Exhibit 10.1
PIPELINE SYSTEMS OPERATING AGREEMENT
     This Pipeline Systems Operating Agreement (the “Agreement”) is being
entered into on February 8, 2010, to be effective as of December 1, 2009 (the
“Effective Date”), by and among Navajo Refining Company, L.L.C., a Delaware
limited liability company (“Navajo Refining”), Lea Refining Company, a Delaware
corporation (“Lea Refining”), Woods Cross Refining Company, L.L.C., a Delaware
limited liability company (“Woods Cross Refining”), Holly Refining & Marketing –
Tulsa LLC, a Delaware limited liability company (“Holly Refining Tulsa” and,
together with Navajo Refining, Lea Refining, and Woods Cross Refining, the
“Holly Entities”), and Holly Energy Partners—Operating, L.P., a Delaware limited
partnership (“Operator”). Each of the Holly Entities and the Operator are
sometimes individually referred to herein as a “Party” and collectively as the
“Parties.”
Background:
     A. Holly Corporation, a Delaware corporation (“Holly”), is the ultimate
parent of the Holly Entities.
     B. Subsidiaries of Holly own and operate certain petroleum refineries in
Artesia, New Mexico, Lovington, New Mexico, Woods Cross, Utah and Tulsa,
Oklahoma that are operated in conjunction with the facilities set forth in
Exhibit A (the “Facilities”).
     C. In connection with the ownership of the Facilities, the Holly Entities
own certain assets that deliver, store, or receive, material to and from (as
applicable) the Facilities, which assets are set forth on Exhibit A attached
hereto and grouped by Facility (such asset groups collectively, the “Systems”).
The Systems transport, store and deliver refined petroleum products, crude oil,
natural gas, hydrogen and liquefied petroleum gas (the “Products”).
     D. The Holly Entities and Operator agree that Operator shall maintain and
operate the Systems in accordance with the terms and conditions of this
Agreement.
Agreement:
     NOW, THEREFORE, the Parties hereby agree as follows:
     1. TERM. The term of this Agreement shall commence on the Effective Date
and, unless earlier terminated in accordance with the terms and conditions
hereof, shall expire on the date occurring five (5) years after the Effective
Date; provided, however, that the term shall automatically renew for successive
terms of five (5) years each, unless terminated pursuant to Section 11 or
Operator sooner resigns or is removed pursuant to Section 11. The initial five
(5) year term and any successive five (5) year term are referred to as the
“Term.”

 

--------------------------------------------------------------------------------

 

     2. RETENTION OF OPERATOR. The Holly Entities hereby retain Operator, and
any of Operator’s subsidiaries to which Operator delegates any of its
obligations or responsibilities under this Agreement, as the operator of the
Systems for the Term.
     3. DUTIES OF OPERATOR.
          3.1 Operation and Maintenance of Systems. During the Term, (a) the
Holly Entities retain Operator, and Operator accepts such retention, to manage,
operate and maintain the Systems for and on behalf of the Holly Entities;
(b) the Holly Entities hereby authorize and empower Operator to do and perform
any and all acts and things necessary, requisite or proper for the efficient and
safe operation, maintenance, upkeep and repair of the Systems and to do all
other things that Operator deems necessary or appropriate to the accomplishment
of the purposes of this Agreement so that the Systems may be utilized for
receiving, transporting, delivering and storing Products; and (c) Operator shall
manage and direct such operation, maintenance, upkeep and repair of the Systems
in an efficient, safe and economical manner and in conformity with the usual
practices in the industry and in accordance in all material respects with all
valid and applicable laws, rules and regulations of governmental authorities.
Notwithstanding anything in this Agreement to the contrary, under no
circumstances is Operator authorized to legally bind or act as the agent of the
Holly Entities.
          3.2 Purchase of Material, Supplies and Services. Subject to the
provisions of Sections 3.9, 4 and 8.2 and except as otherwise provided in
Section 3.7, Operator shall purchase or cause to be purchased necessary
materials, supplies and services and incur such expenses and enter into such
commitments (including, but not limited to, (a) contracts for the maintenance
of, and the construction of additions to and replacements to, the Systems and
(b) contracts for power, fuel, other utilities and communication facilities) as
may be necessary in connection with proper operation and maintenance of the
Systems and for providing maintenance, additions and replacements thereto and
the Holly Entities will reimburse Operator for all amounts expended by Operator
and its affiliates in connection with such purchases; provided, however, that,
the Holly Entities will not be required to reimburse Operator or its affiliates
for such amounts expended pursuant to a contract or agreement, whether written
or oral, (i) for a term that exceeds twelve (12) months, (ii) that is for an
amount greater than Fifty Thousand Dollars ($50,000), or (iii) that is material
to any of the Holly Entities or the Systems, unless, in each case, the Holly
Entities consent in writing to such contract in advance. If, pursuant to the
provisions of this Section 3.2, (i) Operator enters into any contract containing
a warranty, including, without limitation, a warranty on construction or fitness
for a particular purpose, and (ii) the Holly Entities reimburse Operator for the
amounts expended by Operator in connection with such contract (including the
costs of pursuing any warranty claims under such contract), Operator agrees to
use commercially reasonable efforts to pursue any claims for breach of such
warranty and to assign any benefits Operator receives as a result of such
warranty to the applicable Holly Entity. Operator may also make sales, exchanges
or other dispositions of materials, equipment and supplies that are owned by a
Holly Entity and are not needed for operation of the Systems (including pipe or
other equipment salvaged from or constituting a part of any System) (“Surplus
Materials”) with the consent of the Holly Entity that owns such Surplus
Materials. If Operator or any Holly Entity desire to purchase any Surplus
Materials, Operator shall request sealed bids from the Operator, the Holly
Entities and any affiliate of the Holly Entities. Any Surplus Materials may then
be sold to the party submitting the highest responsive bid, as determined by the
Holly Entities, provided that the Holly Entities

