Holly Energy Partners, L.P.
Employee Form of
Change in Control Agreement
EXHIBIT 10.3
CHANGE IN CONTROL AGREEMENT
This CHANGE IN CONTROL AGREEMENT (the
“ Agreement ”) is entered into effective as of
___, 200___ (the “ Effective Date ”), by
and between HOLLY CORPORATION, a Delaware corporation (“
Holly ”) and _______ (the “ Employee
”).
WITNESSETH:
WHEREAS , the Employee is
currently employed by Holly Logistic Services, L.L.C., a Delaware
limited liability company and a wholly owned subsidiary of Holly
(“ HLS ”), and is an integral part of the
management of HLS and of Holly Energy Partners, L.P., a Delaware
limited partnership (the “ Partnership ”);
WHEREAS , Holly considers it
essential to its interest in the Partnership and to the best
interests of its shareholders to foster the continuous employment
of key management personnel such as Employee;
WHEREAS , Holly recognizes
that the possibility of a Change in Control (as defined herein)
will cause uncertainty and distract the Employee from his assigned
duties to the detriment of Holly, HLS, and the Partnership;
and
WHEREAS , the Board of
Directors of Holly (the “ Board ”) has
determined that appropriate steps should be taken to reinforce and
encourage the Employee’s continued attention and dedication
to the Employee’s assigned duties in the event of a Change in
Control.
NOW, THEREFORE , in
consideration of the mutual covenants and agreements contained in
this Agreement and other good and valuable consideration, the
Employee and Holly hereby agree as follows:
Section 1: Definitions
The following terms shall have the
meanings set forth below whenever used herein:
(a) “ Affiliate
” shall mean a person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is
under common control with, a specified person.
(b) “ Base Salary
” shall mean the amount Employee was entitled to receive as
salary on an annualized basis immediately prior to termination of
Employee’s employment (or, if greater, immediately prior to a
Change in Control), including any amounts deferred pursuant
to
any
deferred compensation program, but excluding all bonus, overtime,
welfare benefit premium reimbursement and incentive compensation,
payable by Holly, the General Partner, or the Partnership
(including any amounts reimbursed by the Partnership) as
consideration for the Employee’s services.
(c) “ Beneficial
Owner ” shall mean the beneficial owner of a security as
determined pursuant to Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended.
(d) “ Bonus ”
shall mean an amount equal to the average of the annual bonus
amount actually paid to the Employee for the previous three
(3) years (or, if such Employee has been employed for less
than 3 years, the average bonus amount actually paid to the
Employee for the years employed) by Holly, the General Partner or
the Partnership (including any amounts reimbursed by the
Partnership).
(e) “ Cause ”
shall mean the Employee’s (i) engagement in any act of
willful gross negligence or willful misconduct on a matter that is
not inconsequential, as reasonably determined by the Board in good
faith, or (ii) conviction of a felony. For purposes hereof, no
act or failure to act, on the Employee’s part, shall be
deemed “willful” if the Employee reasonably believed
such acts or omissions were in the best interests of Holly, the
General Partner, or the Partnership. !
(f) “ Change in
Control ” shall mean the occurrence of one of the
following:
(i) Any
Person, or more than one Person acting as a group (as defined in
Treasury regulation 1.409A-3(g)(5)(v)(B)), other than
(1) Holly, the General Partner, the Partnership, or any of
their respective Subsidiaries, (2) a trustee or other
fiduciary holding securities under an employee benefit plan of
Holly, the General Partner, the Partnership, or any of their
Affiliates, (3) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (4) a
corporation (or other entity) owned, directly or indirectly, by
stockholders or unitholders, as applicable, of Holly, the General
Partner, or the Partnership in substantially the same proportions
as their ownership interests in Holly, the General Partner, or the
Partnership, as applicable, becomes the Beneficial Owner, directly
or indirectly, of securities of Holly, the General Partner, or the
Partnership (not including in the securities beneficially owned by
such Person, any securities acquired directly from Holly, the
General Partner, the Partnership, or any of their Affiliates)
representing (A) more than fifty percent (50%) of the combined
voting power of the then outstanding securities of Holly, the
General Partner, or the Partnership, or (B) more than fifty
percent (50%) of the then outstanding common stock or membership
interests, as applicable, of Holly or the General Partner,
excluding any Person who becomes such a Beneficial Owner in
connection with a transaction described in
Section 1(f)(iii)(A) below.
