If you are the record holder of Frontier common stock, you can
change your vote or revoke your proxy at any time before your
proxy is voted at the special meeting. You can do this by:
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timely delivering a signed written notice of revocation;
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timely delivering a new, valid proxy bearing a later date
(including by telephone or through the internet); or
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attending the Frontier special meeting and voting in person,
which will automatically cancel any proxy previously given, or
revoking your proxy in person. Simply attending the Frontier
special meeting without voting will not revoke any proxy that
you have previously given or change your vote.
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A registered shareholder may revoke a proxy by any of these
methods, regardless of the method used to deliver the
shareholders previous proxy.
Written notices of revocation and other communications with
respect to the revocation of proxies should be addressed as
follows:
Frontier Oil Corporation
10000 Memorial Drive, Suite 600
Houston, Texas 77024
Attention: Secretary
If your shares are held in street name through a
broker, bank or other nominee, you may change your vote by
submitting new voting instructions to your broker, bank or
nominee in accordance with its established procedures. If
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your shares are held in the name of a broker, bank or other
nominee and you decide to change your vote by attending the
special meeting and voting in person, your vote in person at the
special meeting will not be effective unless you have obtained
and present an executed proxy issued in your name from the
record holder (your broker, bank or nominee).
Tabulation
of Votes
Frontier has appointed Wells Fargo Shareowner Services
(Wells Fargo) to serve as the Inspector of Election
for the Frontier special meeting. Wells Fargo will independently
tabulate affirmative and negative votes and abstentions.
Solicitation
of Proxies
Frontier is soliciting proxies for the Frontier special meeting
from its shareholders. In accordance with the merger agreement,
Frontier will pay its own cost of soliciting proxies, including
the cost of mailing this joint proxy statement/prospectus, from
its shareholders. In addition to solicitation of proxies by
mail, proxies may be solicited by Frontier directors and
officers, without additional remuneration, by personal
interview, telephone or other means of communication.
Frontier will make arrangements with brokerage houses,
custodians, nominees and fiduciaries to forward proxy
solicitation materials to beneficial owners of shares of
Frontier common stock. Frontier may reimburse these brokerage
houses, custodians, nominees and fiduciaries for their
reasonable expenses incurred in forwarding the proxy materials.
To help assure the presence in person or by proxy of the largest
number of shareholders possible, we have engaged Innisfree
M&A Incorporated, a proxy solicitation firm
(Innisfree), to solicit proxies on Frontiers
behalf. We have agreed to pay Innisfree a proxy solicitation fee
not to exceed $17,500. We will also reimburse Innisfree for its
reasonable out-of pocket costs and expenses.
Adjournments
Any adjournment of the Frontier special meeting may be made from
time to time if the approval of a majority of the votes cast at
the Frontier special meeting is obtained, whether or not a
quorum exists, without further notice other than by an
announcement made at the special meeting (unless the adjournment
is for more than 30 days or if a new record date is fixed).
If a quorum is not present at the special meeting, or if a
quorum is present at the special meeting but there are not
sufficient votes at the time of the special meeting to approve
the proposal to approve the merger agreement, then Frontier
shareholders may be asked to vote on a proposal to adjourn the
Frontier special meeting so as to permit the further
solicitation of proxies.
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THE
MERGER
Effects
of the Merger
At the effective time of the merger, Merger Sub, a wholly owned
subsidiary of Holly that was formed for the sole purpose of
effecting the merger, will merge with and into Frontier.
Frontier will survive the merger and become a wholly owned
subsidiary of Holly. Upon completion of the merger, Hollys
name will be changed to HollyFrontier Corporation. In addition,
the combined company may pursue an internal restructuring of
certain legal entities after completing the merger, which may
include an internal merger of Frontier into HollyFrontier
Corporation, as described under Structure of
the Combined Company Following the Merger. The internal
restructuring of the combined company would be subject to, among
other things, the continuing evaluation of such restructuring
and the approval of the board of directors of the combined
company after the merger.
In the merger, each outstanding share of Frontier common stock
will be converted into the right to receive 0.4811 shares
of Holly common stock, with cash paid in lieu of fractional
shares. This exchange ratio is fixed and will not be adjusted to
reflect stock price changes prior to the closing of the merger.
Holly stockholders will continue to hold their existing Holly
shares.
Background
of the Merger
Holly and Frontier are both independent refiners in
strategically central regions of North America. Hollys
operations are focused in the Rocky Mountain, Southwest and
Mid-Continent regions of the United States and northern Mexico,
and Frontiers are focused in the Rocky Mountain and
Mid-Continent regions of the United States.
In March 2003, after several months of discussions and
negotiations, Holly and Frontier entered into a merger agreement
(the 2003 Merger Agreement) that terminated
following litigation between the parties relating to certain
toxic tort lawsuits involving oil properties adjacent to the
campus of Beverly Hills High School operated by predecessors to
a Frontier subsidiary from 1985 to 1995 (the Beverly Hills
litigation). In August 2003, Frontier filed a lawsuit in
the Delaware Court of Chancery seeking damages based on
allegations that, among other things, Holly had advised Frontier
that it would not proceed with the proposed merger on the agreed
terms and that Holly had repudiated the 2003 Merger Agreement.
Holly filed an answer and counterclaim denying Frontiers
claims and asserting that, among other things, Frontier had
breached certain representations contained in the 2003 Merger
Agreement. In April 2005, the Court ruled, among other things,
that Frontier had not proved that Holly had repudiated the 2003
Merger Agreement and that Holly had not proved that the Beverly
Hills litigation would have, or would reasonably be expected to
have, a material adverse effect on Frontier. Neither Holly nor
Frontier sought an appeal, and the Courts ruling became
final.
Since 2003, each of the two companies has separately pursued and
entered into strategic transactions and growth initiatives that
their management teams believe have enhanced their competitive
positions by increasing both the efficiency and scope of each
companys operations. Strategic transactions and growth
initiatives completed by Holly in recent years have included the
following:
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In July 2004, Holly completed the initial public offering of
limited partnership interests in HEP, which was formed by Holly
to acquire, own and operate, among other things, substantially
all of the refined product pipeline and terminalling assets that
support Hollys refining and marketing operations. Since
July 2004, Holly has periodically sold pipeline and tankage
assets that support its operations to HEP, and Holly currently
has a 34% interest (including a 2% general partnership interest)
in HEP.
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In July 2007, Holly entered into an agreement with Sinclair
Transportation Company to jointly build a refined products
pipeline project from Salt Lake City, Utah to Las Vegas, Nevada
along with terminal facilities in the Cedar City, Utah and North
Las Vegas areas. In July 2010, the pipeline project entered into
its final phase of construction, and completion of the pipeline
is expected to occur in the second quarter of 2011. Holly owns a
75% interest in the pipeline project.
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In June 2009, Holly acquired an 85,000 bpsd refinery in
Tulsa, Oklahoma that produces fuel products that are marketed in
the Mid-Continent region and specialty lubricant products that
are marketed throughout North America and distributed in Central
and South America. In December 2009, Holly acquired a second
refinery
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in Tulsa, Oklahoma, which had a capacity of 75,000 bpsd and
produces gasoline, diesel fuel and jet fuel products and
services markets in the Mid-Continent region. Holly is currently
in the process of integrating the operations of the two
refineries in Tulsa, Oklahoma. Upon completion, the two
facilities are expected to have an integrated crude processing
rate of 125,000 bpsd.
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As an internal growth initiative, Holly invested capital in
excess of $800 million from 2005 through 2010 to improve
yield, increase capacity and enhance complexity of its Navajo
and Woods Cross refineries. In 2010, Holly invested
$52 million in capital improvements to its Tulsa refinery.
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Strategic transactions and growth initiatives completed by
Frontier in recent years have included the following:
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In February 2007, Frontier acquired Ethanol Management Company,
the primary assets of which are a products terminal and blending
facility with a capacity of 25,000 barrels per day located
near Denver, Colorado. Frontier had been a customer of Ethanol
Management Company since 1989, and the acquisition ensured
Frontiers ability to blend gasoline and ethanol to provide
products to the Denver, Colorado market.
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In December 2009, to enhance its refinery in Cheyenne, Wyoming,
Frontier acquired a refined products pipeline that runs from
Cheyenne, Wyoming to Sidney, Nebraska and the associated refined
products terminal and truck rack at Sidney, Nebraska.
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As an internal growth initiative, Frontier invested capital in
excess of $500 million in the aggregate from 2005 through
2009 to improve yield, increase capacity and enhance complexity
of its refinery operations.
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In October and November, 2010, an investment banker from Morgan
Stanley who specializes in the energy sector had several
discussions separately with Mr. Clifton (Hollys
Chairman of the Board and Chief Executive Officer) and
Mr. Jennings (Frontiers Chairman, President and Chief
Executive Officer) regarding industry developments and strategic
considerations. During these discussions, the investment banker
suggested to each of Mr. Clifton and Mr. Jennings that
it might be beneficial for Frontier and Holly to consider a
possible business combination. These conversations were
considered general and informal and the investment banker was
not representing either party. These conversations indicated
that the parties were open to general conversations about
strategic possibilities and a possible future meeting.
On November 3, 2010, at a meeting of the Holly board of
directors in Dallas, Texas, Mr. Clifton advised the Holly
board of directors of his conversations with the Morgan Stanley
investment banker, and the suggestion of potential for a
business combination with Frontier. He noted that in view of the
relative stock trading prices of Holly and Frontier, a potential
merger between the two might be feasible and beneficial to both
companies. The matter was left open for future discussion and
the board authorized Mr. Clifton to explore on a
preliminary basis the possibility of a potential business
combination.
On December 2, 2010, Mr. Jennings telephoned
Mr. Clifton to suggest they meet over lunch to discuss a
possible strategic transaction. Mr. Clifton agreed, and a
meeting was scheduled for December 9, 2010.
On December 9, 2010, Mr. Clifton met with
Mr. Jennings in Dallas. At this meeting,
Messrs. Clifton and Jennings discussed their views
regarding the potential strategic and financial benefits of a
merger between Holly and Frontier, based solely on publicly
available information. In addition, they discussed their views
on the industrys prospects, the economy as a whole and the
potential benefits of a business combination in terms of size
and diversification. They agreed that a combined company would
be stronger and better capitalized, with desirable geographical
locations and a strong combined balance sheet. Mr. Jennings
noted that the combined company and HEP might have further
growth opportunities by offering suitable assets to HEP. Lastly,
Messrs. Clifton and Jennings agreed that, except as
Frontier may have current or future liabilities or obligations
relating to the Beverly Hills litigation, the prior litigation
between Holly and Frontier related to the 2003 Merger Agreement
should play no role in the discussions of any potential merger.
Messrs. Clifton and Jennings concluded the meeting with an
agreement to continue preliminary discussions.
On December 10, 2010, the executive committee of the
Frontier board of directors, consisting of
Messrs. Jennings, Bech and Loyd, discussed the potential
strategic benefits of a business combination with Holly. The
executive committee identified certain matters for future review
and due diligence, including regarding structure, operations,
management and personnel. The committee concluded that
Mr. Jennings should continue conversations
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with Holly and call a meeting of the full board of directors to
discuss the potential transaction if warranted by appropriate
progress in the discussions.
On December 13, 2010, Mr. Jennings telephoned
Mr. Clifton to schedule a meeting with Mr. Clifton to
further discuss a potential combination of Holly and Frontier.
On December 17, 2010, Messrs. Clifton and Jennings had
a follow-up
meeting in Dallas to continue discussions. Each outlined his
views on what roles their respective executive management teams
might have in the combined company and agreed on the need for
management continuity in connection with integrating the two
companies. Both agreed that a business combination between the
two companies remained a mutually desirable prospect as a merger
of equals at market, such as a
30-day
average closing price of the common stock of the two companies.
Mr. Jennings noted financing-related benefits that might
come from a stronger combined balance sheet and ability to
access more trade credit with suppliers.
Beginning in late December 2010 through January 2011,
Mr. Jennings discussed with each of the Frontier directors
a potential transaction with Holly. Mr. Jennings and the
other directors agreed that any potential transaction would be a
stock transaction and true merger of equals, and that the board
of directors would meet to discuss terms if discussions
progressed further.
On January 6, 2011, Messrs. Clifton and Jennings
exchanged emails to arrange a meeting between
Messrs. Jennings and Lamp (Hollys President) on
January 10, 2011.
On January 7, 2011, a special meeting of the Holly board of
directors was held in Dallas at which Mr. Clifton advised
the directors of his meetings with Mr. Jennings. After a
discussion regarding potential strategic and financial benefits
of a transaction with Frontier, the Holly board of directors
unanimously indicated support for management to continue
discussions and due diligence regarding a possible combination
with Frontier as a merger of equals. Mr. Clifton agreed to
do so and provide the Holly board of directors with regular
updates. After the meeting, Mr. Clifton phoned
Mr. Jennings and advised him that the Holly board of
directors was supportive of exploring a potential combination
with Frontier, and they revisited their discussion on the
expected roles for their respective management teams.
On January 7, 2011, Holly engaged Vinson & Elkins
L.L.P. as its legal advisor to assist in the potential merger.
Young Conaway Stargatt & Taylor, LLP was later engaged
as Delaware legal counsel.
On January 10, 2011, Messrs. Jennings and Lamp met in
Dallas to discuss the potential combination between Holly and
Frontier, including industry matters, refinery safety, process
safety and capital allocation. Mr. Lamp provided a mission
and values statement he had developed for Holly.
On January 11, 2011, Messrs. Jennings and Clifton
spoke by telephone regarding the candidates for executive
positions for the combined company, especially Mr. Lamp as
chief operating officer and Mr. Aron (Frontiers
Executive Vice President and Chief Financial Officer) as chief
financial officer. They also indicated general support from
their respective boards for the early stage of discussions.
On January 12, 2011, Messrs. Jennings, Aron and
Bechtol (Frontiers Vice President-General Counsel and
Secretary) met with attorneys from Andrews Kurth LLP in Houston,
Texas regarding the structuring of the potential transaction,
potential timeline and governance. Frontier engaged Andrews
Kurth as its legal advisor to assist in the potential
transaction.
On January 14, 2011, Messrs. Clifton and Jennings met
in Houston to continue their previous discussions. Both
Messrs. Clifton and Jennings agreed that the transaction
should be structured as a merger of equals based on relative
trading prices at market with no premium. They discussed the
structure of the combined companys board and agreed it
should consist of an equal number of Holly and Frontier
directors who qualified as independent under the
rules of the New York Stock Exchange, other than two management
directors. The two non-independent directors would be
Mr. Clifton, who would be Executive Chairman of the board
of directors of the combined company, and Mr. Jennings, who
would be President and Chief Executive Officer and a director of
the combined company. In addition, Messrs. Clifton and
Jennings agreed that the executive officers of the combined
company would consist of both Holly and Frontier executive
officers. Messrs. Clifton and Jennings concluded the
meeting by
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confirming their mutual belief that a combination of the two
companies could be strategically compelling and financially
beneficial to the shareholders of both companies.
On January 14 and 15, 2011, members of Frontier management had
discussions by telephone with representatives of Citi and
representatives of Credit Suisse, respectively, regarding their
acting as Frontiers financial advisors and regarding the
preliminary terms of the proposed merger with Holly. Following
those discussions, Frontier decided to engage Citi and Credit
Suisse as its financial advisors.
On January 16, 2011, the parties and their respective legal
counsel worked to finalize the proposed terms of a mutual
confidentiality agreement that included a two year
standstill agreement under which each of Holly and
Frontier agreed not to propose a takeover or combination
transaction to the other or its stockholders without the consent
of the others board. On January 17, 2011, Holly and
Frontier executed the confidentiality agreement.
On January 17, 2011, after the confidentiality agreement
was executed, Ms. McWatters (Hollys Vice President,
General Counsel and Secretary), Mr. Bechtol and their
respective legal counsel spoke by teleconference to discuss the
process for due diligence and negotiation of definitive
agreements.
In mid-January, members of Holly management had several separate
discussions with representatives of Morgan Stanley and Deutsche
Bank to discuss their acting as Hollys financial advisors
and to review with Morgan Stanley and Deutsche Bank the
preliminary terms of the proposed merger with Frontier. Each of
Morgan Stanley and Deutsche Bank was thereafter engaged as a
financial advisor to Holly.
On January 20, 2011, Messrs. Jennings, Aron and
Bechtol met in the offices of Andrews Kurth together with
representatives of Frontiers legal and financial advisors
to discuss the likely process and timeline for reviewing and
negotiating the proposed merger.
Beginning on or about January 20, 2011, Holly and Frontier
provided due diligence documents and discussed the scope of due
diligence information that would be appropriate to share for
purposes of evaluating a possible strategic combination. The
senior executives of both companies agreed to restrict knowledge
of the discussions to a limited number of individuals within
each company. Between January 20, 2011 and
February 21, 2011, both companies and their respective
legal counsel conducted due diligence primarily by reviewing
documents and participating in teleconferences. Additionally,
Ms. McWatters and Mr. Bechtol, together with attorneys
from Vinson & Elkins and Andrews Kurth, held regular
teleconferences to coordinate exchange of due diligence
materials by the parties and to address ongoing due diligence
questions and requests.
On January 24, 2011, Morgan Stanley and Deutsche Bank met
with Messrs. Clifton, Lamp, Shaw (Hollys Senior Vice
President and Chief Financial Officer), Ms. McWatters and
Vinson & Elkins in Dallas to review the expected
timing of the proposed merger, various due diligence matters
raised by Morgan Stanley and Deutsche Bank, and other planning
issues with respect to the negotiation and review of the
proposed merger.
Also on January 24, 2011, the Holly board of directors held
a special meeting in Dallas. At the meeting, Vinson &
Elkins briefed the board on the legal obligations of the
directors and other legal considerations in connection with the
proposed merger. Mr. Clifton updated the Holly board of
directors on the status of the negotiations of the proposed
merger with Frontier and on his discussions with Morgan Stanley
and Deutsche Bank. The legal due diligence process, antitrust
filings and requirements, and an anticipated timeline were also
discussed. After a discussion, the Holly board of directors
authorized members of Holly management to continue negotiations
with Frontier, including delivery of a draft merger agreement.
On January 25, 2011, Vinson & Elkins sent an
initial draft of a merger agreement to Andrews Kurth. From then
until February 21, 2011, the parties and their legal
counsel negotiated the terms of the merger agreement and related
documents, and exchanged drafts of the merger agreement and
related documents.
On January 31, 2011, Messrs. Clifton, Lamp, Damiris
and Shaw, Ms. McWatters and Messrs. Jennings, Aron and
Bechtol met in Dallas, together with Hollys and
Frontiers respective legal and financial advisors. At the
meeting, each senior management team made a presentation
regarding its companys refineries, assets, operations,
budgets, capital expenditures and other business matters.
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Between January 31, 2011 and February 9, 2011,
Messrs. Jennings and Lamp had ongoing discussions by
telephone to discuss matters relating to operations in
connection with the proposed merger.
On February 4, 2011, the Frontier board of directors held a
special meeting in Houston, together with members of
Frontiers management and legal and financial advisors.
Mr. Jennings provided an overview of the potential
transaction, to be structured as a merger of equals, and the
progress of the transaction to date. Andrews Kurth advised the
board regarding its fiduciary duties in connection with
considering a possible business combination, and the importance
of board review and deliberations. Andrews Kurth also presented
an overview of the draft merger agreement as proposed by Holly,
which had been previously distributed to the board. The board
discussed the terms to be negotiated in the merger agreement,
including the non-solicitation provisions and size of the
break-up
fee. Frontiers financial advisors discussed with the board
certain financial aspects relating to the potential merger.
On February 7, 2011, the Holly board of directors held a
special meeting in Dallas. At the meeting, Mr. Clifton
updated the Holly board of directors on ongoing discussions with
Frontier regarding the proposed merger. At the meeting, the
Holly board, Mr. Shaw, Ms. McWatters, and
Vinson & Elkins discussed the senior management
meeting on January 31, 2011 and the business and legal due
diligence processes and findings, including those relating to
litigation and labor and employment matters, Frontiers
debt structure, and the results of the preliminary antitrust
review. Also, at the meeting, representatives of each of Morgan
Stanley and Deutsche Bank advised the Holly board of directors
of the procedures that their respective firms expected to follow
in advising the Holly board of directors about the possible
fairness, from a financial point of view, of the exchange ratio
to Holly and the expected time to complete their respective
financial analyses. The participants at the meeting also
discussed the expected timing for the transaction and related
matters. At the conclusion of the meeting, the Holly board of
directors authorized Holly management to continue negotiations
with Frontier.
On February 9, 2011, Messrs. Lamp and Damiris met with
Messrs. Purdy (Frontiers Vice President of Commercial
Operations) and Stump (Frontiers Vice President of
Refining Operations) in Denver, Colorado to discuss Hollys
and Frontiers operations, permits, environmental
compliance and refinery facilities. Additional
follow-up
discussions continued through February 18, 2011, regarding
these matters.
On February 11, 2011, the Frontier board of directors held
a telephonic meeting with management and its legal advisor,
Andrews Kurth. The board received an update from members of
management regarding operational due diligence, including
capital expenditures, permits and the integration of
Hollys recently acquired Tulsa facilities. The board
directed management to conduct further due diligence and report
back regarding their review and conclusions as part of
proceeding with discussions.
On February 14, 2011, Messrs. Clifton and Jennings, at
Mr. Jenningss request, discussed questions from
Frontier regarding projected capital expenditures and
environmental matters relating to Hollys refineries in
Tulsa.
On February 16, 2011, the Holly board of directors held a
special meeting in Dallas to receive updates on the proposed
merger with Frontier. At the meeting, Vinson & Elkins
briefed the directors on the applicable legal standards in the
context of evaluating a business combination transaction of the
type being considered, provided an update regarding legal due
diligence, including due diligence relating to the Beverly Hills
litigation, and summarized the terms of the proposed merger
agreement, including termination rights and
break-up
fees under the merger agreement. Also, at the meeting, members
of Holly senior management described their views of the
strategic rationale for the proposed merger and compared the
proposed merger to other growth possibilities. In addition,
Hollys financial advisors discussed with the Holly board
of directors certain financial aspects relating to the potential
merger and related financial analyses. The board also discussed
at length the debt structure of Frontier and post-closing
operational matters, such as accounting system transitions and
management structure. During a recess of the special meeting in
conference rooms near the location of the special meeting, the
Holly outside directors met with Mr. Jennings, and
Messrs. Bech and Myers, both Frontier outside directors,
met with Mr. Clifton, regarding governance, operations and
the proposed merger.
On February 17, 2011, Mr. Jennings telephoned
Mr. Clifton and expressed concern regarding the movements
in each companys stock price during the past week.
Mr. Jennings noted that when comparing the
30-day
average closing stock price of each company (which was the
formula previously discussed in the parties negotiations
to arrive at the exchange ratio for the proposed merger) to the
closing market price of each company at the end of the
39
prior trading day, the Frontier shareholders would effectively
be receiving a discount of approximately 7% for their shares
(after giving effect to a planned special dividend to Frontier
shareholders in the amount of $0.24 per share), and that
Frontier was unlikely to enter into the transaction on those
terms.
In the morning on February 18, 2011, the Holly board of
directors held a special meeting in Dallas. At the meeting,
Mr. Clifton informed the directors of his conversation with
Mr. Jennings on February 17, 2011 regarding recent
movements in Frontiers and Hollys stock prices.
Representatives from Morgan Stanley and Deutsche Bank and Holly
management then engaged in a detailed discussion with the
directors regarding the calculation of the exchange ratio, the
movements in the stock prices of the two companies and possible
reasons for the fluctuations in pricing. After this discussion,
the Holly financial advisors noted that as a result of recent
increases in Frontiers stock price relative to
Hollys trading price, it was likely that Frontier would
seek an increase in the consideration payable to Frontier
shareholders, which consideration had been based on a
30-day
average closing price. In addition to a discussion of the merger
consideration, the Holly board of directors engaged in an
extended discussion regarding the timing of the merger and was
updated on the legal due diligence process.
On February 18, 2011, the Frontier board of directors held
a meeting in Houston. Andrews Kurth and management provided an
overview of open issues in the merger agreement, including the
financing for the combined company. The board received a due
diligence report from legal counsel and management, including an
overview of Holly and HEP, real property, employee benefits and
other matters, and an in-depth presentation regarding
environmental due diligence and compliance. Management discussed
plans for operational enhancements, and reported that the two
companies placed a high value on operational safety and
environmental compliance during their discussions.
Frontiers financial advisors then updated the board as to
certain financial aspects of the potential merger and reviewed
the relative stock price of Frontier and Holly, including the
recent increase in Frontiers stock price relative to
Hollys stock price and compared the ratio of their current
stock prices to the ratio of their respective
30-day
average closing stock prices. Members of the board and
Frontiers management and financial advisors discussed the
rationale for seeking an increase in the consideration to be
received by Frontiers shareholders. The board also
considered financing for the combined company and engaged in
discussions with management regarding expected availability of
financing. After considering the information presented and
discussed, including recent trading prices, the board authorized
Mr. Jennings to engage in additional negotiations with
Holly to seek to increase the exchange ratio.
After the end of the trading day on February 18, 2011
(which was the last trading day prior to the expected execution
date of the merger agreement), Messrs. Clifton and Jennings
discussed by telephone the ongoing movements in both
companies stock prices. They further discussed the fact
that an exchange ratio based on the
30-day
average closing price would represent a discount of
approximately 13% for Frontier shares based on the closing stock
price of each company on that day (after giving effect to the
planned special dividend). Mr. Jennings informed
Mr. Clifton that Frontier and its board of directors were
not comfortable entering into a transaction at more than a small
discount to the current market price.
Later in the day on February 18, 2011, the Holly board of
directors reconvened in Dallas to receive an update from
Mr. Clifton regarding his telephone conversation with
Mr. Jennings and their discussions around the exchange
ratio for the proposed merger with Frontier. Members of
management and representatives from each of Morgan Stanley and
Deutsche Bank engaged in a detailed discussion with the Holly
board regarding the recent movements in the relative stock
prices of the two companies. The possibility of agreeing to an
increase in the planned special dividend to Frontier
shareholders was also discussed generally by the board. After
the discussion, the board instructed Mr. Clifton to
telephone Mr. Jennings to propose an exchange ratio
representative of the
five-day
average closing price.
Mr. Clifton relayed the proposal to Mr. Jennings and
noted the closeness of Hollys increased exchange ratio to
the ratio of the two companies trading prices over the
prior 12 months. Mr. Jennings agreed to discuss the
revised proposal with members of the board of directors later
that evening. After such conversation, the Holly board of
directors reconvened, and Mr. Clifton briefed the directors
of the results of the conversation. After discussion, the Holly
board of directors authorized Holly management to continue its
negotiations with Frontier and to provide timely updates. Later
that night, Messrs. Clifton and Jennings spoke by telephone
about the proposal and what might be an acceptable exchange
ratio to both parties. Messrs. Clifton and Jennings discussed
that agreeing to an
40
increase in the planned special dividend might be a solution.
They agreed to talk again in the morning after both had
considered the matter further.
On February 19, 2011, Messrs. Clifton and Jennings
discussed further the proposed exchange ratio and the concept of
an increased special cash dividend from Frontier to its
shareholders. They tentatively agreed, subject to the review and
approval of their respective boards and agreement on definitive
documentation, to an exchange ratio of 0.4811 of a share of
Holly common stock per share of Frontier common stock and an
increase in the special cash dividend from $0.24 to $0.28 per
share, which would reflect a discount to the current market
price of Frontier shares of approximately 3%, including the
economic effect of the Frontier special dividend.
Over the weekend of February
19-20, 2011,
Holly and Frontier and their respective legal counsel worked to
finalize the negotiation of the merger agreement and amendments
to agreements relating to the retention of senior executives. In
particular, Messrs. Clifton and Jennings had several
telephone discussions and exchanged emails regarding the terms
on which Messrs. Jennings and Aron would waive certain
rights with respect to the vesting of equity and cash
compensation following the merger, the terms on which
Mr. Jennings would extend the term of his retention
agreement, and the terms on which Messrs. Clifton, Lamp and
Shaw would waive certain rights with respect to the vesting of
equity compensation following the merger. See
Interests of Holly Directors and Executive
Officers in the Merger Waiver Agreements and
Interests of Frontier Directors and Executive
Officers in the Merger Retention and Assumption
Agreements for a description of the written retention
agreements and waiver agreements and Interests
of Holly Directors and Executive Officers in the Merger
and Interests of Frontier Directors and
Executive Officers in the Merger for a discussion of the
interests of the Holly directors and executive officers and
Frontier directors and executive officers, respectively, in the
merger.
On the morning of February 21, 2011, members of the
Frontier board of directors held a special telephonic meeting
with members of Frontiers management and legal and
financial advisors. The board discussed the terms of the merger
agreement with members of Frontiers management and legal
advisors. In addition, the board received an update on the
agreement of Messrs. Jennings and Aron to waive certain
rights with respect to the vesting of equity and cash
compensation following the merger. Mr. Jennings discussed
with the board the expected availability of financing for the
combined company. Citi and Credit Suisse reviewed with the
Frontier board their respective financial analyses with respect
to the 0.4811 exchange ratio provided for in the merger
agreement. Andrews Kurth advised the board regarding its
approvals of the merger agreement and related transactions, and
the board scheduled a further meeting in the afternoon of the
same day.
On the afternoon of February 21, 2011, the Frontier board
of directors held a special telephonic meeting with members of
Frontiers management and legal and financial advisors. At
this meeting, Citi and Credit Suisse each rendered to the
Frontier board of directors an oral opinion, confirmed by
delivery of a written opinion dated February 21, 2011, to
the effect that, as of that date and based on and subject to the
assumptions, procedures, factors, qualifications and limitations
set forth in such opinions, the 0.4811 exchange ratio provided
for in the merger agreement was fair, from a financial point of
view, to holders of Frontier common stock. Following discussion
with legal advisors, the Frontier board unanimously approved and
authorized the execution of the merger agreement and recommended
the merger agreement for approval by Frontiers
shareholders. The Frontier board also authorized the payment of
a $0.28 per share special dividend and a $0.06 per share
quarterly dividend to Frontier shareholders.
On February 21, 2011, the Holly board of directors held a
special meeting in Dallas. At the meeting, Vinson &
Elkins summarized the principal terms of the final draft of the
merger agreement, updated the Holly board on the legal due
diligence on the settlement of the Beverly Hills litigation, and
informed the Holly board of the remaining unresolved matters,
which were limited to confirming items listed in disclosure
schedules and certain due diligence questions. Also at this
meeting, the Holly board discussed with members of Holly senior
management and its legal and financial advisors the potential
benefits and other considerations related to the proposed merger
to Holly and its stockholders. Also at the meeting,
Vinson & Elkins further briefed the Holly directors on
their obligations in respect of deliberations regarding the
proposed merger, and representatives of each of Morgan Stanley
and Deutsche Bank, on behalf of their respective firms, rendered
to the Holly board of directors their respective oral opinions
(each subsequently confirmed in writing) to the effect that, as
of such date and based on and subject to the various
assumptions, qualifications and limitations described in their
respective opinion, the exchange ratio of 0.4811 shares of
Holly common stock to be issued in exchange for each outstanding
share of Frontier common stock pursuant to
41
the merger was fair, from a financial point of view, to Holly.
After further discussions, the Holly board authorized members of
Holly management to resolve the few remaining open items with
Frontier and unanimously voted to recommend that the Holly
stockholders approve the issuance of shares of Holly common
stock and the amendment of Hollys certificate of
incorporation as contemplated by the merger agreement.
Following the board meeting, on February 21, 2011, members
of Holly senior management and Frontier senior management,
advised by their respective legal counsel, executed the merger
agreement and related agreements.
Early in the morning on February 22, 2011, Holly and
Frontier issued a joint press release announcing the merger.
Hollys
Reasons for the Merger; Recommendation of the Holly Board of
Directors
In approving the merger agreement and recommending approval of
the issuance of shares of Holly common stock to Frontier
shareholders in connection with the merger, the Holly board of
directors consulted with members of Hollys management, as
well as with Hollys legal and financial advisors, and also
considered a number of factors that the Holly board of directors
viewed as supporting its decisions. The principal factors that
the Holly board of directors viewed as supporting its decisions
are:
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that combining Holly and Frontier would provide the long-term
strategic benefit of creating a more diversified company, with
increased scope and scale of refining operations than that
offered by Holly alone, by adding Frontiers two refineries
with advantaged geographical access to niche product and growing
crude supply markets with increased exposure to light-heavy
differentials;
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the transaction has been structured as a merger of
equals and the exchange ratio reflects an implied discount
in the consideration being paid by Holly in the merger of 4.0%
to the ratio of the closing prices of the two companies
common stock on February 18, 2011, the last trading day
before public announcement of the merger, and the closeness of
the exchange ratio to the historical ratio of the two
companies trading prices over the twelve months prior to
public announcement of the merger;
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the expectation that the combined company would have a broader
geographic sales footprint by adding exposure to the Front Range
region and increased exposure to the Mid-Continent region than
Holly on a stand-alone basis;
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the expectation that the combined company would have a strong
balance sheet, with a substantial cash position compared to the
anticipated outstanding indebtedness of the combined company at
the completion of the merger;
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the expectation that the combined company would have a stronger
financial profile and credit rating given the more diverse asset
base and stronger combined balance sheet of the combined company
in comparison to Holly on a stand-alone basis, which may lower
borrowing costs for the combined company (and potentially for
HEP);
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the expectation that the combined company would have improved
access to capital over the long term with a lower cost of
capital, including equity and debt, based on the anticipated
capital structure of the combined company;
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the expectation that the combined company would have increased
resources to invest in future acquisition and other growth
opportunities in comparison to Holly on a stand-alone basis;
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the anticipated competitive position, business, financial
position, personnel and prospects of the combined company, which
together would create a stronger key customer for HEP, and the
expectation that the merger would provide additional growth
opportunities for HEP and enhance the potential value of
Hollys investment in HEP;
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the expectation that the combined company would achieve cost
savings from, among other things, reductions in corporate
overhead and back office costs in comparison to both companies
on a stand-alone basis;
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the expectation that combining Holly and Frontier would promote
earnings per share accretion (in comparison to Holly on a
stand-alone basis) through realization of synergies;
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the potential opportunities for greater operational efficiencies
and synergies through conducting Hollys and
Frontiers operations as part of a single enterprise;
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the expectation that the combination of Holly and Frontier would
spread risk of unplanned downtime and other operational risks
across the combined companys larger and more diversified
asset base;
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that Hollys solvent deasphalting technology and
Frontiers coker-based asphalt technology are generally
complementary and would combine to create diversified asphalt
processing technology and asphalt manufacturing synergies for
the combined company;
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the opportunity to combine two strong senior management teams,
as described under Board of Directors and
Management Following the Merger;
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that the board of directors of the combined company following
the merger of equals would have equal representation
from the two companies consisting of seven directors chosen by
the current Holly directors and seven directors chosen by the
current Frontier directors, as described under
Board of Directors and Management Following
the Merger;
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the opinion of Morgan Stanley & Co. Incorporated,
dated February 21, 2011, to the Holly board of directors to
the effect that, as of that date and based on and subject to
various assumptions, qualifications and limitations described in
the Morgan Stanley opinion included with this joint proxy
statement/prospectus as Annex B, the exchange ratio of
0.4811 shares of Holly common stock to be issued by Holly
in exchange for each outstanding share of Frontier common stock
pursuant to the merger was fair, from a financial point of view,
to Holly, as more fully described below under the caption
Opinions of Hollys Financial
Advisors Opinion of Morgan Stanley & Co.
Incorporated; and
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the opinion of Deutsche Bank Securities Inc., dated
February 21, 2011, to the Holly board of directors to the
effect that, as of that date and based on and subject to various
assumptions, qualifications and limitations described in the
Deutsche Bank opinion included with this joint proxy
statement/prospectus as Annex C, the exchange ratio of
0.4811 shares of Holly common stock to be issued by Holly
in exchange for each outstanding share of Frontier common stock
was fair, from a financial point of view, to Holly, as more
fully described below under the caption
Opinions of Hollys Financial
Advisors Opinion of Deutsche Bank Securities
Inc.
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In addition to considering the factors described above, the
Holly board of directors also considered the following factors:
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its knowledge of Hollys business, operations, financial
condition, earnings and prospects and its knowledge of
Frontiers business, operations, financial condition,
earnings and prospects, taking into account Frontiers
publicly-filed information and the results of Hollys due
diligence review of Frontier;
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the current and prospective competitive climate in the petroleum
refining and marketing industry in which Holly and Frontier
operate, including the potential for further consolidation in
the refining and marketing industry in North America generally
and the Mid-Continent, Southwestern and Rocky Mountain regions
of the United States in particular;
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the long-term and recent historical trading prices with respect
to shares of Holly common stock and Frontier common stock and
the amount of the merger consideration;
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the fact that the exchange ratio is fixed and will not fluctuate
based upon changes in the market price of Holly or Frontier
common stock between the date of the merger agreement and the
date of the completion of the merger;
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the terms and conditions of the merger agreement, including the
commitments by both Holly and Frontier to complete the merger
and certain reciprocal provisions that may have the effect of
discouraging alternative acquisition proposals involving
Frontier or Holly, and the likelihood of completing the merger;
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the fact that completion of the merger is subject to the
negotiation of suitable financing or refinancing for the
combined company in the form of a new bank facility;
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the fact that the merger agreement does not preclude a third
party from making an unsolicited proposal for a competing
transaction with Holly or Frontier and, that under certain
circumstances more fully described in the sections The
Merger Agreement No Solicitation of Alternative
Proposals beginning on page 97 and The Merger
Agreement Changes in Board Recommendations
beginning on page 98, Holly or Frontier, as applicable, may
furnish non-public information to and enter into discussions
with such third party regarding the competing transaction and
the Holly or Frontier board, as applicable, may withdraw or
modify its recommendations to Holly or Frontier stockholders
regarding the merger; and
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the combined companys ability to operate under the
covenants of Hollys and Frontiers existing
indebtedness
and/or the
combined companys ability to refinance such indebtedness
on reasonable terms and the combined companys ability to
increase its bank lines of credit.
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The Holly board of directors weighed the foregoing against a
number of potentially negative factors, including:
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the restrictions on the conduct of Hollys business during
the period between the execution of the merger agreement and the
completion of the merger;
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the costs associated with the completion of the merger and the
realization of the benefits expected to be obtained in
connection with the merger, including managements time and
energy and potential opportunity cost;
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the challenges in absorbing the effect of any failure to
complete the merger, including potential termination fees and
stockholder and market reactions;
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the risk that regulatory agencies may not approve the merger or
may impose terms and conditions on their approvals that
adversely affect the business and financial results of the
combined company as more fully described under the caption
Regulatory Clearances Required for the
Merger beginning on page 87;
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the potential earnings dilution to Holly stockholders following
the merger;
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the challenges inherent in the combination of two businesses of
the size and complexity of Holly and Frontier, including the
possible diversion of management attention for an extended
period of time;
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the risk of not being able to realize all of the anticipated
cost savings and operational synergies between Holly and
Frontier and the risk that other anticipated benefits might not
be realized; and
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the risks of the type and nature described under Risk
Factors, beginning on page 18 and the matters
described under Special Note Regarding Forward-Looking
Statements beginning on page 17.
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This discussion of the information and factors considered by
Hollys board of directors in reaching its conclusions and
recommendation includes the principal factors considered by the
board, but is not intended to be exhaustive and may not include
all of the factors considered by the Holly board of directors.
In view of the wide variety of factors considered in connection
with its evaluation of the merger and the other transactions
contemplated by the merger agreement, and the complexity of
these matters, the Holly board of directors did not find it
useful and did not attempt to quantify, rank or assign any
relative or specific weights to the various factors that it
considered in reaching its determination to approve the merger
and the other transactions contemplated by the merger agreement,
and to make its recommendation to Holly stockholders. Rather,
the Holly board of directors viewed its decisions as being based
on the totality of the information presented to it and the
factors it considered, including its discussions with, and
questioning of, members of Hollys management and outside
legal and financial advisors. In addition, individual members of
the Holly board of directors may have assigned different weights
to different factors.
Certain of Hollys directors and executive officers have
financial interests in the merger that are different from, or in
addition to, those of Hollys stockholders generally. The
Holly board of directors was aware of and considered these
potential interests, among other matters, in evaluating the
merger and in making its recommendation to Holly stockholders.
For a discussion of these interests, see
Interests of Holly Directors and Executive
Officers in the Merger.
The Holly board of directors unanimously approved the merger
and the merger agreement and determined that the merger and the
other transactions contemplated by the merger agreement,
including
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the issuance of shares of Holly common stock to Frontier
shareholders in connection with the merger, are in the best
interests of Holly and its stockholders. Accordingly, the Holly
board of directors unanimously recommends that the Holly
stockholders vote FOR the proposal to approve the
issuance of shares of Holly common stock to Frontier
shareholders pursuant to the merger.
Opinions
of Hollys Financial Advisors
Opinion
of Morgan Stanley & Co. Incorporated
Holly retained Morgan Stanley to provide it with financial
advisory services in connection with the transaction. Holly
selected Morgan Stanley to act as one of its financial advisors
based on Morgan Stanleys qualifications, expertise and
reputation and its knowledge of the business and affairs of
Holly. At the meeting of the Holly board of directors on
February 21, 2011, Morgan Stanley rendered its oral
opinion, subsequently confirmed in writing, that as of such
date, and based upon and subject to the various assumptions,
considerations, qualifications and limitations set forth in its
written opinion, the exchange ratio pursuant to the merger
agreement was fair, from a financial point of view, to Holly.
The full text of the written opinion of Morgan Stanley, dated
February 21, 2011, which discusses, among other things, the
assumptions made, procedures followed, matters considered, and
qualifications and limitations of the review undertaken by
Morgan Stanley in rendering its opinion, is attached as
Annex B and incorporated by reference into this section of
the joint proxy statement/prospectus. The summary of the Morgan
Stanley fairness opinion provided in this joint proxy
statement/prospectus is qualified in its entirety by reference
to the full text of the opinion. Holly stockholders are urged to
read the opinion carefully and in its entirety. The Morgan
Stanley opinion is directed to the Holly board of directors, in
its capacity as such, and addresses only the fairness, from a
financial point of view, of the exchange ratio pursuant to the
merger agreement as of the date of the opinion. The Morgan
Stanley opinion does not address any other aspect of the merger
and does not constitute a recommendation to any Holly or
Frontier stockholder as to how any such stockholder should vote
with respect to the proposed merger or any other matter.
For the purposes of its opinion, Morgan Stanley, among other
things:
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reviewed certain publicly available financial statements and
other business and financial information of Frontier and Holly,
respectively;
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reviewed certain internal financial statements and other
financial and operating data concerning Frontier and Holly,
respectively;
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reviewed certain financial forecasts prepared by the managements
of Frontier and Holly, respectively, as well as certain
adjustments thereto and extrapolations therefrom prepared with
the guidance of members of Holly management and which had been
approved for Morgan Stanleys use by Holly management;
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reviewed information relating to certain strategic, financial
and operational benefits anticipated from the merger, prepared
by the managements of Frontier and Holly, respectively;
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discussed the past and current operations and financial
condition and the prospects of Frontier, including information
relating to certain strategic, financial and operational
benefits anticipated from the merger, with senior executives of
Frontier;
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discussed the past and current operations and financial
condition and the prospects of Holly, including information
relating to certain strategic, financial and operational
benefits anticipated from the merger, with senior executives of
Holly;
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reviewed the pro forma impact of the merger on Hollys
earnings per share, cash flow, consolidated capitalization and
financial ratios;
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reviewed the reported prices and trading activity for Frontier
common stock and Holly common stock;
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compared the financial performance of Frontier and Holly and the
prices and trading activity of Frontier common stock and Holly
common stock with that of certain other publicly-traded
companies that Morgan Stanley deemed comparable with Frontier
and Holly, respectively, and their securities;
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participated in discussions and negotiations among
representatives of Frontier and Holly and their financial and
legal advisors;
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reviewed the merger agreement; and
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performed such other analyses, reviewed such other information
and considered such other factors as we have deemed appropriate.
|
For purposes of its opinion, Morgan Stanley assumed and relied
upon, without independent verification, the accuracy and
completeness of the information that was publicly available or
supplied or otherwise made available to it by Frontier and
Holly, and formed a substantial basis for Morgan Stanleys
opinion. With respect to the financial forecasts prepared by the
managements of Frontier and Holly, respectively, as well as
certain adjustments thereto and extrapolations therefrom
prepared with guidance from Holly management and which have been
approved for Morgan Stanleys use by Holly management,
including information relating to certain strategic, financial
and operational benefits anticipated from the merger, Morgan
Stanley assumed that they were reasonably prepared on bases
reflecting the best currently available estimates and judgments
of the respective managements of Frontier and Holly, as
applicable, of the future financial performance of Frontier and
Holly, respectively. Morgan Stanley relied upon, without
independent verification, the assessment by the managements of
Frontier and Holly of: (i) the strategic, financial and
other benefits expected to result from the merger; (ii) the
timing and risks associated with the integration of Frontier and
Holly; (iii) their ability to retain key employees of
Frontier and Holly, respectively; and (iv) the validity of,
and risks associated with, Frontiers and Hollys
existing and future technologies, products, services and
business models. In addition, Morgan Stanley assumed that the
merger will be consummated in accordance with the terms set
forth in the merger agreement without any waiver, amendment or
delay of any terms or conditions, including, among other things,
that the merger will qualify as a reorganization within the
meaning of Section 368(a) of the Code, as contemplated by
the merger agreement. Morgan Stanley assumed that in connection
with the receipt of all the necessary governmental, regulatory
or other approvals and consents required for the proposed
merger, no delays, limitations, conditions or restrictions will
be imposed that would have a material adverse effect on the
contemplated benefits expected to be derived in the proposed
merger. Morgan Stanley noted that the merger agreement
contemplated that the parties may agree upon alternative
structures to effect the business combination contemplated by
the merger agreement; however, for purpose of its opinion,
Morgan Stanley assumed with Hollys consent that no such
alternative structure would be implemented.
In its opinion, Morgan Stanley noted that it is not a legal, tax
or regulatory advisor and that as a financial advisor it relied
upon, without independent verification, the assessment of Holly
and Frontier and their respective legal, tax or regulatory
advisors with respect to legal, tax or regulatory matters.
Morgan Stanley expressed no opinion with respect to the fairness
of the amount or nature of the compensation to any of
Hollys or Frontiers officers, directors or
employees, or any class of such persons, relative to the
consideration to be paid to the holders of shares of
Frontiers common stock in the transaction. Morgan Stanley
did not make any independent valuation or appraisal of the
assets or liabilities of Frontier or Holly, nor was it furnished
with any such valuations or appraisals. Morgan Stanleys
opinion was necessarily based on financial, economic, market and
other conditions as in effect on, and the information made
available to it as of, February 21, 2011. Events occurring
after February 21, 2011 may affect Morgan
Stanleys opinion and the assumptions used in preparing it,
and Morgan Stanley did not assume any obligation to update,
revise or reaffirm its opinion. Morgan Stanleys opinion
did not in any manner address the prices at which Holly common
stock or Frontier common stock would trade either prior to or
following consummation of the merger.
The following is a summary of the material financial analyses
performed by Morgan Stanley in connection with its opinion,
dated as of February 21, 2011. Some of these summaries
include information in tabular format. In order to understand
fully the financial analyses used by Morgan Stanley, the tables
must be read together with the text of each summary. The tables
alone do not constitute a complete description of the analyses.
Furthermore, mathematical analysis (such as determining the
average or median) is not in itself a meaningful method of using
the data referred to below.
46
Historical
Exchange Ratio Analysis
Morgan Stanley reviewed the stock price performance of Frontier
and Holly during various periods ending on February 18,
2011, the last full trading day prior to the rendering of Morgan
Stanleys opinion dated February 21, 2011. Morgan
Stanley then calculated the daily historical exchange ratios
during the period between February 15, 2008 and
February 18, 2011 implied by dividing the Frontier closing
price for the relevant date by the Holly closing price for such
date. Morgan Stanley then calculated the average, minimum or
maximum of the resulting exchange ratios, as applicable, across
certain periods within the three-year time range. Morgan Stanley
compared the exchange ratio of 0.4811 provided for in the merger
agreement with historical exchange ratios for such dates and
periods. The following table lists the implied exchange ratios
for these dates and periods:
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Implied Exchange
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Ratio
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Period Ending February 18,
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2011
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Maximum Since February 18, 2010
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0.5650
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Minimum Since February 18, 2010
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0.3960
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Average Since December 17, 2010
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0.4363
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Average Since August 18, 2010
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0.4411
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Average Since February 18, 2010
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0.4742
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Average Since February 15, 2008
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0.5662
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The exchange ratio of 0.4811 provided for in the merger
agreement reflects an implied discount of 4.0% to the market
exchange ratio on February 18, 2011 (0.5012), or an implied
discount of 3.0% to the market exchange ratio on
February 18, 2011, as adjusted for a special
catch-up
cash dividend (which was assumed to be $0.28/share per the
merger agreement), the concept of which was publicly discussed
by Frontier management prior to the announcement of the merger
agreement and expected to be paid to Frontier shareholders in
March 2011 (as adjusted for such a dividend, 0.4962).
Equity
Research Analyst Price Targets
Morgan Stanley reviewed selected public market trading price
targets for Frontier common stock prepared and published by 11
equity research analysts that published or confirmed price
targets for Frontier after February 1, 2011 and prior to
February 18, 2011. For purposes of this analysis, Morgan
Stanley assumed that the analysts who published research reports
after February 1, 2011 and prior to February 18, 2011
and who did not adjust their prior stock price targets, were
deemed to have confirmed their pre-existing price targets.
Morgan Stanley reviewed the most recent price target published
by each analyst. These targets reflect each analysts
estimate of the future public market trading price of Frontier
common stock at the time the price target was published. At
February 18, 2011, the range of selected equity analyst
price targets for Frontier common stock was from approximately
$19 to $33 per share (or approximately $17 to $30 per share if
discounted for an illustrative twelve months at an 11% cost of
equity). Morgan Stanley noted that the Frontier closing price on
February 18, 2011 was $28.12 per share.
Morgan Stanley also reviewed selected public market trading
price targets for Holly common stock prepared and published by
nine equity research analysts that published or confirmed price
targets for Holly after February 1, 2011 and prior to
February 18, 2011. Price targets were assumed to be
confirmed if the analyst published estimates after
February 1, 2011 and prior to February 18, 2011.
Morgan Stanley reviewed the most recent price target published
by each analyst. These targets reflect each analysts
estimate of the future public market trading price of Holly
common stock at the time the price target was published. At
February 18, 2011, the range of selected equity analyst
price targets for Holly common stock was from approximately $40
to $77 per share (or approximately $36 to $69 per share if
discounted for an illustrative twelve months at an 11% cost of
equity). Morgan Stanley noted that the Holly closing price on
February 18, 2011 was $56.11 per share.
Morgan Stanley calculated the exchange ratio implied by the
analyst price targets for Holly and Frontier (only with respect
to such analysts that published price targets for both Holly and
Frontier) by dividing the Frontier price target by the Holly
price target provided by the same analyst. This analysis implied
a range of exchange ratios of 0.4151 to 0.5167 based on price
targets published or confirmed after February 1, 2011 and
prior to February 18,
47
2011. Price targets were assumed to be confirmed if the analyst
published estimates after February 1, 2011 and prior to
February 18, 2011. Morgan Stanley noted that the merger
agreement provided for an exchange ratio of 0.4811.
The public market trading price targets published by securities
research analysts do not necessarily reflect current market
trading prices for shares of Frontier common stock and shares of
Holly common stock and these estimates are subject to
uncertainties, including the future financial performance of
Frontier and Holly and future financial market conditions.
Comparable
Company Analysis
Morgan Stanley compared certain financial information of each of
Holly and Frontier with publicly available consensus earnings
and EBITDA estimates for other companies that shared similar
business characteristics to Holly and Frontier, respectively.
The companies used in this comparison were:
Alon USA Energy, Inc.
CVR Energy, Inc.
Delek US Holdings, Inc.
Frontier Oil Corporation
Holly Corporation
Sunoco, Inc.
Tesoro Corporation
Valero Energy Corporation
Western Refining, Inc.
For purposes of this analysis, Morgan Stanley used the median
estimates of those estimates published publicly by equity
research analysts for each company after February 1, 2011
and prior to February 18, 2011. In cases where there was
limited information available on this basis, Morgan Stanley used
the median of the two most recent estimates, when available (in
either case, referred to here as consensus
estimates).
Morgan Stanley analyzed the ratio of aggregate value, defined as
market capitalization plus total debt, noncontrolling interest
and preferred equity less cash and cash equivalents, to
consensus estimates of EBITDA for calendar years 2011 and 2012
for each of these companies, referred to as AV/EBITDA multiple.
EBITDA is defined as earnings before interest, taxes,
depreciation and amortization. For Holly, Morgan Stanley
presented the
AV/EBITDA
multiple on both a consolidated and deconsolidated basis. The
deconsolidated AV/EBITDA multiple estimated the hypothetical
trading multiple of Hollys refining operations by
excluding the estimated contribution of Hollys interests
in HEP and the UNEV Pipeline, LLC (UNEV Pipeline) from both the
aggregate value and EBITDA. Morgan Stanley observed a range of
AV/EBITDA multiples for these companies based on 2011 consensus
estimates of 4.4x to 7.8x and AV/EBITDA multiples for these
companies based on 2012 consensus estimates of 4.3x to 7.1x.
Morgan Stanley also analyzed the ratio of stock price per share
to the consensus estimates of EPS, or earnings per share,
referred to as P/E, for calendar years 2011 and 2012. Morgan
Stanley observed a range of P/E multiples for these companies of
9.5x to 25.0x for calendar year 2011 and of 8.9x to 17.2x for
calendar year 2012.
Based on an analysis of the relevant metrics for each of the
comparable companies, Morgan Stanley selected (i) reference
ranges of AV/EBITDA multiples of 4.5x to 6.5x and P/E multiples
of 10.0x to 12.0x for the comparable companies and applied these
ranges of multiples to consensus estimates for calendar year
2011 EBITDA and EPS for Holly and Frontier, and
(ii) reference ranges of AV/EBITDA multiples of 5.0x to
6.5x and P/E multiples of 11.0x to 14.5x and applied these
ranges of multiples to consensus estimates for calendar year
2012 EBITDA and EPS for Holly and Frontier.
In the case of Holly, the value ranges implied by the AV/EBITDA
multiples were adjusted to account for the value of Hollys
interests in HEP and the UNEV Pipeline. The AV/EBITDA multiples
outlined above were only applied to EBITDA attributable to
Hollys refining operations, calculated as the consensus
estimates for Hollys EBITDA less the consensus estimates
for HEPs EBITDA less the estimated EBITDA contribution
from Hollys interest in the UNEV Pipeline, which was
assumed to be transferred to HEP at year end 2011. Incremental
value was added when calculating the price per share of
Hollys stock to reflect Hollys interests in HEP and
the UNEV
48
Pipeline. Hollys estimated value in the limited
partnership interests of HEP was based on the public trading
value of those limited partnership interests. Hollys
estimated value in the general partnership interests of HEP was
based on the public trading values of comparable general
partnership interests. Hollys estimated value in the UNEV
Pipeline was based on the forecasted capital contribution in the
UNEV Pipeline as of December 31, 2010.
Similarly, Morgan Stanley only applied P/E multiples to the
consensus estimates for 2011 EPS for Holly excluding the
estimated contribution of UNEV Pipeline earnings for the second
half of 2011 and the estimated value of Hollys interest in
the UNEV Pipeline was added when calculating the resulting price
per share of Hollys stock.
Based on the consensus estimates, the estimated value of
Hollys interests in HEP and the UNEV Pipeline and each
companys respective forecasted outstanding net debt as of
December 31, 2010, with Hollys net debt
unconsolidated for HEPs net debt, Morgan Stanley estimated
the following implied value ranges for shares of Frontier and
Holly, respectively, on a fully diluted basis:
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Share Price
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(approximate value
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Company Trading Analysis (consensus estimates)
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range)
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Frontier
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AV/EBITDA multiple for estimated calendar year 2011
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$
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24 to $33
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AV/EBITDA multiple for estimated calendar year 2012
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$
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22 to $29
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P/E multiple for estimated calendar year 2011
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$
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24 to $29
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P/E multiple for estimated calendar year 2012
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$
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22 to $29
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Holly
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AV/EBITDA multiple for estimated calendar year 2011
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$
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57 to $76
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AV/EBITDA multiple for estimated calendar year 2012
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$
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55 to $67
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P/E multiple for estimated calendar year 2011
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$
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52 to $62
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P/E multiple for estimated calendar year 2012
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$
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50 to $66
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Morgan Stanley noted that the Frontier closing price on
February 18, 2011 was $28.12 per share and that Holly
closing price on February 18, 2011 was $56.11 per share.
Morgan Stanley noted that such analyses indicated a range of
implied exchange ratios of 0.3147 to 0.5923 based on AV/EBITDA
multiples for calendar year 2011, 0.3355 to 0.5251 based on
AV/EBITDA multiples for calendar year 2012, 0.3837 to 0.5469
based on P/E multiples for calendar year 2011, and 0.3299 to
0.5732 based on P/E multiples for calendar year 2012. Morgan
Stanley noted that the merger agreement provided for an exchange
ratio of 0.4811.
No company utilized in the comparable company analysis is
identical to Holly or Frontier (other than the companies
themselves, as applicable). In evaluating comparable companies,
Morgan Stanley made judgments and assumptions with regard to
industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond
the control of Holly and Frontier, such as the impact of
competition on the businesses of Holly and Frontier and the
industry generally, industry growth and the absence of any
adverse material change in the financial condition and prospects
of Holly and Frontier or the industry or in the financial
markets in general.
Discounted
Cash Flow Analysis
Morgan Stanley performed a discounted cash flow analysis, which
is designed to estimate the value of a company by calculating
the present value of estimated future cash flows of the company.
Morgan Stanley calculated a range of equity values per fully
diluted share for each of Holly and Frontier based on
projections of cash flows for the calendar years 2011 through
2015 and an estimate to the terminal value after 2015.
For the purposes of the discounted cash flow analysis Morgan
Stanley used certain financial forecasts prepared by the
managements of Frontier and Holly, respectively, as well as
certain adjustments thereto and extrapolations therefrom
prepared with the guidance of Holly management and which had
been approved for Morgan Stanleys use by Holly management,
which is referred to below as the Holly management
case. Morgan Stanley also reviewed the potential impact of
two additional sensitivity scenarios (each of which was prepared
with guidance from Holly management) on the projected value of
both Frontier and Holly cash flows. The first scenario, Holly
management
49
sensitivity case #1, assumed a wider light/heavy
differential, a wider sweet/sour differential, a heavier/more
sour crude slate (for Frontier only) and a wider lubes to WTI
spread than the Holly management case in the estimated calendar
years 2011 through 2015. The second scenario, Holly management
sensitivity case #2, used the same assumptions as the Holly
management sensitivity case #1 except for a wider
light/heavy differential for the estimated calendar years 2011
through 2015.
In arriving at the estimated equity values per share of Frontier
or Holly common stock, as applicable, Morgan Stanley estimated a
range of terminal values by multiplying Frontiers or
Hollys estimated mid-cycle EBITDA (based on the
2006-2010
average prices of selected commodities, when full year data were
available) by EBITDA multiples ranging from 4.5x to 6.0x. Morgan
Stanley then discounted Frontiers or Hollys
forecasted unlevered free cash flows, as applicable, defined as
net operating profit after tax plus depreciation and
amortization, other non-cash items and net proceeds from asset
sales less changes in working capital, changes in other assets
and liabilities and capital expenditures, and the estimated
terminal value, in each case to a present value using discount
rates ranging from 9.0% to 11.0%. These discount rates were
based on Morgan Stanleys judgment of the estimated range
of Frontiers or Hollys weighted average cost of
capital, as applicable.
In the case of Holly, Morgan Stanleys discounted cash flow
analysis excluded cash flows attributable to HEP. To estimate
the implied Holly price per share Morgan Stanley included
estimates for the value of Hollys interests in HEP based
on the public trading value of the limited partnership interests
and the public trading values of comparable general partnership
interests. These estimated values were added to the equity value
implied by the discounted cash flow analysis to derive an
estimated equity value for Holly.
Based on the foregoing analysis and the forecasted cash and cash
equivalents and debt outstanding of Frontier as of
December 31, 2010 the discounted cash flow analysis of
Frontier yielded an implied value range for Frontier common
stock of approximately $25 to $32 per share, on a fully diluted
basis. Morgan Stanley noted that the Frontier closing price on
February 18, 2011 was $28.12 per share. Based on the
foregoing analysis and the forecasted unconsolidated cash and
cash equivalents and debt outstanding of Holly as of
December 31, 2010, the discounted cash flow analysis of
Holly, including the incremental value associated with HEP,
yielded an implied value range for Holly common stock of
approximately $66 to $82 per share, on a fully diluted basis,
based on the Holly management case. Morgan Stanley noted that
the Holly closing price on February 18, 2011 was $56.11 per
share.
Based on the foregoing analysis and the forecasted cash and cash
equivalents and debt outstanding of Frontier as of
December 31, 2010 the discounted cash flow analysis of
Frontier yielded (i) an implied value range for Frontier
common stock of approximately $32 to $39 per share, on a fully
diluted basis, in the Holly management sensitivity case #1,
and (ii) an implied value range for Frontier common stock
of approximately $35 to $42 per share, on a fully diluted basis,
in the Holly management sensitivity case #2. Morgan Stanley
noted that Frontier closing price on February 18, 2011 was
$28.12 per share. Based on the foregoing analysis and the
forecasted unconsolidated cash and cash equivalents and debt
outstanding of Holly as of December 31, 2010, the
discounted cash flow analysis of Holly, including the
incremental value associated with HEP, yielded (i) an
implied value range for Holly common stock of approximately $75
to $92 per share, on a fully diluted basis, in the Holly
management sensitivity case #1, and (ii) an implied
value range for Holly common stock of approximately $77 to $94
per share, on a fully diluted basis, in the Holly management
sensitivity case #2. Morgan Stanley noted that Holly
closing price on February 18, 2011 was $56.11 per share.
Morgan Stanley noted that such discounted cash flow analysis for
Frontier and Holly implied a range of exchange ratios of 0.3086
to 0.4769 based on the Holly management case. Based on the Holly
management sensitivity case #1, the implied range of
exchange ratios was 0.3528 to 0.5164 and in the Holly management
sensitivity case #2, the range was 0.3713 to 0.5360. Morgan
Stanley noted that the merger agreement provided for an exchange
ratio of 0.4811.
50
Contribution
Analysis
Morgan Stanley reviewed the relative contributions of Holly and
Frontier to the following estimated financial and operating
metrics of the combined company for
2010-2012,
based on the Holly management case and the consensus estimates:
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EBITDA
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Net income
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Capacity
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Complex capacity
|
In the foregoing analysis, Hollys EBITDA was adjusted to
exclude the contribution from HEP and the UNEV Pipeline. When
calculating the resulting equity value contribution for Holly,
Morgan Stanley included estimates for the value of Hollys
interests in HEP based on the public trading value of the
limited partnership interests and the public trading values of
comparable general partnership interests as well as an estimated
value of Hollys interest in the UNEV Pipeline based on the
forecasted capital contribution as of December 31, 2010. To
better align EBITDA for Frontier and Holly on an accounting
basis, Morgan Stanley excluded approximately $25 million in
amortization of turnaround costs from Frontiers operating
expenses in the Holly management case. Morgan Stanley also
excluded UNEV Pipeline earnings contribution for the second half
of 2011 from estimates of Hollys net income and included
an estimated value of Hollys interest in the UNEV Pipeline
based on the forecasted capital contribution as of
December 31, 2010 when calculating Hollys equity
contribution.
Based on the foregoing, Morgan Stanley calculated implied
exchange ratios, or exchange ratio ranges, as applicable, taking
into account the impact of each companys respective
forecasted outstanding net debt as of December 31, 2010,
with Hollys net debt unconsolidated for HEPs net
debt, of:
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Company Trading Analysis
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|
Exchange Ratio
|
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Management Case
|
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AV/EBITDA multiple for estimated calendar years 2010-2012
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0.3117-0.4180
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P/E multiple for estimated calendar years 2010-2012
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0.1821-0.4392
|
Consensus Estimates
|
|
AV/EBITDA multiple for estimated calendar years 2010-2012
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0.2799-0.4904
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P/E multiple for estimated calendar years 2010-2012
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0.2122-0.5820
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Capacity
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0.3125
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Complex Capacity
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0.2715
|
Morgan Stanley noted that the merger agreement provided for an
exchange ratio of 0.4811.
General
Morgan Stanley performed a variety of financial and comparative
analyses for purposes of rendering its opinion. The preparation
of a financial opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary
description. In arriving at its opinion, Morgan Stanley
considered the results of all of its analyses as a whole and did
not attribute any particular weight to any analysis or factor it
considered. Morgan Stanley believes that selecting any portion
of its analyses, without considering all analyses as a whole,
would create an incomplete view of the process underlying its
analyses and opinion. In addition, Morgan Stanley may have given
various analyses and factors more or less weight than other
analyses and factors, and may have deemed various assumptions
more or less probable than other assumptions. As a result, the
ranges of valuations resulting from any particular analysis
described above should not be taken to be Morgan Stanleys
view of the actual value of Holly or Frontier. In performing its
analyses, Morgan Stanley made numerous assumptions with respect
to industry performance, general business and economic
conditions and other matters. Many of these assumptions are
beyond the control of Holly and Frontier. Any estimates
contained in Morgan Stanleys analyses are not necessarily
indicative of future results or actual values, which may be
significantly more or less favorable than those suggested by
such estimates.
51
Morgan Stanley conducted the analyses described above solely as
part of its analysis of the fairness, from a financial point of
view, to Holly of the exchange ratio pursuant to the merger
agreement and in connection with the delivery of its opinion to
the Holly board of directors. These analyses do not purport to
be appraisals or to reflect the prices at which shares of common
stock of Holly or Frontier might actually trade.
Morgan Stanleys opinion and its presentation to the Holly
board of directors was one of many factors taken into
consideration by the Holly board of directors in deciding to
approve, adopt and authorize the merger agreement. Consequently,
the analyses as described above should not be viewed as
determinative of the opinion of the Holly board of directors
with respect to the exchange ratio or of whether the Holly board
of directors would have been willing to agree to a different
exchange ratio. The exchange ratio was determined through
arms-length negotiations between Holly and Frontier and
was approved by the Holly board of directors. Morgan Stanley
provided advice to Holly during these negotiations. Morgan
Stanley did not, however, recommend any specific exchange ratio
to Holly or that any specific exchange ratio constituted the
only appropriate consideration for the merger.
Morgan Stanleys opinion was approved by a committee of
Morgan Stanley investment banking and other professionals in
accordance with its customary practice.
Morgan Stanley is a global financial services firm engaged in
the securities, investment management and individual wealth
management businesses. Its securities business is engaged in
securities underwriting, trading and brokerage activities,
foreign exchange, commodities and derivatives trading, prime
brokerage, as well as providing investment banking, financing
and financial advisory services. Morgan Stanley, its affiliates,
directors and officers may at any time invest on a principal
basis or manage funds that invest, hold long or short positions,
finance positions, and may trade or otherwise structure and
effect transactions, for their own account or the accounts of
its customers, in debt or equity securities or loans of Holly,
Frontier, or any other company, or any currency or commodity,
that may be involved in this transaction, or any related
derivative instrument.
Under the terms of its engagement letter, Morgan Stanley
provided Holly with financial advisory services in connection
with the merger for which it will be paid a fee of $5,125,000, a
portion of which became payable at the time of public
announcement of the merger and a substantial portion of which is
contingent upon, and will become payable upon, completion of the
merger. In addition, Holly may pay to Morgan Stanley an
additional discretionary fee if Holly so determines in its sole
discretion. Furthermore, Holly has also agreed to reimburse
Morgan Stanley for its expenses incurred in performing its
services. In addition, Holly has agreed to indemnify Morgan
Stanley and its affiliates, their respective directors,
officers, agents and employees and each person, if any,
controlling Morgan Stanley or any of its affiliates against
certain liabilities and expenses, including certain liabilities
under the federal securities laws, related to or arising out of
Morgan Stanleys engagement. In May 2011, Holly requested
an affiliate of Morgan Stanley to participate as a lender under
the New Senior Credit Facility described under The
Merger Credit Agreements. Morgan Stanley
currently anticipates that such affiliate may participate as a
lender and would receive customary compensation in connection
therewith. In addition, Morgan Stanley may seek to provide
additional financial advisory and financing services to Holly in
the future and would expect to receive fees for the rendering of
these services.
Opinion
of Deutsche Bank Securities Inc.
Deutsche Bank has acted as one of Hollys financial
advisors in connection with the merger. At the meeting of the
Holly board of directors on February 21, 2011 Deutsche Bank
delivered its oral opinion, subsequently confirmed in writing,
to the Holly board of directors to the effect that, as of that
date and based on and subject to various assumptions, matters
considered and limitations described in the Deutsche Bank
opinion, the exchange ratio was fair, from a financial point of
view, to Holly.
The full text of the written opinion of Deutsche Bank, dated
February 21, 2011, which sets forth the assumptions made,
matters considered and limits on the review undertaken by
Deutsche Bank in rendering its opinion, is included as
Annex C to this joint proxy statement/prospectus and is
incorporated herein by reference. Hollys stockholders are
encouraged to read the opinion in its entirety. Deutsche Bank
expressed no opinion or recommendation as to how any holder of
Holly common stock should vote with respect to the transactions
contemplated by the merger agreement. The summary of the
Deutsche Bank opinion set forth in this joint proxy
statement/prospectus is qualified in its entirety by reference
to the full text of the opinion included as Annex C.
52
In connection with its role as one of Hollys financial
advisors, and in arriving at its opinion, Deutsche Bank, among
other things:
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|
reviewed certain publicly available financial and other
information concerning Holly and Frontier;
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|
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|
reviewed certain internal analyses and other information
relating to Holly prepared by management of Holly;
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|
|
|
reviewed certain internal analyses and other information
relating to Frontier prepared by the management of Frontier;
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|
reviewed certain forecast operating and financial statistics
relating to Holly and Frontier prepared by the managements of
Holly and Frontier, respectively, as well as financial forecasts
prepared therefrom by management of Holly and approved for
Deutsche Banks use by the management of Holly;
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|
held discussions with members of management of Holly and
Frontier regarding the businesses and prospects of Holly and
Frontier, respectively, and the prospects of the combined
company, including, without limitation, certain cost savings and
operating synergies jointly projected by the managements of
Frontier and Holly to result from the merger;
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reviewed the reported prices and trading activity for both Holly
common stock and Frontier common stock;
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to the extent publicly available, compared certain financial and
stock market information for Holly and Frontier with similar
information for certain other companies Deutsche Bank considered
relevant whose securities are publicly traded,
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reviewed the merger agreement; and
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performed such other studies and analyses and considered such
other factors as Deutsche Bank deemed appropriate.
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Deutsche Bank did not assume responsibility for independent
verification of, and did not independently verify, any
information, whether publicly available or furnished to it,
concerning Holly or Frontier, including, without limitation, any
financial information considered in connection with the
rendering of its opinion. Accordingly, for purposes of its
opinion, Deutsche Bank, with Hollys permission, assumed
and relied upon the accuracy and completeness of all such
information. Deutsche Bank did not conduct a physical inspection
of any of the properties or assets, and did not prepare or
obtain any independent evaluation or appraisal of any of the
assets or liabilities (including, without limitation, any
contingent, derivative or off-balance-sheet assets and
liabilities), of Holly or Frontier or any of their respective
subsidiaries, nor did it evaluate the solvency or fair value of
Holly or Frontier under any state or federal law relating to
bankruptcy, insolvency or similar matters. With respect to
financial forecasts and projections, including, without
limitation, the analyses and forecasts of certain cost savings,
operating efficiencies, revenue effects and financial synergies
and other strategic benefits jointly prepared and expected by
Frontier and Holly to be achieved as a result of the merger
(collectively, the Synergies), made available to
Deutsche Bank and used in its analyses, Deutsche Bank assumed
with Hollys permission that they had been reasonably
prepared on bases reflecting the best currently available
estimates and judgments of the management of Holly and Frontier
as to the matters covered thereby. In rendering its opinion,
Deutsche Bank expressed no view as to the reasonableness of such
forecasts and projections, including, without limitation, the
Synergies, or the assumptions on which they were based. Deutsche
Banks opinion was necessarily based upon economic, market
and other conditions, and the information made available to it,
as of the date thereof. Deutsche Bank expressly disclaimed any
undertaking or obligation to advise any person of any change in
any fact or matter affecting its opinion of which it became
aware after the date thereof.
For purposes of rendering its opinion, Deutsche Bank assumed
with Hollys permission that, in all respects material to
its analysis, the merger would be consummated in accordance with
its terms, without any material waiver, modification or
amendment of any term, condition or agreement. Deutsche Bank
also assumed at Hollys direction that the merger would
qualify for federal income tax purposes as a reorganization
under the provisions of Section 368(a) of the Internal
Revenue Code of 1986, as amended. Deutsche Bank also assumed
that all material governmental, regulatory, contractual or other
approvals and consents required in connection with the
53
consummation of the merger would be obtained and that in
connection with obtaining any necessary governmental,
regulatory, contractual or other approvals and consents, no
material restrictions, terms or conditions would be imposed.
Deutsche Bank is not a legal, regulatory, tax or accounting
expert and has relied on the assessments made by Holly and its
advisors with respect to such issues.
The Deutsche Bank opinion was approved and authorized for
issuance by a fairness opinion review committee and was
addressed to, and for the use and benefit of, the board of
directors of Holly. The opinion was limited to the fairness,
from a financial point of view, to the Company of the exchange
ratio. Holly did not ask Deutsche Bank to, and the opinion of
Deutsche Bank did not, address the fairness of the merger, or
any consideration received in connection therewith, to the
holders of any class of securities, creditors or other
constituencies of Holly, nor did it address the fairness of the
contemplated benefits of the merger. Deutsche Bank did not
express any view on, and its opinion did not address, any other
term or aspect of the merger agreement or the merger or any term
or aspect of any other agreement or instrument contemplated by
the merger agreement or entered into or amended in connection
with the merger. Deutsche Bank expressed no opinion as to the
merits of the underlying decision by Holly to engage in the
merger or the relative merits of the merger as compared to any
alternative business strategies, nor did it express an opinion
or recommendation as to how any holder of Holly common stock
should vote with respect to the merger. Deutsche Bank did not
express any view or opinion as to the fairness, financial or
otherwise, of the amount or nature of any compensation payable
to or to be received by any of the officers, directors or
employees of Holly or Frontier, or any class of such persons, in
connection with the merger whether relative to the amounts to be
received by any other person pursuant to the merger agreement or
otherwise. The Deutsche Bank opinion did not in any manner
address the prices at which Holly common stock or Frontier
common stock will trade following the announcement or
consummation of the merger.
Summary of Material Financial Analyses. The
following is a summary of the material financial analyses
contained in the presentation that was made by Deutsche Bank to
the Holly board of directors on February 21, 2011 and that
were used by Deutsche Bank in connection with rendering its
opinion described above. The following summary, however, does
not purport to be a complete description of the financial
analyses performed by Deutsche Bank, nor does the order of
analyses described represent relative importance or weight given
to those analyses by Deutsche Bank. Some of the summaries of the
financial analyses include information presented in tabular
format. The tables must be read together with the full text of
each summary and are alone not a complete description of
Deutsche Banks financial analyses. Except as otherwise
noted, the following quantitative information, to the extent
that it is based on market data, is based on market data as it
existed on or before February 18, 2011, and is not
necessarily indicative of current market conditions.
Historical Exchange Ratio Analysis. Deutsche
Bank reviewed the trading prices of Frontier common stock and
Holly common stock for the period from February 18, 2008
through February 18, 2011. For each trading day during that
period, Deutsche Bank derived the implied historical exchange
ratio by dividing the closing price per share of Frontier common
stock by the closing price per share of Holly common stock. The
following table sets forth the average implied historical
exchange ratios as of February 18, 2011 and for the
specified periods ended February 18, 2011 and the premium
represented by such ratio as compared to the exchange ratio of
0.4811x.
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Premium/(Discount) of
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Implied Historical
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Exchange Ratio to
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Period
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Exchange Ratio
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Implied Historical Exchange Ratio
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Current(1)
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0.5012
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x
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(4.0
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)%
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Adjusted(2)
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0.4962
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x
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(3.0
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)%
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LTM high
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0.5650
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x
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(14.8
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)%
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LTM low
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0.3960
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x
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21.5
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%
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Prior
2-month
period
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0.4363
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x
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10.3
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%
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Prior
6-month
period
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0.4411
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x
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9.1
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%
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Prior 1-year
period
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0.4742
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x
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1.5
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%
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Prior 3-year
period
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0.5662
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x
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(15.0
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)%
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(1) |
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Market data as of February 18, 2011. |
54
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(2) |
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Adjusted for Frontier
catch-up
dividend of $0.28 per share. |
Historical Share Price Analysis. Deutsche Bank
noted that the low and high closing prices per share of Frontier
common stock during the 52-week period ending on
February 18, 2011 were $11.38 and $29.27, respectively.
Deutsche Bank also noted that the low and high closing prices
per share of Holly common stock during the same period were
$23.32 and $61.91, respectively. Deutsche Bank noted that the
range of implied exchange ratios during the 52-week period
ending on February 18, 2011 was 0.3960x to 0.5650x as
compared to the exchange ratio of 0.4811x.
Analyst Price Targets. Deutsche Bank reviewed
the price targets for Frontier common stock prepared and
published by 11 equity research analysts who published price
targets on or after February 1, 2011 and the price targets
for Holly common stock prepared and published by nine equity
research analysts who published price targets on or after
February 1, 2011. These targets reflect each analysts
estimate of the future public market trading price of Frontier
common stock and Holly common stock and are not discounted to
reflect present values.
Deutsche Bank noted that the range of undiscounted equity
analyst price targets of Frontier common stock was between
$19.00 and $33.00 per share and the range of undiscounted equity
analyst price targets of Holly common stock was between $40.00
and $77.00 per share. Deutsche Bank calculated that the implied
exchange ratio based on the price targets of the nine equity
research analysts who published price targets for both Frontier
and Holly ranged from 0.4151x to 0.5167x as compared to the
exchange ratio of 0.4811x.
Selected Companies Analysis. Deutsche Bank
reviewed and compared certain financial information, ratios and
public market multiples for Holly and Frontier to the
corresponding financial information, ratios and public market
multiples for the following publicly traded corporations in the
refining and related sectors (the Selected
Companies):
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Alon USA Energy, Inc.
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CVR Energy, Inc.
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Delek US Holdings, Inc.
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Sunoco, Inc.
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Tesoro Corporation
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Valero Energy Corporation
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Western Refining, Inc.
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Although none of the Selected Companies is directly comparable
to Holly or Frontier, the companies included were chosen because
they are publicly traded companies with operations that for
purposes of analysis may be considered similar to certain
operations of Holly and Frontier.
In its analysis, Deutsche Bank derived and compared multiples
for Frontier, Holly, Hollys refining business on a
standalone basis after removal of certain non-refining
operations (HEP and UNEV pipeline), referred to herein as
Holly Refining, and the Selected Companies,
calculated as follows:
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enterprise value as a multiple of estimated earnings before
interest, taxes, depreciation and amortization, commonly
referred to as EBITDA, for calendar year 2011, which
is referred to below as 2011E EV/EBITDA;
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enterprise value as a multiple of estimated EBITDA for calendar
year 2012, which is referred to below as 2012E
EV/EBITDA;
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|
price per share divided by estimated earnings per share,
commonly referred to as EPS, for calendar year 2011,
which is referred to below as 2011E P/E; and
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price per share divided by estimated EPS for calendar year 2012,
which is referred to below as 2012E P/E.
|
The multiples and ratios for each of the Selected Companies were
calculated using the closing price of the Selected
Companies common stock on February 18, 2011 and were
based on the most recent publicly available
55
information and information from Capital IQ. The multiples and
ratios for Frontier and Holly were calculated using closing
prices per share of Frontier common stock and Holly common stock
on February 18, 2011 and were based on the median estimates
from research analysts who published estimates on or after
February 1, 2011. The multiples and ratios for Holly
Refining were calculated using closing prices per share of Holly
common stock on February 18, 2011 and the median estimates
from research analysts who published estimates on or after
February 1, 2011, subject to certain adjustments to account
for the removal of non-refining operations.
This analysis indicated the following multiples:
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Holly
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Range(1)
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Median(2)
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Frontier
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Holly
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Refining
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|
2011E EV/EBITDA
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4.7x - 7.8x
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5.2x
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5.4x
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6.4x
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4.4x
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2012E EV/EBITDA
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|
4.3x - 6.4x
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5.9x
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6.4x
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7.1x
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5.2x
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2011E P/E(3)
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9.5x - 25.0x
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11.6x
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11.8x
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11.3x
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n/a
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2012E P/E(3)
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|
8.9x - 17.2x
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11.7x
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14.3x
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12.4x
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n/a
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(1) |
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Selected Companies only, excludes Frontier, Holly and Holly
Refining. |
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(2) |
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Median excludes CVR Energy Inc. and Sunoco, Inc. |
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(3) |
|
Range and median exclude Alon USA Energy, Inc. and Holly
Refining. |
Deutsche Bank selected representative ranges of financial
multiples of the selected companies and applied these ranges of
multiples to the relevant Frontier and Holly statistics. This
analysis indicated the following ranges of implied values per
share for Frontier common stock and implied values per share for
Holly common stock:
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Implied Per Share
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Implied Per Share
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Reference Range
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Value for Frontier
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Value for Holly
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|
2011E EV/EBITDA
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|
5.0x - 6.5x
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|
$26.19 - $33.45
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|
$61.41 - $75.22
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2012E EV/EBITDA
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|
5.0x - 6.5x
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|
$22.48 - $28.62
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|
$54.84 - $66.67
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2011E P/E
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|
11.0x - 14.0x
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|
$26.18 - $33.32
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|
$57.13 - $71.84
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2012E P/E
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|
11.5x - 14.5x
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|
$22.66 - $28.57
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|
$52.10 - $65.69
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Deutsche Bank also calculated the exchange ratios implied by
dividing the low end of the implied equity value per share of
Frontier common stock for each financial multiple by the high
end of the implied equity value per share of Holly common stock
for such financial multiple and the exchange ratios implied by
dividing the high end of the implied equity value per share of
Frontier common stock for each multiple by the low end of the
implied equity value per share of Holly common stock for such
financial multiple. This analysis indicated the following range
of implied exchange ratios as compared to the exchange ratio of
0.4811x:
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|
|
Implied Exchange Ratio
|
|
2011E EV/EBITDA
|
|
0.3482x - 0.5447x
|
2012E EV/EBITDA
|
|
0.3371x - 0.5219x
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2011E P/E
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|
0.3644x - 0.5833x
|
2012E P/E
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|
0.3449x - 0.5483x
|
Discounted Cash Flow Analysis. Deutsche Bank
performed a discounted cash flow analysis to determine a range
of implied present values per share of Frontier common stock
based on projected unlevered free cash flows for Frontier on a
standalone basis for the years ending December 31, 2011
through 2015, using estimates from Holly management. The
analysis was based on a range of discount rates from 9.0% to
11.0% and a terminal value based on multiples ranging from 5.0x
to 6.0x applied to Frontiers mid-cycle EBITDA. The
terminal multiple range was based on the average forward-looking
EBITDA multiples for publicly traded corporations in the
refining and related sectors during the period from 2006 to
2010. Frontiers mid-cycle EBITDA was calculated by
applying average product and input pricing spreads and average
crude oil pricing differentials from 2006 to 2010 to
Frontiers
56
forecasted operating configuration. This analysis indicated the
following range of implied per share present values for Frontier
common stock:
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|
|
Holly Management Case
|
|
Holly Management Sensitivity Case 1
|
|
$26.79 - $31.65
|
|
$33.68 - $38.83
|
Deutsche Bank also performed a discounted cash flow analysis to
determine a range of implied present values per share of Holly
common stock based on projected unlevered free cash flows for
Holly on a standalone basis for the years ending
December 31, 2011 through 2015, using estimates from Holly
management and the same methodology described above. This
analysis indicated the following range of implied per share
present values for Holly common stock:
|
|
|
Holly Management Case
|
|
Holly Management Sensitivity Case 1
|
|
$69.93 - $82.24
|
|
$78.81 - $91.52
|
Deutsche Bank also calculated the exchange ratios implied by
dividing the low end of the implied equity value per share of
Frontier common stock by the corresponding high end of the
implied equity value per share of Holly common stock and by
dividing the high end of the implied equity value per share of
Frontier common stock by the corresponding low end of the
implied equity value per share of Holly. This analysis indicated
the following range of implied exchange ratios as compared to
the exchange ratio of 0.4811x:
|
|
|
Holly Management Case
|
|
Holly Management Sensitivity Case 1
|
|
0.3257x - 0.4526x
|
|
0.3680x - 0.4927x
|
Pro Forma Analysis. Deutsche Bank performed an
illustrative pro forma transaction analysis of the potential
financial impact of the merger on Hollys estimated EPS for
fiscal years 2011 and 2012 under various scenarios including
Synergies ranging from $15 to $45 million (of which only
one-half are realized in 2011) and the potential
refinancing or redemption of Frontiers existing bonds. In
this analysis, earnings estimates for Frontier and Holly were
based on Holly management projections and consensus estimates.