2

--------------------------------------------------------------------------------

 

reserve the right to reject any and all bids if they determine, in their sole
discretion, that the price offered is too low or the other terms and conditions
of the offer(s) are not in the best interest of the Holly Entities.
          3.3 Personnel. Subject to the provisions of Sections 4 and 8.2,
Operator shall employ such personnel as may be necessary to efficiently operate
and maintain the Systems, to provide maintenance, additions and replacements
thereto and to perform Operator’s other obligations under this Agreement (the
“Services”). Operator may also utilize from time to time any of its other
employees, or the employees of any affiliated entity, and engage the services of
third-party contractors to perform the Services. Notwithstanding the foregoing,
Operator may not engage any third-party contractors at the Holly Entities’
expense to perform any of the services under Section 8.2, or otherwise charge
the Holly Entities for services set forth in Section 8.2, other than through the
Management Fee set forth in Section 8.1.
          3.4 Retention of Contractors, Consultants and Advisors. Subject to the
provisions of Sections 4 and 8.2, Operator may retain the services of, and
determine the compensation of, such outside contractors, consultants and
advisors (including engineers, attorneys and accountants) as Operator may deem
necessary from time to time in performance of Operator’s obligations under this
Agreement and the Holly Entities will reimburse Operator for all amounts
expended by Operator and its affiliates in connection with such services;
provided, however, that, the Holly Entities will not be required to reimburse
Operator or its affiliates for amounts expended pursuant to a contract or
agreement, whether written or oral, (i) for a term that exceeds twelve
(12) months, (ii) that is for an amount greater than Fifty Thousand Dollars
($50,000), or (iii) that is material to any of the Holly Entities or the
Systems, unless, in each case, the Holly Entities consent in writing to such
contract in advance. If, pursuant to the provisions of this Section 3.4,
(i) Operator enters into any contract containing a warranty, including, without
limitation, a warranty on construction or fitness for a particular purpose, and
(ii) the Holly Entities reimburse Operator for the amounts expended by Operator
in connection with such contract (including the costs of pursuing any warranty
claims under such contract), Operator agrees to use commercially reasonable
efforts to pursue any claims for breach of such warranty and to assign any
benefits Operator receives as a result of such warranty to the applicable Holly
Entity.
          3.5 Reports. Operator shall prepare and file for the Holly Entities
all reports in conjunction with the operation of the Systems that are required
by any regulatory bodies or agencies having jurisdiction over any System or the
operation thereof. Operator shall provide substantially final drafts of such
reports to the Holly Entities for their review and comment as soon as reasonably
practicable, but in no event later than fifteen days prior to the due date of
such report, and Operator shall endeavor in good faith to incorporate all
written comments the Holly Entities provide to Operator within ten days of the
Holly Entities’ receipt of the draft report in the final report that Operator
files. Any reports under the name of a Holly Entity and requiring a signature
shall be executed by a duly authorized representative of such Holly Entity.
Without limiting the foregoing, Operator must report to the Holly Entities, at
least once every twelve (12) months, regarding its operation of the Systems
(each report, an “Operation Report”). Each Operation Report must include at
least the following information:

3

--------------------------------------------------------------------------------

 

          3.5.1 as of the date of such report, the status of expenditures (both
capital and expense) as compared, since the last Operation Report, to the
Budgets prepared under Section 4.4;
          3.5.2 a report of the operations and maintenance of the Systems since
the last Operation Report; and
          3.5.3 the date any new facilities are added to or removed from the
Systems and placed in service or removed from service.
          3.6 Payment of Expenses. Subject to the provisions of Sections 3.2,
3.4, 4 and 8.2, the Holly Entities shall promptly, and in any event within
thirty (30) days after receiving from Operator a written invoice, cause to be
paid and discharged all expenses, costs and liabilities incurred by Operator in
operating and maintaining the Systems and in providing replacements and
additions thereto in accordance with the terms of this Agreement, including
Sections 5 and 8 and the amounts to be reimbursed pursuant to Sections 3.2 and
3.4.
          3.7 Miscellaneous Agreements. Acting as operator for the Systems,
Operator shall negotiate and prepare the following documents for the review,
approval and execution by the applicable Holly Entities:
          3.7.1 Agreements for Lowering, Adjustment or Relocation. Contracts
between the Holly Entities and governmental agencies and/or landowners to lower,
adjust or relocate a pipeline and/or any pipeline facilities that are part of
any System.
          3.7.2 Documents Involving Land Related Rights. The following
instruments and documents relating to real property interests owned by the Holly
Entities and relating to the Systems (including an extension, termination,
assignment and amendment of such instruments and documents):
     (a) releases, partial releases, leases, subleases, easements,
rights-of-way, licenses, permits, consents, deeds and other agreements for
acquisition or disposition of any of the foregoing rights and interests and
other agreements for the use of real property; and
     (b) applications for any of the foregoing relating to lands, waters and
other property owned by or under the jurisdiction of any government or
governmental authority.
          3.8 ROW Maintenance. Certain documents involving real property rights
relating to the Systems (“ROW Documents”) are held by the Holly Entities.
Operator shall be responsible for causing all payments and, to the extent
permitted under this Agreement, taking all actions required in connection with
maintaining and protecting the beneficial rights of the Holly Entities under the
ROW Documents; provided, that the Holly Entities agree that upon the request of
Operator, the applicable Holly Entity will take such actions in its name as the
holder of legal title to the ROW Documents, including paying such annual charges
or other fees or expenses in its name, that Operator and the Holly Entities may
determine are in the best interests of the Holly Entities.