(ii) A
majority of the members of the Board are replaced during any
twelve-month period by directors whose appointment or election is
not endorsed by a majority of the members of the Board prior to the
date of the appointment or election.
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(iii) There
is consummated a merger or consolidation of Holly, the General
Partner, the Partnership, or any direct or indirect Subsidiary of
Holly, the General Partner, or the Partnership with any other
corporation or entity, except if:
(A) the
merger or consolidation results in the voting securities of Holly,
the General Partner, or the Partnership, as applicable, outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities
of the surviving entity or any parent thereof) at least fifty
percent (50%) of the combined voting power of the voting securities
of Holly, the General Partner, the Partnership or such surviving
entity or any parent thereof, as applicable, outstanding
immediately after such merger or consolidation; or
(B) the
merger or consolidation is effected to implement a recapitalization
(or similar transaction) of Holly, the General Partner, or the
Partnership, as applicable, in which no Person becomes the
Beneficial Owner, directly or indirectly, of securities of Holly,
the General Partner, or the Partnership (not including in the
securities beneficially owned by such Person, any securities
acquired directly from Holly, the General Partner, the Partnership,
or their Affiliates other than in connection with the acquisition
by Holly, the General Partner, the Partnership, or their Affiliates
of a business) representing more than fifty percent (50%) of the
combined voting power of the then outstanding securities of Holly,
the General Partner, or the Partnership.
(iv) The
stockholders or unitholders, as applicable, of Holly or the
Partnership approve a plan of complete liquidation or dissolution
of Holly or the Partnership, as applicable, or an agreement for the
sale or disposition by Holly or the Partnership of all or
substantially all of the assets of Holly or the Partnership, as
applicable, other than a sale or disposition by Holly or the
Partnership of all or substantially all of their respective assets
to an entity at least sixty percent (60%) of the combined voting
power of the voting securities of which is owned by the
stockholders, membership interestholders or unitholders, as
applicable, of Holly, the General Partner or the Partnership in
substantially the same proportions as their ownership of Holly, the
General Partner or the Partnership, as applicable, immediately
prior to such sale.
The definition of Change in Control
set forth in this Section 1(f) shall, for all purposes, be
interpreted in compliance with the Nonqualified Deferred
Compensation Rules, and the Board is permitted to use its good
faith discretion in determining whether a Change in Control has
occurred under this Section 1(f). No transaction is intended
to constitute a Change in Control for purposes of the Agreement
unless it would also constitute a change in control under the
Nonqualified Deferred Compensation Rules.
(g) “ Code ”
shall mean the Internal Revenue Code of 1986, as amended.
(h) “ General
Partner ” shall mean the entity or entities holding the
direct or indirect general partnership interest in the Partnership,
including, as of the date of this Agreement, HLS and HEP Logistics
Holdings, L.P.
(i) “ Good Reason
” shall mean, without the express written consent of the
Employee, the occurrence of any of the following:
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(i) the
material reduction in the Employee’s authority, duties or
responsibilities from those in effect immediately prior to the
Change in Control, or a material reduction in the authority, duties
or responsibilities of the supervisor to whom Employee is required
to report;
(ii) a
material reduction in the Employee’s base compensation in
effect immediately before the Change in Control; or
(iii) the
relocation of the Employee to an office or location more than fifty
(50) miles from the location at which the Employee normally
performed Employee’s services immediately prior to the
occurrence of a Change in Control, except for travel reasonably
required in the performance of the Employee’s
responsibilities.
Notwithstanding the foregoing, in the
case of the Employee’s allegation of Good Reason: (A)
Employee shall provide notice to Holly of the event alleged to
constitute Good Reason within ninety (90) days of the
occurrence of such event, and (B) Holly, the General Partner,
and the Partnership shall each be given the opportunity to remedy
the alleged Good Reason event within thirty (30) days from
receipt of notice of such allegation.
(j) “ Nonqualified
Deferred Compensation Rules ” shall mean the limitations
and requirements set forth in section 409A of the Code, the
regulations promulgated thereunder, and any additional guidance
issued by the Internal Revenue Service related thereto.
(k) “ Person
” shall mean any individual, group, partnership, corporation,
association, trust, or other entity or organization.