Based upon the Holly management estimates, Deutsche Banks
analysis indicated a range of 3.2% dilution to 1.8% accretion in
2011 and a range of 0.3% dilution to 6.5% accretion in 2012.
Based upon the consensus estimates, Deutsche Banks
analysis indicated a range of 2.8% to 7.7% accretion in 2011 and
a range of 0.4% dilution to 6.9% accretion in 2012.
Precedent Merger of Equals Transactions
Analysis. Deutsche Bank reviewed the premiums
paid in 28 transactions announced as merger of
equals transactions with a greater than 40% target
ownership announced between April 22, 1996 and
February 9, 2011. Deutsche Bank then calculated the premium
reflected by the exchange ratio in each transaction over the
average exchange ratio for the 30 days preceding
announcement of the transaction. Deutsche Bank noted that the
mean premium was 4.1%, the median premium was 2.6% and the
premium for the merger was 11%.
General. The preparation of a fairness opinion
is a complex process and is not necessarily susceptible to
partial analysis or summary description. Selecting portions of
the analyses or of the summary set forth above, without
considering the analyses as a whole, could create an incomplete
view of the processes underlying Deutsche Banks opinion.
In arriving at its fairness determination, Deutsche Bank
considered the results of all of its analyses and did not
attribute any particular weight to any factor or analysis
considered by it. Rather, Deutsche Bank made its determination
as to fairness on the basis of experience and professional
judgment after considering the results of all of its analyses.
No company (other than Holly or Frontier) or transaction used in
the above analyses as a comparison is directly comparable to
Holly or Frontier or the merger.
Deutsche Bank prepared these analyses for purposes of providing
its opinion to the Holly board of directors as to the fairness
to Holly from a financial point of view of the exchange ratio of
0.4811 shares of Holly common stock to be issued in the
merger for each share of Frontier common stock. These analyses
do not purport to be appraisals nor do they necessarily reflect
the prices at which businesses or securities actually may be
sold. Analyses based upon forecasts of future results, including
estimates of the Synergies, are not necessarily indicative of
actual future results, which may be significantly more or less
favorable than suggested by these analyses. Because these
analyses are inherently subject to uncertainty, being based upon
numerous factors or events beyond the control of the parties
57
or their respective advisors, none of Holly, Frontier, Deutsche
Bank or any other person assumes responsibility if future
results are materially different from those forecast.
The exchange ratio of 0.4811 shares of Frontier common
stock to be issued in the merger for each share of Holly common
stock was determined through arms-length negotiations
between Holly and Frontier and was approved by the Holly board
of directors. Deutsche Bank provided advice to Holly during
these negotiations. Deutsche Bank did not, however, recommend
any specific exchange ratio to Holly or its board of directors
or that any specific exchange ratio constituted the only
appropriate exchange ratio for the merger.
As described above, the opinion from Deutsche Bank to the Holly
board of directors were one of a number of factors taken into
consideration by the Holly board of directors in making its
determination to approve the merger agreement and the merger.
The foregoing summary does not purport to be a complete
description of the analyses performed by Deutsche Bank in
connection with its fairness opinion and is qualified in its
entirety by reference to the written opinion of Deutsche Bank
included as Annex C.
The Holly board of directors engaged Deutsche Bank as a
financial advisor because it is an internationally recognized
investment banking firm that has substantial experience in
transactions similar to the merger. Pursuant to its engagement
letter with Holly, Deutsche Bank will be paid a transaction fee
of $4,875,000 for its services as financial advisor to Holly in
connection with the merger, a portion of which was paid upon
delivery of its opinion and a substantial portion of which is
payable contingent upon completion of the merger. In addition,
Holly may pay to Deutsche Bank an additional discretionary fee
if Holly so determines in its sole discretion. The engagement
letter also provides that Holly may pay to Deutsche Bank a
discretionary fee upon completion of the merger. Holly also
agreed to reimburse Deutsche Bank for its reasonable and
customary expenses, and to indemnify Deutsche Bank against
certain liabilities, in connection with its engagement.
Deutsche Bank is an affiliate of Deutsche Bank AG (together with
its affiliates, the DB Group). The DB Group may
provide investment banking, commercial banking and other
financial services to Holly, Frontier or their respective
affiliates in the future for which Deutsche Bank would expect
the DB Group to receive customary compensation. In the ordinary
course of business, members of the DB Group may actively trade
in the securities and other instruments and obligations of
Frontier, Holly, or their respective affiliates for their own
accounts and for the accounts of their customers. Accordingly,
the DB Group may at any time hold a long or short position in
such securities, instruments and obligations. At the request of
Holly made in May 2011, a member of the DB Group may act as a
lender under the New Senior Credit Facility described under
The Merger Credit Agreements and receive
customary compensation thereunder.
Certain
Prospective Financial Information Reviewed by Holly
Holly does not as a matter of course make projections as to
future performance available to the public and avoids making
projections for extended periods due to the unpredictability of
the underlying assumptions and estimates. However, in connection
with its evaluation of the proposed merger, certain non-public
financial projections regarding Hollys and Frontiers
anticipated future operations were prepared by Holly for the
years 2011 through 2015. In the case of Hollys projections
of Frontiers future performance, Hollys management
based these projections in part on estimates of certain expected
2011 limited financial and operating data provided by Frontier
to Holly. The projections were reviewed by the Holly board of
directors and provided by management to Hollys financial
advisors in connection with the proposed merger. The projections
were independently prepared by Holly management based on
assumptions that Holly management believed to be reasonable at
the time and were not provided to and were not reviewed by
Frontier or its financial advisors prior to the announcement of
the transaction.
The financial projections were not prepared with a view toward
public disclosure, nor were they prepared with a view toward
compliance with published guidelines of the SEC, the guidelines
established by the American Institute of Certified Public
Accountants for preparation and presentation of financial
projections, or GAAP. In addition, the projections were not
prepared with the assistance of, or reviewed, compiled or
examined by, an independent auditor. Neither Hollys
independent auditors, nor any other independent accountants,
have compiled, examined, or performed any procedures with
respect to the prospective financial information contained
herein, nor have they expressed any opinion or any other form of
assurance on such information or its achievability, and assume
no responsibility for, and disclaim any association with, the
prospective financial information.
58
Earnings for the independent refining industry are highly
volatile. The financial projections were based on numerous
variables and assumptions (including but not limited to those
related to industry performance, competition, general business,
economic, market and financial conditions) that are inherently
uncertain and are beyond the control of Holly and Frontier.
Financial projections for both Holly and Frontier are subject to
many risks and uncertainties, including, but not limited to, the
impact of general economic factors outside Hollys control,
volatility in crack spreads, crude oil differentials and other
operating conditions and other risks and uncertainties relating
to Hollys and Frontiers business (including their
ability to achieve strategic goals, objectives and targets over
applicable periods) and other factors described under
Special Note Regarding Forward-Looking Statements,
all of which are subject to change. The projections also did not
give effect to the merger. As a result, actual results may
differ materially from those contained in the financial
projections.
The inclusion of a summary of the financial projections in this
joint proxy statement/prospectus should not be regarded as an
indication that any of Holly, Frontier or their respective
affiliates, officers, directors or other representatives
consider the financial projections to be necessarily predictive
of actual future events, and the financial projections should
not be relied upon as such. None of Holly, Frontier or their
respective affiliates, officers, directors or other
representatives can give you any assurance that actual results
will not differ materially from the financial projections, and
none of them undertakes any obligation to update or otherwise
revise or reconcile the financial projections to reflect
circumstances existing after the date the financial projections
were generated or to reflect the occurrence of future events,
even in the event that any or all of the assumptions underlying
the projections are shown to be in error. None of Holly,
Frontier or their respective affiliates, officers, directors or
other representatives has made or makes any representation to
any stockholder or other person regarding Hollys or
Frontiers ultimate performance compared to the information
contained in the financial projections or that the projected
results will be achieved. The summary of the financial
projections included below is not being included to influence
your decision whether to vote for the merger and the
transactions contemplated in connection with the merger, but are
being provided because the financial projections were considered
in connection with the merger.
Holly has made no representations to Frontier, and Frontier has
made no representations to Holly, in the merger agreement or
otherwise, concerning the financial projections or the estimates
on which they are based. Holly and Frontier urge all
stockholders to review Hollys and Frontiers most
recent SEC filings for a description of Hollys and
Frontiers reported financial results.
The below projections for Hollys EBITDA, net income and
earnings per share are presented as the results from
Hollys refining segment operations, including the
proportional contribution from UNEV Pipeline, LLC in 2011 (and
assuming a pre-tax gain on the sale of Hollys interest in
UNEV Pipeline, L.L.C. to HEP in 2012), plus Hollys
proportional share of the earnings of HEP. Hollys capital
expenditures exclude the capital expenditures of HEP. In the
below projections for Frontier, the amortization of turn-around
costs is included in depreciation and amortization for the
purposes of calculating EBITDA consistent with Frontiers
financial reporting for fiscal year 2010. In the below
forecasts, operating cash flow of Holly and Frontier is defined
as operating cash flow before the effects of changes in working
capital, other assets and other liabilities. The operating cash
flow of Holly includes the estimated general partner and limited
partner distributions received by Holly from HEP in place of
Hollys proportional share of the earnings of HEP otherwise
included in net income.
Holly
Corporation Projections
(prepared
by Holly Corporation)
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|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
2011E
|
|
2012E
|
|
2013E
|
|
2014E
|
|
2015E
|
|
|
(In millions, except per share data)
|
|
Net income attributable to Holly Corporation stockholders
|
|
$
|
260
|
|
|
$
|
260
|
|
|
$
|
328
|
|
|
$
|
329
|
|
|
$
|
330
|
|
Earnings per share (Diluted shares)
|
|
$
|
4.85
|
|
|
$
|
4.85
|
|
|
$
|
6.11
|
|
|
$
|
6.13
|
|
|
$
|
6.15
|
|
EBITDA
|
|
$
|
558
|
|
|
$
|
567
|
|
|
$
|
678
|
|
|
$
|
682
|
|
|
$
|
686
|
|
Operating cash flow per share (Diluted shares)
|
|
$
|
6.97
|
|
|
$
|
6.79
|
|
|
$
|
8.60
|
|
|
$
|
8.71
|
|
|
$
|
8.83
|
|
Capital expenditures
|
|
$
|
208
|
|
|
$
|
186
|
|
|
$
|
90
|
|
|
$
|
90
|
|
|
$
|
90
|
|
59
Frontier
Oil Corporation Projections
(prepared
by Holly Corporation)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
|
2011E
|
|
|
2012E
|
|
|
2013E
|
|
|
2014E
|
|
|
2015E
|
|
|
|
(In millions, except per share data)
|
|
|
Net income
|
|
$
|
218
|
|
|
$
|
228
|
|
|
$
|
237
|
|
|
$
|
232
|
|
|
$
|
228
|
|
Earnings per share (Diluted shares)
|
|
$
|
2.03
|
|
|
$
|
2.13
|
|
|
$
|
2.21
|
|
|
$
|
2.17
|
|
|
$
|
2.13
|
|
EBITDA
|
|
$
|
500
|
|
|
$
|
526
|
|
|
$
|
524
|
|
|
$
|
524
|
|
|
$
|
524
|
|
Operating cash flow per share (Diluted shares)
|
|
$
|
3.27
|
|
|
$
|
3.47
|
|
|
$
|
3.41
|
|
|
$
|
3.44
|
|
|
$
|
3.48
|
|
Capital expenditures
|
|
$
|
106
|
|
|
$
|
71
|
|
|
$
|
96
|
|
|
$
|
60
|
|
|
$
|
60
|
|
Earnings before interest, taxes, depreciation and amortization,
which Holly refers to as EBITDA, is calculated as net income
plus (i) interest expense, net of interest income,
(ii) income tax provision, and (iii) depreciation and
amortization. EBITDA is not a calculation provided for under
GAAP; however, the amounts included in the EBITDA calculation
are derived from amounts included in our consolidated financial
statements. EBITDA should not be considered as an alternative to
net income or operating income as an indication of our operating
performance or as an alternative to operating cash flow as a
measure of liquidity. EBITDA is not necessarily comparable to
similarly titled measures of other companies. EBITDA is
presented here because it is a widely used financial indicator
used by investors and analysts to measure performance. EBITDA is
also used by Hollys management for internal analysis and
as a basis for financial covenants.
Frontiers
Reasons for the Merger; Recommendation of the Frontier Board of
Directors
In evaluating the merger agreement and the merger, the Frontier
board of directors consulted with members of Frontiers
management, as well as with Frontiers legal and financial
advisors, and also considered a number of factors. The principal
factors that the Frontier board of directors viewed as
supporting its decisions to adopt the merger agreement and
recommend its approval by Frontier shareholders are:
|
|
|
|
|
the expectation that the combined company will create a highly
competitive independent refiner in the U.S., with a refining
capacity of more than 440,000 barrels per day, operating
five refineries in the strategic Mid-Continent, Rocky Mountain
and Southwest refining regions;
|
|
|
|
the operating benefits of the business combination, which will
increase Frontiers current refining capacity by
approximately 135% and will further increase the diversification
of Frontiers refining and marketing operations;
|
|
|
|
the prospective business opportunities of Frontier and Holly on
a combined basis after giving effect to the merger, such as
increased access to fast growing areas with high demand for
refined products as well as flexible supplies of domestic and
Canadian crude oil;
|
|
|
|
the increase in the exchange ratio negotiated by Frontier
management prior to execution of the merger agreement based on
the favorable movement of Frontiers trading price relative
to Hollys trading price, and the fact that the exchange
ratio in the merger is comparable to the historical ratio of
trading prices of the two companies;
|
|
|
|
Frontiers ability under the terms of the merger agreement
to declare a special dividend of $0.28 per share payable to
Frontier shareholders of record on March 7, 2011, prior to
the merger;
|
|
|
|
the fact that Frontier shareholders will own approximately 49%
of the combined company immediately following the effective time
of the merger and will continue to participate in potential
appreciation in equity value of the combined company;
|
|
|
|
the expectation that the combined company will have a strong
balance sheet with a substantial cash position;
|
|
|
|
the expectation that the combined company will have improved
access to capital over the long term with a lower cost of
capital, including equity and debt, based on the anticipated
capital structure of the combined company;
|
60
|
|
|
|
|
the benefits of a larger market capitalization and greater
trading volume and liquidity for the shares of common stock of
the combined company than for Frontier on a stand-alone basis;
|
|
|
|
the expectation that the merger will create a more competitive
company than Frontier might be able to create through organic
growth and capacity enhancements on a standalone basis or
through smaller acquisitions;
|
|
|
|
greater diversification of refining capacity, geographical
locations, customer base, refined products and types of crude
oil feedstocks, allowing for the combined company to be better
positioned in an increasingly competitive industry;
|
|
|
|
the anticipated benefits from the combined companys
investment in HEP, potential growth of the combined company
through expanded business relationships with HEP, and the
potential for increased distributions to the combined company
that may be made with respect to the HEP partner interests;
|
|
|
|
Frontiers managements estimate, consistent with
Hollys managements estimate, that the combination of
Frontier and Holly will create annual cost savings of
approximately $30 million through reduced selling, general
and administrative expenses and increased operational
efficiencies;
|
|
|
|
the benefits of the combined distribution and supply network,
including significant pipeline and other midstream assets that
generate substantial third-party revenues and form an important
part of the combined companys refining operations,
operational infrastructure and geographical reach;
|
|
|
|
the expectation that combining Holly and Frontier will promote
earnings per share accretion (in comparison to Frontier on a
stand-alone basis) through realization of synergies;
|
|
|
|
the expectation that after the merger, the combined company will
maintain a high overall Nelson Complexity of 12.1, remaining at
the top of its peer group;
|
|
|
|
the strategic fit of the two companies, and the business,
financial position, personnel and prospects of the combined
company;
|
|
|
|
the expectation that the combined company will benefit from a
strong and experienced management team at both the corporate and
operating levels, based on the positive track record of the
senior management teams of Frontier and Holly in delivering
industry leading financial and operating performance;
|
|
|
|
the expectation that the combination of Holly and Frontier will
spread risk of unplanned downtime and other operational risks
across the combined companys larger and more diversified
asset base;
|
|
|
|
the fact that the merger will qualify for federal income tax
purposes as a reorganization within the meaning of
Section 368(a) of the Code;
|
|
|
|
the structure of the transaction as a merger of equals,
including the provisions in the merger agreement that preserve
continuity of management and composition of the board of
directors of the combined company; and
|
|
|
|
the separate opinions of Credit Suisse and Citi, each dated
February 21, 2011, to the Frontier board of directors as to
the fairness, from a financial point of view, as of that date
and based upon and subject to the assumptions, procedures,
factors, qualifications and limitations set forth in such
opinions, of the exchange ratio set forth in the merger
agreement to holders of Frontier common stock. See
Opinions of Frontiers Financial
Advisors.
|
In addition to considering the factors described above,
Frontiers board of directors also considered the following
factors:
|
|
|
|
|
its knowledge of Frontiers business, financial condition,
results of operations and prospects, as well as Hollys
business, financial condition, results of operations and
prospects, taking into account the results of Frontiers
due diligence review of Holly;
|
|
|
|
the current and prospective competitive climate in the petroleum
refining and marketing industry in which Holly and Frontier
operate in North America generally and the Southwestern and
Rocky Mountain regions of the United States in particular;
|
61
|
|
|
|
|
the long-term and recent historical trading prices with respect
to shares of Holly common stock and Frontier common stock, and
the equity value of HEP;
|
|
|
|
the fact that the exchange ratio is fixed and will not increase
or decrease based upon changes in the market price of Holly or
Frontier common stock between the date of the merger agreement
and the date of the completion of the merger;
|
|
|
|
the review by the Frontier board of directors, in consultation
with Frontiers advisors, of the structure of the merger
and the terms and conditions of the merger agreement, including
certain reciprocal provisions that may have the effect of
discouraging alternative acquisition proposals involving
Frontier or Holly;
|
|
|
|
|
|
the fact that the merger agreement does not preclude a third
party from making an unsolicited proposal for a competing
transaction with Holly or Frontier and, that under certain
circumstances more fully described in the sections The
Merger Agreement No Solicitation of Alternative
Proposals beginning on page 97 and The Merger
Agreement Changes in Board Recommendations
beginning on page 98, Holly or Frontier, as applicable, may
furnish non-public information to and enter into discussions
with such third party regarding the competing transaction and
the Holly or Frontier board, as applicable, may withdraw or
modify its recommendations to Holly or Frontier stockholders
regarding the merger;
|
|
|
|
|
|
the fact that completion of the merger is subject to the
negotiation of suitable financing or refinancing for the
combined company in the form of a new bank facility, and
|
|
|
|
the likelihood of completing the merger on the anticipated
schedule.
|
The Frontier board of directors weighed the foregoing against a
number of potentially negative factors, including:
|
|
|
|
|
the challenges inherent in combining the businesses, operations
and workforces of two oil refining companies, including:
(1) unforeseen difficulties in integrating operations and
systems, (2) the possible diversion of management focus and
resources from operational matters and other strategic
opportunities for an extended period of time and (3) costs
and difficulties of relocating headquarters personnel, systems
and operations to Dallas;
|
|
|
|
the fact that forecasts of future results of operations and
synergies are necessarily estimates based on assumptions, and
the potential that anticipated operational synergies, cost
savings and other anticipated benefits might not be realized,
and the potential that Frontiers business could be more
profitable to shareholders on a standalone basis going forward
than as a combined company if benefits are not realized;
|
|
|
|
the substantial costs to be incurred in connection with the
merger, including the substantial cash and other costs of
integrating the businesses of Frontier and Holly, as well as the
transaction expenses arising from the merger;
|
|
|
|
the potential effect of the merger on Frontiers business
and relationships with employees, customers, suppliers,
regulators and the communities in which it operates;
|
|
|
|
the risk that governmental entities may not approve the merger
or may impose conditions on Frontier or Holly in order to gain
approval for the merger that may adversely impact the operations
and financial results of the combined company;
|
|
|
|
the risk that certain key members of senior management might
choose not to remain employed with Frontier prior to the
completion of the merger or with the combined company after the
merger, especially in view of the relocation of the headquarters
to Dallas;
|
|
|
|
the terms of the merger agreement, including generally
reciprocal covenants relating to the two companies conduct
of their respective businesses during the period between the
signing of the merger agreement and the completion of the
merger, which might have the result of limiting Frontiers
business activities;
|
|
|
|
the terms of the merger agreement relating to non-solicitation
provisions and
break-up
fees, and the potential that such provisions might deter
alternative bidders that might have been willing to pay more for
the shares of Frontier common stock than Frontier is receiving
under the merger agreement;
|
62
|
|
|
|
|
the fact that Frontier did not actively seek other bids or
perform a market check with other prospective buyers after
negotiating the terms of the transaction with Holly;
|
|
|
|
the possibility that the merger might not be completed, or that
completion might be unduly delayed, for reasons beyond
Frontiers
and/or
Hollys control and the potential negative impact of any
such delay on Frontiers business and relationships with
employees, customers, suppliers, regulators and the communities
in which it operates; and
|
|
|
|
|
|
the risks of the type and nature described under Risk
Factors, beginning on page 18, including risks
related to operations, environmental matters and potential
litigation, and the matters described under Special Note
Regarding Forward-Looking Statements beginning on
page 17.
|
The Frontier board of directors also was apprised of certain
interests in the merger of executive officers and the directors
that may be different from, or in addition to, the interests of
Frontier shareholders generally as discussed in
Interests of Frontier Directors and Executive
Officers in the Merger.
This discussion of the information and factors considered by
Frontiers board of directors in reaching its conclusions
and recommendation includes the principal factors considered by
the board, but is not intended to be exhaustive. In view of the
wide variety of factors considered in connection with its
evaluation of the merger and the complexity of these matters,
Frontiers board of directors did not find it practicable,
and did not attempt, to quantify, rank or assign any relative or
specific weights to the various factors that it considered in
reaching its determination to approve the merger agreement and
to recommend that Frontier shareholders vote in favor of the
proposal to approve the merger agreement. The Frontier board of
directors conducted an overall review of the factors described
above, including discussions with Frontiers management and
outside legal and financial advisors regarding certain of the
matters described above. In considering the factors described
above, individual members of the Frontier board of directors may
have given differing weights to different factors.
The Frontier board of directors unanimously adopted the
merger agreement and determined that the merger agreement and
the transactions contemplated thereby, including the merger, are
in the best interests of Frontier and its shareholders. The
Frontier board of directors unanimously recommends that Frontier
shareholders vote FOR the proposal to approve the
merger agreement.
Opinions
of Frontiers Financial Advisors
Opinion
of Credit Suisse Securities (USA) LLC
On February 21, 2011, Credit Suisse rendered its oral
opinion to the Frontier Board (which was subsequently confirmed
in writing by delivery of Credit Suisses written opinion
dated the same date) to the effect that, as of February 21,
2011, the exchange ratio in the merger was fair, from a
financial point of view, to the holders of Frontier common stock.
Credit Suisses opinion was directed to the Frontier
Board and only addressed the fairness, from a financial point of
view, to the holders of Frontier common stock of the exchange
ratio in the merger and did not address any other aspect or
implication of the merger. The summary of Credit Suisses
opinion in this joint proxy statement/prospectus is qualified in
its entirety by reference to the full text of its written
opinion, which is included as Annex D to this joint proxy
statement/prospectus and sets forth the procedures followed,
assumptions made, qualifications and limitations on the review
undertaken and other matters considered by Credit Suisse in
preparing its opinion. However, neither Credit Suisses
written opinion nor the summary of its opinion and the related
analyses set forth in this joint proxy statement/prospectus is
intended to be, and they do not constitute, advice or a
recommendation to any holder of Frontier common stock as to how
such stockholder should vote or act with respect to any matter
relating to the merger.
In arriving at its opinion, Credit Suisse:
|
|
|
|
|
reviewed a draft, dated February 21, 2011, of the Merger
Agreement;
|
|
|
|
reviewed certain publicly available business and financial
information relating to Frontier and Holly;
|
63
|
|
|
|
|
reviewed certain other information relating to Frontier,
including certain financial forecasts and operating data,
provided to Credit Suisse by the management of Frontier;
|
|
|
|
reviewed certain other information relating to Holly, including
estimates with respect to certain prospective financial and
operating data provided to Credit Suisse by the management of
Holly and certain financial forecasts developed from such
estimates based on assumptions provided by and discussions with
the management of Frontier;
|
|
|
|
met with certain members of the management of Frontier and Holly
to discuss the business and prospects of Frontier and Holly,
respectively;
|
|
|
|
considered certain financial data, operating data, and stock
market data of Frontier and Holly and their publicly traded
common stock, and compared that data with similar data for other
companies with publicly traded common stock in businesses that
Credit Suisse deemed similar to those of Frontier and Holly;
|
|
|
|
considered, to the extent publicly available, the financial
terms of certain other business combinations and other
transactions which have recently been effected or announced;
|
|
|
|
considered such other information, financial studies, analyses
and investigations and financial, economic and market criteria
which Credit Suisse deemed relevant.
|
In connection with its review, Credit Suisse did not
independently verify any of the foregoing information and Credit
Suisse assumed and relied upon such information being complete
and accurate in all material respects. With respect to the
financial forecasts for Frontier that Credit Suisse used in its
analyses, the management of Frontier advised Credit Suisse, and
Credit Suisse assumed, that such forecasts were reasonably
prepared on bases reflecting the best available estimates and
judgments of Frontiers management as to the future
financial performance of Frontier, and Credit Suisse expressed
no opinion with respect to such projections or the assumptions
on which they were based. With respect to the financial
forecasts for Holly that Credit Suisse used in its analyses, the
management of Frontier advised Credit Suisse, and Credit Suisse
assumed, that such forecasts were reasonably prepared on bases
reflecting the best available estimates and judgments of
Frontiers management as to the future financial
performance of Holly and were a reasonable basis on which to
evaluate Holly, and Credit Suisse expressed no opinion with
respect to such projections or the assumptions on which they
were based. With respect to the estimates provided to Credit
Suisse by the management of Frontier with respect to the cost
savings and synergies anticipated to result from the Merger,
Credit Suisse was advised by the management of Frontier, and
Credit Suisse assumed, that such forecasts were reasonably
prepared on bases reflecting the best available estimates and
judgments of the management of Frontier as to such cost savings
and synergies and that such cost savings and synergies would be
realized in the amounts and the times indicated. Credit Suisse
assumed, with Frontiers consent, that the Merger would be
treated as a tax-free reorganization for federal income tax
purposes. Credit Suisse also assumed, with Frontiers
consent, that, in the course of obtaining any regulatory or
third party consents, approvals or agreements in connection with
the Merger, no delay, limitation, restriction or condition would
be imposed that would have an adverse effect on Frontier, Holly
or the contemplated benefits of the Merger and that the Merger
would be consummated in accordance with the terms of the Merger
Agreement without waiver, modification or amendment of any
material term, condition or agreement thereof. Furthermore,
Credit Suisse assumed that the definitive Merger Agreement would
conform to the draft reviewed by Credit Suisse in all respects
material to its analyses. In addition, Credit Suisse was not
requested to make, and did not make, an independent evaluation
or appraisal of the assets or liabilities (contingent or
otherwise) of Frontier or Holly, nor was Credit Suisse furnished
with any such evaluations or appraisals, and Credit Suisse
assumed with Frontiers consent, that any such contingent
liabilities (including any environmental liabilities) would not
be material to its analyses or opinion. With Frontiers
consent, Credit Suisse further assumed that any alternative
structures considered by Frontier and Holly to effect the
business combination contemplated by the Merger Agreement would
not materially affect its analyses or opinion and that prior to
the consummation of the Merger, Frontier would declare and pay a
special dividend to holders of Frontier common stock to the
extent permitted by the Merger Agreement.
Credit Suisses opinion addressed only the fairness, from a
financial point of view, to the holders of Frontier common stock
of the exchange ratio in the merger and did not address any
other aspect or implication of the merger or any other
agreement, arrangement or understanding entered into in
connection with the merger or otherwise,
64
including, without limitation, the fairness of the amount or
nature of, or any other aspect relating to, any compensation to
any officers, directors or employees of any party to the merger,
or class of such persons, relative to the exchange ratio or
otherwise. Furthermore, no opinion, counsel or interpretation
was intended regarding matters that require legal, regulatory,
accounting, insurance, tax, executive compensation environmental
or other similar professional advice. It was assumed that such
opinions, counsel, interpretations or advice had been or would
be obtained from the appropriate professional sources. The
issuance of Credit Suisses opinion was approved by an
authorized internal committee of Credit Suisse.
Credit Suisses opinion was necessarily based upon
information made available to Credit Suisse as of the date of
its opinion and financial, economic, market and other conditions
as they existed and could be evaluated on the date of its
opinion. In addition, as the Frontier Board was aware, the
financial projections and estimates that Credit Suisse reviewed
relating to the future financial performance of Frontier and
Holly reflected certain assumptions regarding the oil and gas
and petroleum refining industries that are subject to
significant volatility and that, if different than assumed,
could have a material impact on Credit Suisses analyses
and opinion. Credit Suisse did not express any opinion as to
what the value of shares of Holly common stock actually would be
when issued to holders of Frontier common stock pursuant to the
merger or the prices at which shares of Holly common stock or
Frontier common stock would trade at any time. Credit
Suisses opinion did not address the relative merits of the
merger as compared to alternative transactions or strategies
that might be available to Frontier, nor did it address the
underlying business decision to proceed with the merger. Credit
Suisse was not requested to, and did not, solicit third party
indications of interest in acquiring all or any part of Frontier.
It is understood that Credit Suisses opinion was for the
information of the Frontier Board (solely in its capacity as
such), in connection with its consideration of the merger and
does not constitute advice or a recommendation to any holder of
Frontier common stock as to how such stockholder should vote or
act on any matter relating to the proposed merger.
In preparing its opinion to the Frontier Board, Credit Suisse
performed a variety of analyses, including those described
below. The summary of Credit Suisses valuation analyses is
not a complete description of the analyses underlying Credit
Suisses opinion. The preparation of a fairness opinion is
a complex process involving various quantitative and qualitative
judgments and determinations with respect to the financial,
comparative and other analytic methods employed and the
adaptation and application of those methods to the unique facts
and circumstances presented. As a consequence, neither Credit
Suisses opinion nor the analyses underlying its opinion
are readily susceptible to partial analysis or summary
description. Credit Suisse arrived at its opinion based on the
results of all analyses undertaken by it and assessed as a whole
and did not draw, in isolation, conclusions from or with regard
to any individual analysis, analytic method or factor.
Accordingly, Credit Suisse believes that its analyses must be
considered as a whole and that selecting portions of its
analyses, analytic methods and factors, without considering all
analyses and factors or the narrative description of the
analyses, could create a misleading or incomplete view of the
processes underlying its analyses and opinion.
In performing its analyses, Credit Suisse considered business,
economic, industry and market conditions, financial and
otherwise, and other matters as they existed on, and could be
evaluated as of, the date of its opinion. No company or business
used in Credit Suisses analyses for comparative purposes
is identical to Frontier, Holly or the proposed transaction.
While the results of each analysis were taken into account in
reaching its overall conclusion with respect to fairness, Credit
Suisse did not make separate or quantifiable judgments regarding
individual analyses. The implied exchange ratio reference ranges
indicated by Credit Suisses analyses are illustrative and
not necessarily indicative of actual values nor predictive of
future results or values, which may be significantly more or
less favorable than those suggested by the analyses. In
addition, any analyses relating to the value of assets,
businesses or securities do not purport to be appraisals or to
reflect the prices at which businesses or securities actually
may be sold, which may depend on a variety of factors, many of
which are beyond Frontiers control, Hollys control
and the control of Credit Suisse. Much of the information used
in, and accordingly the results of, Credit Suisses
analyses are inherently subject to substantial uncertainty.
Credit Suisses opinion and analyses were provided to the
Frontier Board in connection with its consideration of the
proposed merger and were among many factors considered by the
Frontier Board in evaluating the proposed
65
merger. Neither Credit Suisses opinion nor its analyses
were determinative of the exchange ratio or of the views of the
Frontier Board with respect to the proposed merger.
The following is a summary of the material valuation analyses
performed in connection with Credit Suisses opinion
rendered to the Frontier Board on February 21, 2011. The
analyses summarized below include information presented in
tabular format. The tables alone do not constitute a complete
description of the analyses. Considering the data in the tables
below without considering the full narrative description of the
analyses, as well as the methodologies underlying, and the
assumptions, qualifications and limitations affecting, each
analysis, could create a misleading or incomplete view of Credit
Suisses analyses.
For purposes of its analyses, Credit Suisse reviewed a number of
financial metrics including:
|
|
|
|
|
Enterprise Value generally the value as of a
specified date of the relevant companys outstanding equity
securities (taking into account its options and other
outstanding convertible securities) plus the value as of such
date of its net debt (the value of its outstanding indebtedness,
preferred stock and capital lease obligations less the amount of
cash on its balance sheet).
|
|
|
|
EBITDA generally the amount of the relevant
companys earnings before interest, taxes, depreciation and
amortization for a specified time period.
|
|
|
|
LP Distributed Cash Flow generally the amount
of the relevant partnerships operating cash flow for a
specified time period that is distributed to its limited
partners.
|
|
|
|
GP Distributed Cash Flow generally the amount
of the relevant partnerships operating cash flow derived
from its general partner interests and incentive distribution
rights in the underlying master limited partnership(s) for a
specified time period that is distributed to its limited
partners.
|
Unless the context indicates otherwise, share prices for the
selected companies used in the Selected Companies Analysis
described below were as of February 18, 2011. Estimates of
financial performance for Frontier for the calendar years ending
December 31, 2011 to 2015 were based on financial
information provided by Frontier management. Estimates of
financial performance for Holly for the calendar years ending
December 31, 2011 to 2015 were based on financial and
operating data provided by Holly management and financial
forecasts developed from such data based on assumptions provided
by and discussed with Frontier management which the management
of Frontier advised Credit Suisse, and Credit Suisse assumed,
were reasonably prepared on bases reflecting the best available
estimates and judgments of Frontiers management as to the
future financial performance of Holly and were a reasonable
basis on which to evaluate Holly. Estimates of financial
performance for the selected companies listed below for the
calendar year ending during calendar year 2011 were based on
publicly available research analyst estimates for those
companies.
Selected
Companies Analyses
Selected
Companies Analysis Holly
Credit Suisse separately considered certain financial data for
Hollys refining business, its limited partnership
interests in HEP and its general partner interests HEP and
selected refining companies or businesses, master limited
partnerships and general partners with publicly traded equity
securities Credit Suisse deemed relevant.
The financial data reviewed for Holly included:
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For its refining business, Enterprise Value as a multiple of CY
2011E EBITDA and CY 2012E EBITDA
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For its limited partnership interests in HEP, Current and CY
2011E LP Distributed Cash Flow Yields; and
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For its general partnership interest in HEP, Current and CY
2011E GP Distributed Cash Flow Yields.
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The selected company refining businesses with publicly traded
equity securities reviewed for Holly were the refining
businesses of:
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Valero Energy Corporation;
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Sunoco, Inc.;
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66
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Tesoro Corporation;
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Western Refining, Inc.; and
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CVR Energy, Inc.;
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The selected company master limited partnerships with publicly
traded equity securities reviewed for Holly were:
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Magellan Midstream Partners, L.P.;
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Buckeye Partners, L.P.;
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NuStar Energy L.P.;
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Sunoco Logistics Partners L.P.;
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Genesis Energy, L.P.; and
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TransMontaigne Partners L.P.
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The selected company general partners with publicly traded
equity securities reviewed for Holly were:
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Kinder Morgan, Inc.;
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Energy Transfer Equity, L.P.;
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Alliance Holdings GP, L.P.;
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NuStar GP Holdings, LLC;
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Targa Resources Corp.;
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Crosstex Energy, Inc.; and
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Atlas Energy, L.P.
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The selected companies analysis for Holly utilizing the selected
company refining companies, businesses, master limited
partnerships and general partners with publicly traded equity
securities indicated the following multiple and yield reference
ranges for Holly and its general and limited partnership
interests in HEP as of February 18, 2011, the most recent
date for which stock market data was available prior to the
meeting of the Frontier Board on February 21, 2011:
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Mean
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-
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Median
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Refining Business
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Enterprise Value as a multiple of 2011E EBITDA
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6.1x
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-
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5.5x
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Enterprise Value as a multiple of 2012E EBITDA
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5.4x
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-
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5.2x
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HEP LP Interest Owned by Holly
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Current Distributed Cash Flow Yield
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5.7%
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-
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5.8%
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2011E Distributed Cash Flow Yield
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5.9%
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-
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6.1%
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HEP GP Interests Owned by Holly
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Current Distributed Cash Flow Yield
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4.1%
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-
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3.8%
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2011E Distributed Cash Flow Yield
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4.5%
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-
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4.2%
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Selected
Companies Analysis Frontier
Credit Suisse considered certain financial data for Frontier and
selected companies, or for the refining businesses of selected
companies, with publicly traded equity securities Credit Suisse
deemed relevant.
The financial data reviewed for Frontier included:
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Enterprise Value as a multiple of CY 2011E EBITDA; and
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67
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Enterprise Value as a multiple of CY 2012E EBITDA;
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With respect to the selected companies analysis for Frontier,
the selected refining companies or companies with refining
businesses with publicly traded equity securities were:
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Valero Energy Corporation;
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Sunoco, Inc.;
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Tesoro Corporation;
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Western Refining, Inc.; and
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CVR Energy, Inc.;
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The selected companies analysis for Frontier indicated the
following multiple reference ranges for the selected companies,
or refining businesses of such companies, with publicly traded
equity securities and for Frontier as of February 18, 2011,
the most recent date for which stock market data was available
prior to the meeting of the Frontier Board on February 21,
2011:
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Mean
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-
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Median
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Enterprise Value as a multiple of 2011E EBITDA
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6.1x
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-
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5.5x
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Enterprise Value as a multiple of 2012E EBITDA
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5.4x
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-
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5.2x
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Selected
Companies Analysis
For purposes of calculating an implied exchange ratio reference
range (i) in analyzing Holly, Credit Suisse applied
multiple ranges based on the selected refining companies or
business analysis for Holly to corresponding financial data for
Hollys refining business; the selected companies master
limited partnerships to corresponding financial data for
Hollys limited partnership interests in HEP; and the
selected companies general partners to corresponding financial
data for Hollys general partnership interests in HEP based
on, in each case, financial forecasts developed from estimates
based on prospective financial and operating data provided to
Credit Suisse by the management of Holly and based on
assumptions provided by and discussions with the management of
Frontier, and (ii) in analyzing Frontier, Credit Suisse
applied multiple ranges based on the selected companies analysis
for Frontier to corresponding financial data for Frontier based
on Frontiers management forecasts. The selected companies
analyses for Holly and Frontier indicated an implied exchange
ratio reference range of 0.383 to 0.524 of a share of Holly
common stock per share of Frontier common stock, as compared to
the exchange ratio in the proposed merger of 0.4811 of a share
of Holly common stock per share of Frontier common stock.
Discounted
Cash Flow Analysis
Credit Suisse also calculated implied exchange ratio reference
ranges based on the net present value of Hollys free cash
flows through 2015 and the net present value of Frontiers
free cash flows through 2015. For purposes of this analysis,
Credit Suisse used the financial forecasts for Holly developed
based on assumptions provided by and discussions with the
management of Frontier from estimates of prospective financial
and operating data provided to Credit Suisse by the management
of Holly and the financial forecasts for Frontier provided by
the management of Frontier. In performing this analysis, Credit
Suisse applied discount rates ranging from 9.0% to 11.5% and
terminal EBITDA multiples of 6.50x to 7.50x to the projected
unlevered free cash flows from Hollys refining business;
discount rates ranging from 7.5% to 9.5% and terminal LP
distributed cash flow yields of 6.75% to 7.25% to the projected
levered free cash flows from Hollys limited partnership
interests in HEP; and discount rates ranging from 12.0% to 14.0%
and terminal GP distributed cash flow yields of 4.75% to 6.00%
to the projected levered free cash flows from Hollys
general partnership interests in HEP, respectively. With respect
to Frontier, in performing this analysis, Credit Suisse applied
discount rates ranging from 9.0% to 11.5% and terminal EBITDA
multiples of 6.50x to 7.50x to Frontiers projected
unlevered free cash flows. This analysis indicated an implied
exchange ratio reference range of 0.348 to 0.499 of a share of
Holly common stock per share of Frontier common stock, as
compared to the exchange ratio in the proposed merger of 0.4811
of a share of Holly common stock per share of Frontier common
stock.
68
Contribution
Analysis
Credit Suisse calculated the relative contributions of Frontier
and Holly to the combined businesses forecasted Adjusted
EBITDA, Adjusted refining EBITDA and Net Income for the calendar
years 2010, 2011 and 2012, based on, with respect to Holly,
financial forecasts developed from estimates based on
prospective financial and operating data provided to Credit
Suisse by the management of Holly and based on assumptions
provided by and discussions with the management of Frontier and
based on, with respect to Frontier, Frontiers management
forecasts, to calculated an implied exchange ratio reference
range of 0.182 to 0.501 of a share of Holly common stock per
share of Frontier common stock, as compared to the exchange
ratio in the proposed merger of 0.4811 of a share of Holly
common stock per share of Frontier common stock.
Other
Information
Historical
Trading Ratios
Credit Suisse also noted the following historical average
trading price ratios as of February 18, 2011, as compared
to the exchange ratio provided for in the merger of 0.4811 of a
share of Holly common stock per share of Frontier common stock:
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Exchange Ratio
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Average Closing
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as Premium/
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Average Closing Stock Price
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Stock Price
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(Discount) to
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Frontier
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Holly
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Trading Ratio
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Trading Ratio
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As of February 18, 2011
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28.12
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56.11
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0.5012
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(4.0
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)%
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3 trading days prior
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28.33
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58.92
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0.4813
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(0.0
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)%
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5 trading days prior
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27.45
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58.81
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0.4669
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3.0
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%
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10 trading days prior
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25.59
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57.33
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0.4458
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7.9
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%
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15 trading days prior
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24.26
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55.21
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0.4385
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9.7
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%
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20 trading days prior
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22.87
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52.54
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0.4338
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10.9
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%
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30 trading days prior
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21.36
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49.17
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0.4332
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11.1
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%
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3 months prior
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18.99
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43.35
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0.4380
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9.8
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%
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6 months prior
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16.11
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36.62
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0.4410
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9.1
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%
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1 year prior
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14.83
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31.69
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0.4742
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1.5
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%
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2 years prior
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14.23
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27.83
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0.5266
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(8.6
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)%
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3 years prior
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16.21
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29.00
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0.5660
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(15.0
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)%
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Other
Matters
Frontier retained Credit Suisse as its financial advisor in
connection with the proposed merger based on Credit
Suisses qualifications, experience and reputation as an
internationally recognized investment banking and financial
advisory firm. Credit Suisse will receive an aggregate fee of
$5 million for its services, a substantial portion of which
is contingent upon completion of the merger. Frontier also has
agreed to reimburse Credit Suisse for reasonable expenses
incurred by Credit Suisse in performing its services, including
reasonable fees and expenses of its legal counsel, and to
indemnify Credit Suisse and related persons against liabilities,
including liabilities under the federal securities laws, arising
out of or related to its engagement.
Credit Suisse and its affiliates have in the past provided
investment banking and other financial services to Frontier and
its affiliates for which Credit Suisse and its affiliates have
received compensation, including having acted as the dealer
manager in connection with an offer to purchase certain of its
outstanding senior notes by the Company in 2010 and having acted
as a joint bookrunning lead managing underwriter in connection
with the public offering of certain senior notes by the Company
in 2010. Credit Suisse and its affiliates also have in the past
provided investment banking and other financial services to
Holly and its affiliates, including having acted as a financial
advisor to Holly in connection with a proposed business
combination with Frontier in 2003 that was not consummated.
Credit Suisse and its affiliates may have provided other
financial advice and services, and may in the future provide
financial advice and services, to Frontier, Holly and their
respective affiliates for which Credit Suisse
69
and its affiliates have received, and would expect to receive,
compensation. Credit Suisse is a full service securities firm
engaged in securities trading and brokerage activities as well
as providing investment banking and other financial services. In
the ordinary course of business, Credit Suisse and its
affiliates may acquire, hold or sell, for its and its affiliates
own accounts and the accounts of customers, equity, debt and
other securities and financial instruments (including bank loans
and other obligations) of Frontier, Holly and any other company
that may be involved in the merger, as well as provide
investment banking and other financial services to such
companies. At the request in May 2011 of Frontier, Credit Suisse
or one of its affiliates may act as a lender under the New
Senior Credit Facility described under The
Merger Credit Agreements and receive customary
compensation thereunder.
Opinion
of Citigroup Global Markets Inc.
Frontier has retained Citi as a financial advisor in connection
with the merger. In connection with this engagement, Frontier
requested that Citi evaluate the fairness, from a financial
point of view, to holders of Frontier common stock of the
exchange ratio provided for in the merger agreement. On
February 21, 2011, at a meeting of Frontiers board of
directors at which the merger was approved, Citi rendered to
Frontiers board an oral opinion, confirmed by delivery of
a written opinion dated February 21, 2011, to the effect
that, as of that date and based on and subject to the matters
described in its opinion, the exchange ratio was fair, from a
financial point of view, to holders of Frontier common stock.
The full text of Citis written opinion, dated
February 21, 2011, which describes the assumptions made,
procedures followed, matters considered and limitations on the
review undertaken, is attached to this joint proxy
statement/prospectus as Annex E and is incorporated into
this joint proxy statement/prospectus by reference. The
description of Citis opinion set forth in this joint proxy
statement/prospectus is qualified in its entirety by reference
to the full text of Citis opinion. Citis opinion
was provided for the information of Frontiers board of
directors (in its capacity as such) in connection with its
evaluation of the exchange ratio from a financial point of view
and did not address any other aspects or implications of the
merger. Citi expressed no view as to, and its opinion did not
address, the underlying business decision of Frontier to effect
the merger, the relative merits of the merger as compared to any
alternative business strategies that might exist for Frontier or
the effect of any other transaction in which Frontier might
engage. Citis opinion is not intended to be and does not
constitute a recommendation to any shareholder as to how such
shareholder should vote or act on any matters relating to the
proposed merger or otherwise.
In arriving at its opinion, Citi:
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reviewed the merger agreement;
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held discussions with certain senior officers, the board of
directors and other representatives and advisors of Frontier and
certain senior officers and other representatives and advisors
of Holly concerning the business, operations and prospects of
Frontier and the business, operations and prospects of Holly,
including Hollys 32% limited partnership interest and 2%
general partnership interest in HEP;
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reviewed certain publicly available business and financial
information relating to Frontier and Holly;
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|
reviewed certain financial forecasts and other information and
data relating to Frontier and Holly provided to or discussed
with Citi by the respective managements of Frontier and Holly,
including certain information relating to dividend payments and
information regarding potential strategic implications and
operational benefits (including amount, timing and
achievability) anticipated by the management of Frontier to
result from the merger;
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reviewed the financial terms of the merger as set forth in the
merger agreement in relation to, among other things, current and
historical market prices and trading volumes of Frontier common
stock, Holly common stock and HEPs limited partnership
units, Frontiers and Hollys historical and projected
earnings and other operating data and Frontiers and
Hollys capitalization and financial condition;
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analyzed certain financial, stock market and other publicly
available information relating to the businesses of other
companies whose operations Citi considered relevant in
evaluating those of Frontier and Holly;
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70
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reviewed, to the extent publicly available, the financial terms
of certain other transactions involving refining
companies; and
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conducted such other analyses and examinations and considered
such other information and financial, economic and market
criteria as Citi deemed appropriate in arriving at its opinion.
|
In rendering its opinion, Citi assumed and relied, without
independent verification, upon the accuracy and completeness of
all financial and other information and data publicly available
or provided to or otherwise reviewed by or discussed with Citi
and upon the assurances of the managements of Frontier and Holly
that they were not aware of any relevant information that was
omitted or remained undisclosed to Citi. As discussed, Citi
considered the selected precedent transactions that it reviewed
to lack sufficient comparability due to various factors and
circumstances that distinguished the proposed merger from such
transactions and, accordingly, did not perform a selected
precedent transactions analysis in reaching its opinion. Also as
Frontier was aware, Citi was not provided with internal
financial forecasts relating to Holly prepared by its management
other than certain operating data and other estimates and,
accordingly, Citi was directed by Frontier to utilize financial
forecasts relating to Holly derived from such operating data,
estimates and other assumptions prepared by Frontiers
management in performing its analyses. With respect to financial
forecasts and other information and data relating to Frontier
and Holly provided to or otherwise reviewed by or discussed with
Citi, including with respect to dividend payments and as to
strategic implications and operational benefits resulting from
the merger, Citi was advised by the managements of Frontier and
Holly, and Citi assumed, with Frontiers consent, that they
were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the managements of Frontier
and Holly, as the case may be, as to the future financial
performance of Frontier and Holly, such strategic implications
and operational benefits and the other matters covered thereby.
Citi also assumed, with Frontiers consent, that the
financial results reflected in such financial forecasts and
other information and data would be realized in the amounts and
at the times projected. Citi relied, at Frontiers
direction, upon the assessments of Frontiers management as
to market and cyclical trends and prospects relating to the
energy industry and the potential impact of such trends and
prospects on Frontier and Holly, including the assumptions of
Frontiers management as to future crude oil, refined
products and other commodity prices reflected in the financial
forecasts and other information and data utilized in Citis
analyses, which prices are subject to significant volatility and
which, if different than as assumed, could have a material
impact on Citis analyses or opinion. Citi assumed, at
Frontiers direction, that there would be no developments
with respect to any of the foregoing that would be material to
Citis analyses or opinion.
Citi did not make, and it was not provided with, an independent
evaluation or appraisal of the assets or liabilities, contingent
or otherwise, of Frontier, Holly or any other entity, and Citi
did not make any physical inspection of the properties or assets
of Frontier, Holly or any other entity. In addition, Citi
assumed, with Frontiers consent, that there were no
material undisclosed liabilities of Frontier or Holly for which
appropriate reserves or other provisions had not been made. Citi
also assumed, with Frontiers consent, that the merger
would be consummated in accordance with its terms without
waiver, modification or amendment of any material term,
condition or agreement, in the course of obtaining the necessary
regulatory or third party approvals, consents, releases and
waivers for the merger, no delay, limitation, restriction or
condition would be imposed that would have an adverse effect on
Frontier, Holly or the contemplated benefits of the merger and
no such adverse effect would result in the event that the merger
is effected through an alternative structure as permitted under
the terms of the merger agreement. Citi further assumed, with
Frontiers consent, that the merger would qualify for
federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code. Citis opinion
relates to the relative values of Frontier and Holly. Citi did
not express any opinion as to what the value of Holly common
stock actually would be when issued pursuant to the merger or
the prices at which Frontier common stock or Holly common stock
would trade at any time.
Citis opinion did not address any terms (other than the
exchange ratio to the extent expressly specified in its opinion)
or other aspects or implications of the merger, including,
without limitation, the form or structure of the merger or any
other agreement, arrangement or understanding to be entered into
in connection with or contemplated by the merger or otherwise.
Citi was not requested to, and it did not, solicit third-party
indications of interest in the possible acquisition of all or a
part of Frontier. Citi expressed no view as to, and its opinion
did not address, the fairness (financial or otherwise) of the
amount or nature or any other aspect of any compensation to any
officers, directors or employees of any parties to the merger,
or any class of such persons, relative to the exchange ratio or
71
otherwise. Citis opinion was necessarily based on
information available to Citi, and financial, stock market and
other conditions and circumstances existing and disclosed to
Citi, as of the date of its opinion. As Frontier was aware, the
credit, financial and stock markets have been experiencing
unusual volatility and Citi expressed no opinion or view as to
any potential effects of such volatility on Frontier, Holly or
the contemplated benefits of the merger. Except as described in
this summary, Frontier imposed no other instructions or
limitations on Citi with respect to the investigations made or
procedures followed by Citi in rendering its opinion.
In preparing its opinion, Citi performed a variety of financial
and comparative analyses, including those described below. This
summary of the analyses is not a complete description of
Citis opinion or the analyses underlying, and factors
considered in connection with, Citis opinion. The
preparation of a financial opinion is a complex analytical
process involving various determinations as to the most
appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances
and, therefore, a financial opinion is not readily susceptible
to summary description. Citi arrived at its ultimate opinion
based on the results of all analyses undertaken by it and
assessed as a whole, and did not draw, in isolation, conclusions
from or with regard to any one factor or method of analysis for
purposes of its opinion. Accordingly, Citi believes that its
analyses must be considered as a whole and that selecting
portions of its analyses and factors or focusing on information
presented in tabular format, without considering all analyses
and factors or the narrative description of the analyses, could
create a misleading or incomplete view of the processes
underlying its analyses and opinion.
In its analyses, Citi considered industry performance, general
business, economic, market and financial conditions and other
matters existing as of the date of its opinion, many of which
are beyond the control of Frontier and Holly. No company,
business or transaction reviewed is identical to Frontier, Holly
or the merger. An evaluation of these analyses is not entirely
mathematical; rather, the analyses involve complex
considerations and judgments concerning financial and operating
characteristics and other factors that could affect the public
trading or other values of the companies, business segments or
transactions reviewed.
The estimates contained in Citis analyses and the
valuation ranges resulting from any particular analysis are not
necessarily indicative of actual values or predictive of future
results or values, which may be significantly more or less
favorable than those suggested by its analyses. In addition,
analyses relating to the value of businesses or securities do
not purport to be appraisals or to reflect the prices at which
businesses or securities actually may be sold. Accordingly, the
estimates used in, and the results derived from, Citis
analyses are inherently subject to substantial uncertainty.
Citi was not requested to, and it did not, recommend the
specific consideration payable in the merger. The type and
amount of consideration payable in the merger was determined
through negotiations between Frontier and Holly and the decision
to enter into the merger was solely that of Frontiers
board of directors. Citis opinion was only one of many
factors considered by Frontiers board of directors in its
evaluation of the merger and should not be viewed as
determinative of the views of Frontiers board of directors
or management with respect to the merger or the exchange ratio
provided for in the merger agreement.
The following is a summary of the material financial analyses
presented to Frontiers board of directors in connection
with Citis opinion. The financial analyses summarized
below include information presented in tabular format. In order
to fully understand Citis financial analyses, the tables
must be read together with the text of each summary. The tables
alone do not constitute a complete description of the financial
analyses. Considering the data below without considering the
full narrative description of the financial analyses, including
the methodologies and assumptions underlying the analyses, could
create a misleading or incomplete view of Citis financial
analyses.
Selected
Public Companies Analysis
Frontier. Citi performed a selected publicly
traded companies analysis of Frontier by comparing certain
financial and stock market information of Frontier with Holly
and the following five selected publicly traded independent
refining companies, referred to as the selected refining
companies:
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CVR Energy, Inc.
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|
Sunoco, Inc.
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72
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Tesoro Corporation
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|
Valero Energy Corporation
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Western Refining, Inc.
|
Citi reviewed, among other things, enterprise values of the
selected refining companies, calculated as equity value (based
on closing stock prices on February 18, 2011) plus
debt, less cash and other adjustments, as a multiple of calendar
years 2011 and 2012 estimated earnings before interest, taxes,
depreciation and amortization, referred to as EBITDA. Citi
reviewed refining firm values of the selected refining
companies, calculated as enterprise value less non-refinery
assets, referred to as refining values, as multiples of total
daily refining capacity per barrel and daily refining capacity
per complexity barrel based on the Nelson complexity index as of
September 30, 2010, referred to as capacity and complexity
barrels, respectively. Citi also reviewed equity values of the
selected companies, based on closing stock prices on
February 18, 2011, as a multiple of calendar years 2011 and
2012 estimated earnings per share, referred to as EPS. Citi then
applied selected ranges of calendar years 2011 and 2012
estimated EBITDA and EPS multiples and refining values to
capacity and complexity barrels derived from Hollys
refinery assets and the selected refining companies to
corresponding data of Frontier. Financial data of the selected
refining companies were based on publicly available research
analysts estimates, public filings and other publicly
available information. Financial data of Frontier were based on
internal estimates of Frontiers management.
Holly. Citi performed a
sum-of-the-parts
selected publicly traded companies analysis of Holly by
performing separate selected publicly traded companies analyses
of Hollys (i) refinery assets, (ii) general
partnership interest in HEP, referred to as the GP interest, and
(iii) limited partnership interest in HEP, referred to as
the LP interest. Financial data of Holly were based on internal
financial information relating to Hollys fiscal year-ended
December 31, 2010 provided by Hollys management and
financial forecasts relating to Holly derived from certain
internal operating data and estimates provided by Hollys
management and other assumptions prepared by Frontiers
management.
Refinery Assets. In its selected publicly
traded companies analysis of Hollys refinery assets, Citi
compared certain financial and stock market information of Holly
with Frontier and the selected refining companies reviewed in
connection with Citis selected publicly traded companies
analysis of Frontier. Citi reviewed, among other things,
enterprise values of the selected refining companies, calculated
as equity value (based on closing stock prices on
February 18, 2011) plus debt, less cash and other
adjustments, as a multiple of calendar years 2011 and 2012
estimated EBITDA, refining values of the selected refining
companies as multiples of capacity and complexity barrels as of
September 30, 2010 and equity values of the selected
companies as a multiple of calendar years 2011 and 2012
estimated EPS. Citi then applied selected ranges of calendar
years 2011 and 2012 estimated EBITDA and EPS multiples and
refining value to capacity and complexity barrels derived from
Frontier and the selected refining companies to corresponding
data of Hollys refinery assets.
GP Interest. In its selected publicly traded
companies analysis of Hollys GP interest, Citi compared
certain financial information of the GP interests with the
following six selected publicly traded general partnerships in
the energy industry, referred to as the selected GPs:
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Alliance Holdings GP, L.P.
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|
Crosstex Energy, Inc.
|
|
|
|
Energy Transfer Equity, L.P.
|
|
|
|
Kinder Morgan, Inc.
|
|
|
|
NuStar GP Holdings, LLC
|
|
|
|
Targa Resources Corp.
|
Citi reviewed, among other information, indicative yields of the
selected GPs, calculated as the most recently declared
annualized distributions as of February 18, 2011, and
estimated distributions of the selected GPs for calendar year
2011 divided by such selected GPs closing unit prices as
of February 18, 2011, referred to as estimated yields. Citi
then applied ranges of selected indicative yields and calendar
year 2011 estimated yields
73
derived from the selected GPs to corresponding data from
Hollys GP interest. Financial data of the selected GPs
were based on publicly available research analysts
estimates, public filings and other publicly available
information.
LP Interest. In its selected publicly traded
companies analysis of HEP, Citi compared certain financial
information of HEP with the following five publicly traded oil
pipeline, transportation and distribution master limited
partnerships, referred to as the selected MLPs:
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|
Buckeye Partners, L.P.
|
|
|
|
Genesis Energy, L.P.
|
|
|
|
Magellan Midstream Partners, L.P.
|
|
|
|
NuStar Energy L.P.
|
|
|
|
Sunoco Logistics Partners L.P.
|
Citi reviewed, among other information, indicative yields of the
selected MLPs as of February 18, 2011 and estimated yields
of the selected MLPs for calendar year 2011. Citi reviewed
equity values of the selected MLPs, based on closing unit prices
on February 18, 2011, as a multiple of calendar years 2011
and 2012 estimated distributable cash flow. Citi also reviewed
enterprise values of the selected MLPs, calculated as equity
value (based on closing unit prices on February 18,
2011) plus debt, less cash and other adjustments, as a
multiple of calendar years 2011 and 2012 estimated EBITDA. Citi
then applied ranges of selected indicative yields as of
February 18, 2011 and estimated yields for calendar year
2011, and calendar years 2011 and 2012 estimated distributable
cash flow and EBITDA multiples, derived from the selected MLPs
to corresponding data of HEP. Financial data of the selected
MLPs were based on publicly available research analysts
estimates, public filings and other publicly available
information.
These analyses indicated the following implied exchange ratio
reference range, as compared to the exchange ratio provided for
in the merger agreement:
|
|
|
Implied Exchange Ratio Reference Range
|
|
Exchange Ratio
|
|
0.379x -
0.526x
|
|
0.4811x
|
Discounted
Cash Flow Analysis
Frontier. Citi performed a discounted cash
flow analysis of Frontier by calculating the estimated present
value of the standalone unlevered, after-tax free cash flows
that Frontier was forecasted to generate during fiscal years
2011 through 2015 based on internal estimates of Frontiers
management. Estimated terminal values for Frontier were
calculated by applying a range of terminal value EBITDA
multiples of 6.5x to 7.75x to Frontiers fiscal year 2015
estimated EBITDA. The cash flows and terminal values were then
discounted to present value using discount rates ranging from
9.31% to 10.92%.
Holly. Citi performed a
sum-of-the-parts
discounted cash flow analysis of Holly by performing separate
discounted cash flow analyses of Hollys (i) refinery
assets, (ii) GP interest and (iii) LP interest.
Financial data of Holly were based on internal financial
information relating to Hollys fiscal year-ended
December 31, 2010 provided by Hollys management and
financial forecasts relating to Holly derived from certain
internal operating data and estimates provided by Hollys
management and other assumptions prepared by Frontiers
management.
Refinery Assets. In its discounted cash flow
analysis of Hollys refinery assets, Citi calculated the
estimated present value of the standalone unlevered, after-tax
free cash flows forecasted to be generated from such assets
during fiscal years 2011 through 2015. Estimated terminal values
for Hollys refinery assets were calculated by applying a
range of terminal value EBITDA multiples of 6.5x to 7.75x to the
fiscal year 2015 estimated EBITDA of Hollys refinery
assets. The cash flows and terminal values were then discounted
to present value using discount rates ranging from 9.31% to
10.92%.
GP Interest. In its discounted cash flow
analysis of Hollys GP interest, Citi calculated the
estimated present value of the standalone after-tax
distributions that Holly was forecasted to receive in respect of
its GP interest
74
during fiscal years 2011 through 2015. Estimated terminal values
for Hollys GP interest were calculated by applying a range
of terminal value distribution yields of 5.0% to 6.0% to the
fiscal year 2015 estimated after-tax distributions in respect of
such GP interests. The distributions and terminal values were
then discounted to present value using discount rates ranging
from 9.26% to 11.64%.
LP Interest. In its discounted cash flow
analysis of HEP, Citi calculated the estimated present value of
the standalone distributable cash flow per unit that HEP was
forecasted to generate during fiscal years 2011 through 2015.
Estimated terminal values for HEP were calculated by applying a
range of terminal value distributable cash flow yields of 6.25%
to 7.0% to HEPs fiscal year 2015 estimated distributable
cash flow per unit. The distributable cash flow and terminal
values were then discounted to present value using discount
rates ranging from 7.76% to 9.14%.
These analyses indicated the following implied exchange ratio
reference range, as compared to the exchange ratio provided for
in the merger agreement:
|
|
|
|
|
Implied Exchange Ratio Reference Range
|
|
Exchange Ratio
|
|
0.347x
0.487x
|
|
|
0.4811x
|
|
Other Information. Citi also reviewed, for
informational purposes, among other things, the following:
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|
|
relative contributions of Frontier and Holly to various
financial and operating metrics of the pro forma combined
company, without giving effect to potential synergies, noting
that such relative contributions indicated an implied exchange
ratio reference range of 0.182x to 0.501x;
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|
implied historical exchange ratios for Frontier and Holly
derived by dividing daily closing stock prices of Frontier
common stock and Holly common stock, noting that the range of
implied historical exchange ratios averaged over various periods
was 0.433x to 0.566x and that the high and low implied exchange
ratios during the 52-week period ended February 18, 2011
was 0.396x to 0.565x; and
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|
stock price targets for Frontier and Holly in recently
published, publicly available Wall Street research analyst
reports, noting that the low and high stock price targets for
Frontier and Holly implied an exchange ratio reference range of
0.234x to 0.825x.
|
Miscellaneous
Under the terms of Citis engagement, Frontier has agreed
to pay Citi for its financial advisory services in connection
with the merger an aggregate fee of $5 million, a portion
of which was payable upon delivery of Citis opinion and a
significant portion of which is contingent upon completion of
the merger. Frontier also has agreed to reimburse Citi for
reasonable expenses incurred by Citi in performing its services,
including reasonable fees and expenses of its legal counsel, and
to indemnify Citi and related persons against liabilities,
including liabilities under the federal securities laws, arising
out of its engagement. In the ordinary course of business, Citi
and its affiliates may actively trade or hold the securities of
Frontier, Holly and their respective affiliates, including HEP,
for its own account or for the account of its customers and,
accordingly, may at any time hold a long or short position in
those securities. At the request of Frontier made in May 2011,
Citi or one of its affiliates may act as a lender under the New
Senior Credit Facility described under The
Merger Credit Agreements and receive customary
compensation thereunder. In addition, Citi and its affiliates,
including Citigroup Inc. and its affiliates, may maintain
relationships with Frontier, Holly and their respective
affiliates, including HEP.
Frontier selected Citi as its financial advisor in connection
with the merger based on Citis reputation and experience.
Citi is an internationally recognized investment banking firm
which regularly engages in the valuation of businesses and their
securities in connection with mergers and acquisitions,
negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other
purposes. The issuance of Citis opinion was authorized by
Citis fairness opinion committee.
Certain
Prospective Financial Information Reviewed by Frontier
Frontier does not as a matter of course make projections as to
future sales, earnings or other results available to the public
and avoids making projections for extended periods due to the
unpredictability of the underlying
75
assumptions and estimates. However, in connection with its
evaluation of the proposed merger, certain non-public financial
projections regarding Hollys and Frontiers
anticipated future operations were prepared by Frontier for the
years 2011 through 2015. In the case of Frontiers
projections of Hollys future performance, Frontiers
management based these projections in part on estimates of
certain limited financial and operating data provided by Holly
to Frontier. The projections were reviewed by the Frontier board
of directors and provided by management to Frontiers
financial advisors in connection with the proposed merger. The
projections were independently prepared by Frontier management
based on assumptions that Frontier management believed to be
reasonable and were not provided to and were not reviewed by
Holly or its financial advisors.
The accompanying prospective financial information was not
prepared with a view toward public disclosure, or with a view
toward complying with the guidelines established by the American
Institute of Certified Public Accountants with respect to
prospective financial information, but, in the view of
Frontiers management, was prepared on a reasonable basis,
reflects the best estimates and judgments available at the time
the prospective financial information was prepared, and
presents, to the best of managements knowledge and belief,
the expected course of action and the expected future financial
performance of Frontier. However, this information is not fact
and should not be relied upon as being necessarily indicative of
actual future results, and readers of this joint proxy
statement/prospectus are cautioned not to place undue reliance
on the prospective financial information.
Neither Frontiers independent auditors, nor any other
independent accountants, have compiled, examined, or performed
any procedures with respect to the prospective financial
information contained herein, nor have they expressed any
opinion or any other form of assurance on such information or
its achievability, and assume no responsibility for, and
disclaim any association with, the prospective financial
information.
Earnings for the independent refining industry are highly
volatile. The financial projections were based on numerous
variables and assumptions (including but not limited to those
related to industry performance, competition, general business,
economic, market and financial conditions) that are inherently
uncertain and are beyond the control of Frontier and Holly.
Financial projections for both Holly and Frontier are subject to
many risks and uncertainties, including, but not limited to, the
impact of general economic factors outside Frontiers
control, volatility in crack spreads, crude oil differentials
and other operating conditions and other risks and uncertainties
relating to Hollys and Frontiers business (including
their ability to achieve strategic goals, objectives and targets
over applicable periods) and other factors described under
Special Note Regarding Forward-Looking Statements,
all of which are subject to change. The projections also did not
give effect to the merger. As a result, actual results may
differ materially from those contained in the financial
projections.
The inclusion of a summary of the financial projections in this
joint proxy statement/prospectus should not be regarded as an
indication that any of Frontier, Holly or their respective
affiliates, officers, directors or other representatives
consider the financial projections to be necessarily predictive
of actual future events, and the financial projections should
not be relied upon as such. None of Frontier, Holly or their
respective affiliates, officers, directors or other
representatives can give you any assurance that actual results
will not differ materially from the financial projections, and
none of them undertakes any obligation to update or otherwise
revise or reconcile the financial projections to reflect
circumstances existing after the date the financial projections
were generated or to reflect the occurrence of future events,
even in the event that any or all of the assumptions underlying
the projections are shown to be in error. None of Frontier,
Holly or their respective affiliates, officers, directors or
other representatives has made or makes any representation to
any shareholder or other person regarding Frontiers or
Hollys ultimate performance compared to the information
contained in the financial projections or that the projected
results will be achieved. The summary of the financial
projections included below is not being included to influence
your decision whether to vote for the merger and the
transactions contemplated in connection with the merger, but are
being provided because the financial projections were considered
in connection with the merger.
Frontier has made no representations to Holly, and Holly has
made no representations to Frontier, in the merger agreement or
otherwise, concerning the financial projections or the estimates
on which they are based. Frontier and Holly urge all
stockholders to review Frontiers and Hollys most
recent SEC filings for a description of Frontiers and
Hollys reported financial results.
76
Frontier
Prospective Financial Information: ($ in millions, rounded to
the nearest whole number)
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ending December 31,
|
|
|
2011E
|
|
2012E
|
|
2013E
|
|
2014E
|
|
2015E
|
|
Revenue
|
|
$
|
7,069
|
|
|
$
|
7,346
|
|
|
$
|
7,150
|
|
|
$
|
7,236
|
|
|
$
|
7,312
|
|
Capital Expenditures
|
|
$
|
106
|
|
|
$
|
71
|
|
|
$
|
96
|
|
|
$
|
75
|
|
|
$
|
75
|
|
EBITDA
|
|
$
|
404
|
|
|
$
|
358
|
|
|
$
|
347
|
|
|
$
|
360
|
|
|
$
|
379
|
|
EBITDA represents income before interest expense, interest
income, income tax, and depreciation and amortization.
Holly
Prospective Financial Information: ($ in millions, rounded to
the nearest whole number)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ending December 31,
|
|
|
2011E
|
|
2012E
|
|
2013E
|
|
2014E
|
|
2015E
|
|
Refining Revenue
|
|
$
|
10,184
|
|
|
$
|
10,322
|
|
|
$
|
10,434
|
|
|
$
|
10,255
|
|
|
$
|
10,427
|
|
Refining Capital Expenditures
|
|
$
|
218
|
|
|
$
|
185
|
|
|
$
|
126
|
|
|
$
|
50
|
|
|
$
|
50
|
|
Adjusted EBITDA
|
|
$
|
450
|
|
|
$
|
424
|
|
|
$
|
442
|
|
|
$
|
434
|
|
|
$
|
457
|
|
Refining EBITDA
|
|
$
|
408
|
|
|
$
|
375
|
|
|
$
|
388
|
|
|
$
|
375
|
|
|
$
|
392
|
|
Refining EBITDA represents income before interest expense,
interest income, income tax, depreciation and amortization for
Hollys refining operations only.
Adjusted EBITDA represents Refining EBITDA plus cash
distributions received from HEP LP and GP interests.
The EBITDA projections with respect to Holly, prepared by
Frontiers management, are based on the equity accounting
method for HEP, reflecting distributions to Holly by HEP, and
were prepared on a basis different from the basis of the
projections with respect to Holly prepared by Hollys
management and described on page 58.
Earnings before interest, taxes, depreciation and amortization,
which Frontier refers to as EBITDA, is calculated as net income
plus (i) interest expense, net of interest income,
(ii) income tax provision, and (iii) depreciation and
amortization. EBITDA is not a calculation provided for under
GAAP; however, the amounts included in the EBITDA calculation
are derived from amounts included in our consolidated financial
statements. EBITDA should not be considered as an alternative to
net income or operating income as an indication of our operating
performance or as an alternative to operating cash flow as a
measure of liquidity. EBITDA is not necessarily comparable to
similarly titled measures of other companies. EBITDA is
presented here because it is a widely used financial indicator
used by investors and analysts to measure performance. EBITDA is
also used by Frontiers management for internal analysis
and as a basis for financial covenants.
Amended
and Restated Certificate of Incorporation of Holly
The Holly board of directors has approved, subject to Holly
stockholder approval and completion of the merger, an amended
and restated certificate of incorporation to (i) provide
for an increase in the number of authorized shares of capital
stock of Holly from 161,000,000 to 325,000,000, which shall
consist of 5,000,000 shares of preferred stock (increased
from 1,000,000 shares of preferred stock) and
320,000,000 shares of common stock (increased from
160,000,000 shares of common stock) authorized for issuance
by Holly, (ii) change Hollys name to
HollyFrontier Corporation, (iii) remove the
limitation that Hollys principal business be limited to
certain activities in connection with petroleum and other
sources of energy, (iv) clarify that no vote of Holly
preferred stockholders or common stockholders is required in
connection with the issuance of preferred stock as authorized by
the Holly board of directors, complying with the conditions
contained in Hollys certificate of incorporation,
(v) provide that the election of directors need not be by
written ballot and (vi) provide for the indemnification of,
and advancement of expenses to, any defendant or witness to any
action by reason of the fact that he or she is or was a director
or officer of Holly or serving at Hollys request. This
summary is qualified in its entirety by reference to the full
text of the form of amended and restated certificate of
incorporation of Holly, which is included in this joint proxy
statement/prospectus as Annex F. Holly has agreed to use
its reasonable best efforts to
77
take all action necessary in accordance with applicable law and
its certificate of incorporation and bylaws to obtain the
approval of this amended and restated certificate of
incorporation at the Holly special meeting, but the approval of
this amended and restated certificate of incorporation is not a
condition to completion of the merger. In the event this
proposal is approved and adopted by Holly stockholders but the
merger is not completed, this amended and restated certificate
of incorporation of Holly will not become effective.
As of May 20, 2011, Holly had no shares of Holly preferred
stock and approximately [ ] shares
of Holly common stock issued and outstanding. As of May 20,
2011, there were approximately
[ ] shares of Holly common stock
reserved for issuance. Based on the number of shares of Frontier
common stock outstanding as of such date, if the merger is
completed, Holly would be required to issue approximately
[ ] additional shares of Holly common
stock to the Frontier shareholders. In addition, upon completion
of the merger, Holly would likely reserve for issuance
approximately [ ] million additional
shares of Holly common stock to cover, among other things, stock
options and restricted stock assumed from Frontier. Although the
number of shares of common stock currently authorized under
Hollys certificate of incorporation will be sufficient to
complete the merger and Hollys management currently has no
definitive plans for the issuance of any additional authorized
shares, the authorization of additional shares would permit the
issuance of shares for future stock dividends, stock splits,
possible acquisitions, equity incentive plans and other
appropriate corporate purposes. The additional shares of Holly
common stock will not be entitled to preemptive rights nor will
existing stockholders have any preemptive right to acquire any
of those shares when issued.
Amended
and Restated Bylaws of Holly
The Holly board of directors has approved, subject to completion
of the merger, an amendment and restatement of Hollys
bylaws to, among other things, (i) increase the maximum
number of director positions available on Hollys board of
directors from eleven to fourteen, (ii) provide for
Executive Chairman, Chief Operating
Officer and Chief Financial Officer officer
positions and specify the respective qualifications, powers and
duties of each such position, (iii) specify the required
timing of any record date to determine stockholders entitled to
act by written consent without a meeting, (iv) specify the
stockholder vote required in order to remove any director at any
meeting of the stockholders and (v) make other clarifying
changes deemed appropriate by the Holly board of directors. This
summary is qualified in its entirety by reference to the full
text of the form of amended and restated bylaws of Holly, which
is included in this joint proxy statement/prospectus as
Exhibit C of Annex A. The amended and restated bylaws
of Holly will be effective as of the effective time of the
merger. In the event the merger is not completed, the amended
and restated bylaws of Holly will not become effective.
Interests
of Holly Directors and Executive Officers in the
Merger
In considering the recommendation of the Holly board of
directors that you vote to approve the proposals submitted for
the Holly stockholder vote set forth in this joint proxy
statement/prospectus, you should be aware that some of
Hollys directors and executive officers have financial
interests in the merger that are different from, or in addition
to, those of Hollys stockholders generally. The Holly
board of directors was aware of and considered these potential
interests, among other matters, in evaluating the merger
agreement and the merger, and in recommending to you that you
approve the proposals submitted for the Holly stockholder vote
set forth in this joint proxy statement/prospectus.
The dates and share prices used below to quantify these
interests have been selected for illustrative purposes only.
They do not necessarily reflect the date on which certain events
will occur and do not represent a projection about the future
value of Hollys common stock.
Positions
with the Combined Company
Following the completion of the merger, it is anticipated that
Matthew P. Clifton will serve as the Executive Chairman of the
board, David L. Lamp will serve as the Executive Vice President
and Chief Operating Officer, Bruce R. Shaw will serve as the
Senior Vice President of Strategy and Corporate Development and
all of the members of Hollys board of directors
immediately prior to the merger will continue to serve as
directors of the combined company, as described under
Board of Directors and Management Following
the Merger.
78
Equity
Awards
Holly has granted outstanding equity awards to its directors and
executive officers under the Holly Corporation Long-Term
Incentive Compensation Plan. Hollys non-employee directors
hold outstanding restricted stock units that have been granted
under the plan and that will automatically vest in full upon the
occurrence of a change in control. For purposes of
the restricted stock unit awards, a change in
control includes the acquisition by a person or group of
ownership of 35% or more of the total voting power of
Hollys stock. For these purposes, persons will be
considered to be acting as a group if they are owners of a
corporation that enters into a merger, consolidation, purchase
or acquisition of stock, or similar business transaction, with
Holly. Since Frontiers shareholders will acquire more than
35% of the voting power of the combined company in the merger,
the merger will constitute a change in control for
purposes of the restricted stock unit awards held by
non-employee directors. Accordingly, upon completion of the
merger, the restricted stock units held by each non-employee
director of Holly will automatically vest in full. The following
table sets forth the estimated value of the outstanding unvested
restricted stock units held by each non-employee director as of
March 14, 2011.
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|
|
|
|
|
|
|
|
|
|
Number of Restricted
|
|
Estimated Value of Restricted
|
Name of Non-Employee Director
|
|
Stock Units
|
|
Stock Units(1)
|
|
Buford P. Berry
|
|
|
12,387
|
|
|
$
|
703,953
|
|
Leldon E. Echols
|
|
|
9,453
|
|
|
$
|
537,214
|
|
Robert G. McKenzie
|
|
|
12,387
|
|
|
$
|
703,953
|
|
Jack P. Reid
|
|
|
12,387
|
|
|
$
|
703,953
|
|
Paul T. Stoffel
|
|
|
12,387
|
|
|
$
|
703,953
|
|
Tommy A. Valenta
|
|
|
4,523
|
|
|
$
|
257,042
|
|
|
|
|
(1) |
|
Calculated based on the number of outstanding restricted stock
units multiplied by a Holly common stock price of $56.83 per
share, which was the closing price per share of Holly common
stock on March 14, 2011. |
The restricted stock and performance share unit awards that have
been issued to executive officers under the plan contain double
trigger vesting provisions and are generally eligible for
accelerated vesting in full in the event that, within
60 days prior to or at any time following a change in
control, the executive officers employment is
terminated either by Holly without cause or by the
executive officer as a result of an adverse change
in the employment relationship. The governing award agreements
refer to this situation as a special involuntary
termination.
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Restricted Stock subject to Time-based
Vesting. Upon a special involuntary termination,
the outstanding restricted stock awards that are subject to
time-based vesting will vest in full.
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Restricted Stock subject to Performance-based
Vesting. Upon a special involuntary termination,
the outstanding restricted stock awards that are subject to
performance-based vesting will remain eligible to vest in full
based on the performance actually attained at the end of the
applicable performance period as if the executive officer had
remained employed through the last day of the performance period.
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Performance Share Units. Upon a special
involuntary termination, the outstanding performance share units
will remain eligible to vest in full based on the performance
actually attained at the end of the applicable performance
period as if the executive officer had remained employed through
the last day of the performance period. Outstanding performance
share unit awards granted prior to 2008 will, upon a special
involuntary termination, vest in full at the maximum level of
200%.
|
For purposes of the outstanding equity awards held by executive
officers, a change in control means, subject to
certain specific exceptions set forth in the governing award
agreements: (i) a person or group of persons becomes the
beneficial owner of more than 40% of the combined voting power
of Hollys then outstanding securities, (ii) a
majority of the members of Hollys board of directors is
replaced by directors who were not endorsed by two-thirds of the
Holly board members prior to their appointment, (iii) the
consummation of a merger or consolidation of Holly or any of its
subsidiaries other than (A) a merger or consolidation
resulting in Hollys voting securities outstanding
immediately prior to the transaction continuing to represent at
least 60% of the combined voting power of Hollys voting
securities or the voting securities of the combined company
outstanding immediately after the transaction, or
79
(B) a merger or consolidation effected to implement a
recapitalization of Holly in which no person or group becomes
the beneficial owner of Hollys securities representing
more than 40% of the combined voting power of Hollys then
outstanding securities, or (iv) Hollys stockholders
approve a plan of complete liquidation or dissolution or an
agreement for the sale or disposition of all or substantially
all of Hollys assets. Since Hollys stockholders will
hold less than 60% of the voting power of the voting securities
of the combined company following the merger, the merger will
constitute a change in control for purposes of the
restricted stock and performance share unit awards. Accordingly,
the first trigger of the special involuntary
termination definition will be pulled upon the completion
of the merger such that, except as described below under
Waiver Agreements, any subsequent
termination of an executive officers employment either by
the combined company without cause or by the
executive officer due to an adverse change will
result in accelerated vesting of the awards in the manner
described above.
For purposes of the outstanding equity awards held by executive
officers, (A) 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 Hollys expense, (ii) gross or
willful and wanton negligence in the performance of the
executives material duties, or (iii) conviction of a
felony involving moral turpitude; and (B) 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). At this time, it is not anticipated
that any of the executive officers of Holly will incur a
special involuntary termination in connection with
the merger. The table below sets forth the number of outstanding
equity awards granted under Hollys Long-Term Incentive
Compensation Plan and held by each of the executive officers as
of March 14, 2011; however, because the value of the
outstanding performance-based restricted stock awards and
performance-share units remains contingent upon the ultimate
performance attained at the end of the applicable performance
period and because it is not anticipated that any of the
executive officers will incur a special involuntary
termination resulting in any accelerated vesting, no
estimated values have been assigned to the awards contained in
the table below.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Restricted
|
|
|
|
|
Number of Restricted
|
|
Shares with
|
|
Number of
|
|
|
Shares with Time-Based
|
|
Performance-Based
|
|
Performance
|
Name of Executive Officer
|
|
Vesting
|
|
Vesting
|
|
Share Units
|
|
Matthew P. Clifton
|
|
|
|
|
|
|
60,389
|
|
|
|
60,554
|
|
David L. Lamp
|
|
|
|
|
|
|
32,920
|
|
|
|
32,878
|
|
Denise C. McWatters
|
|
|
2,369
|
|
|
|
|
|
|
|
4,793
|
|
George J. Damiris
|
|
|
6,562
|
|
|
|
|
|
|
|
13,259
|
|
Bruce R. Shaw
|
|
|
4,922
|
|
|
|
|
|
|
|
9,945
|
|
HEP has also granted similar outstanding equity awards under its
Long-Term Incentive Plan to certain of Hollys executive
officers who perform services for HEP, which awards are subject
to similar accelerated vesting provisions upon a special
involuntary termination event. While the Holly board of
directors believes that the merger also constitutes a
change in control for purposes of the outstanding
equity awards granted under the Holly Energy Partners, L.P.