4

--------------------------------------------------------------------------------

 

          3.9 Additions and Replacements. Any addition or replacement to any
System that exceeds Fifty Thousand Dollars ($50,000) and is not included in a
Capital Budget, Operating Budget or approved Capital Project (each as defined in
Section 4.1), shall be subject to prior approval by the Holly Entities.
     4. BUDGETS AND AUTHORITY FOR EXPENDITURES
          4.1 Definitions. For purposes of this Agreement, (a) the term
“Calendar Year” means a year beginning on the first day of January and ending on
the last day of December, (b) the term “Capital Project” means such additions,
improvements and replacements to the Systems that under Holly’s then current
budget methodologies would be considered a capital project or capital
improvement, (c) the term “Capital Budget” means a budget covering all Capital
Projects that Operator deems advisable to make during a Calendar Year and
(d) the term “Operating Budget” means a complete budget covering all
expenditures categorized as operating expense that Operator deems advisable to
make during a Calendar Year, other than for Capital Projects.
          4.2 Preparation of Budgets and Presentation to the Holly Entities. In
order to inform the Holly Entities of operating and capital expenses
contemplated for a forthcoming Calendar Year, to provide limitations upon
Operator’s ability to make certain expenditures and to grant Operator authority
to make certain expenditures during the Term, Operator shall prepare in
reasonably concise form and shall present to the Holly Entities on or before
each October 1 the following budgets for the next succeeding Calendar Year:
(a) an Operating Budget for the Systems that (i) shall specifically itemize each
maintenance and repair project that is reasonably estimated to exceed Fifty
Thousand Dollars ($50,000), (ii) shall specifically itemize non-routine expenses
that are chargeable to specific assets and identify the specific assets to which
such non-routine expenses relate and (iii) shall make reasonable provisions for
foreseen and unforeseen contingencies by including an item for maintenance and
repair projects of less than Fifty Thousand Dollars ($50,000) per project and
(b) a Capital Budget for the Systems that (i) shall specifically itemize each
Capital Project, the cost of which is reasonably estimated to exceed Fifty
Thousand Dollars ($50,000) per project, (ii) shall specifically itemize all
other Capital Projects and identify the particular assets to which such Capital
Projects relate and (iii) shall make reasonable provisions for foreseen and
unforeseen contingencies by including an item for Capital Projects reasonably
estimated to be less than Fifty Thousand Dollars ($50,000) per project. If
requested by the Holly Entities, Operator shall provide the Holly Entities with
preliminary data reasonably in advance of October 1. Both the Operating Budget
and the Capital Budget (collectively, the “Budgets”) shall include as
attachments a list of agreements (as such agreements become known or available)
that affect budgets for years following the Calendar Year for which the Budgets
are submitted.
          4.3 Budget Amendments. At any time, Operator may propose amendments
making changes, additions or deletions to either or both Budgets for a Calendar
Year by presenting a written budget amendment to the Holly Entities (a “Budget
Amendment”). Each Budget Amendment shall comply with the provisions of
Section 4.2 concerning specific itemization of maintenance and repair projects
and Capital Projects exceeding Fifty Thousand Dollars ($50,000) and non-routine
expenses and Capital Projects relating to particular assets.

5

--------------------------------------------------------------------------------

 

          4.4 Approval of Budgets and Amendments. The Holly Entities shall have
thirty (30) days from the date Operator submits the required Operating Budget
and Capital Budget to approve or reject such Budgets in whole or in part. Any
part of any Budget that is rejected shall either be deleted or resubmitted at
the direction of the Holly Entities. Operator shall then have thirty (30) days
to resubmit any Budget for approval, and the Holly Entities shall endeavor to
approve any such Budget by December 31 of the Calendar Year in which such Budget
is submitted. Any Budget or part of any Budget that has not been approved by the
Holly Entities shall be deemed rejected as of December 31 of the Calendar Year
in which such Budget is submitted. Operator shall continue to operate under the
existing Budget until such new Budget is approved, except that the items in such
existing Budget will be increased by an amount that is equal to the percentage
increase in the PPI (as defined in Section 8.1). For example, if a Budget for
the year 2010 is not agreed to before January 1, 2010, Operator will operate
under the Budget for 2009, adjusted by the percentage increase in the PPI
between the month of October 2008 and the month of October 2009, until such time
as such Budget for 2010 is finally determined.
          4.5 Authority for Expenditure. During a Calendar Year, Operator shall
have the right and authority with respect to each item appearing in such
Calendar Year’s approved Operating Budget and Capital Budget (as they may be
amended by any approved Budget Amendment) to make expenditures up to one hundred
and fifteen percent (115%) of the respective amount provided in such Budgets. No
single item of cost or expense that is not specifically identified in an
approved Operating Budget or Capital Budget and is estimated will result in a
charge in excess of Fifty Thousand Dollars ($50,000), except in case of
emergencies as provided in Section 4.7, shall be incurred by Operator without
the prior written consent of the Holly Entities. Actual costs or expenses of
budgeted items shall not exceed one hundred and fifteen percent (115%) of the
budgeted amount without prior written consent of the Holly Entities. Operator
has no authority to make expenditures on behalf of the Holly Entities except as
provided in this Section 4.5 or as permitted under Sections 3.2 or 4.7.
          4.6 Notice of Budget Variances. If Operator determines that either the
Operating Budget or Capital Budget, any item of the Operating Budget or the
Capital Budget relating to a specific asset and constituting a non-routine
expense or a Capital Project will be exceeded by more than one hundred and
fifteen percent (115%) of the amount of the respective Budget or the amount
budgeted for an item or Capital Project, as applicable, then Operator shall give
written notice to the Holly Entities of such excess and shall solicit the
written consent of the Holly Entities. Unless Operator receives the written
consent of the Holly Entities, Operator shall not charge any of such excess
costs to the Holly Entities beyond what is permitted under Section 4.5.
          4.7 Emergencies. Notwithstanding any provision of this Section 4 to
the contrary, in cases of Emergency, as defined below, Operator may proceed with
maintenance or repair work when necessary to keep the Systems operating or to
restore the facilities to operating condition or to minimize damage, without
necessity for consent of the Holly Entities even when such cost and expense
exceed Fifty Thousand Dollars ($50,000). Operator shall use its commercially
reasonable efforts to notify the Holly Entities as promptly as practicable of
such Emergency, and in no event shall Operator notify any regulatory agency
without also notifying the Holly Entities at the same time in like form. Such
notification shall be by method deemed most appropriate by Operator. For
purposes of this Agreement, an “Emergency” shall mean a sudden or

