UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): March 1, 2011
(February 23, 2011)
HOLLY CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware
(State or other jurisdiction of
incorporation)
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001-03876
(Commission File Number)
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75-1056913
(I.R.S. Employer
Identification Number)
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100 Crescent Court,
Suite 1600
Dallas, Texas
(Address of principal
executive offices)
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75201-6915
(Zip code)
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Registrants telephone number, including area code: (
214) 871-3555
Not applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 1.02
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Termination of a Material Definitive Agreement.
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On February 14, 2011, the Board of Directors of Holly Logistics Services, L.L.C. (HLS)
adopted a form of indemnification agreement to be entered into by Holly Energy Partners, L.P.
(HEP) with certain officers and each director of HLS (the HEP Indemnification Agreements). In
connection with the adoption of the HEP Indemnification Agreements,
on February 23, 2011, Holly
Corporation (the Company) entered into an agreement terminating the Indemnification
Agreement, dated as of December 31, 2006, by and between the
Company and David G. Blair (the Indemnification Agreement). The material terms and conditions of the Indemnification
Agreement are described in the Companys Current Report on Form 8-K filed December 13, 2006, and
are incorporated herein by reference. No material early termination penalties were incurred by the
Company in connection with the termination of the Indemnification Agreement.
Item 5.02(e) Compensatory Arrangements of Certain Officers.
The Company has historically provided certain change in control benefits
to certain employees of HLS to provide for management continuity in the event of a change in
control and to provide competitive benefits for the recruitment and retention of certain employees
that dedicate all or substantially all of their business time to the performance of services for
HEP and its subsidiaries. In addition to adopting the HEP Indemnification Agreements, on February 14,
2011, the Board of Directors of HLS adopted (a) the Holly Energy Partners, L.P. Change in Control
Agreement Policy (the HEP CIC Policy) and (b) a related form of Change in Control Agreement to be
entered into between HEP and certain officers of HLS (the HEP CIC Agreements). In connection
with the adoption of the HEP CIC Policy and the HEP CIC Agreements,
on February 23, 2011, the
Company entered into agreements terminating (i) the Change in Control Agreement, dated as of
January 10, 2008, by and between the Company and David G. Blair, President of HLS (the Blair CIC
Agreement), and (ii) the Change in Control Agreement,
dated as of January 10, 2008, by and between
the Company and Mark T. Cunningham, Vice President, Operations of HLS (together with the Blair CIC
Agreement, the CIC Agreements). The material terms and conditions of the CIC Agreements are
described in the Companys Current Report on Form 8-K filed February 20, 2008, and are incorporated
herein by reference. No material early termination penalties were incurred by the Company in
connection with the termination of the CIC Agreements.
In connection with the adoption of the HEP CIC Policy and the HEP CIC Agreements, on February 23, 2011, the Board of Directors of the Company (the Board) approved and adopted the Amended
and Restated Holly Corporation Change in Control Agreement Policy (the Policy), including the
related form of Change in Control Agreement (each an Agreement and, collectively, the
Agreements) to be entered into between the Company and certain officers of the Company. The
Policy amends and restates the Companys existing Change in Control Agreement Policy in its
entirety. The purpose of the new Policy is to exclude from
eligibility employees of HLS or HEP or their subsidiaries, who will now be covered under the HEP CIC Policy and HEP
CIC Agreements. The new Policy does not in any way modify or affect existing Change in Control
Agreements between the Company and eligible Company officers (each, an Existing Agreement), which
contain the same payment and benefit terms as the Agreements and which will continue in full force
and effect in accordance with their terms.
The terms and procedures of the Policy reflect the recommendation of the Boards Compensation
Committee. Under the Policy, employees of the Company and any
subsidiary or affiliate of the Company, (but excluding employees of
HLS, HEP and any subsidiary of HLS and HEP) at pay grades 34 and above will receive an
Agreement either upon hire or promotion to an eligible pay grade level at the benefit level
described in
2
the table below. However, no eligible individual will be entitled to the benefits described in
the table below unless or until the individual timely executes an Agreement in accordance with the
procedures established by the chief executive officer of the Company. Employees of any subsidiary
or affiliate of the Company, including but not limited to HLS, will not receive an Agreement and
are ineligible to receive any benefits under the Policy.