Long-Term Incentive Plan, the HEP plan is administered by the
board of directors of Holly Logistics Services, L.L.C., and
Holly does not bear any of the costs associated with the
outstanding HEP equity awards.
Waiver
Agreements
Following the merger, certain current executive officers of
Holly will receive different titles and will serve in different
positions with the combined company. Specifically,
(i) Mr. Matthew P. Cliftons title will change
from Chairman of the Board and Chief Executive Officer of Holly
to Executive Chairman of the Board of Holly and Chief Executive
Officer of HEP, (ii) Mr. Bruce Shaws title will
change from Senior Vice President and Chief Financial Officer of
Holly to Senior Vice President of Strategy and Corporate
Development of Holly, and (iii) Mr. David L.
Lamps title will change from President of Holly to
Executive Vice President and Chief Operating Officer of Holly.
Each of these executive officers has entered into a Waiver
Agreement with Holly pursuant to which each such
80
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
Hollys Long-Term Incentive Compensation Plan or HEPs
Long-Term Incentive 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 Holly and its subsidiaries (including, following
the completion of the merger, Frontier and its subsidiaries).
Change
in Control Agreements
Holly has entered into Change in Control Agreements with its
executive officers that provide for certain payments and
benefits in the event of a change in control. Like the equity
awards granted to executive officers that are described above,
the Change in Control Agreements contain double trigger payment
provisions. 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 a specified multiple 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 a specified number of
years for such executive.
For purposes of the Change in Control Agreements, the term
change in control means, subject to certain specific
exceptions set forth in the Change in Control Agreements:
(i) a person or group of persons becomes the beneficial
owner of more than 50% of the combined voting power of
Hollys then outstanding securities or more than 50% of
Hollys outstanding common stock, (ii) a majority of
the members of Hollys 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
Holly or one of its subsidiaries other than (A) a merger or
consolidation resulting in Hollys voting securities
outstanding immediately prior to the transaction continuing to
represent at least 50% of the combined voting power of
Hollys 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 Holly in which no person or group becomes
the beneficial owner of Holly securities representing more than
50% of the combined voting power of Hollys then
outstanding securities, or (iv) Hollys stockholders
approve a plan of complete liquidation or dissolution of Holly
or an agreement for the sale or disposition of all or
substantially all of Hollys assets. Since Hollys
stockholders will continue to hold 50% or more of the combined
voting power of the combined company, the merger will not
constitute a change in control for purposes of the
Change in Control Agreements. Hence, none of Hollys
executive officers will become entitled to payments or benefits
under the Change in Control Agreements in connection with the
merger.
Retirement
Restoration Plan
Holly sponsors a Retirement Restoration Plan that provides for
additional payments to certain executive officers so that total
pension plan benefits are not limited to the maximums set in the
Code and as allowed under the Holly Retirement Restoration Plan.
In the event of a change in control, each
participants benefit under the Retirement Restoration Plan
will be paid immediately after such change in
control (or, in the case of any post-409A benefits, on the
30th day following the change in control date), in the form
of an annuity contract issued by a legal reserve life insurance
company and a cash payment. The annuity contract will be for an
amount equal to the benefits otherwise due the recipient under
the Retirement Restoration Plan reduced by the amount of the
cash payment, which will equal the reasonable estimate of the
federal income tax liability resulting from the annuity
81
contract and the payment. The Retirement Restoration Plan
defines a change in control (i) with respect to
pre-409A
benefits, as any transaction that results in Hollys
stockholders immediately prior to the transaction owning,
immediately after the transaction, directly or indirectly, less
than 40% of the effective voting power with respect to
Hollys business operations conducted immediately prior to
the transaction and (ii) with respect to post-409A
benefits, as the date on which any person or group acquires
ownership of Holly stock that, together with stock held by such
person or group, constitutes more than 60% of the total voting
power of Hollys stock. Since Hollys stockholders
will continue to hold 50% or more of the effective voting power
of the combined company, the merger will not constitute a change
in control for purposes of the Retirement Restoration Plan.
Accordingly, no benefits under the Retirement Restoration Plan
will be triggered in connection with the merger.
Interests
of Frontier Directors and Executive Officers in the
Merger
In considering the recommendation of the board of directors of
Frontier that you vote for the proposal to approve the merger
agreement, you should be aware that Frontiers directors
and executive officers have financial interests in the merger
that may be different from, or in addition to, those of Frontier
stockholders generally. The board of directors of Frontier was
aware of and considered these potential interests, among other
matters, in evaluating and negotiating the merger agreement and
the merger as well as in recommending to you that you vote for
the proposal to approve the merger agreement.
As described in more detail below, these interests include
certain payments and benefits that may be provided to the
executive officers upon the closing of the merger or termination
of their employment under certain circumstances following the
merger, including accelerated vesting of annual and long-term
incentive awards, benefits and certain other termination
benefits that the completion of the merger would not affect.
The dates and share prices used below to quantify these
interests have been selected for illustrative purposes only.
They do not necessarily reflect the dates on which certain
events will occur and do not represent a projection about the
future value of Frontiers common stock.
Treatment
of Frontier Common Stock, Stock Options and other Stock-Based
Awards
As of May 20, 2011, the record date for the Frontier
special meeting, the directors and executive officers of
Frontier and their affiliates beneficially owned and were
entitled to vote [ ] shares of
Frontier common stock, collectively representing approximately
[ ]% of the shares of Frontier common stock
outstanding and entitled to vote. It is expected that
Frontiers directors and executive officers and their
affiliates will vote their shares FOR the approval
of the merger agreement, although none of them has entered into
any agreement requiring them to do so.
Frontier has granted the following types of equity awards and
options to its executive officers under the Frontier stock plan,
and the treatment of such options and equity awards upon
completion of the merger is as follows:
Options to Acquire Frontier Common Stock. Upon
completion of the merger, each outstanding option to acquire
Frontier common stock will be converted into fully vested and
immediately exercisable options to purchase shares of Holly
common stock. The number of shares of Holly common stock which
will be subject to such Holly stock options will be the number
of shares of Frontier common stock subject to each such Frontier
stock option multiplied by 0.4811, rounded down to the nearest
whole share of Holly common stock. The exercise price per share
of Holly common stock under such Holly stock options will be
equal to the exercise price per share of Frontier common stock
for such Frontier stock option divided by 0.4811, rounded up to
the nearest whole cent. All of the previously outstanding
Frontier stock options expired in April 2011, before the
completion of the merger.
Frontier Stock Units. Upon completion of the
merger, each outstanding Frontier stock unit (except Frontier
stock units issued in 2011) will vest and will be converted
into (1) a number of shares of fully vested Holly common
stock equal to 125% of the number of shares of Frontier common
stock subject to such Frontier stock units that are then
credited to the holder, multiplied by 0.4811, rounded down to
the nearest whole share of Holly common stock, and (2) an
amount of cash equal to the amount of cash and stock dividends
and
82
dividend equivalents that would have been credited to the holder
under the Frontier stock plan if the Frontier stock units
instead had been issued as shares of Frontier restricted stock.
Frontier stock units issued in 2011 will convert into comparable
Holly stock units on the same terms and conditions as were
applicable under such Frontier stock units, taking into account
the exchange ratio.
Frontier Restricted Stock. Upon completion of
the merger, each outstanding share of Frontier restricted stock
(except for Frontier restricted stock held by
Messrs. Jennings and Aron and Frontier restricted stock
issued in 2011) will vest and will be converted into the
right to receive 0.4811 fully vested shares of Holly common
stock. In addition, each holder of Frontier restricted stock
will be paid an amount in cash equal to the amount of cash and
stock dividends and dividend equivalents then credited to each
such holder with respect to such Frontier restricted stock. As
discussed further below under Retention and
Assumption Agreements, Messrs. Jennings and Aron have
each agreed to waive, upon the closing of the merger, current
rights to accelerated vesting of their Frontier restricted stock
where such acceleration is based solely on one or more of the
following:
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|
|
the closing of the merger,
|
|
|
|
the voluntary termination of employment upon the relocation of
Frontiers headquarters to Dallas, Texas, or
|
|
|
|
voluntary termination of employment during the
60-day
period following the one year anniversary of the mergers
closing.
|
Upon completion of the merger,
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|
|
|
|
Messrs. Jennings and Arons Frontier restricted stock
will be converted into 0.4811 shares of Holly restricted
stock, rounded down to the nearest whole share of Holly
restricted stock, on the same terms and conditions as were
applicable to such Frontier restricted stock (but taking into
account any changes set forth in the retention agreements
(described below)), and
|
|
|
|
Messrs. Jennings and Aron will be paid an amount of cash
equal to the amount of cash and stock dividends and dividend
equivalents then credited to each of them with respect to such
Frontier restricted stock.
|
Frontier restricted stock issued in 2011 will convert into
comparable Holly restricted stock on the same terms and
conditions as were applicable under such Frontier restricted
stock, and taking into account the exchange ratio.
Frontier has granted its non-employee directors Frontier
restricted stock units under the Frontier stock plan and the
treatment of such restricted stock units upon the completion of
the merger is as follows:
Frontier Restricted Stock Units. Upon the
completion of the merger, each outstanding Frontier restricted
stock unit will vest and will be converted into the right to
receive 0.4811 fully vested shares of Holly common stock.
The following table sets forth the estimated value of the
outstanding restricted stock units held by each non-employee
director as of March 14, 2011.
|
|
|
|
|
|
|
|
|
|
|
Number of Restricted
|
|
Estimated Value of Restricted
|
Name of Non-Employee Director
|
|
Stock Units
|
|
Stock Units(1)
|
|
Douglas Y. Bech
|
|
|
7,060
|
|
|
$
|
191,820.20
|
|
Robert J. Kostelnik
|
|
|
7,060
|
|
|
$
|
191,820.20
|
|
James H. Lee
|
|
|
7,060
|
|
|
$
|
191,820.20
|
|
Paul B. Loyd
|
|
|
7,060
|
|
|
$
|
191,820.20
|
|
Franklin Myers
|
|
|
7,060
|
|
|
$
|
191,820.20
|
|
Michael E. Rose
|
|
|
7,060
|
|
|
$
|
191,820.20
|
|
|
|
|
(1) |
|
Calculated based on the number of outstanding restricted stock
units multiplied by a Frontier common stock price of $27.17 per
share, which was the closing price of Frontier common stock on
March 14, 2011. |
83
Change
in Control Severance Agreements
Frontier has existing Change in Control Severance Agreements, or
CIC agreements, with each of its executive officers. These CIC
agreements require Frontier to make payments or provide benefits
to its executive officers upon certain types of termination of
employment in connection with a change in control of Frontier.
Each of the CIC agreements initially has a three-year term.
However, if a change in control occurs during the term,
(1) in the case of Messrs. Jennings and Aron, the
agreement provides that it shall terminate 60 days after
the first anniversary of the change in control date, subject to
their right to extend the term for a period of three years after
the change in control, and (2) for the other executives,
the agreement provides that it will terminate two years after
the change in control. As discussed further below under
Retention and Assumption Agreements,
Mr. Jennings has elected to extend, upon the completion of
the merger, the term of his CIC agreement to three years
following the merger.
The completion of the merger will constitute a change in control
for purposes of Frontiers CIC agreements. Upon a change in
control, severance benefits continue to accrue until the
executive officer experiences a termination of employment for
one of the following reasons: (1) the executives
employment is terminated by Frontier for a reason other than for
cause (as defined in the CIC agreement) or
disability or (2) the executive terminates his employment
for certain specified reasons (any event described in
clause (1) or (2), a qualifying termination).
Cause generally encompasses certain acts of
dishonesty by the executive or the executives failure to
devote full time efforts to Frontier or abide by the
confidentiality provisions of the agreement, if such failures
result in material injury to Frontier.
The specified reasons for which the executive may terminate his
employment include (1) failure to elect or reelect the
executive to, or removal of the executive from, the offices
designated in the CIC agreement, (2) significant changes in
the executives powers and duties, or reductions in the
executives compensation and benefits, (3) a
determination under certain circumstances that the executive is
unable to carry out the authorities and duties attached to his
position, (4) a breach by Frontier of any material
provision of the CIC agreement that is not remedied within a
certain specified time period, or (5) the failure of a
successor to assume all duties and obligations of Frontier under
the CIC agreement.
The CIC agreements for Messrs. Jennings and Aron also
include a walk-away provision. The walk-away provision permits
the executive to either (1) leave voluntarily within
60 days after the first anniversary of the change in
control event and receive the remainder of his severance pay or
(2) elect to extend the agreement to 36 months
following a change in control event. As discussed further below
under Retention and Assumption
Agreements, Mr. Jennings has agreed to waive, upon
the closing of the merger, this right to voluntarily terminate
his employment with severance benefits during the 60-day period
following the first anniversary of the closing of the merger
solely based on the walk-away provision described above, and has
elected, upon the closing of the merger, to extend his agreement
to 36 months following the merger, in return for which
Frontier and Holly agreed that Mr. Jennings right to
severance, if otherwise triggered under the CIC agreement, will
be calculated without a currently applicable offset for prior
compensation. In addition, as discussed further below under
Retention and Assumption
Agreements, both Messrs. Jennings and Aron agreed to
waive, upon the closing of the merger, their rights to terminate
employment with severance benefits based solely upon the
relocation of Frontiers headquarters to Dallas, Texas.
If an executive officer experiences a qualifying termination
upon or following the completion of the merger during the
applicable term of the CIC agreement, he or she will receive the
following compensation and benefits in accordance with the terms
of the applicable CIC agreement:
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|
|
|
|
Severance. Each executive officer will receive
a cash severance payment ranging from one to six times the
executive officers annual base salary and, except for
Mr. Jennings (as discussed further below under
Retention and Assumption Agreements),
such severance payment will be reduced by any salary and annual
bonus payment paid for the period commencing after the merger.
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|
|
|
Options and Other Stock-Based Awards. All
outstanding Frontier stock options and other equity-based
compensation awards (including any awards granted in
2011) held by the executive at the time of his termination
of employment which were granted prior to the closing of the
merger will automatically vest in
|
84
|
|
|
|
|
full, all performance periods will end with all performance
goals deemed met at the highest level and, if applicable, any
such options shall remain exercisable for the remainder of their
terms as if the executives employment had not terminated.
All of the previously outstanding Frontier stock options expired
in April 2011 before the closing of the merger.
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|
|
|
|
|
Tax
Gross-Up. If
any payments or benefits made pursuant to the terms of the CIC
agreements or otherwise result in the executive being subject to
any income, excise, or other tax (excess tax
amounts) at a rate above the rate ordinarily applicable to
wages and salaries paid in the ordinary course of business,
whether as a result of the provisions of Sections 280G,
4999 or 409A of the Code, or any similar or analogous provisions
of the Code or any other statute, then the amount due to the
executive shall be increased by an amount such that the net
amount received by the executive after paying any applicable tax
and any federal, state or other taxes on such additional amount,
shall be equal to the amount that the executive would have
received if such excess tax amounts were not applicable.
|
If an executive officer incurs a qualifying termination during
the six month period preceding the completion of the merger
(provided the merger constitutes a change in control
event for purposes of Section 409A of the Code),
then, not later than 30 days following the merger, the
executive officer will receive a lump sum payment equal to the
sum of (i) his annual base salary times the applicable
multiplier (applicable multipliers range from one to six), plus
(ii) the fair market value of any shares subject to
Frontier equity compensation awards that were held by the
executive officer immediately prior to his termination but that
were forfeited in connection with such termination (less the
amount of any applicable exercise prices), minus (iii) the
amount of any severance payment received by the executive
officer pursuant to a severance agreement (described below).
Executive
Severance Agreements
Frontier also has existing Executive Severance Agreements
(severance agreements) with each of its executive
officers that operate following certain terminations of
employment unrelated to a change in control, but otherwise
similar to a qualifying termination under the CIC agreements.
These severance agreements provide for (i) continuation of
base salary for a period of time (12 months for Vice
Presidents and 18 months for Executive Vice Presidents and
higher), (ii) payment of a pro-rated annual incentive
amount for the year of termination, (iii) payment by
Frontier of COBRA health care premiums (for up to 12 months
for Vice Presidents and 18 months for Executive Vice
Presidents and above), (iv) outplacement assistance (not to
exceed $15,000), (v) vesting of all equity-based
compensation awards held by the executive (except that
performance awards intended to satisfy Section 162(m) of
the Code will be paid pro rata based on performance actually
attained or upon the occurrence of a change in control), and
(vi) continued coverage under existing life insurance
programs (for up to 12 months for Vice Presidents and
18 months for Executive Vice Presidents), if permitted by
the applicable contract.
Retention
and Assumption Agreements
Mr. Michael C. Jennings, Frontiers President and
Chief Executive Officer, and Mr. Doug S. Aron,
Frontiers Executive Vice President and Chief Financial
Officer, entered into certain Retention and Assumption
Agreements which will be effective immediately before the merger
(the retention agreements), whereby each agreed to
waive, upon the closing of the merger, current rights to
accelerated vesting of Frontier restricted stock where such
acceleration is based solely on one or more of the following:
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|
|
|
|
the closing of the merger (which would otherwise have triggered
full vesting on account of a change in control);
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|
|
|
voluntary termination on account of the relocation of
Frontiers headquarters to Dallas, Texas (which would
otherwise have triggered full vesting); or
|
|
|
|
voluntary termination during the
60-day
period following the first anniversary of the closing of the
merger (which would otherwise have triggered full vesting).
|
Messrs. Jennings and Aron also agreed to waive, upon the
closing of the merger, certain other rights under their
respective CIC agreements. Messrs. Jennings and Aron each
agreed to waive, upon the closing of the merger, their rights to
terminate employment with severance benefits based solely upon
the relocation of Frontiers headquarters
85
to Dallas, Texas. In addition, Mr. Jennings has agreed to
waive, upon the closing of the merger, his right to voluntarily
terminate his employment with severance benefits during the
60-day
period following the first anniversary of the closing of the
merger solely based on the walk-away provision of the CIC
agreement described above, and has elected to extend the term of
his CIC agreement to 36 months following the merger, in
return for which Frontier and Holly agreed that
Mr. Jennings right to severance, if otherwise
triggered under the CIC agreement, will be calculated without a
currently applicable offset for prior compensation.
Other rights to accelerated equity awards and severance benefits
are retained. The retention agreements do not affect rights in
respect of Frontier stock units or dividends and dividend
equivalent amounts accrued in respect of Frontier stock units
and Frontier restricted stock immediately before the merger. As
previously described, the Frontier stock units held by
Messrs. Jennings and Aron will be converted into a number
of shares of fully vested Holly common stock equal to 125% of
the number of shares of Frontier common stock subject to such
Frontier stock units that are then credited to the holder,
multiplied by 0.4811, rounded down to the nearest whole share of
Holly common stock. Further, Messrs. Jennings and Aron will
be paid an amount in cash equal to the amount of cash and stock
dividends and dividend equivalents credited with respect to
their Frontier stock units and Frontier restricted stock.
Pursuant to the retention agreements, Holly agreed to assume
Frontiers obligations in respect of all Frontier
restricted stock held by Messrs. Jennings and Aron (which
will become restricted stock of Holly). Any dividends with
respect to Holly restricted stock held by Messrs. Jennings
and Aron pursuant to agreements assumed by Holly will be paid as
and when such dividends are paid to holders of unrestricted
stock of the same class. Holly also will assume both of
Messrs. Jennings and Arons CIC agreements, subject to
the modifications in the retention agreements. Holly separately
undertook to reimburse Messrs. Jennings and Aron for any
exposure to adverse tax results arising under Section 409A
of the Code. This protection is currently in place under the CIC
agreements.
Upon termination of the merger agreement for any reason, the
retention agreements will terminate and have no effect.
The table below sets forth the number and estimated value of
outstanding equity awards held by each of Messrs. Jennings
and Aron as of March 14, 2011. Upon completion of the
merger, performance-based stock units will vest and be converted
into fully vested shares of Holly common stock, and restricted
stock will be converted into shares of Holly restricted stock,
in each case, in accordance with the exchange ratio. See
Treatment of Frontier Stock Options and Other
Stock-Based Awards.
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Number of Shares of
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Value of Shares of
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Number of Performance-
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Value of Performance-
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Name of Executive Officer
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Restricted Stock
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Restricted Stock(1)
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Based Stock Units
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Based Stock Units(2)
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Michael C. Jennings
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235,921
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$
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6,409,974
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103,433
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$
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3,512,843
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Doug S. Aron
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95,295
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$
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2,589,165
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39,933
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$
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1,356,225
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(1) |
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Calculated based on the number of outstanding shares of
restricted stock multiplied by a Frontier common stock price of
$27.17 per share, which was the closing price of Frontier common
stock on March 14, 2011. |
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(2) |
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Calculated based on the number of outstanding performance-based
stock units, multiplied by 125% as provided in the merger
agreement, multiplied by the price of $27.17 per share, which
was the closing price of Frontier common stock on March 14,
2011. |
Board of
Directors and Management Following the Merger
Immediately following the effective time of the merger, the
board of directors of the combined company will be expanded from
its current size of seven members to fourteen members, seven of
whom will be chosen by the current Holly directors (at least six
of whom will be independent for purposes of the rules of the
NYSE) and seven of whom will be chosen by the current Frontier
directors (at least six of whom will be independent for purposes
of the rules of the NYSE). Mr. Clifton will be one of the
seven Holly directors and will serve as Executive Chairman of
the board. As of the date of this joint proxy
statement/prospectus, it is anticipated that all of the members
of Hollys and Frontiers respective boards of
directors immediately prior to the merger will continue to serve
as directors of the combined company. Upon completion of the
merger, Mr. Clifton, currently Chairman of the Holly board
of directors and Chief Executive Officer of Holly, will serve as
Executive Chairman of the board of directors, and
86
Mr. Jennings, currently Chairman, President and Chief
Executive Officer of Frontier, will serve as President and Chief
Executive Officer. The combined companys executive
management team is expected to also include Mr. Aron,
currently Frontiers Executive Vice President and Chief
Financial Officer, as Executive Vice President and Chief
Financial Officer, Mr. Lamp, currently Hollys
President, as Executive Vice President and Chief Operating
Officer, and Mr. Shaw, currently Hollys Senior Vice
President and Chief Financial Officer, as Senior Vice President
of Strategy and Corporate Development.
Regulatory
Clearances Required for the Merger
Under the HSR Act, Holly and Frontier must file notifications
with the Federal Trade Commission and the Antitrust Division and
observe a mandatory pre-merger waiting period before completing
the merger. On March 7, 2011, each of Holly and Frontier
filed its notification under the HSR Act. On March 18,
2011, Holly and Frontier were notified of the early termination
of the pre-merger waiting period under the HSR Act.
In addition to the HSR Act related filings and clearances, Holly
and Frontier have agreed to use their reasonable best efforts to
obtain as promptly as practicable applicable state and other
federal antitrust regulatory approvals required to complete the
merger, except where the failure to obtain any such approval
would not reasonably be expected to delay or prevent the
completion of the merger or have a material adverse effect on
the expected benefits of the transactions contemplated by the
merger agreement to Holly. Holly and Frontier have agreed to
cooperate with one another to determine which regulatory filings
or approvals are required to be made or obtained prior to the
effective date of the merger and to timely make all such filings
and seek all such approvals. Holly and Frontier are currently
reviewing which such regulatory filings and approvals, if any,
are required and expect to timely make all such filings and seek
all such approvals.
Holly and Frontier cannot assure you that other government
agencies or private parties will not initiate actions to
challenge the merger before or after it is completed. Any such
challenge to the merger could result in a court order enjoining
the merger or in restrictions or conditions that would have a
material adverse effect on the combined company following the
merger if the merger is completed. Such restrictions and
conditions could include requiring the divestiture or spin-off
of assets or businesses. Under the terms of the merger
agreement, each of Holly and Frontier is required to commit to
any divestitures or similar arrangements with respect to its
assets, or conduct of business arrangements, if that divestiture
or arrangement (i) is a condition to obtain any clearance
or approval from any governmental entity in order to complete
the merger, (ii) is contingent upon the completion of the
merger and (iii) would not materially impair the business
operations of Holly, Frontier and their subsidiaries, taken as a
whole, as combined in the merger in the manner intended by Holly
and Frontier. No additional stockholder approval is expected to
be required or sought for any decision by Holly or Frontier
after the Holly special meeting and the Frontier special meeting
to agree to any terms and conditions necessary to resolve any
regulatory objections to the merger.
Exchange
of Shares in the Merger
Prior to the effective time of the merger, Holly will appoint an
exchange agent to handle the exchange of shares of Frontier
common stock for shares of Holly common stock. At the effective
time of the merger, shares of Frontier common stock will be
converted into the right to receive shares of Holly common stock
without the need for any action by the holders of Frontier
common stock.
Promptly after the effective time of the merger, but in no event
later than three business days after the closing of the merger,
Holly will cause the exchange agent to mail to each holder of a
Frontier stock certificate a letter of transmittal specifying,
among other things, that delivery will be effected, and risk of
loss and title to any certificates representing Frontier common
stock shall pass, only upon proper delivery of such certificates
to the exchange agent. The letter will also include instructions
explaining the procedure for surrendering Frontier stock
certificates in exchange for shares of Holly common stock.
Frontier shareholders should not return Frontier stock
certificates with the enclosed proxy card. Holders of
uncertificated shares of Frontier common stock in book-entry
form will automatically receive the merger consideration and
will not be required to deliver a certificate or an executed
letter of transmittal to the exchange agent.
87
After the effective time of the merger, shares of Frontier
common stock will no longer be outstanding, will be
automatically canceled and will cease to exist and each
certificate, if any, that previously represented shares of
Frontier common stock will represent only the right to receive
the merger consideration as described above. With respect to
such shares of Holly common stock deliverable upon the surrender
of Frontier stock certificates, until holders of such Frontier
stock certificates have surrendered such stock certificates to
the exchange agent for exchange, those holders will not receive
dividends or distributions with respect to such shares of Holly
common stock with a record date after the effective time of the
merger.
Frontier shareholders will not receive any fractional shares of
Holly common stock pursuant to the merger. Instead of any
fractional shares, Frontier shareholders will be paid an amount
in cash for such fraction calculated by multiplying the
fractional share interest to which such holder would otherwise
be entitled by the closing price for a share of Holly common
stock as reported on the NYSE on the first trading day
immediately following the date on which the merger is effective.
Holly stockholders need not take any action with respect to
their stock certificates.
Treatment
of Frontier Stock Options and Other Stock-Based Awards
Upon completion of the merger, each outstanding option to
acquire Frontier common stock will be converted into fully
vested and immediately exercisable options to purchase shares of
Holly common stock. The number of shares of Holly common stock
which will be subject to such Holly stock options will be the
number of shares of Frontier common stock subject to each such
Frontier stock option multiplied by 0.4811, rounded down to the
nearest whole share of Holly common stock. The exercise price
per share of Holly common stock for such Holly stock option will
equal the exercise price per share of Frontier common stock for
such Frontier stock option divided by 0.4811, rounded up to the
nearest whole cent. All of the previously outstanding Frontier
stock options expired in April 2011 before the completion of the
merger.
Upon completion of the merger, each outstanding Frontier stock
unit (except Frontier stock units issued in 2011) will vest
and will be converted into (1) a number of shares of fully
vested Holly common stock equal to 125% of the number of shares
of Frontier common stock subject to such Frontier stock units
that are then credited to the holder, multiplied by 0.4811,
rounded down to the nearest whole share of Holly common stock,
and (2) an amount of cash equal to the amount of cash and
stock dividends and dividend equivalents that would have been
credited to the holder under the Frontier stock plan if the
Frontier stock units instead had been issued as shares of
Frontier restricted stock. Frontier stock units issued in 2011
will convert into comparable Holly stock units on the same terms
and conditions as were applicable under such Frontier stock
units, taking into account the exchange ratio.
Upon completion of the merger, each outstanding share of
Frontier restricted stock (except for Frontier restricted stock
held by Messrs. Jennings and Aron and Frontier restricted
stock issued in 2011) will vest and will be converted into
the right to receive 0.4811 fully vested shares of Holly common
stock. In addition, each holder of Frontier restricted stock
will be paid an amount in cash equal to the amount of cash and
stock dividends and dividend equivalents then credited to each
such holder with respect to such Frontier restricted stock. As
discussed above under Interests of Frontier
Directors and Executive Officers in the Merger
Retention and Assumption Agreements, Messrs. Jennings
and Aron have each agreed to waive, upon the closing of the
merger, current rights to accelerated vesting of their Frontier
restricted stock where such acceleration is based solely on one
or more of the following: (1) the closing of the merger,
(2) the voluntary termination of employment on account of
the relocation of Frontiers headquarters to Dallas, Texas,
or (3) the voluntary termination of employment during the
60-day
period following the one year anniversary of the mergers
closing.
Upon completion of the merger, (1) each share of
Messrs. Jennings and Arons Frontier restricted stock
will be converted into 0.4811 shares of Holly restricted
stock, rounded down to the nearest whole share of Holly
restricted stock on the same terms and conditions as were
applicable to such Frontier restricted stock (but taking into
account any changes set forth in the retention agreements
(described above)), and (2) Messrs. Jennings and Aron
will be paid an amount of cash equal to the amount of cash and
stock dividends and dividend equivalents then credited to each
of them with respect to such Frontier restricted stock.
88
Frontier restricted stock issued in 2011 will convert into
comparable Holly restricted stock on the same terms and
conditions as were applicable under such Frontier restricted
stock, taking into account the exchange ratio.
Upon the completion of the merger, each outstanding Frontier
restricted stock unit will vest and will be converted into the
right to receive 0.4811 fully vested shares of Holly common
stock.
Structure
of the Combined Company Following the Merger
In connection with planning the integration of the businesses of
Holly and Frontier after the merger, the management teams of
Frontier and Holly have been evaluating and expect to continue
evaluating an internal restructuring of certain Holly and
Frontier legal entities after completing the merger, which may
include an internal merger of Frontier into HollyFrontier
Corporation. Although the internal restructuring is not required
to complete the merger, the management of each of Holly and
Frontier currently believes that implementing the internal
restructuring as soon as possible following completion of the
merger could better facilitate a successful integration of Holly
and Frontier. Such internal restructuring would be subject to
the continuing evaluation of such restructuring and the approval
of the board of directors of HollyFrontier Corporation following
the merger. In order to facilitate the internal restructuring,
Frontier has commenced consent solicitations to amend the
indentures governing Frontiers senior notes, as described
under Treatment of Other Debt. The
internal restructuring of the combined company would be subject
to, among other things, the continuing evaluation of such
restructuring and the approval of the board of directors of the
combined company following the completion of the merger.
Credit
Agreements
It is currently anticipated that, upon the effective time of the
merger, Frontiers revolving credit facility will be
terminated and any indebtedness thereunder repaid. As of
April 30, 2011, there was no indebtedness outstanding under
Frontiers credit facility and there were approximately
$267.4 million in outstanding letters of credit, as to
which no amounts had been drawn. As of April 30, 2011,
there was no indebtedness outstanding under Hollys credit
facility and there were approximately $80.4 million in
outstanding letters of credit, as to which no amounts had been
drawn. The amount of indebtedness and letters of credit
outstanding under the Frontier credit facility and the Holly
credit facility at the effective time of the merger may be
significantly more or less than the above listed amounts. To the
extent that there is any indebtedness outstanding under either
the Frontier credit facility or the Holly credit facility, the
combined company currently plans to fund the repayment of the
indebtedness thereunder from cash on hand or borrowings under
the new revolving credit facility of the combined company at the
effective time of the merger.
In addition, it is a condition to the closing of the merger
that, subject only to completion of the merger, the combined
company enter into a new revolving credit facility. Holly and
Frontier currently anticipate that the combined company will
enter into a new five-year senior secured revolving credit
facility (the New Senior Credit Facility),
which is currently expected to be in an amount of up to
$1 billion and to be secured by substantially all of the
current assets of the combined company. Holly and Frontier have
entered into an engagement letter (the Engagement
Letter) with Union Bank, N.A. (Union
Bank), BNP Paribas, and BNP Paribas Securities Corp.
(BNP Securities), pursuant to which Union
Bank and BNP Securities have agreed to use their best efforts to
arrange the New Senior Credit Facility. At the request of Holly
or Frontier made in May 2011, Morgan Stanley and Deutsche Bank,
Hollys financial advisors in connection with the merger,
and Credit Suisse and Citi, Frontiers financial advisors
in connection with the merger, or their respective affiliates
may act as lenders under the New Senior Credit Facility and
receive customary compensation thereunder. The amount and terms
of the New Senior Credit Facility remain subject to the
syndication process. If the parties are unable to negotiate a
new revolving credit facility for the combined company, it is
not known whether both of the parties would waive this condition.
89
The merger will have no effect on the revolving credit facility
of HEP, which will remain in place after the effective time of
the merger.
Treatment
of Other Debt
The completion of the merger will result in a change of control
for purposes of the indentures governing Frontiers
$150.0 million 6.875% senior notes due 2018 and
$200.0 million 8.5% senior notes due 2016. Following
the merger, Frontier will be required to offer to repurchase
those senior notes at a cash purchase price equal to 101% of the
principal amount of the senior notes plus accrued and unpaid
interest. The Frontier senior notes currently trade at prices in
excess of 101%. Frontier intends to fund any repurchases
pursuant to such offer from working capital, including cash on
hand or borrowings under the new revolving credit facility of
the combined company.
In order to facilitate the internal restructuring of certain
legal entities of the combined company following the merger as
described under Structure of the Combined
Company Following the Merger, Frontier has commenced
consent solicitations for the consents of the holders of the
Frontier senior notes to amend the indentures governing each
series of the Frontier senior notes. If the consent
solicitations are consummated, the proposed amendments would,
among other things, result in HEP and its subsidiaries being
excluded from certain of the restrictive covenants in the
Frontier indentures to the same extent as HEP and its
subsidiaries are excluded from certain of the restrictive
covenants in the indenture governing Hollys outstanding
senior notes, including any requirement for HEP and its
subsidiaries to guarantee the Frontier senior notes in the event
Frontier were to be merged into HollyFrontier Corporation.
Additionally, the proposed amendments would amend the
transactions with affiliates and additional guarantor covenants
in the Frontier indentures. The consent of holders representing
not less than a majority of the outstanding aggregate principal
amount of each series of the Frontier senior notes is required
to approve the proposed amendments. If the consent solicitation
is consummated, Frontier will pay customary consent fees to the
holders of the Frontier senior notes. The effectiveness of the
proposed amendments is conditioned upon, among other things, the
completion of the merger. The closing of the merger is not
conditioned on the receipt of the requisite consents in the
consent solicitations. However, if the requisite consents in the
consent solicitations are not obtained, the combined company may
be unable to consummate some or all of the internal
restructuring while the Frontier senior notes remain
outstanding, in which case the combined company may pursue an
alternative structure, may effect some but not all of the
internal restructuring or may not undergo an internal
restructuring. If the internal restructuring is not consummated
and Frontier remains a wholly owned subsidiary of HollyFrontier
Corporation, HollyFrontier Corporation will not be required to
assume or guarantee the Frontier senior notes following the
merger, but if the internal restructuring is consummated as
currently anticipated, HollyFrontier Corporation will be the
issuer of the Frontier senior notes.
The completion of the merger will not result in a change of
control for purposes of the indenture governing Hollys
$300.0 million 9.875% senior notes due 2017. Holly
anticipates that Frontier and certain of its subsidiaries will
guarantee Hollys senior notes and the new credit facility
of the combined company following the merger.
The merger will have no effect on HEPs $185 million
6.25% senior notes due 2015 or HEPs $150 million
8.25% senior notes due 2018.
Dividend
Policy
Holly currently pays quarterly cash dividends on shares of its
common stock and currently intends to consider the declaration
of a dividend on a quarterly basis. Any future determination
regarding dividend or distribution payments will be at the
discretion of the Holly board of directors, subject to
applicable limitations under Delaware law, and will depend upon
many factors, including results of operations, financial
condition, earnings, capital requirements and other legal
requirements. Hollys credit agreement and senior notes
limit the payment of dividends. Frontiers senior notes may
restrict the payment of dividends based on covenants related to
interest coverage and restricted payments. Future debt
agreements of the combined company following the merger may also
restrict the combined companys ability to pay dividends.
90
Listing
of Holly Common Stock
It is a condition to the completion of the merger that the
shares of Holly common stock to be issued to Frontier
shareholders pursuant to the merger and the shares of Holly
common stock reserved for issuance pursuant to Holly stock
options (including those shares of Holly common stock to be
issued upon conversion of the Frontier restricted stock) be
authorized for listing on the NYSE, subject to official notice
of issuance. It is expected that following the merger, if
Hollys amended and restated certificate of incorporation
is approved and adopted to, among other things, change the name
of Holly to HollyFrontier Corporation, Holly will
change the trading symbol of Holly common stock on the NYSE from
HOC to [ ].
De-Listing
and Deregistration of Frontier Stock
Upon completion of the merger, the Frontier common stock
currently listed on the NYSE will cease to be listed on the NYSE
and will subsequently be deregistered under the Exchange Act.
No
Appraisal Rights
Under Delaware and Wyoming law, as well as the certificates of
incorporation and bylaws of each company, neither the holders of
Holly capital stock nor the holders of Frontier capital stock,
respectively, are entitled to appraisal rights in connection
with the merger. See the section entitled No Appraisal
Rights beginning on page 130.
Litigation
Related to the Merger
Twelve substantially similar shareholder lawsuits styled as
class actions have been filed by alleged Frontier shareholders
challenging the merger and naming as defendants Frontier, its
board of directors and, in certain instances, Holly and Merger
Sub as aiders and abettors. To date, such shareholder actions
have been filed in Harris County, Texas, Laramie County,
Wyoming, the U.S. District Court for the Northern District
of Texas, and the U.S. District Court for the Southern
District of Texas.
The lawsuits filed in the District Courts of Harris County,
Texas are entitled: Adam Walker, Individually and On Behalf
of All Others Similarly Situated vs. Frontier Oil Corporation,
et al. (filed February 22, 2011),
Andrew Goldberg, on Behalf of Himself and All Other
Similarly Situated Shareholders of Frontier Oil
Corporation v. Frontier Oil Corporation, et al. (filed
February 24, 2011), L.A. Murphy, On Behalf of Herself
and All Others Similarly Situated v. Paul B.
Loyd, Jr., et al. (filed February 24, 2011),
Zhixin Huang v. Frontier Oil Corp., et al. (filed
February 24, 2011), Robert Pettigrew, individually and
on behalf of all others similarly situated v. Frontier Oil
Corporation, et al. (filed February 25, 2011),
Walter E. Ryan, Jr., On Behalf of Himself and All Others
Similarly Situated v. Frontier Oil Corporation, et al.
(filed February 25, 2011), Christopher Borrelli,
Individually and on Behalf of All Others Similarly
Situated v. Frontier Oil Corporation, et al. (filed
March 2, 2011), and Randy Whitman, Individually and
on behalf of all others similarly situated v. Frontier Oil
Corporation, et al. (filed on March 8, 2011). The
lawsuit filed in the District Court of Laramie County, Wyoming
is entitled Thomas Greulich, Individually and on Behalf of
All Others Similarly Situated v. Frontier Oil Corporation,
et al. (filed March 1, 2011). The lawsuit filed in the
U.S. District Court for the Northern District of Texas is
entitled Angelo Chiarelli, On Behalf of Himself and All
Others Similarly Situated v. Holly Corporation, et al.
(filed on March 2, 2011). The lawsuits filed in the
U.S. District Court for the Southern District of Texas are
entitled Tim Wilcox, Individually and on behalf of all others
similarly situated v. Frontier Oil Corporation, et al.
(filed on March 7, 2011), and Jackie A. Rhymes,
individually and on behalf of others similarly situated v.
Michael Jennings, et al. (filed on March 17, 2011).
These lawsuits generally allege that (1) the consideration
to be received by Frontiers shareholders in the merger is
inadequate, (2) the Frontier directors breached their
fiduciary duties by, among other things, approving the merger at
an inadequate price under circumstances involving certain
alleged conflicts of interest, (3) the merger agreement
includes preclusive deal protection provisions, and
(4) Frontier, and in some cases Holly and Merger Sub, aided
and abetted Frontiers board of directors in breaching its
fiduciary duties to Frontiers shareholders. The
shareholder actions seek various remedies, including enjoining
the transaction from being consummated in accordance with its
agreed-upon
terms, compensatory damages, and costs and disbursements
relating to the lawsuits.
91
In the cases pending in Texas state court, on March 21,
2011, plaintiff in the Walker lawsuit filed an amended
petition alleging that Frontiers current directors also
breached their fiduciary duties by failing to disclose material
information or making materially inadequate disclosures
concerning the proposed merger in the registration statement on
Form S-4.
On March 25, 2011, the lawsuits pending in the District
Court of Harris County, Texas, were consolidated under the style
In re: Frontier Oil Corp., Cause
No. 2011-11451,
and interim class counsel was appointed on April 12, 2011.
On May 9, 2011, Holly answered the consolidated amended
petition, generally denying the allegations and asserting
affirmative defenses. Discovery is in the early stages.
With respect to the federal lawsuits, on March 24, 2011,
plaintiffs in the lawsuits pending in the United States District
Court for the Southern District of Texas filed a motion to
consolidate the Wilcox and Rhymes cases pending in
that district and to appoint interim lead counsel. On
April 7, 2011, plaintiffs in the Wilcox and
Rhymes cases filed substantially similar amended
complaints. In addition to the claims described in general
above, these lawsuits also allege that the defendants violated
Sections 14(a) and 20(a) of the Exchange Act by making
untrue statements of material fact and omitting to state
material facts necessary to make the statements that were made
not misleading in the registration statement on
Form S-4.
On April 21, 2011, Holly and Merger Sub moved to dismiss
the amended class action complaints filed in the Wilcox
and Rhymes cases. On May 6, 2011, Holly also
moved to dismiss the original class action complaint filed in
the Chiarelli case; Merger Sub was not named as a
defendant in that action.
The defendants intend to vigorously defend these and any future
lawsuits, as they believe that they have valid defenses to all
claims and that the lawsuits are entirely without merit.
92
THE
MERGER AGREEMENT
The following section summarizes material provisions of the
merger agreement, which is included in this joint proxy
statement/prospectus as Annex A and is incorporated herein
by reference in its entirety. The rights and obligations of
Holly and Frontier are governed by the express terms and
conditions of the merger agreement and not by this summary or
any other information contained in this joint proxy
statement/prospectus. Holly and Frontier stockholders are urged
to read the merger agreement carefully and in its entirety as
well as this joint proxy statement/prospectus before making any
decisions regarding the merger, including the approval of the
merger agreement, the issuance of shares of Holly common stock
to Frontier shareholders pursuant to the merger and the approval
and adoption of Hollys amended and restated certificate of
incorporation.
The merger agreement is included in this joint proxy
statement/prospectus to provide you with information regarding
its terms and is not intended to provide any factual information
about Holly or Frontier. The merger agreement contains
representations and warranties by each of the parties to the
merger agreement. These representations and warranties have been
made solely for the benefit of the other parties to the merger
agreement and:
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may not be intended as statements of fact, but rather as a way
of allocating the risk between the parties in the event that the
statements therein prove to be inaccurate;
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have been qualified by certain disclosures that were made
between the parties in connection with the negotiation of the
merger agreement, which disclosures are not reflected in the
merger agreement itself; and
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may apply standards of materiality in a way that is different
from what may be viewed as material by you or other investors.
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Accordingly, the representations and warranties and other
provisions of the merger agreement should not be read alone, but
instead should be read together with the information provided
elsewhere in this joint proxy statement/prospectus and in the
documents incorporated by reference into this joint proxy
statement/prospectus. See Where You Can Find More
Information beginning on page 133.
This summary is qualified in its entirety by reference to the
merger agreement.
Terms of
the Merger; Merger Consideration
The merger agreement provides that, on the terms and subject to
the conditions set forth in the merger agreement and in
accordance with the Wyoming Business Corporation Act (the
WBCA), at the effective time of the merger, Merger
Sub will merge with and into Frontier. Frontier will be the
surviving corporation in the merger and will become a wholly
owned subsidiary of Holly. At the effective time of the merger,
each outstanding share of Frontier common stock (other than
shares owned by Frontier, Holly or Merger Sub or any subsidiary
of Frontier or Holly, which will be canceled and cease to exist)
will be converted into the right to receive 0.4811 shares
of Holly common stock.
Holly will not issue fractional shares of Holly common stock
pursuant to the merger agreement. Instead, each Frontier
shareholder who otherwise would have been entitled to receive a
fraction of a share of Holly common stock will receive in lieu
thereof and, upon surrender of his or her shares of Frontier
common stock, an amount in cash for such fraction calculated by
multiplying the fractional share interest to which such holder
would otherwise be entitled by the closing price for a share of
Holly common stock, as reported on the NYSE on the first trading
day immediately following the date on which the merger is
effective.
The exchange ratio will be adjusted accordingly to provide
Frontier common shareholders the same economic effect as
contemplated by the merger agreement prior to any
reorganization, reclassification, recapitalization, stock split,
split-up,
stock dividend or stock distribution, combination or exchange of
shares with respect to the shares of either Holly common stock
or Frontier common stock prior to the effective time of the
merger.
93
Alternative
Structures
The merger agreement provides that the parties will reasonably
cooperate in the consideration and implementation of alternative
structures to effect the business combination contemplated by
the merger agreement, including, without limitation, merging
Frontier with and into Merger Sub or merging Frontier into
Holly, as long as such alternative structure does not impose any
material delay on, or condition to, the consummation of the
merger, does not cause any closing condition contained in the
merger agreement not to be capable of being fulfilled and does
not adversely affect any of the parties or either Hollys
or Frontiers stockholders. The merger agreement provides
that the fact that a direct merger of Frontier into Holly would
require the approval of a majority of the holders of outstanding
shares of Holly common stock will not be deemed to have any of
the effects mentioned above.
Completion
of the Merger
Unless the parties agree otherwise, the closing of the merger
will take place on the first business day immediately following
the day on which the last condition to the completion of the
merger has been satisfied or waived or such other date as Holly
and Frontier may agree in writing. The merger will be effective
at the date and time the parties agree and specify in the
articles of merger, which will be filed with the Wyoming
Secretary of State. Hollys amended and restated
certificate of incorporation will be filed with the Delaware
Secretary of State immediately prior to the filing of the
certificate of merger and will become effective at the same time
as the merger.
Holly and Frontier currently expect the closing of the merger to
occur in the third quarter of 2011. However, as the merger is
subject to various regulatory clearances and the satisfaction or
waiver of other conditions described in the merger agreement, it
is possible that factors outside the control of Holly and
Frontier could result in the merger being completed at an
earlier time, a later time or not at all.
Exchange
of Shares in the Merger
Prior to the effective time of the merger, Holly will appoint an
exchange agent to handle the exchange of shares of Frontier
common stock for shares of Holly common stock. At the effective
time of the merger, shares of Frontier common stock will be
converted into the right to receive shares of Holly common stock
without the need for any action by the holders of Frontier
common stock.
Promptly after the effective time of the merger (and in no event
later than three business days after the closing date of the
merger), Holly will cause the exchange agent to send a letter of
transmittal to each record holder of Frontier common stock as of
the effective time of the merger specifying, among other things,
that delivery will be effected, and risk of loss and title to
any certificates representing Frontier shares will pass, only
upon proper delivery of such certificates to the exchange agent.
The letter will also include instructions explaining the
procedure for surrendering Frontier stock certificates in
exchange for shares of Holly common stock. Any uncertificated
shares of Frontier common stock in book-entry form will be
deemed surrendered to the exchange agent at the effective time
of the merger.
After the effective time of the merger, shares of Frontier
common stock will no longer be outstanding, will be
automatically canceled and will cease to exist and each
certificate, if any, that previously represented shares of
Frontier common stock will represent only the right to receive
the merger consideration as described above, any cash in lieu of
fractional shares of Holly common stock and any dividends or
other distributions to which the holders of the certificates
become entitled upon surrender of such certificates. With
respect to such shares of Holly common stock deliverable upon
the surrender of Frontier stock certificates, until holders of
such Frontier stock certificates have surrendered such stock
certificates to the exchange agent for exchange, those holders
will not receive dividends or distributions with respect to such
shares of Holly common stock with a record date after the
effective time of the merger.
Representations
and Warranties
The merger agreement contains reciprocal representations and
warranties. Each of Holly and Frontier have made representations
and warranties regarding, among other things:
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organization, good standing and corporate power;
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authority with respect to the execution and delivery of the
merger agreement, and the due and valid execution and delivery
and enforceability of the merger agreement;
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capital structure;
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ownership of subsidiaries;
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absence of conflicts with, or violations of, organizational
documents, other contracts and applicable laws;
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compliance with permits;
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required regulatory filings and consents and approvals of
governmental entities;
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SEC documents and financial statements;
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absence of certain litigation;
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absence of undisclosed liabilities;
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absence of certain changes and events since the end of the third
fiscal quarter of 2010;
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tax matters;
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benefits matters and ERISA compliance;
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collective bargaining agreements and other labor matters;
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environmental matters;
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intellectual property;
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title to properties and condition of assets;
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insurance;
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brokers fees payable in connection with the merger;
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opinions from financial advisors;
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material contracts;
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inapplicability of state takeover statutes;
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internal controls and disclosure controls and
procedures; and
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compliance with the Foreign Corrupt Practices Act.
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The merger agreement also contains certain representations and
warranties of Holly with respect to its wholly owned subsidiary,
Merger Sub, including, without limitation, corporate
organization, absence of material assets or liabilities, lack of
prior business activities, capitalization, and authority with
respect to the execution and delivery of the merger agreement.
Many of the representations and warranties in the merger
agreement are qualified by a materiality or
material adverse effect standard (that is, they will
not be deemed to be untrue or incorrect unless their failure to
be true or correct, individually or in the aggregate, would, as
the case may be, be material or have a material adverse effect).
For purposes of the merger agreement, a material adverse
effect means, with respect to a party, any change, effect,
occurrence, state of facts or development that, individually or
in the aggregate, materially and adversely affects (i) the
business, assets and liabilities (taken together), results of
operations or financial condition of such party and its
subsidiaries on a consolidated basis or (ii) the ability of
such party to consummate the transactions contemplated by the
merger agreement or fulfill the conditions to closing the merger
set forth in the
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merger agreement, except in the case of clause (i) that the
definition of material adverse effect excludes any
change, effect, occurrence, state of facts or development that
results from:
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general economic, regulatory or political conditions in the
U.S. or the other countries in which such party operates
(except to the extent such conditions affect such party
disproportionately relative to other participants in the
petroleum refining industry);
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financial or securities market fluctuations or conditions
(except to the extent such fluctuations or conditions affect
such party disproportionately relative to other participants in
the petroleum refining industry);
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changes in, or conditions affecting, the petroleum refining
industry generally (except to the extent such changes affect
such party disproportionately relative to other participants in
the petroleum refining industry);
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the announcement or pendency of the merger or the compliance
with the covenants regarding the conduct of the parties
business prior to the effective time of the merger described in
the subsection entitled Conduct of
Business below;
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any stockholder class action or other litigation arising from
allegations of a breach of fiduciary duty relating to the merger
agreement;
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any failure, in and of itself, by such party to meet any
internal or published projections, forecasts, estimates or
predictions in respect of revenues, earnings or other financial
or operating metrics for any period (however, the facts or
occurrences giving rise to or contributing to such failure may
be deemed to constitute or be taken into account in determining
whether there has been or will be a material adverse effect);
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any change, in and of itself, in the market price, credit rating
or trading volume of such partys securities (however, the
facts or occurrences giving rise to or contributing to such a
change may be deemed to constitute or be taken into account in
determining whether there has been or will be a material adverse
effect); and
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any change in applicable law, regulation or GAAP (or
authoritative interpretation thereof) (except to the extent such
change affects such party disproportionately relative to other
participants in the petroleum refining industry).
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Conduct
of Business
Each of Holly and Frontier has agreed to certain covenants in
the merger agreement restricting the conduct of its business
between the date of the merger agreement and the effective time
of the merger. In general, each of Holly and Frontier has agreed
to (i) conduct its operations in the ordinary course in
substantially the same manner as conducted before the date of
the merger agreement, (ii) use reasonable best efforts to
preserve intact its business organization, maintain satisfactory
business relationships and retain the services of its officers
and employees and (iii) take no action that is likely to
delay or materially or adversely affect the ability of either
party to obtain any necessary regulatory or other governmental
approvals required to consummate the merger.
In addition, each of Holly and Frontier has agreed to specific
restrictions relating to the conduct of its business between the
date of the merger agreement and the effective time of the
merger, including, but not limited to, the following (subject,
in each case, to exceptions specified below and in the merger
agreement or previously disclosed in writing to the other party
as provided in the merger agreement or as consented to in
advance by the other party):
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amending its charter or bylaws;
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issuing shares of its capital stock or otherwise changing its
capital structure;
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granting any option, warrant or other right to acquire shares of
its capital stock;
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increasing compensation or benefits paid to any officer,
director, employee or agent, or entering into or amending any
employment or severance agreement;
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adopting or amending in any material respect any employee
benefit plan;
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declaring or paying dividends or other distributions on its
capital stock (other than specified ordinary and special
dividends);
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redeeming or otherwise acquiring its own or its
subsidiaries capital stock or other equity interests;
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selling, leasing or otherwise disposing of its assets for an
amount in excess of $10,000,000, individually or in the
aggregate, other than in the ordinary course of business and for
fair value;
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making certain acquisitions and investments;
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changing its accounting principles or practices other than as
required by a change in law or in GAAP;
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taking certain actions relating to tax matters;
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incurring or guaranteeing indebtedness;
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entering into or materially extending or amending any material
lease, mortgage, lien, security interest or other encumbrance in
connection with any indebtedness, other than in the ordinary
course of business;
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making certain capital expenditures;
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terminating, amending or waiving any confidentiality or
standstill agreement;
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entering into or amending any agreement with any holder of its
capital stock with respect to holding, voting or disposing of
shares;
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causing the acceleration of rights, benefits or payments under
any employee benefit plan;
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entering into, amending or terminating any hedge contracts other
than in the ordinary course of business consistent with past
practice;
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splitting, combining, subdividing or reclassifying its
outstanding shares of capital stock;
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purchasing any securities of the other party;
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doing business in any country in which such party is not doing
business as of the date of the merger agreement;
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entering into joint ventures;
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settling certain material claims, actions or proceedings;
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with respect to Holly, transferring, pledging or otherwise
disposing of any of its equity interests in HEP; and
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agreeing to take any of the foregoing actions.
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No
Solicitation of Alternative Proposals
Each of Holly and Frontier has agreed that, from the time of the
execution of the merger agreement until the earlier of the
termination of the merger agreement or the completion of the
merger, it and its subsidiaries will not and it will cause its
and their directors and officers, and will use its reasonable
best efforts to cause its controlled affiliates, employees,
agents and representatives, not to, directly or indirectly,
(i) solicit, initiate or knowingly encourage or facilitate
any inquiry, proposal or offer regarding, or that would
reasonably be expected to lead to, an acquisition proposal (as
defined below), (ii) participate in any discussions or
negotiations regarding, or furnish to any person any information
with respect to, or cooperate with any person in connection
with, or take any other action to knowingly facilitate any
inquiries or the making of any proposal that constitutes or may
reasonably be expected to lead to, any acquisition proposal or
(iii) enter into any letter of intent, understanding or
agreement (oral or written) regarding, or that is intended to
result in, or would be reasonably expected to lead to, an
acquisition proposal.
An acquisition proposal with respect to a party
means any inquiry, proposal or offer regarding, or that would
reasonably be expected to lead to, (i) a transaction,
including any share issuance, tender offer, exchange offer or
share exchange, pursuant to which any person or group (other
than the other party to the merger agreement and its
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affiliates), directly or indirectly, acquires or would acquire
beneficial ownership of 10% or more of such partys
outstanding common stock or voting power or, with respect to
Holly, any of the equity interests in the MLP or the general
partner of the MLP owned by Holly or its subsidiaries,
(ii) a merger, consolidation, share exchange, business
combination or transaction pursuant to which any person or group
(other than the other party to the merger agreement and its
affiliates) or such persons stockholders would
beneficially own 10% or more of the outstanding common stock or
voting power of such party or, if applicable, any surviving
entity or parent entity resulting from any such transaction or,
with respect to Holly, any of the equity interests in the MLP or
the general partner of the MLP owned by Holly or its
subsidiaries, (iii) any transaction pursuant to which any
person or group (other than the other party to the merger
agreement and its affiliates), directly or indirectly, acquires
or would acquire control of assets (including equity securities
of subsidiaries) of such party or its subsidiaries representing
10% or more of consolidated revenues, net income or EBITDA for
the last 12 full calendar months or the fair market value of all
of the assets of such party and its subsidiaries, taken as a
whole immediately prior to such transaction, (iv) a
recapitalization of such party or any of its subsidiaries or any
transaction similar to a transaction referred to in
clause (ii) above pursuant to which any third person or
group (other than the other party to the merger agreement and
its affiliates) or the stockholders of such third person, would
beneficially own 10% or more of the outstanding common stock or
voting power of such party or, if applicable, the parent entity
resulting from any such transaction (or, with respect to Holly,
10% or more of the limited partner interests in the MLP, any of
the incentive distribution rights of the MLP or any of the
general partner interests of the MLP), (v) with respect to
Holly, the sale or transfer, directly or indirectly, of any
equity interests in the MLP or the general partner of the MLP
owned by Holly or its subsidiaries or (vi) any combination
of the foregoing (in each case, other than the merger
contemplated by the merger agreement).
Notwithstanding the restrictions described above, prior to
obtaining the relevant stockholder approval, the board of
directors of each of Holly and Frontier is permitted to furnish
information with respect to Holly or Frontier (pursuant to a
confidentiality agreement), as applicable, and enter into
negotiations or discussions with, and only with, a person who
has made an unsolicited bona fide written acquisition proposal
if the board of directors of such party determines in good faith
(after consultation with its outside legal counsel and financial
advisors) that such acquisition proposal is a superior proposal
(as defined below) and the failure to furnish information or to
enter into discussions regarding such proposal would be
inconsistent with the fiduciary obligations of such board under
applicable law. A superior proposal with respect to
a party means an unsolicited bona fide written acquisition
proposal that the board of directors of such party (after
consultation with its outside legal counsel and financial
advisors) determines in good faith is reasonably likely to
result in a transaction more favorable to such partys
stockholders from a financial point of view than the merger,
taking into account all legal, financial, regulatory and other
aspects of the acquisition proposal, the likelihood of
consummation and any changes to the terms of the merger
agreement proposed by the other party in response to such
proposal. The merger agreement requires a party to provide at
least 48 hours notice to the other party of its intent to
furnish information to, or enter into negotiations or
discussions with, a third person pursuant to this exception.
The merger agreement requires that the parties notify each other
promptly (and in any event within 24 hours) of, among other
things, the receipt of any acquisition proposal or request for
information that is reasonably likely to lead to an acquisition
proposal. Any such notification shall include a copy, or, if not
in writing, a summary of the material terms and conditions, of
any such acquisition proposal. In addition, the merger agreement
requires the parties to continue to update each other of
material changes to any acquisition proposal. The merger
agreement also requires both Holly and Frontier to cease, and
cause to be terminated, all discussions, inquiries or
negotiations with any person conducted prior to the execution of
the merger agreement with respect to any acquisition proposal
and request the prompt return or destruction of all confidential
information previously furnished in connection therewith.
Changes
in Board Recommendations
The board of directors of each of Holly and Frontier has agreed
that it will not (i) withdraw, withhold, modify or change
in a manner adverse to the other party the recommendation,
approval or declaration of advisability by such board of the
matters required to be submitted to such partys
stockholders, as applicable, (ii) recommend, approve or
declare advisable any acquisition proposal or
(iii) resolve, agree or propose publicly to take any such
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actions or approve, adopt, recommend or declare advisable, or
cause or permit such party to enter into, any agreement
constituting or related to, or that is intended to or would be
reasonably expected to lead to an acquisition proposal or
requiring, or reasonably expected to cause, such party to
abandon, terminate, delay or fail to consummate, or that would
otherwise impede, interfere with or be inconsistent with, the
transactions contemplated by the merger agreement (any action in
(i), (ii) or (iii) above, an adverse
recommendation change).
Notwithstanding the restrictions described above, at any time
prior to obtaining the relevant stockholder approval, the board
of directors of Holly or Frontier, as applicable, may make an
adverse recommendation change (other than in connection with an
acquisition proposal) if such board determines in good faith
(after consultation with its outside legal counsel) that the
failure to take such action would be inconsistent with the
boards fiduciary duties under applicable law. At any time
prior to obtaining the relevant stockholder approval, the board
of directors of Holly or Frontier, as applicable, may make an
adverse recommendation change in connection with an acquisition
proposal if such board determines in good faith (after
consultation with its outside legal counsel) that the
acquisition proposal is an unsolicited bona fide written
acquisition proposal made after the date of the merger agreement
and not in breach of such partys non-solicitation
restrictions contained in the merger agreement and that such
acquisition proposal constitutes a superior proposal and the
failure to make an adverse recommendation change would be
inconsistent with the boards fiduciary duties under
applicable law. Prior to taking any such action, the withdrawing
party must (a) inform the other party in writing that its
board of directors intends to take such action and specifying
the reasons for such action, (b) if any superior proposal
is the basis of such action, provide a copy of such proposal or,
if no written proposal exists, a summary of the material terms
and conditions of such proposal, (c) allow five business
days to elapse following the other partys receipt of such
written notice and (d) if requested by the non-withdrawing
party, negotiate in good faith with the non-withdrawing party
with respect to any changes to the merger agreement proposed by
the non-withdrawing party.
If the board of directors of Holly or Frontier withdraws or
modifies its recommendation, where the merger agreement is
terminated, such board of directors will nonetheless continue to
be obligated to hold its stockholders meeting and submit the
proposals described in this joint proxy statement/prospectus to
its stockholders for their vote, as applicable.
Efforts
to Obtain Required Stockholder Votes
Holly has agreed to take all action necessary in accordance with
applicable law and its certificate of incorporation and bylaws
to hold its special stockholders meeting for purposes of
obtaining stockholder approval for the proposal to approve the
issuance of shares of Holly common stock constituting merger
consideration to Frontier shareholders in connection with the
merger.
The Holly board of directors has approved the issuance of shares
of Holly common stock constituting merger consideration to
Frontier shareholders in connection with the merger and adopted
resolutions directing that the issuance of shares of Holly
common stock constituting merger consideration to Frontier
shareholders in connection with the merger be submitted to the
Holly stockholders for their consideration. The Holly board of
directors has also approved an amended and restated certificate
of incorporation in the form attached to this joint proxy
statement/prospectus as Annex F to, among other things,
increase the number of authorized shares of capital stock and to
change its corporate name at the effective time of the merger,
and has adopted resolutions directing that such proposals be
submitted to Holly stockholders for their consideration.
Although Holly has agreed to use its reasonable best efforts to
obtain stockholder approval for the proposal relating to the
amended and restated certificate of incorporation, obtaining
such approval is not a condition to the merger.
The Holly board of directors also agreed to approve an amendment
to the Holly Corporation Long-Term Incentive Compensation Plan
to increase the number of authorized shares of common stock
available for issuance and to recommend the approval of such
amendment to Hollys stockholders. Holly and Frontier have
subsequently concluded that such an amendment to the Holly
Corporation Long-Term Incentive Compensation Plan is unnecessary
and Frontier has granted Holly a waiver with respect to, among
other things, seeking stockholder approval of such an amendment.
Frontier has also agreed to take all action necessary in
accordance with applicable law and its certificate of
incorporation and bylaws to hold its special shareholders
meeting for purposes of obtaining shareholder approval
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for the proposal to approve the merger agreement. The board of
directors of Frontier has adopted the merger agreement and
declared the merger agreement and the transactions contemplated
thereby, including the merger, advisable and in the best
interests of Frontier and its shareholders and adopted
resolutions directing that the merger agreement be submitted to
the Frontier shareholders for their consideration.
Efforts
to Complete the Merger
Holly and Frontier have each agreed to:
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promptly (and in any event within 15 business days from the date
of the merger agreement) make their respective filings under the
HSR Act, with respect to the merger and make any other required
submissions under the HSR Act;
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use their reasonable best efforts to satisfy the conditions to
closing in the merger agreement as promptly as practicable and
to cooperate with one another in timely making all filings and
obtaining all consents, approvals, permits or authorizations
that are required to be made or obtained prior to the effective
time of the merger with or from any governmental or regulatory
authorities;
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promptly notify each other of any communication concerning the
merger from any governmental authority and permit the other
party to review in advance any proposed communication to any
governmental entity;
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not participate in any meeting or discussion with any
governmental authority concerning the merger unless it consults
with the other party in advance and, to the extent permitted by
such governmental authority, gives the other party the
opportunity to attend and participate;
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furnish the other party with copies of all correspondence,
filings and communications with any government or regulatory
authority with respect to the merger (other than copies of their
respective filings under the HSR Act); and
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furnish the other party with such necessary information and
reasonable assistance as such other parties and their respective
affiliates may reasonably request in connection with their
preparation of necessary filings, registrations or submissions
of information to any governmental or regulatory authorities.
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In addition, Holly and Frontier have each agreed to:
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use its reasonable best efforts to avoid the entry of, or to
have vacated or terminated, any decree, order or judgment that
would restrain, prevent or delay the closing of the merger,
including defending through litigation on the merits any claim
asserted in any court by any party; and
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use its reasonable best efforts to avoid or eliminate each and
every impediment under any antitrust, competition or trade
regulation law that may be asserted by any governmental entity
with respect to the merger so as to enable the closing of the
merger to occur as soon as reasonably possible.
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Frontier and Holly have agreed to consent to any divestitures,
licenses, hold separate arrangements or similar matters required
by any governmental entity as a condition to resolving such
governmental entitys objections to the merger or obtaining
its approval of the merger and that are contingent upon
consummation of the merger. Notwithstanding the foregoing, Holly
and Frontier are not required under the merger agreement to
agree to any such divestitures, licenses, hold separate
arrangements or similar matters that would materially impair the
business operations of Holly, Frontier and their subsidiaries,
taken as a whole, as combined in the manner currently intended
by the parties.
Governance
Matters After the Merger
Upon completion of the merger, the board of directors of Holly
will consist of fourteen members, including: (i) seven
directors chosen by the current Holly directors (at least six of
whom will be independent for purposes of the rules of the NYSE),
whom we refer to as Holly designees, and (ii) seven
directors chosen by the current Frontier directors (at least six
of whom will be independent for purposes of the rules of the
NYSE), whom we refer to as Frontier designees. As of the date of
this joint proxy statement/prospectus, it is anticipated that
all of the members of Hollys and Frontiers
respective boards of directors immediately prior to the merger
will continue to serve as
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directors of the combined company. Upon completion of the
merger, each standing committee of the Holly board of directors
will be comprised of equal numbers of Frontier designees and
Holly designees.
Upon completion of the merger, (i) Mr. Clifton will
serve as the Executive Chairman of the Board of Holly,
(ii) Mr. Jennings will serve as the President and
Chief Executive Officer of Holly, (iii) Mr. Aron will
serve as the Executive Vice President and Chief Financial
Officer of Holly, (iv) Mr. Lamp will serve as the
Executive Vice President and Chief Operating Officer of Holly,
and (v) Mr. Shaw will serve as the Senior Vice
President of Strategy and Corporate Development of Holly.
On or prior to the effective time of the merger, the bylaws of
Holly will be amended and restated in the form attached to this
joint proxy statement/prospectus as Exhibit C of
Annex A.
Upon completion of the merger, Holly will change its name to
HollyFrontier Corporation, subject to obtaining approval from
Holly stockholders to amend Hollys restated certificate of
incorporation for this purpose. HollyFrontier Corporations
executive headquarters will be located in the Dallas, Texas area.
Employee
Benefits Matters
Holly and Frontier have agreed that:
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from the date of completion of the merger until
December 31, 2011, the surviving corporation will assume
and maintain all of Frontiers employee benefit plans as in
effect immediately prior to the completion of the merger, and
will not amend any such plan to reduce any benefits provided
under such plans;
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any discretionary employer contributions for 2011 for any
Frontier qualified defined contribution plans will be made at
approximately the same percentage of compensation (or employee
or salary deferral contribution in the case of a discretionary
matching contribution) of eligible participants as was made to
such plan for 2010, except for any adjustments necessary to
comply with applicable law and regulations;
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with respect to Frontier employees who become employees of the
combined company following the merger without any gap in
employment, such employees will be credited with service with
Frontier prior to the merger for purposes of eligibility,
vesting and benefit determinations under any employment benefit
plan of Holly or the surviving corporation, other than
determination of accrual of service under any defined benefit
pension plan that did not cover the employee immediately prior
to the effective time of the merger or any determination of the
right to receive, or the amount of, any retiree or other
post-retirement medical coverage (except for COBRA medical
continuation coverage or any arrangement covering the employee
prior to the merger); and
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notwithstanding the foregoing provisions, subject to compliance
with applicable local law, neither party is restricted from
modifying or terminating any plan, at or after the effective
time of the merger, with respect to persons employed at
operations outside the United States.
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Holly and Frontier have also entered into written retention
agreements, which will be effective at the effective time of the
merger, with each of Messrs. Jennings and Aron, and Holly
has entered into waiver agreements with each of
Messrs. Clifton, Shaw and Lamp, which the parties agreed
will not be amended without the prior written consent of the
other party. The written retention agreements and waiver
agreements are described in the section entitled The
Merger Interests of Frontier Directors and Executive
Officers in the Merger Retention and Assumption
Agreements and The Merger Interests of
Holly Directors and Executive Officers in the Merger
Waiver Agreements of this joint proxy statement/prospectus.
Treatment
of Frontier Stock Options and Other Stock Based Awards and
Programs
Stock Options. Upon completion of the merger,
each outstanding option to purchase Frontier common stock
granted pursuant to the Frontier Oil Corporation Omnibus
Incentive Compensation Plan, which we refer to as the Frontier
stock plan, whether or not the option is exercisable or vested,
will be converted pursuant to the merger agreement into a fully
vested and immediately exercisable stock option to acquire
shares of Holly common stock on the same terms and conditions as
were applicable immediately prior to the merger. The number of
shares of Holly common stock underlying each such Holly stock
option will be determined by multiplying the number of shares of
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Frontier common stock subject to the Frontier stock option
immediately prior to the merger by the exchange ratio, and
rounding down to the nearest whole share of Holly common stock.
The exercise price per share of each such Holly stock option
will be determined by dividing the per share exercise price of
such stock option by the exchange ratio, and rounding up to the
nearest whole cent. All of the previously outstanding Frontier
stock options expired in April 2011, before the completion of
the merger.
Restricted Stock. Upon completion of the
merger, each outstanding (or earned but not yet granted to the
holder after the end of an applicable performance period) share
of Frontier restricted stock held by Messrs. Jennings and
Aron will be converted into (i) 0.4811 shares of
restricted stock of Holly (rounded down to the nearest whole
share) on the same terms and conditions as were applicable
immediately prior to the merger, and (ii) the right to
receive a cash amount equal to the amount of cash and stock
dividends and dividend equivalents then credited to the holder
with respect to such share.
Upon completion of the merger, except with respect to the awards
described in the preceding paragraph, each outstanding (or
earned but not yet granted to the holder after the end of an
applicable performance period) share of Frontier restricted
stock that is subject to restrictions or other conditions which
have not lapsed immediately prior to the merger will be
converted into (i) fully vested shares of Holly common
stock at the same exchange ratio and with the same rights and
subject to the same conditions as other outstanding shares of
Frontier common stock and (ii) the right to receive a cash
amount equal to the amount of cash and stock dividends and
dividend equivalents then credited to the holder with respect to
such share.
Stock Units. Upon completion of the merger,
each outstanding Frontier stock unit with respect to which the
applicable performance period has not ended will be converted
into (i) the number of shares of fully vested Holly common
stock equal to 125% of the number of shares of Frontier common
stock subject to such Frontier stock units that are then
credited to the holder, multiplied by the exchange ratio
(rounded down to the nearest whole share of Holly common stock),
and (ii) the right to receive a cash amount equal to the
amount of cash and stock dividends and dividend equivalents that
would have been credited to the holder under the Frontier stock
plan if the Frontier stock units instead had been issued as
shares of Frontier restricted stock.
Restricted Stock Units. Immediately prior to
the merger, each outstanding Frontier restricted stock unit with
respect to which the applicable vesting period has not ended
will become fully vested and converted into the same number of
shares of Frontier common stock, and shall be treated at the
effective time of the merger as, and shall be afforded the same
rights and subject to the same conditions as, other outstanding
shares of Frontier common stock with the right to receive the
merger consideration at the same exchange ratio.
The number of shares and, if applicable, the exercise price,
under each Frontier stock option, share of Frontier restricted
stock and Frontier stock unit will be adjusted appropriately in
the event of a reorganization, recapitalization, stock split,
stock dividend or similar transaction to provide the holders the
same economic effect prior to the occurrence of such event;
provided that no such adjustment will be made to the extent such
adjustment would result in a Frontier stock option becoming
nonqualified deferred compensation within the meaning of
Section 409A of the Code. As soon as practicable following
the effective time of the merger, Holly will file a registration
statement on
Form S-8
(or other appropriate form if
Form S-8
is not available) with respect to the shares of Holly common
stock subject to such Holly stock options, Holly stock units and
Holly restricted stock and shall maintain the effectiveness of
such registration statement for so long as such equity awards
remain outstanding.
Other
Covenants and Agreements
The merger agreement contains certain other covenants and
agreements, including covenants relating to:
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cooperation between Holly and Frontier in the preparation of
this joint proxy statement/prospectus;
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confidentiality and access by each party to certain information
about the other party during the period prior to the effective
time of the merger;
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listing on the NYSE of the shares of Holly common stock to be
issued in the merger;
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the use of each partys reasonable best efforts to cause
the merger to qualify as a reorganization within the meaning of
the Code;
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coordination between Frontier and Holly with respect to the
declaration, setting of record dates and payment dates of
dividends on the shares of Frontier common stock;
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the delivery of accounting comfort letters;
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cooperation between Holly and Frontier in negotiating and
entering into a new or amended credit facility to be effective
at the effective time of the merger; and
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cooperation between Holly and Frontier in connection with public
announcements.
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Holly has also agreed to maintain officers and
directors liability insurance, for six years following the
effective time of the merger, for Frontiers current and
former directors and employees who are currently covered by the
liability insurance coverage currently maintained by Frontier on
terms substantially no less advantageous to the indemnified
parties than Frontiers existing insurance. Notwithstanding
the foregoing, the surviving corporation will not be required to
pay annual premiums in excess of 250% of the annual premium
amount payable by Frontier for the policy year that includes the
date of the merger agreement.
Conditions
to Completion of the Merger
The obligations of Holly and Frontier to complete the merger are
subject to the satisfaction of the following conditions:
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approval of the merger agreement by a majority of the votes cast
at the Frontier special meeting;
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approval of the issuance of shares of Holly common stock to
Frontier shareholders pursuant to the merger by holders of a
majority of the outstanding shares of Holly capital stock
present in person or represented by proxy and entitled to vote
thereon at the Holly special meeting;
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the expiration or earlier termination of the waiting period (and
any extension thereof) applicable to the merger under the HSR
Act;
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the expiration of any mandatory waiting period and receipt of
any required consent under any other applicable United States
federal or state antitrust laws, except where the failure to
observe such waiting period or obtain such consent would not
reasonably be expected to delay or prevent the consummation of
the merger or have a material adverse effect on the expected
benefits of the transactions contemplated by the merger
agreement to Holly;
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absence of any injunction, decree, order, statute, rule or
regulation by a court or other governmental entity that makes
unlawful or prohibits the consummation of the merger;
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effectiveness of the registration statement of which this joint
proxy statement/prospectus forms a part and the absence of a
stop order or proceedings threatened or initiated by the SEC for
that purpose;
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authorization for the listing on the NYSE of the shares of Holly
common stock to be issued in connection with the merger and upon
conversion of the Frontier restricted stock and the shares of
Holly common stock reserved for issuance pursuant to Holly stock
options, subject to official notice of issuance; and
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the entry into and effectiveness of the new credit facility,
subject only to the consummation of the merger.
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In addition, each of Hollys and Frontiers
obligations to effect the merger is subject to the satisfaction
or waiver of the following additional conditions:
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the representations and warranties of the other party, other
than the representations related to the shares of capital stock
authorized, issued and outstanding or reserved for issuance and
the absence of any outstanding voting debt, (i) to the
extent qualified by material adverse effect, will be true and
correct, and (ii) to the extent not qualified by material
adverse effect, will be true and correct except where the
failure to be true and correct, individually or in the
aggregate, has not had, and would not reasonably be expected to
have, a material adverse effect on such party, in the case of
(i) and (ii), as of the date of the merger agreement and as
of the closing date (except for those representations and
warranties that were made as of a specified date, which need be
true and correct only as of such specified date);
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the representations and warranties of the other party relating
to the shares of capital stock authorized, issued and
outstanding or reserved for issuance and the absence of any
outstanding voting debt will be true and correct in all respects
(other than de minimis inaccuracies) as of the date of the
merger agreement and as of the closing date (except for
representations or warranties made as of a specified date, which
need be true and correct only as of such specified date);
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the other party having performed, in all material respects, its
covenants and agreements contained in the merger agreement
required to be performed on or prior to the closing date;
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receipt of a certificate executed by the other partys
chairman of the board, president and chief executive officer as
to the satisfaction of the conditions described in the preceding
three bullets; and
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receipt of a tax opinion from the partys tax counsel to
the effect that (i) with respect to the tax opinion
provided to Holly, the merger will be treated for federal income
tax purposes as a reorganization within the meaning
of Section 368(a) of the Code and that each of Holly,
Frontier and Merger Sub will be a party to the reorganization
within the meaning of Section 368(b) of the Code and
(ii) with respect to the tax opinion provided to Frontier,
the merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the
Code and that no gain or loss will be recognized by Frontier or
the shareholders of Frontier to the extent that they receive
Holly common stock in exchange for Frontier common stock
pursuant to the merger.
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Termination
of the Merger Agreement
The merger agreement may be terminated at any time prior to the
effective time of the merger, even after the receipt of the
required stockholder approvals, under the following
circumstances:
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by mutual written consent of Holly and Frontier approved by
their respective boards of directors;
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by either Holly or Frontier:
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if the merger is not consummated by September 30, 2011,
provided that if the only condition to closing that has not been
satisfied by such date is the execution, delivery and
effectiveness of the new credit facility and neither party is in
material breach of its covenants in the merger agreement
regarding the new credit facility, then such date will
automatically be extended to the final outside date (as defined
below);
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if Holly stockholders fail to approve the issuance of shares of
Holly common stock to Frontier shareholders in connection with
the merger at the Holly special meeting;
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if Frontier shareholders fail to approve the merger agreement at
the Frontier special meeting;
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if any U.S. governmental entity issues a final and
nonappealable order permanently enjoining or otherwise
prohibiting the consummation of the merger; or
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if the new credit facility is not entered into and effective,
subject only to the consummation of the merger, by the later of
September 30, 2011 or the final outside date;
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by Holly upon a breach of any covenant or agreement on the part
of Frontier, or if any representation or warranty of Frontier
becomes untrue, in either case such that the conditions to
Hollys obligations to complete the merger would not then
be satisfied and such breach is not curable or, if curable, is
not cured within 30 days after written notice;
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by Frontier upon a breach of any covenant or agreement on the
part of Holly, or if any representation or warranty of Holly
becomes untrue, in either case such that the conditions to
Frontiers obligations to complete the merger would not
then be satisfied and such failure is not curable or, if
curable, is not cured within 30 days after written notice;
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by Holly if, prior to obtaining approval of the Frontier
shareholders, the board of directors of Frontier makes an
adverse recommendation change;
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by Frontier if, prior to obtaining approval of the Holly
stockholders, the board of directors of Holly makes an adverse
recommendation change;
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by Holly if, prior to obtaining approval of the Holly
stockholders, the board of directors of Holly makes an adverse
recommendation change in connection with a superior
proposal; and
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by Frontier if, prior to obtaining approval of the Frontier
shareholders, the board of directors of Frontier makes an
adverse recommendation change in connection with a superior
proposal.
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The final outside date is the date that is the later
of September 30, 2011 or the date that is sixty
(60) days after the satisfaction of the last of the
conditions to closing relating to required stockholder
approvals, the waiting periods and consents under
U.S. antitrust laws, the effectiveness of the registration
statement of which the joint proxy statement/prospectus forms a
part and absence of stop orders, and the authorization for
listing on the NYSE of shares of Holly common stock to be issued
or reserved for issuance in connection with the merger.
Expenses
and Termination Fees; Liability for Breach
Each party has agreed to pay all fees and expenses incurred by
it in connection with the merger and the other transactions
contemplated by the merger agreement, except that the parties
will share equally all fees and expenses (excluding each
partys internal costs and the fees and expenses of
attorneys, accountants and financial and other advisors) in
relation to the printing, filing and mailing of this joint proxy
statement/prospectus and registration statement and any filing
fees in connection with the merger pursuant to the HSR Act, the
Securities Act, the Exchange Act and any other applicable laws,
rules and regulations of any governmental authority.
Holly will be obligated to pay a termination fee of
$80 million to Frontier and reimburse Frontier for up to
$12 million in expenses incurred by Frontier in connection
with the merger agreement if:
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either Holly or Frontier terminates the merger agreement because
the merger has not been completed by September 30, 2011 or
the final outside date, as applicable (only to the extent that
the Holly special stockholders meeting has not been held), or
because the issuance of the shares of Holly common stock in the
merger is not approved at the Holly stockholders meeting duly
convened for such purpose, in either case, if prior to the time
of the stockholders meeting or prior to the termination of the
merger agreement, an acquisition proposal with respect to Holly
becomes publicly known and within twelve months after such
termination Holly enters into a definitive agreement to
consummate an acquisition proposal or an acquisition proposal is
consummated (provided that for purposes of this clause, all
references in the definition of acquisition proposal to
10% will instead be deemed to refer to
40%);
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Frontier terminates the merger agreement because, prior to
obtaining the approval of the Holly stockholders, the board of
directors of Holly makes an adverse recommendation change;
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Holly terminates the merger agreement because, prior to
obtaining the approval of the Holly stockholders, the board of
directors of Holly makes an adverse recommendation change in
connection with a superior proposal;
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Frontier terminates the merger agreement as a result of
Hollys material breach of its non-solicitation covenant in
the merger agreement; or
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Frontier terminates the merger agreement after the final outside
date for failure to obtain the new credit facility as a result
of Hollys material breach of its obligations under the
merger agreement relating to the new credit facility.
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In addition, Holly will be obligated to reimburse Frontier for
up to $12 million in expenses incurred by Frontier in
connection with the merger agreement if either Frontier or Holly
terminate the merger agreement because the Holly stockholders
fail to approve the issuance of shares of Holly common stock to
Frontier shareholders pursuant to the merger at the Holly
stockholder meeting duly convened for such purpose even if
Frontier is not entitled to a termination fee.