6

--------------------------------------------------------------------------------

 

unexpected event which causes, or risks causing, damage to a System, or death or
injury to any person, or any other event that is of such a nature that a
response cannot, in the sole discretion of Operator, await the decision of the
Holly Entities.
     5. ACCOUNTING
          5.1 Maintenance of Accounts. Operator shall maintain true and accurate
accounts of all expenses, costs and liabilities chargeable to the Holly Entities
under Sections 4, 7 and 8 and all revenue accrued and invoiced, all of which
shall be charged or credited to the Holly Entities, in accordance with Generally
Accepted Accounting Principles practiced in the United States at the time
prevailing for firms engaged in a business similar to that of the Holly Entities
and in accordance with the Uniform System of Accounts (including any subsequent
modifications or revisions thereof) Prescribed for Oil Pipeline Companies by the
Federal Energy Regulatory Commission or its successors or by any other
governmental agency having regulatory jurisdiction over the Holly Entities or
any System, consistently applied (collectively, “GAAP”). Operator shall maintain
such books of account at its principal place of business and such shall be open
to inspection and examination at reasonable times by the Holly Entities or any
of their authorized representatives.
          5.2 Government Reports. Operator shall prepare and file any reports
required by any commission or governmental agency having jurisdiction over any
System; provided, however, that Operator shall provide substantially final
drafts of such reports to the Holly Entities for their review and comment as
soon as reasonably practicable, but in no event later than fifteen days prior to
the due date of such report, and Operator shall endeavor in good faith to
incorporate all written comments the Holly Entities provide to Operator within
ten days of the Holly Entities’ receipt of the draft report in the final report
that Operator files. Any reports under the name of a Holly Entity and requiring
a signature shall be executed by a duly authorized representative of such Holly
Entity.
     6. OPERATING PROCEDURES
          6.1 Common Carrier Operations. If any of the Systems is a common
carrier, then Operator shall operate such System on behalf of the Holly Entities
as a common carrier and in conformance with applicable tariffs and rules and
regulations applicable to oil pipeline common carriers under the Interstate
Commerce Act.
          6.2 Measurements of Shipments and Deliveries. Measurements of
shipments and deliveries shall be made in accordance with Operator’s standard
measurement policies and procedures, which policies and procedures shall be
subject to the approval of the Holly Entities, which approval shall not be
unreasonably withheld. To the extent amendments are dictated by industry
practices, governmental regulation or the reasonable operational requirements of
Operator, Operator reserves the right to propose amendments to this procedure
from time to time for approval by the Holly Entities, such approval not to be
unreasonably withheld. Product custody transfer will take place at the meters
under the control of Operator. The Holly Entities will have the right to witness
all meter provings and instrument calibrations. The Holly Entities will pay only
for unscheduled meter provings requested by the Holly Entities and found to be
within acceptable limits according to the approved policies and procedures.

7

--------------------------------------------------------------------------------

 

          6.3 Product Quality. Where applicable, Operator shall maintain and
enforce the minimum specifications set forth in the Holly Entities’ tariffs as
in effect from time to time for the Systems.
          6.4 Product Losses and Gains. Where applicable, accounting for Product
losses and gains from the Systems shall be governed by the terms and conditions
of applicable Holly Entity tariffs.
          6.5 Scheduling. Operator shall schedule shipments on the Systems in
the manner that most efficiently utilizes the Systems.
     7. INSURANCE, CLAIMS AND RELEASE OF OPERATOR
          7.1 Insurance Coverage of Operator. During the Term, Operator agrees
to carry and keep in force, or cause its Delegates (as defined below) to carry
and keep in force, commercially reasonable insurance coverage for the protection
of itself and the Holly Entities, including at a minimum the insurance described
below:
          7.1.1 Workers’ compensation/employers liability insurance that
provides statutory workers’ compensation benefits. The policy must have a
deductible or self-insured retention of no more than Five Hundred Thousand
Dollars ($500,000) per person per accident. The employers liability insurance
should have limits of no less than One Million Dollars ($1,000,000). The term
“workers’ compensation” as used herein includes that which is required under the
laws of any state or other governmental entity applicable to the work being
performed for the Systems by Operator.
          7.1.2 Commercial automobile liability insurance with a limit of One
Million Dollars ($1,000,000) per accident for bodily injury and/or property
damage.
          7.1.3 Commercial or comprehensive general liability insurance on an
occurrence form with a combined single limit of no less than Fifteen Million
Dollars ($15,000,000) per occurrence, and annual aggregates of Fifteen Million
Dollars ($15,000,000), for bodily injury and property damage, including coverage
for blanket contractual liability, broad form property damage, environmental
restoration, personal injury liability, independent contractors and Petroleum
Product/completed operations and in the aggregate.
          7.1.4 Property damage insurance (including boiler and machinery
coverage) insuring Operator’s and its Delegates assets against loss or damage by
fire and the other hazards covered by a standard extended coverage and all-risk
insurance policy for the full insurable value thereof on a replacement cost
claim recovery basis (without reduction for depreciation or co-insurance and
without any exclusions or reduction of policy limits for acts of domestic and
foreign terrorism or other specified action/inaction). The insurance policy will
include a waiver of subrogation against the Holly Entities and Operator agrees
to waive subrogation against the Holly Entities. Notwithstanding anything in
this