(l) “ Protection
Period ” shall mean the twenty-four (24) month
period beginning on the date of the Change in Control.
(m) “ Subsidiary
” shall mean, as to any Person, a corporation or other entity
of which a majority of the combined voting power of the outstanding
voting securities is owned, directly or indirectly, by that
Person.
(n) “ Termination
Event ” shall mean the Employee’s Termination of
Employment:
(i) by
Holly, a General Partner, the Partnership or any successor of the
foregoing without Cause;
(ii) by
Holly, a General Partner, the Partnership or any successor of the
foregoing as a condition to the consummation of (or entry into,
provided the transaction is consummated) the Change in Control
transaction; or
(iii) by
the Employee for Good Reason.
Notwithstanding the occurrence of the one of the events listed
above in Section 1(n)(i) through 1(n)(iii) hereof, a
Termination Event shall not have occurred for purposes of this
Agreement if (A) the Employee either (I) remains employed by
any of Holly, a General Partner, the Partnership, or an Affiliate
of any of the foregoing, or (II) is offered employment with
any of
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Holly, a
General Partner, the Partnership or any Affiliate of the foregoing,
within thirty (30) days after the occurrence of such event, and
(B) such employment is on substantially the same terms as the
Employee’s employment in effect immediately prior to the
occurrence of such event.
(o) “ Termination of
Employment ” shall mean a termination of Employee’s
employment within the meaning of Treas. Reg. §
1.409A-1(h)(1)(ii).
Section 2: Term of Agreement
The term of this Agreement (the
“ Term ”) shall be for the period which
commences on the Effective Date and which terminates on
May 15, 20___; provided, however, that the Term of this
Agreement will be automatically extended for an additional one
(1) year period as of May 15, 20___ and on each
May 15 date occurring thereafter, unless the Board cancels
further extension of this Agreement by giving notice to the
Employee at least sixty (60) days prior to the applicable
extension date. Upon a Change in Control during the Term, the Term
will be extended (or reduced, as the case may be) through the end
of the Protection Period, immediately following which time this
Agreement will terminate. If, prior to a Change in Control, the
Employee ceases for any reason (other than pursuant to a
Termination Event) to be an employee of Holly, the General Partner,
or the Partnership, thereupon the Term shall be deemed to have
expired and this Agreement shall immediately terminate and be of no
further effect. Notwithstanding the expiration of the Term or other
termination of this Agreement, (i) Sections 5(a), 6(d)
and 6(k) of this Agreement shall survive any expiration or
termination of this Agreement, and (ii) if a Change in
Control shall occur prior to the expiration of the Term or other
termination of this Agreement, the terms of this Agreement shall
survive to the extent necessary to enable Employee to enforce his
rights under Sections 3 and 4 of this Agreement.
Section 3: Severance Benefits
(a) Termination due to a
Termination Event . In the event that the Employee’s
employment is terminated due to the occurrence of a Termination
Event in connection with or within two years after a Change in
Control, the Employee shall be entitled to the following payments
and other benefits:
(i) Holly
shall pay to the Employee a lump sum cash amount equal to the sum
of (A) the Employee’s accrued and unpaid salary as of
his date of termination plus (B) reimbursement for all
expenses reasonably and necessarily incurred by the Employee (in
accordance with company policy) prior to termination in connection
with the business of Holly, the General Partner, or the Partnership
plus (C) any accrued vacation pay, to the extent not
theretofore paid. This amount shall be paid within ten
(10) days of the Employee’s Termination of
Employment.
(ii) Holly
shall pay to the Employee an additional lump sum cash amount equal
to ___ times the sum of Employee’s Base Salary
plus Employee’s Bonus. Subject to the requirements of
Section 3(c), this amount shall be paid within fifteen
(15) days after the Employee’s Termination of
Employment.
(iii) Holly
shall provide the Employee (and the Employee’s dependents, if
applicable), for a period of ___ years following his
Termination of Employment, with a similar
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level of
medical and dental insurance benefits upon substantially the same
terms and conditions as existed immediately prior to the
Employee’s termination.