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Frontier will be obligated to pay a termination fee of
$80 million to Holly and reimburse Holly for up to
$12 million in expenses incurred by Holly in connection
with the merger agreement if:
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either Holly or Frontier terminates the merger agreement because
the merger has not been completed by September 30, 2011 or
the final outside date, as applicable (only to the extent that
the Frontier shareholders meeting has not been held), or because
the merger agreement is not approved at the Frontier
shareholders meeting duly convened for such purpose, in either
case, if prior to the time of the shareholders meeting or prior
to the termination of the merger, an acquisition proposal with
respect to Frontier becomes publicly known and within twelve
months after such termination Frontier enters into a definitive
agreement to consummate an acquisition proposal or an
acquisition proposal is consummated (provided that for purposes
of this clause, all references in the definition of acquisition
proposal to 10% will instead be deemed to refer to
40%);
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Holly terminates the merger agreement because, prior to
obtaining the approval of the Frontier shareholders, the board
of directors of Frontier makes an adverse recommendation change;
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Frontier terminates the merger agreement because, prior to
obtaining the approval of the Frontier shareholders, the board
of directors of Frontier makes an adverse recommendation change
in connection with a superior proposal;
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Holly terminates the merger agreement as a result of
Frontiers material breach of its non-solicitation covenant
in the merger agreement; or
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Holly terminates the merger agreement after the final outside
date for failure to obtain the new credit agreement as a result
of Frontiers material breach of its obligations under the
merger agreement relating to the new credit facility.
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Amendments,
Extensions and Waivers
The merger agreement may be amended by the parties, by action
taken or authorized by the board of directors of Holly and
Frontier, at any time before or after receipt of the approvals
of the Holly or Frontier stockholders required to consummate the
merger. However, after any such stockholder approval, there may
not be, without further approval of Holly stockholders and
Frontier shareholders, any amendment of the merger agreement
which by applicable law requires further stockholder approval.
At any time prior to the effective time of the merger, any party
may (i) extend the time for performance of any obligations
or other acts of the other party, (ii) waive any
inaccuracies in the representations and warranties of the other
party contained in the merger agreement and (iii) waive
compliance by the other party with any of the agreements or
conditions contained in the merger agreement.
No Third
Party Beneficiaries
While the merger agreement is not intended to confer upon you or
any person other than Holly, Frontier and Merger Sub any rights
or remedies, it provides limited exceptions. Frontiers and
Hollys directors and officers will continue to have
indemnification and liability insurance coverage after the
completion of the merger. Furthermore, each party will have the
right, on behalf of its stockholders, to pursue damages and
other relief, including equitable relief, for the other
partys willful and material breach of any of its
representations and warranties in the merger agreement or
willful and material breach of any covenant in the merger
agreement. However, this right is enforceable on behalf of
Frontier shareholders only by Frontier in its sole and absolute
discretion or on behalf of Holly stockholders only by Holly in
its sole and absolute discretion, and any and all interests in
such claims shall attach to shares of Frontier common stock or
Holly common stock, as applicable, and subsequently trade and
transfer with those shares. As a result, any damages,
settlements or other amounts recovered by a party with respect
to such claims may, in such partys sole and absolute
discretion, be (i) distributed, in whole or in part, by
such party to its stockholders as of any date determined by such
party or (ii) retained by such party for the use and
benefit of such party on behalf of its stockholders as such
party deems fit.
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Specific
Performance
Holly and Frontier acknowledged and agreed in the merger
agreement that irreparable damage would occur in the event that
any of the provisions of the merger agreement were not performed
in accordance with their specific terms or were otherwise
breached, and that monetary damages, even if available, would
not be an adequate remedy. In addition, the parties agreed that
they will be entitled to seek an injunction or injunctions to
prevent breaches of the merger agreement and to enforce
specifically the performance of terms and provisions of the
merger agreement without proof of actual damages. The parties
further agreed not to assert that a remedy of specific
performance is unenforceable, invalid, contrary to law or
inequitable for any reason, nor to object to a remedy of
specific performance on the basis that a remedy of monetary
damages would provide an adequate remedy for any such breach.
Each party further acknowledged and agreed that the agreements
relating to specific performance are an integral part of the
transactions contemplated by the merger agreement and that,
without these agreements, the other party would not have entered
into the merger agreement. Each party further agreed that no
other party or any other person will be required to obtain,
furnish or post any bond or similar instrument in connection
with or as a condition to obtaining any remedy relating to
specific performance, and each party irrevocably waived any
right it may have to require the obtaining, furnishing or
posting of any such bond or similar instrument.
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MATERIAL
U.S. FEDERAL INCOME TAX CONSEQUENCES
General
The following discussion addresses the material
U.S. federal income tax consequences of the merger.
This discussion addresses only holders of Frontier common stock
who hold that stock as a capital asset and are
U.S. persons, as defined for U.S. federal
income tax purposes. For these purposes a
U.S. person is:
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an individual citizen or resident of the United States;
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a corporation (or any other entity treated as a corporation for
U.S. federal income tax purposes) created or organized in
or under the laws of the United States, any state thereof or the
District of Columbia;
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an estate the income of which is subject to U.S. federal
income taxation regardless of its source; or
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a trust that (i) is subject to the primary supervision of a
court within the United States and one or more U.S. persons
have the authority to control all substantial decisions of the
trust or (ii) has a valid election in effect under
applicable U.S. Treasury regulations to be treated as a
U.S. person.
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This discussion does not address any non-income taxes or any
foreign, state or local tax consequences of the merger. This
discussion does not address all aspects of U.S. federal
income taxation that may be relevant to a holder of Frontier
common stock in light of that holders particular
circumstances or to a holder subject to special rules (such as a
controlled foreign corporation, passive foreign investment
company, company that accumulates earnings to avoid
U.S. federal income tax, foreign tax-exempt organization,
financial institution, broker or dealer in securities, insurance
company, regulated investment company, real estate investment
trust, person who holds Frontier common stock as part of a
hedging or conversion transaction or as part of a short-sale or
straddle, partnership or other pass-through entity for
U.S. federal income tax purposes or a person who acquired
Frontier common stock pursuant to the exercise of options or
otherwise as compensation). This discussion is based on the
Code, applicable Treasury regulations, administrative
interpretations and court decisions, each as in effect as of the
date of this joint proxy statement/prospectus and all of which
are subject to change, possibly with retroactive effect.
If a partnership (or an entity or arrangement treated as a
partnership for U.S. federal income tax purposes) holds
Frontier common stock, the tax treatment of a partner will
generally depend on the status of the partner and the activities
of the partnership. Partners of partnerships holding Frontier
common stock should consult their own tax advisors.
We urge you to consult your own tax advisors as to the
specific tax consequences to you of the merger, including the
applicability and effect of federal, state, local and foreign
income and other tax laws in light of your particular
circumstances.
Tax
Opinions
As a condition to the completion of the merger,
Vinson & Elkins L.L.P., counsel to Holly, will have
delivered an opinion, dated as of the closing date of the
merger, to the effect that the merger will be treated for
federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code and that each of
Holly, Frontier and Merger Sub will be a party to the
reorganization within the meaning of Section 368(b) of the
Code.
Completion of the merger is also conditioned upon the receipt by
Frontier of an opinion of Andrews Kurth LLP, counsel to
Frontier, dated as of the closing date of the merger, to the
effect that the merger will be treated for federal income tax
purposes as a reorganization within the meaning of
Section 368(a) of the Code and that no gain or loss will be
recognized by Frontier or the shareholders of Frontier to the
extent that they receive Holly common stock in exchange for
Frontier common stock pursuant to the merger.
Neither Holly nor Frontier intends to waive these conditions.
The opinions regarding the merger will not address any state,
local or foreign tax consequences of the merger. The opinions
will be based on certain assumptions and representations as to
factual matters from Holly and Frontier, as well as certain
covenants and undertakings by Holly and Frontier. If any of the
assumptions, representations, covenants or undertakings is
incorrect, incomplete, inaccurate or is violated in any material
respect, the validity of the conclusions reached by counsel in
their opinions would be jeopardized and the tax consequences of
the merger could differ from those
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described in this joint proxy statement/prospectus. Neither
Holly nor Frontier is currently aware of any facts or
circumstances that would cause the assumptions, representations
covenants and undertakings to be incorrect, incomplete,
inaccurate or violated in any material respect.
An opinion of counsel represents counsels best legal
judgment but is not binding on the IRS or any court, so there
can be no certainty that the IRS will not challenge the
conclusions reflected in the opinion or that a court would not
sustain such a challenge. Neither Holly nor Frontier intends to
obtain a ruling from the IRS on the tax consequences of the
merger. If the IRS were to successfully challenge the
reorganization status of the merger, the tax consequences would
be very different from those set forth in this joint proxy
statement/prospectus. The following discussion assumes that the
merger will be treated as a reorganization within the meaning of
Section 368(a) of the Code.
Tax
Consequences to Holders of Frontier Common Stock
Subject to the discussion below relating to the receipt of cash
in lieu of factional shares, the U.S. federal income tax
consequences of the merger are as follows:
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a holder of Frontier common stock will not recognize any gain or
loss upon the exchange of the holders shares of Frontier
common stock for shares of Holly common stock in the merger;
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a holder of Frontier common stock will have a tax basis in the
Holly common stock received in the merger equal to the tax basis
of the Frontier common stock surrendered by the holder in
exchange for that Holly common stock in the merger; and
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a holder of Frontier common stock will have a holding period for
shares of Holly common stock received in the merger that
includes its holding period for its shares of Frontier common
stock surrendered by the holder in exchange for that Holly
common stock in the merger.
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No fractional shares of Holly common stock will be distributed
to holders of Frontier common stock in connection with the
merger. A holder that receives cash in lieu of a fractional
share of Holly common stock as a part of the merger will
generally recognize capital gain or loss measured by the
difference between the cash received for such fractional share
and the holders tax basis in the fractional share above.
An individual U.S. holder will generally be subject to
U.S. federal income tax at a reduced rate with respect to
such capital gain, assuming that the U.S. holder has held
all of its Frontier common stock for more than one year.
Backup withholding, currently at 28%, may apply with respect to
certain payments, such as cash received for fractional shares,
unless the holder of the Frontier common stock receiving such
payments (i) is an exempt holder (generally, corporations,
tax-exempt organizations, qualified pension and profit-sharing
trusts, individual retirement accounts, or nonresident aliens
who, when required, provide certification as to their status) or
(ii) provides a certificate containing the holders
name, address, correct federal taxpayer identification number
and a statement that the holder is exempt from backup
withholding. Backup withholding does not constitute an
additional tax, but is merely an advance payment that may be
credited against a holders U.S. federal income tax
liability if the required information is supplied to the IRS.
Reporting
Requirements
Each holder of Frontier common stock who receives shares of
Holly common stock in the merger is required to retain records
pertaining to the merger pursuant to Treasury
Regulation Section 1.368-3(d).
Each holder of Frontier common stock who receives shares of
Holly common stock in the merger and who owns immediately before
the merger 5% or more, by vote or value, of Frontier stock will
be required to file a statement with his or her federal income
tax return for the year of the merger. As provided in Treasury
Regulation Section 1.368-3(b),
the statement must set forth the holders basis in, and the
fair market value of, the shares of Frontier common stock
surrendered in the merger, the date of the merger and the name
and employer identification number of Holly, Frontier and Merger
Sub.
Tax
Consequences to Holly, Frontier and Merger Sub
None of Holly, Frontier or Merger Sub will recognize any gain or
loss for U.S. federal income tax purposes as a result of
the merger.
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ACCOUNTING
TREATMENT
Holly prepares its financial statements in accordance with GAAP.
The merger will be accounted for using the acquisition method of
accounting with Holly being considered the acquirer of Frontier
for accounting purposes. This means that Holly will allocate the
purchase price to the fair value of Frontiers tangible and
intangible assets and liabilities at the acquisition date, with
the excess purchase price being recorded as goodwill. Under the
acquisition method of accounting, goodwill is not amortized but
is tested for impairment at least annually.
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UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The Unaudited Pro Forma Condensed Combined Balance Sheet
combines the historical consolidated balance sheets of Holly and
Frontier, giving effect to the merger as if it had been
consummated on March 31, 2011. The Unaudited Pro Forma
Condensed Combined Statements of Income for the three months
ended March 31, 2011 and the year ended December 31,
2010 combine the historical consolidated statements of income of
Holly and Frontier, giving effect to the merger as if it had
been consummated on January 1, 2010, the beginning of the
earliest period presented. The historical consolidated financial
statements of Frontier have been adjusted to reflect certain
reclassifications in order to conform with Hollys
financial statement presentation.
The Unaudited Pro Forma Condensed Combined Financial Statements
were prepared using the acquisition method of accounting with
Holly considered the acquirer of Frontier. Accordingly,
consideration given by Holly to complete the merger with
Frontier will be allocated to assets and liabilities of Frontier
based upon their estimated fair values as of the date of
completion of the merger. As of the date of this joint proxy
statement/prospectus, Holly has not completed the detailed
valuation studies necessary to arrive at the required estimates
of the fair value of the Frontier assets to be acquired and the
liabilities to be assumed and the related allocations of
purchase price, nor has it identified all adjustments necessary
to conform Frontiers accounting policies to Hollys
accounting policies. A final determination of the fair value of
Frontiers assets and liabilities will be based on the
actual net tangible and intangible assets and liabilities of
Frontier that exist as of the date of completion of the merger
and, therefore, cannot be made prior to the completion of the
transaction. In addition, the value of the consideration to be
given by Holly to complete the merger will be determined based
on the trading price of Hollys common stock at the time of
the completion of the merger. Accordingly, the pro forma
purchase price adjustments are preliminary and are subject to
further adjustments as additional information becomes available
and as additional analyses are performed. The preliminary pro
forma purchase price adjustments have been made solely for the
purpose of providing the Unaudited Pro Forma Condensed Combined
Financial Statements presented below. Holly estimated the fair
value of Frontiers assets and liabilities based on
discussions with Frontiers management, preliminary
valuation studies, due diligence and information presented in
public filings. Until the merger is completed, both companies
are limited in their ability to share information. Upon
completion of the merger, final valuations will be performed.
Increases or decreases in the fair value of relevant balance
sheet amounts will result in adjustments to the balance sheet
and/or
statement of income. There can be no assurance that such
finalization will not result in material changes.
These Unaudited Pro Forma Condensed Combined Financial
Statements have been developed from and should be read in
conjunction with the respective audited and unaudited
consolidated financial statements of Holly and Frontier
contained in their respective Annual Reports on
Form 10-K
for the fiscal year ended December 31, 2010 and their
respective Quarterly Reports on Form 10-Q for the three
months ended March 31, 2011, respectively, which are
incorporated by reference into this joint proxy
statement/prospectus. The Unaudited Pro Forma Condensed Combined
Financial Statements are provided for illustrative purposes only
and do not purport to represent what the actual consolidated
results of operations or the consolidated financial position of
Holly would have been had the merger occurred on the dates
assumed, nor are they necessarily indicative of future
consolidated results of operations or consolidated financial
position.
Holly expects to incur significant costs associated with
integrating the operations of Holly and Frontier. The Unaudited
Pro Forma Condensed Combined Financial Statements do not reflect
the costs of any integration activities or benefits that may
result from realization of future cost savings from operating
efficiencies or revenue synergies expected to result from the
merger.
111
UNAUDITED
PRO FORMA CONDENSED COMBINED BALANCE SHEET
March 31, 2011
(In
thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
Historical
|
|
|
Pro Forma
|
|
|
Condensed
|
|
|
|
Holly
|
|
|
Frontier
|
|
|
Adjustments
|
|
|
Combined
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
224,114
|
|
|
$
|
685,375
|
|
|
$
|
(17,154
|
)(a)
|
|
$
|
892,335
|
|
Marketable securities
|
|
|
48,947
|
|
|
|
|
|
|
|
|
|
|
|
48,947
|
|
Accounts receivable, net: Product and transportation
|
|
|
349,509
|
|
|
|
261,630
|
|
|
|
|
|
|
|
611,139
|
|
Crude oil resales
|
|
|
802,745
|
|
|
|
|
|
|
|
346,000
|
(b)
|
|
|
1,148,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,152,254
|
|
|
|
261,630
|
|
|
|
346,000
|
|
|
|
1,759,884
|
|
Inventories: Crude oil and
refined products
|
|
|
424,785
|
|
|
|
274,679
|
|
|
|
429,697
|
(c)
|
|
|
1,129,161
|
|
Materials and supplies
|
|
|
48,671
|
|
|
|
25,203
|
|
|
|
20,689
|
(c)
|
|
|
94,563
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
473,456
|
|
|
|
299,882
|
|
|
|
450,386
|
|
|
|
1,223,724
|
|
Income taxes receivable
|
|
|
2,042
|
|
|
|
30,634
|
|
|
|
|
|
|
|
32,676
|
|
Deferred income taxes
|
|
|
4,791
|
|
|
|
13,757
|
|
|
|
(18,548
|
)(d)
|
|
|
|
|
Prepayments and other
|
|
|
10,150
|
|
|
|
11,807
|
|
|
|
|
|
|
|
21,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,915,754
|
|
|
|
1,303,085
|
|
|
|
760,684
|
|
|
|
3,979,523
|
|
Properties, plants and equipment, at cost
|
|
|
2,282,634
|
|
|
|
1,550,417
|
|
|
|
(535,417
|
)(e)
|
|
|
3,297,634
|
|
Accumulated depreciation
|
|
|
(481,082
|
)
|
|
|
(536,278
|
)
|
|
|
536,278
|
(e)
|
|
|
(481,082
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,801,552
|
|
|
|
1,014,139
|
|
|
|
861
|
|
|
|
2,816,552
|
|
Marketable securities (long-term)
|
|
|
19,550
|
|
|
|
|
|
|
|
|
|
|
|
19,550
|
|
Other
assets: Turnaround
costs
|
|
|
69,409
|
|
|
|
51,177
|
|
|
|
(51,177
|
)(e)
|
|
|
69,409
|
|
Goodwill
|
|
|
81,602
|
|
|
|
|
|
|
|
1,657,174
|
(f)
|
|
|
1,738,776
|
|
Deferred income taxes
|
|
|
|
|
|
|
5,450
|
|
|
|
(5,450
|
)(b)
|
|
|
|
|
Intangibles and other
|
|
|
101,893
|
|
|
|
11,815
|
|
|
|
44,088
|
(g)
|
|
|
157,796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
272,454
|
|
|
|
68,442
|
|
|
|
1,644,635
|
|
|
|
1,985,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
3,989,760
|
|
|
$
|
2,385,666
|
|
|
$
|
2,406,180
|
|
|
$
|
8,781,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
1,498,508
|
|
|
$
|
557,981
|
|
|
$
|
346,000
|
(b)
|
|
$
|
2,402,489
|
|
Accrued liabilities
|
|
|
76,734
|
|
|
|
34,043
|
|
|
|
|
|
|
|
110,777
|
|
Income taxes payable
|
|
|
|
|
|
|
57,607
|
|
|
|
|
|
|
|
57,607
|
|
Deferred income taxes
|
|
|
|
|
|
|
|
|
|
|
152,599
|
(d)
|
|
|
152,599
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
1,575,242
|
|
|
|
649,631
|
|
|
|
498,599
|
|
|
|
2,723,472
|
|
Long-term debt
|
|
|
834,213
|
|
|
|
350,667
|
|
|
|
24,050
|
(h)
|
|
|
1,208,930
|
|
Deferred income taxes
|
|
|
131,698
|
|
|
|
231,246
|
|
|
|
(5,450
|
)(b)
|
|
|
345,988
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,506
|
)(d)
|
|
|
|
|
Other long-term liabilities
|
|
|
80,657
|
|
|
|
62,763
|
|
|
|
|
|
|
|
143,420
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
763
|
|
|
|
57,736
|
|
|
|
(57,736
|
)(i)
|
|
|
1,277
|
|
|
|
|
|
|
|
|
|
|
|
|
514
|
(j)
|
|
|
|
|
Additional capital
|
|
|
193,121
|
|
|
|
266,870
|
|
|
|
(266,870
|
)(i)
|
|
|
3,201,607
|
|
|
|
|
|
|
|
|
|
|
|
|
3,008,486
|
(j)
|
|
|
|
|
Retained earnings
|
|
|
1,283,021
|
|
|
|
1,171,414
|
|
|
|
(1,171,414
|
)(i)
|
|
|
1,265,867
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,154
|
)(a)
|
|
|
|
|
Accumulated other comprehensive loss
|
|
|
(25,866
|
)
|
|
|
(6,491
|
)
|
|
|
6,491
|
(i)
|
|
|
(25,866
|
)
|
Common stock held in treasury
|
|
|
(677,253
|
)
|
|
|
(398,170
|
)
|
|
|
398,170
|
(i)
|
|
|
(677,253
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
773,786
|
|
|
|
1,091,359
|
|
|
|
1,900,487
|
|
|
|
3,765,632
|
|
Noncontrolling interest
|
|
|
594,164
|
|
|
|
|
|
|
|
|
|
|
|
594,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
1,367,950
|
|
|
|
1,091,359
|
|
|
|
1,900,487
|
|
|
|
4,359,796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
3,989,760
|
|
|
$
|
2,385,666
|
|
|
$
|
2,406,180
|
|
|
$
|
8,781,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the Unaudited Pro
Forma Condensed Combined Financial Statements.
112
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
For the Three Months Ended March 31, 2011
(In
thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
Historical
|
|
|
Pro Forma
|
|
|
Condensed
|
|
|
|
Holly
|
|
|
Frontier
|
|
|
Adjustments
|
|
|
Combined
|
|
|
Sales and other revenues
|
|
$
|
2,326,585
|
|
|
$
|
1,908,654
|
|
|
$
|
|
|
|
$
|
4,235,239
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of products sold (exclusive of depreciation and
amortization)
|
|
|
1,984,617
|
|
|
|
1,561,403
|
|
|
|
|
|
|
|
3,546,020
|
|
Operating expenses (exclusive of depreciation and amortization)
|
|
|
134,743
|
|
|
|
75,807
|
|
|
|
|
|
|
|
210,550
|
|
General and administrative expenses (exclusive of depreciation
and amortization)
|
|
|
16,818
|
|
|
|
10,603
|
|
|
|
|
|
|
|
27,421
|
|
Depreciation and amortization
|
|
|
31,308
|
|
|
|
26,968
|
|
|
|
(12,873
|
)(e)
|
|
|
45,403
|
|
Gain on sale of assets
|
|
|
|
|
|
|
(21
|
)
|
|
|
|
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expense
|
|
|
2,167,486
|
|
|
|
1,674,760
|
|
|
|
(12,873
|
)
|
|
|
3,829,373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
159,099
|
|
|
|
233,894
|
|
|
|
12,873
|
|
|
|
405,866
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of SLC Pipeline
|
|
|
740
|
|
|
|
|
|
|
|
|
|
|
|
740
|
|
Interest income
|
|
|
85
|
|
|
|
347
|
|
|
|
|
|
|
|
432
|
|
Interest expense
|
|
|
(16,204
|
)
|
|
|
(8,634
|
)
|
|
|
953
|
(h)
|
|
|
(23,885
|
)
|
Merger transaction costs
|
|
|
(3,698
|
)
|
|
|
(5,148
|
)
|
|
|
8,846
|
(k)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19,077
|
)
|
|
|
(13,435
|
)
|
|
|
9,799
|
|
|
|
(22,713
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
|
140,022
|
|
|
|
220,459
|
|
|
|
22,672
|
|
|
|
383,153
|
|
Income tax provision:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
49,489
|
|
|
|
60,951
|
|
|
|
|
|
|
|
110,440
|
|
Deferred
|
|
|
(478
|
)
|
|
|
19,642
|
|
|
|
8,615
|
(d)
|
|
|
27,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,011
|
|
|
|
80,593
|
|
|
|
8,615
|
|
|
|
138,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
91,011
|
|
|
|
139,866
|
|
|
|
14,057
|
|
|
|
244,934
|
|
Less net income attributable to noncontrolling interest
|
|
|
6,317
|
|
|
|
|
|
|
|
|
|
|
|
6,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to common stockholders
|
|
$
|
84,694
|
|
|
$
|
139,866
|
|
|
$
|
14,057
|
|
|
$
|
238,617
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings attributable to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.59
|
|
|
$
|
1.34
|
|
|
|
|
(l)
|
|
$
|
2.28
|
|
Diluted
|
|
$
|
1.58
|
|
|
$
|
1.32
|
|
|
|
|
(l)
|
|
$
|
2.27
|
|
Average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
53,307
|
|
|
|
104,580
|
|
|
|
|
(l)
|
|
|
104,729
|
|
Diluted
|
|
|
53,633
|
|
|
|
105,765
|
|
|
|
|
(l)
|
|
|
105,138
|
|
The accompanying notes are an integral part of the Unaudited Pro
Forma Condensed Combined Financial Statements.
113
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
For the Year Ended December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
Historical
|
|
|
Pro Forma
|
|
|
Condensed
|
|
|
|
Holly
|
|
|
Frontier
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
(In thousands, except per share data)
|
|
|
Sales and other revenues
|
|
$
|
8,322,929
|
|
|
$
|
5,884,906
|
|
|
$
|
|
|
|
$
|
14,207,835
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of products sold (exclusive of depreciation and
amortization)
|
|
|
7,367,149
|
|
|
|
5,367,278
|
|
|
|
|
|
|
|
12,734,427
|
|
Operating expenses (exclusive of depreciation and amortization)
|
|
|
504,414
|
|
|
|
281,793
|
|
|
|
|
|
|
|
786,207
|
|
General and administrative expenses (exclusive of depreciation
and amortization)
|
|
|
70,839
|
|
|
|
47,192
|
|
|
|
|
|
|
|
118,031
|
|
Depreciation and amortization
|
|
|
117,529
|
|
|
|
104,821
|
|
|
|
(48,442
|
)(e)
|
|
|
173,908
|
|
Gain on sale of assets
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expense
|
|
|
8,059,931
|
|
|
|
5,801,083
|
|
|
|
(48,442
|
)
|
|
|
13,812,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
262,998
|
|
|
|
83,823
|
|
|
|
48,442
|
|
|
|
395,263
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of SLC Pipeline
|
|
|
2,393
|
|
|
|
|
|
|
|
|
|
|
|
2,393
|
|
Interest income
|
|
|
1,168
|
|
|
|
2,345
|
|
|
|
|
|
|
|
3,513
|
|
Interest expense
|
|
|
(74,196
|
)
|
|
|
(32,581
|
)
|
|
|
3,134
|
(h)
|
|
|
(103,643
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(70,635
|
)
|
|
|
(30,236
|
)
|
|
|
3,134
|
|
|
|
(97,737
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
|
192,363
|
|
|
|
53,587
|
|
|
|
51,576
|
|
|
|
297,526
|
|
Income tax provision:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
35,472
|
|
|
|
13,839
|
|
|
|
|
|
|
|
49,311
|
|
Deferred
|
|
|
23,840
|
|
|
|
1,963
|
|
|
|
19,599
|
(d)
|
|
|
45,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,312
|
|
|
|
15,802
|
|
|
|
19,599
|
|
|
|
94,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
133,051
|
|
|
|
37,785
|
|
|
|
31,977
|
|
|
|
202,813
|
|
Less net income attributable to noncontrolling interest
|
|
|
29,087
|
|
|
|
|
|
|
|
|
|
|
|
29,087
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to common stockholders
|
|
$
|
103,964
|
|
|
$
|
37,785
|
|
|
$
|
31,977
|
|
|
$
|
173,726
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share attributable to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.95
|
|
|
$
|
0.36
|
|
|
|
|
(l)
|
|
$
|
1.66
|
|
Diluted
|
|
$
|
1.94
|
|
|
$
|
0.36
|
|
|
|
|
(l)
|
|
$
|
1.65
|
|
Average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
53,218
|
|
|
|
104,261
|
|
|
|
|
(l)
|
|
|
104,640
|
|
Diluted
|
|
|
53,609
|
|
|
|
105,726
|
|
|
|
|
(l)
|
|
|
105,114
|
|
The accompanying notes are an integral part of the Unaudited Pro
Forma Condensed Combined Financial Statements.
114
NOTES TO
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS
|
|
Note 1.
|
Basis of
Presentation
|
On February 21, 2011, Holly and Frontier entered into the
merger agreement whereby Frontier will become a wholly-owned
subsidiary of Holly. Under the terms of the merger agreement,
each outstanding share of Frontier common stock will be
exchanged for 0.4811 shares of Holly common stock.
The accompanying Unaudited Pro Forma Condensed Combined
Financial Statements were prepared in accordance with Accounting
Standards Codification Topic 805 using the acquisition method of
accounting with Holly considered the acquirer of Frontier.
The accompanying Unaudited Pro Forma Condensed Combined
Financial Statements present the pro forma consolidated
financial position and results of operations of the combined
company based upon the historical financial statements of Holly
and Frontier, after giving effect to the merger and adjustments
described in these notes, and are intended to reflect the impact
of the merger on Hollys consolidated financial statements.
The accompanying Unaudited Pro Forma Condensed Combined
Financial Statements are presented for illustrative purposes
only and do not reflect the costs of any integration activities
or benefits that may result from realization of future cost
savings due to operating efficiencies or revenue synergies
expected to result from the merger.
The Unaudited Pro Forma Condensed Combined Balance Sheet gives
effect to the merger as if it had been consummated on
March 31, 2011 and includes estimated pro forma adjustments
for the preliminary valuations of assets acquired and
liabilities assumed. These adjustments are subject to further
revision as additional information becomes available and
additional analyses are performed. The Unaudited Pro Forma
Condensed Combined Statements of Income for the three months
ended March 31, 2011 and the year ended December 31,
2010 give effect to the merger as if it had been consummated on
January 1, 2010, the beginning of the earliest period
presented.
The Unaudited Pro Forma Condensed Combined Balance Sheet has
been adjusted to reflect the preliminary allocation of the
purchase price to identifiable net assets acquired with the
excess purchase recorded as goodwill. The purchase price
allocation in these Unaudited Pro Forma Condensed Combined
Financial Statements is based upon a purchase price of
approximately $3 billion. This amount was derived as
described below in accordance with the merger agreement, based
on the outstanding shares of Frontier common stock at
May 11, 2011, the exchange ratio of 0.4811 shares of
Holly common stock for each Frontier share and a price per Holly
common share of $58.52, which represents the closing price of
Holly shares of common stock on May 11, 2011. The actual
number of shares of Holly common stock issued in the merger will
be based upon the actual number of Frontier shares outstanding
when the merger closes, and the valuation of those shares will
be based on the trading price of Hollys common stock when
the merger closes. This is inclusive of Frontier common stock
expected to be issued upon the immediate vesting of outstanding
Frontier equity awards. Substantially all of the Frontier
restricted stock and stock unit awards that were issued prior to
February 21, 2011 (date of merger agreement) and
outstanding at May 11, 2011 will become fully vested as of
the date of merger.
Under the terms of Frontiers senior notes having an
aggregate principal amount of $350 million outstanding at
March 31, 2011, the merger will represent a change in
control that provides the note holders the right to
require Holly to repurchase the Frontier senior notes at a
purchase price equal to 101% of the principal amount of the
notes. Holly does not anticipate that it will be required to
repurchase a significant amount of the notes because the
Frontier senior notes currently trade at prices in excess of
101%. Accordingly, no adjustment is included in the Unaudited
Pro Forma Condensed Combined Financial Statements to reflect any
repurchase of the Frontier senior notes.
115
NOTES TO
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (Continued)
The preliminary purchase price is calculated as follows:
|
|
|
|
|
|
|
(In thousands, except per share data)
|
|
|
Assumed outstanding shares of Frontier common stock to be
exchanged(1)
|
|
|
106,885
|
|
Exchange ratio
|
|
|
0.4811
|
|
|
|
|
|
|
Assumed shares of Holly common stock to be issued
|
|
|
51,422
|
|
Price per share
|
|
$
|
58.52
|
|
|
|
|
|
|
Fair value of Holly shares expected to be issued
|
|
$
|
3,009,000
|
(2)
|
|
|
|
|
|
|
|
|
(1) |
|
Inclusive of Frontier common stock expected to be issued upon
the immediate vesting of outstanding Frontier restricted stock
and stock unit awards immediately prior to the consummation of
the merger. |
(2) |
|
Estimated fair value is rounded to the nearest million. |
The preliminary purchase price will fluctuate with changes in
the trading price of Holly common stock until the merger is
completed. A 25% increase or decrease in the $58.52 price of
Holly common stock used in the preliminary purchase price
calculation above would increase or decrease the purchase price
by approximately $750 million.
The table below represents a preliminary allocation of the total
consideration to Frontiers tangible and intangible assets
and liabilities based on Holly managements preliminary
estimate of their respective fair values as of March 31,
2011:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Cash
|
|
$
|
685,375
|
|
Inventories
|
|
|
750,268
|
|
Other current assets
|
|
|
650,071
|
|
Properties, plants and equipment
|
|
|
1,015,000
|
|
Goodwill
|
|
|
1,657,174
|
|
Intangibles and other non-current assets
|
|
|
55,903
|
|
Long-term debt and capital leases
|
|
|
(374,717
|
)
|
Deferred income taxes, including current
|
|
|
(371,680
|
)
|
Other liabilities assumed
|
|
|
(1,058,394
|
)
|
|
|
|
|
|
Total estimated purchase price
|
|
$
|
3,009,000
|
|
|
|
|
|
|
Upon completion of the fair value assessment after the merger,
it is anticipated that the ultimate purchase price allocation
will differ from the preliminary assessment outlined above. Any
changes to the initial estimates of the fair value of the assets
and liabilities will be recorded as adjustments to those assets
and liabilities and residual amounts will be allocated to
goodwill.
Note 2. Pro
Forma Adjustments
The Unaudited Pro Forma Condensed Combined Statements of Income
do not include any material non-recurring charges that will
arise in subsequent periods as a result of the merger. The
Unaudited Pro Forma Condensed Combined Financial Statements
reflect the following adjustments:
(a) Cash. A $17.2 million
decrease to cash and retained earnings to reflect estimated
remaining merger transaction costs. These represent estimated
one-time investment banking, legal and professional fees and are
not presented net of tax due to the insignificance of the
estimated tax impact. Additionally, these costs are not
116
NOTES TO
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (Continued)
included in the Unaudited Pro Forma Condensed Combined
Statements of Income as they are non-recurring expenses.
(b) Conforming
Reclassifications. Reclassifications consist
of (i) a $346 million increase to accounts receivable
and payable balances to
gross-up
crude oil resale receivable and payable balances attributable to
the same counterparty and are recorded and settled on a net
basis to conform to Hollys policy of recording such
receivable and payable balances on a gross basis, and
(ii) the reclassification of $5.5 million in
non-current deferred income tax assets against non-current
deferred income tax liabilities to conform with Hollys
policy of presenting all non-current deferred income tax amounts
on a net basis.
(c) Inventories. A
$429.7 million increase to crude oil and refined products
inventory and a $20.7 million increase to materials and
supplies to reflect the fair value of Frontiers
inventories.
(d) Income Taxes. To record the
income tax effects of the purchase accounting adjustments.
(e) Properties, Plants and
Equipment. The estimated fair value of
Frontiers owned properties, plants and equipment including
property and equipment recorded under capital leases
approximates Frontiers net book value. This estimated
value is preliminary and is subject to further adjustments based
on the final fair value determinations to be completed upon
completion of the merger. Additionally, Frontiers deferred
turnaround and catalyst costs of $51.2 million are
eliminated. These costs previously incurred by Frontier relate
to periodic overhauls and refurbishments to Frontiers
petroleum refinery processing units and costs of catalysts used
in the refining process. These costs are implicit in the
estimated fair value assigned to Frontiers refining
facilities as they contribute to the physical and operating
condition of the refineries and have been factored into the
estimated fair value of Frontiers refineries.
The Unaudited Pro Forma Condensed Consolidated Statements of
Income reflect a net decrease in depreciation and amortization
of $48.4 million for the year ended December 31, 2010
and $12.9 million for the three months ended March 31,
2011. This reflects a decrease in depreciation expense resulting
from adjustments to useful lives that primarily relate to
refinery, pipeline, terminal and building facilities having an
estimated fair value of $995 million and estimated remaining
useful lives of 25 years and the elimination of
approximately $24 million for the year ended
December 31, 2010 and $5.1 million for the three
months ended March 31, 2011 in amortization attributable to
deferred turnaround and catalyst costs, partially offset by a
$16 million increase for the year ended December 31,
2010 and a $4 million increase for the three months ended
March 31, 2011 in amortization expense resulting from fair
value adjustments to Frontiers intangibles and other
assets. In future years, significant turnaround and catalyst
costs are expected to be incurred periodically in order to
maintain and operate the Frontier refineries. Such costs will be
deferred and amortized over their expected useful lives and the
amortization expense related thereto could approximate such
amounts reflected in Frontiers historical financial
statements.
(f) Goodwill. To record the
goodwill attributable the merger. Goodwill is not amortized, but
rather is assessed for impairment at least annually or more
frequently whenever events or circumstances indicate that
goodwill might be impaired.
(g) Intangibles and Other
Assets. A $44.1 million increase to
reflect the estimated fair value of Frontiers intangibles
and other assets. This represents an off-take agreement having
an estimated fair value of $50 million and remaining life
of 3.1 years, net of the elimination of Frontiers
deferred financing costs of $5.9 million.
(h) Long-Term Debt. A
$24.1 million increase to reflect the fair value of
Frontiers long-term debt and capital lease obligations.
The difference between the fair value and the face amount of
each borrowing is amortized to interest expense over the
remaining term of the borrowings based on the maturity dates. As
a result of these adjustments, the Unaudited Pro Forma Condensed
Combined Statements of Income reflect lower interest expense of
$3.1 million for the year ended December 31, 2010 and
$1 million for the three months ended March 31, 2011.
117
NOTES TO
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (Continued)
(i) Frontier Oil Stockholders
Equity. The elimination of all of
Frontiers stockholders equity including
$57.7 million of common stock, $266.9 million of
additional capital, $1,171.4 million of retained earnings,
$398.2 million of treasury stock and $6.5 million of
accumulated other comprehensive loss as a result of the
acquisition method of accounting.
(j) Holly Common Stock
Issuance. An assumed 51.4 million shares
of Holly common stock will be issued to Frontier stockholders
using an assumed per share price of $58.52 totaling
$3 billion.
(k) Merger Transaction Costs. To
eliminate $8.8 million in one-time direct merger related
costs incurred during the three months ended March 31, 2011.
(l) Earnings Per Share. The pro
forma combined basic and diluted earnings per share for the
three months ended March 31, 2011 and the year ended
December 31, 2010 are calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
|
Three Months Ended
|
|
|
Year Ended
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
|
(In thousands, except per share data)
|
|
|
Pro forma net income attributable to common stockholders
|
|
$
|
238,617
|
|
|
$
|
173,726
|
|
Holly weighted average shares outstanding basic
|
|
|
53,307
|
|
|
|
53,218
|
|
Estimated shares of Holly common stock to be issued:
|
|
|
|
|
|
|
|
|
Frontier shares issued and outstanding(1)
|
|
|
51,422
|
|
|
|
51,422
|
|
|
|
|
|
|
|
|
|
|
Total weighted shares outstanding basic
|
|
|
104,729
|
|
|
|
104,640
|
|
Dilutive effect of unvested equity awards
|
|
|
409
|
|
|
|
474
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding diluted
|
|
|
105,138
|
|
|
|
105,114
|
|
|
|
|
|
|
|
|
|
|
Pro forma earnings per share basic
|
|
$
|
2.28
|
|
|
$
|
1.66
|
|
|
|
|
|
|
|
|
|
|
Pro forma earnings per share diluted
|
|
$
|
2.27
|
|
|
$
|
1.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents estimated shares of Holly common stock to be issued
after giving effect to the 0.4811 exchange ratio as set forth in
the merger agreement. |
118
COMPARATIVE
STOCK PRICE DATA AND DIVIDENDS
Stock
Prices
Shares of Holly common stock are listed for trading on the NYSE
under the symbol HOC. Shares of Frontier common
stock are listed for trading on the NYSE under the symbol
FTO. The following table sets forth the closing
sales prices per share of Holly common stock and Frontier common
stock, on an actual and equivalent per share basis, on the NYSE,
on the following dates:
|
|
|
|
|
February 18, 2011, the last full trading day prior to the
public announcement of the merger, and
|
|
|
|
|
|
May [ ], 2011, the last trading day for
which this information could be calculated prior to the filing
of this joint proxy statement/prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frontier Equivalent
|
|
|
Holly Common Stock
|
|
Frontier Common Stock
|
|
Per Share(1)
|
|
February 18, 2011
|
|
$
|
56.11
|
|
|
$
|
28.12
|
|
|
$
|
26.99
|
|
May [ ], 2011
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
|
|
(1) |
|
The equivalent per share data for Frontier common stock has been
determined by multiplying the market price of one share of Holly
common stock on each of the dates by the exchange ratio of
0.4811. |
The following table sets forth, for the periods indicated, the
high and low sales prices per share of Holly common stock and
Frontier common stock on the NYSE composite transaction
reporting system. For current price information, you should
consult publicly available sources.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frontier
|
|
|
Holly
|
|
Calendar Period
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
Year ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
16.84
|
|
|
$
|
11.80
|
|
|
$
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27.42
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$
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18.15
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Second Quarter
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|
|
18.40
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|
|
|
12.09
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|
|
|
31.63
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|
|
|
17.23
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|
Third Quarter
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|
|
15.15
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|
|
|
12.00
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|
|
|
26.22
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|
|
|
16.71
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Fourth Quarter
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16.54
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|
|
|
11.03
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|
|
|
33.53
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|
|
|
23.57
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|
Year ended December 31, 2010
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First Quarter
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$
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14.78
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|
|
$
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12.11
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|
|
$
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30.86
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|
|
$
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25.13
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Second Quarter
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|
|
15.70
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|
|
|
12.76
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|
|
|
30.57
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|
|
|
23.32
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|
Third Quarter
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|
|
14.12
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|
|
|
11.38
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|
|
|
29.86
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|
|
|
24.35
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|
Fourth Quarter
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|
|
18.20
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|
|
|
12.93
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|
|
|
41.38
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|
|
|
28.19
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|
Year ending December 31, 2011
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
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|
$
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30.27
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|
|
$
|
17.36
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|
|
$
|
63.21
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|
|
$
|
39.84
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|
Second Quarter (through May 11, 2011)
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|
$
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32.37
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|
|
$
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24.40
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|
|
$
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66.55
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|
$
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50.60
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|
Dividends
Holly paid a quarterly cash dividend of $0.15 per share for each
quarter during 2009 and 2010 and for the quarter ended
March 31, 2011.
Frontier did not declare any dividends in 2010. Frontier paid a
quarterly cash dividend of $0.05 per share for the quarter ended
March 31, 2008 and $0.06 per share for each of the quarters
ended June 30, 2008 through December 31, 2009. On
March 21, 2011, Frontier paid a special dividend of $0.28
per common share, or approximately $28 million. In
addition, Frontier paid a quarterly cash dividend of $0.06 per
common share, or approximately $6 million, for the quarter
ended March 31, 2011.
In addition, in May 2011, Hollys board of directors
declared a regular quarterly cash dividend of $0.15 per
share for the quarter ended June 30, 2011, which will be
paid on July 1, 2011 to holders of record of Holly common
stock as of June 20, 2011. Frontier plans to pay its
regular quarterly cash dividend of $0.06 per share for the
quarter ended June 30, 2011, subject to board approval.
119
COMPARISON
OF RIGHTS OF HOLLY STOCKHOLDERS
AND FRONTIER SHAREHOLDERS
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FRONTIER
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HOLLY
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Authorized Capital
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Frontiers articles of incorporation provide that Frontier
has the authority to issue 180,500,000 shares consisting
of and divided into:
one class of 180,000,000 shares
of common stock, no par value; and
one class of 500,000 shares of
preferred stock, $100 par value, which may be divided into
and issued in series.
As of
the date of this joint proxy statement/ prospectus, Frontier
does not have outstanding any shares of preferred stock.
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Hollys certificate of incorporation provides that Holly
has the authority to issue 161,000,000 shares, of
which:
160,000,000 shares with par value
of $0.01 each will be common stock; and
1,000,000 shares with par value
$1.00 each will be preferred stock.
As of
the date of this joint proxy statement/prospectus, Holly does
not have outstanding any shares of preferred stock.
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Preferred Stock
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Frontiers articles of incorporation provide that preferred
stock may be issued from time to time in one or more series.
Authority is expressly granted to and vested in the board of
directors to authorize from time to time the issuance of
preferred stock in such series and to fix from time to time the
number of shares to be included in any series, and the
designations, powers, preferences and relative, participating,
option or other special rights, and qualifications, limitations
or restrictions thereof, of all shares of such series, all of
which will be stated in a resolution or resolutions providing
for the issuance of such preferred stock.
Subject to the rights of the holders of any series of preferred
stock pursuant to the terms of any preferred stock designation,
the number of authorized shares of preferred stock may be
increased or decreased (but not below the number of shares
thereof then outstanding) by the affirmative vote of the holders
of a majority of Frontiers stock entitled to vote
generally in the election of directors. Except as otherwise
provided by law or by a preferred stock designation, the holders
of preferred stock will not be entitled to vote at or receive
notice of any meeting of shareholders.
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Hollys certificate of incorporation provides that shares
of preferred stock, $1.00 par value, may be issued from
time to time in one or more series, each such series to have
such distinctive designation or title as may be fixed by the
board of directors prior to the issuance of any shares thereof.
Each share of any series of preferred stock will be identical
with all other shares of such series, except as to the date from
which cumulative preferred dividends, if any, will be
cumulative. For each such series, the board of directors will
determine, by resolution or resolutions adopted prior to the
issuance of any shares thereof, the rights, preferences,
limitations and restrictions of shares of such series,
including, without limitation, rights, or limitations with
respect to voting powers, if any, redemption rights, if any,
conversion rights, if any, dividend rights and any preferences
on liquidation.
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Voting Rights
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Frontiers bylaws provide each shareholder of record of
Frontier common stock is entitled to one vote for each share
held on every matter properly submitted for shareholder vote.
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Hollys bylaws provide each stockholder of record of Holly
common stock is entitled to one vote in person or by proxy for
each share held and registered on the books of Holly.
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Holders of Frontier common stock do not have cumulative voting
rights.
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Holders of Holly common stock do not have cumulative voting
rights.
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Dividends
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Frontiers bylaws provide that, subject to applicable law
and the provisions of
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Under §170 of the DGCL, the board of directors may declare
and pay dividends
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120
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FRONTIER
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HOLLY
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Frontiers articles of incorporation, dividends may be
declared by the board of directors at any meeting and may be
paid in cash, in property or in shares of Frontiers common
stock. Any such declaration will be at the discretion of the
board of directors. A director will be fully protected in
relying in good faith upon the books of account of Frontier or
statements prepared by any of its officers as to the value and
amount of the assets, liabilities or net profits of Frontier or
any other facts pertinent to the existence and amount of surplus
or other funds from which dividends might properly be
declared.
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upon the shares of its capital stock either (1) out of its
surplus, as defined in the DGCL, or (2) in case there shall be
no surplus, out of its net profits for the fiscal year in which
the dividend is declared and/or the preceding fiscal year.
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The
board of directors may set aside a reserve for any proper
purpose from the funds available for dividends. The board of
directors may later abolish or modify any such reserve.
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Number and Qualification of Directors
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Frontiers bylaws currently provide that the number of
directors will be fixed by the board of directors from time to
time. The term of each director will expire at the annual
meeting following his or her election. Frontier currently has
7 directors.
Directors need not be shareholders of Frontier or residents of
Wyoming.
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Hollys bylaws provide that there will be no less than
three and no more than eleven members of the board of directors.
Each director holds office until the next annual meeting and
until his or her successor is elected and qualified. Holly
currently has 7 directors.
The
proposed amendment to Hollys bylaws, as contemplated by
the merger agreement, would increase the authorized number of
directors to 14.
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Under
Delaware law, directors need not be stockholders of Holly or
residents of Delaware.
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Election of Directors
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Frontiers bylaws provide that directors are elected by a
plurality of the votes cast by the holders of common stock.
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Hollys bylaws provide that directors are elected by a
plurality of the shares of common stock present or represented
by proxy and entitled to vote.
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Removal of Directors
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Under Wyoming law, a director may be removed only if the number
of votes cast to remove him exceeds the number of votes cast not
to remove him. Shareholders may remove directors with or without
cause unless the articles of incorporation provide otherwise,
which Frontiers do not. Wyoming law also provides that a
director may be removed by the shareholders only at a meeting
called for that purpose, and that the meeting notice must state
that the purpose, or one of the purposes, of the meeting is the
removal of the director.
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Under Delaware law and Hollys bylaws, Hollys
directors may be removed with or without cause by the holders of
a majority of the shares then entitled to vote at an election of
directors at any meeting of Hollys stockholders called for
that purpose.
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Frontiers bylaws provide that a member of any committee
may be removed from such committee, either with or without
cause, at
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121
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FRONTIER
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HOLLY
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any time, by resolution adopted by a majority of the whole
board of directors at any meeting of the board of directors.
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Vacancies on the Board of Directors
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Frontiers bylaws provide that any vacancy occurring in the
board of directors may be filled by the affirmative vote of a
majority of the remaining directors then in office although less
than a quorum of the board of directors. The term of a director
elected to fill a vacancy will expire at the next meeting of
shareholders at which directors are elected.
Any
newly-created directorship resulting from any increase in the
number of directors constituting the total number of directors
that Frontier would have if there were no vacancies may be
filled by a majority of the directors then in office (although
less than a quorum), or by the sole remaining director. Each
director so appointed will hold office until his or her
successor is elected and qualified or until his or her earlier
death, resignation or removal.
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Hollys bylaws provide that any vacancy occurring in the
board of directors created on account of death, resignation,
removal, disqualification or other causes, or resulting from an
increase in the authorized number of directors, will be filled
by a majority of the directors then in office, although less
than a quorum, and the directors so chosen will hold office
until the next annual election of directors and until their
successors are duly elected and qualified or until their earlier
death, resignation or removal; provided, however, that if the
remaining directors constitute less than a majority of the whole
board of directors, the Delaware Court of Chancery may, upon
application of any stockholder or stockholders holding at least
10% of the total number of shares of the capital stock of the
corporation at the time outstanding having the right to vote for
the directors, summarily order an election to be held to fill
any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office as
aforesaid, which election will be governed by §211 of the
DGCL.
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Action by Written Consent
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Under Wyoming law, any action required or permitted to be taken
at a meeting of shareholders may be taken without a meeting by
unanimous written consent.
Frontiers bylaws provide that action to be taken at a
meeting of shareholders may be taken without a meeting if notice
of the proposed action is given to all voting shareholders and
the action is taken by the holders of all shares entitled to
vote on the action. The action will be evidenced by one or more
written consents describing the action taken, signed, either
manually or in facsimile, by the holders of the requisite number
of shares entitled to vote on the action, and delivered to
Frontier for inclusion in the minutes or filing with the
corporate records.
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Under §228 of the DGCL, because Hollys certificate of
incorporation does not provide otherwise, any action that is
required or may be taken at any annual or special meeting of
Hollys stockholders may be taken by the written consent by
the holders of Holly common stock having at least the minimum
number of votes that would be necessary to authorize or take
such action at a meeting of Hollys stockholders.
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Advance Notice
Requirements for
Stockholder
Nominations and Other Proposals
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Annual Meetings
Frontiers bylaws provide that shareholders must give
written notice of any shareholder proposal to the secretary of
Frontier on or before the later of: (1) 60 days before the
meeting, or (2) 10 days after the board of directors first
publishes the date of the meeting.
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Annual Meetings
Hollys bylaws provide that for a stockholder proposal to
be properly brought before an annual meeting by a stockholder,
the stockholder must deliver notice, mailed to and received at
the principal executive office of Holly, not less than 120
calendar days nor
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122
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FRONTIER
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HOLLY
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Notices must include, as to each matter the shareholder
proposes to bring before the annual meeting, (i) the nature of
the proposed business with reasonable particularity, including
the exact text of any proposal to be presented for adoption and
any supporting statement and the shareholders reasons for
conducting such business at the annual meeting, (ii) any
material interest of the shareholder in such business, (iii) the
name, principal occupation and record address of the
shareholder, (iv) the class and number of shares of Frontier
that are held of record or beneficially owned by the
shareholder, (v) the dates upon which the shareholder acquired
such shares of stock and documentary support for any claims of
beneficial ownership, (vi) such other matters as may be required
by the Frontier articles of incorporation, (vii) a
representation that the shareholder is a holder of record of
stock of Frontier entitled to vote at such meeting and intends
to appear in person or by proxy at the meeting to propose such
business, and (viii) a representation whether the shareholder or
the beneficial owner, if any, intends or is part of a group
which intends: (A) to deliver a proxy statement and/or form of
proxy to holders of at least the percentage of the
corporations outstanding capital stock required to approve
or adopt the proposal, and/or (B) otherwise to solicit proxies
from shareholders in support of such proposal. The foregoing
notice requirements will be deemed satisfied by a shareholder if
the shareholder has notified Frontier of his or her intention to
present a proposal at an annual meeting in compliance with Rule
14a-8 under the Exchange Act, and such shareholders
proposal has been included in a proxy statement that has been
prepared by Frontier to solicit proxies for such annual
meeting.
Frontiers bylaws provide that for shareholder board
nominations to be timely, written notice of the nominations must
be received by the secretary of Frontier by the later to occur
of (1) 60 days prior to the date of any election meeting or
(2) 10 days after the board of directors first publishes
the date of any election meeting.
Notices for director nominees must include (A) the exact name of
the nominee, (B) the nominees age, principal occupation,
business address, telephone number,
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more than 150 calendar days before the anniversary date of
Hollys proxy statement mailed to Hollys stockholders
for the prior years annual meeting. If no annual meeting
was held in the previous year or if the date of the applicable
annual meeting has been changed by more than 30 days from
the date contemplated at the time of the prior years proxy
statement, then written notice must be received by the secretary
of Holly not later than 60 days before the date on which
the proxy statement is first mailed.
Notices must include a brief description of the proposal,
including the text of the resolutions and the reasons therefor
and, as to the stockholder making the proposal, the name and
address of the stockholder, the class and number of shares of
Holly voting stock beneficially owned by the stockholder and any
financial interest of the stockholder in the proposal.
Hollys bylaws also provide that for stockholder board
nominations to be timely, written notice of the nominations must
be received by the secretary of Holly, with respect to an
election at an annual meeting, not less than 90 nor more than
120 days before the anniversary date of the prior
years annual meeting.
Notices for director nominees must include (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 Hollys books, of such
stockholder and (b) the class and number of shares of voting
stock of Holly which are beneficially owned by such stockholder.
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123
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FRONTIER
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HOLLY
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facsimile number and electronic mail address and residence
address and telephone number, (C) the number of shares (if any)
of each class of stock of Frontier held of record or
beneficially owned by the nominee and (D) all other information
relating to the nominee that is required to be disclosed in
solicitations of proxies for election of directors pursuant to
Regulation 14A under the Exchange Act.
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Special Meetings
Wyoming law requires a corporation to hold a special meeting at
the call of the board of directors or the persons authorized to
do so in the articles of incorporation or bylaws, or upon
receipt of written demands signed by the holders of at least 10%
of the votes entitled to be cast at the meeting.
Frontiers bylaws provide that special meetings of the
shareholders may be called by the board of directors, the
chairman of the board of directors, the chief executive officer,
the president or at the request of the holders of not less than
twenty-five percent (25%) of all of the outstanding shares of
Frontier entitled to vote at the meeting on any issue proposed
to be considered at such meeting; provided that the board of
directors will have the discretion to require that issues for
which a special meeting is called be considered instead at the
next annual meeting of shareholders if the request for the
special meeting is made within ninety (90) days prior to the end
of Frontiers fiscal year. At any special meeting, no
business will be transacted and no corporate action will be
taken other than as stated in the notice of the meeting.
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Special Meetings
Hollys bylaws provide that special meetings may be called
by the chief executive officer, and must be called by the
chairman of the board, the chief executive officer, the
president, a vice president, the secretary or an assistant
secretary, at the request in writing of a majority of the board
of directors, or of a majority of the executive committee, or of
stockholders owning a majority of the outstanding shares having
voting power. Such request will state the purpose or purposes of
the proposed meeting.
Hollys bylaws provide that notice of the meeting must be
given not less than 30 nor more than 60 days before the
date on which the meeting is to be held, unless the meeting is
called by the chairman of the board, the chief executive
officer, the president, a vice president, the secretary or an
assistant secretary of Holly at the request in writing of a
majority of the board of directors, in which case such notice
will be delivered not less than 10 nor more than 60 days
before the date on which the special meeting is to be held.
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For
stockholder board nominations with respect to an election at a
special meeting, written notice of the nominations must be
received by the secretary of Holly not later than the close of
business on the seventh day after the first to occur of the date
on which notice of the date of the special meeting was mailed to
Hollys stockholders or the date on which public disclosure
of the date of the special meeting was first made. The notices
must contain the same information as discussed above under
Annual Meetings.
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Amendments to the Certificate of Incorporation
|
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Under Wyoming law, Frontiers board of directors will
approve an amendment to the articles of incorporation and
recommend that Frontiers shareholders approve the
amendment. Approval of the amendment requires the affirmative
vote of a majority
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Pursuant to §242 of the DGCL, the Holly board of directors
must adopt a resolution setting forth a proposed amendment to
Hollys certificate of incorporation. A meeting of
stockholders will then be called to vote on the amendment. The
amendment
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124
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FRONTIER
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HOLLY
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of the shares entitled to vote at a shareholder meeting in
which a quorum exists.
A
proposed amendment must be approved by the holders of a majority
of the shares entitled to vote on the amendment by any voting
group if the proposed amendment would create dissenters
rights with respect to the voting group.
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must be approved by both a majority of the outstanding stock
entitled to vote, as well as a majority of the outstanding stock
of each class entitled to vote as a class.
Under
certain circumstances, § 242(b)(2) of the DGCL entitles the
holders of the outstanding shares of each class to vote as a
class on a proposed amendment, whether or not entitled to vote
thereon by the certificate of incorporation.
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Amendments to Bylaws
|
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Frontiers bylaws may be altered, amended or repealed, or
new bylaws may be adopted, by the affirmative vote of
662/3%
of the members of the entire board of directors then in office.
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Hollys bylaws may be amended or repealed only by the
affirmative vote of not less than 67% of the issued and
outstanding stock entitled to vote thereon at any regular or
special meeting of the stockholders, if notice of the proposed
alteration or amendment is contained in the notice of meeting,
or by the affirmative vote of a majority of Hollys board
of directors.
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Quorum
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Frontiers bylaws provide that except as otherwise provided
by applicable law, the articles of incorporation or the bylaws,
a majority of the outstanding shares of Frontier entitled to
vote with respect to any matter, represented in person or by
proxy, constitutes a quorum for action on that matter.
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Hollys bylaws provide that a majority in interest of the
stockholders entitled to vote at a meeting of stockholders,
present in person or by proxy, constitutes a quorum.
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Limitation of Personal Liability of Directors
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Frontiers articles of incorporation provide that, to the
fullest extent permitted by the WBCA, no person who is or was a
director of Frontier will be personally liable to Frontier or
its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability:
for any breach of the directors
duty of loyalty to Frontier or its shareholders,
for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation
of law,
for unlawful distributions upon
corporate dissolution (under Section 17- 16-833 of the WBCA),
or
for any transaction from which the
director derived an improper personal benefit.
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No director of Holly will be personally liable to Holly or any
of its stockholders for monetary damages for breach of such
directors duty as a director, except that a director will
remain liable to the extent provided by law:
for breach of the directors duty
of loyalty to Holly or its stockholders,
for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation
of law,
for unlawful dividends or stock
purchases or redemptions by Holly, or
for any transaction from which the
director derived an improper personal benefit.
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Indemnification of Directors and Officers
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Frontiers articles of incorporation provide that Frontier
will indemnify, to the fullest extent permitted by applicable
law and pursuant to the bylaws, each person who is or was a
director or officer of Frontier, and Frontier may indemnify each
employee and agent of Frontier and all other persons whom
Frontier is authorized to indemnify under the
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Hollys bylaws provide for indemnification, to the fullest
extent permitted by the DGCL, including the advancement of
expenses for the defense, of any person who was or is threatened
to be made a party to any threatened, pending or completed
action, suit or proceeding, by reason of the fact that he or she
is or was a director, officer,
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125
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FRONTIER
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HOLLY
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provisions of the WBCA, from and against all expenses,
liabilities or other matters arising out of or in any way
related to their status as such or their acts, omissions or
services rendered in such capacities.
Frontiers bylaws provide that Frontier will, to the
maximum extent permitted by Wyoming law, indemnify every person
who is or was a party or is or was threatened to be made a party
to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative, whether formal or informal, any appeal therein,
and any inquiry or investigation that could lead thereto by
reason of the fact that such person is or was a director,
advisory director or officer of Frontier or any of its direct or
indirect subsidiaries, or is or was a person nominated or
designated by (or pursuant to authority granted by) the board of
directors or any committee thereof to serve in any such
capacities, or is or was serving at the request of Frontier or
any of its direct or indirect subsidiaries as a director,
officer, partner, venturer, proprietor, trustee, employee, agent
or similar fiduciary of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan or
other enterprise, and may indemnify every person who is or was a
party or is or was threatened to be made a party to any
proceeding by reason of the fact that such person is or was an
employee or agent of Frontier or any of its direct or indirect
subsidiaries or is or was serving at the request of Frontier or
any of its direct or indirect subsidiaries as an employee or
agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against all expenses
(including counsel fees), judgments, fines and amounts paid or
owed in settlement, actually and reasonably incurred by such
person or rendered or levied against such person in connection
with such proceeding, if such person acted in good faith and in
a manner such person reasonably believed to be in or not opposed
to the best interests of Frontier and, with respect to any
criminal action or proceeding, such person had no reasonable
cause to believe his conduct was unlawful.
Moreover, Frontier will indemnify every person who is or was a
party or who is or
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employee or agent of Holly or is or was serving at the request
of Holly in such capacity with another corporation or other
enterprise. Unless otherwise determined by Hollys board
of directors in its discretion, such indemnification will be
made available only if any such person:
notifies the chief executive officer,
president or secretary of Holly within 5 business days after
he/she becomes aware of any such action, suit or proceeding;
furnishes the chief executive officer,
president or secretary with copies of all papers served upon or
received by such person;
makes available to officers or counsel
of Holly all information necessary to keep Holly currently
advised as to the status of such action, suit or proceeding;
and
permits Holly, at its option and
expense, to participate in or direct the defense thereof in good
faith, and in the case of any proposed settlement of any action,
suit, or proceeding, the defense of which is not directed by
Holly, to submit the proposed terms and conditions of the
settlement to Hollys board of directors for its
approval.
The
indemnification rights provided by Hollys bylaws are not
exclusive of any other rights to which those indemnified may be
entitled under any agreement, vote of stockholders or
disinterested directors, or otherwise.
Holly
has also entered into agreements with its directors and officers
in addition to the indemnification provided for in its bylaws.
These agreements, among other things, indemnify directors and
officers of Holly, to the fullest extent permitted by Delaware
law, for certain expenses, losses, claims, liabilities,
judgments, fines and settlement amounts incurred by the person
seeking indemnification in any action or proceeding, including
any action by or in the right of Holly, on account of services
as a director or officer of any of Hollys affiliates, or
as a director or officer of any other company or enterprise that
the person seeking indemnification provides services to at
Hollys request.
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126
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FRONTIER
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HOLLY
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was threatened to be made a party to any proceeding by or in
the right of Frontier to procure a judgment in its favor by
reason of the fact that such person is or was a director,
advisory director or officer of Frontier or any of its direct or
indirect subsidiaries, or is or was a person nominated or
designated by (or pursuant to authority granted by) the board of
directors or any committee thereof to serve in any such
capacities, or is or was serving at the request of Frontier or
any of its direct or indirect subsidiaries as a director,
officer, partner, venturer, proprietor, trustee, employee, agent
or similar fiduciary of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan or
other enterprise, and may, to the maximum extent permitted from
time to time under the laws of the State of Wyoming, indemnify
every person who is or was a party or who is or was threatened
to be made a party to any proceeding by or in the right of
Frontier to procure a judgment in its favor by reason of the
fact that such person is or was an employee or agent of Frontier
or any of its direct or indirect subsidiaries or is or was
serving at the request of Frontier or any of its direct or
indirect subsidiaries as an employee or agent of another
corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise, against all expenses (including
counsel fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such proceeding if
such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best
interests of Frontier; provided, however, that no
indemnification will be made with respect to any claim, issue or
matter as to which such person has been adjudged to be liable to
Frontier unless and only to the extent that, despite the
adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to
indemnification.
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Certain Business Combination Restrictions
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The Wyoming Management Stability Act contains takeover
restrictions that apply to publicly traded corporations that
meet the tests regarding size and Wyoming contacts contained in
the statute but that have not opted out of the
statute. Because Frontier has not opted out, it and its
shareholders are subject to the restrictions contained in the
statute.
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Under §203 of the DGCL, a corporation is prohibited for a
three- year period following the time a stockholder becomes an
interested stockholder, from engaging in any business
combination with an interested stockholder who, together with
its affiliates or associates, owns, or who is an affiliate or
associate of the corporation and within a three-year period did
own, 15% or more of the corporations voting stock,
unless:
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127
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FRONTIER
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HOLLY
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Under the statute, with some exceptions, Frontier is prohibited
from engaging in any business combination (as
defined in the statute) with an interested shareholder, or any
affiliate or associate of an interested shareholder, for three
years after the date the shareholder became an interested
shareholder, unless:
before the shareholder became an
interested shareholder, the board of directors approved the
business combination or the transaction that resulted in the
shareholder becoming an interested shareholder, or
on or after the shareholder became an
interested shareholder, the business combination is approved by
the board of directors and authorized at an annual or special
meeting of shareholders, and not by written consent, by the
affirmative vote of at least two- thirds of the outstanding
voting stock that is not owned by the interested shareholder.
An
interested shareholder, with some exceptions, is any
person, and that persons affiliates and associates, who
owns 15% or more of the voting stock or who is an affiliate or
associate of the corporation and owned 15% or more of the voting
stock within 3 years of the date.
The
statute also contains restrictions on any person who makes a
tender offer for shares if, after the acquisition, the person
will own more than 10% of any class of outstanding shares. The
statute generally requires the offeror to make filings with the
secretary of state providing information regarding the offer and
the offeror, to deliver a copy of the filing to the corporation,
and to make the offer to holders of the same class on
substantially equivalent terms. The statute also requires a
waiting period of 20 business days after the offer during which
no purchase or payment can be made and a period of 2 years
after the takeover during which the offeror may not acquire any
shares unless the holder of those shares is also afforded a
reasonable opportunity to dispose of those shares to the offeror
upon substantially equivalent terms. The stockholder takeover
provisions do not apply to an acquisition if all acquisitions of
equity securities of the same class during the preceding
12 months by the offeror or any of its affiliates do not
exceed
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prior to the time the stockholder
became an interested stockholder, the board of directors of the
corporation approved either the business combination or the
transaction which resulted in the stockholder becoming an
interested stockholder;
prior to the time the stockholder became
an interested stockholder, the board of directors of the
corporation approved either the business combination or the
transaction which resulted in the stockholder becoming an
interested stockholder;
the interested stockholder owned at
least 85% of the voting stock of the corporation, excluding
specified shares, upon consummation of the transaction which
resulted in the stockholder becoming an interested stockholder;
or
at or subsequent to the time the
stockholder became an interested stockholder, the business
combination is approved by the board of directors of the
corporation and authorized by the affirmative vote, at an annual
or special meeting and not by written consent, of at least
662/3%
of the outstanding voting shares of the corporation, excluding
shares held by that interested stockholder.
A
business combination generally includes:
mergers, consolidations and sales or
other dispositions of 10% or more of the assets of a corporation
to or with an interested stockholder;
specified transactions resulting in the
issuance or transfer to an interested stockholder of any capital
stock of the corporation or its subsidiaries; and
other transactions resulting in a
disproportionate financial benefit to an interested
stockholder.
A
corporation may elect not to be governed by §203 of the
DGCL. Neither Hollys certificate of incorporation nor its
bylaws contain this election. Therefore, Holly is governed by
§203 of the DGCL.
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128
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FRONTIER
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HOLLY
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2% of that class.
The
control-share acquisition provisions of the statute, with some
exceptions, deny voting rights to shares acquired in a
control- share acquisition unless voting rights are
conferred by a vote of the shareholders. A control-share
acquisition is the acquisition of shares that, when added
to all other shares of the corporation with respect to which
that person may exercise voting power, would entitle that person
to exercise the voting power of the corporation in the election
of directors within any of the following ranges of voting
power:
1/5 or more but less than 1/3,
1/3 or more but less than a majority,
or
a majority or more.
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Holly has adopted resolutions rendering this statute
inapplicable to the merger agreement and the transactions
contemplated thereby.
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Frontier has adopted resolutions rendering this statute
inapplicable to the merger agreement and the transactions
contemplated thereby.
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129
NO
APPRAISAL RIGHTS
Under Delaware and Wyoming law, as well as the certificate of
incorporation and bylaws of each company, neither the holders of
Holly capital stock nor the holders of Frontier capital stock,
respectively, are entitled to appraisal rights in connection
with the merger.
LEGAL
MATTERS
The validity of the shares of Holly common stock to be issued
pursuant to the Merger will be passed upon by Vinson &
Elkins LLP. The material U.S. federal income tax
consequences relating to the Merger will be passed upon for
Holly by Vinson & Elkins LLP and for Frontier by
Andrews Kurth LLP.
EXPERTS
Holly
The consolidated financial statements of Holly appearing in
Hollys Annual Report on
Form 10-K
for the year ended December 31, 2010, and the effectiveness
of Hollys internal control over financial reporting as of
December 31, 2010 have been audited by Ernst &
Young LLP, an independent registered public accounting firm, as
set forth in its reports thereon, included therein, and
incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon
such reports given on the authority of such firm as experts in
accounting and auditing.
Frontier
The consolidated financial statements, and the related financial
statement schedules, incorporated in this proxy
statement/prospectus by reference from the Annual Report on
Form 10-K
of Frontier Oil Corporation for the year ended December 31,
2010, and the effectiveness of Frontier Oil Corporations
internal control over financial reporting have been audited by
Deloitte & Touche LLP, an independent registered
public accounting firm, as stated in their reports, which are
incorporated herein by reference. Such consolidated financial
statements and financial statement schedules have been so
incorporated in reliance upon the reports of such firm given
upon their authority as experts in accounting and auditing.
130
FUTURE
STOCKHOLDER PROPOSALS
Holly
For inclusion in the proxy statement and form of proxy relating
to the Holly 2012 annual meeting, stockholder proposals
submitted pursuant to
Rule 14a-8
of the Exchange Act must be received by Hollys Secretary
not later than December 2, 2011 and must otherwise comply
with the requirements of
Rule 14a-8.
Pursuant to Hollys bylaws, a stockholder must deliver
notice, mailed to and received at the principal executive
offices of Holly, not less than 120 calendar days nor more than
150 calendar days before the anniversary date of Hollys
proxy statement released to stockholders in connection with the
prior years annual meeting. However, if the date of the
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
Hollys Secretary not later than 60 days before the
date Holly commences mailing of its proxy materials in
connection with the annual meeting. In accordance with these
provisions, stockholders must deliver notice to Holly no earlier
than November 2, 2011 and no later than December 2,
2011 for their proposals to be considered at the Holly 2012
annual meeting.
In addition to the requirements in Hollys bylaws regarding
stockholder proposals generally, the bylaws also provide that a
stockholder may nominate a person for election to the Holly
board of directors by delivering timely notice in writing to
Hollys Secretary. To be timely, a stockholders
notice must be delivered to, or mailed and received at, the
principal executive offices of Holly 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 Hollys Secretary 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 Hollys
books, of such stockholder and (b) the class and number of
shares of voting stock of Holly that are beneficially owned by
such stockholder. In accordance with these provisions,
stockholders must deliver notice to Holly no earlier than
January 12, 2012 and no later than February 11, 2012
for stockholder nominations of directors to be considered at the
Holly 2012 annual meeting.
Frontier
For inclusion in the proxy statement and form of proxy relating
to the Frontier 2012 annual meeting, shareholder proposals
submitted pursuant to
Rule 14a-8
of the Exchange Act must be received by Frontiers
Secretary not later than November 21, 2011 and must
otherwise comply with the requirements of
Rule 14a-8.
Proposals of shareholders of Frontier submitted for
consideration at the Frontier 2012 annual meeting (outside of
the
Rule 14a-8
process), in accordance with Frontiers bylaws, must be
received by Frontier by the later of 60 days before the
2012 annual meeting or 10 days after notice of such meeting
is first published. If such timely notice of a proposal is not
given, the proposal may not be brought before the Frontier 2012
annual meeting.
131
OTHER
MATTERS PRESENTED AT THE MEETINGS
As of the date of this joint proxy statement/prospectus, neither
the Holly board of directors nor the Frontier board of directors
knows of any matters that will be presented for consideration at
either the Holly special meeting or the Frontier special
meeting, respectively, other than as described in this joint
proxy statement/prospectus. If any other matters come before
either the Holly special meeting or the Frontier special meeting
or any adjournment or postponement thereof and shall be voted
upon, the proposed proxy will be deemed to confer authority to
the individuals named as authorized therein to vote the shares
represented by the proxy as to any matters that fall within the
purposes set forth in the notice of special meeting. It is
intended that the persons named in the enclosed proxy and acting
thereunder will vote in accordance with their best judgment on
such matters.
132
WHERE YOU
CAN FIND MORE INFORMATION
Holly and Frontier each file annual, quarterly and current
reports, proxy statements and other information with the SEC
under the Exchange Act. You may read and copy any of this
information at the SECs Public Reference Room at
100 F Street, N.E., Washington, D.C. 20549.
Please call the SEC at
1-800-SEC-0330
for further information on the Public Reference Room. The SEC
also maintains an internet website that contains reports, proxy
and information statements, and other information regarding
issuers, including Holly and Frontier, who file electronically
with the SEC. The address of that site is www.sec.gov.
Investors may also consult Hollys or Frontiers
website for more information about Holly or Frontier,
respectively. Hollys website is www.hollycorp.com.
Frontiers website is www.frontieroil.com. Information
included on these websites is not incorporated by
reference into this joint proxy statement/prospectus.
Holly has filed with the SEC a registration statement of which
this joint proxy statement/prospectus forms a part. The
registration statement registers the shares of Holly common
stock to be issued to Frontier shareholders pursuant to the
merger. The registration statement, including the attached
exhibits, contains additional relevant information about Holly
and Holly common stock. The rules and regulations of the SEC
allow Holly and Frontier to omit certain information included in
the registration statement from this joint proxy
statement/prospectus.
In addition, the SEC allows Holly and Frontier to disclose
important information to you by referring you to other documents
filed separately with the SEC. This information is considered to
be a part of this joint proxy statement/prospectus.
This joint proxy statement/prospectus incorporates by reference
the documents listed below that Holly has previously filed with
the SEC (other than information furnished pursuant to
Item 2.01 or Item 7.01 of a Current Report on
Form 8-K).
These documents contain important information about Holly, its
financial condition or other matters.
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Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010.
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Proxy Statement on Schedule 14A filed March 31, 2011.
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Quarterly Report on
Form 10-Q
for the quarterly period ended March 31, 2011.
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Current Reports on
Form 8-K,
filed February 22, 2011, March 1, 2011, March 21,
2011, May 11, 2011 and May 13, 2011.
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The description of Holly common stock contained in Hollys
registration statement on
Form S-3
filed with the SEC under Section 5 of the Securities Act on
May 17, 1995, including any subsequently filed amendments
and reports updating such description.
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In addition, Holly incorporates by reference any future filings
it makes with the SEC under Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this joint proxy
statement/prospectus and prior to the closing of the merger
(other than information furnished pursuant to Item 2.02 or
Item 7.01 of any Current Report on
Form 8-K,
unless expressly stated otherwise therein). Such documents are
considered to be a part of this joint proxy
statement/prospectus, effective as of the date such documents
are filed.
You can obtain any of these documents from the SEC, through the
SECs website at the address described above, or Holly will
provide you with copies of these documents, without charge, upon
written or oral request to:
Holly Corporation
100 Crescent Court, Suite 1600
Dallas, Texas
75201-2975
(214) 871-3555
Attn: Investor Relations
This joint proxy statement/prospectus also incorporates by
reference the documents listed below that Frontier has
previously filed with the SEC (other than information furnished
pursuant to Item 2.02 or Item 7.01 of a Current Report
on
Form 8-K).
These documents contain important information about Frontier,
its financial condition or other matters.
133
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Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010.
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Proxy Statement on Schedule 14A filed March 21, 2011.
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Quarterly Report on
Form 10-Q
for the quarterly period ended March 31, 2011.
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Current Reports on
Form 8-K,
filed February 22, 2011, March 21, 2011, May 2,
2011, May 11, 2011 and May 13, 2011.
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In addition, Frontier incorporates by reference any future
filings it makes with the SEC under Section 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this joint
proxy statement/prospectus and prior to the date of the Frontier
special meeting (other than information furnished pursuant to
Item 2.02 or Item 7.01 of any Current Report on
Form 8-K,
unless expressly stated otherwise therein). Such documents are
considered to be a part of this joint proxy
statement/prospectus, effective as of the date such documents
are filed.
You can obtain any of these documents from the SEC, through the
SECs website at the address described above, or Frontier
will provide you with copies of these documents, without charge,
upon written or oral request to:
Frontier Oil Corporation
10000 Memorial Drive, Suite 600
Houston, TX
77024-3411
(713) 688-9600
Attention: Investor Relations
In the event of conflicting information in this joint proxy
statement/prospectus in comparison to any document incorporated
by reference into this joint proxy statement/prospectus, or
among documents incorporated by reference, the information in
the latest filed document controls.
You should rely only on the information contained or
incorporated by reference into this joint proxy
statement/prospectus. No one has been authorized to provide you
with information that is different from that contained in, or
incorporated by reference into, this joint proxy
statement/prospectus. This joint proxy statement/prospectus is
dated May [ ], 2011. You should not
assume that the information contained in this joint proxy
statement/prospectus is accurate as of any date other than that
date. You should not assume that the information incorporated by
reference into this joint proxy statement/prospectus is accurate
as of any date other than the date of such incorporated
document. Neither our mailing of this joint proxy
statement/prospectus to Holly stockholders or Frontier
shareholders nor the issuance by Holly of shares of common stock
pursuant to the merger will create any implication to the
contrary.
This document contains a description of the representations and
warranties that each of Holly and Frontier made to the other in
the merger agreement. Representations and warranties made by
Holly, Frontier and other applicable parties are also set forth
in contracts and other documents (including the merger
agreement) that are attached or filed as exhibits to this
document or are incorporated by reference into this document.
These materials are included or incorporated by reference only
to provide you with information regarding the terms and
conditions of the agreements, and not to provide any other
factual information regarding Holly, Frontier or their
businesses. Accordingly, the representations and warranties and
other provisions of the merger agreement should not be read
alone, but instead should be read only in conjunction with the
other information provided elsewhere in this document or
incorporated by reference into this document.
134
Annex A
AGREEMENT
AND PLAN OF MERGER
BY AND AMONG
HOLLY CORPORATION,
NORTH ACQUISITION, INC.