8

--------------------------------------------------------------------------------

 

Agreement to the contrary, Operator shall not charge any of the premiums for
this insurance to the Holly Entities.
          7.1.5 The insurance limits required by Sections 7.1.1, 7.1.2, 7.1.3
and 7.1.4 may be satisfied by the use of umbrella or excess policies, provided
the required insurance is properly scheduled therein.
          7.1.6 As part of the Management Fee, the Holly Entities shall pay
Operator the amount set forth on Exhibit A for the line item labeled “Insurance
Reimbursement” as reimbursement of the premiums for the insurance required by
Sections 7.1.1, 7.1.2 and 7.1.3. It is the intent of the Parties that the Holly
Entities be charged the premiums for the insurance required by Sections 7.1.1,
7.1.2 and 7.1.3 only to the extent such insurance relates to the services to be
performed by Operator and its affiliates under this Agreement and that Operator
and its affiliates shall be responsible for that portion of the premium that
relates to their other assets and business in general. The Parties recognize
that this division of the premium cannot be calculated exactly and agree that
upon the written request of either the Holly Entities to Operator or Operator to
the Holly Entities, they shall renegotiate the Insurance Reimbursement amount.
In the event the Holly Entities and Operator are unable to agree on a new
Insurance Reimbursement amount within thirty (30) days following the written
request of either the Holly Entities or Operator to renegotiate such amount,
including if the failure to agree is due in part to Operator and its affiliates
carrying insurance policies that exceed what the Holly Entities deem to be
commercially reasonable insurance coverage, then the Holly Entities shall have
the right to terminate this Agreement in accordance with Section 11.4.
          7.1.7 Operator shall require all contractors engaged in work for the
benefit of the Systems to comply with all applicable workers’ compensation,
social security, labor, and employer’s liability laws and to maintain such
insurance as may be required by the Holly Entities from time to time and by
applicable law, regulation or contract, and to carry other insurance in such
amounts as Operator shall determine is appropriate. All insurance under
Sections 7.1.2 and 7.1.3 shall include the Holly Entities as additional insureds
and for contractors shall be endorsed with an appropriate waiver of subrogation
in favor of the Holly Entities and Operator.
          7.2 Insurance Coverage of Holly Entities. During the Term, the Holly
Entities agree to carry and keep in force the following insurance for protection
of themselves and Operator:
          7.2.1 Workers’ compensation/employers liability insurance that
provides statutory workers’ compensation benefits. The policy must have a
deductible or self-insured retention of no more than Five Hundred Thousand
Dollars ($500,000) per person per accident. The employer’s liability insurance
should have limits of no less than One Million Dollars ($1,000,000). The term
“workers’ compensation” as used herein includes that which is required under the

9

--------------------------------------------------------------------------------

 

laws of any state or other governmental entity applicable to the work being
performed at the Facilities by the Holly Entities.
          7.2.2 Commercial automobile liability insurance with a limit of One
Million Dollars ($1,000,000) per accident for bodily injury and/or property
damage.
          7.2.3 Commercial or comprehensive general liability insurance on an
occurrence form with a combined single limit of no less than Fifteen Million
Dollars ($15,000,000) per occurrence, and annual aggregates of Fifteen Million
Dollars ($15,000,000), for bodily injury and property damage, including coverage
for blanket contractual liability, broad form property damage, environmental
restoration, personal injury liability, independent contractors and Petroleum
Product/completed operations and in the aggregate. The insurance policy will
include a waiver of subrogation against Operator and the Holly Entities agree to
waive subrogation against Operator, except in the case of gross negligence or
willful misconduct.
          7.2.4 Property damage insurance (including boiler and machinery
coverage) insuring the Holly Entities’ assets against loss or damage by fire and
the other hazards covered by a standard extended coverage and all-risk insurance
policy for the full insurable value thereof on a replacement cost claim recovery
basis (without reduction for depreciation or co-insurance and without any
exclusions or reduction of policy limits for acts of domestic and foreign
terrorism or other specified action/inaction). The insurance policy will include
a waiver of subrogation against Operator and the Holly Entities agree to waive
subrogation against Operator, except in the case of gross negligence or willful
misconduct.
          7.2.5 The insurance limits required by Sections 7.2.1, 7.2.2, 7.2.3,
and 7.2.4 may be satisfied by the use of umbrella or excess policies, provided
the required insurance is properly scheduled therein.
          7.3 Release and Indemnification of Operator. Inasmuch as Operator has
agreed with the Holly Entities to maintain and operate the Systems on a
combination Management Fee and direct charge basis, the Holly Entities hereby
release Operator and its employees, agents and affiliates, including, without
limitation, any subsidiary of Operator to whom Operator delegates any of its
rights or obligations under this Agreement (a “Delegate”), and contractors, and
agrees to fully indemnify, defend and hold harmless Operator and its employees,
agents, affiliates, Delegates and contractors, from (a) all claims arising out
of, in connection with or as an incident to, any act or omission, including
negligence, of Operator or its employees, agents, affiliates, Delegates or
contractors in maintaining and operating the Systems that exceeds the insurance
coverage carried by Operator pursuant to Section 7.1 or that are not of the
character of liability covered under such insurance and (b) all deductible
payments required under the insurance coverage carried by Operator; provided,
however, that the release and indemnification of Operator under this Section 7.3
does not apply to claims that arise from the gross negligence or willful
misconduct of Operator or its employees, agents, affiliates, Delegates or
contractors or to the extent of any

