Audit Committee Charter
Amended and Restated
Adopted by the Board of Directors
August 4, 2004
Organization and Membership: The Holly Corporation Audit
Committee (the "Committee") shall consist of at least three
directors, one of whom shall be designated by the Board of Directors (the
"Board") as the Chairman. The members of the Committee shall be
elected by the Board or a nominating committee of the Board annually and shall
serve until their successors shall be duly elected and qualified. The Committee
shall have as members only Directors of Holly Corporation (the
"Company") who are independent under the standards applicable to
companies whose shares are listed on the New York Stock Exchange
("NYSE") and applicable regulations of the Securities and Exchange
Commission (the "SEC"). Each member of the Committee shall be
financially literate and shall meet any additional requirements applicable
under SEC regulations and NYSE listing standards. Notwithstanding the foregoing
membership requirements, no action of the Committee shall be invalid by reason
of any such requirement not being met at the time such action is taken.
Statement of Policy: The Committee shall provide assistance to
the Board in fulfilling its oversight responsibility to the stockholders of the
Company relating to the Company's financial statements and the financial
reporting process, the systems of internal accounting and financial controls,
the independent auditors' qualifications and independence, the selection,
engagement and retention of independent auditors, the annual independent audit
of the Company's financial statements, the performance of the Company's
internal audit function, and legal compliance and ethics programs as
established by management and the Board.
Meetings: Consistent with its duties and responsibilities, the
Committee shall meet at least four times annually to review and discuss with
management the financial information of the Company and shall meet as many
additional times as the members deem necessary or appropriate to fulfill their
duties in accordance with this Charter. The Committee should meet at least
annually in separate executive sessions with management,
those performing the internal audit function, and the independent auditors to
discuss any matters that the Committee or any of these groups believes should
be discussed privately.
Functions and Limitations: The function of the Committee is
oversight in accordance with the responsibilities and powers set forth in this
Charter. Management and the independent auditors for the Company are
accountable to the Committee. Management of the Company, not the Committee, is
responsible for the preparation, presentation and integrity of the Company's
financial statements. Management is responsible for maintaining appropriate
accounting and financial reporting principles and policies and internal
controls and procedures designed to assure compliance with accounting standards
and applicable laws and regulations. The independent auditors, not the
Committee, are responsible for planning and carrying out a proper audit of the
Company's annual financial statements, reviews of the Company's quarterly
financial statements prior to the filing of each quarterly report on Form 10-Q,
and other procedures. In fulfilling their responsibilities hereunder, it is
recognized that members of the Committee are not full-time employees of the
Company and, although they meet the applicable membership requirements, are
not, and do not represent themselves to be, accountants or auditors by
profession or experts in the fields of accounting or auditing, including in
respect of auditor independence. As such, it is not the duty or responsibility
of the Committee or its members to conduct "field work" or other
types of auditing or accounting reviews or procedures or to set auditor
independence standards. Absent actual knowledge to the contrary (which shall be
promptly reported to the Board), each member of the Committee shall be entitled
to rely on (i) the integrity of those persons and organizations within and
independent from the Company from which the Committee receives information and
(ii) the accuracy of the financial and other information provided to the
Committee by persons or organizations.
Accountability of the Independent Auditors: The Company's
independent auditors are accountable to and report directly to the Committee.
The Committee shall have the sole authority and responsibility with respect to
the appointment, engagement, compensation, oversight, evaluation and, where
appropriate, dismissal of the Company's independent auditors.
Responsibilities and Processes: The Committee shall have the
authority to take all actions it deems advisable to fulfill its
responsibilities and duties.
The Committee has the authority to retain, on such terms as the Committee deems
necessary or advisable, professional advisors to advise the Committee,
including, without limitation, legal counsel, accounting experts or other
consultants, which may be the same as or different from the Company's primary
legal counsel, accounting experts and other consultants, as the Committee deems
necessary or advisable in connection with the exercise of its powers and
responsibilities as set forth in this Charter.
The Committee shall be responsible for the resolution of any disagreements
between the independent auditors and management regarding the Company's
accounting or financial reporting practices.
The Company shall provide for appropriate funding, as determined by the
Committee, for payment of compensation to the independent auditors employed by
the Company for the purpose of rendering or issuing an audit report or related
work or performing other audit, review or attest services for the Company and
to any persons performing internal audit functions, legal counsel, accounting
advisors or other consultants employed by the Committee.
The Chairman shall make regular reports to the Board on the Committee's
The Committee may perform any other activities consistent with this Charter,
the Company's Certificate of Incorporation and Bylaws, the rules of the NYSE
and governing law as the Committee or the Board deems necessary or appropriate.
The Committee will, as it deems necessary in its business judgment, carry out
the following processes:
Relationship with Independent Auditors:
- Annually select and engage
the Company's independent auditors retained to audit the financial
statements of the Company.
- Review and pre-approve the
independent auditor's auditing services (including comfort letters),
non-audit services (subject to any applicable de minimis exception) and
- Review the Company's
disclosures in the Company's periodic reports filed with the SEC regarding
any approved non-audit services provided or to be provided by the
- Actively engage in a dialogue
with the independent auditors with respect to any disclosed relationships
or services that may impact the objectivity and independence of the
independent auditors and take, or recommend the full Board take,
appropriate action to oversee the independence of the independent
- Provide for the rotation of
the lead audit partner having responsibility for the audit and the
concurring review partner responsible for reviewing the audit in
accordance with applicable NYSE listing standards and applicable rules and
regulations of the SEC.
