Exhibit 10.1
[FORM]
HOLLY LOGISTIC SERVICES, L.L.C.
PERFORMANCE UNIT AGREEMENT
     This Performance Unit Agreement (the “Agreement”) is made and entered into
by and between HOLLY LOGISTIC SERVICES, L.L.C., a Delaware limited partnership
(the “Company”), and                                          (the “Employee”).
This Agreement is entered into as of the ___day of ___,                     
(the “Date of Grant”).
W I T N E S S E T H:
     WHEREAS, the Company has adopted the HOLLY ENERGY PARTNERS, L.P. LONG-TERM
INCENTIVE PLAN (the “Plan”) to attract, retain and motivate employees, directors
and consultants; and
     WHEREAS, the Company believes that a grant to the Employee of performance
units of Holly Energy Partners, L.P. (the “Partnership”) as part of the
Executive’s compensation for services provided to the Company is consistent with
the stated purposes for which the Plan was adopted.
     NOW, THEREFORE, in consideration of the services rendered by the Employee,
it is agreed by and between the Company and the Employee, as follows:
     1. Grant. The Company hereby grants to the Employee as of the Date of Grant
an Award of                      performance units (the “Performance Units”),
subject to the terms and conditions set forth in this Agreement. Depending on
the performance of Holly Energy Partners, L.P. (the “Partnership”), the Employee
may earn from ___(___%) to ___(___%) of the Performance Units, based on
[performance measure to be described].
     2. Nature of Award. The Performance Units represent an Award for the
“Performance Period” which begins on ___, ___and ends on ___, ___. Following the
completion of the Performance Period, the Employee shall be entitled to a
payment of Common Units of the Partnership (“Common Units”) as determined under
this Section 2 and payable at the time indicated in Section 4 or Section 3(b),
as applicable.
     (a) Performance Measure. The number of Performance Units earned for the
Performance Period is determined on the basis of [performance measure to be
described].
     (b) Common Units Payable. The number of Common Units payable is equal to
the result of multiplying Performance Units by the “Performance Percentage” set
forth below:

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      ___-Year Total Increase     in   Performance Percentage [performance
measure]   (%) to be Multiplied by Per Common Unit   Performance Units
< $____
  —%
$____
  —%
$____
  —%
$____
  —%
> $____
  —%
 
   

      The percentages above shall be interpolated between points.

     3. Early Termination. In the event of separation from employment of the
Employee prior to the end of the Performance Period on account of an event
described in this Section 3, the number of Performance Units with respect to
which payment at the end of the Performance Period is based shall be determined
as follows:
     (a) (i) In the event that the Employee separates from employment for any
reason other than voluntary separation or Cause, as defined in
Section 3(c)(vii), or (ii) in the event of the Employee’s death or (iii) in the
event of the Employee’s total and permanent disability as determined by the
Compensation Committee of the Company’s Board of Directors (the “Committee”) in
its sole discretion, or (iv) in the event that the Employee shall retire after
attaining normal retirement age of 62 or after attaining an earlier retirement
age approved by the Committee in its sole discretion, the number of Performance
Units that shall be earned by and paid to the Employee or his beneficiary, in
accordance with and at the time specified in Section 4, shall be determined as
follows: the Employee shall forfeit a percentage of the Performance Units earned
equal to the percentage that the number of full months following the date of
separation, death, disability or retirement to the end of the Performance Period
bears to ___. The Committee shall determine the number of Performance Units
earned and to be paid to the Employee or his beneficiary in accordance with
Section 2 for the entire Performance Period as soon as administratively
practicable after the end of the Performance Period. In its sole discretion, the
Committee may make a payment to the Employee assuming a Performance Percentage
of up to                      (___%) of the Performance Units instead of the
pro-rata number of Performance Units as determined pursuant to this
Section 3(a). Unless the Committee determines otherwise, the Employee will have
no right to any other Performance Units and those other Performance Units
granted under this Agreement will be forfeited. If the Employee separates from
employment prior to the end of the Performance Period due to voluntary
separation or on account of Cause, all Performance Units hereunder will be
forfeited.
     (b) In the event of a Special Involuntary Termination, as defined in
Section 3(c)(vi), before the end of the Performance Period, no Performance Units