10

--------------------------------------------------------------------------------

 

insurance of Operator carried pursuant to Section 7.1. The provisions of this
Section 7.3 shall survive the termination of this Agreement.
          7.4 Release and Indemnification of the Holly Entities. Operator hereby
releases each of the Holly Entities and their affiliates and agrees to fully
indemnify, defend and hold harmless the Holly Entities and their affiliates, to
the extent that claims arise from the gross negligence or willful misconduct of
Operator its employees, agents, affiliates that are subsidiaries of Operator,
Delegates or contractors, in maintaining and operating the Systems, or to the
extent covered by insurance carried by Operator pursuant to Section 7.1. The
provisions of this Section 7.4 shall survive the termination of this Agreement.
     8. COMPENSATION AND PAYMENT TERMS
          8.1 Management Fee. Operator shall charge the Holly Entities an annual
management fee in the aggregate amount set forth on Exhibit A (the “Management
Fee”) to compensate Operator for performing the services set forth in
Section 8.2. The Management Fee shall be paid by the Holly Entities to Operator
in equal monthly installments on the first of the month and shall be prorated
for the period (including any partial months) beginning on the Effective Date
through December 31, 2009. The Management Fee will be adjusted each July 1,
commencing July 1, 2010, by an amount equal to the upper change in the annual
change rounded to four decimal places of the Producers Price
Index-Commodities-Finished Goods, (PPI), et al. (“PPI”), produced by the U.S.
Department of Labor, Bureaus of Labor Statistics. The series ID is WPUSOP3000 as
of December 31, 2007 – located at http://www.bls.gov/data/. The change factor
shall be calculated as follows: annual PPI index (most current year) less annual
PPI index (most current year minus 1) divided by annual PPI index (most current
year minus 1). An example for year 2006 change is: [PPI (2005) – PPI (2004)] /
PPI (2004) or (155.7 – 148.5) / 148.5 or .0485 or 4.85%. If the PPI index change
is negative in a given year then the annual change will be deemed to be “zero.”
In the event the above index is no longer published as presently constituted,
the Parties shall negotiate in good faith to agree on a new index that gives
comparable protection against inflation, and the same method of adjustment for
increases in the new index shall be used to calculate increases in the
Management Fee.
          8.2 Included Services. The Management Fee covers those services
described in Part I of Exhibit B attached hereto and made a part hereof. All
services referred to in Part I of Exhibit B performed by Operator shall be
absorbed by Operator at no extra charge to the Holly Entities beyond the
Management Fee.
          8.3 Direct Charge Expenses (Generally). Subject to the terms and
provisions of this Agreement, including Sections 4 and 8.2, (a) routine costs,
including wages, salaries, benefits, payroll taxes and travel, personal expenses
and supplies associated with direct field operating and/or maintenance work
performed by Operator’s area level staff will be directly charged to and paid by
the Holly Entities, (b) non-routine activities outside the ordinary course of
business including, but not limited to, special studies and projects, external
audits, outside legal services, and (subject to Section 7) litigation, Capital
Budget or Operating Budget projects and approved engineering, design,
construction and expansion projects (in accordance with Section 4), shall be
directly charged to and paid by the Holly Entities, and (c) those activities and
services described on Exhibit C attached hereto and made a part hereof shall be
directly charged to and paid

11

--------------------------------------------------------------------------------

 

by the Holly Entities. Activities included under clause (a) of this Section 8.3
include, but are not limited to, day-to-day routine operations and maintenance
of the Systems based on actual costs. This Section 8.3 is applicable to, but
shall not be limited to, supervisors, foremen, control center operators and
operating maintenance personnel, but excludes services set forth in Section 8.2
(which are covered by the Management Fee). All such direct charges shall be paid
by the Holly Entities to Operator within thirty (30) days after the Holly
Entities receive from Operator a written invoice setting forth such direct
charges.
          8.4 Description of Direct Charge Expenses. Examples of the types of
costs properly chargeable to the Holly Entities under Section 8.3, subject to
Sections 4 and 8.2 and the other terms and provisions of this Agreement, as
direct charge items are listed in Part II of Exhibit B and on Exhibit C attached
hereto.
     9. SURPLUS EQUIPMENT; INVENTORIES
          9.1 Disposal of Material and Equipment. Except as provided in
Section 3.2, no materials or equipment relating to any System and owned by a
Holly Entity may be sold or disposed of without such Holly Entity first
approving such sale or disposition. All proceeds derived from any such sale or
disposition shall be credited to the account of the applicable Holly Entity.
          9.2 Inventories, Reports, Etc. Inventories and other matters referred
to in this Section 9.2 shall be governed by the following:
          9.2.1 Certain Regulatory Reports. Operator shall arrange for such
reports, right-of-way alignment maps, field inventories and valuation reports
and statements of reconciliation as may be required by regulatory agencies
having jurisdiction over the Systems and in the number of copies required.
          9.2.2 Inventories of Systems. Except as provided in Sections 9.2.1 and
9.2.3, Operator shall not be required to make any inventories of any System
except upon the mutual agreement of the Holly Entities and Operator.
          9.2.3 Inventories of Material Stock. Not more frequently than every
four (4) years, Operator shall inventory all of the material stock of each
System and furnish the Holly Entities with a statement reflecting the value of
the account and its findings as the result of such inventory insofar as there
are any “overs” and “shorts.” Notice of intention to make such an inventory
shall be given by Operator to the Holly Entities in order that the Holly
Entities may be represented during the inventory. Any costs incurred by Operator
in the taking and assembling of these inventories shall be charged as a direct
charge to the Holly Entities.
     10. DISPUTE RESOLUTION
          10.1 Disputes. Any and all Arbitrable Disputes must be resolved
through the use of binding arbitration using three arbitrators, in accordance
with the Commercial Arbitration Rules of the American Arbitration Association,
as supplemented to the extent necessary to