AND
FRONTIER OIL CORPORATION
DATED AS OF FEBRUARY 21, 2011
TABLE OF
CONTENTS
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Page
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ARTICLE 1 THE MERGER
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A-1
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Section 1.1
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THE MERGER
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A-1
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Section 1.2
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CLOSING; EFFECTIVE TIME
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A-1
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Section 1.3
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ARTICLES OF INCORPORATION
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A-2
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Section 1.4
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BYLAWS
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A-2
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Section 1.5
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DIRECTORS AND EXECUTIVE OFFICERS
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A-2
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Section 1.6
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ACTIONS OF HOLLY
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A-2
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Section 1.7
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ALTERNATIVE STRUCTURES
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A-2
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ARTICLE 2 CONVERSION
OF SECURITIES
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A-2
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Section 2.1
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EFFECT ON CAPITAL STOCK OF FRONTIER AND MERGER SUB
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A-2
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Section 2.2
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SURRENDER OF SHARES
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A-3
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Section 2.3
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STOCK OPTIONS AND OTHER STOCK-BASED AWARDS
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A-4
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Section 2.4
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EXCHANGE PROCEDURES
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A-6
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Section 2.5
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DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES
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A-6
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Section 2.6
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NO FURTHER OWNERSHIP RIGHTS IN FRONTIER COMMON STOCK
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A-6
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Section 2.7
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NO FRACTIONAL SHARES OF HOLLY COMMON STOCK
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A-6
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Section 2.8
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TERMINATION OF EXCHANGE FUND
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A-7
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Section 2.9
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NO LIABILITY
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A-7
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Section 2.10
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INVESTMENT OF THE EXCHANGE FUND
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A-7
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Section 2.11
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LOST CERTIFICATES
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A-7
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Section 2.12
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WITHHOLDING RIGHTS
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A-7
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Section 2.13
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FURTHER ASSURANCES
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A-8
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Section 2.14
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STOCK TRANSFER BOOKS
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A-8
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF HOLLY AND MERGER SUB
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A-8
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Section 3.1
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EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY
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A-8
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Section 3.2
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AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS
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A-8
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Section 3.3
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CAPITALIZATION
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A-9
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Section 3.4
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SUBSIDIARIES
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A-9
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Section 3.5
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NO VIOLATION
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A-10
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Section 3.6
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NO CONFLICT
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A-10
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Section 3.7
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SEC DOCUMENTS; FINANCIAL STATEMENTS
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A-11
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Section 3.8
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LITIGATION AND LIABILITIES
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A-11
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Section 3.9
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ABSENCE OF CERTAIN CHANGES
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A-12
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Section 3.10
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TAXES
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A-12
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Section 3.11
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EMPLOYEE BENEFIT PLANS
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A-13
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Section 3.12
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LABOR MATTERS
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A-15
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Section 3.13
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ENVIRONMENTAL MATTERS
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A-15
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Section 3.14
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INTELLECTUAL PROPERTY
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A-16
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Section 3.15
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TITLE TO PROPERTIES; CONDITION OF ASSETS
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A-17
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Section 3.16
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INSURANCE
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A-18
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Section 3.17
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NO BROKERS
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A-18
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Section 3.18
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OPINION OF FINANCIAL ADVISORS
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A-18
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Section 3.19
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CONTRACTS; DEBT INSTRUMENTS
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A-18
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Section 3.20
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RECOMMENDATION; VOTE REQUIRED
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A-19
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Section 3.21
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CERTAIN APPROVALS
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A-19
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A-i
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Page
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Section 3.22
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CERTAIN CONTRACTS
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A-19
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Section 3.23
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NO RIGHTS PLAN OR AGREEMENT
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A-19
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Section 3.24
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INTERNAL CONTROLS
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A-19
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Section 3.25
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FOREIGN CORRUPT PRACTICES ACT
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A-19
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF FRONTIER
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A-20
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Section 4.1
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EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY
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A-20
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Section 4.2
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AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS
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A-20
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Section 4.3
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CAPITALIZATION
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A-20
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Section 4.4
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SUBSIDIARIES
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A-21
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Section 4.5
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NO VIOLATION
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A-21
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Section 4.6
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NO CONFLICT
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A-21
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Section 4.7
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SEC DOCUMENTS; FINANCIAL STATEMENTS
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A-22
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Section 4.8
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LITIGATION AND LIABILITIES
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A-22
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Section 4.9
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ABSENCE OF CERTAIN CHANGES
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A-23
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Section 4.10
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TAXES
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A-23
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Section 4.11
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EMPLOYEE BENEFIT PLANS
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A-24
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Section 4.12
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LABOR MATTERS
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A-26
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Section 4.13
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ENVIRONMENTAL MATTERS
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A-26
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Section 4.14
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INTELLECTUAL PROPERTY
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A-27
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Section 4.15
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TITLE TO PROPERTIES; CONDITION OF ASSETS
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A-27
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Section 4.16
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INSURANCE
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A-28
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Section 4.17
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NO BROKERS
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A-28
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Section 4.18
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OPINION OF FINANCIAL ADVISORS
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A-28
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Section 4.19
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CONTRACTS; DEBT INSTRUMENTS
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A-28
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Section 4.20
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RECOMMENDATION; VOTE REQUIRED
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A-29
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Section 4.21
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CERTAIN APPROVALS
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A-29
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Section 4.22
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CERTAIN CONTRACTS
|
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A-29
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Section 4.23
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NO RIGHTS PLAN OR AGREEMENT
|
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A-29
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Section 4.24
|
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INTERNAL CONTROLS
|
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A-29
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Section 4.25
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FOREIGN CORRUPT PRACTICES ACT
|
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A-30
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ARTICLE 5 COVENANTS
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A-30
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Section 5.1
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CONDUCT OF BUSINESS
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A-30
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Section 5.2
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NO SOLICITATION BY HOLLY
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A-34
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Section 5.3
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NO SOLICITATION BY FRONTIER
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A-36
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Section 5.4
|
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MEETINGS OF STOCKHOLDERS
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A-38
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Section 5.5
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FILINGS; REASONABLE BEST EFFORTS
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A-40
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Section 5.6
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INSPECTION
|
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A-41
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Section 5.7
|
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PUBLICITY
|
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A-41
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Section 5.8
|
|
REGISTRATION STATEMENT
|
|
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A-41
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Section 5.9
|
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LISTING APPLICATION
|
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A-42
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Section 5.10
|
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EXPENSES
|
|
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A-42
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Section 5.11
|
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INDEMNIFICATION AND INSURANCE
|
|
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A-43
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Section 5.12
|
|
EMPLOYEE BENEFITS
|
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A-44
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Section 5.13
|
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TAX QUALIFICATION
|
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A-45
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Section 5.14
|
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DIVIDENDS
|
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A-45
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Section 5.15
|
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GOVERNANCE MATTERS; HEADQUARTERS; COMPANY NAME
|
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A-45
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A-ii
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Page
|
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Section 5.16
|
|
NO CONTROL OF OTHER PARTYS BUSINESS
|
|
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A-46
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Section 5.17
|
|
ACCOUNTANTS LETTERS
|
|
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A-46
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Section 5.18
|
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CREDIT AGREEMENT
|
|
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A-46
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|
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ARTICLE 6 CONDITIONS
|
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A-47
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Section 6.1
|
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CONDITIONS TO EACH PARTYS OBLIGATION TO EFFECT THE MERGER
|
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A-47
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Section 6.2
|
|
CONDITIONS TO OBLIGATION OF HOLLY TO EFFECT THE MERGER
|
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A-48
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Section 6.3
|
|
CONDITIONS TO OBLIGATION OF FRONTIER TO EFFECT THE MERGER
|
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A-48
|
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|
|
|
|
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ARTICLE 7 TERMINATION
|
|
|
A-49
|
|
Section 7.1
|
|
TERMINATION BY MUTUAL CONSENT
|
|
|
A-49
|
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Section 7.2
|
|
TERMINATION BY FRONTIER OR HOLLY
|
|
|
A-49
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Section 7.3
|
|
TERMINATION BY HOLLY
|
|
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A-49
|
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Section 7.4
|
|
TERMINATION BY FRONTIER
|
|
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A-50
|
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Section 7.5
|
|
EFFECT OF TERMINATION
|
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A-50
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Section 7.6
|
|
EFFECT OF VOTE
|
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A-52
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|
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ARTICLE 8 GENERAL
PROVISIONS
|
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A-52
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Section 8.1
|
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SURVIVAL
|
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A-52
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Section 8.2
|
|
NOTICES
|
|
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A-52
|
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Section 8.3
|
|
ASSIGNMENT; BINDING EFFECT
|
|
|
A-53
|
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Section 8.4
|
|
ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; NO OTHER
REPRESENTATIONS AND WARRANTIES
|
|
|
A-53
|
|
Section 8.5
|
|
AMENDMENTS
|
|
|
A-54
|
|
Section 8.6
|
|
GOVERNING LAW; WAIVER OF JURY TRIAL
|
|
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A-54
|
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Section 8.7
|
|
COUNTERPARTS
|
|
|
A-54
|
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Section 8.8
|
|
HEADINGS
|
|
|
A-54
|
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Section 8.9
|
|
INTERPRETATION
|
|
|
A-54
|
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Section 8.10
|
|
WAIVERS
|
|
|
A-56
|
|
Section 8.11
|
|
SEVERABILITY
|
|
|
A-56
|
|
Section 8.12
|
|
SPECIFIC ENFORCEMENT
|
|
|
A-56
|
|
Section 8.13
|
|
JURISDICTION
|
|
|
A-56
|
|
Section 8.14
|
|
LIMITATION ON DAMAGES
|
|
|
A-57
|
|
Section 8.15
|
|
OBLIGATION OF MERGER SUB
|
|
|
A-57
|
|
Section 8.16
|
|
EXTENSION; WAIVER
|
|
|
A-57
|
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Section 8.17
|
|
DEFINITIONS
|
|
|
A-57
|
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Section 8.18
|
|
DISCLOSURE LETTERS
|
|
|
A-60
|
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|
|
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|
|
EXHIBITS
|
|
|
|
|
Exhibit A
|
|
FRONTIER ARTICLES OF INCORPORATION
|
|
|
|
|
Exhibit B
|
|
HOLLY CHARTER AMENDMENT
|
|
|
|
|
Exhibit C
|
|
HOLLY BYLAWS
|
|
|
|
|
A-iii
This AGREEMENT AND PLAN OF MERGER (including the Exhibits
hereto, this Agreement), dated as of
February 21, 2011, is among HOLLY CORPORATION, a Delaware
corporation (Holly), NORTH ACQUISITION, INC.,
a Wyoming corporation and direct wholly owned subsidiary of
Holly (Merger Sub), and FRONTIER OIL
CORPORATION, a Wyoming corporation (Frontier).
RECITALS
WHEREAS, the respective Boards of Directors of each of Holly,
Merger Sub and Frontier determined that it is in the best
interests of their respective corporations and stockholders that
Holly and Frontier engage in a merger of equals
business combination in order to advance the long-term strategic
business interests of Holly and Frontier;
WHEREAS, the respective Boards of Directors of each of Holly and
Frontier have determined that such merger of equals
business combination shall be effected pursuant to the terms of
this Agreement through the Merger (as defined below);
WHEREAS, upon the terms and subject to the conditions set forth
herein, Merger Sub will merge with and into Frontier with
Frontier as the surviving corporation (the
Merger);
WHEREAS, upon consummation of the Merger, Frontier will become a
wholly owned subsidiary of Holly;
WHEREAS, for federal income tax purposes, it is intended that
the Merger qualifies as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder
(the Code);
WHEREAS, the Board of Directors of Holly has approved this
Agreement and determined that the terms of this Agreement are
fair to and in the best interests of Holly and its stockholders
and resolved to recommend to the stockholders of Holly the
approval of the issuance of shares of common stock, par value
$0.01 per share, of Holly (Holly Common
Stock) constituting the Merger Consideration; and
WHEREAS, the Board of Directors of Frontier has adopted this
Agreement and has determined that the Merger is in the best
interests of the holders of shares of common stock, without par
value, of Frontier (Frontier Common Stock)
and resolved to recommend approval of this Agreement by the
shareholders of Frontier; and
WHEREAS, the Board of Directors of Merger Sub has adopted this
Agreement and has determined that the Merger is in the best
interests of Holly, as its sole shareholder.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained
herein, the parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
Section 1.1 THE
MERGER. Upon the terms and subject to the
conditions hereof, in accordance with the Wyoming Business
Corporation Act (the WBCA), at the Effective
Time, Merger Sub shall merge with and into Frontier, with
Frontier continuing as the surviving corporation in the Merger
(Surviving Corporation) and the separate
corporate existence of Merger Sub shall cease. The Merger shall
have the effects specified in the WBCA. As a result of the
Merger, Frontier will become a wholly owned subsidiary of Holly.
Section 1.2 CLOSING;
EFFECTIVE TIME.
(a) The Closing. Subject to the terms and
conditions of this Agreement, the closing of the Merger (the
Closing) shall take place (i) at the
offices of Vinson & Elkins L.L.P., 2001 Ross Avenue,
Suite 3700, Dallas, Texas
75201-2975,
at 4:00 p.m., local time, on the business day immediately
following the day on which the last to be fulfilled or waived of
the conditions set forth in Article 6 (other than those
conditions that by their nature are to be satisfied at the
Closing, but subject to fulfillment or waiver of those
conditions) shall be fulfilled or waived in accordance herewith
or (ii) at such other time, date or place as Frontier and
Holly may agree in writing. The date on which the Closing occurs
is hereinafter referred to as the Closing
Date.
A-1
(b) Effective Time of the Merger. As soon
as practicable on the Closing Date, Frontier shall file with the
Secretary of State of the State of Wyoming (the Wyoming
Secretary) articles of merger with respect to the
Merger (such articles of merger, the Articles of
Merger), which Articles of Merger shall be in such
form as is required by, and executed and acknowledged in
accordance with, the WBCA. The Merger shall become effective at
such date and time as Frontier and Holly shall mutually agree
and shall be specified in the Articles of Merger; provided that
(i) such date and time shall be after the time of filing of
the Articles of Merger and (ii) the Merger shall become
effective at the same date and time. As used in this Agreement,
the term Effective Time shall mean the date
and time when the Merger becomes effective.
Section 1.3 ARTICLES OF
INCORPORATION. At the Effective Time, the
articles of incorporation of Frontier shall be amended and
restated to read in the form of Exhibit A and, as so
amended and restated, such articles of incorporation shall be
the articles of incorporation of Surviving Corporation, until
thereafter changed or amended as provided therein or by
applicable law.
Section 1.4 BYLAWS. At
the Effective Time, the bylaws of Frontier shall be amended and
restated to be the same as the bylaws of Merger Sub as in effect
immediately prior to the Effective Time, until thereafter
changed or amended as provided therein or by applicable law.
Section 1.5 DIRECTORS
AND EXECUTIVE OFFICERS.
(a) The directors and executive officers of Holly at the
Effective Time shall be as provided in Section 5.15.
(b) The directors of Merger Sub immediately prior to the
Effective Time shall be the directors of Surviving Corporation,
and the officers of Merger Sub immediately prior to the
Effective Time shall be the officers of Surviving Corporation,
in each case, until their respective successors are duly elected
and qualified.
Section 1.6 ACTIONS
OF HOLLY. Holly, in its capacity as the sole
shareholder of Merger Sub, by its execution and delivery hereof,
consents to such corporations entering into and performing
this Agreement and the transactions contemplated hereby. Holly
shall take all actions necessary to cause Merger Sub to take any
actions necessary in order to consummate the Merger and the
other transactions contemplated hereby.
Section 1.7 ALTERNATIVE
STRUCTURES. The parties agree to reasonably
cooperate in the consideration and implementation of alternative
structures to effect the business combination contemplated by
this Agreement, including without limitation, by merging
Frontier with and into Merger Sub, or by merging Frontier into
Holly, as long as such alternative structure does not
(i) impose any material delay on, or condition to, the
consummation of the Merger, (ii) cause any closing
condition set forth in Article 6 not to be capable of being
fulfilled (unless duly waived by the party entitled to the
benefits thereof) or (iii) adversely affect any of the
parties hereto or either Hollys or Frontiers
stockholders; provided, however, that the fact that a direct
merger of Frontier into Holly would require the approval of a
majority of the holders of outstanding shares of Holly Common
Stock shall not be deemed to have the effect of (i),
(ii) or (iii) above.
ARTICLE 2
CONVERSION
OF SECURITIES
Section 2.1 EFFECT
ON CAPITAL STOCK OF FRONTIER AND MERGER SUB. At
the Effective Time, by virtue of the Merger and without any
action on the part of Frontier, Holly, Merger Sub or any holder
of any shares of Frontier Common Stock:
(a) Each share of common stock, par value $0.01 per share,
of Merger Sub (Merger Sub Common Stock)
issued and outstanding immediately prior to the Effective Time
shall be converted into one share of common stock of Surviving
Corporation.
(b) Each share of Frontier Common Stock that is held by
Frontier as treasury stock or that is owned by Frontier, Holly,
Merger Sub, any direct or indirect wholly owned Frontier
Subsidiary or any direct or indirect wholly owned Holly
Subsidiary immediately prior to the Effective Time shall cease
to be outstanding and shall be canceled and retired and shall
cease to exist and no consideration shall be delivered in
exchange therefor.
A-2
(c) Except as provided in Section 2.1(b) and
Section 2.7, each share of Frontier Common Stock issued and
outstanding immediately prior to the Effective Time shall be
converted into the right to receive 0.4811 (the
Exchange Ratio) fully paid and nonassessable
shares of Holly Common Stock.
(d) The consideration provided for in Section 2.1(c),
together with the consideration provided for in
Section 2.7, is referred to herein as the Merger
Consideration. At the Effective Time, each
certificate, whether represented in certificated or
non-certificated book-entry form (a Frontier
Certificate), formerly representing any shares of
Frontier Common Stock, shall thereafter represent only the right
to receive the Merger Consideration and the right to receive any
distribution or dividends pursuant to Section 2.5.
(e) All of such shares of Holly Common Stock issued
pursuant to this Section 2.1 shall be duly authorized and
validly issued and free of preemptive rights, with no personal
liability attaching to the ownership thereof. All shares of
Frontier Common Stock shall cease to be outstanding and shall be
canceled and retired and shall cease to exist, and each holder
of a Frontier Certificate that immediately prior to the
Effective Time represented any shares of Frontier Common Stock
shall thereafter cease to have any rights with respect to such
shares of Frontier Common Stock, except as provided in
Section 2.6 the right to receive the Merger Consideration
to be issued in consideration therefor, including any cash in
lieu of fractional shares of applicable Holly Common Stock with
respect thereto to be issued in consideration therefor, and any
dividends or other distributions to which holders of Frontier
Common Stock become entitled, all in accordance with this
Article 2 upon the surrender of such Frontier Certificate.
(f) If, between the date of this Agreement and the
Effective Time, there is declared or effected a reorganization,
reclassification, recapitalization, stock split,
split-up,
stock dividend or stock distribution (including any dividend or
distribution of securities convertible into Holly Common Stock
or Frontier Common Stock), combination or exchange of shares
with respect to, or rights issued in respect of, Holly Common
Stock or Frontier Common Stock, the Merger Consideration shall
be adjusted accordingly to provide to the holders of Frontier
Common Stock the same economic effect as contemplated by this
Agreement prior to such event.
Section 2.2 SURRENDER
OF SHARES.
(a) Prior to the Effective Time, Holly shall designate a
bank or trust company to act as agent for the holders of shares
of Frontier Common Stock in connection with the Merger (the
Exchange Agent) to receive the Merger
Consideration to which holders of such shares shall become
entitled pursuant to Section 2.1. Prior to, or
substantially simultaneously with, the Effective Time, Holly
will deposit with the Exchange Agent, for the benefit of the
holders of Frontier Certificates, for exchange in accordance
with this Article 2 through the Exchange Agent,
certificates representing the shares of Holly Common Stock to be
delivered as the Merger Consideration (such certificates,
whether represented in certificated or non-certificated
book-entry form, to the extent applicable, the Holly
Common Certificates). In addition, Holly shall deposit
with the Exchange Agent, from time to time as needed, cash
sufficient to make payments in lieu of fractional shares
pursuant to Section 2.7 and to pay any dividends or other
distributions which holders of Frontier Certificates have the
right to receive pursuant to Section 2.5. All such Holly
Common Certificates and cash deposited with the Exchange Agent
pursuant to this Section 2.2(a) is hereinafter referred to
as the Exchange Fund.
(b) Promptly after the Effective Time, but in no event
later than three business days following the Closing Date, Holly
shall cause to be mailed to each record holder, at the Effective
Time, of an outstanding Frontier Certificate, a form of letter
of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Frontier
Certificates shall pass, only upon proper delivery of the
Frontier Certificate to the Exchange Agent) and instructions for
use in effecting the surrender of the Frontier Certificate for
payment of the Merger Consideration therefor. Within three
business days after surrender to the Exchange Agent of a
Frontier Certificate, together with such letter of transmittal,
duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may be
required pursuant to such instructions, the holder of such
Frontier Certificate shall be entitled to receive in exchange
therefor the Merger Consideration for each share formerly
represented by such Frontier Certificate and such Frontier
Certificate shall then be canceled. No interest shall be paid or
accrued for the benefit of holders of Frontier Certificates on
the Merger Consideration payable upon the surrender of Frontier
Certificates (including, without limitation, any cash payable
pursuant to Section 2.5 or Section 2.7). If payment of
A-3
the Merger Consideration is to be made to a person other than
the person in whose name the surrendered Frontier Certificate is
registered, it shall be a condition of payment that the Frontier
Certificate so surrendered shall be properly endorsed or shall
be otherwise in proper form for transfer and that the person
requesting such payment shall have paid any transfer and other
taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of
the Frontier Certificate surrendered or shall have established
to the satisfaction of Frontier Surviving Corporation that such
tax either has been paid or is not applicable.
Section 2.3 STOCK
OPTIONS AND OTHER STOCK-BASED AWARDS.
(a) Each option to purchase shares of Frontier Common Stock
(a Frontier Stock Option) granted under the
Frontier Stock Plan, whether or not exercisable or vested, that
is outstanding immediately prior to the Effective Time shall
cease to represent a right to acquire shares of Frontier Common
Stock and shall be converted, at the Effective Time, into a
fully vested and immediately exercisable option to purchase
shares of Holly Common Stock (a Holly Stock
Option), on the same terms and conditions as were
applicable under such Frontier Stock Option (but taking into
account any changes thereto, including the acceleration thereof,
provided for in the Frontier Stock Plan, in any award agreement
or in such Frontier Stock Option by reason of this Agreement or
the transactions contemplated hereby), except that (i) the
number of shares of Holly Common Stock which shall be subject to
each such Holly Stock Option shall be the number of shares of
Frontier Common Stock subject to each such Frontier Stock Option
multiplied by the Exchange Ratio, rounded, if necessary, down to
the nearest whole share of Holly Common Stock, and
(ii) such Holly Stock Option shall have an exercise price
per share of Holly Common Stock equal to the exercise price per
share of Frontier Common Stock for such Frontier Stock Option
divided by the Exchange Ratio, rounded, if necessary, up to the
nearest whole cent; provided, however, that, notwithstanding
anything to the contrary in this Agreement, in all cases such
conversion shall be effected in a manner consistent with the
requirements of Section 424(a) of the Code and the
regulations promulgated thereunder (as modified by
Section 409A of the Code and the regulations promulgated
thereunder with respect to Frontier Stock Options that are not
intended to qualify as incentive stock options
within the meaning of Section 422 of the Code).
(b) Except with respect to (1) the Frontier Restricted
Stock and Frontier Stock Units issued pursuant to the Frontier
Stock Plan and the related Frontier Restricted Stock agreements
identified in Schedule 2.3(b) of the Frontier Disclosure
Letter (the Restricted Stock Agreements) or
the related Stock Unit/Restricted Stock Agreements also
identified in Schedule 2.3(b) of the Frontier Disclosure Letter,
as applicable (such Stock Unit/Restricted Stock Agreements,
together with the Restricted Stock Agreements, collectively
referred to as the Executive Stock
Agreements) to each Named Executive prior to the
Effective Time and (2) any awards listed on
Schedule 5.1(b)(vi) of the Frontier Disclosure Letter, the
Board of Directors of Frontier (the Frontier
Board) (or any duly constituted and authorized
committee thereof administering the Frontier Stock Plan) shall
adopt such resolutions or take such other actions as may be
required to the effect that, effective as of the Effective Time:
(i) each Frontier Stock Unit that is issued and outstanding
immediately prior to the Effective Time and with respect to
which the applicable performance period has not ended prior to
the Effective Time shall, automatically and without any required
action on the part of any holder thereof, be cancelled in full
as of such date and such Frontier Stock Units will be converted
into (A) a number of shares of fully vested Holly Common
Stock equal to 125% of the number of shares of Frontier Common
Stock subject to such Frontier Stock Units that are then
credited to the holder, multiplied by the Exchange Ratio,
rounded, if necessary, down to the nearest whole share of Holly
Common Stock, and (B) an amount of cash equal to the amount
of cash and stock dividends and dividend equivalents that would
have been credited to the holder under the Frontier Stock Plan
if the Frontier Stock Units instead had been issued as shares of
Frontier Restricted Stock; (ii) with respect to each award
of Frontier Restricted Stock that is issued and outstanding (or
earned but not yet granted to the holder after the end of an
applicable performance period) immediately prior to the
Effective Time and that is subject to restrictions or other
conditions which have not lapsed immediately prior to the
Effective Time, (A) such Frontier Restricted Stock shall
automatically become 100% vested at the Effective Time and shall
be treated at the Effective Time as, and shall be afforded the
same rights and shall be subject to the same conditions as,
other issued and outstanding shares of Frontier Common Stock
pursuant to Section 2.1(c), and (B) the holder of such
Frontier Restricted Stock shall be paid an amount of cash equal
to the amount of cash and stock dividends and dividend
equivalents then credited to the holder with respect thereto;
and (iii) with respect to each Frontier Restricted Stock
Unit (Frontier RSU) that is issued and
outstanding immediately prior to the Effective Time and with
respect to which the applicable vesting period has not ended
prior to the Effective Time, all
A-4
such Frontier RSUs shall automatically and without any required
action on the part of the holder thereof, become 100% vested and
converted into a like number of shares of Frontier Common Stock
on such date in accordance with their terms, and shall be
treated at the Effective Time as, and shall be afforded the same
rights and shall be subject to the same conditions as, other
issued and outstanding shares of Frontier Common Stock pursuant
to Section 2.1(c). All cash amounts due pursuant to this
Section 2.3(b) shall be paid or delivered, less all
applicable deductions and withholdings required by applicable
law to be withheld in respect of such amounts, within five
business days after the Closing Date, unless otherwise specified
herein. As used in this Agreement, Frontier Stock
Unit shall mean Stock Unit as such term is
defined in the Frontier Stock Plan, and Frontier
Restricted Stock shall mean Restricted
Stock as such term is defined in the Frontier Stock Plan.
(c) With respect to the Frontier Restricted Stock and the
Frontier Stock Units issued to each Named Executive pursuant to
the Frontier Stock Plan and the Executive Stock Agreements,
prior to the Effective Time, the Frontier Board (or any duly
constituted and authorized committee thereof administering the
Frontier Stock Plan) shall adopt such resolutions or take other
actions as may be required to the effect that, effective as of
the Effective Time, the following shall occur: (A)(i) each share
of Frontier Restricted Stock held by each Named Executive that
is issued and outstanding (or earned but not yet granted to the
Named Executive after the end of an applicable performance
period) immediately prior to the Effective Time shall cease to
represent Frontier Restricted Stock and shall be converted, at
the Effective Time, into restricted stock of Holly
(Holly Restricted Stock), on the same terms
and conditions as were applicable under such Frontier Restricted
Stock (but taking into account any changes thereto set forth in
the Frontier Retention Agreements), (ii) the holder thereof
shall be paid at the Effective Time an amount of cash equal to
the amount of cash, dividends and dividend equivalents then
credited to the holder with respect thereto and (iii) each
share of Frontier Restricted Stock shall be converted into
0.4811 shares of Holly Restricted Stock, rounded down to
the nearest whole share of Holly Restricted Stock and
(B) each Frontier Stock Unit that is issued and outstanding
immediately prior to the Effective Time and with respect to
which the applicable performance period has not ended prior to
the Effective Time shall, automatically and without any required
action on the part of any holder thereof, be cancelled in full
as of such date and such Frontier Stock Units will be converted
into (x) a number of shares of fully vested Holly Common
Stock equal to 125% of the number of shares of Frontier Common
Stock subject to such Frontier Stock Units that are then
credited to the holder, multiplied by the Exchange Ratio,
rounded, if necessary, down to the nearest whole share of Holly
Common Stock, and (y) an amount of cash equal to the amount
of cash and stock dividends and dividend equivalents that would
have been credited to the holder under the Frontier Stock Plan
if the Frontier Stock Units instead had been issued as shares of
Frontier Restricted Stock. All cash amounts due pursuant to this
Section 2.3(c) shall be paid or delivered, less all
applicable deductions and withholdings required by applicable
law to be withheld in respect of such amounts, within five
business days after the Closing Date, unless otherwise specified
herein.
(d) Any and all Frontier equity awards listed on
Schedule 5.1(b)(vi) of the Frontier Disclosure Letter that
are outstanding immediately prior to the Effective Time will be
governed by their terms and will be converted, at the Effective
Time, into comparable Holly equity awards and the number of
shares of Holly Common Stock and Holly Restricted Stock subject
to such Holly equity awards shall be determined taking into
account the Exchange Ratio.
(e) For purposes of Section 2.3(a),
Section 2.3(b), Section 2.3(c) and
Section 2.3(d), the number of shares and the exercise price
per share under each Frontier Stock Option and the number of
shares subject to each Frontier Stock Unit and each award of
Frontier Restricted Stock shall be adjusted appropriately upon
the occurrence of any of the events contemplated in
Section 2.1(f) hereof to provide the holders of Frontier
Stock Options, Frontier Stock Units and Frontier Restricted
Stock the same economic effect as contemplated by this Agreement
prior to the occurrence of such event; provided, however, that
no such adjustment shall be made to the extent such adjustment
would result in a Frontier Stock Option becoming nonqualified
deferred compensation within the meaning of Section 409A of
the Code.
(f) As soon as practicable after the Effective Time, Holly
shall deliver to the holders of Frontier Stock Options, Frontier
Stock Units and Frontier Restricted Stock that are being
converted into Holly Stock Options, Holly Stock Units and Holly
Restricted Stock pursuant to this Section 2.3 appropriate
notices setting forth such holders rights pursuant to the
Frontier Stock Plan, and shall enter into written agreements
with such holders stating that such Frontier Stock Options,
Frontier Stock Units and Frontier Restricted Stock have been
converted into Holly Stock Options, Holly Stock Units or Holly
Restricted Stock, as applicable, and that the agreements between
Frontier and
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each such holder regarding such Frontier Stock Options, Frontier
Stock Units and Frontier Restricted Stock, as applicable, shall
be assumed by Holly and continue in effect on the same terms and
conditions (subject to the adjustments required by this
Section 2.3 after giving effect to the Merger and the terms
of the Frontier Stock Plan) pursuant to the applicable Holly
Stock Plan.
(g) Prior to the Effective Time, Frontier shall take all
necessary action for the adjustment of Frontier Stock Options
under this Section 2.3.
Section 2.4 EXCHANGE
PROCEDURES. Promptly after the Effective Time but
in no event later than three business days following the Closing
Date, Holly shall cause the Exchange Agent to mail to each
holder of a Frontier Certificate the documentation specified in
Section 2.2(b) hereof. Any uncertificated shares of
Frontier Common Stock in book-entry form shall be deemed
surrendered to the Exchange Agent at the Effective Time, and
each holder thereof shall be entitled to receive (A) Holly
Common Certificates representing, in the aggregate, the whole
number of shares of Holly Common Stock that such holder has the
right to receive pursuant to Section 2.1 (after taking into
account all shares of Holly Common Stock then held by such
holder) and (B) a check in the amount equal to the cash
that such holder has the right to receive pursuant to the
provisions of this Article 2, including cash in lieu of any
fractional shares of Holly Common Stock that such holder is
entitled to receive pursuant to Section 2.7 and dividends
or other distributions that such holder is entitled to receive
pursuant to Section 2.5. The Frontier Certificate so
surrendered shall forthwith be canceled. Until such time as a
Holly Common Certificate is issued to or at the direction of the
holder of a surrendered Frontier Certificate, such Holly Common
Stock represented thereby shall be deemed not outstanding and
shall not be entitled to vote on any matter. In the event of a
transfer of ownership of Frontier Common Stock that occurred
prior to the Effective Time, but is not registered in the
transfer records of Frontier, one or more Holly Common
Certificates evidencing, in the aggregate, the proper number of
shares of Holly Common Stock, a check in the proper amount of
cash that such holder has the right to receive in lieu of any
fractional shares of Holly Common Stock pursuant to
Section 2.7 and any dividends or other distributions to
which such holder is entitled pursuant to Section 2.5, may
be issued with respect to such Frontier Common Stock to such a
transferee if the Frontier Certificate is presented to the
Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid. If any Holly
Common Certificate is to be issued in a name other than that in
which the Frontier Certificate surrendered in exchange therefor
is registered, it shall be a condition of such exchange that the
Person requesting such exchange shall pay any transfer or other
taxes required by reason of the issuance of Holly Common
Certificates in a name other than that of the registered holder
of the Frontier Certificate surrendered, or shall establish to
the reasonable satisfaction of Holly or the Exchange Agent that
such tax has been paid or is not applicable.
Section 2.5 DISTRIBUTIONS
WITH RESPECT TO UNEXCHANGED SHARES. No dividends
or other distributions with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Frontier
Certificate with respect to the shares of Holly Common Stock
that such holder would be entitled to receive upon surrender of
such Frontier Certificate, and no cash payment in lieu of
fractional shares of Holly Common Stock shall be paid to any
such holder pursuant to Section 2.7 until such holder shall
surrender such Frontier Certificate in accordance with
Section 2.7. Subject to the effect of applicable law,
following surrender of any such Frontier Certificate, there
shall be paid to the record holder thereof without interest,
(a) promptly after the time of such surrender, the amount
of any cash payable in lieu of fractional shares of Holly Common
Stock to which such holder is entitled pursuant to
Section 2.7 and the amount of any dividends or other
distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Holly
Common Stock and (b) at the appropriate payment date, the
amount of any dividends or other distributions with a record
date after the Effective Time and a payment date subsequent to
such surrender payable with respect to such shares of Holly
Common Stock.
Section 2.6 NO
FURTHER OWNERSHIP RIGHTS IN FRONTIER COMMON
STOCK. All shares of Holly Common Stock issued
and cash paid upon exchange of shares of Frontier Common Stock
in accordance with the terms of this Article 2 (including
any cash paid pursuant to Section 2.5 or Section 2.7)
shall be deemed to have been issued or paid in full satisfaction
of all rights pertaining to the shares of Frontier Common Stock.
Section 2.7 NO
FRACTIONAL SHARES OF HOLLY COMMON STOCK. No
certificates or scrip or shares of Holly Common Stock
representing fractional shares of Holly Common Stock or
book-entry credit of the same shall be issued upon the surrender
for exchange of Frontier Certificates, and such fractional share
interests will not
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entitle the owner thereof to vote or to have any rights of a
stockholder of Holly or a holder of shares of Holly Common
Stock. For purposes of this Section 2.7, all fractional
shares to which a single record holder would be entitled shall
be aggregated and calculations shall be rounded to three decimal
places. Notwithstanding any other provision of this Agreement,
each holder of Frontier Certificates who would otherwise have
been entitled to receive a fraction of a share of Holly Common
Stock (determined after taking into account all Frontier
Certificates delivered by such holder) shall receive, in lieu
thereof, cash (without interest) in an amount equal to the
product of (a) such fractional part of a share of Holly
Common Stock multiplied by (b) the closing price for a
share of Holly Common Stock as reported on the New York Stock
Exchange (NYSE) on the first trading day
following the date on which the Effective Time occurs. As soon
as practicable after the determination of the amount of cash to
be paid to such former holders of Frontier Common Stock in lieu
of any fractional interests, the Exchange Agent shall notify
Holly, and Holly shall ensure that there is deposited with the
Exchange Agent, and shall cause the Exchange Agent to make
available in accordance with this Agreement, such amounts to
such former holders of Frontier Common Stock.
Section 2.8 TERMINATION
OF EXCHANGE FUND. Any portion of the Exchange
Fund that remains undistributed to the holders of Frontier
Certificates six months after the Effective Time shall, at
Hollys request, be delivered to Holly or otherwise on the
instruction of Holly, and any holders of Frontier Certificates
who have not theretofore complied with this Article 2 shall
after such delivery look only to Holly for the Merger
Consideration with respect to the shares of Frontier Common
Stock formerly represented thereby to which such holders are
entitled pursuant to Section 2.1, any cash in lieu of
fractional shares of Holly Common Stock to which such holders
are entitled pursuant to Section 2.7 and any dividends or
distributions with respect to shares of Holly Common Stock to
which such holders are entitled pursuant to Section 2.5.
Any such portion of the Exchange Fund remaining unclaimed by
holders of shares of Frontier Common Stock immediately prior to
such time as such amounts would otherwise escheat to or become
property of any governmental entity shall, to the extent
permitted by law, become the property of Holly free and clear of
any claims or interest of any Person previously entitled thereto.
Section 2.9 NO
LIABILITY. None of Frontier, Holly, Merger Sub,
Surviving Corporation or the Exchange Agent shall be liable to
any Person in respect of any Merger Consideration delivered to a
public official pursuant to any applicable abandoned property,
escheat or similar law.
Section 2.10 INVESTMENT
OF THE EXCHANGE FUND. The Exchange Agent shall
invest any cash included in the Exchange Fund as directed by
Holly, on a daily basis, provided that no such investment or
loss thereon shall affect the amounts payable or the timing of
the amounts payable to Frontier shareholders pursuant to this
Article 2. Any interest and other income resulting from
such investments shall promptly be paid to Holly. The Exchange
Fund shall be invested by the Exchange Agent as directed by
Holly, provided that such investments shall be in obligations of
or guaranteed by the United States of America, in commercial
paper obligations rated
A-1 or
P-1 or
better by Moodys Investors Services, Inc. or
Standard & Poors Corporation, respectively, or
in certificates of deposit, bank repurchase agreements or
bankers acceptances of commercial banks with capital
exceeding $500 million.
Section 2.11 LOST
CERTIFICATES. If any Frontier Certificate shall
have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Frontier
Certificate to be lost, stolen or destroyed and, if required by
Holly, the posting by such Person of a bond in such reasonable
amount as Holly may direct as indemnity against any claim that
may be made against it with respect to such Frontier
Certificate, the Exchange Agent will deliver in exchange for
such lost, stolen or destroyed Frontier Certificate, the Merger
Consideration with respect to the shares of Frontier Common
Stock formerly represented thereby, any cash in lieu of
fractional shares of Holly Common Stock, and unpaid dividends
and distributions on shares of Holly Common Stock deliverable in
respect thereof, pursuant to this Agreement.
Section 2.12 WITHHOLDING
RIGHTS. Holly shall be entitled to deduct and
withhold, or cause to be deducted or withheld, from the
consideration otherwise payable pursuant to this Agreement such
amounts as it is required to deduct and withhold with respect to
the making of such payment under the Code, or any provision of
state, local or foreign tax law. To the extent that amounts are
so withheld or paid over to or deposited with the relevant
governmental entity by Holly, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid
to the Person in respect of which such deduction and withholding
was made by Holly.
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Section 2.13 FURTHER
ASSURANCES. At and after the Effective Time, the
officers and directors of Holly or Surviving Corporation, as
applicable, shall be authorized to execute and deliver, in the
name and on behalf of Surviving Corporation, Frontier or Merger
Sub, any deeds, bills of sale, assignments or assurances and to
take and do, in the name and on behalf of Surviving Corporation,
Frontier or Merger Sub, any other actions and things necessary
to vest, perfect or confirm of record or otherwise in Holly or
Surviving Corporation, any and all right, title and interest in,
to and under any of the rights, properties or assets acquired or
to be acquired by Holly or Surviving Corporation, as applicable,
as a result of, or in connection with, the Merger.
Section 2.14 STOCK
TRANSFER BOOKS. The stock transfer books of
Frontier shall be closed immediately upon the Effective Time,
and there shall be no further registration of transfers of
shares of Frontier Common Stock thereafter on the records of
Frontier. At or after the Effective Time, any Frontier
Certificates presented to the Exchange Agent, Holly or Surviving
Corporation for any reason shall be converted into the right to
receive the Merger Consideration, with respect to the shares of
Frontier Common Stock formerly represented thereby (including
any cash in lieu of fractional shares of Holly Common Stock to
which the holders thereof are entitled pursuant to
Section 2.7 and any dividends or other distributions to
which the holders thereof are entitled pursuant to
Section 2.5). From and after the Effective Time, the
holders of Frontier Certificates evidencing ownership of shares
outstanding immediately prior to the Effective Time shall cease
to have any rights with respect to such shares except as
otherwise provided for herein or by applicable law.
ARTICLE 3
REPRESENTATIONS
AND WARRANTIES OF HOLLY AND MERGER SUB
Except as set forth in the disclosure letter delivered to
Frontier concurrently with the execution hereof (the
Holly Disclosure Letter) in accordance with
Section 8.18 or as disclosed with reasonable specificity in
the Holly Reports (as defined in Section 3.7), Holly and
Merger Sub, jointly and severally, represent and warrant to
Frontier that:
Section 3.1 EXISTENCE;
GOOD STANDING; CORPORATE AUTHORITY.
(a) Holly is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware. Holly is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each
jurisdiction in which the character of the properties owned or
leased by it therein or in which the transaction of its business
makes such qualification necessary, except where the failure to
be so qualified would not have, individually or in the
aggregate, a Holly Material Adverse Effect (as defined in
Section 8.9). Holly has all requisite corporate power and
authority to own, operate and lease its properties and to carry
on its business as now conducted. The copies of Hollys
certificate of incorporation and bylaws previously made
available to Frontier are true and correct and contain all
amendments as of the date of this Agreement.
(b) Merger Sub is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Wyoming. Except as contemplated by this Agreement, Merger Sub
does not hold and has not held any material assets or incurred
any material liabilities, and has not carried on any business
activities other than in connection with the Merger and the
other transactions contemplated by this Agreement. The
authorized capital stock of Merger Sub consists of
100 shares of common stock, $0.01 par value, all of
which have been duly issued, are fully paid and nonassessable
and are owned directly by Holly free and clear of any Liens. The
copies of Merger Subs articles of incorporation and bylaws
previously made available to Frontier are true and correct and
contain all amendments as of the date of this Agreement.
Section 3.2 AUTHORIZATION,
VALIDITY AND EFFECT OF AGREEMENTS.
(a) Holly has the requisite corporate power and authority
to execute and deliver this Agreement and all other agreements
and documents contemplated hereby to which it is a party. The
consummation by Holly of the transactions contemplated hereby
has been duly authorized by all requisite corporate action,
other than, with respect to the Merger, the approval by
Hollys stockholders of the issuance of Holly Common Stock
constituting the Merger Consideration. Assuming the due
authorization, execution and delivery of this Agreement by each
of Frontier and Merger Sub, this Agreement constitutes the valid
and legally binding obligation of Holly, enforceable in
accordance
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with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors
rights and general principles of equity.
(b) Merger Sub has the requisite corporate power and
authority to execute and deliver this Agreement and all other
agreements and documents contemplated hereby to which it is a
party. Except, solely in the case of the Merger, for the
adoption of this Agreement by Holly as the sole shareholder of
Merger Sub, the consummation by Merger Sub of the transactions
contemplated by this Agreement, including the Merger, has been
duly authorized by all requisite corporate action. Assuming the
due authorization, execution and delivery of this Agreement by
each of Frontier and Holly, this Agreement constitutes the valid
and legally binding obligation of Merger Sub, enforceable in
accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to
creditors rights and general principles of equity.
Section 3.3 CAPITALIZATION. The
authorized capital stock of Holly consists of
160,000,000 shares of Holly Common Stock, and
1,000,000 shares of preferred stock, par value of $1.00 per
share (the Holly Preferred Stock). As of
February 18, 2011, there were
(a) 53,264,688 shares of Holly Common Stock issued and
outstanding, (b) no shares of Holly Preferred Stock issued
and outstanding, (c) no shares of Holly Common Stock
issuable pursuant to options, (d) 118,956 shares of
unvested Holly Restricted Stock issued under the equity
incentive plans of Holly described in Schedule 3.3 of the
Holly Disclosure Letter (the Holly Stock
Plans) and (e) up to 277,671 shares of Holly
Common Stock subject to performance stock units issuable under
the Holly Stock Plans. All issued and outstanding shares of
Holly Common Stock (i) are duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights,
(ii) were not issued in violation of the terms of any
agreement or other understanding binding upon Holly and
(iii) were issued in compliance with all applicable charter
documents of Holly and all applicable federal and state
securities laws, rules and regulations. Except (i) as set
forth in this Section 3.3, (ii) for any shares of
Holly Common Stock issued pursuant to the exercise of the
options or other awards referred to in subsections (c),
(d) and (e) above, and (iii) for shares of Holly
Common Stock issuable pursuant to the exercise of such options
or other awards, there are no outstanding shares of capital
stock and there are no options, warrants, calls, subscriptions,
stockholder rights plans or similar instruments, convertible
securities, or other rights, agreements or commitments which
obligate Holly or any of its Subsidiaries to issue, transfer or
sell any shares of capital stock or other voting securities of
Holly or any of its Subsidiaries. Holly has no outstanding
bonds, debentures, notes or other obligations the holders of
which have the right to vote (or which are convertible into or
exercisable for securities having the right to vote) with the
stockholders of Holly on any matter.
Section 3.4 SUBSIDIARIES.
(a) Each of Hollys Subsidiaries is a corporation,
limited liability company or partnership duly organized, validly
existing and in good standing (where applicable) under the laws
of its jurisdiction of incorporation or organization, has the
corporate, limited liability company or partnership power and
authority to own, operate and lease its properties and to carry
on its business as it is now being conducted, and is duly
qualified to do business and is in good standing (where
applicable) in each jurisdiction in which the ownership,
operation or lease of its property or the conduct of its
business requires such qualification, except for jurisdictions
in which such failure to be so qualified or to be in good
standing would not have, individually or in the aggregate, a
Holly Material Adverse Effect. Except as described in
Section 3.4(b) with respect to the entities listed therein,
all of the outstanding shares of capital stock of, or other
ownership interests in, each of Hollys Subsidiaries is
duly authorized, validly issued, fully paid and nonassessable.
Except with respect to Holly Energy Partners, L.P.
(MLP) and UNEV Pipeline, LLC
(UNEV), each of Hollys Subsidiaries is
owned, directly or indirectly, by Holly free and clear of all
liens, mortgages, security interests, indentures, deeds of
trust, pledges, deposits, restrictions, burdens, liens,
licenses, leases, subleases, rights of first refusal, rights of
first offer, charges, privileges, easements, rights of way,
reservations, options, preferential purchase rights, rights of a
vendor under any title retention or conditional sale agreement,
or other arrangements substantially equivalent thereto, in each
case regardless of whether relating to the extension of credit
or the borrowing of money (collectively,
Liens). Each of the Subsidiaries of MLP and
UNEV are owned, directly or indirectly, by MLP and UNEV,
respectively, free and clear of all Liens. Holly owns, directly
or indirectly, (a) 7,290,000 of the common units of MLP and
a 2% general partner interest in MLP and (b) 75% of the
equity interests of UNEV, in each case free and clear of all
Liens. Schedule 3.4 of the Holly Disclosure Letter sets
forth for each Subsidiary of Holly, its name and jurisdiction of
incorporation or organization.
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(b) The issued and outstanding limited partner interests of
MLP consist of the common units and incentive distribution
rights. All of MLPs outstanding equity interests,
including common units, incentive distribution rights, limited
partner interests and general partner interests (collectively,
the MLP Equity Interests), have been duly
authorized and validly issued in accordance with MLPs
First Amended and Restated Agreement of Limited Partnership
dated as of July 13, 2004, as amended (the
Partnership Agreement), and are fully paid
(to the extent required under the Partnership Agreement) and
nonassessable (except as such nonassessability may be affected
by
Sections 17-607
and 17-804
of the Delaware Revised Uniform Limited Partnership Act (the
DRULPA). All of the issued and outstanding
partnership interests of HEP Logistics Holdings, L.P. have been
duly authorized and validly issued and are fully paid (to the
extent required under the partnership agreement of HEP Logistics
Holdings, L.P. and the limited partner interests in HEP
Logistics Holdings, L.P. are nonassessable (except as such
nonassessability may be affected by
Sections 17-607
and 17-804
of the DRULPA). All of the issued and outstanding membership
interests of HEP Logistics Services, L.L.C. have been duly
authorized and validly issued, are fully paid (to the extent
required under the limited liability company agreement of HEP
Logistics Services, L.L.C. and nonassessable (except as such
nonassessability may be affected by
Sections 18-607
and 17-804
of the Delaware Limited Liability Company Act.
Section 3.5 NO
VIOLATION. Neither Holly nor any of its
Subsidiaries is, or has received notice that it is or would be
with the passage of time, in violation of any term, condition or
provision of (a) its charter documents or bylaws,
(b) any loan or credit agreement, note, bond, mortgage,
indenture, contract, agreement, lease, license or other
instrument or (c) any order of any court, governmental
authority or arbitration board or tribunal, or any law,
ordinance, governmental rule or regulation to which Holly or any
of its Subsidiaries or any of their respective properties or
assets is subject, or is delinquent with respect to any report
required to be filed with any governmental entity, except, in
the case of matters described in clause (b) or (c), as
would not have, individually or in the aggregate, a Holly
Material Adverse Effect. Except as would not have, individually
or in the aggregate, a Holly Material Adverse Effect,
(i) Holly and its Subsidiaries hold all permits, licenses,
variances, exemptions, orders, franchises and approvals of all
governmental authorities necessary for the lawful conduct of
their respective businesses (the Holly
Permits) and (ii) Holly and its Subsidiaries are
in compliance with the terms of the Holly Permits. No
investigation by any governmental authority with respect to
Holly or any of its Subsidiaries is pending or, to the knowledge
of Holly, threatened, other than those that would not have,
individually or in the aggregate, a Holly Material Adverse
Effect.
Section 3.6 NO
CONFLICT.
(a) Neither the execution and delivery by Holly and Merger
Sub of this Agreement nor the consummation by Holly and Merger
Sub of the transactions contemplated hereby in accordance with
the terms hereof will: (i) conflict with or result in a
breach of any provisions of the charter documents or bylaws of
Holly or Merger Sub; (ii) violate, or conflict with, or
result in a breach of any provision of, or constitute a default
(or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination or in
a right of termination or cancellation of, or give rise to a
right of purchase under, or accelerate the performance required
by, or result in the creation of any Lien upon, any of the
properties of Holly or its Subsidiaries under, or result in
being declared void, voidable, or without further binding
effect, or otherwise result in a detriment to Holly or any of
its Subsidiaries under, any of the terms, conditions or
provisions of, any note, bond, mortgage, indenture, deed of
trust, Holly Permit, lease, contract, agreement, joint venture
or other instrument or obligation to which Holly or any of its
Subsidiaries is a party, or by which Holly or any of its
Subsidiaries or any of their properties is bound or affected; or
(iii) contravene or conflict with or constitute a violation
of any provision of any law, rule, regulation, judgment, order
or decree binding upon or applicable to Holly, Merger Sub or any
of their Subsidiaries, except, in the case of matters described
in clause (ii) or (iii), as would not have or reasonably be
expected to have, individually or in the aggregate, a Holly
Material Adverse Effect.
(b) Neither the execution and delivery by Holly and Merger
Sub of this Agreement nor the consummation by Holly and Merger
Sub of the transactions contemplated hereby in accordance with
the terms hereof will require any consent, approval or
authorization of, or filing or registration with, any
governmental or regulatory authority, other than (i) the
filings provided for in Article 1, (ii) filings
required under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the HSR
Act), the Securities Exchange Act of 1934, as amended
(the Exchange Act), the Securities Act of
1933, as amended (the Securities Act), and
applicable state securities and Blue Sky
A-10
laws, (iii) filings required by the Federal Energy
Regulatory Commission and any state energy regulatory
commissions with respect to interstate and intrastate petroleum
pipelines, and (iv) filings required by the Federal
Communications Commission with respect to microwave transmitter
licenses ((i), (ii), (iii) and (iv) collectively, the
Regulatory Filings), except for any consent,
approval or authorization the failure of which to obtain and for
any filing or registration the failure of which to make would
not have or reasonably be expected to have, individually or in
the aggregate, a Holly Material Adverse Effect.
(c) Other than as contemplated by Section 3.6(b), no
consents, assignments, waivers, authorizations or other
certificates are necessary in connection with the transactions
contemplated hereby to provide for the continuation in full
force and effect of all of the Holly Material Contracts (as
hereinafter defined) or for Holly or Merger Sub to consummate
the transactions contemplated hereby, except where the failure
to receive such consents or other certificates would not have or
reasonably be expected to have, individually or in the
aggregate, a Holly Material Adverse Effect.
(d) Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby
will: (i) result in or constitute the satisfaction of a
condition to (whether or not there be any additional condition
to) any payment from Holly or its Subsidiaries (including
severance, unemployment compensation, parachute payment, bonus
or otherwise) becoming due to any director, employee or
independent contractor of Holly or any of its Subsidiaries under
any Holly Plan (as defined in Section 3.11) or otherwise;
(ii) increase any benefits otherwise payable under any
Holly Plan or otherwise; or (iii) result in the
acceleration of the time of payment or vesting of any such
benefits.
Section 3.7 SEC
DOCUMENTS; FINANCIAL STATEMENTS. Holly has made
available (to the extent not available to the public on the
SECs EDGAR website) to Frontier each registration
statement, report, proxy statement or information statement
(other than preliminary materials) filed by Holly and MLP with
the Securities and Exchange Commission (SEC)
since December 31, 2007, each in the form (including
exhibits and any amendments thereto) filed with the SEC prior to
the date of this Agreement (collectively, the Holly
Reports). Each of Holly and MLP has filed all forms,
reports and documents required to be filed by it with the SEC
pursuant to relevant securities statutes, regulations, policies
and rules since such time. As of their respective dates, the
Holly Reports (i) were prepared in accordance with the
applicable requirements of the Securities Act, the Exchange Act,
the Sarbanes-Oxley Act of 2002, as amended (the
Sarbanes-Oxley Act) and the rules and
regulations thereunder in all material respects and
(ii) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements made therein, in the
light of the circumstances under which they were made, not
misleading at the time such statements were made. Other than
MLP, none of the Subsidiaries of Holly is required to make any
filings with the SEC. Each of the consolidated balance sheets
included in or incorporated by reference into the Holly Reports
(including the related notes and schedules) fairly presents in
all material respects the consolidated financial position of
(a) Holly and its Subsidiaries or (b) MLP and its
Subsidiaries, as applicable, in each case as of its date, and
each of the consolidated statements of operations, cash flows
and stockholders or partners equity included in or
incorporated by reference into the Holly Reports (including any
related notes and schedules) fairly presents in all material
respects the results of consolidated operations, cash flows or
changes in stockholders or partners equity, as the
case may be, of (x) Holly and its Subsidiaries or
(y) MLP and its Subsidiaries, as applicable, in each case
for the periods set forth therein (subject, in the case of
unaudited statements, to such exceptions as may be permitted by
Form 10-Q
of the SEC), and in each case in accordance with generally
accepted accounting principles in the United States
(GAAP) consistently applied during the
periods involved, except as may be noted therein, and except
that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which were
not or are not expected to be material in amount or effect.
Section 3.8 LITIGATION
AND LIABILITIES. There are no actions, suits or
proceedings pending against Holly or any of its Subsidiaries or,
to Hollys knowledge, threatened against Holly or any of
its Subsidiaries, at law or in equity, or before or by any
federal, state or foreign commission, court, board, bureau,
agency or instrumentality, other than those that would not have
or reasonably be expected to have, individually or in the
aggregate, a Holly Material Adverse Effect. There are no
outstanding judgments, decrees, injunctions, awards or orders
against Holly or any of its Subsidiaries, other than those that
would not have, individually or in the aggregate, a Holly
Material Adverse Effect. There are no obligations or liabilities
of any nature, whether accrued, absolute, contingent
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or otherwise, of Holly or any of its Subsidiaries, other than
those liabilities and obligations (a) that are disclosed in
the Holly Reports, (b) that have been incurred in the
ordinary course of business since September 30, 2010,
(c) related to expenses associated with the transactions
contemplated by this Agreement or (d) that would not have
or reasonably be expected to have, individually or in the
aggregate, a Holly Material Adverse Effect.
Section 3.9 ABSENCE
OF CERTAIN CHANGES. Since September 30,
2010, Holly has conducted its business only in the ordinary and
usual course of business, and during such period there has not
been (i) any event, condition, action or occurrence that
has had or would reasonably be expected to have, individually or
in the aggregate, a Holly Material Adverse Effect;
(ii) through the date of this Agreement, any material
change by Holly or any of its Subsidiaries (viewed on a
consolidated basis) in any of its accounting methods, principles
or practices or any of its tax methods, practices or elections,
except for changes required by GAAP; (iii) any material
damage, destruction, or loss to the business or properties of
Holly and its Subsidiaries, taken as a whole, not covered by
insurance; (iv) through the date of this Agreement, any
declaration, setting aside or payment of any dividend or other
distribution in respect of the capital stock of Holly (other
than ordinary quarterly dividends of $0.15 per share on Holly
Common Stock and MLPs quarterly cash distributions payable
to holders of its common units and to its general partner), or
any direct or indirect redemption, purchase or any other
acquisition by Holly of any such stock; (v) through the
date of this Agreement, any change in the capital stock or in
the number of shares or classes of the authorized or outstanding
capital stock of Holly (other than as a result of issuances
under Holly Stock Plans or exercises of options to purchase
shares of Holly Common Stock outstanding or issued as permitted
hereunder pursuant to Section 5.1(a)(vi)) or MLP;
(vi) through the date of this Agreement, any increase in or
establishment by Holly, MLP or any of their Subsidiaries of any
bonus, insurance, severance, deferred compensation, pension,
retirement, profit sharing, stock option, stock purchase or
other employee benefit plan, except in the ordinary course of
business; or (vii) through the date of this Agreement, any
event, condition, action or occurrence that is prohibited on or
after the date of this Agreement under
Section 5.1(a)(viii), (ix), (x), (xii), (xiii), (xv),
(xvi), or (xx) of this Agreement.
Section 3.10 TAXES.
(a) Each of Holly and its Subsidiaries and each affiliated,
consolidated, combined, unitary or similar group of which Holly
or any such Subsidiary is or, since January 1, 2004, was a
member has (i) duly filed (or there has been filed on its
behalf) on a timely basis (taking into account any extensions of
time to file before the date of this Agreement) with appropriate
governmental authorities all Tax Returns (as defined below)
required to be filed by or with respect to it, except to the
extent that any failure to file would not have, individually or
in the aggregate, a Holly Material Adverse Effect, and
(ii) duly paid or deposited in full on a timely basis or
made adequate provisions in accordance with GAAP (or there has
been paid or deposited or adequate provision has been made on
its behalf) for the payment of all Taxes (as defined below)
required to be paid by it other than those being contested in
good faith by Holly or a Subsidiary of Holly and adequately
provided for on the financial statements contained in the Holly
Reports and except to the extent that any failure to pay or
deposit or make adequate provision for the payment of such Taxes
would not have, individually or in the aggregate, a Holly
Material Adverse Effect.
(b) Except for matters that would not have, individually or
in the aggregate, a Holly Material Adverse Effect,
(i) Schedule 3.10(b) of the Holly Disclosure Letter
sets forth the last taxable period through which the federal
income Tax Returns of Holly and each of its Subsidiaries have
been examined by the Internal Revenue Service (the
IRS) (or the applicable statutes of
limitation for the assessment of federal income taxes for such
periods have expired) or otherwise closed; (ii) all
deficiencies asserted as a result of any examinations of Holly
and its Subsidiaries by any taxing authority have been paid
fully, settled or adequately provided for in the financial
statements contained in the Holly Reports; (iii) as of the
date of this Agreement, neither Holly nor any of its
Subsidiaries has granted any requests, agreements, consents or
waivers to extend the statutory period of limitations applicable
to the filing of any Tax Return or the assessment of any Taxes
of Holly or any of its Subsidiaries that will be outstanding as
of the Effective Time; (iv) neither Holly nor any of its
Subsidiaries is a party to, is bound by or has any obligation
under any tax sharing, allocation or indemnity agreement or any
similar agreement or arrangement; (v) there are no Tax
liens on any assets of Holly or its Subsidiaries except for
(A) Taxes not yet currently due and (B) matters being
contested by Holly or its Subsidiaries in good faith for which
adequate reserves are reflected in the financial statements
contained in the Holly Reports; and (vi) neither Holly nor
any of its Subsidiaries is a party to an
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agreement that provides for the payment of any amount that could
constitute a parachute payment within the meaning of
Section 280G of the Code.
(c) Neither Holly nor any of its Subsidiaries has
(i) participated, directly or indirectly, in any reportable
transaction within the meaning of Treas. Reg.
§ 1.6011-4(b), or (ii) claimed any deduction,
credit, or other tax benefit by reason of any tax
shelter within the meaning of former Section 6111(c)
of the Code or any confidential corporate tax
shelter within the meaning of former Section 6111(d)
of the Code.
(d) Since its inception, (i) MLP has been treated as a
partnership for U.S. federal income tax purposes and
(ii) MLP has satisfied the gross income requirements of
Section 7704(c) of the Code for each taxable year in which
it was a publicly traded partnership.
(e) For purposes of this Agreement,
(i) Tax or Taxes
means all federal, state, county, local, foreign or other net
income, gross income, gross receipts, sales, use, ad valorem,
transfer, accumulated earnings, personal holding, excess
profits, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium,
property, disability, capital stock, or windfall profits taxes,
customs duties or other taxes, fees, assessments or governmental
charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts imposed by
any taxing authority (domestic or foreign), and
(ii) Tax Return means any return,
report, claim for refund, or information return or statement
relating to Taxes, including any schedule or attachment thereto,
and including any amendment thereof.
Section 3.11 EMPLOYEE
BENEFIT PLANS.
(a) For purposes of this Section 3.11, the term
Subsidiaries as applied to Holly shall include any entity,
whether or not incorporated, which, with Holly, forms or formed
a controlled group of corporations, a group of trades or
business under common control or an affiliated service group,
within the meaning of Section 414(b), (c) or
(m) of the Code, within the six full calendar years prior
to the Closing Date.
(b) All employee benefit plans, programs, arrangements and
agreements, including but not limited to pension, retirement,
disability, medical, dental or other health insurance plans;
life insurance or other death benefit plans; profit sharing,
deferred compensation, stock option, bonus or other incentive
plans; vacation benefit plans or policies; severance or
redundancy plans; individual employee agreements; and foreign
plans not subject to the Employee Retirement Income Security Act
of 1974, as amended (ERISA) (whether or not
described in Section 3(3) of ERISA, whether or not funded,
whether written or oral, and whether or not legally enforceable,
in whole or in part) (i) to which Holly or any Subsidiary
is a party or by which it is bound, (ii) with respect to
which Holly or any Subsidiary has made any payments or
contributions, or (iii) to which Holly or any Subsidiary
may otherwise have any liability, are listed in
Schedule 3.11(b) of the Holly Disclosure Letter (the
Holly Plans).
(c) All Holly Plans comply in form and have been
administered in operation in compliance in all material respects
with all applicable requirements of law, excluding any
deficiencies that would not have, individually or in the
aggregate, a Holly Material Adverse Effect, no event has
occurred which will or could cause any such Holly Plan to fail
to comply with such requirements, excluding any deficiencies
that would not have, individually or in the aggregate, a Holly
Material Adverse Effect, and no notice has been issued by any
governmental authority questioning or challenging such
compliance, and no inquiry or audit has been initiated with
respect thereto by any governmental authority.
(d) All required employer contributions under any such
plans have been made and the applicable funds have been funded
in accordance with the terms thereof, excluding any deficiencies
that would not have, individually or in the aggregate, a Holly
Material Adverse Effect.
(e) Any Holly Plan intended to be qualified under
Section 401(a) of the Code has been determined by the IRS
to be so qualified (or an application for qualification is
pending before the IRS) under the currently applicable
provisions of the Code, and nothing has occurred or is
anticipated to occur to cause the loss of such qualified status.
(f) Holly does not sponsor, maintain, participate in or
contribute to, and has not at any time sponsored, maintained,
participated in or contributed to (and never has been required
to contribute to) any (i) employee pension benefit plan (as
such term is defined in Section 3(2) of ERISA)
(Pension Plan) that is or was subject to
minimum funding standards of the Code or ERISA;
(ii) multiemployer plan as that term is defined
in Section 414(f) of the
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Code or Section 4001(a)(3) of ERISA; (iii) foreign
benefit plans; or (iv) voluntary employee benefit
associations intended to be exempt from federal income tax under
Section 501(c)(9) of the Code.
(g) (i) Holly has paid all premiums (including any
applicable interest, charges and penalties for late payment) due
the Pension Benefit Guaranty Corporation (the
PBGC) with respect to each Pension Plan for
which premiums to the PBGC are required; (ii) no Pension
Plan had, as of its most recent actuarial report, an
unfunded benefit liability (as such term is defined
in Section 4001(a)(18) of ERISA) or has failed to satisfy
the minimum funding standards as described in Section 302
of ERISA or Section 412 of the Code, whether or not waived;
(iii) with respect to any Pension Plan, there has been no
event or condition that presents a significant risk of plan
termination, no notice of intent to terminate such Pension Plan
has been given under Section 4041 of ERISA, and no
proceeding has been instituted under Section 4042 of ERISA
to terminate such Pension Plan; (iv) no liability to the
PBGC has been incurred (other than with respect to required
premium payments), which liability has not been satisfied;
(v) no reportable event (as that term is
defined in Section 4043 of ERISA and for which the
30-day
notice requirement has not been waived) has occurred with
respect to any Pension Plan; (vi) each Pension Plan uses a
funding method permissible under ERISA and the actuarial
assumptions used in connection therewith are reasonable
individually and in the aggregate; and (vii) the fair
market value of the assets of each Pension Plan will exceed or
equal the actuarial present value of the benefit liabilities,
within the meaning of Section 4041 of ERISA, under the
Pension Plan, based upon reasonable actuarial assumptions and
the asset valuation principles established by the PBGC.
(h) The execution of this Agreement or the consummation of
the Merger will not give rise to or trigger any change of
control, accelerated vesting, severance or other similar
provisions in any Holly Plan (either solely as a result thereof
or as a result of such transactions in conjunction with any
other event).
(i) Excluding claims for benefits incurred in the ordinary
course of the Holly Plan activities, there are no pending or
anticipated claims against or otherwise involving any of the
Holly Plans and no suit, action or other litigation has been
brought against or with respect to any Holly Plan or any
fiduciary of any Holly Plan.
(j) Neither Holly nor any of its Subsidiaries has incurred
or reasonably expects to incur any liability under subtitle E of
Title IV of ERISA with respect to any multiemployer
plan, within the meaning of Section 4001(a)(3) of
ERISA.
(k) None of the assets of any Holly Plan is invested in
employer securities (as defined in Section 407(d)(1) of
ERISA) or employer real property (as defined in
Section 407(d)(2) of ERISA).
(l) There have been no prohibited transactions
(as described in Section 406 of ERISA or Section 4975
of the Code) with respect to any Holly Plan that would have,
individually or in the aggregate, a Holly Material Adverse
Effect.
(m) There have been no acts or omissions by Holly or any of
its Subsidiaries which have given rise to or may give rise to
fines, penalties, taxes or related charges under
Section 502 of ERISA or Chapters 43, 47, 68 or 100 of
the Code for which Holly or any of its Subsidiaries are or may
be liable that would result in a Holly Material Adverse Effect.
(n) Each Holly Plan which constitutes a group health
plan (as defined in Section 607(1) of ERISA or
Section 4980B(g)(2) of the Code), including any plans of
current and former Affiliates which must be taken into account
under Sections 4980B and 414(t) of the Code or
Section 601 of ERISA, has been operated in material
compliance with applicable law, including continuation coverage
requirements of Section 4980B of the Code, Chapter 100
of the Code and Section 601 of ERISA to the extent such
requirements are applicable, and each such plan (including any
such plan covering retirees or other former employees) may be
amended (including, without limitation, to prospectively curtail
or discontinue benefits
and/or
increase participant contribution requirements) or terminated
without liability (other than with respect to welfare benefits
in the ordinary course) to Holly, its Subsidiaries or successors.
(o) Neither Holly nor any of its Subsidiaries has any
liability or contingent liability for providing, under any Holly
Plan or otherwise, any post-retirement medical or life insurance
benefits, other than statutory liability for providing group
health plan continuation coverage under Part 6 of
Title I of ERISA and Section 4980B of the Code or
applicable state law.
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(p) Obligations under or relating to the Holly Plans are
properly reflected in the financial statements of Holly in
accordance with GAAP.
(q) Except with respect to any limitations in any Holly
Bargaining Agreements, there has been no act or omission that
would impair the ability of Holly or any of its Subsidiaries (or
any successor thereto) to unilaterally amend or terminate any
Holly Plan to the full extent permitted under applicable law.
(r) Except as would not reasonably be expected to have,
individually or in the aggregate, a Holly Material Adverse
Effect, with respect to each Holly Plan that is a
nonqualified deferred compensation plan (as defined
for purposes of Section 409A(d)(1) of the Code),
(i) such plan has been operated since January 1, 2005
in compliance with Section 409A of the Code and all
applicable IRS guidance promulgated thereunder to the extent
such plan is subject to Section 409A of the Code and so as
to avoid any Tax, interest or penalty thereunder; (ii) the
document or documents that evidence each such plan have
conformed to the provisions of Section 409A of the Code and
the final regulations under Section 409A of the Code since
December 31, 2008; and (iii) as to any such plan in
existence prior to January 1, 2005 and not subject to
Section 409A of the Code, has not been materially
modified (within the meaning of IRS Notice
2005-1) at
any time after October 3, 2004. No Holly Stock Option
(whether currently outstanding or previously exercised) is, has
been or would be, as applicable, subject to any Tax, penalty or
interest under Section 409A of the Code.
Section 3.12 LABOR
MATTERS.
(a) Schedule 3.12(a) of the Holly Disclosure Letter
lists each of the collective bargaining or other labor union
contracts applicable to any employees of Holly or any of its
Subsidiaries to which Holly or any of its Subsidiaries is a
party or is otherwise subject (the Holly Bargaining
Agreements). To Hollys knowledge, Holly and each
of its Subsidiaries are in material compliance with the Holly
Bargaining Agreements. As of the date of this Agreement, there
is no pending or, to Hollys knowledge, threatened labor
dispute, strike, or work stoppage against Holly or any of its
Subsidiaries that that would have, individually or in the
aggregate, a Holly Material Adverse Effect.
(b) Holly has provided Frontier with true, complete and
correct copies of the Holly Bargaining Agreements, including any
amendments thereto. There are no employee pension benefit
plans (as defined in Section 3(2) of ERISA),
employee welfare benefit plans (as defined in
Section 3(l) of ERISA), or other programs, plans or
arrangements, maintained in whole or in part, contributed to, or
required to be contributed to, in whole or in part, by Holly or
any of its Subsidiaries relating to the employees represented by
the Holly Bargaining Agreements other than as disclosed to
Frontier.
(c) To the knowledge of Holly, all employees of Holly and
its Subsidiaries are lawfully authorized to work in the United
States according to applicable immigration laws. Holly is in
compliance in all material respects with all applicable laws
relating to the documentation and record keeping of its
employees work authorization status.
(d) No employee of Holly or any of its Subsidiaries is
subject or a party to any employment, severance, retention, or
other contract and each employee of Holly and its Subsidiaries
is an employee at will.
(e) As of the date of this Agreement, and for the two
preceding years, there have not been any plant closings, mass
layoffs or other terminations of employees of Holly and its
Subsidiaries that would create any obligations upon or
liabilities for Holly and its Subsidiaries under the Worker
Adjustment and Retraining Notification Act or similar laws
(WARN).
(f) Holly and its Subsidiaries are, and have been since
January 1, 2007, in compliance in all material respects
with all applicable laws and regulations regarding labor and
employment practices.
Section 3.13 ENVIRONMENTAL
MATTERS.
(a) As used in this Agreement:
(i) Environmental Laws means any and all
applicable laws, statutes, regulations, rules, orders,
ordinances, legally enforceable directives, and rules of common
law of any governmental entity pertaining to protection of human
health (to the extent arising from exposure to Hazardous
Materials) or the environment (including, without limitation,
any natural resource damages or any generation, use, storage,
treatment,
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disposal, release, threatened release, discharge, or emission of
Hazardous Materials into the indoor or outdoor environment) in
effect at the time of Closing;
(ii) Hazardous Materials means any
(1) chemical, product, substance, waste, pollutant, or
contaminant that is defined or listed as hazardous or toxic or
that is otherwise regulated under any Environmental Law;
(2) asbestos containing materials, whether in a friable or
non-friable condition, polychlorinated biphenyls, naturally
occurring radioactive materials or radon; and (3) any
petroleum hydrocarbons, petroleum products, petroleum
substances, crude oil, natural gas, and any components,
fractions, or derivatives thereof;
(iii) Environmental Permits means any
and all permits, registrations, licenses, consents, exemptions,
variances, authorizations, and similar approvals required under
Environmental Laws;
(iv) Release means any depositing,
spilling, leaking, pumping, pouring, placing, emitting,
discarding, abandoning, emptying, discharging, migrating,
injecting, escaping, leaching, dumping, or disposing;
(v) Holly Real Properties means those
real properties owned, leased, or otherwise operated by Holly or
its Subsidiaries in connection with the performance of any of
their respective businesses; and
(vi) Offsite Non-Holly Real Properties
means any real properties other than the Holly Real Properties.
(b) Except as would not have, individually or in the
aggregate, a Holly Material Adverse Effect:
(i) Holly and its Subsidiaries and their respective
operations, assets, businesses and Holly Real Properties are in
compliance with all Environmental Laws and Environmental Permits;
(ii) All Environmental Permits required under Environmental
Laws for operating Hollys and its Subsidiaries
assets, businesses, and Holly Real Properties as they are
currently being operated have been obtained and are currently in
full force and effect and, to Hollys knowledge, there are
no conditions or circumstances that would limit or preclude it
or its Subsidiaries from renewing such Environmental Permits;
(iii) Holly and its Subsidiaries are not subject to any
pending or, to Hollys knowledge, threatened claims,
actions, suits, investigations, inquiries or proceedings under
Environmental Laws and neither Holly nor its Subsidiaries have
received written notice of alleged violations or liability under
applicable Environmental Laws with respect to their respective
operations, assets, businesses or Holly Real Properties;
(iv) There have been no Releases of Hazardous Materials on,
under or from the Holly Real Properties and there are no
investigations, remediations, removals or monitorings of
Hazardous Materials required under Environmental Laws at such
properties;
(v) Neither Holly nor its Subsidiaries has received any
written notice asserting an alleged liability or obligation
under any Environmental Laws with respect to the investigation,
remediation, removal, or monitoring of any Hazardous Materials
at, under, or Released or threatened to be Released from any
Offsite Non-Holly Real Properties and, to the knowledge of
Holly, there are no conditions or circumstances that would
reasonably be expected to result in the receipt of such written
notice; and
(vi) Holly and its Subsidiaries have made available to
Frontier complete and correct copies of all material
environmental site assessment reports, studies, and
correspondence on environmental matters (in each instance
relevant to Holly or its Subsidiaries) that are in Hollys
or its Subsidiaries possession and relating to their
respective operations, assets, businesses or Holly Real
Properties.
Neither Holly nor its Subsidiaries makes any representation or
warranty regarding compliance or failure to comply with, or any
actual or contingent liability under, any Environmental Law,
except as expressly set forth in this Section 3.13.
Section 3.14 INTELLECTUAL
PROPERTY.
(a) Holly and its Subsidiaries own, or possess all
necessary licenses or other valid rights to use, all
Intellectual Property used or held for use in connection with
their respective businesses as currently being conducted, free
and clear of material Liens, except where the failure to own or
possess such licenses and other rights would not have,
individually or in the aggregate, a Holly Material Adverse
Effect. Except in the ordinary course of business, neither
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Holly nor any of its Subsidiaries has granted to any other
person any license to use any of the Intellectual Property owned
by Holly. Intellectual Property means all of
the following legal rights, title, or interest in or arising
under the laws of any state, country, or international treaty
regime, whether or not filed, perfected, registered, or
recorded: (a) patents, patent applications, and statutory
invention registrations, together with all reissuances,
continuations,
continuations-in-part,
divisionals, extensions, renewals, and re-examinations thereof;
(b) trademarks, service marks, trade names, logos, Internet
domain names and trade dress, together with the goodwill
associated therewith; (c) database rights and rights
associated with works of authorship, including copyrights and
moral rights; (d) registrations, rights to register and
applications for registration of any of the foregoing in (a) -
(c); and (e) rights relating to know-how, trade secrets,
and confidential information, including customer lists,
marketing studies, concepts, methods, techniques, and inventions
(whether or not patentable).
(b) Holly has received no written assertions alleging that
either Holly or any of its Subsidiaries has infringed or
misappropriated, or is currently infringing or misappropriating,
the Intellectual Property of a third party, except where such
infringement or misappropriation would not have, individually or
in the aggregate, a Holly Material Adverse Effect. To the
knowledge of Holly, the conduct of Hollys and its
Subsidiaries respective businesses as currently conducted
does not infringe, misappropriate, or otherwise conflict in any
material respect with any Intellectual Property of a third
party. To Hollys knowledge, no third party is infringing
or misappropriating any Intellectual Property of Holly or any of
its Subsidiaries in any material respect.
(c) Holly and its Subsidiaries have taken commercially
reasonable measures to protect the confidentiality of trade
secrets and confidential information owned by Holly and its
Subsidiaries or licensed to Holly and its Subsidiaries by third
parties, except where the failure to take such measures would
not have, individually or in the aggregate, a Holly Material
Adverse Effect.
Section 3.15 TITLE TO
PROPERTIES; CONDITION OF ASSETS.
(a) Except for goods and other property sold, used or
otherwise disposed of since September 30, 2010 in the
ordinary course of business for fair value, as of the date of
this Agreement, Holly and its Subsidiaries have good and
indefeasible title to, or hold valid leasehold interests in, or
valid rights of way, easements or licenses over, under and
across, all their respective properties, interests in properties
and assets, real and personal, reflected in Hollys
September 30, 2010 financial statements included in the
Holly Reports, free and clear of any Lien, except:
(a) Liens reflected in the balance sheet of Holly as of
September 30, 2010 included in the Holly Reports;
(b) Liens for current taxes, assessments or other
governmental charges not yet due and payable; (c) Liens of
mechanics, materialmen, workmen and operators arising by
operation of law in the ordinary course of business, or by
written agreement existing as of the date of this Agreement, for
sums not yet due or being contested in good faith by appropriate
proceedings; and (d) such imperfections of title, minor
encumbrances, easements and Liens that would not have,
individually or in the aggregate, a Holly Material Adverse
Effect. All leases, subleases and other agreements pursuant to
which Holly or any of its Subsidiaries leases, subleases or
otherwise acquires or obtains operating rights affecting any
real or personal property are valid, binding and enforceable in
accordance with their terms, except where the failure to be
valid, binding and enforceable would not have, individually or
in the aggregate, a Holly Material Adverse Effect; and there is
not, under any such leases, any existing or prospective default
or event of default or event which with notice or lapse of time,
or both, would constitute a default by Holly or any of its
Subsidiaries that would have, individually or in the aggregate,
a Holly Material Adverse Effect. No consents or other approvals
of any lessor, or its lender, are required under any material
lease as a result of the consummation of the transactions
contemplated by this Agreement, except where the failure to
obtain any such consent or approval would not have, individually
or in the aggregate, a Holly Material Adverse Effect.
(b) The tangible assets, including without limitation,
refinery improvements, terminal improvements, pipelines and
equipment of Holly and its Subsidiaries (i) are in good
operating condition and repair, subject to ordinary wear and
tear, and have been maintained in accordance with standard
industry practice, (ii) are adequate for the purpose for
which they are being used and are capable of being used in the
business as presently conducted without present need for
replacement or repair, except in the ordinary course of
business, (iii) conform in all material respects with all
applicable legal requirements, and (iv) in the aggregate
provide the capacity to engage in their respective businesses on
a continuous basis, subject to routine maintenance.
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Section 3.16 INSURANCE. Holly
and its Subsidiaries maintain insurance coverage adequate in the
industry for the operation of their respective businesses
(taking into account the cost and availability of such
insurance).
Section 3.17 NO
BROKERS. Holly has not entered into any contract,
arrangement or understanding with any person or firm which may
result in the obligation of Frontier, Holly or Merger Sub to pay
any finders fees, brokerage or agents commissions or
other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions
contemplated hereby, except that Holly has retained Morgan
Stanley & Co. Incorporated and Deutsche Bank
Securities Inc. to act as its financial advisors in connection
with the Merger, copies of the engagement letters for which and
the terms of which (including the fees owed by Holly in
connection therewith) have been disclosed in writing to Frontier
prior to the date of this Agreement.
Section 3.18 OPINION
OF FINANCIAL ADVISORS. The Holly Board has
received the opinion of each of Morgan Stanley & Co.
Incorporated and Deutsche Bank Securities Inc. to the effect
that, as of the date of such opinion, and based upon and subject
to the various assumptions, qualifications and limitations set
forth therein, the Exchange Ratio is fair, from a financial
point of view, to Holly, it being understood and acknowledged by
Frontier that each such opinion has been rendered for the
information and assistance of the Holly Board, in its capacity
as such, in connection with the Holly Boards evaluation of
the Merger, and is not intended to, and may not, be relied upon
by Frontier, its Affiliates or their respective Subsidiaries or
any other Person unless otherwise specified therein.
Section 3.19 CONTRACTS;
DEBT INSTRUMENTS.
(a) Except for documents filed or listed as exhibits to the
Holly Reports filed since January 1, 2010 (Holly
Material Contracts), as of the date of this Agreement,
there are no contracts or leases that are material to the
business, properties, assets, financial condition or results of
operations of Holly and its Subsidiaries taken as a whole.
Neither Holly nor any of its Subsidiaries is in violation of or
in default under (nor does there exist any condition which with
the passage of time or the giving of notice or both would cause
such a violation of or default under) any Holly Material
Contract to which it is a party or by which it or any of its
properties or assets is bound, except for violations or defaults
that would not have, individually or in the aggregate, a Holly
Material Adverse Effect. Each Holly Material Contract is in full
force and effect, and is a legal, valid and binding obligation
of Holly or one of its Subsidiaries and, to the knowledge of
Holly, each of the other parties thereto, enforceable in
accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, moratorium or other similar
laws relating to creditors rights and general principles
of equity and except where the failure of any Holly Material
Contract to be in full force and effect or a legal, valid and
binding obligation and enforceable in accordance with its terms
would not have, individually or in the aggregate, a Holly
Material Adverse Effect. No condition exists or event has
occurred which (whether with or without notice or lapse of time
or both) would constitute a default by Holly or one of its
Subsidiaries or, to the knowledge of Holly, any other party
thereto under any Holly Material Contract or result in a right
of termination of any Holly Material Contract, except for any
condition or event that would not have, individually or in the
aggregate, a Holly Material Adverse Effect.
(b) Set forth in Schedule 3.19(b) of the Holly
Disclosure Letter is, as of the date of this Agreement,
(i) a list of all loan or credit agreements, notes, bonds,
mortgages, indentures and other agreements and instruments
pursuant to which any indebtedness of Holly or its Subsidiaries
in an aggregate principal amount in excess of $5,000,000 is
outstanding or may be incurred, (ii) the respective
principal amounts outstanding thereunder as of the date of this
Agreement and (iii) the approximate amount of consolidated
cash and cash equivalents of Holly and its Subsidiaries as of
the date of this Agreement.
(c) Neither Holly nor any of its Subsidiaries has entered
into any contract, and there is no commitment, judgment,
injunction, order or decree to which Holly or any of its
Subsidiaries is a party or subject to, that has or would
reasonably be expected to have the effect of prohibiting or
impairing the conduct of business by Holly or any of its
Subsidiaries (or of Holly or any of its other Subsidiaries after
the Merger) or any contract that may be terminable as a result
of Frontiers status as a competitor of any party to such
contract, except, in each case, for any prohibition, impairment
or termination right that would not have, individually or in the
aggregate, a Holly Material Adverse Effect.
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Section 3.20 RECOMMENDATION;
VOTE REQUIRED. The Holly Board, at a meeting duly
called and held, has by unanimous vote of those directors
present, (i) determined that this Agreement and the
transactions contemplated hereby are fair to and in the best
interests of Holly and its stockholders, (ii) approved this
Agreement and the transactions contemplated hereby and
(iii) recommended to the holders of Holly Common Stock the
approval of the issuance of Holly Common Stock constituting the
Merger Consideration. The only vote of the holders of any class
or series of capital stock of Holly necessary to approve any
transaction contemplated by this Agreement (other than those
contemplated in Section 5.4(c))is the vote of the holders
of Holly Common Stock required by the rules of the NYSE to
approve the issuance of the Holly Common Stock constituting the
Merger Consideration (the Holly Requisite
Vote). The Board of Directors of Merger Sub, by
written consent duly adopted prior to the date hereof,
(i) determined that this Agreement and the transactions
contemplated hereby are in the best interests of Holly, as its
sole shareholder, (ii) adopted this Agreement and the
transactions contemplated hereby, which adoption and approval
have not been rescinded or modified and (iii) submitted
this Agreement for approval by Holly, as the sole shareholder of
Merger Sub.
Section 3.21 CERTAIN
APPROVALS. The Holly Board has taken any and all
necessary and appropriate action to render inapplicable to the
Merger and the transactions contemplated by this Agreement the
restrictions contained in Section 203 of the Delaware
General Corporation Law (DGCL) and any other
fair price, moratorium, control share
acquisition, interested stockholder or other similar
antitakeover provision or regulation and any restrictive
provision of any antitakeover provision in the certificate of
incorporation or bylaws of Holly.
Section 3.22 CERTAIN
CONTRACTS. Neither Holly nor any of its
Subsidiaries is a party to or bound by (i) any
non-competition agreement or any other agreement or obligation
which purports to limit the manner in which, or the localities
in which, the current business of Holly and its Subsidiaries,
taken as a whole, or (to the knowledge of Holly) Frontier and
its Subsidiaries, taken as a whole, is conducted or
(ii) any executory agreement or obligation which pertains
to the acquisition or disposition of any asset, or which
provides any third party any lien, claim or preferential right
with regard thereto, except, in the case of this clause (ii),
for such agreements or obligations that would not have,
individually or in the aggregate, a Holly Material Adverse
Effect.
Section 3.23 NO
RIGHTS PLAN OR AGREEMENT. Holly has not adopted
any so-called poison pill rights plan or agreement.
Section 3.24 INTERNAL
CONTROLS.
(a) Each of the principal executive officer and the
principal financial officer of Holly or MLP, as applicable (or
each former principal executive officer and each former
principal financial officer of Holly or MLP, as applicable) has
made all certifications required by
Rule 13a-14
or 15d-14
under the Exchange Act and Sections 302 and 906 of the
Sarbanes-Oxley Act with respect to the Holly Reports, and the
statements contained in such certifications are true and
accurate as of the date such certifications were made. For
purposes of this Agreement, principal executive
officer and principal financial
officer shall have the meanings given to such terms in
the Sarbanes-Oxley Act.
(b) Holly maintains a system of internal control over
financial reporting (as defined in
Rules 13a-15(f)
and
15d-15(f) of
the Exchange Act) in compliance with the Exchange Act.
(c) Since January 1, 2010, neither Hollys nor
MLPs, as applicable, outside auditors nor the audit
committee of the Holly Board or the Board of Directors of MLP,
as applicable, has been advised of (i) any material
weaknesses in the design or operation of internal control over
financial reporting or (ii) any fraud that involves
management or other employees who have a significant role in
Hollys or MLPs, as applicable, internal control over
financial reporting. For purposes of this Agreement, the term
material weakness shall have the meaning
assigned to it in the Statement of Auditing Standards
No. 60, as in effect on the date of this Agreement.
Section 3.25 FOREIGN
CORRUPT PRACTICES ACT. Except for such matters as
would not, individually or in the aggregate, reasonably be
expected to have a Holly Material Adverse Effect, as of the date
of this Agreement:
(a) In connection with Hollys and its
Subsidiaries compliance with the Foreign Corrupt Practices
Act, as amended (the Foreign Corrupt Practices
Act), there have been no voluntary disclosures under
the Foreign Corrupt Practices Act.
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(b) No governmental entity has notified Holly or any of its
Subsidiaries in writing of any actual or alleged violation or
breach of the Foreign Corrupt Practices Act.