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shall be forfeited, and payment with respect to                      (___%) of
the Performance Units shall be made as soon as administratively practicable
following the Special Involuntary Termination, but in no event later than two
and one-half months after the end of the calendar year in which the Special
Involuntary Termination occurs. Payment pursuant to this Section 3(b) is in lieu
of payment pursuant to Section 3(a) and if the Employee receives payment
pursuant to this Section 3(b) the Employee will not be entitled to any payment
pursuant to Section 3(a).
     (c) Definitions. For purposes of this Section 3,
     (i) “Change in Control” shall mean:
     A. Any “Person” (as defined in Section 3(c)(ii) below), other than Holly
Corporation (“Holly”) or any of its wholly-owned subsidiaries, HEP Logistics
Holdings, L.P. (the “General Partner”), the Partnership, the Company, or any of
their subsidiaries, a trustee or other fiduciary holding securities under an
employee benefit plan of Holly, the Partnership, the Company or any of their
“Affiliates” (as defined in Section 3(c)(v) below), an underwriter temporarily
holding securities pursuant to an offering of such securities, or entity owned,
directly or indirectly, by the holders of the voting securities of Holly, the
Company, the General Partner or the Partnership in substantially the same
proportions as their ownership in Holly, the Company, the General Partner or the
Partnership, respectively, is or becomes the “Beneficial Owner” (as defined in
Section 3(c)(iii) below), directly or indirectly, of securities of Holly, the
Company, 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, the Company or their Affiliates)
representing more than forty percent (40%) of the combined voting power of
Holly’s, the Company’s, the General Partner’s or the Partnership’s then
outstanding securities, excluding any Person who becomes such a Beneficial Owner
in connection with a transaction described in Section 3(c)(i)(C)(I) below.
     B. The individuals who as of the Date of Grant constitute the Board of
Directors of Holly (the “Holly Board”) and any “New Director” (as defined in
Section 3(c)(iv) below) cease for any reason to constitute a majority of the
Holly Board.
     C. There is consummated a merger or consolidation of Holly, the Company,
the General Partner or the Partnership with any other entity, except if:
     (1) the merger or consolidation results in the voting securities of Holly,
the Company, the General

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Partner or the Partnership 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 sixty percent
(60%) of the combined voting power of the voting securities of Holly, the
Company, the General Partner or the Partnership, as applicable, or such
surviving entity or any parent thereof outstanding immediately after such merger
or consolidation; or
     (2) the merger or consolidation is effected to implement a recapitalization
of Holly, the Company, the General Partner or the Partnership (or similar
transaction) in which no Person is or becomes the Beneficial Owner, directly, or
indirectly, of securities of, as applicable, (not including in the securities
beneficially owned by such Person any securities acquired directly from Holly,
the Company, the General Partner or the Partnership or their Affiliates other
than in connection with the acquisition by Holly, the Company, the General
Partner or the Partnership or its Affiliates of a business) representing more
than forty percent (40%) of the combined voting power of Holly’s, the Company’s
the General Partner’s or the Partnership’s, as applicable, then outstanding
securities.
     D. The holders of the voting securities of Holly, the Company, the General
Partner or the Partnership approve a plan of complete liquidation or dissolution
of holders of the voting securities of Holly, the Company, the General Partner
or the Partnership or an agreement for the sale or disposition by the Company of
all or substantially all of the Company’s assets, other than a sale or
disposition by holders of the voting securities of Holly, the Company, the
General Partner or the Partnership of all or substantially all of Holly’s, the
Company’s the General Partner’s or the Partnership’s assets, as applicable, to
an entity at least sixty percent (60%) of the combined voting power of the
voting securities of which is owned by the direct and indirect holders of the
voting securities of Holly, the Company, the General Partner or the Partnership
in substantially the same proportions as their ownership of direct or indirect
holders of the voting securities of Holly, the Company, the General Partner or
the Partnership, as applicable, immediately prior to such sale.
     (ii) “Person” shall have the meaning given in section 3(a)(9) of the
Securities Exchange Act of 1934 (the “1934 Act”) as modified and used in
sections 13(d) and 14(d) of the 1934 Act.