- Set, and periodically review
and modify as appropriate, clear policies with respect to the Company's
hiring of employees or former employees of the Company's independent
- Periodically obtain and
review a report from the independent auditors regarding all relationships
between the independent auditors and the Company that may impact the
independent auditors' objectivity and in-dependence, and discuss such
report with the independent auditors. The Committee shall recommend to the
Board any appropriate action in response to the written report that the
Committee deems necessary to satisfy itself of the independence and
objectivity of the independent auditors.
- Periodically obtain and
review reports from the independent auditors that include (i) all critical
accounting policies and practices used; (ii) all alternative treatments of
financial information within generally accepted accounting principles
("GAAP") that have been discussed with management, the
ramifications of the alternative treatments, and the treatment preferred
by the independent auditors; and (iii) other material written
communications between the independent auditors and management.
- Annually approve a report
meeting the requirements of any applicable regulations of the SEC for
inclusion in the Company's proxy statement relating to the Company's
annual meeting of stockholders.
- Review with management and
the independent auditors the Company's Quarterly Reports on Form 10-Q and
Annual Reports on Form 10-K prior to the filing of each such report. Such
review shall be conducted by the Committee or by the Chairman or a member
designated by the Chairman.
- Review and discuss with
management and the independent auditors the Company's quarterly and annual
financial information, including matters required to be reviewed under
applicable legal, regulatory or NYSE requirements.
- Review and, as appropriate,
discuss with financial management the Company's earnings releases,
including the use of any "non-GAAP financial measures."
- Upon completion of any annual
audit, meet separately with the independent auditors and management and
review the Company's financial statements and related notes, the results
of their audit, any report or opinion rendered in connection therewith,
any significant difficulties encountered during the course of the audit,
including any restrictions on the scope of work or access to required
information, any significant disagreements with management concerning
accounting or disclosure matters, any significant adjustment proposed by
the independent auditors, and the adequacy and integrity of the Company's
internal accounting controls and the extent to which major recommendations
made by the independent auditors have been implemented or resolved.
- Regularly review with the
Company's independent auditors any audit problems or difficulties and
- Review and consider with the
independent auditors and management the matters required to be discussed
by Statement of Auditing Standards No. 61. These discussions shall include
consideration of the quality of the Company's accounting principles as
applied in its financial reporting, including review of estimates, reserves
and accruals, re-view of judgmental areas, review of audit adjustments
whether or not recorded and such other inquiries as may be appropriate.
Based on the foregoing review, the Committee shall make its recommendation
to the Board as to the inclusion of the Company's audited financial
statements in the Company's Annual Report on Form 10-K.
- Discuss with management and
the independent auditors the adequacy and effectiveness of the accounting
and financial controls, including the Company's system to monitor and
manage business risk, and legal and ethical compliance programs.
- Select and contract with
appropriate persons to perform the internal audit function.
- Direct the scope of the
duties and activities of those performing the internal audit function, who
shall report directly to the Committee.
- Periodically meet and review
with those performing the internal audit function internal audit reports
and the progress of activities and any findings of major significance
stemming from internal audits.
- Receive periodic reports from
management on all matters within the Committee's areas of responsibility, including as appropriate (i) the
Company's accounting and financial reporting practices, (ii) accounting,
financial reporting, legal and tax developments of significance to the
Company, and (iii) the status and results of special studies con-ducted
for the Company by independent auditors.
- Annually review the continued
adequacy of the Committee's Charter and report the results of the review
along with recommendations, if necessary, to the Board.
- Conduct an annual evaluation
with the Board regarding the performance of the Committee.
- Discuss with management the
Company's guidelines and policies governing the Company's process of risk
assessment and risk management.
- Regularly apprise the Board,
through minutes and special presentations as necessary, of significant
developments in the course of performing the Committee's duties.
Ethical and Legal Compliance:
- Establish, and periodically review
and modify as appropriate, procedures for the receipt, retention and
treatment of complaints received regarding accounting, internal accounting
controls, and auditing matters and for confidential, anonymous submissions
by Company employees of concerns regarding questionable accounting or
- Review any disclosures
provided by the Chairman of the Board and Chief Executive Officer or the
Chief Financial Officer to the Commit-tee regarding (i) significant
deficiencies in the design or operation of internal controls which could
adversely affect the Company's ability to record, process, summarize, and
report financial data; and (ii) any fraud which involves management or
other employees who have a significant role in the Company's internal controls.
- Nothing in this Charter will,
or will be deemed to, increase, expand or modify in any manner adverse to
any member of the Committee the duties, obligations, or responsibilities
of any member of the Committee, it being the intent and purpose of this
Charter to grant enabling power to the Committee.
- Nothing in this Charter will,
or will be deemed to, decrease or modify in any manner adverse to any
member of the Committee, such member's right to rely on statements and
certifications made by the Company's officers, employees, agents, counsel,
experts and auditors.
- Nothing in this Charter will,
or will be deemed to, adversely affect in any manner the rights of members
of the Committee to indemnification and advancement of expenses under the
By-Laws of the Company or under any contract, agreement, arrangement or
understanding benefiting such member.
- No provision of this Charter
will be construed to create for the Committee or its members
legally enforceable duties, liabilities or obligations in addition to
duties, liabilities or obligations otherwise applicable to the Committee
or its members.