(c) Neither Holly nor any of its Subsidiaries has undergone
or is undergoing any audit, review, inspection, investigation,
survey or examination of records, in each case conducted by a
governmental entity and relating to Hollys or its
Subsidiaries compliance with the Foreign Corrupt Practices
Act, and to Hollys knowledge, there is no basis for any
such audit, review, inspection, investigation, survey or
examination of records by a governmental entity.
(d) Neither Holly nor any of its Subsidiaries has been or
is now under any administrative, civil or criminal charge or
indictment or, to Hollys knowledge, investigation,
alleging noncompliance with the Foreign Corrupt Practices Act,
nor, to Hollys knowledge, is there any basis for any such
charge, indictment or investigation.
(e) Neither Holly nor any of its Subsidiaries has been or
is now a party to any administrative or civil litigation
alleging noncompliance with the Foreign Corrupt Practices Act,
nor, to Hollys knowledge, is there any basis for any such
proceeding.
ARTICLE 4
REPRESENTATIONS
AND WARRANTIES OF
FRONTIER
Except as set forth in the disclosure letter delivered to Holly
concurrently with the execution hereof (the Frontier
Disclosure Letter) in accordance with
Section 8.18 or as disclosed with reasonable specificity in
the Frontier Reports (as defined in Section 4.7), Frontier
represents and warrants to Holly and Merger Sub that:
Section 4.1 EXISTENCE;
GOOD STANDING; CORPORATE AUTHORITY. Frontier is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of Wyoming. Frontier is
duly qualified to do business as a foreign corporation and is in
good standing under the laws of each jurisdiction in which the
character of the properties owned or leased by it therein or in
which the transaction of its business makes such qualification
necessary, except where the failure to be so qualified would not
have, individually or in the aggregate, a Frontier Material
Adverse Effect (as defined in Section 8.9). Frontier has
all requisite corporate power and authority to own, operate and
lease its properties and to carry on its business as now
conducted. The copies of Frontiers articles of
incorporation and bylaws previously made available to Holly are
true and correct and contain all amendments as of the date of
this Agreement.
Section 4.2 AUTHORIZATION,
VALIDITY AND EFFECT OF AGREEMENTS. Frontier has
the requisite corporate power and authority to execute and
deliver this Agreement and all other agreements and documents
contemplated hereby to which it is a party. The consummation by
Frontier of the transactions contemplated hereby has been duly
authorized by all requisite corporate action, other than the
approval of the Merger by Frontiers shareholders. Assuming
the due authorization, execution and delivery of this Agreement
by each of Holly and Merger Sub, this Agreement constitutes the
valid and legally binding obligation of Frontier, enforceable in
accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to
creditors rights and general principles of equity.
Section 4.3 CAPITALIZATION. The
authorized capital stock of Frontier consists of
180,000,000 shares of Frontier Common Stock and
500,000 shares of Frontiers preferred stock, par
value $1.00 per share (Frontier Preferred
Stock). As of February 18, 2011, there were
(a) 105,752,570 shares of Frontier Common Stock issued
and outstanding, (b) no shares of Frontier Preferred Stock
issued and outstanding, (c) 434,793 shares of Frontier
Common Stock issuable pursuant to options granted under the
omnibus incentive plan of Frontier described in
Schedule 4.3 of the Frontier Disclosure Letter (the
Frontier Stock Plan),
(d) 1,245,381 shares of unvested Frontier Restricted
Stock issued under the Frontier Stock Plan and
(e) 42,360 shares of Frontier Common Stock subject to
Frontier Stock Units issuable under the Frontier Plan. All
issued and outstanding shares of Frontier Common Stock
(i) are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights, (ii) were not
issued in violation of the terms of any agreement or other
understanding binding upon Frontier and (iii) were issued
in compliance with all applicable charter documents of Frontier
and all applicable federal and state securities laws,
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rules and regulations. Except (i) as set forth in this
Section 4.3, (ii) for any shares of Frontier Common
Stock issued pursuant to the exercise of options or other awards
referred to in subsection (c) above, and (iii) for
shares of Frontier Common Stock issuable pursuant to the
exercise of such options, there are no outstanding shares of
capital stock and there are no options, warrants, calls,
subscriptions, shareholder rights plans or similar instruments,
convertible securities, or other rights, agreements or
commitments which obligate Frontier or any of its Subsidiaries
to issue, transfer or sell any shares of capital stock or other
voting securities of Frontier or any of its Subsidiaries.
Frontier has no outstanding bonds, debentures, notes or other
obligations the holders of which have the right to vote (or
which are convertible into or exercisable for securities having
the right to vote) with the shareholders of Frontier on any
matter.
Section 4.4 SUBSIDIARIES. Each
of Frontiers Subsidiaries is a corporation duly organized,
validly existing and in good standing (where applicable) under
the laws of its jurisdiction of incorporation or organization,
has the corporate, limited liability company or partnership
power and authority to own, operate and lease its properties and
to carry on its business as it is now being conducted, and is
duly qualified to do business and is in good standing (where
applicable) in each jurisdiction in which the ownership,
operation or lease of its property or the conduct of its
business requires such qualification, except for jurisdictions
in which such failure to be so qualified or to be in good
standing would not have, individually or in the aggregate, a
Frontier Material Adverse Effect. All of the outstanding shares
of capital stock of, or other ownership interests in, each of
Frontiers Subsidiaries is duly authorized, validly issued,
fully paid and nonassessable, and is owned, directly or
indirectly, by Frontier free and clear of all Liens.
Schedule 4.4 of the Frontier Disclosure Letter sets forth
for each Subsidiary of Frontier its name and jurisdiction of
incorporation or organization.
Section 4.5 NO
VIOLATION. Neither Frontier nor any of its
Subsidiaries is, or has received notice that it is or would be
with the passage of time, in violation of any term, condition or
provision of (a) its charter documents or bylaws,
(b) any loan or credit agreement, note, bond, mortgage,
indenture, contract, agreement, lease, license or other
instrument or (c) any order of any court, governmental
authority or arbitration board or tribunal, or any law,
ordinance, governmental rule or regulation to which Frontier or
any of its Subsidiaries or any of their respective properties or
assets is subject, or is delinquent with respect to any report
required to be filed with any governmental entity, except, in
the case of matters described in clause (b) or (c), as
would not have, individually or in the aggregate, a Frontier
Material Adverse Effect. Except as would not have, individually
or in the aggregate, a Frontier Material Adverse Effect,
(i) Frontier and its Subsidiaries hold all permits,
licenses, variances, exemptions, orders, franchises and
approvals of all governmental authorities necessary for the
lawful conduct of their respective businesses (the
Frontier Permits) and (ii) Frontier and
its Subsidiaries are in compliance with the terms of the
Frontier Permits. No investigation by any governmental authority
with respect to Frontier or any of its Subsidiaries is pending
or, to the knowledge of Frontier, threatened, other than those
that would not have, individually or in the aggregate, a
Frontier Material Adverse Effect.
Section 4.6 NO
CONFLICT.
(a) Neither the execution and delivery by Frontier of this
Agreement nor the consummation by Frontier of the transactions
contemplated hereby in accordance with the terms hereof will:
(i) conflict with or result in a breach of any provisions
of the charter documents or bylaws of Frontier;
(ii) violate, or conflict with, or result in a breach of
any provision of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a
default) under, or result in the termination or in a right of
termination or cancellation of, or give rise to a right of
purchase under, or accelerate the performance required by, or
result in the creation of any Lien upon, any of the properties
of Frontier or its Subsidiaries under, or result in being
declared void, voidable, or without further binding effect, or
otherwise result in a detriment to Frontier or any of its
Subsidiaries under, any of the terms, conditions or provisions
of, any note, bond, mortgage, indenture, deed of trust, Frontier
Permit, lease, contract, agreement, joint venture or other
instrument or obligation to which Frontier or any of its
Subsidiaries is a party, or by which Frontier or any of its
Subsidiaries or any of their properties is bound or affected; or
(iii) contravene or conflict with or constitute a violation
of any provision of any law, rule, regulation, judgment, order
or decree binding upon or applicable to Frontier or any of its
Subsidiaries, except, in the case of matters described in
clause (ii) or (iii), as would not have or reasonably be
expected to have, individually or in the aggregate, a Frontier
Material Adverse Effect.
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(b) Neither the execution and delivery by Frontier of this
Agreement nor the consummation by Frontier of the transactions
contemplated hereby in accordance with the terms hereof will
require any consent, approval or authorization of, or filing or
registration with, any governmental or regulatory authority,
other than the Regulatory Filings, except for any consent,
approval or authorization the failure of which to obtain and for
any filing or registration the failure of which to make would
not have or reasonably be expected to have, individually or in
the aggregate, a Frontier Material Adverse Effect.
(c) Other than as contemplated by Section 4.6(b), no
consents, assignments, waivers, authorizations or other
certificates are necessary in connection with the transactions
contemplated hereby to provide for the continuation in full
force and effect of all of the Frontier Material Contracts (as
hereinafter defined) or for Frontier to consummate the
transactions contemplated hereby, except where the failure to
receive such consents or other certificates would not have or
reasonably be expected to have, individually or in the
aggregate, a Frontier Material Adverse Effect.
(d) Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby
will: (i) result in or constitute the satisfaction of a
condition to (whether or not there be any additional condition
to) any payment from Frontier or its Subsidiaries (including
severance, unemployment compensation, parachute payment, bonus
or otherwise) becoming due to any director, employee or
independent contractor of Frontier or any of its Subsidiaries
under any Frontier Plan (as defined in Section 4.11) or
otherwise; (ii) increase any benefits otherwise payable
under any Frontier Plan or otherwise; or (iii) result in
the acceleration of the time of payment or vesting of any such
benefits.
Section 4.7 SEC
DOCUMENTS; FINANCIAL STATEMENTS. Frontier has
made available (to the extent not available to the public on the
SECs EDGAR website) to Holly each registration statement,
report, proxy statement or information statement (other than
preliminary materials) filed by Frontier with the SEC since
December 31, 2007, each in the form (including exhibits and
any amendments thereto) filed with the SEC prior to the date of
this Agreement (collectively, the Frontier
Reports). Frontier has filed all forms, reports and
documents required to be filed by it with the SEC pursuant to
relevant securities statutes, regulations, policies and rules
since such time. As of their respective dates, the Frontier
Reports (i) were prepared in accordance with the applicable
requirements of the Securities Act, the Exchange Act, the
Sarbanes-Oxley Act and the rules and regulations thereunder in
all material respects and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under
which they were made, not misleading at the time such statements
were made. Except for the Subsidiaries of Frontier that
guarantee Frontiers outstanding 8.50% Senior Notes
and 6.875% Senior Notes, none of the Subsidiaries of
Frontier is required to make any filings with the SEC. Each of
the consolidated balance sheets included in or incorporated by
reference into the Frontier Reports (including the related notes
and schedules) fairly presents in all material respects the
consolidated financial position of Frontier and its Subsidiaries
as of its date, and each of the consolidated statements of
operations, cash flows and shareholders equity included in
or incorporated by reference into the Frontier Reports
(including any related notes and schedules) fairly presents in
all material respects the results of consolidated operations,
cash flows or changes in shareholders equity, as the case
may be, of Frontier and its Subsidiaries for the periods set
forth therein (subject, in the case of unaudited statements, to
such exceptions as may be permitted by
Form 10-Q
of the SEC), and in each case in accordance with GAAP
consistently applied during the periods involved, except as may
be noted therein, and except that the unaudited interim
financial statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be
material in amount or effect.
Section 4.8 LITIGATION
AND LIABILITIES. There are no actions, suits or
proceedings pending against Frontier or any of its Subsidiaries
or, to Frontiers knowledge, threatened against Frontier or
any of its Subsidiaries, at law or in equity, or before or by
any federal, state or foreign commission, court, board, bureau,
agency or instrumentality, other than those that would not have
or reasonably be expected to have, individually or in the
aggregate, a Frontier Material Adverse Effect. There are no
outstanding judgments, decrees, injunctions, awards or orders
against Frontier or any of its Subsidiaries, other than those
that would not have, individually or in the aggregate, a
Frontier Material Adverse Effect. There are no obligations or
liabilities of any nature, whether accrued, absolute, contingent
or otherwise, of Frontier or any of its Subsidiaries, other than
those liabilities and obligations (a) that are disclosed in
the Frontier Reports, (b) that have been incurred in the
ordinary course of business since September 30, 2010,
(c) related to expenses associated with the transactions
contemplated by this Agreement or
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(d) that would not have or reasonably be expected to have,
individually or in the aggregate, a Frontier Material Adverse
Effect.
Section 4.9 ABSENCE
OF CERTAIN CHANGES. Since September 30,
2010, Frontier has conducted its business only in the ordinary
and usual course of business and during such period there has
not been (i) any event, condition, action or occurrence
that has had or would reasonably be expected to have,
individually or in the aggregate, a Frontier Material Adverse
Effect; (ii) through the date of this Agreement, any
material change by Frontier or any of its Subsidiaries (viewed
on a consolidated basis) in any of its accounting methods,
principles or practices or any of its tax methods, practices or
elections, except for changes required by GAAP; (iii) any
material damage, destruction, or loss to the business or
properties of Frontier and its Subsidiaries, taken as a whole,
not covered by insurance; (iv) through the date of this
Agreement, any declaration, setting aside or payment of any
dividend or other distribution in respect of the capital stock
of Frontier (other than ordinary dividends on the Frontier
Common Stock at a rate not greater than $0.06 per share in any
quarter and a special dividend on the Frontier Common Stock at a
rate not greater than $0.28 per share), or any direct or
indirect redemption, purchase or any other acquisition by
Frontier of any such stock; (v) through the date of this
Agreement, any change in the capital stock or in the number of
shares or classes of Frontiers authorized or outstanding
capital stock (other than as a result of issuances under
Frontier Stock Plan or exercises of options to purchase shares
of Frontier Common Stock outstanding or issued as permitted
hereunder pursuant to Section 5.1(b)(vi));
(vi) through the date of this Agreement, any increase in or
establishment by Frontier or any of its Subsidiaries of any
bonus, insurance, severance, deferred compensation, pension,
retirement, profit sharing, stock option, stock purchase or
other employee benefit plan, except in the ordinary course of
business; or (vii) through the date of this Agreement, any
event, condition, action or occurrence that is prohibited on or
after the date of this Agreement under
Section 5.1(b)(viii), (ix), (x), (xii), (xiii), (xv),
(xvi), or (xx) of this Agreement.
Section 4.10 TAXES.
(a) Each of Frontier and its Subsidiaries and each
affiliated, consolidated, combined, unitary or similar group of
which Frontier or any such Subsidiary is or, since
January 1, 2004, was a member has (i) duly filed (or
there has been filed on its behalf) on a timely basis (taking
into account any extensions of time to file before the date of
this Agreement) with appropriate governmental authorities all
Tax Returns required to be filed by or with respect to it,
except to the extent that any failure to file would not have,
individually or in the aggregate, a Frontier Material Adverse
Effect, and (ii) duly paid or deposited in full on a timely
basis or made adequate provisions in accordance with GAAP (or
there has been paid or deposited or adequate provision has been
made on its behalf) for the payment of all Taxes required to be
paid by it other than those being contested in good faith by
Frontier or a Subsidiary of Frontier and adequately provided for
on the financial statements contained in the Frontier Reports
and except to the extent that any failure to pay or deposit or
make adequate provision for the payment of such Taxes would not
have, individually or in the aggregate, a Frontier Material
Adverse Effect.
(b) Except for matters that would not have, individually or
in the aggregate, a Frontier Material Adverse Effect,
(i) Schedule 4.10(b) of the Frontier Disclosure Letter
sets forth the last taxable period through which the federal
income Tax Returns of Frontier and each of its Subsidiaries have
been examined by the IRS (or the applicable statutes of
limitation for the assessment of federal income taxes for such
periods have expired) or otherwise closed; (ii) all
deficiencies asserted as a result of any examinations of
Frontier and its Subsidiaries by any taxing authority have been
paid fully, settled or adequately provided for in the financial
statements contained in the Frontier Reports; (iii) as of
the date of this Agreement, neither Frontier nor any of its
Subsidiaries has granted any requests, agreements, consents or
waivers to extend the statutory period of limitations applicable
to the filing of any Tax Return or the assessment of any Taxes
of Frontier or any of its Subsidiaries that will be outstanding
as of the Effective Time; (iv) neither Frontier nor any of
its Subsidiaries is a party to, is bound by or has any
obligation under any tax sharing, allocation or indemnity
agreement or any similar agreement or arrangement;
(v) there are no Tax liens on any assets of Frontier or its
Subsidiaries except for (A) Taxes not yet currently due and
(B) matters being contested by Frontier or its Subsidiaries
in good faith for which adequate reserves are reflected in the
financial statements contained in the Frontier Reports; and
(vi) neither Frontier nor any of its Subsidiaries is a
party to an agreement that provides for the payment of any
amount that could constitute a parachute payment
within the meaning of Section 280G of the Code.
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(c) Neither Frontier nor any of its Subsidiaries has
(i) participated, directly or indirectly, in any reportable
transaction within the meaning of Treas. Reg.
§ 1.6011-4(b), or (ii) claimed any deduction,
credit, or other tax benefit by reason of any tax
shelter within the meaning of former Section 6111(c)
of the Code or any confidential corporate tax
shelter within the meaning of former Section 6111(d)
of the Code.
Section 4.11 EMPLOYEE
BENEFIT PLANS.
(a) For purposes of this Section 4.11, the term
Subsidiaries as applied to Frontier shall include any entity,
whether or not incorporated, which, with Frontier, forms or
formed a controlled group of corporations, a group of trades or
business under common control or an affiliated service group,
within the meaning of Section 414(b), (c) or
(m) of the Code, within the six full calendar years prior
to the Closing Date.
(b) All employee benefit plans, programs, arrangements and
agreements, including but not limited to pension, retirement,
disability, medical, dental or other health insurance plans;
life insurance or other death benefit plans; profit sharing,
deferred compensation, stock option, bonus or other incentive
plans; vacation benefit plans or policies; severance or
redundancy plans; individual employee agreements; and foreign
plans not subject to ERISA (whether or not described in
Section 3(3) of ERISA, whether or not funded, whether
written or oral, and whether or not legally enforceable, in
whole or in part) (i) to which Frontier or any Subsidiary
is a party or by which it is bound, (ii) with respect to
which Frontier or any Subsidiary has made any payments or
contributions, or (iii) to which Frontier or any Subsidiary
may otherwise have any liability, are listed in
Schedule 4.11(b) of the Frontier Disclosure Letter (the
Frontier Plans).
(c) All Frontier Plans comply in form and have been
administered in operation in compliance in all material respects
with all applicable requirements of law, excluding any
deficiencies that would not have, individually or in the
aggregate, a Frontier Material Adverse Effect, no event has
occurred which will or could cause any such Frontier Plan to
fail to comply with such requirements, excluding any
deficiencies that would not have, individually or in the
aggregate, a Frontier Material Adverse Effect, and no notice has
been issued by any governmental authority questioning or
challenging such compliance, and no inquiry or audit has been
initiated with respect thereto by any governmental authority.
(d) All required employer contributions under any such
plans have been made and the applicable funds have been funded
in accordance with the terms thereof, excluding any deficiencies
that would not have, individually or in the aggregate, a
Frontier Material Adverse Effect.
(e) Any Frontier Plan intended to be qualified under
Section 401(a) of the Code has been determined by the IRS
to be so qualified (or an application for qualification is
pending before the IRS) under the currently applicable
provisions of the Code, and nothing has occurred or is
anticipated to occur to cause the loss of such qualified status.
(f) Frontier does not sponsor, maintain, participate in or
contribute to, and has not at any time sponsored, maintained,
participated in or contributed to (and never has been required
to contribute to) any (i) multiemployer plan as
that term is defined in Section 414(f) of the Code or
Section 4001(a)(3) of ERISA; (ii) foreign benefit
plan; or (iii) voluntary employee benefit association
intended to be exempt from federal income tax under
Section 501(c)(9) of the Code. Frontier does not sponsor,
maintain, participate in or contribute to any Pension Plan that
is or was subject to minimum funding standards of the Code or
ERISA.
(g) (i) Frontier has paid all premiums (including any
applicable interest, charges and penalties for late payment) due
the PBGC with respect to each Pension Plan for which premiums to
the PBGC are required; (ii) no Pension Plan had, as of its
most recent actuarial report, an unfunded benefit
liability (as such term is defined in
Section 4001(a)(18) of ERISA) or has failed to satisfy the
minimum funding standards as described in Section 302 of
ERISA or Section 412 of the Code, whether or not waived;
(iii) with respect to any Pension Plan, there has been no
event or condition that presents a significant risk of plan
termination, no notice of intent to terminate such Pension Plan
has been given under Section 4041 of ERISA, and no
proceeding has been instituted under Section 4042 of ERISA
to terminate such Pension Plan; (iv) no liability to the
PBGC has been incurred (other than with respect to required
premium payments), which liability has not been satisfied;
(v) no reportable event (as that term is
defined in Section 4043 of ERISA and for which the
30-day
notice requirement has not been waived) has occurred with
respect to any Pension Plan; (vi) each Pension Plan uses a
funding method permissible under ERISA and the actuarial
assumptions used in connection therewith are reasonable
individually and in the aggregate;
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(vii) the fair market value of the assets of each Pension
Plan will exceed or equal the actuarial present value of the
benefit liabilities, within the meaning of Section 4041 of
ERISA, under the Pension Plan, based upon reasonable actuarial
assumptions and the asset valuation principles established by
the PBGC.
(h) Except as otherwise set forth in this Agreement, the
execution of this Agreement or the consummation of the Merger
will not give rise to or trigger any change of control,
accelerated vesting, severance or other similar provisions in
any Frontier Plan (either solely as a result thereof or as a
result of such transactions in conjunction with any other event).
(i) Excluding claims for benefits incurred in the ordinary
course of the Frontier Plan activities, there are no pending or
anticipated claims against or otherwise involving any of the
Frontier Plans and no suit, action or other litigation has been
brought against or with respect to any Frontier Plan or any
fiduciary of any Frontier Plan.
(j) Neither Frontier nor any of its Subsidiaries has
incurred or reasonably expects to incur any liability under
subtitle E of Title IV of ERISA with respect to any
multiemployer plan, within the meaning of
Section 4001(a)(3) of ERISA.
(k) None of the assets of any Frontier Plan is invested in
employer securities (as defined in Section 407(d)(1) of
ERISA) or employer real property (as defined in
Section 407(d)(2) of ERISA).
(l) There have been no prohibited transactions
(as described in Section 406 of ERISA or Section 4975
of the Code) with respect to any Frontier Plan that would have,
individually or in the aggregate, a Frontier Material Adverse
Effect.
(m) There have been no acts or omissions by Frontier or any
of its Subsidiaries which have given rise to or may give rise to
fines, penalties, taxes or related charges under
Section 502 of ERISA or Chapters 43, 47, 68 or 100 of
the Code for which Frontier or any of its Subsidiaries are or
may be liable that would result in a Frontier Material Adverse
Effect.
(n) Each Frontier Plan which constitutes a group
health plan (as defined in Section 607(1) of ERISA or
Section 4980B(g)(2) of the Code), including any plans of
current and former Affiliates which must be taken into account
under Sections 4980B and 414(t) of the Code or
Section 601 of ERISA, has been operated in material
compliance with applicable law, including continuation coverage
requirements of Section 4980B of the Code, Chapter 100
of the Code and Section 601 of ERISA to the extent such
requirements are applicable, and each such plan (including any
such plan covering retirees or other former employees) may be
amended (including, without limitation, to prospectively curtail
or discontinue benefits
and/or
increase participant contribution requirements) or terminated
without liability (other than with respect to welfare benefits
in the ordinary course) to Frontier, its Subsidiaries or
successors.
(o) Neither Frontier nor any of its Subsidiaries has any
liability or contingent liability for providing, under any
Frontier Plan or otherwise, any post-retirement medical or life
insurance benefits, other than statutory liability for providing
group health plan continuation coverage under Part 6 of
Title I of ERISA and Section 4980B of the Code or
applicable state law.
(p) Obligations under or relating to the Frontier Plans are
properly reflected in the financial statements of Frontier in
accordance with GAAP.
(q) There has been no act or omission that would impair the
ability of Frontier, Holly or any of their respective
Subsidiaries (or any successor thereto) to unilaterally amend or
terminate any Frontier Plan to the full extent permitted under
applicable law.
(r) Except as would not reasonably be expected to have,
individually or in the aggregate, a Frontier Material Adverse
Effect, with respect to each Frontier Plan that is a
nonqualified deferred compensation plan (as defined
for purposes of Section 409A(d)(1) of the Code),
(i) such plan has been operated since January 1, 2005
in compliance with Section 409A of the Code and all
applicable IRS guidance promulgated thereunder to the extent
such plan is subject to Section 409A of the Code and so as
to avoid any Tax, interest or penalty thereunder; (ii) the
document or documents that evidence each such plan have
conformed to the provisions of Section 409A of the Code and
the final regulations under Section 409A of the Code since
December 31, 2008; and (iii) as to any such plan in
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existence prior to January 1, 2005 and not subject to
Section 409A of the Code, has not been materially
modified (within the meaning of IRS Notice
2005-1) at
any time after October 3, 2004. No Frontier Stock Option
(whether currently outstanding or previously exercised) is, has
been or would be, as applicable, subject to any Tax, penalty or
interest under Section 409A of the Code.
Section 4.12 LABOR
MATTERS.
(a) Schedule 4.12(a) of the Frontier Disclosure Letter
lists each of the collective bargaining or other labor union
contracts applicable to any employee of Frontier or any of its
Subsidiaries to which Frontier or any of its Subsidiaries is a
party or is otherwise subject (the Frontier Bargaining
Agreements). To Frontiers knowledge, Frontier
and each of its Subsidiaries are in material compliance with the
Frontier Bargaining Agreements. As of the date of this
Agreement, there is no pending or, to Frontiers knowledge,
threatened labor dispute, strike, or work stoppage against
Frontier or any of its Subsidiaries that that would have,
individually or in the aggregate, a Frontier Material Adverse
Effect.
(b) Frontier has provided Holly with true, complete and
correct copies of the Frontier Bargaining Agreements, including
any amendments thereto. There are no employee pension
benefit plans (as defined in Section 3(2) of ERISA),
employee welfare benefit plans (as defined in
Section 3(l) of ERISA), or other programs, plans or
arrangements, maintained in whole or in part, contributed to, or
required to be contributed to, in whole or in part, by Frontier
or any of its Subsidiaries relating to the employees represented
by the Frontier Bargaining Agreements other than as disclosed to
Holly.
(c) To the knowledge of Frontier, all employees of Frontier
and its Subsidiaries are lawfully authorized to work in the
United States according to applicable immigration laws. Frontier
is in compliance in all material respects with all applicable
laws relating to the documentation and record keeping of its
employees work authorization status.
(d) No employee of Frontier or any of its Subsidiaries is
subject or a party to any employment, severance retention, or
other contract, and each employee of Frontier and its
Subsidiaries is an employee at will.
(e) As of the date of this Agreement, and for the two
preceding years, there have not been any plant closings, mass
layoffs or other terminations of employees of Frontier and its
Subsidiaries that would create any obligations upon or
liabilities for Frontier and its Subsidiaries under WARN.
(f) Frontier and its Subsidiaries are, and have been since
January 1, 2007, in compliance in all material respects
with all applicable laws and regulations regarding labor and
employment practices.
Section 4.13 ENVIRONMENTAL
MATTERS.
(a) As used in this Agreement:
(i) Frontier Real Properties means those
real properties owned, leased, or otherwise operated by Frontier
or its Subsidiaries in connection with the performance of any of
their respective businesses; and
(ii) Offsite Non-Frontier Real
Properties means any real properties other than the
Frontier Real Properties.
(b) Except as would not have, individually or in the
aggregate, a Frontier Material Adverse Effect:
(i) Frontier and its Subsidiaries and their respective
operations, assets, businesses and Frontier Real Properties are
in compliance with all Environmental Laws and Environmental
Permits;
(ii) All Environmental Permits required under Environmental
Laws for operating Frontiers and its Subsidiaries
assets, businesses, and Frontier Real Properties as they are
currently being operated have been obtained and are currently in
full force and effect and, to Frontiers knowledge, there
are no conditions or circumstances that would limit or preclude
it or its Subsidiaries from renewing such Environmental Permits;
(iii) Frontier and its Subsidiaries are not subject to any
pending or, to Frontiers knowledge, threatened claims,
actions, suits, investigations, inquiries or proceedings under
Environmental Laws and neither Frontier
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nor its Subsidiaries have received written notice of alleged
violations or liability under applicable Environmental Laws with
respect to their respective operations, assets, businesses, or
Frontier Real Properties;
(iv) There have been no Releases of Hazardous Materials on,
under or from the Frontier Real Properties and there are no
investigations, remediations, removals or monitorings of
Hazardous Materials required under Environmental Laws at such
properties;
(v) Neither Frontier nor its Subsidiaries has received any
written notice asserting an alleged liability or obligation
under any Environmental Laws with respect to the investigation,
remediation, removal, or monitoring of any Hazardous Materials
at, under, or Released or threatened to be Released from any
Offsite Non-Frontier Real Properties and, to the knowledge of
Frontier, there are no conditions or circumstances that would
reasonably be expected to result in the receipt of such written
notice; and
(vi) Frontier and its Subsidiaries have made available to
Holly complete and correct copies of all material environmental
site assessment reports, studies, and correspondence on
environmental matters (in each instance relevant to Frontier or
its Subsidiaries) that are in Frontiers or its
Subsidiaries possession and relating to their respective
operations, assets, businesses or Frontier Real Properties.
Neither Frontier nor its Subsidiaries makes any representation
or warranty regarding compliance or failure to comply with, or
any actual or contingent liability under, any Environmental Law,
except as expressly set forth in this Section 4.13.
Section 4.14 INTELLECTUAL
PROPERTY.
(a) Frontier and its Subsidiaries own, or possess all
necessary licenses or other valid rights to use, all
Intellectual Property used or held for use in connection with
their respective businesses as currently being conducted, free
and clear of material Liens, except where the failure to own or
possess such licenses and other rights would not have,
individually or in the aggregate, a Frontier Material Adverse
Effect. Except in the ordinary course of business, neither
Frontier nor any of its Subsidiaries has granted to any other
person any license to use any of the Intellectual Property owned
by Frontier.
(b) Frontier has received no written assertions alleging
that Frontier or its Subsidiaries has infringed or
misappropriated, or is currently infringing or misappropriating,
the Intellectual Property of a third party, except where such
infringement or misappropriation would not have, individually or
in the aggregate, a Frontier Material Adverse Effect. To the
knowledge of Frontier, the conduct of Frontiers and its
Subsidiaries respective businesses as currently conducted
does not infringe, misappropriate, or otherwise conflict in any
material respect with any Intellectual Property of a third
party. To Frontiers knowledge, no third party is
infringing or misappropriating any Intellectual Property of
Frontier or any of its Subsidiaries in any material respect.
(c) Frontier and its Subsidiaries have taken commercially
reasonable measures to protect the confidentiality of trade
secrets and confidential information owned by Frontier and its
Subsidiaries or licensed to Frontier and its Subsidiaries by
third parties, except where the failure to take such measures
would not have, individually or in the aggregate, a Frontier
Material Adverse Effect.
Section 4.15 TITLE TO
PROPERTIES; CONDITION OF ASSETS.
(a) Except for goods and other property sold, used or
otherwise disposed of since September 30, 2010 in the
ordinary course of business for fair value, as of the date of
this Agreement, Frontier and its Subsidiaries have good and
indefeasible title to, or hold valid leasehold interests in, or
valid rights of way, easements or licenses over, under and
across, all their respective properties, interests in properties
and assets, real and personal, reflected in Frontiers
September 30, 2010 financial statements included in the
Frontier Reports, free and clear of any Lien, except:
(a) Liens reflected in the balance sheet of Frontier as of
September 30, 2010 included in the Frontier Reports;
(b) Liens for current taxes, assessments or other
governmental charges not yet due and payable; (c) Liens of
mechanics, materialmen, workmen and operators arising by
operation of law in the ordinary course of business, or by
written agreement existing as of the date of this Agreement, for
sums not yet due or being contested in good faith by appropriate
proceedings; and (d) such imperfections of title, minor
encumbrances, easements and Liens that would not have,
individually or in the aggregate, a Frontier Material Adverse
Effect. All leases, subleases and other agreements pursuant to
which Frontier or any of its Subsidiaries leases, subleases or
otherwise acquires or obtains
A-27
operating rights affecting any real or personal property are
valid, binding and enforceable in accordance with their terms,
except where the failure to be valid, binding and enforceable
would not have, individually or in the aggregate, a Frontier
Material Adverse Effect; and there is not, under any such
leases, any existing or prospective default or event of default
or event which with notice or lapse of time, or both, would
constitute a default by Frontier or any of its Subsidiaries that
would have, individually or in the aggregate, a Frontier
Material Adverse Effect. No consents or other approvals of any
lessor, or its lender, are required under any material lease as
a result of the consummation of the transactions contemplated by
this Agreement, except where the failure to obtain any such
consent or approval would not have, individually or in the
aggregate, a Frontier Material Adverse Effect.
(b) The tangible assets, including without limitation,
refinery improvements, terminal improvements, pipelines and
equipment of Frontier and its Subsidiaries (i) are in good
operating condition and repair, subject to ordinary wear and
tear, and have been maintained in accordance with standard
industry practice, (ii) are adequate for the purpose for
which they are being used and are capable of being used in the
business as presently conducted without present need for
replacement or repair, except in the ordinary course of
business, (iii) conform in all material respects with all
applicable legal requirements, and (iv) in the aggregate
provide the capacity to engage in their respective businesses on
a continuous basis, subject to routine maintenance.
Section 4.16 INSURANCE. Frontier
and its Subsidiaries maintain insurance coverage adequate in the
industry for the operation of their respective businesses
(taking into account the cost and availability of such
insurance).
Section 4.17 NO
BROKERS. Frontier has not entered into any
contract, arrangement or understanding with any person or firm
which may result in the obligation of Holly, Frontier or Merger
Sub to pay any finders fees, brokerage or agents
commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of
the transactions contemplated hereby, except that Frontier has
retained Credit Suisse Securities (USA) LLC and Citigroup Global
Markets Inc. to act as its financial advisors in connection with
the Merger, copies of the engagement letters for which and the
terms of which (including the fees owed by Frontier in
connection therewith) have been disclosed in writing to Holly
prior to the date of this Agreement.
Section 4.18 OPINION
OF FINANCIAL ADVISORS. The Frontier Board has
received the opinion of each of Credit Suisse Securities (USA)
LLC and Citigroup Global Markets Inc. to the effect that, as of
the date of such opinion, and based upon and subject to the
assumptions, qualifications, limitations and other matters
considered in connection with such opinion, the Exchange Ratio
is fair, from a financial point of view, to the holders of
shares of Frontier Common Stock; it being understood and
acknowledged by Holly and Merger Sub that such opinion has been
rendered for the information of the Frontier Board (in its
capacity as such) in connection with the Frontier Boards
consideration of the Merger, and is not intended to, and may
not, be relied upon by Holly or any of its Affiliates.
Section 4.19 CONTRACTS;
DEBT INSTRUMENTS.
(a) Except for documents filed or listed as exhibits to the
Frontier Reports filed since January 1, 2010
(Frontier Material Contracts), as of the date
of this Agreement, there are no contracts or leases that are
material to the business, properties, assets, financial
condition or results of operations of Frontier and its
Subsidiaries taken as a whole. Neither Frontier nor any of its
Subsidiaries is in violation of or in default under (nor does
there exist any condition which with the passage of time or the
giving of notice or both would cause such a violation of or
default under) any Frontier Material Contract to which it is a
party or by which it or any of its properties or assets is
bound, except for violations or defaults that would not have,
individually or in the aggregate, a Frontier Material Adverse
Effect. Each Frontier Material Contract is in full force and
effect, and is a legal, valid and binding obligation of Frontier
or one of its Subsidiaries and, to the knowledge of Frontier,
each of the other parties thereto, enforceable in accordance
with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, moratorium or other similar laws
relating to creditors rights and general principles of
equity and except where the failure of any Frontier Material
Contract to be in full force and effect or a legal, valid and
binding obligation and enforceable in accordance with its terms
would not have, individually or in the aggregate, a Frontier
Material Adverse Effect. No condition exists or event has
occurred which (whether with or without notice or lapse of time
or both) would constitute a default by Frontier or one of its
Subsidiaries or, to the knowledge of Frontier, any other party
thereto
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under any Frontier Material Contract or result in a right of
termination of any Frontier Material Contract, except for any
condition or event that would not have, individually or in the
aggregate, a Frontier Material Adverse Effect.
(b) Set forth in Schedule 4.19(b) of the Frontier
Disclosure Letter is, as of the date of this Agreement,
(i) a list of all loan or credit agreements, notes, bonds,
mortgages, indentures and other agreements and instruments
pursuant to which any indebtedness of Frontier or its
Subsidiaries in an aggregate principal amount in excess of
$5,000,000 is outstanding or may be incurred, (ii) the
respective principal amounts outstanding thereunder as of the
date of this Agreement and (iii) the approximate amount of
consolidated cash and cash equivalents of Frontier and its
Subsidiaries as of the date of this Agreement.
(c) Neither Frontier nor any of its Subsidiaries has
entered into any contract, and there is no commitment, judgment,
injunction, order or decree to which Frontier or any of its
Subsidiaries is a party or subject to, that has or would
reasonably be expected to have the effect of prohibiting or
impairing the conduct of business by Frontier or any of its
Subsidiaries (or of Holly or any of its other Subsidiaries after
the Merger) or any contract that may be terminable as a result
of Hollys status as a competitor of any party to such
contract, except, in each case, for any prohibition, impairment
or termination right that would not have, individually or in the
aggregate, a Frontier Material Adverse Effect.
Section 4.20 RECOMMENDATION;
VOTE REQUIRED. The Frontier Board, at a meeting
duly called and held, has by unanimous vote of those directors
present, (i) determined that this Agreement and the
transactions contemplated hereby are in the best interests of
Frontiers shareholders, (ii) adopted this Agreement
and the transactions contemplated hereby and
(iii) recommended that this Agreement be approved by the
holders of Frontier Common Stock. The votes cast by holders of
shares of Frontier Common Stock represented at a
shareholders meeting at which a quorum exists favoring
approval of this Agreement in excess of the votes cast in
opposition to approval of this Agreement is the only vote of the
holders of any class or series of Frontier capital stock
necessary to approve this Agreement and the Merger (the
Frontier Requisite Vote).
Section 4.21 CERTAIN
APPROVALS. The Frontier Board has taken any and
all necessary and appropriate action to render inapplicable to
the Merger and the transactions contemplated by this Agreement
the restrictions contained in the Wyoming Management Stability
Act and any other fair price,
moratorium, control share acquisition, interested
shareholder or other similar antitakeover provision or
regulation and any restrictive provision of any antitakeover
provision in the articles of incorporation or bylaws of Frontier.
Section 4.22 CERTAIN
CONTRACTS. Neither Frontier nor any of its
Subsidiaries is a party to or bound by (i) any
non-competition agreement or any other agreement or obligation
which purports to limit the manner in which, or the localities
in which, the current business of Frontier and its Subsidiaries,
taken as a whole, or (to the knowledge of Frontier) Holly and
its Subsidiaries, taken as a whole, is conducted or
(ii) any executory agreement or obligation which pertains
to the acquisition or disposition of any asset, or which
provides any third party any lien, claim or preferential right
with regard thereto, except, in the case of this clause (ii),
for such agreements or obligations that would not have,
individually or in the aggregate, a Frontier Material Adverse
Effect.
Section 4.23 NO
RIGHTS PLAN OR AGREEMENT. Frontier has not
adopted any so-called poison pill rights plan or
agreement.
Section 4.24 INTERNAL
CONTROLS.
(a) Each of the principal executive officer and the
principal financial officer of Frontier (or each former
principal executive officer and each former principal financial
officer of Frontier) has made all certifications required by
Rule 13a-14
or 15d-14
under the Exchange Act and Sections 302 and 906 of the
Sarbanes-Oxley Act with respect to the Frontier Reports, and the
statements contained in such certifications are true and
accurate as of the date such certifications were made.
(b) Frontier maintains a system of internal control over
financial reporting (as defined in
Rules 13a-15(f)
and
15d-15(f) of
the Exchange Act) in compliance with the Exchange Act.
(c) Since January 1, 2010, neither Frontiers
outside auditors nor the audit committee of the Frontier Board
has been advised of (i) any material weaknesses in the
design or operation of internal control over financial reporting
or
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(ii) any fraud that involves management or other employees
who have a significant role in Frontiers internal control
over financial reporting.
Section 4.25 FOREIGN
CORRUPT PRACTICES ACT. Except for such matters as
would not, individually or in the aggregate, reasonably be
expected to have a Frontier Material Adverse Effect, as of the
date of this Agreement:
(a) In connection with Frontiers and its
Subsidiaries compliance with the Foreign Corrupt Practices
Act, there have been no voluntary disclosures under the Foreign
Corrupt Practices Act.
(b) No governmental entity has notified Frontier or any of
its Subsidiaries in writing of any actual or alleged violation
or breach of the Foreign Corrupt Practices Act.
(c) Neither Frontier nor any of its Subsidiaries has
undergone or is undergoing any audit, review, inspection,
investigation, survey or examination of records, in each case
conducted by a governmental entity and relating to
Frontiers or its Subsidiaries compliance with the
Foreign Corrupt Practices Act, and to Frontiers knowledge,
there is no basis for any such audit, review, inspection,
investigation, survey or examination of records by a
governmental entity.
(d) Neither Frontier nor any of its Subsidiaries has been
or is now under any administrative, civil or criminal charge or
indictment or, to Frontiers knowledge, investigation,
alleging noncompliance with the Foreign Corrupt Practices Act,
nor, to Frontiers knowledge, is there any basis for any
such charge, indictment or investigation.
(e) Neither Frontier nor any of its Subsidiaries has been
or is now a party to any administrative or civil litigation
alleging noncompliance with the Foreign Corrupt Practices Act,
nor, to Frontiers knowledge, is there any basis for any
such proceeding.
ARTICLE 5
COVENANTS
Section 5.1 CONDUCT
OF BUSINESS.
(a) Prior to the Effective Time, except as set forth in the
Holly Disclosure Letter or as expressly contemplated by this
Agreement, including Section 5.12, or as consented to in
advance in writing by Frontier, which consent shall not be
unreasonably withheld or delayed, Holly:
(i) shall, and shall cause each of its Subsidiaries to,
conduct its operations according to their usual, regular and
ordinary course in substantially the same manner as heretofore
conducted;
(ii) shall use its reasonable best efforts, and shall cause
each of its Subsidiaries to use its reasonable best efforts, to
preserve intact their business organizations and goodwill, keep
available the services of their respective officers and
employees and maintain satisfactory relationships with those
persons having business relationships with them;
(iii) shall not amend its certificate of incorporation or
bylaws;
(iv) shall promptly notify Frontier of any material adverse
change in its financial condition or business or any
termination, cancellation, repudiation or material breach of any
Holly Material Contract (or communications expressly indicating
the same may be contemplated), or the institution of any
material litigation or material governmental complaints,
investigations or hearings (or communications in writing
indicating the same may be contemplated), or the breach in any
material respect of any representation or warranty contained
herein;
(v) shall promptly make available (in paper form or via the
Internet), to the extent not available on the SECs EDGAR
website, to Frontier true and correct copies of any report,
statement or schedule filed with the SEC subsequent to the date
of this Agreement;
(vi) shall not (A) except pursuant to the exercise of
options, warrants, conversion rights and other contractual
rights existing on the date of this Agreement and disclosed in
the Holly Disclosure Letter, issue any
A-30
shares of its capital stock, effect any stock split or otherwise
change its capitalization as it existed on the date of this
Agreement; (B) grant, confer or award any option, warrant,
conversion right or other right not existing on the date of this
Agreement to acquire any shares of its capital stock except
pursuant to contractual commitments existing on the date of this
Agreement and disclosed in the Holly Disclosure Letter;
(C) increase any compensation or benefits of any officer,
director, employee or agent of Holly or any of its Subsidiaries
or enter into or amend any employment agreement or severance
agreement with any of its present or future officers, directors
or employees; or (D) except as contemplated by
Section 5.4(b) and Section 5.12, adopt any new
employee benefit plan (including any stock option, stock benefit
or stock purchase plan) or amend (except as required by law) any
existing employee benefit plan in any material respect;
(vii) shall not, and, in the case of clause (B) below,
shall not permit any of its Subsidiaries to (A) declare,
set aside or pay any dividend or make any other distribution or
payment with respect to any shares of its capital stock (other
than Hollys ordinary quarterly dividends payable with
respect to the shares of Holly Common Stock of $0.15 per share
and MLPs quarterly cash distributions payable to holders
of its common units and to its general partner), or
(B) redeem, purchase or otherwise acquire any shares of its
capital stock or capital stock of any of its Subsidiaries or any
option, warrant, conversion right or other right to acquire such
shares, or make any commitment for any such action other than as
contemplated in this Agreement;
(viii) shall not, and shall not permit any of its
Subsidiaries to, sell, lease or otherwise dispose of any of its
assets (including capital stock of Subsidiaries) for an amount
in excess of $10,000,000, individually or in the aggregate,
except in the ordinary course of business and for fair value;
(ix) shall not, and shall not permit any of its
Subsidiaries to, except for amounts that in the aggregate do not
exceed $10,000,000, authorize, propose, agree to, enter into or
consummate any acquisition of equity interests in or assets of
any Person whether by purchase of equity interests, purchase of
assets, merger, consolidation or other business combination, or
in any other manner; provided, however, that this
clause (ix) shall not apply to MLP and its Subsidiaries
except to the extent that any such action would either
(A) not satisfy the accretion test specified in
Section 5.6(b) of the Partnership Agreement, or
(B) would result in a Total Leverage Ratio (as defined in
the MLP Credit Agreement) of more than 4.0 to 1.0;
(x) shall not, except as may be required as a result of a
change in law or in GAAP, change any of the accounting
principles or practices used by it;
(xi) shall, and shall cause each of its Subsidiaries to,
use reasonable best efforts to maintain with financially
responsible insurance companies insurance in such amounts and
against such risks and losses as are customary for such party;
(xii) shall not, and shall not permit any of its
Subsidiaries to, except where it would not have, individually or
in the aggregate, a Holly Material Adverse Effect, (A) make
or rescind any express or deemed election relating to Taxes,
including elections for any and all joint ventures,
partnerships, limited liability companies, working interests or
other investments where it has the capacity to make such binding
election, (B) settle or compromise any claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or
controversy relating to Taxes, or (C) change in any respect
any of its methods of reporting any item for federal income tax
purposes from those employed in the preparation of its federal
income Tax Return for the most recent taxable year for which a
return has been filed, except as may be required by applicable
law;
(xiii) shall not, nor shall it permit any of its
Subsidiaries to, (A) incur any indebtedness for borrowed
money (except under credit lines in existence as of the date of
this Agreement and disclosed in Schedule 5.1(a)(xiii) of
the Holly Disclosure Letter or disclosed with reasonable
specificity in the Holly Reports) or guarantee any such
indebtedness or issue or sell any debt securities or warrants or
rights to acquire any debt securities of such party or any of
its Subsidiaries or guarantee any debt securities of others,
(B) except in the ordinary course of business, enter into
or materially extend or amend any material lease (whether such
lease is an operating or capital lease) or create or materially
extend any material mortgages, liens, security interests or
other encumbrances on the property of Holly or any of its
Subsidiaries in connection with any indebtedness thereof or
(C) make or commit to make aggregate capital expenditures
in excess of those set forth in Schedule 5.1(a)(xiii) of
the Holly Disclosure Letter; provided, however, that
clause (A) above shall not restrict
A-31
MLP and its Subsidiaries from incurring indebtedness or issuing
or selling any debt securities in order to finance any action
permitted by MLP under clause (ix) above to the extent that
any such action would not result in a Total Leverage Ratio (as
defined in the MLP Credit Agreement) of more than 4.0 to 1.0;
(xiv) subject to Section 5.4(b), shall not take any
action that is likely to delay materially or adversely affect
the ability of any of the parties hereto to obtain any consent,
authorization, order or approval of any governmental commission,
board or other regulatory body or the expiration of any
applicable waiting period required to consummate the Merger;
(xv) unless in the good faith opinion of the Holly Board
after consultation with its outside legal counsel complying with
the following provisions would be inconsistent with the
fiduciary duties of the Holly Board and only then if taking such
actions would not violate any of the other terms of this
Agreement, shall not, and shall not permit any of its
Subsidiaries to, terminate, amend, modify or waive any provision
of any confidentiality or standstill agreement to which it or
any of its Subsidiaries is a party; and during such period shall
enforce, to the fullest extent permitted under applicable law,
the provisions of such agreement, including by obtaining
injunctions to prevent any breaches of such agreements and to
enforce specifically the terms and provisions thereof in any
court of the United States of America or any state having
jurisdiction;
(xvi) shall not enter into or amend any agreement with any
holder of Holly capital stock with respect to holding, voting or
disposing of shares of Holly Common Stock;
(xvii) shall not by resolution of the Holly Board or any
committee thereof cause the acceleration of rights, benefits or
payments under any Holly Plans;
(xviii) other than in the ordinary course of business
consistent with past practice, enter into, amend or terminate
any hedge contracts;
(xix) shall not split, combine, subdivide or reclassify its
outstanding shares of capital stock;
(xx) shall not purchase any Frontier Common Stock or any
other debt, equity or other securities of Frontier;
(xxi) shall not, and shall not permit any of its
Subsidiaries to, (A) do business in any country in which
Holly or any of its Subsidiaries is not doing business as of the
date of this Agreement or (B) enter into any joint venture,
partnership or other joint business venture with any person;
(xxii) shall not settle any material claim, action or
proceeding, except settlements that do not, individually or in
the aggregate, require the payment by Holly and its Subsidiaries
of an amount in excess of $10,000,000;
(xxiii) shall not sell, transfer, assign, exchange, pledge
or otherwise dispose of any MLP Equity Interests owned by Holly
or any of its Subsidiaries; and
(xxiv) shall not, nor shall it permit any of its
Subsidiaries to, agree in writing or otherwise to take any of
the foregoing actions;
provided, however, that nothing contained in
Section 5.1(a)(xiii)(B) or (C) shall apply to the MLP
Entities.
(b) Prior to the Effective Time, except as set forth in the
Frontier Disclosure Letter or as expressly contemplated by this
Agreement, including Section 5.12, or as consented to in
advance in writing by Holly, which consent shall not be
unreasonably withheld or delayed, Frontier:
(i) shall, and shall cause each of its Subsidiaries to,
conduct its operations according to their usual, regular and
ordinary course in substantially the same manner as heretofore
conducted;
(ii) shall use its reasonable best efforts, and shall cause
each of its Subsidiaries to use its reasonable best efforts, to
preserve intact their business organizations and goodwill, keep
available the services of their respective officers and
employees and maintain satisfactory relationships with those
persons having business relationships with them;
(iii) shall not amend its articles of incorporation or
bylaws;
A-32
(iv) shall promptly notify Holly of any material adverse
change in its financial condition or business or any
termination, cancellation, repudiation or material breach of any
Frontier Material Contract (or communications expressly
indicating the same may be contemplated), or the institution of
any material litigation or material governmental complaints,
investigations or hearings (or communications in writing
indicating the same may be contemplated), or the breach in any
material respect of any representation or warranty contained
herein;
(v) shall promptly make available (in paper form or via the
Internet), to the extent not available on the SECs EDGAR
website, to Holly true and correct copies of any report,
statement or schedule filed with the SEC subsequent to the date
of this Agreement;
(vi) shall not (A) except pursuant to the exercise of
options, warrants, conversion rights and other contractual
rights existing on the date of this Agreement and disclosed in
the Frontier Disclosure Letter, issue any shares of its capital
stock, effect any stock split or otherwise change its
capitalization as it existed on the date of this Agreement;
(B) grant, confer or award any option, warrant, conversion
right or other right not existing on the date of this Agreement
to acquire any shares of its capital stock except pursuant to
contractual commitments existing on the date of this Agreement
and disclosed in the Frontier Disclosure Letter;
(C) increase any compensation or benefits of any officer,
director, employee or agent of Frontier or any of its
Subsidiaries or enter into or amend any employment agreement or
severance agreement with any of its present or future officers,
directors or employees; or (D) except as contemplated by
Section 2.3 and Section 5.12, adopt any new employee
benefit plan (including any stock option, stock benefit or stock
purchase plan) or amend (except as required by law) any existing
employee benefit plan in any material respect;
(vii) shall not, and, in the case of clause (B) below,
shall not permit any of its Subsidiaries to (A) declare,
set aside or pay any dividend or make any other distribution or
payment with respect to any shares of its capital stock (other
than ordinary dividends on the Frontier Common Stock at a rate
not greater than $0.06 per share in any quarter and a special
dividend on the Frontier Common Stock at a rate not greater than
$0.28 per share) or (B) redeem, purchase or otherwise
acquire any shares of its capital stock or capital stock of any
of its Subsidiaries or any option, warrant, conversion right or
other right to acquire such shares, or make any commitment for
any such action other than as contemplated in this Agreement and
the Frontier Stock Plan and related award agreements relating to
the cashless exercise of equity awards;
(viii) shall not, and shall not permit any of its
Subsidiaries to, sell, lease or otherwise dispose of any of its
assets (including capital stock of Subsidiaries) for an amount
in excess of $10,000,000, individually or in the aggregate,
except in the ordinary course of business and for fair value;
(ix) shall not, and shall not permit any of its
Subsidiaries to, except for amounts that in the aggregate do not
exceed $10,000,000, authorize, propose, agree to, enter into or
consummate any acquisition of equity interests in or assets of
any Person whether by purchase of equity interests, purchase of
assets, merger, consolidation or other business combination, or
in any other manner;
(x) shall not, except as may be required as a result of a
change in law or in GAAP, change any of the accounting
principles or practices used by it;
(xi) shall, and shall cause each of its Subsidiaries to,
use reasonable best efforts to maintain with financially
responsible insurance companies insurance in such amounts and
against such risks and losses as are customary for such party;
(xii) shall not, and shall not permit any of its
Subsidiaries to, except where it would not have, individually or
in the aggregate, a Frontier Material Adverse Effect,
(A) make or rescind any express or deemed election relating
to Taxes, including elections for any and all joint ventures,
partnerships, limited liability companies, working interests or
other investments where it has the capacity to make such binding
election, (B) settle or compromise any claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or
controversy relating to Taxes, or (C) change in any respect
any of its methods of reporting any item for federal income tax
purposes from those employed in the preparation of its federal
income Tax Return for the most recent taxable year for which a
return has been filed, except as may be required by applicable
law;
A-33
(xiii) shall not, nor shall it permit any of its
Subsidiaries to, (A) incur any indebtedness for borrowed
money (except under credit lines in existence as of the date of
this Agreement and disclosed in Schedule 5.1(b)(xiii) of
the Frontier Disclosure Letter or disclosed with reasonable
specificity in the Frontier Reports) or guarantee any such
indebtedness or issue or sell any debt securities or warrants or
rights to acquire any debt securities of such party or any of
its Subsidiaries or guarantee any debt securities of others,
(B) except in the ordinary course of business, enter into
or materially extend or amend any material lease (whether such
lease is an operating or capital lease) or create or materially
extend any material mortgages, liens, security interests or
other encumbrances on the property of Frontier or any of its
Subsidiaries in connection with any indebtedness thereof or
(C) make or commit to make aggregate capital expenditures
in excess of those set forth in Schedule 5.1(b)(xiii) of
the Frontier Disclosure Letter;
(xiv) subject to Section 5.4(b), shall not take any
action that is likely to delay materially or adversely affect
the ability of any of the parties hereto to obtain any consent,
authorization, order or approval of any governmental commission,
board or other regulatory body or the expiration of any
applicable waiting period required to consummate the Merger;
(xv) unless in the good faith opinion of the Frontier Board
after consultation with its outside legal counsel complying with
the following provisions would be inconsistent with the
fiduciary duties of the Frontier Board and only then if taking
such actions would not violate any of the other terms of this
Agreement, shall not, and shall not permit any of its
Subsidiaries to, terminate, amend, modify or waive any provision
of any confidentiality or standstill agreement to which it or
any of its Subsidiaries is a party; and during such period shall
enforce, to the fullest extent permitted under applicable law,
the provisions of such agreement, including by obtaining
injunctions to prevent any breaches of such agreements and to
enforce specifically the terms and provisions thereof in any
court of the United States of America or any state having
jurisdiction;
(xvi) shall not enter into or amend any agreement with any
holder of Frontier capital stock with respect to holding, voting
or disposing of shares of Frontier Common Stock;
(xvii) except as permitted under this Agreement, shall not
by resolution of the Frontier Board or any committee thereof
cause the acceleration of rights, benefits or payments under any
Frontier Plans;
(xviii) other than in the ordinary course of business
consistent with past practice, enter into, amend or terminate
any hedge contracts;
(xix) shall not split, combine, subdivide or reclassify its
outstanding shares of capital stock;
(xx) shall not purchase any Holly Common Stock or any other
debt, equity or other securities of Holly;
(xxi) shall not, and shall not permit any of its
Subsidiaries to, (A) do business in any country in which
Frontier or any of its Subsidiaries is not doing business as of
the date of this Agreement or (B) enter into any joint
venture, partnership or other joint business venture with any
person;
(xxii) shall not settle any material claim, action or
proceeding, except settlements that do not, individually or in
the aggregate, require the payment by Frontier and its
Subsidiaries of an amount in excess of $10,000,000; and
(xxiii) shall not, nor shall it permit any of its
Subsidiaries to, agree in writing or otherwise to take any of
the foregoing actions.
Section 5.2 NO
SOLICITATION BY HOLLY.
(a) Holly agrees that it and its Subsidiaries:
(i) will not, and Holly will cause each of its or its
Subsidiaries officers and directors not to, and will use
its reasonable best efforts to cause each Controlled Affiliate
and any of Hollys or its Subsidiaries or its
Controlled Affiliates employees, agents and
representatives, including any investment banker, attorney and
accountant retained or consulted by Holly or any of its
Subsidiaries, not to, and on becoming aware of it will use its
best efforts to stop any such Person from continuing to,
directly or indirectly, (A) solicit, initiate, or knowingly
induce, encourage or facilitate (including by way of furnishing
information) any inquiry, proposal or offer (whether or not in
writing) (including any proposal or offer to its stockholders)
or take any other action designed to facilitate any inquiries or
proposals regarding, with respect to, or that would be
reasonably
A-34
expected to lead to, (1) a transaction, including any share
issuance, tender offer, exchange offer or share exchange,
pursuant to which any third Person (or group) (other than
Frontier or its Affiliates), directly or indirectly, acquires,
would acquire or has the right to acquire beneficial ownership
(as defined in
Rule 13d-3
under the Exchange Act) of 10% or more of the outstanding shares
of Holly Common Stock, 10% or more of the outstanding voting
power of Holly (or options, rights or warrants to purchase, or
securities convertible into or exchangeable for, such common
stock or other securities representing 10% or more of the voting
power), any of the MLP Equity Interests owned by Holly or any of
its Subsidiaries, whether from Holly, MLP or any of their
Subsidiaries, as applicable, or pursuant to a tender offer or
exchange offer or otherwise; (2) a merger, consolidation,
share exchange, business combination or transaction pursuant to
which any third Person or group of Persons (other than Frontier
and its Affiliates) party thereto, or the stockholders of such
third Person or Persons, beneficially owns or would beneficially
own 10% or more of the outstanding shares of Holly Common Stock
or the outstanding voting power of Holly or any of its
Subsidiaries, any of the MLP Equity Interests owned by Holly or
any of its Subsidiaries, or, if applicable, any surviving entity
or the parent entity resulting from any such transaction
immediately upon consummation thereof; (3) any transaction
pursuant to which any third Person or group of Persons (other
than Frontier and its Affiliates) directly or indirectly
(including, without limitation, by way of merger, consolidation,
share exchange, other business combination, partnership, joint
venture, sale, lease, contribution or other disposition)
acquires or would acquire control of assets (including for this
purpose the equity securities of or other ownership interests in
the Subsidiaries of Holly, or the MLP Equity Interests owned by
Holly or its Subsidiaries) of Holly or any of its Subsidiaries
representing 10% or more of the consolidated revenues, net
income or EBITDA for the last 12 full calendar months or the
fair market value of all of the assets of Holly and its
Subsidiaries, taken as a whole, immediately prior to such
transaction; (4) a recapitalization of Holly or any of its
Subsidiaries or any transaction similar to a transaction
referred to in clause (2) above involving Holly or any of
its Subsidiaries pursuant to which any third Person or group of
Persons (other than Frontier and its Affiliates) or the
stockholders of such third Person(s), beneficially owns or would
beneficially own 10% or more of the outstanding shares of Holly
Common Stock or the outstanding voting power of Holly or its
Subsidiaries (including, without limitation, with respect to
MLP, 10% or more of the limited partner interests of MLP, any of
the incentive distribution rights of MLP
and/or any
of the general partner interests of MLP) or, if applicable, the
parent entity resulting from any such transaction immediately
upon the consummation thereof; (5) the sale or transfer,
directly or indirectly, by Holly or any of its Subsidiaries, of
any equity interests in MLP or HEP Logistics Holdings, L.P.
owned by Holly or any of its Subsidiaries; or (6) any
combination of the foregoing (in each case, other than the
Merger) (any such proposal, offer or transaction being
hereinafter referred to as a Holly Acquisition
Proposal), (B) participate or engage in any
discussions or negotiations with any Person regarding, or
furnish to any Person any information with respect to, or
cooperate in any way with any Person (whether or not a Person
making a Holly Acquisition Proposal) in connection with, or take
any other action to knowingly facilitate or to make effective,
implement or consummate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead
to, any Holly Acquisition Proposal, or (C) enter into any
letter of intent, memorandum of understanding, agreement in
principle, acquisition agreement, merger agreement, option
agreement, joint venture agreement, partnership agreement or
other agreement or arrangement (oral or written) regarding, or
that is intended to result in, or would reasonably be expected
to lead to, any Holly Acquisition Proposal; and (ii) will
immediately, upon becoming aware of any such discussions,
inquiries or negotiations, cease and cause to be terminated any
existing discussions, inquiries or negotiations with any Person
conducted heretofore with respect to any Holly Acquisition
Proposal or any inquiry or proposal that may reasonably be
expected to lead to a Holly Acquisition Proposal, request the
prompt return or destruction of all confidential information
previously furnished with respect thereto and immediately
terminate all physical and electronic data room access
previously granted to any such Person or its Representatives;
provided, however, that nothing contained in this Agreement
shall prevent Holly or the Holly Board from (1) complying
with
Rule 14e-2
or 14d-9
promulgated under the Exchange Act with regard to a Holly
Acquisition Proposal, (2) making any disclosure to the
holders of shares of Holly Common Stock that the Holly Board,
after consultation with outside legal counsel, is required to
make under applicable law or the rules of the NYSE, provided
that in any event the Holly Board shall not make an Adverse
Recommendation Change except in accordance with
Section 5.4(b), or (3) at any time prior to obtaining
the Holly Stockholder Approval, providing information (pursuant
to a confidentiality agreement containing terms that are
determined in good faith by Holly to be substantially similar
to, and not more favorable to such Person in the aggregate than,
those contained in the Confidentiality Agreement (it being
understood that such confidentiality agreement and any related
agreements will not include any provision calling for any
exclusive
A-35
right to negotiate with such Person or have the effect of
prohibiting Holly from complying with its obligations under this
Agreement)) to, or engaging in any negotiations or discussions
with, any Person or group who has made an unsolicited bona fide
written Holly Acquisition Proposal that did not otherwise result
from a breach of this Section 5.2 if, with respect to the
actions set forth in this clause (3), (x) in the good faith
judgment of the Holly Board, after consultation with outside
legal counsel and financial advisors, and after taking into
account all legal, financial, regulatory and other aspects of
the Holly Acquisition Proposal, the likelihood of consummation
(including, without limitation, legal and regulatory
considerations and any conditions to, and expected timing risks
of, completion) and any changes to the terms of the Merger
proposed by Frontier in response to such proposal, such Holly
Acquisition Proposal is reasonably likely to result in a
transaction more favorable to the holders of the shares of Holly
Common Stock from a financial point of view than the Merger (a
Holly Superior Proposal) and (y) the
Holly Board, after consultation with its outside legal counsel,
determines in good faith that the failure to do so would be
inconsistent with the fiduciary obligations of the Holly Board
under applicable law. Whenever the term group
is used in this Agreement, it is used as defined in
Rule 13d-3
under the Exchange Act.
(b) Holly agrees that it will notify Frontier promptly (and
in any event within 24 hours) if any proposal or offer
relating to or constituting a Holly Acquisition Proposal is
received by, any information is requested from, or any
discussions or negotiations are sought to be initiated or
continued with, Holly or any of its officers, directors,
employees, agents or representatives. Such notice to Frontier
shall be made orally and in writing and shall (i) indicate
the identity of the Person or group making such request or
inquiry or engaging in such negotiations or discussions and
(ii) include a copy of the written Holly Acquisition
Proposal or, if not in writing, a written summary in reasonable
detail of the material terms and conditions of the Holly
Acquisition Proposal or the request or inquiry. Thereafter,
Holly shall keep Frontier fully informed on a prompt basis (and
in any event within 24 hours) of any material changes,
additions or adjustments to the terms or conditions of any such
proposal or offer. Not less than forty-eight (48) hours
prior to taking any action referred to in clause (3) of the
proviso of Section 5.2(a)(ii), if Holly intends to participate
in any such discussions or negotiations or provide any such
information to any such third party, Holly shall give notice to
Frontier including the identity of the relevant person or group
and provide to Frontier all of the information required by this
Section 5.2. Holly will not enter into any agreement on or
after the date of this Agreement that would prevent Holly from
providing any information, and in the manner and within the
time, required by this Section 5.2(b) to Frontier.
(c) Except in compliance with Section 5.4, nothing in
this Section 5.2 shall permit Holly to enter into any
agreement with respect to a Holly Acquisition Proposal during
the term of this Agreement, it being agreed that, during the
term of this Agreement, Holly shall not enter into any agreement
with any Person that provides for, or in any way facilitates, a
Holly Acquisition Proposal, other than (i) a
confidentiality agreement containing terms that are determined
in good faith by Holly to be substantially similar to and not
more favorable to such Person in the aggregate than those
contained in the Confidentiality Agreement (it being understood
that such confidentiality agreement and any related agreements
will not include any provision calling for any exclusive right
to negotiate with such Person or having the effect of
prohibiting Holly from complying with its obligations under this
Section 5.2)
and/or
(ii) a standstill agreement that is in reasonably customary
form and that does not contain terms that have the effect of
prohibiting Holly from complying with its obligations under this
Section 5.2.
Section 5.3 NO
SOLICITATION BY FRONTIER.
(a) Frontier agrees that it and its Subsidiaries:
(i) will not, and Frontier will cause each of its or its
Subsidiaries officers and directors not to, and will use
its reasonable best efforts to cause each Controlled Affiliate
and any of Frontiers or its Subsidiaries or its
Controlled Affiliates employees, agents and
representatives, including any investment banker, attorney and
accountant retained or consulted by Frontier or any of its
Subsidiaries, not to, and on becoming aware of it will use its
best efforts to stop any such Person from continuing to,
directly or indirectly, (A) solicit, initiate, or knowingly
induce, encourage or facilitate (including by way of furnishing
information) any inquiry, proposal or offer (whether or not in
writing) (including any proposal or offer to its shareholders)
or take any other action designed to facilitate any inquiries or
proposals regarding, with respect to, or that would be
reasonably expected to lead to, (1) a transaction,
including any share issuance, tender offer, exchange offer or
share exchange, pursuant to which any third Person (or group)
(other than Holly or its Affiliates), directly or indirectly,
acquires, would acquire or has the right to acquire beneficial
ownership (as defined in
Rule 13d-3
under the Exchange Act) of 10% or more of the outstanding shares
of Frontier Common Stock or 10% or
A-36
more of the outstanding voting power of Frontier (or options,
rights or warrants to purchase, or securities convertible into
or exchangeable for, such common stock or other securities
representing 10% or more of the voting power), whether from
Frontier or any of its Subsidiaries, as applicable, or pursuant
to a tender offer or exchange offer or otherwise; (2) a
merger, consolidation, share exchange, business combination or
transaction pursuant to which any third Person or group of
Persons (other than Holly and its Affiliates) party thereto, or
the stockholders of such third Person or Persons, beneficially
owns or would beneficially own 10% or more of the outstanding
shares of Frontier Common Stock or the outstanding voting power
of Frontier or any of its Subsidiaries, or, if applicable, any
surviving entity or the parent entity resulting from any such
transaction immediately upon consummation thereof; (3) any
transaction pursuant to which any third Person or group of
Persons (other than Holly and its Affiliates) directly or
indirectly (including, without limitation, by way of merger,
consolidation, share exchange, other business combination,
partnership, joint venture, sale, lease, contribution or other
disposition) acquires or would acquire control of assets
(including for this purpose the equity securities of, or other
ownership interests in, the Subsidiaries of Frontier) of
Frontier or any of its Subsidiaries representing 10% or more of
the consolidated revenues, net income or EBITDA for the last 12
full calendar months or the fair market value of all of the
assets of Frontier and its Subsidiaries, taken as a whole,
immediately prior to such transaction; (4) a
recapitalization of Frontier or any of its Subsidiaries or any
transaction similar to a transaction referred to in
clause (2) above involving Frontier or any of its
Subsidiaries pursuant to which any third Person or group of
Persons (other than Holly and its Affiliates) or the
stockholders of such third Person(s), beneficially owns or would
beneficially own 10% or more of the outstanding shares of
Frontier Common Stock or the outstanding voting power of
Frontier or its Subsidiaries or, if applicable, the parent
entity resulting from any such transaction immediately upon the
consummation thereof; or (5) any combination of the
foregoing (in each case, other than the Merger) (any such
proposal, offer or transaction being hereinafter referred to as
a Frontier Acquisition Proposal),
(B) participate or engage in any discussions or
negotiations with any Person regarding, or furnish to any Person
any information with respect to, or cooperate in any way with
any Person (whether or not a Person making a Frontier
Acquisition Proposal) in connection with, or take any other
action to knowingly facilitate or to make effective, implement
or consummate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any
Frontier Acquisition Proposal, or (C) enter into any letter
of intent, memorandum of understanding, agreement in principle,
acquisition agreement, merger agreement, option agreement, joint
venture agreement, partnership agreement or other agreement or
arrangement (oral or written) regarding, or that is intended to
result in, or would reasonably be expected to lead to, any
Frontier Acquisition Proposal; and (ii) will immediately,
upon becoming aware of any such discussions, inquiries or
negotiations, cease and cause to be terminated any existing
discussions, inquiries or negotiations with any Person conducted
heretofore with respect to any Frontier Acquisition Proposal or
any inquiry or proposal that may reasonably be expected to lead
to a Frontier Acquisition Proposal, request the prompt return or
destruction of all confidential information previously furnished
with respect thereto and immediately terminate all physical and
electronic data room access previously granted to any such
Person or its Representatives; provided, however, that nothing
contained in this Agreement shall prevent Frontier or the
Frontier Board from (1) complying with
Rule 14e-2
or 14d-9
promulgated under the Exchange Act with regard to a Frontier
Acquisition Proposal, (2) making any disclosure to the
holders of shares of Frontier Common Stock that the Frontier
Board, after consultation with outside legal counsel, is
required to make under applicable law or the rules of the NYSE,
provided that in any event the Frontier Board shall not make an
Adverse Recommendation Change except in accordance with
Section 5.4(b) or (3) at any time prior to obtaining
the Frontier Stockholder Approval, providing information
(pursuant to a confidentiality agreement containing terms that
are determined in good faith by Frontier to be substantially
similar to, and not more favorable to such Person in the
aggregate than, those contained in the Confidentiality Agreement
(it being understood that such confidentiality agreement and any
related agreements will not include any provision calling for
any exclusive right to negotiate with such Person or have the
effect of prohibiting Frontier from complying with its
obligations under this Agreement)) to, or engaging in any
negotiations or discussions with, any Person or group who has
made an unsolicited bona fide written Frontier Acquisition
Proposal that did not otherwise result from a breach of this
Section 5.3 if, with respect to the actions set forth in
this clause (3), (x) in the good faith judgment of the
Frontier Board, after consultation with outside legal counsel
and financial advisors, and after taking into account all legal,
financial, regulatory and other aspects of the Frontier
Acquisition Proposal, the likelihood of consummation (including,
without limitation, legal and regulatory considerations and any
conditions to, and expected timing risks of, completion), and
any changes to the terms of the Merger proposed by Holly in
response to such proposal, such Frontier Acquisition Proposal is
reasonably likely to
A-37
result in a transaction more favorable to the holders of the
shares of Frontier Common Stock from a financial point of view
than the Merger (a Frontier Superior
Proposal) and (y) the Frontier Board, after
consultation with its outside legal counsel, determines in good
faith that the failure to do so would be inconsistent with the
fiduciary obligations of the Frontier Board under applicable law.
(b) Frontier agrees that it will notify Holly promptly (and
in any event within 24 hours) if any proposal or offer
relating to or constituting a Frontier Acquisition Proposal is
received by, any information is requested from, or any
discussions or negotiations are sought to be initiated or
continued with, Frontier or any of its officers, directors,
employees, agents or representatives. Such notice to Holly shall
be made orally and in writing and shall (i) indicate the
identity of the Person or group making such request or inquiry
or engaging in such negotiations or discussions and
(ii) include a copy of the written Frontier Acquisition
Proposal or, if not in writing, a written summary in reasonable
detail of the material terms and conditions of the Frontier
Acquisition Proposal or the request or inquiry. Thereafter,
Frontier shall keep Holly fully informed on a prompt basis (and
in any event within 24 hours) of any material changes,
additions or adjustments to the terms or conditions of any such
proposal or offer. Not less than forty-eight (48) hours
prior to taking any action referred to in clause (3) of the
proviso of Section 5.3(a)(ii), if Frontier intends to
participate in any such discussions or negotiations or provide
any such information to any such third party, Frontier shall
give notice to Holly including the identity of the relevant
person or group and provide to Holly all of the information
required by this Section 5.3. Frontier will not enter into
any agreement on or after the date of this Agreement that would
prevent Frontier from providing any information, and in the
manner and within the time, required by this Section 5.3(b)
to Holly.
(c) Except in compliance with Section 5.4, nothing in
this Section 5.3 shall permit Frontier to enter into any
agreement with respect to a Frontier Acquisition Proposal during
the term of this Agreement, it being agreed that, during the
term of this Agreement, Frontier shall not enter into any
agreement with any Person that provides for, or in any way
facilitates, a Frontier Acquisition Proposal, other than
(i) a confidentiality agreement containing terms that are
determined in good faith by Frontier to be substantially similar
to and not more favorable to such Person in the aggregate than
those contained in the Confidentiality Agreement (it being
understood that such confidentiality agreement and any related
agreements will not include any provision calling for any
exclusive right to negotiate with such Person or having the
effect of prohibiting Frontier from complying with its
obligations under this Section 5.3)
and/or
(ii) a standstill agreement that is in reasonably customary
form and that does not contain terms that have the effect of
prohibiting Frontier from complying with its obligations under
this Section 5.3.
Section 5.4 MEETINGS
OF STOCKHOLDERS.
(a) Holly will take all action necessary in accordance with
applicable law and its certificate of incorporation and bylaws
to convene as promptly as practicable a meeting of its
stockholders for purposes of obtaining the Holly Requisite Vote.
Frontier will take all action necessary in accordance with
applicable law and its articles of incorporation and bylaws to
convene as promptly as practicable a meeting of its shareholders
for purposes of obtaining the Frontier Requisite Vote. Frontier
and Holly shall each use their reasonable best efforts to hold
their respective stockholders meetings on the same day.
(b) Except as otherwise permitted by this Section 5.4,
Holly and Frontier, through their respective Boards of
Directors, shall (i) recommend approval of the matters
described in Section 5.4(a) to be submitted to their
respective stockholders, (ii) not (A) withdraw,
withhold, modify, or change such recommendation, approval or
declaration of advisability in a manner adverse to the other
party, (B) recommend, approve or declare advisable any
Holly Acquisition Proposal (including, without limitation, any
Holly Superior Proposal) or Frontier Acquisition Proposal
(including, without limitation, any Frontier Superior Proposal),
as the case may be, or (C) resolve, agree or propose
publicly to take any action described in clause (A) or
(B) above (any action in clause (A), (B) or
(C) above being referred to as an Adverse
Recommendation Change), (iii) not approve, adopt,
recommend or declare advisable, or propose publicly to approve,
adopt, recommend or declare advisable, or cause or permit the
entry into, any letter of intent, memorandum of understanding,
agreement in principle, acquisition agreement, merger agreement,
option agreement, joint venture agreement, partnership agreement
or other agreement or arrangement (oral or written) constituting
or related to, or that is intended to or would reasonably be
expected to lead to, any Holly Acquisition Proposal or Frontier
Acquisition Proposal, as the case may be, or requiring, or
reasonably expected to cause, Holly or Frontier, as the case may
be, to abandon, terminate, delay or fail to consummate, or that
would otherwise impede,
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interfere with or be inconsistent with, the transactions
contemplated by this Agreement, or requiring, or reasonably
expected to cause, Holly (in the case of Holly) or Frontier (in
the case of Frontier) to fail to comply with its obligations
under this Agreement (other than a confidentiality agreement
referred to in Section 5.2 or Section 5.3 above, as
the case may be), or (iv) unless such recommendation has
been withdrawn, withheld, modified or changed as permitted by
this Section 5.4(b), use their reasonable best efforts to
solicit the Holly Requisite Vote (in the case of Holly) and the
Frontier Requisite Vote (in the case of Frontier).
Notwithstanding the foregoing, the Holly Board or Frontier
Board, as applicable (the Withdrawing Party,
the other party being the Non-Withdrawing
Party), may at any time prior to obtaining the Holly
Requisite Vote or Frontier Requisite Vote, as applicable,
(i) other than in connection with any Holly Acquisition
Proposal (in the case of Holly) or Frontier Acquisition Proposal
(in the case of Frontier) (which must be made pursuant to
clause (ii) below), make an Adverse Recommendation Change
if the Holly Board or the Frontier Board, as the case may be,
determines in good faith (after consultation with its outside
legal counsel) that the failure to take such action would be
inconsistent with their fiduciary duties under applicable law
(such action, an Other Fiduciary Adverse Recommendation
Change) or (ii) make an Adverse Recommendation
Change in connection with any Holly Acquisition Proposal (in the
case of Holly) or Frontier Acquisition Proposal (in the case of
Frontier), if the Holly Board or the Frontier Board, as the case
may be, determines in good faith (after consultation with its
outside legal counsel and financial advisors) that (A) an
unsolicited bona fide written Holly Acquisition Proposal (in the
case of Holly) or Frontier Acquisition Proposal (in the case of
Frontier) made after the date of this Agreement and not the
result of a breach of Section 5.2 or Section 5.3, as
the case may be, constitutes a Holly Superior Proposal (in the
case of Holly) or a Frontier Superior Proposal (in the case of
Frontier) and (B) the failure to make an Adverse
Recommendation Change would be inconsistent with their fiduciary
duties under applicable law (such action, a Superior
Proposal Adverse Recommendation Change);
provided, however, that the Withdrawing Party may only take the
foregoing actions if (1) the Withdrawing Party has provided
written notice to the Non-Withdrawing Party (a
Withdrawal Notice) advising the
Non-Withdrawing Party that the Board of Directors of the
Withdrawing Party intends to take such action (and specifying,
in reasonable detail, the reasons for such action), (2) if
any Holly Superior Proposal or Frontier Superior Proposal, as
applicable, is the basis for such action, the Withdrawal Notice
specifies the material terms and conditions of the Holly
Superior Proposal or Frontier Superior Proposal, as applicable,
and identifies the Person or group making such Holly Superior
Proposal or Frontier Superior Proposal (and including a copy of
the most current version of the agreement or proposal relating
to such Holly Superior Proposal or Frontier Superior Proposal,
as applicable (or, if no such written proposal exists, a written
summary of the material terms and conditions of such Holly
Superior Proposal or Frontier Superior Proposal, as
applicable)), (3) at least five business days have elapsed
following the Non-Withdrawing Partys receipt of such
Withdrawal Notice (it being understood that any amendment or
modification to any Acquisition Proposal that is the basis for
such proposed action shall require a new Withdrawal Notice and a
new five business day period) and (4) if requested by the
Non-Withdrawing Party, the Withdrawing Party has negotiated in
good faith with the Non-Withdrawing Party during such five
business day period (as extended pursuant to clause (3)
above) with respect to any changes to this Agreement proposed by
the Non-Withdrawing Party during such period. In determining
whether to give a Withdrawal Notice or take the actions
specified in the prior sentence, the Holly Board or Frontier
Board, as applicable, shall in good faith take into account any
changes to the terms of this Agreement proposed by the
Non-Withdrawing Party, and the Withdrawing Party shall not
terminate this Agreement in accordance with Section 7.3(c)
or Section 7.4(c), as applicable, with respect to a Holly
Superior Proposal or a Frontier Superior Proposal, as
applicable, unless, prior to the effectiveness of such
termination, the board of directors of the Withdrawing Party
shall have determined in good faith (after consultation with its
outside legal counsel) that, notwithstanding any such changes to
the terms of this Agreement proposed by the Non-Withdrawing
Party, the failure to make a Superior Proposal Adverse
Recommendation Change would be inconsistent with their fiduciary
duties under applicable law. Holly and Frontier shall each be
required to comply with its obligations under
Section 5.4(a) whether or not its Board of Directors
withdraws, modifies, withholds or changes its recommendation
with respect to the matters described in Section 5.4(a) to
be submitted to their respective stockholders or declares the
advisability of any other offer or proposal. Any disclosure by
Holly or Frontier relating to a Holly Acquisition Proposal (in
the case of Holly) or a Frontier Acquisition Proposal (in the
case of Frontier) shall be deemed to be an action specified in
this Section 5.4(b) by Holly or Frontier, as applicable,
unless the Holly Board or Frontier Board, as applicable,
reaffirms in such disclosure its recommendation with respect to
the matters described in Section 5.4(a) to be submitted to
their respective stockholders. It is understood that any
violation of the restrictions set forth in this
Section 5.4(b) by any director, officer, employee, agent or
representative (including financial or legal advisor or
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other retained representative) of either party or any of its
Subsidiaries will be deemed to be a breach of this
Section 5.4(b) by such party.
(c) The Holly Board has approved and declared advisable an
amendment to Hollys certificate of incorporation in the
form attached hereto as Exhibit B (the
Amendment) to, among other things, increase
the number of authorized shares under its certificate of
incorporation and to change its corporate name at the Effective
Time in accordance with Section 5.15(f), and resolved to
recommend the approval and adoption of the Amendment to the
holders of Holly Common Stock. In addition, the Holly Board will
approve and declare advisable an amendment to the Holly
Corporation Long-Term Incentive Compensation Plan to increase
the number of authorized shares of Holly Common Stock available
for issuance under the Holly Corporation Long-Term Incentive
Compensation Plan to a reasonable number of shares taking into
account the transactions contemplated by this Agreement, subject
to the consummation of the Merger, and will resolve to recommend
the approval and adoption of such amendment to the holders of
Holly Common Stock. Holly shall use its reasonable best efforts
to take all action necessary in accordance with applicable law
and its certificate of incorporation and bylaws to obtain such
approvals at the Holly stockholders meeting referred to in
Section 5.4(a); provided, however, that in no event shall
obtaining approval of such proposals be a condition precedent to
the Closing of the transactions contemplated by this Agreement.
(d) Promptly following the execution and delivery of this
Agreement by each of the parties hereto, Holly, as the sole
shareholder of Merger Sub, will approve this Agreement.
Section 5.5 FILINGS;
REASONABLE BEST EFFORTS.