The term of each Agreement will end on the first May 15 following the effective date of the
Agreement, regardless of the date on which an officer entered into an Agreement. On that date and
on each subsequent May 15
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, the term of each Agreement will be automatically extended
for one additional year, unless the Company gives notice to each officer 60 days prior to the
automatic extension date. The Agreements provide that if in connection with or within two years
after a Change in Control (as defined in the Agreements), an officer is terminated without
Cause, leaves voluntarily for Good Reason (as each such term is defined in the Agreements), or
is terminated as a condition of the occurrence of the transaction constituting the Change in
Control, the officer will receive the following cash severance amounts paid by the Company: (i) a
cash payment equal to his accrued and unpaid salary, reimbursement of expenses, and accrued
vacation pay, and (ii) a lump sum amount equal to the multiple applicable to his pay grade
specified in the table below 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, and (B) his annual bonus
amount, calculated as the average annual bonus paid to him for the prior three years. In addition,
the officer (and his dependents, as applicable) will receive a continuation of medical and dental
benefits for the number of years applicable to the officers pay grade indicated in the table
below. All payments and benefits due under the Agreement are conditioned on execution and
nonrevocation by the officer of a release for the benefit of the Company and its related entities
and agents.
If amounts payable to an officer under the Agreement (or pursuant to any other arrangement or
agreement with the Company that are payable as a result of a change in ownership or control)
(collectively, the Payments) exceed the amount allowed under Section 280G of the Internal Revenue
Code of 1986, as amended (the Code), for such officer by 10% or more, the Company will pay the
officer a tax gross up (a Gross Up) in an amount necessary to allow the officer to retain (after
all regular income and any excise taxes imposed on golden parachute payments) a net amount equal to
the total present value of the Payments on the date they are to be paid (after all regular income
taxes but without reduction for any excise taxes imposed on golden parachute payments).
Conversely, the Payments will be cut back if they exceed the Code Section 280G limit for the
officer by less than 10%. The determination of whether a Gross Up will be paid will be determined
by an independent public accounting firm selected by the Company and reasonably acceptable to the
officer.
The applicable multiplier and number of years that medical and dental benefits will be
continued will be determined based on the officers pay grade classification in accordance with the
following chart:
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Years of Medical and Dental
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Lump Sum Multiplier
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Continuation
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Grades 34 and 35
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1 X
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1 Year
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Grades 36 and 37
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2 X
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2 Years
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Grade 38 and Above
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3 X
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3 Years
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The foregoing description of the Policy and the Agreement does not purport to be complete and is
qualified in its entirety by reference to the full text of the Policy and the Agreement, copies of
which are attached hereto as Exhibit 10.1 and Exhibit 10.2, respectively, and are incorporated
herein by reference.
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Item 9.01
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Financial Statements and Exhibits
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10.1
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Amended and Restated Change in Control Agreement Policy
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10.2
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Holly Corporation Form of Change in Control Agreement
(incorporated by reference to Exhibit 10.2 of the Companys
Current Report on Form 8-K filed February 20, 2008)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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HOLLY CORPORATION
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By:
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/s/Bruce R. Shaw
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Bruce R. Shaw
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Senior Vice President and
Chief Financial Officer
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Date:
March 1, 2011
EXHIBIT INDEX
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Exhibit
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Number
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Exhibit Title
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10.1
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Amended and Restated Change in Control Agreement Policy
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10.2
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Holly Corporation Form of Change in Control Agreement
(incorporated by reference to Exhibit 10.2 of the Companys
Current Report on Form 8-K filed February 20, 2008)
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Exhibit 10.1
Holly Corporation
Amended and Restated Change in Control Agreement Policy
February 23, 2011
This Amended and Restated Change in Control Agreement Policy reflects the terms and procedures
as approved at the February 23, 2011 meeting of the Board of Directors (Board) of Holly
Corporation (Holly) based upon the recommendation of the Compensation Committee of the Board.
This Amended and Restated Change in Control Agreement Policy supersedes and replaces all prior or
contemporaneous policies concerning such subject matter.
1.
Eligibility
Employees
of Holly and any subsidiary or affiliate of Holly (but excluding
employees of Holly Logistics Services, L.L.C.(HLS), Holly
Energy Partners, L.P. (HEP) and any
subsidiary of HLS and HEP) at pay grades 34 and above will receive CIC Agreements either
upon hire or promotion to an eligible pay grade level at the benefit level described in Section 2
below. However, no eligible individual will be entitled to the benefits described in Section 2
below unless or until the individual timely executes a CIC Agreement in accordance with the
procedures established by the Chief Executive Officer of Holly.