12

--------------------------------------------------------------------------------

 

determine any procedural appeal questions by the Federal Arbitration Act (Title
9 of the United States Code). If there is any inconsistency between this
Section 10.1 and the Commercial Arbitration Rules or the Federal Arbitration
Act, the terms of this Section 10.1 will control the rights and obligations of
the Parties. Arbitration must be initiated within the time limits set forth in
this Agreement, or if no such limits apply, then within a reasonable time or the
time period allowed by the applicable statute of limitations. Arbitration may be
initiated by a Party (“Claimant”) serving written notice on the other Party
(“Respondent”) that the Claimant elects to refer the Arbitrable Dispute to
binding arbitration. Claimant’s notice initiating binding arbitration must
identify the arbitrator Claimant has appointed. The Respondent shall respond to
Claimant within thirty (30) days after receipt of Claimant’s notice, identifying
the arbitrator Respondent has appointed. If the Respondent fails for any reason
to name an arbitrator within the 30-day period, Claimant shall petition the
American Arbitration Association for appointment of an arbitrator for
Respondent’s account. The two arbitrators so chosen shall select a third
arbitrator within thirty (30) days after the second arbitrator has been
appointed. The Claimant will pay the compensation and expenses of the arbitrator
named by it, and the Respondent will pay the compensation and expenses of the
arbitrator named by or for it. The costs of petitioning for the appointment of
an arbitrator, if any, shall be paid by Respondent. The Claimant and Respondent
will each pay one-half of the compensation and expenses of the third arbitrator.
All arbitrators must (i) be neutral parties who have never been officers,
directors or employees of any of the Holly Entities, Operator or any of their
affiliates and (ii) have not less than seven (7) years experience in the
petroleum transportation industry. The hearing will be conducted in Dallas,
Texas and commence within thirty (30) days after the selection of the third
arbitrator. The Holly Entities, Operator and the arbitrators shall proceed
diligently and in good faith in order that the award may be made as promptly as
possible. Except as provided in the Federal Arbitration Act, the decision of the
arbitrators will be binding on and non-appealable by the Parties hereto. The
arbitrators shall have no right to grant or award indirect, consequential,
punitive or exemplary damages of any kind. The Arbitrable Disputes may be
arbitrated in a common proceeding along with disputes under other agreements
between the Holly Entities, Operator or their affiliates to the extent that the
issues raised in such disputes are related. Without the written consent of the
Parties, no unrelated disputes or third party disputes may be joined to an
arbitration pursuant to this Agreement.
          10.2 Definitions. As used in this Agreement, the following terms shall
have the meanings set forth below:
          10.2.1 “Applicable Law” means any applicable statute, law, regulation,
ordinance, rule, judgment, rule of law, order, decree, permit, approval,
concession, grant, franchise, license, agreement, requirement, or other
governmental restriction or any similar form of decision of, or any provision or
condition of any permit, license or other operating authorization issued under
any of the foregoing by, or any determination by any Governmental Authority
having or asserting jurisdiction over the matter or matters in question, whether
now or hereafter in effect and in each case as amended (including, without
limitation, all of the terms and provisions of the common law of such
Governmental Authority), as interpreted and enforced at the time in question.
          10.2.2 “Arbitrable Dispute” means any and all disputes, Claims,
controversies and other matters in question between any of the Holly Entities,
on

13

--------------------------------------------------------------------------------

 