(a) Subject to the terms and conditions herein provided,
Holly and Frontier shall:
(i) promptly (but in any event within 15 business days from
the date of this Agreement) make their respective filings under
the HSR Act with respect to the Merger and thereafter shall
promptly make any other required submissions under the HSR Act;
(ii) use their reasonable best efforts to satisfy the
conditions to closing in Article 6 (including, in the case of
Holly, obtaining the opinion described in Section 6.2(b)
and, in the case of Frontier, obtaining the opinion described in
Section 6.3(b)) as promptly as practicable and to cooperate
with one another in (1) determining which filings are
required to be made prior to the Effective Time with, and which
consents, approvals, permits or authorizations are required to
be obtained prior to the Effective Time from, governmental or
regulatory authorities of the United States, the several states,
and foreign jurisdictions in connection with the execution and
delivery of this Agreement and the consummation of the Merger
and the transactions contemplated hereby; and (2) timely
making all such filings and timely seeking all such consents,
approvals, permits or authorizations;
(iii) promptly notify each other of any communication
concerning this Agreement or the Merger to that party from any
governmental authority and permit the other party to review in
advance any proposed communication concerning this Agreement or
the Merger to any governmental entity;
(iv) not agree to participate in any meeting or discussion
with any governmental authority in respect of any filings,
investigation or other inquiry concerning this Agreement or the
Merger unless it consults with the other party in advance and,
to the extent permitted by such governmental authority, gives
the other party the opportunity to attend and participate
thereat;
(v) furnish the other party with copies of all
correspondence, filings and communications (and memoranda
setting forth the substance thereof) between them and their
Affiliates and their respective representatives on the one hand,
and any government or regulatory authority or members or their
respective staffs on the other hand, with respect to this
Agreement and the Merger (other than copies of their respective
filings under the HSR Act); and
(vi) furnish the other party with such necessary
information and reasonable assistance as such other parties and
their respective Affiliates may reasonably request in connection
with their preparation of necessary filings, registrations or
submissions of information to any governmental or regulatory
authorities, including any filings necessary or appropriate
under the provisions of the HSR Act.
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(b) Without limiting Section 5.5(a) and subject to
Section 5.5(c), Frontier and Holly shall:
(i) each use its reasonable best efforts to avoid the entry
of, or to have vacated or terminated, any decree, order or
judgment that would restrain, prevent or delay the Closing,
including defending through litigation on the merits any claim
asserted in any court by any party; and
(ii) each use its reasonable best efforts to avoid or
eliminate each and every impediment under any antitrust,
competition or trade regulation law that may be asserted by any
governmental entity with respect to the Merger so as to enable
the Closing to occur as soon as reasonably possible.
(c) Neither Frontier nor Holly shall, without the other
partys prior written consent, commit to any divestitures,
licenses, hold separate arrangements or similar matters,
including covenants affecting business operating practices (or
allow its Subsidiaries to commit to any divestitures, licenses,
hold separate arrangements or similar matters) in connection
with the transactions contemplated under this Agreement, but the
parties shall commit or consent to, and shall use reasonable
efforts to effect (and shall cause their Subsidiaries to commit
or consent to and use reasonable efforts to effect), any such
divestitures, licenses, hold separate arrangements or similar
matters as any governmental entity shall request if such
divestitures, licenses, hold separate arrangements or similar
matters are required by any such governmental entity as a
condition to resolving such governmental entitys
objections to the Merger or obtaining its approval of the Merger
and are contingent upon consummation of the Merger; provided
that, notwithstanding anything to the contrary in this
Section 5.5(c) or the remainder of this Agreement, neither
Frontier, Holly nor any of their respective Subsidiaries shall
be required to agree (with respect to (x) Frontier or its
Subsidiaries or (y) Holly or its Subsidiaries) to any
divestitures, licenses, hold separate arrangements or similar
matters, including covenants affecting business operating
practices, if such divestitures, licenses, arrangements or
similar matters, individually or in the aggregate, would
materially impair the business operations of Holly, Frontier and
their Subsidiaries, taken as a whole, as combined in the manner
currently intended by the parties.
Section 5.6 INSPECTION. From
the date of this Agreement to the Effective Time, Holly and
Frontier shall allow all designated officers, attorneys,
accountants and other representatives of the other party
reasonable access at all reasonable times upon reasonable notice
to the records and files, correspondence, audits and properties,
as well as to all information relating to commitments,
contracts, titles and financial position, or otherwise
pertaining to the business and affairs of Holly and its
Subsidiaries or Frontier and its Subsidiaries, including
inspection of such properties; provided that no investigation
pursuant to this Section 5.6 shall affect any
representation or warranty given by any party hereunder, and
provided further that notwithstanding the provision of
information or investigation by any party, no party shall be
deemed to make any representation or warranty except as
expressly set forth in this Agreement. Notwithstanding the
foregoing, no party shall be required to provide any information
which it reasonably believes it may not provide to any other
party by reason of applicable law, rules or regulations, which
that party reasonably believes constitutes information protected
by attorney/client privilege, or which it is required to keep
confidential by reason of contract or agreement with third
parties. The parties hereto will make reasonable and appropriate
substitute disclosure arrangements under circumstances in which
the restrictions of the preceding sentence apply. Holly and
Frontier agree that they will not, and will cause their
representatives not to, use any information obtained pursuant to
this Section 5.6 for any purpose unrelated to the
consummation of the transactions contemplated by this Agreement.
All nonpublic information obtained pursuant to this
Section 5.6 shall be governed by the Mutual Confidentiality
Agreement dated January 17, 2011 between Frontier and Holly
(the Confidentiality Agreement).
Section 5.7 PUBLICITY. Holly
and Frontier will consult with each other and will mutually
agree upon any press releases or public announcements pertaining
to this Agreement or the transactions contemplated hereby and
shall not issue any such press releases or make any such public
announcements prior to such consultation and agreement, except
as may be required by applicable law or by obligations pursuant
to any listing agreement with any national securities exchange,
in which case the party proposing to issue such press release or
make such public announcement shall use its reasonable best
efforts to consult in good faith with the other party before
issuing any such press releases or making any such public
announcements.
Section 5.8 REGISTRATION
STATEMENT. As promptly as reasonably practicable
following the date of this Agreement, Frontier and Holly shall
cooperate in preparing and each shall cause to be filed with the
SEC mutually acceptable joint proxy materials (the
Proxy Statement/Prospectus) and Frontier and
Holly shall prepare,
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and Holly shall file with the SEC, a Registration Statement on
Form S-4
under the Securities Act (the Registration
Statement). The Proxy Statement/Prospectus will be
included as a prospectus in and will constitute a part of the
Registration Statement as Hollys prospectus. Each of
Frontier and Holly shall use reasonable best efforts to have the
Proxy Statement/Prospectus cleared by the SEC and the
Registration Statement declared effective by the SEC and to keep
the Registration Statement effective as long as is necessary to
consummate the Merger and the transactions contemplated hereby.
Each of Frontier and Holly shall, as promptly as practicable
after receipt thereof, provide the other parties with copies of
any written comments, and advise each other of any oral
comments, with respect to the Proxy Statement/Prospectus or
Registration Statement received from the SEC. Frontier and Holly
shall cooperate and provide the other parties with a reasonable
opportunity to review and comment on any amendment or supplement
to the Proxy Statement/Prospectus and the Registration Statement
prior to filing such with the SEC, and each will provide each
other party with a copy of all such filings made with the SEC.
Notwithstanding any other provision herein to the contrary, no
amendment or supplement (including by incorporation by
reference) to the Proxy Statement/Prospectus or the Registration
Statement shall be made without the approval of both Frontier
and Holly, which approval shall not be unreasonably withheld or
delayed; provided that, with respect to documents filed by a
party hereto that are incorporated by reference in the
Registration Statement or Proxy Statement/Prospectus, this right
of approval shall apply only with respect to information
relating to the other party or its business, financial condition
or results of operations; and provided, further, that Frontier,
in connection with a change in the recommendation of the
Frontier Board as to the Merger, and Holly, in connection with a
change in the recommendation of the Holly Board as to the
Merger, may amend or supplement the Proxy Statement/Prospectus
or Registration Statement (including by incorporation by
reference) to effect such a change, and in such event, this
right of approval shall apply only with respect to information
relating to the other party or its business, financial condition
or results of operations, and shall be subject to the right of
each party to have its Board of Directors deliberations
and conclusions accurately described. Frontier will use
reasonable best efforts to cause the Proxy Statement/ Prospectus
to be mailed to Frontier shareholders, and Holly will use
reasonable best efforts to cause the Proxy Statement/Prospectus
to be mailed to Holly stockholders, in each case, as promptly as
practicable after the Registration Statement is declared
effective under the Securities Act. Each of Frontier and Holly
shall advise the other parties, promptly after it receives
notice thereof, of the time when the Registration Statement has
become effective, the issuance of any stop order, the suspension
of the qualification of the Holly Common Stock issuable in
connection with the Merger for offering or sale in any
jurisdiction, or any request by the SEC for amendment of the
Proxy Statement/Prospectus or the Registration Statement. If, at
any time prior to the Effective Time, any information relating
to Frontier or Holly, or any of their respective Affiliates,
officers or directors, is discovered by Frontier or Holly and
such information should be set forth in an amendment or
supplement to any of the Registration Statement or the Proxy
Statement/Prospectus so that any of such documents would not
include any misstatement of a material fact or omit to state any
material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading,
the party hereto discovering such information shall promptly
notify the other parties and, to the extent required by law,
rules or regulations, an appropriate amendment or supplement
describing such information shall be promptly filed with the SEC
and disseminated to the stockholders of Frontier and Holly.
Section 5.9 LISTING
APPLICATION. Holly shall use its reasonable best
efforts to cause the Holly Common Stock to be issued in the
Merger to be approved for listing on the NYSE prior to the
Effective Time, subject to official notice of issuance. Holly
shall promptly prepare and submit to the NYSE a listing
application covering the shares of Holly Common Stock issuable
in the Merger and shares issuable pursuant to Holly Stock
Options.
Section 5.10 EXPENSES. Whether
or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such
expenses, except (a) that Frontier and Holly shall each pay
and bear one-half of (i) each regulatory filing,
notification, registration or similar fee required to be paid by
any party in connection with this Agreement and the transactions
contemplated hereby under the HSR Act, the Securities Act, the
Exchange Act and other applicable laws, rules and regulations of
any governmental authority and (ii) any fees and expenses
(excluding each partys internal costs and fees and
expenses of attorneys, accountants and financial and other
advisors) incurred in respect of printing, filing and mailing of
the Proxy Statement/Prospectus and the Registration Statement.
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Section 5.11 INDEMNIFICATION
AND INSURANCE.
(a) From and after the Effective Time, Holly shall as
provided in this Section 5.11 cause Surviving Corporation
to indemnify, defend and hold harmless to the fullest extent
permitted under applicable law each person who is immediately
prior to the Effective Time, or has been at any time prior to
the Effective Time, an officer or director of Frontier or Holly
(or any Subsidiary or division thereof), and each person who
immediately prior to the Effective Time is serving or prior to
the Effective Time has served at the request of Frontier or
Holly as a director, officer, trustee or fiduciary of another
corporation, partnership, joint venture, trust, pension or other
employee benefit plan or enterprise (individually, an
Indemnified Party and, collectively, the
Indemnified Parties) against all losses,
claims, damages, liabilities, costs or expenses (including
attorneys fees), judgments, fines, penalties and amounts
paid in settlement in connection with any claim, action, suit,
proceeding or investigation arising out of or pertaining to acts
or omissions, or alleged acts or omissions, by them in their
capacities as such, whether commenced, asserted or claimed
before or after the Effective Time, to the fullest extent such
indemnification by Surviving Corporation is permitted under
applicable law. In the event of any such claim, action, suit,
proceeding or investigation (an Action),
(i) Holly shall cause Surviving Corporation to pay, as
incurred, the fees and expenses of counsel selected by the
Indemnified Party, which counsel shall be reasonably acceptable
to Holly, in advance of the final disposition of any such Action
to the fullest extent permitted by applicable law, and, if
required, upon receipt of any undertaking required by applicable
law, and (ii) Holly will, and will cause Surviving
Corporation to, cooperate in the defense of any such matter;
provided, however, neither Holly nor Surviving Corporation shall
be liable for any settlement effected without its written
consent (which consent shall not be unreasonably withheld or
delayed), and provided further that neither Holly nor Surviving
Corporation shall be obligated pursuant to this
Section 5.11(a) to pay the fees and disbursements of more
than one counsel, except for one local counsel, for all
Indemnified Parties in any single Action, unless, in the good
faith judgment of any of the Indemnified Parties, there is or
may be a conflict of interest between two or more of such
Indemnified Parties, in which case there may be separate counsel
for each similarly situated group. With respect to any
determination of whether an Indemnified Party is entitled to
indemnification by Surviving Corporation under this
Section 5.11, the Indemnified Party shall have the right,
as contemplated by the WBCA, to require that such determination
be made by special legal counsel selected by the Indemnified
Party and approved by Surviving Corporation (which approval
shall not be unreasonably withheld), and who has not otherwise
performed material services for Frontier, Holly or the
Indemnified Party within the last three (3) years.
(b) The rights to indemnification hereunder, including
provisions relating to advances of expenses incurred in defense
of any action or suit, in the certificate of incorporation or
articles of incorporation, bylaws and any indemnification
agreement of Frontier, Holly and their respective Subsidiaries
with respect to matters occurring through the Effective Time,
shall survive the Merger and shall continue in full force and
effect.
(c) For a period of six (6) years after the Effective
Time, Holly shall, or shall cause Surviving Corporation to,
maintain officers and directors liability insurance
covering each person who is immediately prior to the Effective
Time, or has been at any time prior to the Effective Time, an
officer or director of Frontier (or any Subsidiary or division
thereof), and each person who immediately prior to the Effective
Time is serving or prior to the Effective Time has served at the
request of Frontier, as a director, officer, trustee or
fiduciary of another corporation, partnership, joint venture,
trust, pension or other employee benefit plan or enterprise
(individually, a Frontier Indemnified Party
and, collectively, the Frontier Indemnified
Parties) who are or at any time prior to the Effective
Time were covered by their respective officers and
directors liability insurance (D&O
Insurance) policies on terms substantially no less
advantageous to the Frontier Indemnified Parties than such
existing insurance with respect to acts or omissions, or alleged
acts or omissions, prior to the Effective Time (whether claims,
actions or other proceedings relating thereto are commenced,
asserted or claimed before or after the Effective Time);
provided that, after the Effective Time, Surviving Corporation
shall not be required to pay annual premiums in excess of 250%
of the annual premium amount payable by Frontier for the policy
year including the date of this Agreement (the amount of which
premium is set forth in Schedule 5.11(c) of the Frontier
Disclosure Letter), but in such case shall purchase as much
coverage as reasonably practicable for such amount. Holly shall
have the right to cause coverage to be extended under the
D&O Insurance of Frontier by obtaining a six-year
tail policy on terms and conditions substantially no
less advantageous than Frontiers existing D&O
Insurance, and such tail policy shall satisfy the
provisions of this Section 5.11(c).
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(d) The rights of each Indemnified Party hereunder shall be
in addition to any other rights such Indemnified Party may have
under the certificate of incorporation, articles of
incorporation or bylaws of Frontier or Holly, as applicable, or
any of their respective Subsidiaries, under the DGCL or WBCA, or
otherwise. The provisions of this Section 5.11 shall
survive the consummation of the Merger, are expressly intended
to benefit each of the Indemnified Parties, and may not be
amended or terminated after the Effective Time in a manner
contrary to the interest of an Indemnified Party without the
consent of such Indemnified Party.
(e) Notwithstanding any other provisions hereof, the
obligations of Frontier, Holly and Surviving Corporation
contained in this Section 5.11 shall be binding upon the
successors and assigns of Holly and Surviving Corporation. In
the event Holly or Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or
merges into any other Person or (ii) transfers all or
substantially all of its properties and assets to any Person,
then and in each such case, proper provision shall be made so
that the successors and assigns of Holly or Surviving
Corporation, as the case may be, shall assume and honor the
obligations set forth in this Section 5.11.
Section 5.12 EMPLOYEE
BENEFITS.
(a) After the Effective Time, Holly shall honor, and shall
cause its Subsidiaries to honor, all employee benefit plans,
contracts, agreements and commitments of Frontier or any of its
Subsidiaries maintained or entered into by Frontier or any of
its Subsidiaries prior to the date of this Agreement that apply
to any current or former employee or current or former director
of Frontier or any of its Subsidiaries, as applicable; provided,
however, that, except as otherwise expressly provided in this
Section 5.12, Holly reserves the right to modify, and to
cause any of its Subsidiaries to modify, any such plan,
contract, agreement or commitment in accordance with its terms.
(b) Notwithstanding the provisions of Section 5.12(a):
(i) Except as provided in Section 2.3 and
Section 5.1 (pertaining to the Frontier Stock Plan),
Frontier and Holly agree that for the period beginning at the
Effective Time and ending December 31, 2011 (or such later
date as may be determined by Holly), Surviving Corporation shall
assume and maintain all Frontier Plans as in effect immediately
prior to the Effective Time, and shall not amend any such plan
to reduce any benefit provided under any such plan. With respect
to any Frontier Plan that is a qualified defined contribution
plan providing for discretionary employer contributions, such
contributions for 2011 shall be made at approximately the same
percentage of compensation (or employee or salary deferral
contribution in the case of a discretionary matching
contribution) of eligible participants as was made to such plan
for 2010. Notwithstanding the foregoing, contributions may be
adjusted to the extent necessary to comply with applicable law
and regulations.
(ii) Each employee of Frontier or any of its Subsidiaries
who becomes an employee of Holly, Surviving Corporation, or any
of their respective Subsidiaries as of the Effective Time
without any gap in employment shall be credited with service
with Frontier, any of its Subsidiaries, or any of their
predecessors, for purposes of eligibility, vesting and benefit
determination under any employee benefit plan or policy of Holly
or Surviving Corporation. Notwithstanding the foregoing, this
Section 5.12(b)(ii) shall not apply to the determination of
accrual service under any defined benefit pension plan as
defined in Section 3(35) of ERISA (regardless whether such
plan is qualified under Code Section 401(a)) that did not
cover the employee immediately prior to the Effective Time, and
shall not apply to the determination of the right to receive, or
the amount of, any retiree or other post-retirement medical
service (except for COBRA medical continuation coverage as
described in Section 4980B of the Code or any arrangement
covering the employee prior to the Effective Time).
(iii) Subject to compliance with applicable local law,
nothing in this Section 5.12(b) shall be construed to
restrict the ability of any entity to modify or terminate any
plan (at or after the Effective Time) with respect to persons
employed at operations outside the United States.
(iv) Nothing in this Section 5.12(b) shall be
construed as a contract of employment, and this
Section 5.12(b) shall not give any employee the right to be
retained in the employ of any entity. Nothing in this
Section 5.12(b) shall be construed to require the provision
of coverage or benefits to an employee following termination of
employment except to the extent such coverage or benefits is
otherwise required pursuant to the terms of the applicable plan
or arrangement or by applicable law.
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(c) Prior to the Effective Time, the parties shall cause
the Holly Board, or a duly authorized committee of
non-employee directors thereof, to authorize the
conversion of Frontier Stock Options into Holly Stock Options
(and the acquisition of shares of Holly Common Stock
thereunder), the conversion of Frontier Stock Units into Holly
Stock Units, and the conversion of Frontier Restricted Stock
into Holly Restricted Stock, in each case in accordance with
Section 2.3 at the Effective Time, and to take such other
actions as may be necessary to authorize the events contemplated
in Section 2.3. Such resolution shall set forth the name of
the applicable insiders for purposes of
Section 16 of the Exchange Act, the number of securities to
be acquired by each such individual, and that the approval is
being granted to exempt the transaction under
Rule 16b-3
of the Exchange Act. Holly shall reserve for issuance a number
of shares of Holly Common Stock at least equal to the number of
shares of Holly Common Stock that will be subject to Holly Stock
Options and Holly Stock Units and each award of Holly Restricted
Stock as a result of the actions contemplated by
Section 2.3. As soon as practicable following the Effective
Time, Holly shall file a registration statement on
Form S-8
(or any successor form, or if
Form S-8
is not available, other appropriate forms) with respect to the
shares of Holly Common Stock subject to such Holly Stock
Options, Holly Stock Units and Holly Restricted Stock and shall
maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as
such Holly Stock Options, Holly Stock Units and Holly Restricted
Stock remain outstanding.
(d) Any other provisions hereof to the contrary
notwithstanding, the provisions of this Section 5.12 do not
cover, and shall not be deemed for the benefit of, any Frontier
Represented Employees.
(e) Prior to or simultaneously with the execution of this
Agreement and effective at the Effective Time,
(i) Frontier, Holly and each of the Name Executives shall
enter into a written retention agreement as to certain matters
related to the Merger (the Frontier Retention
Agreements) and (ii) Holly and each of Matthew P.
Clifton, Bruce R. Shaw and David L. Lamp shall enter into a
waiver agreement as to certain matters related to the Merger
(the Holly Waiver Agreements), which Frontier
Retention Agreements and Holly Waiver Agreements shall not be
amended or modified without the prior written consent of the
other party.
Section 5.13 TAX
QUALIFICATION.
(a) Holly shall use its reasonable best efforts to, and to
cause each of its Subsidiaries to, (i) cause the Merger to
qualify as a reorganization within the meaning of
Section 368(a) of the Code and (ii) obtain the opinion
of counsel referred to in Section 6.2(b), including the
execution of the officers certificates referred to therein
and in Section 6.3(b). Holly shall use its reasonable best
efforts not to, and shall use its reasonable best efforts not to
permit any of its Subsidiaries to, take any action (including
any action otherwise permitted by Section 5.1(a)) that
would prevent or impede the Merger from qualifying as a
reorganization within the meaning of
Section 368(a) of the Code.
(b) Frontier shall use its reasonable best efforts to, and
to cause each of its Subsidiaries to, (i) cause the Merger
to qualify as a reorganization within the meaning of
Section 368(a) of the Code and (ii) obtain the opinion
of counsel referred to in Section 6.3(b), including the
execution of the officers certificates referred to therein
and in Section 6.2(b). Frontier shall use its reasonable
best efforts not to, and shall use its reasonable best efforts
not to permit any of its Subsidiaries to, take any action
(including any action otherwise permitted by
Section 5.1(b)) that would prevent or impede the Merger
from qualifying as a reorganization within the
meaning of Section 368(a) of the Code.
Section 5.14 DIVIDENDS. Frontier
shall coordinate with Holly respecting the declaration, setting
of record dates and payment dates of dividends on the shares of
Frontier Common Stock so that holders of shares of Frontier
Common stock do not receive dividends on both shares of Frontier
Common Stock and Holly Common Stock received in the Merger in
respect of any calendar quarter or fail to receive a dividend on
shares of Frontier Common Stock or Holly Common Stock received
in the Merger in respect of any calendar quarter.
Section 5.15 GOVERNANCE
MATTERS; HEADQUARTERS; COMPANY NAME.
(a) On or prior to the Effective Time, the bylaws of Holly
shall be amended and restated in the form attached hereto as
Exhibit C.
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(b) Holly shall take all requisite action, effective as of
the Effective Time, (i) to cause the size of the Board of
Directors of Holly (the Holly Board) to be
fourteen directors and (ii) to cause the directors on the
Holly Board to be comprised of (x) seven directors chosen
by the current Frontier directors (at least six of whom shall be
independent for purposes of the rules of the NYSE (as the same
may be modified prior to the Effective Time)) (the
Frontier Designees), and (y) seven
directors chosen by the current Holly directors (at least six of
whom shall be independent for purposes of the rules of the NYSE
(as the same may be modified prior to the Effective Time)) (the
Holly Designees), each to serve for a term
expiring on the earlier of his or her death, resignation or
removal or the next annual meeting of stockholders and, despite
the expiration of his or her term, until his or her successor
has been elected and qualified or there is a decrease in the
size of the Holly Board. If at any time prior to the Effective
Time, any such board designee becomes unable or unwilling to
serve as a director of Holly at the Effective Time, then the
party that designated such individual shall designate another
individual to serve in such individuals place.
(c) Holly shall take all requisite action, effective as of
the Effective time, to cause each then standing committee of the
Holly Board to be comprised of equal numbers of Frontier
Designees and Holly Designees. If at any time prior to the
Effective Time, any such committee designee becomes unable or
unwilling to serve as a director of Holly at the Effective Time,
then the party that designated such individual as a board
designee shall designate another individual to serve in such
individuals place on the applicable committee(s).
(d) Holly shall take all requisite action, effective as of
the Effective Time, to cause (i) Matthew P. Clifton to
become the Executive Chairman of the Board of Holly,
(ii) Michael C. Jennings to become President and Chief
Executive Officer of Holly, (iii) Doug S. Aron to become
the Executive Vice President and Chief Financial Officer of
Holly, (iv) David L. Lamp to become the Chief Operating
Officer of Holly, and (v) Bruce R. Shaw to become the
Senior Vice President of Strategy and Corporate Development of
Holly (the persons specified in clauses (ii) and (iii), the
Named Executives). If at any time prior to
the Effective Time, any of the Named Executives becomes unable
or unwilling to serve in such capacity at the Effective Time,
then Frontier and Holly shall mutually agree on another
individual to serve in such capacity.
(e) The executive headquarters for Holly shall be located
in the Dallas, Texas area.
(f) Immediately upon consummation of the Merger, Holly
shall change its name to HollyFrontier Corporation, subject to
obtaining approval from Hollys stockholders to amend
Hollys certificate of incorporation for such purpose.
Section 5.16 NO
CONTROL OF OTHER PARTYS BUSINESS. Nothing
contained in this Agreement shall give Holly, directly or
indirectly, the right to control or direct Frontiers
operations or give Frontier, directly or indirectly, the right
to control or direct Hollys operations prior to the
Effective Time. Prior to the Effective Time, each of Frontier
and Holly shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision
over its respective operations.
Section 5.17 ACCOUNTANTS
LETTERS. Each of Holly and Frontier shall use
reasonable best efforts to cause to be delivered to the other
party letters from their respective independent accountants, one
letter dated as of the date the Registration Statement is
declared effective (and one dated as of the date any
post-effective amendment is declared effective if a
post-effective amendment is required), in form and substance
reasonably satisfactory to the other party and customary in
scope and substance for comfort letters delivered by independent
public accountants in connection with registration statements
similar to the Registration Statement and any post-effective
amendment, if required; provided that the failure of any such
letter to be delivered shall not result in a failure of a
condition to the Merger.
Section 5.18 CREDIT
AGREEMENT. From the date of this Agreement until
the Effective Time, each of Holly and Frontier shall, and shall
use their reasonable best efforts to cause each of their
respective officers, directors, employees, advisors, attorneys,
accountants and representatives to, jointly cooperate in good
faith to negotiate, prepare and enter into, as of the Closing
Date, a Holly credit facility (which may be an amendment and
restatement of, or amendment to, the Holly Credit Agreement) to
be effective at the Effective Time for the benefit of Holly and
its Subsidiaries (other than the MLP Entities) and Frontier and
its Subsidiaries, which credit facility may be entered into with
Holly and/or
Frontiers existing lenders or new lenders and shall
contain the terms set forth in Schedule 5.18 of the Holly
Disclosure Letter (the New Bank Facility). In
connection with entering into the New
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Bank Facility, each of Holly and Frontier shall (a) cause
its appropriate officers and employees to be available, on a
customary basis and on reasonable advance notice, to meet with
prospective lenders in meetings, presentations and due diligence
sessions, (b) keep the other party reasonably informed
about negotiations and other discussions with prospective
lenders regarding the New Bank Facility, (c) promptly provide
the other party with copies of drafts of any term sheets,
commitment letters, agreements or other documents or
communications regarding the New Bank Facility, (d) provide
reasonable advance notice of any meetings with prospective
lenders regarding the New Bank Facility and provide the other
party an opportunity to attend such meetings, (e) take
commercially reasonable actions necessary to permit the
prospective lenders involved to evaluate such partys and
its Subsidiaries current assets, cash management and
accounting systems, policies and procedures relating thereto for
the purposes of establishing collateral arrangements as of the
Effective Time, and (f) use reasonable best efforts to
assist the other party to obtain waivers, consents, estoppels
and approvals from counterparties to material leases,
encumbrances and contracts to which such party or any Subsidiary
of such party is a party and to arrange with prospective lenders
discussions, to the extent reasonably necessary, with
counterparties to material leases, encumbrances and contracts
that will be in full force and effect as of the Effective Time;
provided, however, that Holly shall take the lead in
consultation with Frontier in the arrangement and negotiation of
the New Bank Facility; provided further, however, that neither
party nor any Subsidiary of such party shall be required to
incur any liability in connection with the New Bank Facility
prior to the Effective Time.
Section 5.19 CERTAIN
CONSENTS. Frontier shall use its reasonable best
efforts to obtain prior to Closing each consent set forth on
Schedule 5.19.
ARTICLE 6
CONDITIONS
Section 6.1 CONDITIONS
TO EACH PARTYS OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each party
to effect the Merger shall be subject to the fulfillment or
waiver in writing by mutual agreement of the parties at or prior
to the Closing Date of the following conditions:
(a) (i) The Holly Requisite Vote shall have been
obtained and (ii) the Frontier Requisite Vote shall have
been obtained.
(b) (i) The waiting period (and any extension thereof)
applicable to the consummation of the Merger shall have expired
or been terminated under the HSR Act, and (ii) any
mandatory waiting period or required consent under any other
applicable United States federal or state competition or
antitrust law or regulation shall have expired or been obtained
except where the failure to observe such waiting period or
obtain a consent referred to in this clause (ii) would not
reasonably be expected to delay or prevent the consummation of
the Merger or have a material adverse effect on the expected
benefits of the transactions contemplated by this Agreement to
Holly.
(c) None of the parties hereto shall be subject to any
decree, order or injunction of a United States federal or state
court of competent jurisdiction, which prohibits the
consummation of the Merger, and no statute, rule or regulation
shall have been enacted by any governmental authority which
prohibits or makes unlawful the consummation of the Merger.
(d) The Registration Statement shall have become effective
and no stop order with respect thereto shall be in effect and no
proceedings for that purpose shall have been commenced or
threatened by the SEC.
(e) The shares of Holly Common Stock to be issued pursuant
to the Merger and the shares of Holly Common Stock reserved for
issuance pursuant to Holly Stock Options (including those shares
of Holly Common Stock to be issued upon conversion of the
Frontier Restricted Stock in accordance with Section 2.3)
shall have been authorized for listing on the NYSE, subject to
official notice of issuance.
(f) The New Bank Facility shall have been executed,
delivered and become effective, subject only to the consummation
of the Merger.
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Section 6.2 CONDITIONS
TO OBLIGATION OF HOLLY TO EFFECT THE MERGER. The
obligation of Holly to effect the Merger shall be subject to the
fulfillment or waiver in writing by Holly at or prior to the
Closing Date of the following conditions:
(a) (i) Frontier shall have performed in all material
respects its covenants and agreements contained in this
Agreement required to be performed on or prior to the Closing
Date, (ii) the representations and warranties of Frontier
contained in this Agreement (other than as contained in
Section 4.3) (A) to the extent qualified by Frontier
Material Adverse Effect shall be true and correct and
(B) to the extent not qualified by Frontier Material
Adverse Effect shall be true and correct, except, in the case of
clause (B), where the failure of such representations and
warranties to be so true and correct, individually or in the
aggregate, has not had, and would not reasonably be expected to
have, a Frontier Material Adverse Effect, in each case in this
clause (ii) as of the date of this Agreement and as of the
Closing Date (except for representations and warranties made as
of a specified date, which need be true and correct only as of
the specified date) and (iii) the representations and
warranties of Frontier contained in Section 4.3 shall be
true and correct in all respects (other than de minimis
inaccuracies) as of the date of this Agreement and as of the
Closing Date (except for representations and warranties made as
of a specified date, which need be true and correct only as of
the specified date), and Holly shall have received a certificate
of Frontier, executed on its behalf by its Chairman of the
Board, President and Chief Executive Officer, dated the Closing
Date, certifying to such effect.
(b) Holly shall have received the opinion of
Vinson & Elkins L.L.P. or other nationally recognized
tax counsel, acting as counsel to Holly, in form and substance
reasonably satisfactory to Holly, on the basis of certain facts,
representations and assumptions set forth in such opinion, dated
the Closing Date, a copy of which shall be furnished to
Frontier, to the effect that (i) the Merger will be treated
for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code and (ii) each of
Holly, Frontier and Merger Sub will be a party to the
reorganization within the meaning of Section 368(b) of the
Code. In rendering such opinion, such counsel shall be entitled
to receive and rely upon customary representations of officers
of Holly, Merger Sub and Frontier as to such matters as such
counsel may reasonably request.
Section 6.3 CONDITIONS
TO OBLIGATION OF FRONTIER TO EFFECT THE
MERGER. The obligations of Frontier to effect the
Merger shall be subject to the fulfillment or waiver in writing
by Frontier at or prior to the Closing Date of the following
conditions:
(a) (i) Holly shall have performed in all material
respects its covenants and agreements contained in this
Agreement required to be performed on or prior to the Closing
Date, (ii) the representations and warranties of Holly
contained in this Agreement (other than as contained in
Section 3.3) (A) to the extent qualified by Holly
Material Adverse Effect shall be true and correct and
(B) to the extent not qualified by Holly Material Adverse
Effect shall be true and correct, except, in the case of clause
(B), where the failure of such representations and warranties to
be so true and correct, individually or in the aggregate, has
not had, and would not reasonably be expected to have, a Holly
Material Adverse Effect, in each case in this clause (ii)
as of the date of this Agreement and as of the Closing Date
(except for representations and warranties made as of a
specified date, which need be true and correct only as of the
specified date) and (iii) the representations and
warranties of Holly contained in Section 3.3 shall be true
and correct in all respects (other than de minimis inaccuracies)
as of the date of this Agreement and as of the Closing Date
(except for representations and warranties made as of a
specified date, which need be true and correct only as of the
specified date), and Frontier shall have received a certificate
of Holly, executed on its behalf by its Chairman of the Board,
President and Chief Executive Officer, dated the Closing Date,
certifying to such effect.
(b) Frontier shall have received the opinion of Andrews
Kurth LLP or other nationally recognized tax counsel, acting as
counsel to Frontier, in form and substance reasonably
satisfactory to Frontier, on the basis of certain facts,
representations and assumptions set forth in such opinion, dated
the Closing Date, a copy of which will be furnished to Holly, to
the effect that (i) the Merger will be treated for federal
income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code and (ii) no gain or loss
will be recognized by Frontier or the shareholders of Frontier
to the extent that they receive Holly Common Stock in exchange
for Frontier Common Stock pursuant to the Merger. In rendering
such opinion, such counsel shall be entitled to receive and rely
upon customary representations of officers of Frontier, Holly
and Merger Sub as to such matters as such counsel may reasonably
request.
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ARTICLE 7
TERMINATION
Section 7.1 TERMINATION
BY MUTUAL CONSENT. This Agreement may be
terminated at any time prior to the Effective Time by the mutual
written agreement of Holly and Frontier approved by action of
their respective Boards of Directors in their respective
discretion for any reason.
Section 7.2 TERMINATION
BY FRONTIER OR HOLLY. At any time prior to the
Effective Time, this Agreement may be terminated by Holly or
Frontier, in either case by action of the Holly Board or
Frontier Board, respectively, if:
(a) the Merger shall not have been consummated by
September 30, 2011; provided, however, that if the only
condition to closing that has not been satisfied by such date is
the one set forth in Section 6.1(f) and one of the parties
is not then in material breach of its obligations under
Section 5.18, then such date shall automatically be
extended to the Final Outside Date; provided, further, that the
right to terminate this Agreement pursuant to this
clause (a) shall not be available to any party whose
failure or whose Affiliates failure to perform or observe
in any material respect any of its obligations under this
Agreement in any manner shall have been the principal cause of,
or resulted in, the failure of the Merger to occur on or before
such date; or
(b) the Holly Requisite Vote shall not have been obtained
at a meeting (including adjournments and postponements) of
Hollys stockholders that shall have been duly convened for
the purpose of obtaining the Holly Requisite Vote; or
(c) the Frontier Requisite Vote shall not have been
obtained at a meeting (including adjournments and postponements)
of Frontiers shareholders that shall have been duly
convened for the purpose of obtaining the Frontier Requisite
Vote;
(d) a United States federal or state court of competent
jurisdiction or United States federal or state governmental,
regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action
(including the enactment of any statute, rule, regulation,
decree or executive order) permanently restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling
or other action (including the enactment of any statute, rule,
regulation, decree or executive order) shall have become final
and non-appealable; provided, however, that the party seeking to
terminate this Agreement pursuant to this clause (d) shall
have complied with Section 5.5 and with respect to other
matters not covered by Section 5.5 shall have used its
reasonable best efforts to remove such injunction, order or
decree; or
(e) the condition to closing set forth in
Section 6.1(f) has not been satisfied by the later of
September 30, 2011 or the date that is sixty days after the
last of the conditions set forth in Sections 6.1(a), (b),
(d) and (e) has been satisfied (such later date, the
Final Outside Date); provided, however, that
the right to terminate this Agreement pursuant to this
clause (e) shall not be available to any party whose
failure or whose Affiliates failure to perform or observe
in any material respect any of its obligations under
Section 5.18 shall have been the principal cause of, or
resulted in, the failure of the condition set forth in
Section 6.1(f) to be satisfied.
Section 7.3 TERMINATION
BY HOLLY. At any time prior to the Effective
Time, this Agreement may be terminated by Holly, by action of
the Holly Board, if:
(a) (i) there has been a breach by Frontier of any
representation, warranty, covenant or agreement set forth in
this Agreement or if any representation or warranty of Frontier
shall have become untrue, in either case such that the
conditions set forth in Section 6.2(a) would not be
satisfied and (ii) such breach is not curable, or, if
curable, is not cured within 30 days after written notice
of such breach is given to Frontier by Holly; provided, however,
that the right to terminate this Agreement pursuant to this
Section 7.3(a) shall not be available to Holly if it, at
such time, is in material breach of any representation,
warranty, covenant or agreement set forth in this Agreement such
that the conditions set forth in Section 6.3(a) shall not
be satisfied;
(b) prior to obtaining the Frontier Requisite Vote, the
Frontier Board shall have made an Adverse Recommendation
Change; or
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(c) prior to obtaining the Holly Requisite Vote, the Holly
Board shall have made a Superior Proposal Adverse
Recommendation Change pursuant to Section 5.4(b) (it being
understood that Holly shall not have the right to terminate this
Agreement pursuant to this Section 7.3(c) unless and until
Holly shall have paid Frontier all amounts due under
Section 7.5(a)).
Section 7.4 TERMINATION
BY FRONTIER. At any time prior to the Effective
Time, this Agreement may be terminated by Frontier, by action of
the Frontier Board, if:
(a) (i) there has been a breach by Holly of any
representation, warranty covenant or agreement set forth in this
Agreement or if any representation or warranty of Holly shall
have become untrue, in either case such that the conditions set
forth in Section 6.3(a) would not be satisfied and
(ii) such breach is not curable, or, if curable, is not
cured within 30 days after written notice of such breach is
given by Frontier to Holly; provided, however, that the right to
terminate this Agreement pursuant to this Section 7.4(a)
shall not be available to Frontier if it, at such time, is in
material breach of any representation, warranty, covenant or
agreement set forth in this Agreement such that the conditions
set forth in Section 6.2(a) shall not be satisfied;
(b) prior to obtaining the Holly Requisite Vote, the Holly
Board shall have made an Adverse Recommendation Change; or
(c) prior to obtaining the Frontier Requisite Vote, the
Frontier Board shall have made a Superior Proposal Adverse
Recommendation Change pursuant to Section 5.4(b) (it being
understood that Frontier shall not have the right to terminate
this Agreement pursuant to this Section 7.4(c) unless and
until Frontier shall have paid Holly all amounts due under
Section 7.5(b)).
Section 7.5 EFFECT
OF TERMINATION.
(a) If this Agreement is terminated
(i) by Holly or Frontier pursuant to either
Section 7.2(a) (only to the extent that the Holly
stockholders meeting described in Section 5.4(a) has
not been held) or Section 7.2(b) and, in either case, if
(A) prior to the time of the Holly Requisite Vote not being
obtained at a duly held meeting of the Holly stockholders called
for that purpose (including adjournments and postponements) or
prior to the termination of this Agreement, a Holly Acquisition
Proposal shall have become publicly known or an intention to
make a Holly Acquisition Proposal has been publicly announced or
has otherwise become publicly known and (B) within twelve
(12) months after such termination Holly enters into a
definitive agreement to consummate a Holly Acquisition Proposal
or a Holly Acquisition Proposal is consummated; provided,
however, that for the purpose of this Section 7.5(a)(i),
all references in the definition of Holly Acquisition Proposal
to 10% shall instead be deemed to refer to
40%;
(ii) by Frontier pursuant to Section 7.4(b);
(iii) by Holly pursuant to Section 7.3(c);
(iv) by Frontier pursuant to Section 7.4(a) as a
result of Hollys material breach of its obligations under
Section 5.2; or
(v) by Frontier pursuant to Section 7.2(e) as a result
of Hollys material breach of its obligations under
Section 5.18;
then Holly shall pay Frontier the Holly Termination Amount (as
defined below) and, in addition, reimburse Frontier for all
expenses incurred by Frontier in connection with this Agreement
up to the Reimbursement Maximum Amount (as defined below). All
payments under this Section 7.5(a) shall be made in cash by
wire transfer to an account designated by Frontier (x) in
the case of clause (ii), (iv) or (v) above, on the
business day immediately following such termination, (y) in
the case of clause (iii) above, prior to such termination,
and (z) in the case of
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clause (i) above, on the date of the first to occur of the
events referred to in clause (i)(B) above. The term
Holly Termination Amount shall mean
$80,000,000. The term Reimbursement Maximum
Amount shall mean $12,000,000. In addition, Holly
shall reimburse Frontier for all expenses incurred by Frontier
in connection with this Agreement up to the Reimbursement
Maximum Amount if this Agreement has been terminated pursuant to
Section 7.2(b) even if Frontier is not entitled to any
Holly Termination Amount under this Section 7.5(a). Holly
acknowledges that the agreements contained in this
Section 7.5(a) are an integral part of the transactions
contemplated by this Agreement, and that, without these
agreements, Frontier would not enter into this Agreement;
accordingly, if Holly fails promptly to pay any amount due
pursuant to this Section 7.5(a), and, in order to obtain
such payment, Frontier commences a suit which results in a
judgment against Holly for the payment set forth in this
Section 7.5(a), Holly shall pay to Frontier its costs and
expenses (including attorneys fees) in connection with
such suit, together with interest on the Holly Termination
Amount and other amounts to be reimbursed to Frontier under this
Section 7.5(a) from the date payment was required to be
made until the date of such payment at the prime rate of Union
Bank, N.A. in effect on the date such payment was required to be
made plus one percent (1%). If this Agreement is terminated
pursuant to a provision that calls for a payment to be made
under this Section 7.5(a), it shall not be a defense to
Hollys obligation to pay hereunder that this Agreement
could have been terminated under a different provision or could
have been terminated at an earlier or later time.
(b) If this Agreement is terminated
(i) by Holly or Frontier pursuant to either
Section 7.2(a) (only to the extent that the Frontier
shareholders meeting described in Section 5.4(a) has
not been held) or Section 7.2(c) and, in either case, if
(A) prior to the time of the Frontier Requisite Vote not
being obtained at a duly held meeting of the Frontier
shareholders called for that purpose (including adjournments and
postponements) or prior to the termination of this Agreement, a
Frontier Acquisition Proposal shall have become publicly known
or an intention to make a Frontier Acquisition Proposal has been
publicly announced or has otherwise become publicly known and
(B) within twelve (12) months after such termination
Frontier enters into a definitive agreement to consummate a
Frontier Acquisition Proposal or a Frontier Acquisition Proposal
is consummated; provided, however, that for the purpose of this
Section 7.5(b)(i), all references in the definition of
Frontier Acquisition Proposal to 10% shall instead
be deemed to refer to 40%;
(ii) by Holly pursuant to Section 7.3(b);
(iii) by Frontier pursuant to Section 7.4(c);
(iv) by Holly pursuant to Section 7.3(a) as a result
of Frontiers material breach of its obligations under
Section 5.3; or
(v) by Holly pursuant to Section 7.2(e) as a result of
Frontiers material breach of its obligations under
Section 5.18;
then Frontier shall pay Holly the Frontier Termination Amount
(as defined below) and, in addition, reimburse Holly for all
expenses incurred by Holly in connection with this Agreement up
to the Reimbursement Maximum Amount. All payments under this
Section 7.5(b) shall be made in cash by wire transfer to an
account designated by Holly (x) in the case of clause (ii),
(iv) or (v) above, on the first business day
immediately following such termination, (y) in the case of
clause (iii) above, prior to such termination, and
(z) in the case of clause (i) above, on the date of
the first to occur of the events referred to in clause (i)(B)
above. The term Frontier Termination Amount
shall mean $80,000,000. In addition, Frontier shall reimburse
Holly for all expenses incurred by Holly in connection with this
Agreement up to the Reimbursement Maximum Amount if this
Agreement has been terminated pursuant to Section 7.2(c)
even if Holly is not entitled to any Frontier Termination Amount
under this Section 7.5(b). Frontier acknowledges that the
agreements contained in this Section 7.5(b) are an integral
part of the transactions contemplated by this Agreement, and
that, without these agreements, Holly would not enter into this
Agreement; accordingly, if Frontier fails promptly to pay any
amount due pursuant to this Section 7.5(b), and, in order
to obtain such payment, Holly commences a suit which results in
a judgment against Frontier for the payment set forth in this
Section 7.5(b), Frontier shall pay to Holly its costs and
expenses (including attorneys fees) in connection with
such suit, together with interest on the Frontier Termination
Amount and other amounts to be reimbursed to Holly under this
Section 7.5(b) from the date payment was required to be
made until the date of such payment at the prime rate of
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Bank of America, N.A. in effect on the date such payment was
required to be made plus one percent (1%). If this Agreement is
terminated pursuant to a provision that calls for a payment to
be made under this Section 7.5(b), it shall not be a
defense to Frontiers obligation to pay hereunder that this
Agreement could have been terminated under a different provision
or could have been terminated at an earlier or later time.
Section 7.6 EFFECT
OF VOTE. Any right to terminate this Agreement
provided under Section 7.1, Section 7.2(a),
Section 7.2(d), Section 7.3(a) or Section 7.4(a)
hereunder shall be effective notwithstanding whether the Holly
Requisite Vote or the Frontier Requisite Vote has been obtained.
Any right to terminate this Agreement provided under
Section 7.2(b) or Section 7.4(b) hereunder shall be
effective notwithstanding whether the Frontier Requisite Vote
has been obtained. Any right to terminate this Agreement
provided under Section 7.2(c) or Section 7.3(b)
hereunder shall be effective notwithstanding whether the Holly
Requisite Vote has been obtained.
ARTICLE 8
GENERAL
PROVISIONS
Section 8.1 SURVIVAL. (a) In
the event of termination of this Agreement and the abandonment
of the Merger pursuant to Article 7, all rights and
obligations of the parties hereto shall terminate, except the
obligations of the parties pursuant to Section 5.10 and
Section 7.5, and except for the provisions of this
Section 8.1, Section 8.2, Section 8.3,
Section 8.4, Section 8.6, Section 8.7,
Section 8.8, Section 8.9, Section 8.10,
Section 8.11, Section 8.12, Section 8.13,
Section 8.14 and Section 8.18 and the Confidentiality
Agreement, which provisions shall survive the termination of
this Agreement and shall remain in full force and effect;
provided that nothing herein shall relieve any party from any
liability for any willful and material breach by such party of
any of its covenants or agreements set forth in this Agreement
and, subject to Section 8.14, all rights and remedies of
such nonbreaching party under this Agreement in the case of such
a breach, at law or in equity, shall be preserved. The parties
hereto agree that, if this Agreement has been terminated in a
manner giving rise to a payment obligation under
Section 7.5, any remedy or amount payable pursuant to
Section 7.5 or Section 5.10 shall be the sole and
exclusive remedy of the party receiving payment thereunder
unless the other party is in willful and material breach of any
of its representations, warranties, covenants or agreements set
forth in this Agreement.
(b) None of the representations, warranties and agreements
in this Agreement or in any instrument delivered pursuant to
this Agreement shall survive the consummation of the Merger;
provided, however, that Article 2, this Article 8 and
the agreements contained in Section 5.10 through
Section 5.13 shall survive the consummation of the Merger,
unless otherwise provided herein.
Section 8.2 NOTICES. Any
notice required to be given hereunder shall be sufficient if in
writing, and sent by courier service (with proof of service),
hand delivery, certified or registered mail (return receipt
requested and first-class postage prepaid) or electronic mail
(with electronic confirmation of delivery), addressed as follows:
(a) if to Frontier:
Frontier Oil Corporation
10000 Memorial Drive, Suite 600
Houston, Texas 77024
Attn: J. Currie Bechtol
Email: cbechtol@frontieroil.com
with a copy to:
Andrews Kurth LLP
600 Travis Street
Suite 4200
Houston, Texas 77002
Attn: Robert V. Jewell
Melinda Brunger
Email: bjewell@andrewskurth.com
mbrunger@andrewskurth.com
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(b) if to Holly or Merger Sub:
Holly Corporation
100 Crescent Court, Suite 1600
Dallas, Texas 75201
Attn: Denise McWatters
Email: Denise.McWatters@hollycorp.com
with a copy to:
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attn: Alan J. Bogdanow
Christopher R. Rowley
Email: abogdanow@velaw.com
crowley@velaw.com
or to such other address as any party shall specify by written
notice so given, and such notice shall be deemed to have been
delivered as of the date so telecommunicated, personally
delivered, emailed or mailed.
Section 8.3
ASSIGNMENT; BINDING EFFECT. Neither this
Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto
(whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding
sentence, this Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective
successors and assigns.
Section 8.4 ENTIRE
AGREEMENT; NO THIRD PARTY BENEFICIARIES; NO OTHER
REPRESENTATIONS AND WARRANTIES.
(a) This Agreement (which constitutes a Definitive
Transaction Agreement as defined in the Confidentiality
Agreement), the Confidentiality Agreement (other than
Sections 3 and 9 thereof, which are hereby suspended and
shall be of no further force or effect during the term of this
Agreement and after the Effective Time, but shall come back into
effect if this Agreement is terminated without the consummation
of the Merger), the exhibits and schedules to this Agreement,
the Holly Disclosure Letter, the Frontier Disclosure Letter and
any documents delivered by the parties in connection herewith
constitute the entire agreement among the parties with respect
to the subject matter hereof and supersede all prior agreements
and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Agreement
shall be binding upon any party hereto unless made in writing
and signed by all parties hereto. Notwithstanding anything to
the contrary in this Agreement and for the avoidance of doubt,
the parties acknowledge that (i) nothing in this Agreement
is binding on MLP or its Subsidiaries (the MLP
Entities), which entities are not parties to this
Agreement, and that there shall be no recourse against any MLP
Entity or any director, officer, general partner, partner,
member, managing member, shareholder or person in similar
capacity of any MLP Entity for any breach of any provision of
this Agreement that applies to the activities of any MLP Entity,
and (ii) Holly and Merger Sub shall be responsible for any
breach of this Agreement based on any actions taken or not taken
by any MLP Entity.
(b) This Agreement (which constitutes a Definitive
Transaction Agreement as defined in the Confidentiality
Agreement), the Confidentiality Agreement (other than
Sections 3 and 9 thereof, which are hereby suspended and
shall be of no further force or effect during the term of this
Agreement and after the Effective Time, but shall come back into
effect if this Agreement is terminated without the consummation
of the Merger), the exhibits and schedules to this Agreement,
the Holly Disclosure Letter, the Frontier Disclosure Letter and
any documents delivered by the parties in connection herewith
are not intended to confer upon any Person other than the
parties any rights or remedies other than (i) as
specifically provided in Section 5.11, (ii) the right
of Frontier, on behalf of its shareholders, to pursue damages
and other relief, including equitable relief, in the event of
Hollys or Merger Subs willful and material breach of
any of its representations and warranties in this Agreement or
willful and material breach of any of its covenants and
agreements in this Agreement, which right is hereby acknowledged
and agreed by Holly and Merger Sub and (iii) the right of
Holly, on behalf of its stockholders, to pursue damages and
other relief,
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including equitable relief, in the event of Frontiers
willful and material breach of any of its representations and
warranties in this Agreement or willful and material breach of
any of its covenants and agreements in this Agreement, which
right is hereby acknowledged and agreed by Frontier; provided,
however, that the rights granted pursuant to clauses (ii)
and (iii) shall be enforceable on behalf of holders of
Frontier Common Stock only by Frontier in its sole and absolute
discretion or on behalf of holders of Holly Common Stock only by
Holly in its sole and absolute discretion, it being understood
and agreed that any and all interests in such claims shall
attach to such shares of Frontier Common Stock or Holly Common
Stock, as applicable, and subsequently trade and transfer
therewith and, consequently, any damages, settlements or other
amounts recovered or received by Frontier or Holly, as
applicable, with respect to such claims (net of expenses
incurred by Frontier or Holly, as applicable, in connection
therewith) may, in Frontiers or Hollys, as
applicable, sole and absolute discretion, be (x) as
applicable, distributed, in whole or in part, by Frontier to the
holders of shares of Frontier Common Stock of record as of any
date determined by Frontier or by Holly to the holders of shares
of Holly Common Stock of record as of any date determined by
Holly or (y) as applicable, retained by Frontier for the
use and benefit of Frontier on behalf of its shareholders in any
manner Frontier deems fit or retained by Holly for the use and
benefit of Holly on behalf of its stockholders in any manner
Holly deems fit.
(c) EACH PARTY HERETO AGREES THAT, EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT,
NEITHER FRONTIER NOR HOLLY MAKES ANY OTHER REPRESENTATIONS OR
WARRANTIES AND EACH HEREBY DISCLAIMS ANY OTHER REPRESENTATIONS
OR WARRANTIES MADE BY ITSELF OR ANY OF ITS OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, FINANCIAL AND LEGAL ADVISORS OR OTHER
REPRESENTATIVES, WITH RESPECT TO THE EXECUTION AND DELIVERY OF
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY,
NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO ANY OTHER PARTY OR
ANY OTHER PARTYS REPRESENTATIVES OF ANY DOCUMENT OR OTHER
INFORMATION WITH RESPECT TO ANY ONE OR MORE OF THE FOREGOING.
Section 8.5 AMENDMENTS. This
Agreement may be amended by the parties hereto, by action taken
or authorized by the Holly Board and the Frontier Board, at any
time before or after approval of matters presented in connection
with the Merger by the stockholders of Holly or Frontier, but
after any such stockholder approval, no amendment shall be made
which by law requires the further approval of stockholders
without obtaining such further approval. This Agreement may not
be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
Section 8.6 GOVERNING
LAW; WAIVER OF JURY TRIAL. THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE
LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD TO ITS CONFLICT OF
LAW PRINCIPLES) EXCEPT TO THE EXTENT THE PROVISIONS OF THE WBCA
ARE MANDATORILY APPLICABLE. EACH PARTY ACKNOWLEDGES AND AGREES
THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS
LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT.
Section 8.7 COUNTERPARTS. This
Agreement may be executed in several counterparts, each of which
shall be deemed to be an original, but all of which together
shall be deemed to be one and the same instrument.
Section 8.8 HEADINGS. Headings
of the Articles and Sections of this Agreement are for the
convenience of the parties only, and shall be given no
substantive or interpretative effect whatsoever.
Section 8.9 INTERPRETATION. In
this Agreement:
(a) Unless the context otherwise requires, words describing
the singular number shall include the plural and vice versa, and
words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and
partnerships and vice versa.
(b) The words include, includes and
including are not limiting.
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(c) The phrase to the knowledge of and similar
phrases relating to (i) knowledge of Holly shall mean the
actual knowledge of its Chief Executive Officer; President;
Senior Vice President and Chief Financial Officer; Senior Vice
President, Supply and Marketing; and Vice President, General
Counsel and Secretary and (ii) knowledge of Frontier shall
mean the actual knowledge of its Chairman of the Board,
President and Chief Executive Officer; Executive Vice President
and Chief Financial Officer; Vice President, General Counsel and
Secretary; Vice President Refining Operations; and
Vice President Commercial Operations.
(d) Affiliate means, with respect to any
Person, any other Person, whether or not for profit, that
controls, is controlled by, or is under common control with the
first Person. For purposes of this definition,
control means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the
ownership of voting securities, through other voting rights, by
contract or otherwise.
(e) Controlled Affiliate means, with
respect to any Person, any other Person, whether or not for
profit, that is directly or indirectly controlled by the first
Person. For purposes of this definition, control
means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities,
through other voting rights, by contract or otherwise.
(f) EBITDA means earnings before
interest, taxes, depreciation and amortization, in each case as
such items are determined in accordance with GAAP, as shown on
the applicable publicly-filed financial statements.
(g) Material Adverse Effect with respect
to Holly or Frontier shall mean any change, effect, occurrence,
state of facts or development that, individually or in the
aggregate, materially and adversely affects (A) the
business, assets and liabilities (taken together), results of
operations or financial condition of such Person and its
Subsidiaries on a consolidated basis or (B) the ability of
such Person to consummate the transactions contemplated by this
Agreement or fulfill the conditions to closing set forth in
Article 6, except to the extent (in the case of
clause (A) above) that such change, effect, occurrence,
state of facts or development results from (I) general
economic, regulatory or political conditions or changes therein
in the United States or the other countries in which such party
operates; (II) financial or securities market fluctuations
or conditions; (III) changes in, or events or conditions
affecting, the petroleum refining industry generally;
(IV) the announcement or pendency of the Merger or
compliance with the terms and conditions of Section 5.1
hereof; (V) stockholder class action or other litigation
arising from allegations of a breach of fiduciary duty relating
to this Agreement; (VI) any failure, in and of itself, by
such Person to meet any internal or published projections,
forecasts, estimates or predictions in respect of revenues,
earnings or other financial or operating metrics for any period
(it being understood that the facts or occurrences giving rise
to or contributing to such failure may be deemed to constitute,
or be taken into account in determining whether there has been
or will be, a Material Adverse Effect); (VII) any change,
in and of itself, in the market price or trading volume of such
Persons securities or in such Persons credit rating
(it being understood that the facts or occurrences giving rise
to or contributing to such change may be deemed to constitute,
or be taken into account in determining whether there has been
or will be, a Material Adverse Effect); or (VIII) any
change in applicable law, regulation or GAAP (or authoritative
interpretation thereof), except, in the case of clauses (I),
(II), (III) and (VIII) only to the extent such
changes, effects, occurrences, state of facts or developments
affect such Person disproportionately relative to other
participants in the petroleum refining industry. Holly
Material Adverse Effect and Frontier Material
Adverse Effect mean a Material Adverse Effect with
respect to Holly and Frontier, respectively.
(h) MLP Credit Agreement means the
Second Amended and Restated Credit Agreement dated
February 14, 2011, among Holly Energy Partners
Operating, L.P., Wells Fargo Bank, N.A., as administrative
agent, the other agents party thereto and the other financial
institutions party thereto as lenders.
(i) Person or person
means an individual, a corporation, a limited liability company,
a partnership, an association, a trust or other entity or
organization, including any government and any agency or
instrumentality thereof.
(j) Subsidiary when used with respect to
any party means any corporation or other organization, whether
incorporated or unincorporated, of which such party directly or
indirectly owns or controls at least a majority of the
securities or other interests having by their terms ordinary
voting power to elect a majority of the board of directors
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or others performing similar functions with respect to such
corporation or other organization, or any organization of which
such party directly or indirectly is a general partner.
Section 8.10 WAIVERS. Except
as provided in this Agreement, no action taken pursuant to this
Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any
representations, warranties, covenants or agreements contained
in this Agreement. The waiver by any party hereto of a breach of
any provision hereunder shall not operate or be construed as a
waiver of any prior or subsequent breach of the same or any
other provision hereunder. The failure of any party to this
Agreement to assert any of its rights under this Agreement shall
not constitute a waiver of such rights.
Section 8.11 SEVERABILITY. Any
term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the
remaining terms and provisions of this Agreement or affecting
the validity or enforceability of any of the terms or provisions
of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision
shall be interpreted to be only so broad as is enforceable.
Section 8.12 SPECIFIC
ENFORCEMENT. The parties acknowledge and agree
that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached, and that
monetary damages, even if available, would not be an adequate
remedy therefor and therefore fully intend for specific
performance to be the principal remedy for breaches of this
Agreement. It is accordingly agreed that, prior to the
termination of this Agreement pursuant to Article 7, the
parties (on behalf of themselves and the third-party
beneficiaries of this Agreement) shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the performance of terms and
provisions of this Agreement in any court referred to in
Section 8.13(a), without proof of actual damages, this
being in addition to any other remedy to which they are entitled
at law or in equity. The parties further agree not to assert
that a remedy of specific enforcement is unenforceable, invalid,
contrary to law or inequitable for any reason, nor to object to
a remedy of specific performance on the basis that a remedy of
monetary damages would provide an adequate remedy for any such
breach. Each party further acknowledges and agrees that the
agreements contained in this Section 8.12 are an integral
part of the transactions contemplated by this Agreement and
that, without these agreements, the other parties would not
enter into this Agreement. Each party further agrees that no
other party hereto or any other Person shall be required to
obtain, furnish or post any bond or similar instrument in
connection with or as a condition to obtaining any remedy
referred to in this Section 8.12, and each party hereto
irrevocably waives any right it may have to require the
obtaining, furnishing or posting of any such bond or similar
instrument.
Section 8.13 JURISDICTION. Each
of the parties hereto hereby (a) agrees that any claim,
suit, action or other proceeding, directly or indirectly,
arising out of, under or relating to this Agreement, its
negotiation or the transactions contemplated by this Agreement,
will be heard and determined in the Chancery Court of the State
of Delaware (and each agrees that no such claim, action, suit or
other proceeding relating to this Agreement will be brought by
it or any of its Affiliates except in such court), subject to
any appeal, provided that if jurisdiction is not then available
in the Chancery Court of the State of Delaware, then any such
claim, suit, action or other proceeding may be brought in any
Delaware state court or any federal court located in the State
of Delaware and (b) irrevocably and unconditionally submits
to the exclusive jurisdiction of any such court in any such
claim, suit, action or other proceeding and irrevocably and
unconditionally waives the defense of an inconvenient forum to
the maintenance of any such claim, suit, action or other
proceeding. Each of the parties hereto further agrees that, to
the fullest extent permitted by applicable law, service of any
process, summons, notice or document by U.S. registered
mail to such Persons respective address set forth in
Section 8.2 will be effective service of process for any
claim, action, suit or other proceeding in Delaware with respect
to any matters to which it has submitted to jurisdiction as set
forth above in the immediately preceding sentence. The parties
hereto hereby agree that a final judgment in any such claim,
suit, action or other proceeding will be conclusive, subject to
any appeal, and may be enforced in other jurisdictions by suit
on the judgment or in any other manner provided by applicable
law. In connection with any such proceeding that
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results in a judgment, the non-prevailing party will pay the
prevailing party its reasonable costs and expenses (including
attorneys fees and expenses) incurred in connection with
such proceeding.
Section 8.14 LIMITATION
ON DAMAGES. IN NO EVENT SHALL ANY PARTY BE LIABLE
IN RESPECT OF THIS AGREEMENT FOR PUNITIVE OR EXEMPLARY DAMAGES.
Section 8.15 OBLIGATION
OF MERGER SUB. Whenever this Agreement requires
Merger Sub (or any successors) to take any action prior to the
Effective Time, such requirement shall be deemed to include an
undertaking on the part of Holly to cause such action to be
taken and a guarantee of the performance thereof.
Section 8.16 EXTENSION;
WAIVER. At any time prior to the Effective Time,
each party may, to the extent legally allowed, (a) extend
the time for the performance of any of the obligations or other
acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant
hereto and (c) waive compliance with any of the agreements
or conditions for the benefit of such party contained herein.
Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
Section 8.17 DEFINITIONS. The
following capitalized terms are used in this document with the
meanings set forth in the indicated sections of this Agreement:
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Action
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Section 5.11(a)
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Adverse Recommendation Change
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Section 5.4(b)
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Affiliate
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Section 8.9(d)
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Agreement
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First Sentence
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Amendment
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Section 5.4(c)
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Articles of Merger
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Section 1.2(b)
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Closing
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Section 1.2(a)
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Closing Date
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Section 1.2(a)
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Code
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Recitals
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Confidentiality Agreement
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Section 5.6
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Controlled Affiliate
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Section 8.9(e)
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DGCL
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Section 3.21
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D&O Insurance
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Section 5.11(c)
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Disclosure Letter
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Section 8.18
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DRULPA
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Section 3.4(b)
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EBITDA
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Section 8.9(f)
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ERISA
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Section 3.11(b)
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Effective Time
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Section 1.2(b)
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Environmental Laws
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Section 3.13(a)(i)
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Environmental Permits
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Section 3.13(a)(iii)
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Exchange Act
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Section 3.6(b)
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Exchange Agent
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Section 2.2(a)
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Exchange Fund
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Section 2.2(a)
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Exchange Ratio
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Section 2.1(c)
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Executive Stock Agreements
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Section 2.3(b)
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Final Outside Date
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Section 7.2(e)
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Foreign Corrupt Practices Act
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Section 3.25(a)
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Frontier
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First sentence
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Frontier Acquisition Proposal
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Section 5.3(a)
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Frontier Bargaining Agreements
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Section 4.12(a)
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Frontier Board
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Section 2.3(b)
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Frontier Certificate
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Section 2.1(d)
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Frontier Common Stock
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Recitals
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Frontier Designees
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Section 5.15(b)
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Frontier Disclosure Letter
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Article 4
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Frontier Indemnified Parties
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Section 5.11(c)
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Frontier Indemnified Party
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Section 5.11(c)
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Frontier Material Adverse Effect
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Section 8.9(g)
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Frontier Material Contracts
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Section 4.19(a)
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Frontier Permits
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Section 4.5
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Frontier Plans
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Section 4.11(b)
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Frontier Preferred Stock
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Section 4.3
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Frontier Real Properties
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Section 4.13(a)(i)
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Frontier Reports
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Section 4.7
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Frontier Requisite Vote
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Section 4.20
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Frontier Restricted Stock
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Section 2.3(b)
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Frontier Retention Agreements
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Section 5.12(e)
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Frontier RSU
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Section 2.3(b)
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Frontier Stock Option
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Section 2.3(a)
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Frontier Stock Plan
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Section 4.3
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Frontier Stock Unit
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Section 2.3(b)
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Frontier Superior Proposal
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Section 5.3(a)
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Frontier Termination Amount
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Section 7.5(b)
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GAAP
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Section 3.7
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group
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Section 5.2(a)
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Hazardous Materials
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Section 3.13(a)(ii)
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Holly
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First Sentence
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Holly Acquisition Proposal
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Section 5.2(a)
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Holly Bargaining Agreements
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Section 3.12(a)
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Holly Board
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Section 5.15(b)
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Holly Common Certificates
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Section 2.2(a)
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Holly Common Stock
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Recitals
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Holly Designees
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Section 5.15(b)
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Holly Disclosure Letter
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Article 3
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Holly Material Adverse Effect
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Section 8.9(g)
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Holly Material Contracts
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Section 3.19(a)
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Holly Permits
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Section 3.5
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Holly Plans
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Section 3.11(b)
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Holly Preferred Stock
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Section 3.3
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Holly Real Properties
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Section 3.13(a)(v)
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Holly Reports
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Section 3.7
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Holly Requisite Vote
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Section 3.20
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Holly Restricted Stock
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Section 2.3(c)
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Holly Stock Option
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Section 2.3(a)
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Holly Stock Plans
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Section 3.3
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Holly Superior Proposal
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Section 5.2(a)
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A-58
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Holly Termination Amount
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Section 7.5(a)
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Holly Waiver Agreements
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Section 5.12(e)
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HSR Act
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Section 3.6(b)
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Indemnified Parties
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Section 5.11(a)
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Indemnified Party
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Section 5.11(a)
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Intellectual Property
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Section 3.14(a)
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IRS
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Section 3.10(b)
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Liens
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Section 3.4(a)
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Material Adverse Effect
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Section 8.9(g)
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material weakness
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Section 3.24(c)
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Merger
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Recitals
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Merger Consideration
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Section 2.1(d)
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Merger Sub
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First sentence
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Merger Sub Common Stock
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Section 2.1(a)
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MLP
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Section 3.4(a)
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MLP Credit Agreement
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Section 8.9(h)
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MLP Entities
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Section 8.4
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MLP Equity Interests
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Section 3.4(b)
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Named Executives
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Section 5.15(d)
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New Bank Facility
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Section 5.18
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Non-Withdrawing Party
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Section 5.4(b)
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NYSE
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Section 2.7
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Offsite Non-Holly Real Properties
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Section 3.13(a)(vi)
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Offsite Non-Frontier Real Properties
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Section 4.13(a)(ii)
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Other Fiduciary Adverse Recommendation Change
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Section 5.4(b)
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Partnership Agreement
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Section 3.4(b)
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PBGC
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Section 3.11(g)
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Pension Plan
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Section 3.11(f)
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Person
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Section 8.9(i)
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principal executive officer
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Section 3.24(a)
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principal financial officer
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Section 3.24(a)
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Proxy Statement/Prospectus
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Section 5.8
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Registration Statement
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Section 5.8
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Regulatory Filings
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Section 3.6(b)
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Reimbursement Maximum Amount
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Section 7.5(a)
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Release
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Section 3.13(a)(iv)
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Restricted Stock Agreements
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Section 2.3(b)
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Sarbanes-Oxley Act
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Section 3.7
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SEC
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Section 3.7
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Securities Act
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Section 3.6(b)
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Subsidiary
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Section 8.9(j)
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Superior Proposal Adverse Recommendation Change
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Section 5.4(b)
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Surviving Corporation
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Section 1.1
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Tax
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Section 3.10(e)
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Tax Return
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Section 3.10(e)
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A-59
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Taxes
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Section 3.10(e)
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UNEV
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Section 3.4(a)
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WARN
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Section 3.12(e)
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WBCA
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Section 1.1
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Withdrawal Notice
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Section 5.4(b)
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Withdrawing Party
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Section 5.4(b)
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Wyoming Secretary
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Section 1.2(b)
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Section 8.18 DISCLOSURE
LETTERS. The parties acknowledge and agree that
(a) the Holly Disclosure Letter and the Frontier Disclosure
Letter (each a Disclosure Letter) may include
certain items and information solely for informational purposes
for the convenience of the other party and (b) the
disclosure by either party of any matter in its Disclosure
Letter shall not be deemed to constitute an acknowledgment by
such party that the matter is required to be disclosed by the
terms of this Agreement or that the matter is material. If any
Disclosure Letter discloses in any section or schedule thereof
an item or information in such a way as to make its relevance to
the disclosure required by another section or schedule thereof
readily apparent, the matter shall be deemed to have been
disclosed in such other section or schedule, notwithstanding the
omission of an appropriate cross-reference to such other section
or schedule.
[SIGNATURE
PAGE FOLLOWS]
A-60
IN WITNESS WHEREOF, the parties have executed this Agreement and
caused the same to be duly delivered on their behalf on the day
and year first written above.
HOLLY CORPORATION
|
|
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By:
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/s/ Matthew
P. Clifton
|
Name: Matthew P. Clifton
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Title:
|
Chief Executive Officer
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NORTH ACQUISITION, INC.
Name: Bruce R. Shaw
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Title:
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Sr. Vice President and CFO
|
FRONTIER OIL CORPORATION
Name: Mike Jennings
|
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Title:
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Chairman, President and Chief Executive
|
Officer
A-61
Exhibit A
THIRD
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
FRONTIER OIL CORPORATION
(Pursuant
to
Section 17-16-202
of the
Wyoming Business Corporation Act)
FRONTIER OIL CORPORATION (the
Corporation), a corporation organized
and existing under and by virtue of the Wyoming Business
Corporation Act (the WBCA), does
hereby certify as follows:
FIRST: The name of the Corporation is Frontier
Oil Corporation.
SECOND: The prior Restated Articles of Incorporation
of the Corporation were filed in Office of the Secretary of
State of the State of Wyoming (the Secretary of
State) on August 10, 1987 under the name
Wainoco Oil Corporation.
THIRD: These Third Amended and Restated Articles of
Incorporation, which restate, integrate and further amend the
Second Amended and Restated Articles of Incorporation of the
Corporation, as amended, were duly adopted in accordance with
Section 17-16-1003
of the WBCA.
FOURTH: These Third Amended and Restated Articles of
Incorporation shall become effective immediately upon their
filing with the Secretary of State.
FIFTH: The Second Amended and Restated Articles of
Incorporation of the Corporation, as amended, are hereby amended
and restated to read in its entirety as follows:
ARTICLE I
NAME
The name of the Corporation is Frontier Oil
Corporation (the Corporation).
ARTICLE II
REGISTERED
OFFICE AND REGISTERED AGENT
The registered office of the Corporation in the State of Wyoming
is 1720 Carey Avenue, Cheyenne, Wyoming 82001, and the name of
its registered agent in this state at such address is CT
Corporation System.
ARTICLE III
PURPOSE
The purpose for which the Corporation is organized is to engage
in any and all lawful business and activities for which
corporations may be organized under the Wyoming Business
Corporation Act (WBCA).
ARTICLE IV
CAPITALIZATION
Section 4.1 Authorized
Capital.
The aggregate number of shares of all classes of stock which the
corporation shall have authority to issue is 1,000 shares
of Common Stock no par value.
Exhibit A-1
Section 4.2 Common
Stock.
(a) The holders of shares of Common Stock shall be entitled
to vote upon all matters submitted to a vote of holders of
shares of Common Stock of the Corporation and shall be entitled
to one vote for each share of Common Stock held.
(b) The holders of shares of Common Stock shall be entitled
to receive such dividends (payable in cash, stock or otherwise)
as may be declared thereon by the Board of Directors at any time
and from time to time out of any funds of the Corporation
legally available therefor.
(c) In the event of any voluntary or involuntary
liquidation, dissolution or
winding-up
of the Corporation, after payment or provision for payment of
the debts and other liabilities of the Corporation, the holders
of shares of Common Stock shall be entitled to receive all of
the remaining assets of the Corporation available for
distribution to its shareholders, ratably in proportion to the
number of shares of Common Stock held by them. For purposes of
this paragraph (c), a liquidation, dissolution or
winding-up
of the Corporation shall not be deemed to be occasioned by or to
include (i) any consolidation or merger of the Corporation
with or into another corporation or other entity or (ii) a
sale, lease, exchange or conveyance of all or a part of the
assets of the Corporation.
ARTICLE V
DIRECTORS
Section 5.1 Number
and Term.
The number of directors of the Corporation shall from time to
time be fixed exclusively by the bylaws of the Corporation, as
the same may be amended from time to time (the
Bylaws).
Section 5.2 Limitation
of Personal Liability.
To the fullest extent now or hereafter permitted by the WBCA, no
person who is or was a director of the Corporation shall be
personally liable to the Corporation or its shareholders for
monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the
directors duty of loyalty to the Corporation or its
shareholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation
of law, (iii) under
Section 17-16-833
of the WBCA, or (iv) for any transaction from which the
director derived an improper personal benefit. No amendment to
or repeal of this Section 5.2 shall apply to or have any
effect on the liability of any director for or with respect to
acts or omissions occurring prior to such amendment or repeal.
ARTICLE VI
BYLAWS
The Board of Directors is expressly authorized and empowered to
adopt, alter, amend or repeal the Bylaws but only by the
affirmative vote of a majority of the number of directors then
in office.
ARTICLE VII
INDEMNIFICATION;
INSURANCE
Section 7.1 Indemnification
of Directors and Officers.
The Corporation shall indemnify, to the fullest extent permitted
by applicable law (as now or hereafter in effect) and pursuant
to the Bylaws, each person who is or was a director or officer
of the Corporation, and may indemnify each employee and agent of
the Corporation and all other persons whom the Corporation is
authorized to indemnify under the provisions of the WBCA, from
and against all expenses, liabilities or other matters arising
out of or in any way related to their status as such or their
acts, omissions or services rendered in such capacities.
Exhibit A-2
Section 7.2 Insurance.
The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability
asserted against him or her and incurred by him or her in any
such capacity, or arising out of his or her status as such,
whether or not the Corporation would have the power to indemnify
him or her against such liability.
[SIGNATURE
PAGE FOLLOWS]
Exhibit A-3
IN WITNESS WHEREOF, these Third Amended and Restated Articles of
Incorporation have been executed for and on behalf and in the
name of the Corporation by its duly authorized officer on
,
200 .
FRONTIER OIL CORPORATION
Name:
Exhibit A-4
Exhibit B
AMENDED
AND RESTATED
CERTIFICATE
OF INCORPORATION
OF
HOLLYFRONTIER
CORPORATION
HollyFrontier Corporation, a corporation organized and existing
under the laws of the State of Delaware (the
Corporation), hereby certifies as follows:
1. The name of the Corporation is HollyFrontier
Corporation, and the name under which the Corporation was
originally incorporated is GENERAL APPLIANCE CORPORATION.
The date of filing its original Certificate of Incorporation
with the Secretary of State was January 25, 1947.
2. This Amended and Restated Certificate of Incorporation
has been duly adopted and ratified in accordance with
Sections 242 and 245 of the General Corporation Law of the
State of Delaware, and restates and amends the text of the
Certificate of Incorporation as amended, supplemented and
restated heretofore, to read in its entirety as follows:
ARTICLE FIRST: The name of the Corporation shall
be HollyFrontier Corporation.
ARTICLE SECOND: The address of the registered
office of the Corporation in the State of Delaware is at 1209
Orange Street, in the City of Wilmington, County of New Castle.
The name of the Corporations registered agent at that
address is The Corporation Trust Company.
ARTICLE THIRD: The Corporation may engage in any
lawful activity for which corporations may be organized under
the General Corporation Law of Delaware.
ARTICLE FOURTH: The total number of shares of
stock which the Corporation shall have authority to issue is
Three Hundred Twenty Five Million (325,000,000) shares, of which
Five Million (5,000,000) shares having par value of One Dollar
($1.00) each, amounting in the aggregate to Five Million Dollars
($5,000,000), shall be Preferred Stock, and of which Three
Hundred Twenty Million (320,000,000) shares having par value of
One Cent ($0.01) each, amounting in the aggregate to Three
Million Two Hundred Thousand Dollars ($3,200,000), shall be
Common Stock.
The designations and the powers, preferences and rights, and the
qualifications, limitations
and/or
restrictions thereof shall be determined as follows:
PREFERRED
STOCK, $1.00 par value
Shares of Preferred Stock may be issued from time to time in one
or more series, each such series to have such distinctive
designation or title as may be fixed by the Board of Directors
prior to the issuance of any shares thereof. Each share of any
series of Preferred Stock shall be identical with all other
shares of such series, except as to the date from which
cumulative preferred dividends, if any, shall be cumulative. For
each such series, the Board of Directors shall determine, by
resolution or resolutions adopted prior to the issuance of any
shares thereof, the rights, preferences, limitations and
restrictions of shares of such series, including, without
limitation, rights, or limitations with respect to voting
powers, if any, redemption rights, if any, conversion rights, if
any, dividend rights and any preferences on liquidation.
COMMON
STOCK, $.01 par value
Subject to any preferences, qualifications, limitations, voting
rights and restrictions with respect to each class of the
capital stock of the Corporation having any preference or
priority over the Common Stock, the holders of the Common Stock
shall have and possess all rights appertaining to capital stock
of the Corporation.
Exhibit B-1
No holder of stock of any class of the Corporation shall be
entitled as of right to subscribe for, purchase or receive any
part of any new or additional shares of stock of any class,
whether now or hereafter authorized, or of bonds, debentures or
other evidences of indebtedness convertible into or exchangeable
for stock, but all such new or additional shares of stock of any
class, or bonds, debentures or other evidences of indebtedness
convertible into or exchangeable for stock, may be issued and
disposed of by the Board of Directors on such terms and for such
consideration, so far as may be permitted by law, and to such
person or persons as the Board of Directors in its absolute
discretion may deem advisable. Except as expressly provided
elsewhere in this Article Fourth, no vote of holders of
Preferred Stock or Common Stock shall be required in connection
with the designation or the issuance of any shares of any series
of any Preferred Stock authorized by and complying with the
conditions contained herein.
ARTICLE FIFTH: The number of directors of the
Corporation shall be fixed time to time by or in the manner
provided for in the By-Laws but shall never be less than three.
In case of any increase in the number of directors, the
additional directors may be elected by the directors then in
office or by the stockholders at any annual or special meeting.
Election of directors need not be by written ballot.
ARTICLE SIXTH: In furtherance and not in
limitation of the powers conferred by statute, the Board of
Directors is expressly authorized to make, alter, amend, and
repeal the By-Laws of the Corporation.
The By-Laws may confer powers on the Board of Directors in
addition to the foregoing and in addition to the powers and
authorities expressly conferred by statute.
ARTICLE SEVENTH: No director of the Corporation
shall be personally liable to the Corporation or any of its
stockholders for monetary damages for breach of such
directors duty as a director, except that a director shall
remain liable to the extent provided by law (i) for breach
of the directors duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the Delaware
General Corporation Law or (iv) for any transaction from
which the director derived an improper personal benefit. No
amendment or deletion of this Article shall impair the immunity
of any person under this Article for any act or omission
occurring prior to the effectiveness of such amendment or
deletion.
The Corporation shall indemnify to the fullest extent authorized
by law (as now or hereafter in effect), and shall advance
expenses to, any person made, or threatened to be made, a
defendant or witness to any action, suit or proceeding (whether
civil or criminal or otherwise) by reason of the fact that he,
his testator or intestate, is or was a director or officer of
the Corporation, or is or was, at the request of the
Corporation, serving any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, in
any capacity. Nothing contained herein shall affect any rights
to indemnification to which employees other than directors and
officers may be entitled by law. No amendment or deletion of
this Article shall impair the immunity of any person under this
Article for any act or omission occurring prior to the
effectiveness of such amendment or deletion.
ARTICLE EIGHTH: A director of this Corporation
shall not in the absence of fraud be disqualified by his office
from dealing or contracting with the Corporation either as a
vendor, purchaser, or otherwise, nor in the absence of fraud,
shall any transaction or contract of this Corporation be void or
voidable or affected by reason of the fact that any director or
any firm of which any director is a member or an employee or any
corporation of which any director is an officer, director,
stockholder, or employee is in any way interested in such
transaction or contract, even though the vote of the director or
directors having such adverse interest shall have been necessary
to obligate the Corporation upon such contract or transaction,
and, in the absence of fraud, no director or directors having
such adverse interest shall be liable to the Corporation or to
any stockholder or creditor thereof or to any other person for
any loss incurred by it under or by reason of any such contract
or transaction, nor, in the absence of fraud, shall any such
director or directors be accountable for any gains or profits
realized thereon.
ARTICLE NINTH: Whenever a compromise or
arrangement is proposed between this Corporation and its
creditors or any class of them
and/or
between this Corporation and its stockholders or any class of
them, any court of equitable jurisdiction within the State of
Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this
Corporation under the provisions of Section 291 of
Title 8 of the Delaware Code or on the
Exhibit B-2
application of trustees in dissolution or of any receiver or
receivers appointed for this Corporation under the provisions of
Section 279 of Title 8 of the Delaware Code order a
meeting of the creditors or class of creditors,
and/or of
the stockholders or class of stockholders of this Corporation,
as the case may be, to be summoned in such a matter as the said
Court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors,
and/or of
the stockholders or class of stockholders of this Corporation,
as the case may be, agree to any compromise or arrangement and
to reorganization of this Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement
and the said reorganization shall, if sanctioned by the Court to
which the said application has been made, be binding on all
creditors or class of creditors,
and/or on
all the stockholders or class of stockholders, of this
Corporation, as the case may be, and also on this Corporation.
Exhibit B-3
IN WITNESS WHEREOF, said HollyFrontier Corporation has caused
this Amended and Restated Certificate of Incorporation to be
duly executed by
,
its
,
this day of
,
2011.
