Certain Relationships and Related Party Transactions
Related Party Transactions
The
Company provides various general and administrative services to HEP under the terms of an Omnibus Agreement. Under the Omnibus Agreement, HEP pays the Company an annual fee, currently $2.5 million. The administrative fee is increased annually,
beginning July 1, 2018, for changes in the Producers Price Index-Commodities-Finished Goods, (PPI), et al. and may increase in connection with the expansion of HEPs operations through the acquisition or construction of new assets or
businesses. The administrative fee covers expenses the Company incurs in performing centralized corporate functions for HEP, such as executive services, tax, legal, accounting, treasury, information technology and other corporate services, including
the administration of employee benefit plans. The fee does not include salaries of personnel who perform services for HLS or the cost of their employee benefits, such as 401(k), pension, and health insurance benefits
In addition, under a secondment arrangement with HLS, the Company seconds certain of its employees to HLS to provide operational and maintenance services with respect
to certain of HEPs processing, refining, pipeline and tankage assets at certain of the Companys refineries, including routine operational and maintenance activities. During their period of secondment, the seconded employees are under the
management and supervision of HLS. HLS is required to reimburse the Company for the prorated portion of the wages, benefits, and other costs of these employees.
On
October 31, 2017, the Company closed on an equity restructuring transaction with HEP pursuant to which its incentive distribution rights were canceled and the Companys 2% general partner interest in HEP was converted into a
non-economic
general partner interest in HEP. In consideration, the Company received 37,250,000 HEP common units. In addition, the Company agreed to waive $2.5 million of limited partner cash distributions for
each of twelve consecutive quarters beginning with the first quarter the units issued were eligible to receive distributions as consideration.
In March 2016,
Mr. Bech purchased $500,000 of the Companys 5.875% Senior Notes due 2026 in the open market.
Julia Heidenreich, Vice President, Commercial Analysis and
Pricing, is the wife of Richard L. Voliva III, Executive Vice President and Chief Financial Officer of the Company. Ms. Heidenreich received cash and equity compensation totaling $501,883 in 2018. Ms. Heidenreich does not report to
Mr. Voliva.
Review, Approval or Ratification of Transactions with Related Persons
The Audit Committee is charged with the responsibility of reviewing and approving all transactions with related persons, when required by the Companys Code of
Business Conduct and Ethics. This responsibility is set forth in the Audit Committees charter. In addition, pursuant to the Code of Business Conduct and Ethics, an employee should disclose any potential conflict of interest to a supervisor who
does not have a conflict of interest and the Chief Compliance Officer and obtain approval prior to proceeding with the potentially conflicted situation. If a director has a potential conflict of interest, the transaction or relationship must be
disclosed to the Board or a committee of the Board that does not include such director.
In determining whether to approve or disapprove entry into a related party
transaction, the Audit Committee considers factors it deems appropriate, which may include, among others, whether the related party transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the
same or similar circumstances, the extent of the related partys interest in the transaction and whether the terms of the transaction are in the best interest of the Company. All related party transactions that are approved by the Audit
Committee are disclosed to the Board.
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HollyFrontier Corporation