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     (iii) “Beneficial Owner” shall have the meaning provided in Rule 13d-3
under the 1934 Act.
     (iv) “New Director” shall mean an individual whose election by the Holly’s
Board or nomination for election by holders of the voting securities of Holly
was approved by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at the Date of Grant or whose election or
nomination for election was previously so approved or recommended. However, “New
Director” shall not include a director whose initial assumption of office is in
connection with an actual or threatened election contest, including but not
limited to a consent solicitation relating to the election of directors of the
Holly.
     (v) “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated
under section 12 of the 1934 Act.
     (vi) “Special Involuntary Termination” shall mean the occurrence of (1) or
(2) within sixty (60) days prior to, or at any time after, a “Change in Control”
(as defined in Section 3(c)(i)), where (1) is termination of the Employee’s
employment with the Company (including subsidiaries of the Company) by the
Company for any reason other than “Cause” (as defined in Section 3(c)(vii)) and
(2) is a resignation by the Employee from employment with the Company (including
subsidiaries of the Company) within ninety (90) days after an “Adverse Change”
(as defined in Section 3(c)(viii)) by the Company (including subsidiaries of the
Company) in the terms of the Employee’s employment.
     (vii) “Cause” shall mean:
     A. An act or acts of dishonesty on the part of the Employee constituting a
felony or serious misdemeanor and resulting or intended to result directly in
gain or personal enrichment at the expense of the Company;
     B. Gross or willful and wanton negligence in the performance of the
Employee’s material and substantial duties of employment with the Company; or
     C. Conviction of a felony involving moral turpitude.
The existence of Cause shall be determined by the Committee, in its sole and
absolute discretion.
     (viii) “Adverse Change” shall mean (A) a change in the city in which the
Employee is required to work regularly, (B) a substantial increase in travel
requirements of employment, (C) a substantial reduction in duties of the type
previously performed by the Employee, or (D) a significant reduction in
compensation or benefits (other than bonuses and

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other discretionary items of compensation) that does not apply generally to
Employees of the Company or its successor.
     4. Payment of Performance Units. The number of Common Units payable at the
end of the Performance Period (or such earlier time as specified under
Section 3(b)) shall be payable as soon as reasonably practicable following the
close of the Performance Period, but in no event later than two and one-half
months after the end of the calendar year in which the Performance Period closes
(or such earlier time as specified under Section 3(b)), in the amount determined
in accordance with Section 2, as adjusted by Section 3, if applicable. Such
payment will be subject to withholding for taxes and other applicable payroll
adjustments. The Committee’s determination of the amount payable shall be
binding upon the Employee and his beneficiary or estate.
     5. Adjustment in Number of Performance Units. Except as provided below, in
the event that the outstanding Common Units are increased, decreased or
exchanged for a different number or kind of units or other securities, or if
additional, new or different units or securities are distributed with respect to
the Units through merger, consolidation, sale of all or substantially all of the
assets of the Partnership, reorganization, recapitalization, unit dividend, unit
split, reverse unit split or other distribution with respect to such Common
Units, there shall be substituted for the Common Units under the Performance
Units subject to this Agreement the appropriate number and kind of Common Units
or new or replacement securities as determined in the sole discretion of the
Committee.
     6. Delivery of Common Units. No Common Units shall be delivered pursuant to
this Agreement until the approval of any governmental authority required in
connection with this Agreement, or the issuance of Common Units hereunder, has
been received by the Company.
     7. Securities Act. The Company shall have the right, but not the
obligation, to cause the Common Units payable under this Agreement to be
registered under the appropriate rules and regulations of the Securities and
Exchange Commission. The Company shall not be required to deliver any Common
Units hereunder if, in the opinion of counsel for the Company, such delivery
would violate the Securities Act of 1933 or any other applicable federal or
state securities laws or regulations.
     8. Federal and State Taxes. The Employee may incur certain liabilities for
Federal, state or local taxes and the Company may be required by law to withhold
such taxes for payment to taxing authorities. Upon the determination by the
Company of the amount of taxes required to be withheld, if any, the Employee
shall either pay to the Company, in cash or by certified or cashier’s check, an
amount equal to the taxes required to be withheld, or the Employee shall
authorize the Company to withhold from monies owing by the Company to the
Employee an amount equal to the federal, state or local taxes required to be
withheld. Authorization of the Employee to the Company to withhold taxes
pursuant to this Section shall be in form and content acceptable to the
Committee. An authorization to withhold taxes pursuant to this provision shall
be irrevocable unless and until the tax liability of the Employee has been fully
paid. In the