HOLLYFRONTIER CORPORATION
Name:
Exhibit B-4
Exhibit C
AMENDED
AND RESTATED BY-LAWS
OF
HOLLYFRONTIER
CORPORATION
EFFECTIVE
AS
OF ,
2011
ARTICLE I
Offices
The principal office of HollyFrontier Corporation (the
Corporation) in the State of Delaware shall
be in the City of Wilmington, County of New Castle, and the name
of the resident agent in charge thereof is The Corporation
Trust Company.
The Corporation may, in addition to its principal office in the
State of Delaware, establish and maintain an office or offices
at such other places as the Board of Directors of the
Corporation (the Board) may from time to time
deem necessary or desirable.
ARTICLE II
Stockholders
Meetings
Section 1. Place
of Meetings. The annual meeting of the
stockholders for the election of directors and any special
meetings of stockholders shall be held at such time and place as
shall be stated in the notice of such meeting.
Section 2. Annual
Meetings. The annual meeting of the stockholders
for the election of directors and for the transaction of any
other business properly presented for action at such meeting
shall be held on the second Thursday in May of each year or on
such other day as may be fixed by resolution of the Board;
provided, however, that if the Board deems it
impracticable to hold the meeting on the date originally
determined, such annual meeting shall be held as soon as
practicable after such date on a date to be specified in a
resolution of the Board.
At an annual meeting, only such business shall be conducted, and
only such proposals shall be acted upon, as shall have been
brought before the annual meeting (i) by, or at the
direction of, the Board or (ii) by any stockholder of the
Corporation who complies with the notice procedures set forth in
this Section 2 or, with respect to the election of
directors, Section 11 of Article III of these By-Laws.
For a proposal to be properly brought before an annual meeting
by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be
timely, a stockholders notice must be delivered to, or
mailed and received at, the principal executive offices of the
Corporation not less than 120 calendar days nor more than 150
calendar days before the anniversary date of the
corporations proxy statement released to stockholders in
connection with the prior years annual meeting. However,
if no annual meeting was held in the previous year, or if the
date of the applicable annual meeting has been changed by more
than 30 days from the date contemplated at the time of the
previous years proxy statement, a stockholders
notice must be received by the Secretary not later than
60 days before the date the Corporation commences mailing
of its proxy materials in connection with the applicable annual
meeting. In no event shall the public announcement of an
adjournment of an annual meeting commence a new time period for
the giving of a stockholders notice as described above. A
stockholders notice to the Secretary shall set forth as to
each matter the stockholder proposes to bring before the annual
meeting (i) a brief description of the proposal desired to
be brought before the annual meeting, including the complete
text of any resolutions intended to be submitted at the annual
meeting and the reasons for conducting such business at the
annual meeting, (ii) the name and address, as they appear
on the Corporations books, of the stockholder proposing
such matter and any other stockholders known by such stockholder
to be supporting such proposal, (iii) the class and number
of shares of the Corporations stock which are beneficially
owned by the stockholder on the date of such stockholders
notice and by any other stockholders known by such stockholder
to be supporting such proposal on the date of such
stockholders notice,
Exhibit C-1
and (iv) any financial interest of the stockholder in such
proposal. In addition, a stockholder seeking to submit such
proposal at the meeting shall promptly provide any other
information reasonably requested by the Corporation.
Except as otherwise provided by law, at any time following the
Corporations receipt of a proposal, the Chairman of the
Board (or other presiding officer at an annual meeting) shall
have the power to determine whether any matter proposed to be
brought before the annual meeting was proposed in accordance
with the notice procedures set forth in this Section 2 and
if any proposal is not in compliance with this Section 2,
the Chairman of the Board (or such other presiding officer) may
exclude such proposal from the annual meeting.
Notwithstanding the forgoing provisions of this Section 2,
a stockholder who seeks to have any proposal included in the
Corporations proxy materials shall comply with the
requirements of
Rule 14a-8
of Regulation 14A under the Securities Exchange Act of
1934, as amended.
In the event a proposal is presented for action at such annual
meeting which, in the opinion of the ranking executive officer
of the Corporation attending such meeting, requires the giving
of prior notice of such business to stockholders, no action
shall be taken on such proposal at such meeting unless and until
proof of timely and adequate notice of such proposal shall have
been filed with and accepted by the ranking executive officer of
the Corporation attending such meeting.
Section 3. Special
Meetings. Special meetings of the stockholders
may be called by the Chief Executive Officer, and shall be
called by the Chairman of the Board, the Chief Executive
Officer, the President, a Vice President, the Secretary or an
Assistant Secretary, at the request in writing of a majority of
the Board, or of a majority of the Executive Committee, or of
stockholders owning a majority of the outstanding shares having
voting power. Such request shall state the purpose or purposes
of the proposed meeting.
Section 4. Notice. Notice
of all stockholders meetings stating the time and place,
and, in the case of special meetings, the purpose or purposes
for which the meeting is called, shall be delivered personally
or mailed to each stockholder entitled to vote at such meeting
not less than 30 nor more than 60 days before the meeting
of stockholders is to be held, unless the stockholders
meeting is called by the Chairman of the Board, the Chief
Executive Officer, the President, a Vice President, the
Secretary or an Assistant Secretary of the Corporation, at the
request in writing of a majority of the Board, in which case
such notice shall be delivered not less than 10 nor more than
60 days before the meeting of stockholders is to be held.
If mailed, notice shall be directed to the stockholder at his
last known post office address as the same appears on the stock
records of the Corporation.
Section 5. Proxies. At
any meeting of the stockholders, each stockholder entitled to
vote may vote either in person or by proxy, but no proxy shall
be voted on after three years from its date, unless such proxy
shall, on its face, name a longer period for which it is to
remain in force. Each proxy either (a) shall be authorized
in writing, subscribed by the stockholder or his duly authorized
attorney, but need not be sealed, witnessed or acknowledged, and
shall be filed with the Secretary at or before the meeting, or
(b) shall be authorized by means of an electronic
transmission as permitted by law and shall be filed in
accordance with the procedure established for the meeting.
Section 6. Quorum. At
any annual or special meeting of stockholders a majority in
interest of the stockholders entitled to vote thereat, present
in person or by proxy, shall constitute a quorum, except as
otherwise provided by law, but if at any meeting of the
stockholders there be less than a quorum present, the
stockholders present at such meeting may, without further
notice, adjourn the same from time to time until a quorum shall
attend, but no business shall be transacted at any such
adjourned meeting except such as might have been lawfully
transacted had the meeting not been adjourned.
Section 7. Voting. Except
as otherwise expressly required by statute, the Certificate of
Incorporation or these By-Laws, each stockholder shall at each
meeting of the stockholders be entitled to one vote in person or
by proxy for each share of stock of the Corporation entitled to
be voted thereat held by him and registered in his name on the
books of the Corporation
(a) on such date as may be fixed pursuant to
Article VIII of these By-Laws as the record date for the
determination of stockholders entitled to notice of and to vote
at such meeting; or
(b) in the event that no record date shall have been so
fixed, on the date of such meeting; provided, however, that,
except where a record date shall have been so fixed, no share of
stock of the Corporation shall be
Exhibit C-2
voted at any election of directors which shall have been
transferred on the books of the Corporation within 20 days
prior to such election of directors.
The vote for directors and, upon the demand of any stockholder,
the vote upon any question before the meeting shall be by
ballot. Except as otherwise provided by law or the Certificate
of Incorporation or these By-Laws, directors shall be elected by
a plurality vote of the stockholders present or represented at
the meeting, and each other question properly presented to any
meeting of stockholders shall be decided by a majority of the
votes cast on the question entitled to vote thereon. The date
and time of the opening and the closing of the polls for each
matter upon which the stockholders will vote at any meeting of
stockholders shall be announced at the meeting by the Chairman
of the Board (or other presiding officer of the Corporation).
Section 8. List
of Stockholders. A complete list of the
stockholders entitled to vote at the ensuing election, arranged
in alphabetical order, with the residence of each, and the
number of voting shares held by each, shall be prepared and
filed in the office where the election is to be held at least
10 days before every election, and shall at all times
during the usual hours for business during the said 10 days
and during the whole time of said election be open to the
examination of any stockholder.
Section 9. Judges
of Election. Whenever a vote at a meeting of
stockholders shall be by ballot, the polls shall be opened and
closed, the proxies and ballots shall be received, and all
questions pertaining to the qualification of voters and the
validity of proxies and the acceptance or rejection of votes
shall be decided by two Judges of Election. Such Judges of
Election shall be appointed by the Board before or at the
meeting, or in default thereof, by the officer presiding at the
meeting, and shall be sworn to the faithful performance of their
duties. If any Judge of Election previously appointed shall fail
to attend or refuse or be unable to serve, a substitute shall be
appointed by the presiding officer.
Section 10. Consent
Notice. In order that the Corporation may
determine the stockholders entitled to consent to corporate
action in writing without a meeting, the Board may fix a record
date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board,
and which date shall not be more than 60 nor less than
10 days before the date of such meeting. Any stockholder of
record seeking to have the stockholders authorize or take
corporate action by written consent shall, by written notice to
the Secretary of the Corporation, request the Board to fix a
record date. The Board shall promptly, but in all events within
10 days after the date on which such a request is received,
adopt a resolution fixing the record date. If no record date has
been fixed by the Board within 10 days of the date on which
such a request is received, the record date for determining
stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board is required
by applicable law, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be
taken is delivered to the Corporation by delivery to its
registered office in the State of Delaware, its principal place
of business, or any officer or agent of the Corporation having
custody of the book in which proceedings for stockholder
meetings are recorded, to the attention of the Secretary of the
Corporation. Delivery shall be by hand or by certified or
registered mail, return receipt requested. If no record date has
been fixed by the Board and prior action by the Board is
required by applicable law, the record date for determining
stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the date
on which the Board adopts a resolution taking such prior action.
ARTICLE III
Directors
Section 1. Powers. Except
as otherwise provided by law, by the Certificate of
Incorporation or by these By-Laws, the property, business and
affairs of the Corporation shall be managed by the Board.
Section 2. Number
and Tenure. The Board shall consist of no less
than 3 nor more than 14 members as the Board may determine from
time to time by Resolution of the Board. Directors shall hold
office until the next annual election and until their successors
shall be duly elected and qualified. The Board shall keep full
and fair records and accounts of its proceedings and
transactions. Directors need not be stockholders.
Exhibit C-3
Section 3. Regular
Meetings. The Board shall meet for the election
of officers and for the transaction of any other business as
soon as practicable after the annual meeting of stockholders.
Other regular meetings of the Board may be held at such times
and places as the Board may from time to time determine. No
notice of any such annual or regular meeting of the Board need
be given.
Section 4. Special
Meetings. Special meetings of the Board shall be
called by the Secretary or any Assistant Secretary at the
request of the Chairman of the Board, the Chief Executive
Officer, the President or of any two directors. Notice of the
time and place of any special meeting of the Board shall be
mailed, postage prepaid, to each director at least 48 hours
before the time at which the meeting is to be held, or shall be
sent by confirmed facsimile transmission or other form of
electronic communication, or be delivered personally or by
telephone, at least 24 hours before the time at which such
meeting is to be held. Notice of any special meeting need not be
given to any director who shall waive notice thereof. Any
meeting of the Board shall be a legal meeting without notice
thereof having been given, if all the directors of the
Corporation then holding office shall be present thereat.
Section 5. Place
of Meetings. Meetings of the Board may be held at
such places in or out of the State of Delaware as may be fixed
by the Board or designated in the notice of the meeting, except
that the annual meeting of the Board, if held without notice,
shall be held at the principal executive office of the
Corporation.
Section 6. Quorum. A
majority of the Board, but not less than two directors, shall
constitute a quorum for the transaction of business, but if, at
any meeting of the Board, there be less than a quorum present, a
majority of the directors present may, without further notice,
adjourn the same from time to time until a quorum shall attend.
A majority of such quorum shall decide any questions that may
come before the meeting.
Section 7. Resignations. A
resignation from the Board shall be deemed to take effect upon
its receipt by the Corporation unless otherwise specified
therein.
Section 8. Vacancies. Vacancies
in the Board created on account of death, resignation, removal,
disqualification or other causes, or resulting from an increase
in the authorized number of directors, shall be filled by a
majority of the directors then in office, although less than a
quorum, and the directors so chosen shall hold office until the
next annual election and until their successors shall be duly
elected and qualified or until their earlier death, resignation
or removal; provided, however, that if the
remaining directors shall constitute less than a majority of the
whole Board, the Court of Chancery may, upon application of any
stockholder or stockholders holding at least 10% of the total
number of shares of the capital stock of the Corporation at the
time outstanding having the right to vote for directors,
summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the
directors chosen by the directors then in office as aforesaid,
which election shall be governed by Section 211 of the
General Corporation Law of the State of Delaware (the
DGCL).
Section 9. Removal. At
any meeting of the stockholders called for the purpose any
director may, by vote of stockholders entitled to cast a
majority of the votes then entitled to vote in the election of
directors, be removed from office with or without cause.
Section 10. Compensation. Directors
shall receive such compensation for their services as shall be
fixed from time to time by resolution of the Board. Nothing in
this Section shall be construed to preclude a director from
serving the Corporation in any other capacity and receiving
compensation therefore.
Section 11. Nominees
for Director. Nominations by stockholders of
persons to be elected to the Board shall be made pursuant to
timely notice in writing to the Secretary of the Corporation. To
be timely, a stockholders notice must be delivered to, or
mailed and received at, the principal executive offices of the
Corporation (a) with respect to an election to be held at
the annual meeting of the stockholders of the Corporation, not
less than 90 days nor more than 120 days prior to the
anniversary date of the immediately preceding annual meeting of
stockholders of the Corporation, and (b) with respect to an
election to be held at a special meeting of stockholders of the
Corporation for the election of directors, not later than the
close of business on the seventh day following the date on which
notice of the date of the special meeting was mailed to
stockholders of the Corporation or public disclosure of the date
of the special meeting was made, whichever first occurs. Such
stockholders notice to the Secretary of the Corporation
shall set forth (a) 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 Securities Exchange
Exhibit C-4
Act of 1934, as amended (including such persons written
consent to being named in the proxy statement as a nominee and
to serve as a director if elected), and (b) as to the
stockholder giving the notice (i) the name and address, as
they appear on the Corporations books, of such stockholder
and (ii) the class and number of shares of voting stock of
the Corporation which are beneficially owned by such
stockholder. In the event that a person is validly designated as
a nominee to be elected to the Board in accordance with the
procedures set forth in this Section 11 and thereafter
becomes unable or unwilling to stand for election to the Board,
the stockholder who proposed such nominee may designate a
substitute nominee, if such substitute nominee is designated
within and in accordance with the time limitations set forth in
this Section 11, upon providing the information specified
in clause (a) above with respect to such substitute
nominee. Except as otherwise provided by law, at any time
following the Corporations receipt of a nomination for
director of the Corporation by a stockholder, the Chairman of
the Board (or other presiding officer at an annual meeting)
shall have the power to determine whether the proposed
nomination was made in accordance with the notice procedures set
forth in this Section 11, and if any nomination is not in
compliance with this Section 11, the Chairman of the Board
(or such other presiding officer) may refuse to acknowledge the
nomination of any such person at the annual meeting.
Notwithstanding the foregoing provisions of this
Section 11, a stockholder shall also comply with all
applicable requirements of the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder with
respect to the matters set forth in this Section 11.
Section 12. Board
Action By Written Consent In Lieu of
Meeting. Action required or permitted by
applicable law, the Certificate of Incorporation or these
By-Laws to be taken at a meeting of the Board may be taken
without a meeting if the action is taken by all members of the
Board. The action shall be evidenced by one or more written
consents describing the action taken, signed, either manually,
in facsimile or electronically, by each director, and included
in the minutes or filed with the corporate records reflecting
the action taken. Action taken under this Section 12 is
effective when the last director signs the consent, unless the
consent specifies a different effective date.
Section 13. Chairman
of the Board; Vice Chairman of the Board. The
Board may designate from among its members a Chairman of the
Board, which person may be an Executive Chairman of the Board
(as described in Article V, Section 2 of these
By-Laws), and may also designate a Vice Chairman of the Board.
The Chairman of the Board shall preside at all meetings of
stockholders and of the Board, and shall advise and counsel the
officers of the Corporation and shall have and perform such
duties as usually devolve upon his role and such other duties as
are prescribed by these By-Laws and by the Board. The Vice
Chairman of the Board shall, in the absence of the Chairman of
the Board, preside at all meetings of stockholders and of the
Board, and exercise and discharge the responsibilities and
duties of the Chairman of the Board. He or she shall have and
perform such other duties as may be prescribed or assigned by
the Board or the Chairman of the Board.
ARTICLE IV
Committees
Section 1. Executive
Committee. The Board, by resolution adopted by a
majority of the whole Board, may designate not less than three
of the directors then in office (at least one of whom shall be
the Chief Executive Officer or the President of the Corporation)
to constitute an Executive Committee. Terms of members of the
Executive Committee shall be at the pleasure of the Board but
only while a member remains a director. If the Chairman of the
Board is a member of the Executive Committee, he shall be
Chairman of the Committee; otherwise, the Chairman of the
Executive Committee shall be the Chief Executive Officer if he
is a member of the Executive Committee or, if the Chief
Executive Officer is not a member of the Executive Committee,
the President shall be the Chairman of the Executive Committee.
To the extent permitted by law or except as otherwise provided
by this Section 1 or by resolution of the Board, during the
intervals between meetings of the Board, the Executive Committee
shall possess and may exercise all of the powers of the Board in
the management of the business and affairs of the Corporation.
An action of the Executive Committee taken within the scope of
its authority shall be an act of the Board. All action taken by
the Executive Committee shall be reported to the Board at its
regular meeting next succeeding such action, but failure to so
render such report shall not invalidate any such action.
Vacancies in the Executive Committee shall be filled by the
Board, but during the temporary absence of a member of the
Executive Committee, the remaining members of the Executive
Committee may appoint a member of the Board to act in the place
of such absent member.
Exhibit C-5
Section 2. Meetings
and Records of Executive Committee. Subject to
the provisions of these By-Laws, the Executive Committee shall
fix its own rules of procedure and shall meet as provided by
such rules or by resolution of the Board, and it shall also meet
at the call of the Chairman of the Board, the Chief Executive
Officer or the President of the Corporation or of any two
members of the Committee. Notice of meetings of the Executive
Committee may be given orally, by telephone, or in any other
manner that reasonably assures receipt thereof and no minimum
advance notice shall be required. No notice shall be required
for any meeting of the Executive Committee in which a majority
of its members participate, action may be taken by the Executive
Committee in any manner permitted for directors actions or
meetings under Delaware law, and action taken by a majority of
the members of the Executive Committee shall constitute the
action of the Executive Committee. Two members of the Executive
Committee shall constitute a quorum. The Executive Committee
shall keep records of its proceedings and transactions.
Section 3. Other
Committees. The Board may by resolution provide
for such other standing or special committees as it deems
desirable and discontinue the same at pleasure. Each such
committee shall have such powers and perform such duties, not
inconsistent with law, as may be assigned to it by the Board. If
provision be made for any such committee, the members thereof
shall be appointed by the Board and shall serve during the
pleasure of the Board. Vacancies on such committees shall be
filled by the Board. Section 2 of this ARTICLE IV
shall also apply to the meetings of such other committees
mutatis mutandis.
ARTICLE V
Officers
Section 1. General. The
officers of the Corporation may consist of an Executive Chairman
of the Board, a Chief Executive Officer, a President, a Chief
Operating Officer, a Chief Financial Officer, one or more
Executive Vice Presidents, Senior Vice Presidents
and/or Vice
Presidents (some of whom may have particular authority and
responsibilities as designated in their titles by the Board), a
Secretary, a Controller, a Treasurer and such Assistant Vice
Presidents, Assistant Secretaries, Assistant Treasurers or other
subordinate officers as may from time to time be designated by
the Board. One person may hold more than one office, and no
officer (other than an Executive Chairman of the Board) need be
a director. These said officers shall have all the usual powers
and shall perform all of the usual duties incident to their
respective offices and shall, in addition, perform such other
duties as shall be assigned to them from time to time by the
Board. In its discretion, the Board may leave unfilled any
office, except that there shall always be either a Chief
Executive Officer or a President of the Corporation.
Section 2. Executive
Chairman. If the Board designates the Chairman of
the Board as the Executive Chairman of the Board, he or she
shall be an officer of the Corporation. The Executive Chairman
of the Board: (i) shall provide advice and counsel to the
Chief Executive Officer, the President and other members of
senior management in areas such as corporate and strategic
planning and policy, acquisitions, major capital expenditures
and other areas requested by the Board; (ii) may sign and
execute any document, deed, paper, mortgage, bond, stock
certificate, contract or other instrument or obligation in the
name and on behalf of the Corporation, except in cases where the
execution thereof shall be expressly delegated by the Board or
by these By-Laws to some other officer or agent of the
Corporation or shall be required by law to be otherwise
executed; and (iii) shall, in general, perform all duties
as may be prescribed by these By-Laws or assigned to him or her
by the Board from time to time.
Section 3. Chief
Executive Officer. Subject to the control of the
Board, the Chief Executive Officer shall be responsible for the
general management of the business of the Corporation and shall
have supervisory authority over the general policies and
business of the Corporation, and may sign and execute any
document, deed, paper, mortgage, bond, stock certificate,
contract or other instrument or obligation in the name and on
behalf of the Corporation, except in cases where the execution
thereof shall be expressly delegated by the Board or by these
By-Laws to some other officer or agent of the Corporation or
shall be required by law to be otherwise executed, and shall
exercise such other powers as the Board may from time to time
direct. In the event that the positions of Chairman of the Board
and Vice Chairman of the Board are unfilled, the Chief Executive
Officer shall in addition have the authority and
responsibilities of the Chairman of the Board.
Exhibit C-6
Section 4. President. The
President shall, subject to the powers of supervision and
control conferred upon the Chief Executive Officer, have all
necessary powers to discharge such responsibility including the
powers to sign and execute any document, deed, paper, mortgage,
bond, stock certificate, contract or other instrument or
obligation in the name and on behalf of the Corporation, except
in cases where the execution thereof shall be expressly
delegated by the Board or by these By-Laws to some other officer
or agent of the Corporation or shall be required by law to be
otherwise executed, and such other powers as the Board may from
time to time direct. In the event that the office of Chief
Executive Officer is unfilled, the President shall in addition
have the authority and responsibilities of the Chief Executive
Officer as specified in Section 3 of this Article.
Section 5. Chief
Operating Officer. The Chief Operating Officer
shall perform such duties as are customary for a chief operating
officer to perform, including the powers to sign and execute any
document, deed, paper, mortgage, bond, stock certificate,
contract or other instrument or obligation in the name and on
behalf of the Corporation, except in cases where the execution
thereof shall be expressly delegated by the Board or by these
By-Laws to some other officer or agent of the Corporation or
shall be required by law to be otherwise executed, and shall
perform such other duties as from time to time may be assigned
to him or her by the Board of Directors, the Chief Executive
Officer or the President.
Section 6. Chief
Financial Officer. The Chief Financial Officer
shall perform such duties as are customary for a chief financial
officer to perform, including the powers to sign and execute any
document, deed, paper, mortgage, bond, stock certificate,
contract or other instrument or obligation in the name and on
behalf of the Corporation, except in cases where the execution
thereof shall be expressly delegated by the Board or by these
By-Laws to some other officer or agent of the Corporation or
shall be required by law to be otherwise executed, and shall
perform such other duties as from time to time may be assigned
to him or her by the Board of Directors, the Chief Executive
Officer or the President.
Section 7. Executive
and Senior Vice Presidents; Vice Presidents. Each
Executive Vice President, Senior Vice President, or Vice
President shall exercise general supervision and have executive
control of such departments of the Corporations business,
or perform such other executive duties as shall from time to
time be assigned to him or her by the Board, the Chief Executive
Officer or by the President. The Board shall have the power to
designate particular areas of authority and responsibility of an
Executive Vice President, Senior Vice President or Vice
President and to indicate such designation in such
officers title. In case of the absence or disability of
the Chief Executive Officer and the President, each Executive
Vice President and Senior Vice President (without regard to
whether his or her title specifies particular areas of authority
and responsibility) and each Vice President whose title does not
designate specific areas of authority and responsibility shall
be vested with all the powers of the Chief Executive Officer and
the President in respect of the powers to sign and execute any
document, deed, paper, mortgage, bond, stock certificate,
contract or other instrument or obligation in the name and on
behalf of the Corporation, except in cases where the execution
thereof shall be expressly delegated by the Board or by these
By-Laws to some other officer or agent of the Corporation or
shall be required by law to be otherwise executed. In the case
of each Vice President whose title indicates one or more
specific areas of authority and responsibility, such Vice
Presidents authority and responsibilities shall be limited
to the area or areas designated in such Vice Presidents
title as specified by the Board.
Section 8. Secretary. The
Secretary shall keep the minutes of the meetings of the
stockholders and of the Board and of the Executive Committee, in
books provided for the purpose; he or she shall see that all
notices are duly given in accordance with the provisions of
these By-Laws, or as required by law; he or she shall be
custodian of the records and of the corporate seals of the
Corporation; he or she shall see that the corporate seal is
affixed to all documents, the execution of which, on behalf of
the Corporation, under its seal, is duly authorized, and when so
affixed may attest the same; and, in general, he or she shall
perform all duties incident to the office of a secretary of a
corporation, and such other duties as from time to time may be
assigned by the Board. The Secretary may sign, with the Chief
Executive Officer, the President, the Chief Financial Officer or
a Vice President, certificates of the stock of the Corporation.
The Secretary shall be sworn to the faithful discharge of his
duties.
Section 9. Controller. The
Controller shall report directly to the Chief Financial Officer,
and shall have charge of the supervision of the accounting
system of the Corporation, including the preparation and filing
of all reports required by law to be made to any public
authorities and officials. He or she shall perform such other
duties
Exhibit C-7
as are usually associated with his office or as shall be
assigned to him by the Board, the President or the Chief
Financial Officer.
Section 10. Treasurer. The
Treasurer shall report directly to the Chief Financial Officer,
and shall have charge of and be responsible for all funds,
securities, receipts and disbursements of the Corporation, and
shall deposit, or cause to be deposited, in the name of the
Corporation, all moneys or other valuable effects in such banks,
trust companies or other depositories as shall, from time to
time, be selected by the Board; he shall render to the Chief
Executive Officer, the Chief Financial Officer and to the Board,
whenever requested, an account of the financial condition of the
Corporation; he or she may sign, with the Chief Executive
Officer, the President, the Chief Financial Officer or a Vice
President, certificates of stock of the Corporation; and, in
general, shall perform all the duties incident to the office of
a treasurer of a corporation, and such other duties as may be
assigned by the Board.
Section 11. Assistant
Officers. Each assistant officer shall perform
such duties and have such responsibilities as may be delegated
to him or her by the superior officer to whom he is made
responsible, by designation of the Chief Executive Officer, or
as the Board may prescribe. The Board may, from time to time,
authorize any executive officer to appoint and remove assistant
officers and prescribe the powers and duties thereof.
Section 12. Officers
Holding Two or More Offices. Any person may hold
two or more offices except that the person holding the office of
Secretary may not also hold the office of Chairman of the Board,
Vice Chairman of the Board, Chief Executive Officer or President
and no officer shall execute, acknowledge or verify any
instrument in more than one capacity, if such instrument be
required by law, by the Certificate of Incorporation, or by
these By-Laws, to be executed, acknowledged or verified by any
two or more officers.
Section 13. Voting
of Other Stock. Unless specifically directed
otherwise by resolution of the Board, each of the Chief
Executive Officer and the President shall have full power and
authority on behalf of the Corporation to vote the stock of any
other corporation owned or held by the Corporation at any
meeting of the stockholders of such other corporation, or to
execute the written consent of this Corporation to any action
that may be taken by the stockholders of such other corporation
without a meeting.
Section 14. Compensation. The
Board shall have power to fix the compensation of all officers
of the Corporation. It may authorize any officer, upon whom the
power of appointing subordinate officers may have been
conferred, to fix the compensation of such subordinate officers.
Section 15. Removal. Any
officer of the Corporation may be removed, with or without
cause, by the Board at a meeting called for that purpose, or
(except in case of an officer elected by the Board) by an
officer upon whom such power of removal may have been conferred.
Section 16. Indemnification. The
Corporation shall indemnify any person (including the heirs,
executors or administrators of such a person) who was or is a
party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, by reason of
the fact that he or she is or was a director, officer, employee
or agent of the Corporation or is or was serving at the request
of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, in accordance with and to the fullest extent
permitted by the DGCL as same may be amended from time to time,
including the advancement of expenses incurred by the
indemnified person in defending any such threatened, pending or
completed action, suit or proceeding. To the extent the present
or former spouse(s) of any party indemnified hereunder is made a
party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding solely by virtue
of his or her marital relationship to such indemnified party,
such spouse shall be indemnified hereunder to the fullest extent
permitted by the DGCL as same may be amended from time to time.
Except as the Board of the Corporation in its discretion (but
subject to applicable law) may otherwise determine, such
indemnification shall be afforded only if such person within 5
business days after his becoming aware of the institution of
such action, suit or proceeding, shall have notified in writing
by registered or certified mail, the Chief Executive Officer,
President or Secretary of the Corporation of the institution of
such action, suit or proceeding, and shall have furnished such
Chief Executive Officer, President or Secretary with true copies
of all papers served upon or otherwise received by such person
relating to such action, suit or proceeding, and shall make
available to officers or counsel of the Corporation all
information necessary to keep the Corporation currently advised
as to the status of such action, suit, or proceeding, and permit
the Corporation, at its option and expense, at any time during
the course
Exhibit C-8
of such action, suit or proceeding, through counsel of the
Corporations choosing, to participate in or direct the
defense thereof in good faith, and in case of any proposed
settlement of any action, suit or proceeding the defense of
which is not directed by the Corporation, to submit the proposed
terms and conditions thereof to the Board of the Corporation for
their approval, failing which no indemnification hereunder shall
be afforded for any such settlement. Such indemnification as
hereinabove provided shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any
agreement, vote of stockholders or disinterested directors, or
otherwise.
ARTICLE VI
Fiscal Year
Effective beginning with the fiscal year ending
December 31, 2003, the fiscal year of the Corporation shall
end on the thirty-first day of December in each year, or on such
other day as may be fixed from time to time by the Board.
ARTICLE VII
Seal
The Board shall provide a suitable seal, having inscribed
thereon the name of the Corporation; the year of its
incorporation and such other appropriate legend as may from time
to time be determined by the Board. If deemed advisable by the
Board, a duplicate seal or duplicate seals may be provided and
kept for the necessary purposes of the Corporation.
ARTICLE VIII
Stock
Section 1. Certificates. Certificates
of stock shall be issued in such form as may be approved by the
Board and shall be signed by the Chief Executive Officer, the
President, the Chief Financial Officer or a Vice President, and
by the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary, and sealed with the seal of the
Corporation; provided, however, that where any
such certificate is signed by a Transfer Agent and by a
Registrar, the signature of any such Chief Executive Officer,
President, Chief Financial Officer, Vice President, Treasurer,
Assistant Treasurer, Secretary or Assistant Secretary and the
seal of the Corporation upon such certificates may be facsimiles
engraved or printed thereon. The shares of the
Corporations capital stock may be certificated or
uncertificated in accordance with the laws of the State of
Delaware.
Section 2. Transfer
Agents and Registrars. The Board shall have power
and authority to make all such rules and regulations as it may
deem expedient concerning the issue, registration, and transfer
of certificates of stock, and may appoint Transfer Agents and
Registrars thereof.
Section 3. Closing
of Books. The Board shall have power to close the
stock transfer books of the Corporation for a period not
exceeding 60 days preceding the date of any meeting of
stockholders or the date for payment of any dividend or the date
for the allotment of rights or the date when any change or
conversion or exchange of capital stock shall go into effect;
provided, however, that in lieu of closing the stock transfer
books as aforesaid, the Board may fix in advance a date, not
exceeding 60 days preceding the date of any meeting of
stockholders or the date for the payment of any dividend, or the
date for the allotment of rights, or the date when any change or
conversion or exchange of capital stock shall go into effect, as
a record date for the determination of the stockholders entitled
to notice of, and to vote at, any such meeting, or entitled to
receive payment of any such dividend, or to any such allotment
of rights, or to exercise the rights in respect of any such
change, conversion or exchange of capital stock, and in such
case only such stockholders as shall be stockholders of record
on the date so fixed shall be entitled to such notice of, and to
vote at, such meeting, or to receive payment of such dividend,
or to receive such allotment of rights, or to exercise such
rights, as the case may be, notwithstanding any transfer of any
stock on the books of the Corporation after any such record date
fixed as aforesaid.
Exhibit C-9
Section 4. Lost,
Mutilated, or Destroyed Certificates. In case any
certificate of stock is lost, mutilated or destroyed, the Board
may authorize the issue of a new certificate in place thereof
upon such terms and conditions, as it may deem advisable.
ARTICLE IX
Signatures
Section 1. Checks. All
checks, drafts, notes or other obligations of the Corporation
shall be signed by the Chief Executive Officer, the President,
the Chief Financial Officer
and/or a
Vice President,
and/or the
Treasurer, Assistant Treasurer, Controller or by any person or
persons thereunto authorized by the Board or the Executive
Committee.
Section 2. Endorsements. All
endorsements, assignments, transfers, stock powers or other
instruments of transfer of securities standing in the name of
the Corporation shall be executed for and in the name of the
Corporation by the Chief Executive Officer, the President or a
Vice President, and the Secretary or an Assistant Secretary, or
by any person or persons thereunto authorized by the Board or
the Executive Committee.
Section 3. Proxies. Except
as otherwise authorized or directed from time to time by the
Board or the Executive Committee, the Chief Executive Officer of
the Corporation, or in his absence or disability, the President
or an Executive or Senior Vice President of the Corporation, may
authorize from time to time the signature and issuance of
proxies to vote upon,
and/or of
consents or waivers in respect of, shares of stock of other
corporations standing in the name of the Corporation. All such
proxies, consents or waivers shall be signed in the name of the
Corporation by the Chief Executive Officer, the President or an
Executive or Senior Vice President and the Secretary or an
Assistant Secretary.
ARTICLE X
Notice of
Meetings
Whenever by law or by the Certificate of Incorporation or by
these By-Laws notice is required to be given to any stockholder,
such notice shall be delivered by first-class mail, postage
prepaid, and the time when the same shall be mailed shall be
deemed to be the time of the giving of such notice.
ARTICLE XI
Amendments
These By-Laws may be amended or repealed or new By-Laws may be
adopted only by the affirmative vote of the holders of not less
than 67% of the stock issued and outstanding and entitled to
vote thereon at any regular or special meeting of the
stockholders, if notice of the proposed alteration or amendment
be contained in the notice of meeting, or by the affirmative
vote of a majority of the Board.
Exhibit C-10
Annex B
[MORGAN
STANLEY & CO. INCORPORATED LETTERHEAD]
February 21,
2011
Board of Directors
Holly Corporation
Suite 1600, 100 Crescent Court
Dallas, TX
75201-6915
Members
of the Board:
We understand that Holly Corporation (Holly), North
Acquisition, Inc., a wholly owned subsidiary of Holly
(Merger Sub), and Frontier Oil Corporation (the
Company) have entered into an Agreement and Plan of
Merger, dated February 21, 2011 (the Merger
Agreement), which provides, among other things, for the
merger of Merger Sub with and into the Company (the
Merger). As a result of the Merger, the Company will
become a wholly owned subsidiary of Holly, and each outstanding
share of the Companys common stock, without par value
(Company Common Stock), other than shares held by
the Company as treasury stock or that are held by the Company,
Holly, Merger Sub or any direct or indirect wholly owned
subsidiary of the Company or Holly, will be converted into the
right to receive 0.4811 shares (the Exchange
Ratio) of Hollys common stock, par value $0.01 per
share (Holly Common Stock), subject to adjustment
under certain circumstances. The terms and conditions of the
Merger are more fully set forth in the Merger Agreement. We also
understand that consistent with the Merger Agreement, prior to
the consummation of the Merger, the Company will be permitted to
declare and pay to the holders of shares of Company Common Stock
a special cash dividend in an amount not to exceed $0.28 per
share (the Special Dividend). You have asked for our
opinion as to whether the Exchange Ratio pursuant to the Merger
Agreement is fair from a financial point of view to Holly.
For purposes of the opinion set forth herein, we have:
1) Reviewed certain publicly available financial statements
and other business and financial information of the Company and
Holly, respectively;
2) Reviewed certain internal financial statements and other
financial and operating data concerning the Company and Holly,
respectively;
3) Reviewed certain financial forecasts prepared by the
managements of the Company and Holly, respectively, as well as
certain adjustments thereto and extrapolations therefrom
prepared with the guidance of Holly management and which have
been approved for our use by Holly management;
4) Reviewed information relating to certain strategic,
financial and operational benefits anticipated from the Merger,
prepared by the managements of the Company and Holly,
respectively;
5) Discussed the past and current operations and financial
condition and the prospects of the Company, including
information relating to certain strategic, financial and
operational benefits anticipated from the Merger, with senior
executives of the Company;
6) Discussed the past and current operations and financial
condition and the prospects of Holly, including information
relating to certain strategic, financial and operational
benefits anticipated from the Merger, with senior executives of
Holly;
7) Reviewed the pro forma impact of the Merger on
Hollys earnings per share, cash flow, consolidated
capitalization and financial ratios;
8) Reviewed the reported prices and trading activity for
Company Common Stock and Holly Common Stock;
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9) Compared the financial performance of the Company and
Holly and the prices and trading activity of Company Common
Stock and Holly Common Stock with that of certain other
publicly-traded companies that we deemed comparable with the
Company and Holly, respectively, and their securities;
10) Participated in discussions and negotiations among
representatives of the Company and Holly and their financial and
legal advisors;
11) Reviewed the Merger Agreement; and
12) Performed such other analyses, reviewed such other
information and considered such other factors as we have deemed
appropriate.
We have assumed and relied upon, without independent
verification, the accuracy and completeness of the information
that was publicly available or supplied or otherwise made
available to us by the Company and Holly, and formed a
substantial basis for this opinion. With respect to the
financial forecasts prepared by the managements of the Company
and Holly, respectively, as well as certain adjustments thereto
and extrapolations therefrom prepared with the guidance from
Holly Management and which have been approved for our use by
Holly management, including information relating to certain
strategic, financial and operational benefits anticipated from
the Merger, we have assumed that they have been reasonably
prepared on bases reflecting the best currently available
estimates and judgments of the respective managements of the
Company and Holly, as applicable, of the future financial
performance of the Company and Holly, respectively. We have
relied upon, without independent verification, the assessment by
the managements of the Company and Holly of: (i) the
strategic, financial and other benefits expected to result from
the Merger; (ii) the timing and risks associated with the
integration of the Company and Holly; (iii) their ability
to retain key employees of the Company and Holly, respectively,
and (iv) the validity of, and risks associated with, the
Companys and Hollys existing and future
technologies, products, services and business models. In
addition, we have assumed that the Merger will be consummated in
accordance with the terms set forth in the Merger Agreement
without any waiver, amendment or delay of any terms or
conditions, including, among other things, that the Merger will
qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as
amended, as contemplated by the Merger Agreement. Morgan Stanley
has assumed that in connection with the receipt of all the
necessary governmental, regulatory or other approvals and
consents required for the proposed Merger, no delays,
limitations, conditions or restrictions will be imposed that
would have a material adverse effect on the contemplated
benefits expected to be derived in the proposed Merger. We note
that the Merger Agreement contemplates that the parties may
agree upon alternative structures to effect the business
combination contemplated by the Merger Agreement; however, for
purpose of our opinion, we have assumed with your consent that
no such alternative structure will be implemented.
We are not legal, tax, or regulatory advisors. We are financial
advisors only and have relied upon, without independent
verification, the assessment of Holly and the Company and their
legal, tax, or regulatory advisors with respect to legal, tax,
or regulatory matters. We express no opinion with respect to the
fairness of the amount or nature of the compensation to any of
the Companys or Hollys officers, directors or
employees, or any class of such persons, relative to the
consideration to be paid to the holders of shares of Company
Common Stock in the transaction. We have not made any
independent valuation or appraisal of the assets or liabilities
of the Company or Holly, nor have we been furnished with any
such valuations or appraisals. Our opinion is necessarily based
on financial, economic, market and other conditions as in effect
on, and the information made available to us as of, the date
hereof. Events occurring after the date hereof may affect this
opinion and the assumptions used in preparing it, and we do not
assume any obligation to update, revise or reaffirm this opinion.
We have acted as financial advisor to the Board of Directors of
Holly in connection with this transaction and will receive a fee
for our services, a significant portion of which is contingent
upon the closing of the Merger. Morgan Stanley may also seek to
provide financial advisory and financing services to Holly in
the future and expects to receive fees for the rendering of
these services.
Please note that Morgan Stanley is a global financial services
firm engaged in the securities, investment management and
individual wealth management businesses. Our securities business
is engaged in securities underwriting, trading and brokerage
activities, foreign exchange, commodities and derivatives
trading, prime brokerage, as well as providing investment
banking, financing and financial advisory services. Morgan
Stanley, its
B-2
affiliates, directors and officers may at any time invest on a
principal basis or manage funds that invest, hold long or short
positions, finance positions, and may trade or otherwise
structure and effect transactions, for their own account or the
accounts of its customers, in debt or equity securities or loans
of Holly, the Company, or any other company, or any currency or
commodity, that may be involved in this transaction, or any
related derivative instrument.
This opinion has been approved by a committee of Morgan Stanley
investment banking and other professionals in accordance with
our customary practice. This opinion is for the information of
the Board of Directors of Holly, in its capacity as such, and
may not be used for any other purpose without our prior written
consent, except that a copy of this opinion may be included in
its entirety in any filing Holly is required to make with the
Securities and Exchange Commission in connection with this
transaction if such inclusion is required by applicable law. In
addition, this opinion does not in any manner address the prices
at which Holly Common Stock or Company Common Stock will trade
either prior to or following consummation of the Merger and
Morgan Stanley expresses no opinion or recommendation as to how
the shareholders of Holly or the Company should vote at the
shareholders meetings to be held in connection with the
Merger.
Based on and subject to the foregoing, we are of the opinion on
the date hereof that the Exchange Ratio pursuant to the Merger
Agreement is fair from a financial point of view to Holly.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Thomas Whayne
Name: Thomas Whayne
B-3
Annex C
[Deutsche
Bank Securities Inc. Letterhead]
February 21, 2011
Board of Directors
Holly Corporation
100 Crescent Court, Suite 1600
Dallas, TX 75201
Ladies and Gentlemen:
Deutsche Bank Securities Inc. (Deutsche Bank)
has acted as financial advisor to Holly Corporation (the
Company) in connection with the Agreement and
Plan of Merger (the Merger Agreement), dated
as of February 21, 2011, among the Company, Frontier Oil
Corporation (Frontier), and North
Acquisition, Inc., a wholly owned subsidiary of the Company
(Merger Sub), which provides, among other
things, for the merger of Merger Sub with and into Frontier, as
a result of which Frontier will become a wholly owned subsidiary
of the Company (the Transaction). As set
forth more fully in the Merger Agreement, as a result of the
Transaction, each issued and outstanding share of common stock,
without par value, of Frontier (the Frontier Common
Stock), other than any shares of Frontier Common Stock
held as treasury stock or owned by Frontier, the Company, Merger
Sub or any direct or indirect wholly owned subsidiary of
Frontier or the Company, will be converted into the right to
receive 0.4811 (the Exchange Ratio) shares of
common stock, par value $0.01 per share, of the Company (the
Company Common Stock).
You have requested our opinion as to the fairness of the
Exchange Ratio, from a financial point of view, to the Company.
In connection with our role as financial advisor to the Company,
and in arriving at our opinion, we reviewed (i) certain
publicly available financial and other information concerning
the Company and Frontier, (ii) certain internal analyses
and other information relating to the Company prepared by
management of the Company, (iii) certain internal analyses
and other information relating to Frontier prepared by
management of Frontier and (iv) certain forecast operating
and financial statistics relating to the Company and Frontier
prepared by the managements of the Company and Frontier,
respectively, as well as financial forecasts prepared therefrom
by management of the Company and approved for our use by the
management of the Company. We have also held discussions with
members of management of the Company and Frontier regarding the
businesses and prospects of the Company and Frontier,
respectively, and the prospects of the combined company,
including, without limitation, certain cost savings and
operating synergies jointly projected by the managements of
Frontier and the Company to result from the Transaction. In
addition, we (i) reviewed the reported prices and trading
activity for both the Company Common Stock and the Frontier
Common Stock, (ii) to the extent publicly available,
compared certain financial and stock market information for the
Company and Frontier with similar information for certain other
companies we considered relevant whose securities are publicly
traded, (iii) reviewed the Merger Agreement, and
(iv) performed such other studies and analyses and
considered such other factors as we deemed appropriate.
Deutsche Bank has not assumed responsibility for independent
verification of, and has not independently verified, any
information, whether publicly available or furnished to it,
concerning the Company or Frontier, including, without
limitation, any financial information considered in connection
with the rendering of its opinion. Accordingly, for purposes of
its opinion, Deutsche Bank has, with your permission, assumed
and relied upon the accuracy and completeness of all such
information. Deutsche Bank has not conducted a physical
inspection of any of the properties or assets, and has not
prepared or obtained any independent evaluation or appraisal of
any of the assets or liabilities (including, without limitation,
any contingent, derivative or off-balance-sheet assets and
liabilities), of the Company or Frontier or any of their
respective subsidiaries, nor have we evaluated the solvency or
fair value of the Company or Frontier under any state or federal
law relating to bankruptcy, insolvency or similar matters. With
respect to financial forecasts and projections, including,
without limitation, the analyses and forecasts of certain cost
savings, operating efficiencies, revenue effects and financial
synergies and other strategic benefits
C-1
jointly prepared and expected by Frontier and the Company to be
achieved as a result of the Transaction (collectively, the
Synergies), made available to Deutsche Bank
and used in its analyses, Deutsche Bank has assumed with your
permission that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments
of the management of the Company and Frontier as to the matters
covered thereby. In rendering its opinion, Deutsche Bank
expresses no view as to the reasonableness of such forecasts and
projections, including, without limitation, the Synergies, or
the assumptions on which they are based. Deutsche Banks
opinion is necessarily based upon economic, market and other
conditions, and the information made available to it, as of the
date hereof. We expressly disclaim any undertaking or obligation
to advise any person of any change in any fact or matter
affecting our opinion of which we become aware after the date
hereof.
For purposes of rendering its opinion, Deutsche Bank has assumed
with your permission that, in all respects material to its
analysis, the Transaction will be consummated in accordance with
its terms, without any material waiver, modification or
amendment of any term, condition or agreement. We have also
assumed, at your direction, that the Transaction will qualify
for federal income tax purposes as a reorganization under the
provisions of Section 368(a) of the Internal Revenue Code
of 1986, as amended. Deutsche Bank has also assumed that all
material governmental, regulatory, contractual or other
approvals and consents required in connection with the
consummation of the Transaction will be obtained and that in
connection with obtaining any necessary governmental,
regulatory, contractual or other approvals and consents, no
material restrictions, terms or conditions will be imposed. We
are not legal, regulatory, tax or accounting experts and have
relied on the assessments made by the Company and its advisors
with respect to such issues.
This opinion has been approved and authorized for issuance by a
fairness opinion review committee and is addressed to, and for
the use and benefit of, the Board of Directors of the Company.
This opinion is limited to the fairness, from a financial point
of view, of the Exchange Ratio to the Company. You have not
asked us to, and this opinion does not, address the fairness of
the Transaction, or any consideration received in connection
therewith, to the holders of any class of securities, creditors
or other constituencies of the Company, nor does it address the
fairness of the contemplated benefits of the Transaction. We do
not express any view on, and our opinion does not address, any
other term or aspect of the Merger Agreement or Transaction or
any term or aspect of any other agreement or instrument
contemplated by the Merger Agreement or entered into or amended
in connection with the Transaction. Deutsche Bank expresses no
opinion as to the merits of the underlying decision by the
Company to engage in the Transaction or the relative merits of
the Transaction as compared to any alternative business
strategies, nor do we express an opinion or recommendation as to
how any holder of Company Common Stock should vote with respect
to the Transaction. We do not express any view or opinion as to
the fairness, financial or otherwise, of the amount or nature of
any compensation payable to or to be received by any of the
officers, directors, or employees of the Company or Frontier, or
any class of such persons, in connection with the Transaction
whether relative to the amounts to be received by any other
person pursuant to the Merger Agreement or otherwise. This
opinion does not in any manner address the prices at which the
Company Common Stock or the Frontier Common Stock will trade
following the announcement or consummation of the Transaction.
Deutsche Bank will be paid a fee for its services as financial
advisor to the Company in connection with the Transaction, a
portion of which is payable upon delivery of this opinion and a
substantial portion of which is contingent upon consummation of
the Transaction. The Company has also agreed to reimburse
Deutsche Bank for its expenses, and to indemnify Deutsche Bank
against certain liabilities, in connection with its engagement.
We are an affiliate of Deutsche Bank AG (together with its
affiliates, the DB Group). DB Group may
provide investment banking, commercial banking and other
financial services to the Company, Frontier or their respective
affiliates in the future for which we would expect the DB Group
to receive compensation. In the ordinary course of business,
members of the DB Group may actively trade in the securities and
other instruments and obligations of Frontier, the Company, or
their respective affiliates for their own accounts and for the
accounts of their customers. Accordingly, the DB Group may at
any time hold a long or short position in such securities,
instruments and obligations.
Based upon and subject to the foregoing assumptions,
limitations, qualifications and conditions, it is Deutsche
Banks opinion that, as of the date hereof, the Exchange
Ratio is fair, from a financial point of view, to the Company.
This letter is provided to the Board of Directors of the Company
in connection with and for the purposes of its evaluation of the
Transaction. This opinion may not be disclosed, summarized,
referred to, or communicated (in
C-2
whole or in part) to any other person for any purpose whatsoever
except with our prior written approval, provided that this
opinion may be reproduced in full in any proxy or information
statement mailed by the Company to its stockholders (or, if a
joint proxy statement is utilized, mailed by the Company and
Frontier to their respective stockholders) in connection with
the Transaction.
Very truly yours,
/s/ Deutsche Bank Securities Inc.
DEUTSCHE BANK SECURITIES INC.
C-3
Annex D
[CREDIT
SUISSE SECURITIES (USA) LLC LETTERHEAD]
February 21, 2011
Board of Directors
Frontier Oil Corporation
10000 Memorial Drive, Suite 600
Houston, Texas
77024-3411
Members of the Board:
You have asked us to advise you in your capacity as the Board of
Directors of Frontier Oil Corporation (the Company)
with respect to the fairness, from a financial point of view, to
the holders of common stock, without par value (Company
Common Stock), of the Company of the Exchange Ratio (as
defined below) to be received by such holders pursuant to the
terms of the Agreement and Plan of Merger (the Merger
Agreement) to be entered into by and among Holly
Corporation (the Acquiror), North Acquisition, Inc.,
a wholly owned subsidiary of the Acquiror (Merger
Sub), and the Company. The Merger Agreement provides for,
among other things, the merger (the Merger) of the
Company with Merger Sub pursuant to which each outstanding share
of Company Common Stock will be converted into the right to
receive 0.4811 of a share (the Exchange Ratio) of
common stock, par value $0.01 per share (Acquiror Common
Stock), of the Acquiror and the Company will become a
wholly owned subsidiary of the Acquiror.
In arriving at our opinion, we have reviewed a draft, dated
February 21, 2011, of the Merger Agreement and certain
publicly available business and financial information relating
to the Company and the Acquiror. We have also reviewed certain
other information relating to the Company, including certain
financial forecasts and operating data, provided to us by the
management of the Company. In addition, we have reviewed certain
other information relating to the Acquiror, including estimates
with respect to certain prospective financial and operating data
provided to us by the management of the Acquiror and certain
financial forecasts developed therefrom based on assumptions
provided by and discussions with the management of the Company.
We have also met with certain members of the management of the
Company and the Acquiror to discuss the business and prospects
of the Company and the Acquiror, respectively. We have also
considered certain financial data, operating data, and stock
market data of the Company and the Acquiror and their publicly
traded common stock, and we have compared that data with similar
data for other companies with publicly traded common stock in
businesses we deemed similar to those of the Company and the
Acquiror, and we have considered, to the extent publicly
available, the financial terms of certain other business
combinations and other transactions which have recently been
effected or announced. We also considered such other
information, financial studies, analyses and investigations and
financial, economic and market criteria which we deemed relevant.
In connection with our review, we have not independently
verified any of the foregoing information and have assumed and
relied on such information being complete and accurate in all
material respects. With respect to the financial forecasts for
the Company referred to above, the management of the Company has
advised us, and we have assumed, that such forecasts have been
reasonably prepared on bases reflecting the best currently
available estimates and judgments of the Companys
management as to the future financial performance of the Company
and we express no opinion with respect to such projections or
the assumptions on which they are based. With respect to the
financial forecasts for the Acquiror referred to above, the
management of the Company has advised us, and we have assumed,
that such forecasts have been reasonably prepared on bases
reflecting the best currently available estimates and judgments
of the Companys management as to the future financial
performance of the Acquiror and are a reasonable basis on which
to evaluate the Acquiror and we express no opinion with respect
to such projections or the assumptions on which they are based.
With respect to the estimates provided to us by the management
of the Company with respect to the cost savings and synergies
anticipated to result from the Merger, we have been advised by
the management of the Company, and we have assumed, that such
forecasts have been reasonably prepared on bases reflecting the
best currently available estimates and judgments of the
management of the Company as to such
D-1
cost savings and synergies and will be realized in the amounts
and the times indicated thereby. We have assumed, with your
consent, that the Merger will be treated as a tax-free
reorganization for federal income tax purposes. We also have
assumed, with your consent, that, in the course of obtaining any
regulatory or third party consents, approvals or agreements in
connection with the Merger, no delay, limitation, restriction or
condition will be imposed that would have an adverse effect on
the Company, the Acquiror or the contemplated benefits of the
Merger and that the Merger will be consummated in accordance
with the terms of the Merger Agreement without waiver,
modification or amendment of any material term, condition or
agreement thereof. Furthermore, we have assumed that the
definitive Merger Agreement will conform to the draft reviewed
by us in all respects material to our analyses. In addition, we
have not been requested to make, and have not made, an
independent evaluation or appraisal of the assets or liabilities
(contingent or otherwise) of the Company or the Acquiror, nor
have we been furnished with any such evaluations or appraisals
and we have assumed with your consent, that any such contingent
liabilities (including any environmental liabilities) would not
be material to our analyses or opinion. With your consent, we
have further assumed that any alternative structures considered
by the Company and the Acquiror to effect the business
combination contemplated by the Merger Agreement would not
materially affect our analyses or opinion and that prior to the
consummation of the Merger, the Company will declare and pay a
special dividend to holders of Company Common Stock to the
extent permitted by the Merger Agreement.
Our opinion addresses only the fairness, from a financial point
of view, to the holders of Company Common Stock of the Exchange
Ratio in the Merger and does not address any other aspect or
implication of the Merger or any other agreement, arrangement or
understanding entered into in connection with the Merger or
otherwise, including, without limitation, the fairness of the
amount or nature of, or any other aspect relating to, any
compensation to any officers, directors or employees of any
party to the Merger, or class of such persons, relative to the
Exchange Ratio or otherwise. Furthermore, no opinion, counsel or
interpretation is intended regarding matters that require legal,
regulatory, accounting, insurance, tax, executive compensation,
environmental or other similar professional advice. It is
assumed that such opinions, counsel, interpretations or advice
have been or will be obtained from the appropriate professional
sources. The issuance of this opinion was approved by our
authorized internal committee.
Our opinion is necessarily based upon information made available
to us as of the date hereof and financial, economic, market and
other conditions as they exist and can be evaluated on the date
hereof. In addition, as you are aware, the financial projections
and estimates that we have reviewed relating to the future
financial performance of the Company and the Acquiror reflect
certain assumptions regarding the oil and gas and petroleum
refining industries that are subject to significant volatility
and that, if different than assumed, could have a material
impact on our analyses and opinion. We are not expressing any
opinion as to what the value of shares of Acquiror Common Stock
actually will be when issued to the holders of Company Common
Stock pursuant to the Merger or the prices at which shares of
Acquiror Common Stock or Company Common Stock will trade at any
time. Our opinion does not address the relative merits of the
Merger as compared to alternative transactions or strategies
that might be available to the Company, nor does it address the
Companys underlying business decision to proceed with the
Merger. We were not requested to, and did not, solicit third
party indications of interest in acquiring all or any part of
the Company.
We have acted as financial advisor to the Company in connection
with the Merger and will receive a fee for our services, a
significant portion of which is contingent upon the consummation
of the Merger. We also became entitled to receive a fee upon the
delivery of our opinion. In addition, the Company has agreed to
indemnify us and certain related parties for certain liabilities
and other items arising out of or related to our engagement. We
and our affiliates have in the past provided investment banking
and other financial services to the Company and its affiliates,
for which we and our affiliates have received compensation,
including having acted as the dealer manager in connection with
an offer to purchase certain of its outstanding senior notes by
the Company in 2010 and having acted as a joint bookrunning lead
managing underwriter in connection with the public offering of
certain senior notes by the Company in 2010. We and our
affiliates also have in the past provided investment banking and
other financial services to the Acquiror and its affiliates,
including having acted as a financial advisor to the Acquiror in
connection with a proposed business combination with the Company
in 2003 that was not consummated. We and our affiliates may have
provided other financial advice and services, and may in the
future provide financial advice and services, to the Company,
the Acquiror and their respective affiliates for which we and
our affiliates have received, and would expect to receive,
compensation. We are a full service securities firm engaged in
securities
D-2
trading and brokerage activities as well as providing investment
banking and other financial services. In the ordinary course of
business, we and our affiliates may acquire, hold or sell, for
our and our affiliates own accounts and the accounts of
customers, equity, debt and other securities and financial
instruments (including bank loans and other obligations) of the
Company, the Acquiror and any other company that may be involved
in the Merger, as well as provide investment banking and other
financial services to such companies.
It is understood that this letter is for the information of the
Board of Directors of the Company (in its capacity as such) in
connection with its consideration of the Merger and does not
constitute advice or a recommendation to any stockholder as to
how such stockholder should vote or act on any matter relating
to the proposed Merger.
Based upon and subject to the foregoing, it is our opinion that,
as of the date hereof, the Exchange Ratio in the Merger is fair,
from a financial point of view, to holders of Company Common
Stock.
Very truly yours,
/s/ CREDIT SUISSE SECURITIES (USA) LLC
D-3
Annex E
[LETTERHEAD
OF CITIGROUP GLOBAL MARKETS INC.]
February 21, 2011
The Board of Directors
Frontier Oil Corporation
10000 Memorial Drive, Suite 600
Houston, Texas 77024
The Board of Directors:
You have requested our opinion as to the fairness, from a
financial point of view, to the holders of the common stock of
Frontier Oil Corporation (Frontier) of the Exchange
Ratio (defined below) set forth in an Agreement and Plan of
Merger, dated as of February 21, 2011 (the
Agreement), among Holly Corporation
(Holly), North Acquisition, Inc., a wholly owned
subsidiary of Holly (Merger Sub), and Frontier. As
more fully described in the Agreement, Merger Sub will be merged
with and into Frontier (the Merger) pursuant to
which each outstanding share of the common stock, without par
value, of Frontier (Frontier Common Stock) will be
converted into the right to receive 0.4811 (the Exchange
Ratio) of a share of the common stock, par value $0.01 per
share, of Holly (Holly Common Stock).
In arriving at our opinion, we reviewed the Agreement and held
discussions with certain senior officers, directors and other
representatives and advisors of Frontier and certain senior
officers and other representatives and advisors of Holly
concerning the business, operations and prospects of Frontier
and the business, operations and prospects of Holly, including
Hollys 32% limited partnership interest and 2% general
partnership interest in Holly Energy Partners, L.P.
(HEP). We reviewed certain publicly available
business and financial information relating to Frontier and
Holly as well as certain financial forecasts and other
information and data relating to Frontier and Holly provided to
or discussed with us by the respective managements of Frontier
and Holly, including certain information relating to dividend
payments and information regarding potential strategic
implications and operational benefits (including the amount,
timing and achievability thereof) anticipated by the management
of Frontier to result from the Merger. We reviewed the financial
terms of the Merger as set forth in the Agreement in relation
to, among other things: current and historical market prices and
trading volumes of Frontier Common Stock, Holly Common Stock and
the limited partnership units of HEP; the historical and
projected earnings and other operating data of Frontier and
Holly; and the capitalization and financial condition of
Frontier and Holly. We analyzed certain financial, stock market
and other publicly available information relating to the
businesses of other companies whose operations we considered
relevant in evaluating those of Frontier and Holly and reviewed,
to the extent publicly available, the financial terms of certain
other transactions involving refining companies. In addition to
the foregoing, we conducted such other analyses and examinations
and considered such other information and financial, economic
and market criteria as we deemed appropriate in arriving at our
opinion. The issuance of our opinion has been authorized by our
fairness opinion committee.
In rendering our opinion, we have assumed and relied, without
independent verification, upon the accuracy and completeness of
all financial and other information and data publicly available
or provided to or otherwise reviewed by or discussed with us and
upon the assurances of the managements of Frontier and Holly
that they are not aware of any relevant information that has
been omitted or that remains undisclosed to us. As discussed, we
considered the selected precedent transactions that we reviewed
to lack sufficient comparability due to various factors and
circumstances that distinguish the proposed Merger from such
transactions and, accordingly, did not perform a selected
precedent transactions analysis in reaching our opinion. Also as
you are aware, we have not been provided with internal financial
forecasts relating to Holly prepared by the management thereof
other than certain operating data for calendar 2011 and,
accordingly, we have been directed by Frontier to utilize
financial forecasts relating to Holly derived from such
operating data and other assumptions prepared by the management
of Frontier in performing our analyses. With respect to the
financial forecasts and other information and data relating to
Frontier and Holly provided to or otherwise reviewed by or
discussed with us (including with respect to dividend payments
E-1
The Board of Directors
Frontier Oil Corporation
February 21, 2011
Page 2
and as to strategic implications and operational benefits
resulting from the Merger), we have been advised by the
managements of Frontier and Holly and we have assumed, with your
consent, that they were reasonably prepared on bases reflecting
the best currently available estimates and judgments of the
managements of Frontier and Holly, as the case may be, as to the
future financial performance of Frontier and Holly, such
strategic implications and operational benefits and the other
matters covered thereby. We also have assumed, with your
consent, that the financial results reflected in such financial
forecasts and other information and data will be realized in the
amounts and at the times projected. We have relied, at the
direction of Frontier, upon the assessments of the management of
Frontier as to market and cyclical trends and prospects relating
to the energy industry and the potential impact of such trends
and prospects on Frontier and Holly, including the assumptions
of the management of Frontier as to future crude oil, refined
products and other commodity prices reflected in the financial
forecasts and other information and data utilized in our
analyses, which prices are subject to significant volatility and
which, if different than as assumed, could have a material
impact on our analyses or opinion. We have assumed, at the
direction of Frontier, that there will be no developments with
respect to any of the foregoing that would be material to our
analyses or opinion.
We have not made or been provided with an independent evaluation
or appraisal of the assets or liabilities (contingent or
otherwise) of Frontier, Holly or any other entity nor have we
made any physical inspection of the properties or assets of
Frontier, Holly or any other entity. We have assumed, with your
consent, that there are no material undisclosed liabilities of
Frontier or Holly for which appropriate reserves or other
provisions have not been made. We also have assumed, with your
consent, that the Merger will be consummated in accordance with
its terms without waiver, modification or amendment of any
material term, condition or agreement, in the course of
obtaining the necessary regulatory or third party approvals,
consents, releases and waivers for the Merger, no delay,
limitation, restriction or condition will be imposed that would
have an adverse effect on Frontier, Holly or the contemplated
benefits of the Merger and no such adverse effect will result in
the event that the Merger is effected through an alternative
structure as permitted under the terms of the Agreement. We
further have assumed, with your consent, that the Merger will
qualify for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended. Our opinion, as set forth
herein, relates to the relative values of Frontier and Holly. We
are not expressing any opinion as to what the value of Holly
Common Stock actually will be when issued pursuant to the Merger
or the prices at which Frontier Common Stock or Holly Common
Stock will trade at any time.
Our opinion does not address any terms (other than the Exchange
Ratio to the extent expressly specified herein) or other aspects
or implications of the Merger, including, without limitation,
the form or structure of the Merger or any other agreement,
arrangement or understanding to be entered into in connection
with or contemplated by the Merger or otherwise. We were not
requested to, and we did not, solicit third-party indications of
interest in the possible acquisition of all or a part of
Frontier. We express no view as to, and our opinion does not
address, the underlying business decision of Frontier to effect
the Merger, the relative merits of the Merger as compared to any
alternative business strategies that might exist for Frontier or
the effect of any other transaction in which Frontier might
engage. We also express no view as to, and our opinion does not
address, the fairness (financial or otherwise) of the amount or
nature or any other aspect of any compensation to any officers,
directors or employees of any parties to the Merger, or any
class of such persons, relative to the Exchange Ratio or
otherwise. Our opinion is necessarily based upon information
available to us, and financial, stock market and other
conditions and circumstances existing and disclosed to us, as of
the date hereof. As you are aware, the credit, financial and
stock markets have been experiencing unusual volatility and we
express no opinion or view as to any potential effects of such
volatility on Frontier, Holly or the contemplated benefits of
the Merger.
Citigroup Global Markets Inc. has acted as financial advisor to
Frontier in connection with the proposed Merger and will receive
a fee for such services, a significant portion of which is
contingent upon the consummation of the Merger. We also will
receive a fee in connection with the delivery of this opinion.
In the ordinary course of
E-2
The Board of Directors
Frontier Oil Corporation
February 21, 2011
Page 3
business, we and our affiliates may actively trade or hold the
securities of Frontier, Holly and their respective affiliates,
including HEP, for our own account or for the account of our
customers and, accordingly, may at any time hold a long or short
position in such securities. In addition, we and our affiliates
(including Citigroup Inc. and its affiliates) may maintain
relationships with Frontier, Holly and their respective
affiliates, including HEP.
Our advisory services and the opinion expressed herein are
provided for the information of the Board of Directors of
Frontier (in its capacity as such) in its evaluation of the
proposed Merger, and our opinion is not intended to be and does
not constitute a recommendation to any shareholder as to how
such shareholder should vote or act on any matters relating to
the proposed Merger or otherwise.
Based upon and subject to the foregoing, our experience as
investment bankers, our work as described above and other
factors we deemed relevant, we are of the opinion that, as of
the date hereof, the Exchange Ratio is fair, from a financial
point of view, to holders of Frontier Common Stock.
Very truly yours,
/s/ Citigroup Global Markets Inc.
CITIGROUP GLOBAL MARKETS INC.
E-3
Annex F
FORM OF
AMENDED
AND RESTATED
CERTIFICATE
OF INCORPORATION
OF
HOLLYFRONTIER
CORPORATION
HollyFrontier Corporation, a corporation organized and existing
under the laws of the State of Delaware (the
Corporation), hereby certifies as follows:
1. The name of the Corporation is HollyFrontier
Corporation, and the name under which the Corporation was
originally incorporated is GENERAL APPLIANCE CORPORATION.
The date of filing its original Certificate of Incorporation
with the Secretary of State was January 25, 1947.
2. This Amended and Restated Certificate of Incorporation
has been duly adopted and ratified in accordance with
Sections 242 and 245 of the General Corporation Law of the
State of Delaware, and restates and amends the text of the
Certificate of Incorporation as amended, supplemented and
restated heretofore, to read in its entirety as follows:
ARTICLE FIRST: The name of the
Corporation shall be HollyFrontier Corporation.
ARTICLE SECOND: The address of the
registered office of the Corporation in the State of Delaware is
at 1209 Orange Street, in the City of Wilmington, County of New
Castle. The name of the Corporations registered agent at
that address is The Corporation Trust Company.
ARTICLE THIRD: The Corporation may engage
in any lawful activity for which corporations may be organized
under the General Corporation Law of Delaware.
ARTICLE FOURTH: The total number of
shares of stock which the Corporation shall have authority to
issue is Three Hundred Twenty Five Million (325,000,000) shares,
of which Five Million (5,000,000) shares having par value of One
Dollar ($1.00) each, amounting in the aggregate to Five Million
Dollars ($5,000,000), shall be Preferred Stock, and of which
Three Hundred Twenty Million (320,000,000) shares having par
value of One Cent ($0.01) each, amounting in the aggregate to
Three Million Two Hundred Thousand Dollars ($3,200,000), shall
be Common Stock.
The designations and the powers, preferences and rights, and the
qualifications, limitations
and/or
restrictions thereof shall be determined as follows:
PREFERRED
STOCK, $1.00 par value
Shares of Preferred Stock may be issued from time to time in one
or more series, each such series to have such distinctive
designation or title as may be fixed by the Board of Directors
prior to the issuance of any shares thereof. Each share of any
series of Preferred Stock shall be identical with all other
shares of such series, except as to the date from which
cumulative preferred dividends, if any, shall be cumulative. For
each such series, the Board of Directors shall determine, by
resolution or resolutions adopted prior to the issuance of any
shares thereof, the rights, preferences, limitations and
restrictions of shares of such series, including, without
limitation, rights, or limitations with respect to voting
powers, if any, redemption rights, if any, conversion rights, if
any, dividend rights and any preferences on liquidation.
F-1
COMMON
STOCK, $.01 par value
Subject to any preferences, qualifications, limitations, voting
rights and restrictions with respect to each class of the
capital stock of the Corporation having any preference or
priority over the Common Stock, the holders of the Common Stock
shall have and possess all rights appertaining to capital stock
of the Corporation.
No holder of stock of any class of the Corporation shall be
entitled as of right to subscribe for, purchase or receive any
part of any new or additional shares of stock of any class,
whether now or hereafter authorized, or of bonds, debentures or
other evidences of indebtedness convertible into or exchangeable
for stock, but all such new or additional shares of stock of any
class, or bonds, debentures or other evidences of indebtedness
convertible into or exchangeable for stock, may be issued and
disposed of by the Board of Directors on such terms and for such
consideration, so far as may be permitted by law, and to such
person or persons as the Board of Directors in its absolute
discretion may deem advisable. Except as expressly provided
elsewhere in this Article Fourth, no vote of holders of
Preferred Stock or Common Stock shall be required in connection
with the designation or the issuance of any shares of any series
of any Preferred Stock authorized by and complying with the
conditions contained herein.
ARTICLE FIFTH: The number of directors of
the Corporation shall be fixed time to time by or in the manner
provided for in the By-Laws but shall never be less than three.
In case of any increase in the number of directors, the
additional directors may be elected by the directors then in
office or by the stockholders at any annual or special meeting.
Election of directors need not be by written ballot.
ARTICLE SIXTH: In furtherance and not in
limitation of the powers conferred by statute, the Board of
Directors is expressly authorized to make, alter, amend, and
repeal the By-Laws of the Corporation.
The By-Laws may confer powers on the Board of Directors in
addition to the foregoing and in addition to the powers and
authorities expressly conferred by statute.
ARTICLE SEVENTH: No director of the
Corporation shall be personally liable to the Corporation or any
of its stockholders for monetary damages for breach of such
directors duty as a director, except that a director shall
remain liable to the extent provided by law (i) for breach
of the directors duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the Delaware
General Corporation Law or (iv) for any transaction from
which the director derived an improper personal benefit. No
amendment or deletion of this Article shall impair the immunity
of any person under this Article for any act or omission
occurring prior to the effectiveness of such amendment or
deletion.
The Corporation shall indemnify to the fullest extent authorized
by law (as now or hereafter in effect), and shall advance
expenses to, any person made, or threatened to be made, a
defendant or witness to any action, suit or proceeding (whether
civil or criminal or otherwise) by reason of the fact that he,
his testator or intestate, is or was a director or officer of
the Corporation, or is or was, at the request of the
Corporation, serving any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, in
any capacity. Nothing contained herein shall affect any rights
to indemnification to which employees other than directors and
officers may be entitled by law. No amendment or deletion of
this Article shall impair the immunity of any person under this
Article for any act or omission occurring prior to the
effectiveness of such amendment or deletion.
ARTICLE EIGHTH: A director of this
Corporation shall not in the absence of fraud be disqualified by
his office from dealing or contracting with the Corporation
either as a vendor, purchaser, or otherwise, nor in the absence
of fraud, shall any transaction or contract of this Corporation
be void or voidable or affected by reason of the fact that any
director or any firm of which any director is a member or an
employee or any corporation of which any director is an officer,
director, stockholder, or employee is in any way interested in
such transaction or contract, even though the vote of the
director or directors having such adverse interest shall have
been necessary to obligate the Corporation upon such contract or
transaction, and, in the absence of fraud, no director or
directors having such adverse interest shall be liable to the
Corporation or to any stockholder or creditor thereof or to any
other person for any loss incurred by it under or by reason of
any such contract or transaction, nor, in the absence of fraud,
shall any such director or directors be accountable for any
gains or profits realized thereon.
F-2
ARTICLE NINTH: Whenever a compromise or
arrangement is proposed between this Corporation and its
creditors or any class of them
and/or
between this Corporation and its stockholders or any class of
them, any court of equitable jurisdiction within the State of
Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this
Corporation under the provisions of Section 291 of
Title 8 of the Delaware Code or on the application of
trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of
Section 279 of Title 8 of the Delaware Code order a
meeting of the creditors or class of creditors,
and/or of
the stockholders or class of stockholders of this Corporation,
as the case may be, to be summoned in such a matter as the said
Court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors,
and/or of
the stockholders or class of stockholders of this Corporation,
as the case may be, agree to any compromise or arrangement and
to reorganization of this Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement
and the said reorganization shall, if sanctioned by the Court to
which the said application has been made, be binding on all
creditors or class of creditors,
and/or on
all the stockholders or class of stockholders, of this
Corporation, as the case may be, and also on this Corporation.
F-3
IN WITNESS WHEREOF, said HollyFrontier Corporation has caused
this Amended and Restated Certificate of Incorporation to be
duly executed by
,
its
,
this day of
,
2011.
HOLLYFRONTIER CORPORATION
Name:
F-4
PART II
INFORMATION
NOT REQUIRED IN PROSPECTUS
|
|
ITEM 20.
|
Indemnification
of Directors and Officers
|
The following summary is qualified in its entirety by reference
to the complete copy of the General Corporation Law of the State
of Delaware (DGCL) and Hollys restated
certificate of incorporation and bylaws.
Section 145 of the DGCL provides that a corporation may
indemnify any person who was or is a party, or is threatened to
be made a party, to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
corporation) by reason of the fact that he or she is or was a
director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses
(including attorneys fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him or
her in connection with such action, suit or proceeding if he or
she acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the
corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her
conduct was unlawful. Section 145 further provides that a
corporation similarly may indemnify any such person serving in
any such capacity who was or is a party, or is threatened to be
made a party, to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he or she is or was a
director, officer, employee or agent of the corporation or is or
was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses
(including attorneys fees) actually and reasonably
incurred in connection with the defense or settlement of such
action or suit if he or she acted in good faith and in a manner
he or she reasonably believed to be in, or not opposed to, the
best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the
Delaware Court of Chancery or such other court in which such
action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all
of the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the
Delaware Court of Chancery or such other court shall deem proper.
As permitted by the DGCL, the Holly restated certificate of
incorporation provides that Holly directors shall have no
personal liability to Holly or its stockholders for monetary
damages for breach of fiduciary duty as a director, except
(1) for any breach of the directors duty of loyalty
to Holly or its stockholders, (2) for acts or omissions not
in good faith or that involve intentional misconduct or knowing
violation of law, (3) for unlawful payment of a dividend or
unlawful stock purchase or stock redemption or (4) for any
transaction from which a director derived an improper personal
benefit. The Holly bylaws provide that indemnification shall be
provided to the fullest extent permitted by the DGCL for all
current or former Holly directors or officers.
Holly has purchased insurance policies providing Holly officers
and directors coverage against certain liabilities claimed
against them by reason of their being Holly officers and
directors.
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|
ITEM 21.
|
Exhibits
and Financial Statement Schedules
|
See Exhibit Index below.
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
a. to include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933;
b. to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the
most recent post-effective amendment thereof) that, individually
or in the aggregate,
II-1
represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end
of the estimated maximum offering range may be reflected in the
form of prospectus filed with the Securities and Exchange
Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
Calculation of Registration Fee table in the
effective registration statement; and
c. to include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
2. That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. To remove from registration by means of a post-effective
amendment any of the securities being registered that remain
unsold at the termination of the offering.
4. That, for the purpose of determining liability under the
Securities Act of 1933 to any purchaser, each prospectus filed
by the registrant pursuant to Rule 424(b) as part of a
registration statement relating to an offering, other than
registration statements relying on Rule 430B or other than
prospectuses filed in reliance on Rule 430A, shall be deemed to
be part of and included in the registration statement as of the
date it is first used after effectiveness. Provided, however,
that no statement made in a registration statement or prospectus
that is part of the registration statement or made in a document
incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify
any statement that was made in the registration statement or
prospectus that was part of the registration statement or made
in any such document immediately prior to such date of first use.
5. That, for the purpose of determining liability of the
registrant under the Securities Act of 1933 to any purchaser in
the initial distribution of the securities, in a primary
offering of securities of the undersigned registrant pursuant to
this registration statement, regardless of the underwriting
method used to sell the securities to the purchaser, if the
securities are offered or sold to such purchaser by means of any
of the following communications, the undersigned registrant will
be a seller to the purchaser and will be considered to offer or
sell such securities to such purchaser: (i) any preliminary
prospectus or prospectus of the undersigned registrant relating
to the offering required to be filed pursuant to Rule 424;
(ii) any free writing prospectus relating to the offering
prepared by or on behalf of the undersigned registrant or used
or referred to by the undersigned registrant; (iii) the
portion of any other free writing prospectus relating to the
offering containing material information about the undersigned
registrant or its securities provided by or on behalf of the
undersigned registrant; and (iv) any other communication
that is an offer in the offering made by the undersigned
registrant to the purchaser.
6. That, for purposes of determining any liability under
the Securities Act of 1933, each filing of the registrants
annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended (and, where
applicable, each filing of an employee benefit plans
annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934, as amended) that is incorporated by
reference in this registration statement shall be deemed to be a
new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
7. That prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part
of this registration statement by any person or party who is
deemed to be an underwriter within the meaning of
Rule 145(c), the registrant undertakes that such reoffering
prospectus will contain the
II-2
information called for by the applicable registration form with
respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the
other items of the applicable form.
8. That every prospectus (i) that is filed pursuant to
paragraph (5) above, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act of
1933 and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an
amendment to this registration statement and will not be used
until such amendment has become effective, and that for the
purpose of determining liabilities under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
9. Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant to
the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Securities Act of
1933 and will be governed by the final adjudication of such
issue.
10. To respond to requests for information that is
incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this registration statement,
within one business day of receipt of such request, and to send
the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration
statement through the date of responding to the request.
11. To supply by means of a post-effective amendment all
information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and
included in this registration statement when it became effective.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Amendment No. 2 to the
registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Dallas,
State of Texas, on May 13, 2011.
HOLLY CORPORATION,
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By:
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/s/ Matthew
P. Clifton
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Name: Matthew P. Clifton
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Title:
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Chairman of the Board and Chief Executive Officer
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Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 2 to the registration statement has been
signed below by the following persons in the capacities, and on
the date, indicated.
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Signature
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Title
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Date
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/s/ Matthew P.
CliftonMatthew
P. Clifton
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Chairman of the Board and Chief Executive Officer (Principal
Executive Officer)
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May 13, 2011
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*Bruce
R. Shaw
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Senior Vice President and Chief Financial Officer (Principal
Financial Officer)
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May 13, 2011
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*Scott
C. Surplus
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Vice President and Controller (Principal Accounting Officer)
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May 13, 2011
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*Buford
P. Berry
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Director
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May 13, 2011
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*Leldon
E. Echols
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Director
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May 13, 2011
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R.
Kevin Hardage
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Director
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*Robert
G. McKenzie
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Director
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May 13, 2011
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*Jack
P. Reid
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Director
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May 13, 2011
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*Tommy
A. Valenta
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Director
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May 13, 2011
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*By:
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/s/ Matthew
P. Clifton
Matthew
P. Clifton
Attorney-in-Fact
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II-4
Exhibit Index
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Exhibit
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Number
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Exhibit Title
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2.1
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Agreement and Plan of Merger, dated as of February 21, 2011,
among Holly Corporation, North Acquisition, Inc. and Frontier
Oil Corporation (included as Annex A to the joint proxy
statement/prospectus forming a part of this registration
statement and incorporated herein by reference) (The annexes,
schedules and certain exhibits thereto have been omitted
pursuant to Item 601(b)(2) of Regulation S-K)
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3.1
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Restated Certificate of Incorporation of Holly Corporation,
dated March 10, 2010 (filed as Exhibit 3.1 to Holly
Corporations Form 10-K for the year ended December 31,
2010, Commission file number 1-03876 and incorporated herein by
reference)
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3.2
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Bylaws of Holly Corporation, dated December 22, 2005 (filed as
Exhibit 3.2.2 to Holly Corporations Form 8-K filed
December 22, 2005, Commission file number 1-03876 and
incorporated herein by reference)
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3.3
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Form of Amended and Restated Certificate of Incorporation of
HollyFrontier Corporation (included as Annex F to the joint
proxy statement/prospectus forming a part of this Registration
Statement and incorporated herein by reference)
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3.4
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Form of Amendment and Restatement of By-Laws of HollyFrontier
Corporation (included as Exhibit C of Annex A to the joint proxy
statement/prospectus forming a part of this Registration
Statement and incorporated herein by reference)
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5.1*
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Opinion of Vinson & Elkins LLP as to the validity of the
shares of Holly Corporation common stock
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8.1*
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Form of Opinion of Vinson & Elkins LLP as to certain tax
matters
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8.2*
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Form of Opinion of Andrews Kurth LLP as to certain tax matters
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10.1
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Retention and Assumption Agreement, dated as of February 21,
2011, by and among Frontier Oil Corporation, Holly Corporation
and Michael D. Jennings (filed as Exhibit 10.1 to Frontier Oil
Corporations Form 8-K filed February 22, 2011, Commission
file number 1-7627 and incorporated herein by reference)
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10.2
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Retention and Assumption Agreement, dated as of February 21,
2011, by and among Frontier Oil Corporation, Holly Corporation
and Doug S. Aron (filed as Exhibit 10.2 to Frontier Oil
Corporations Form 8-K filed February 22, 2011, Commission
file number 1-7627 and incorporated herein by reference)
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10.3*
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Waiver Agreement, dated as of February 21, 2011, by and between
Holly Corporation and Matthew P. Clifton
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10.4*
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Waiver Agreement, dated as of February 21, 2011, by and between
Holly Corporation and David C. Lamp
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10.5*
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Waiver Agreement, dated as of February 21, 2011, by and between
Holly Corporation and Bruce R. Shaw
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23.1*
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Consent of Vinson & Elkins LLP (included in Exhibit 5.1
hereto)
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23.2*
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Consent of Vinson & Elkins LLP (included in Exhibit 8.1
hereto)
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23.3*
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Consent of Andrews Kurth LLP (included in Exhibit 8.2 hereto)
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23.4
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Consent of Ernst & Young LLP, auditor of Holly Corporation
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23.5
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Consent of Deloitte & Touche LLP, auditor of Frontier Oil
Corporation
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24
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Power of Attorney of Directors and Officers (included in
signature page to initial filing of this Registration Statement)
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99.1
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Consent of Morgan Stanley & Co. Incorporated
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99.2
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Consent of Deutsche Bank Securities Inc.
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99.3
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Consent of Credit Suisse Securities (USA) LLC
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99.4*
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Consent of Citigroup Global Markets Inc.
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99.5
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Form of Proxy Card of Holly Corporation
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99.6
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Form of Proxy Card of Frontier Oil Corporation
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