(A) To
the extent that any such medical or dental benefits are self-funded
and during the period Employee would, but for the continued
coverage provided pursuant to this Section 3(a)(iii), be
entitled to continuation coverage with respect to such benefits
pursuant to the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended (“COBRA”), if Employee elected such
coverage and paid the applicable premiums (the “COBRA
Continuation Period”), the costs of the continued benefit
coverage provided under this Section 3(a)(iii) will be imputed
as income to the Employee and reported on Form W-2. Following the
COBRA Continuation Period, to the extent Employee is still entitled
to continued coverage pursuant to this Section 3(a)(iii), the
medical and dental coverage to be continued under such self-funded
arrangement shall be provided in accordance with the provisions of
Treas. Reg. § 1.409A-3(i)(1)(iv)(A) as it applies to the
provision of in-kind benefits.
(B) Notwithstanding
the foregoing provisions of this Section 3(a)(iii), in the
event Holly is unable to provide any of the promised medical or
dental benefits under its benefits plans, Holly will reimburse
Employee for amounts necessary to enable the Employee to obtain
medical and dental benefits substantially equal to what was
provided to the Employee immediately prior to the Employee’s
termination; provided, that any such reimbursement will be made in
accordance with the provisions of Treas. Reg. §
1.409A-3(i)(1)(iv), including but not limited to the requirements
that (I) the expenses eligible for reimbursement will be
determined by reference to the objective and nondiscretionary
criteria set forth in Holly’s medical and dental benefit
plans, (II) the expenses eligible for reimbursement during one
taxable year of the Employee will not affect the expenses eligible
for reimbursement in any other taxable year (provided, that a limit
imposed on the amount of expenses that may be reimbursed over some
or all of the continuation period described in this
Section 3(a)(iii) shall not in and of itself cause the
reimbursement arrangement described herein to fail to satisfy the
requirements of Treas. Reg. § 1.409A-3(i)(1)(iv)),
(III) the reimbursement of an eligible expense will be made on
or before the last day of the Employee’s taxable year
following the taxable year in which the expense was incurred, and
(IV) the right to reimbursement will not be subject to
liquidation or exchange for another benefit.
(C) Notwithstanding
the foregoing provisions of this Section 3(a)(iii), in the
event the Employee becomes reemployed with another employer and
becomes eligible to receive medical and dental benefits similar to
the benefits described herein from such employer, the medical and
dental benefit coverage provided for herein shall terminate.
Benefit continuation provided pursuant to this
Section 3(a)(iii) will be applied towards any continuation
coverage to which the Employee is entitled pursuant to COBRA.
(b) Other Severance Pay
. The Employee shall not be entitled to receive payment under any
severance plan, policy or arrangement maintained by Holly, the
General Partner, or the Partnership (other than this Agreement). If
the Employee is entitled to any notice or payment in lieu of any
notice of termination of employment required by Federal, state or
local law, including but not limited to the Worker Adjustment and
Retraining Notification Act, the amounts to which the Employee
would otherwise be entitled under this Agreement shall be reduced
by the amount of any such payment in lieu of notice. If the
Employee is entitled to any severance or
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termination payments under any employment or other agreement (other
than award agreements issued pursuant to the Holly Corporation
Long-Term Incentive Compensation Plan or the Holly Energy Partners,
L.P. Long-Term Incentive Plan) with, or any plan or arrangement of,
Holly, the General Partner, or the Partnership, the payments to
which the Employee would otherwise be entitled under this Agreement
shall be reduced by the amount of such payment. Except as set forth
above, the foregoing payments and benefits shall be in addition to
and not in lieu of any payments or benefits to which the Employee
and his dependents may otherwise be entitled to under the
compensation and employee benefit plans of Holly, the General
Partner, and the Partnership. Nothing herein shall be deemed to
restrict the right of Holly, the General Partner, or the
Partnership to amend or terminate any such plan in a manner
generally applicable to similarly situated active employees, as
applicable, in which event the Employee shall be entitled to
participate on the same basis (including payment of applicable
contributions) as similarly situated active employees.
(c) Release . Payments
under Sections 3(a)(ii) and (iii) shall be conditioned
upon the execution, non-revocation, and delivery of a Release
Agreement in the form attached hereto as Exhibit A (the
“ Release ”) by the Employee within 45 days
of the date of Employee’s Termination of Employment.
Notwithstanding the times of payment otherwise set forth in Section
3(a), the payments due under Sections 3(a)(ii) and
(iii) shall be made (or commenced, in the case of the
paym
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