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discretion of the Committee, the required taxes may be withheld in kind from the
Common Units payable under this Agreement. In the event that the Employee fails
to make arrangements that are acceptable to the Committee for providing to the
Company, at the time or times required, the amounts of federal, state and local
taxes required to be withheld with respect to the Common Units payable to the
Employee under this Agreement, the Company shall have the right to purchase at
current market price as determined by the Committee and/or to sell to one or
more third parties in either market or private transactions sufficient Common
Units payable under this Agreement to provide the funds needed for the Company
to make the required tax payment or payments.
     9. Definitions; Copy of Plan. To the extent not specifically provided
herein, all terms used in this Agreement shall have the same meanings ascribed
to them in the Plan. By the execution of this Agreement, the Employee
acknowledges receipt of a copy of the Plan. If any provision of this Agreement
is held to be illegal, invalid or unenforceable under any applicable law, then
such provision will be deemed to be modified to the minimum extent necessary to
render it legal, valid and enforceable; and if such provision cannot be so
modified, then this Agreement will be construed as if not containing the
provision held to be invalid, and the rights and obligations of the parties will
be construed and enforced accordingly.
     10. Administration. This Agreement shall at all times be subject to the
terms and conditions of the Plan. The Committee shall have sole and complete
discretion with respect to all matters reserved to it by the Plan and decisions
of the majority of the Committee with respect thereto and this Agreement shall
be final and binding upon the Employee and the Company. In the event of any
conflict between the terms and conditions of this Agreement and the Plan, the
provisions of the Plan shall control.
     11. No Right to Continued Employment. This Agreement shall not be construed
to confer upon the Employee any right to continue as an Employee of the Company
and shall not limit the right of the Company, in its sole discretion, to
terminate the service of the Employee at any time.
     12. Governing Law. This Agreement shall be interpreted and administered
under the laws of the State of Texas, without giving effect to any conflict of
laws provisions.
     13. Amendments. This Agreement may be amended only by a written agreement
executed by the Company and the Employee. Any such amendment shall be made only
upon the mutual consent of the parties, which consent (of either party) may be
withheld for any reason.
     14. No Liability for Good Faith Determinations. The Company and the members
of the Committee and the Board shall not be liable for any act, omission or
determination taken or made in good faith with respect to this Agreement or the
Performance Units granted hereunder.

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     15. No Guarantee of Interests. The Board and the Company do not guarantee
the Common Units from loss or depreciation.
     16. Nontransferability of Agreement. This Agreement and all rights under
this Agreement shall not be transferable by the Employee during his life other
than by will or pursuant to applicable laws of descent and distribution. Any
rights and privileges of the Employee in connection herewith shall not be
transferred, assigned, pledged or hypothecated by the Employee or by any other
person or persons, in any way, whether by operation of law, or otherwise, and
shall not be subject to execution, attachment, garnishment or similar process.
In the event of any such occurrence, this Agreement shall automatically be
terminated and shall thereafter be null and void. Notwithstanding the foregoing,
all or some of the Units or rights under this Agreement may be transferred to a
spouse pursuant to a domestic relations order issued by a court of competent
jurisdiction.
     IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its officers thereunto duly authorized, and the Employee has set his hand
effective as of the date and year first above written.

              HOLLY LOGISTIC SERVICES, L.L.C.
 
       
 
  By:    
 
       
 
                  Employee

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