2.
Severance Benefits under CIC Agreements
The CIC Agreements contain a double trigger, meaning that severance benefits only become
payable if a Change in Control occurs and an executive experiences a Termination Event during
the Protection Period. The severance benefits potentially payable under the CIC Agreements
contain three components:
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Accrued but unpaid salary, reimbursement of expenses, and accrued vacation pay;
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A lump sum amount equal to the sum of an executives base salary plus annual bonus multiplied
by the applicable multiplier (see chart below); and
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Continuation of medical and dental benefits for a specified number of years (see chart below).
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The applicable multiplier and number of years that medical and dental benefits will be
continued will be determined based on the executives pay grade classification in accordance with
the following chart:
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Years of Medical and Dental
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Lump Sum Multiplier
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Continuation
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Grades 34 and 35
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1X
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1 Year
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Grades 36 and 37
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2X
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2 Years
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Grade 38 and Above
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3X
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3 Years
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3.
Term of CIC Agreements
The initial term of each and every CIC Agreement will end on the first May 15th following the
effective date of the CIC Agreement, regardless of the date on which an executive entered into a
CIC Agreement with Holly. On that date and on each subsequent May 15th, the term of each CIC
Agreement will be automatically extended for one additional year, unless Holly gives notice to each
executive 60 days prior to the automatic extension date. For example, if an eligible executive is
hired on and enters into a CIC Agreement on March 1, 2011, the initial term of his CIC Agreement
will last until May 15, 2011, and if Holly does not give a notice of nonextension by March 16,
2011, then the term of the CIC Agreements will be automatically extended to May 15, 2012 on May 15,
2011. The occurrence of a Change in Control will extend or reduce the term of the CIC Agreements
through the end of the Protection Period.
4.
Applicable Definitions
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Change in Control
the CIC Agreements use the same definition used
with respect to awards issued under Hollys Long Term Incentive Plan
(LTIP) with certain modifications (intended to comply with section
409A of the Internal Revenue Code) as specified below:
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A third party acquisition of more than 50% (versus 40% under the LTIP
awards) of the outstanding stock of Holly or of the combined voting
power of outstanding securities of Holly; or
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A majority of the Board is replaced during any 12 month
period with directors who are not endorsed by a majority
of the existent Board (versus no time limitation under the
LTIP awards); or
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A merger or consolidation of Holly, except if:
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Hollys voting securities continue to represent at least
50% (versus 60% under the LTIP awards) of the combined
voting power of the voting securities of the surviving
entity; or
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The event is a recapitalization of Holly and no one person
owns more than 50% (versus 40% under the LTIP awards) of
Hollys voting securities following the transaction; or
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A liquidation or sale of Holly, except to an entity owned 60% by Holly.
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Protection Period
is the 24 month period beginning on the date a Change in Control occurs.
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Termination Event
means a termination of an executives employment without Cause, for
Good Reason, or as a condition to the consummation of or entry into a Change in Control
transaction.
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Cause
means an executives (1) engagement in an act of
willful gross negligence or willful misconduct on a matter
that is not inconsequential, or (2) conviction of a
felony.
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Good Reason
means, without an executives consent, (1) a
material reduction in the executives authority, duties or
responsibilities (or in the authority, duties or
responsibilities of the executives supervisor), (2) a
material reduction in executives base compensation, or
(3) relocation of an executive to an office more than 50
miles away from the location at which executive normally
performs his duties. An executive must give notice of the
occurrence of a Good Reason event within 90 days and
give the company 30 days to cure.
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5.
Additional Provisions
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Gross Up Payments If the severance benefits paid under the CIC
Agreement (when combined with any other change in control payments,
including but not limited to the accelerated vesting of equity
compensation awards, received by the executive) exceed the limits
imposed by section 280G of the Internal Revenue Code by more than 10%,
then Holly will make a gross up payment to the executive. If the
severance benefits (when combined with other change in control
payments) exceed the section 280G limits by less than 10%, then the
executives severance benefits will be cut back to an amount within
the section 280G limits. The determination of whether either a gross
up payment or a cut back is required under these provisions will be
made by an independent public accounting firm.
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Release Payment of the lump sum amount and continuation of medical and dental benefits are
conditioned on the execution and nonrevocation by an executive of a release agreement.
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Arbitration The CIC Agreements are subject to binding arbitration in the event of any dispute.
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6.
Form Agreements
The CIC Agreement form for Holly is attached as Appendix A.