the one hand, and Operator, on the other hand, arising out of or relating to
this Agreement or the alleged breach hereof, or in any way relating to the
subject matter of this Agreement regardless of whether (a) allegedly
extra-contractual in nature, (b) sounding in contract, tort or otherwise,
(c) provided for by Applicable Law or otherwise or (d) seeking damages or any
other relief, whether at law, in equity or otherwise.
          10.2.3 “Claim” means any existing or threatened future claim, demand,
suit, action, investigation, proceeding, governmental action or cause of action
of any kind or character (in each case, whether civil, criminal, investigative
or administrative), known or unknown, under any theory, including those based on
theories of contract, tort, statutory liability, strict liability, employer
liability, premises liability, products liability, breach of warranty or
malpractice.
          10.2.4 “Governmental Authority” means any federal, state, local or
foreign government or any provincial, departmental or other political
subdivision thereof, or any entity, body or authority exercising executive,
legislative, judicial, regulatory, administrative or other governmental
functions or any court, department, commission, board, bureau, agency,
instrumentality or administrative body of any of the foregoing.
     11. TERMINATION, DEFAULTS AND REMEDIES; RESIGNATION OR REMOVAL OF OPERATOR
          11.1 Termination. This Agreement may be terminated by (a) the written
agreement of the Parties or (b) by the Holly Entities, on the one hand, or
Operator, on the other hand, giving the other Party or Parties, as the case may
be, written notice of termination at least 180 days prior to the expiration of
the initial five (5) year term or any successive five (5) year term, as
applicable, in which case this Agreement shall terminate as of 12:01 a.m.,
Dallas, Texas time, on the expiration of the initial five (5) year term or the
successive five (5) year term, as applicable. The Holly Entities shall remain
liable for and shall pay all Management Fees and direct costs incurred for any
period prior to termination and for any termination payments due to third
parties in connection with any such termination.
          11.2 Default of the Holly Entities. If the Holly Entities fail to make
any payment required to be made by the Holly Entities hereunder or fail to
perform any other obligation to be performed by the Holly Entities hereunder,
Operator shall give the Holly Entities a written notice of default setting forth
in reasonable detail the defaults of the Holly Entities and stating the actions
that, if taken and pursued to completion, would cure such defaults. If the Holly
Entities have not cured such defaults within thirty (30) days after receiving
said notice, or within a reasonable time after receiving said notice (if the
default is of a kind that reasonably cannot be cured within thirty (30) days),
Operator shall have the right and option to terminate this Agreement and to
pursue its remedies at law or in equity, subject to the provisions of
Section 10.
          11.3 Default by Operator. If Operator fails to perform any obligation
to be performed by Operator hereunder, the Holly Entities shall give Operator a
written notice of default setting forth in reasonable detail the defaults of
Operator and stating the actions that, if taken and

14

--------------------------------------------------------------------------------

 

pursued to completion, would cure such defaults. If Operator has not cured such
defaults within thirty (30) days after receiving said notice, or within a
reasonable time after receiving said notice (if the default is of a kind that
reasonably cannot be cured within thirty (30) days), the Holly Entities shall
have the right and option to remove the Operator as provided in Section 11.6
and/or to terminate this Agreement and to pursue its remedies at law or in
equity, subject to the provisions of Section 10.
          11.4 Failure to Agree on Insurance. If (i) Operator carries insurance
policies that exceed what the Holly Entities deem to be commercially reasonable
coverage or (ii) the Holly Entities and Operator are unable to agree on a new
Insurance Reimbursement amount within thirty (30) days following the written
request of either the Holly Entities or Operator to renegotiate such amount,
including if the failure to agree is due in part to Operator and its affiliates
carrying insurance policies that exceed what the Holly Entities deem to be
commercially reasonable insurance coverage, then the Holly Entities may give
notice of removal to Operator, in which case Operator shall be removed as
Operator but shall nevertheless continue to perform all of the duties,
responsibilities and obligations of Operator until the first to occur of (a) the
expiration of twelve (12) months from the date of such notice of removal or
(b) such time as the Holly Entities notify Operator that the Holly Entities have
selected a successor operator.
          11.5 Resignation of Operator. Operator may resign by sending written
notice to the Holly Entities; provided, however, that Operator shall not be
relieved of duties as Operator for a period of at least twelve (12) months after
the date of such notice or until such earlier time as a successor Operator has
been retained.
          11.6 Removal of Operator for Cause. If (i) Operator breaches or
defaults in the performance of any term or condition of this Agreement,
(ii) such breach or default materially and adversely affects, or would
reasonably be expected to materially and adversely affect, the operation or
maintenance of the Systems and (iii) Operator has failed to correct any such
breach or default within thirty (30) days after notice of such breach or default
is given by a Holly Entity to Operator, then the Holly Entities may give notice
of removal to Operator, in which case Operator shall be removed as Operator but
shall nevertheless continue to perform all of the duties, responsibilities and
obligations of Operator until the first to occur of (a) the expiration of twelve
(12) months from the date of such notice of removal or (b) such time as the
Holly Entities notify Operator that the Holly Entities have selected a successor
operator. A Holly Entity’s notice of breach or default to Operator under this
Section 11.6 shall state with particularity the breach or default complained of.
To the extent Operator disputes a Holly Entity’s complaint, then the matter
shall be addressed pursuant to the terms of Section 10; provided, however, the
Holly Entities’ ability to deliver a notice of removal to Operator relating to
such breach or default that is the subject of the arbitration shall be limited
while such arbitration is ongoing. A finding by the arbitration panel pursuant
to Section 10 that Operator breached or defaulted in the performance of any such
term or condition of this Agreement, such breach or default materially and
adversely affected, or would reasonably be expected to materially and adversely
affect, the operation or maintenance of any asset listed on Exhibit A and failed
to correct any such breach of default within thirty (30) days after notice by a
Holly Entity, shall be final and binding upon the Parties and shall permit the
Holly Entities to deliver notice of removal to Operator and remove Operator as
provided in this Section 11.6.

15

--------------------------------------------------------------------------------

 

     12. LIMITATION OF DAMAGES
          12.1 NOTWITHSTANDING ANYTHING CONTAINED TO THE CONTRARY IN ANY OTHER
PROVISION OF THIS AGREEMENT AND EXCEPT FOR CLAIMS MADE BY THIRD PARTIES WHICH
SHALL NOT BE LIMITED BY THIS PARAGRAPH, THE PARTIES AGREE THAT THE RECOVERY BY
ANY PARTY, INCLUDING PURSUANT TO SECTION 7.3 OR 7.4 OF ANY LIABILITIES, DAMAGES,
COSTS OR OTHER EXPENSES SUFFERED OR INCURRED BY IT (i) AS A RESULT OF ANY BREACH
OR NONFULFILLMENT BY A PARTY OF ANY OF ITS REPRESENTATIONS, WARRANTIES,
COVENANTS, AGREEMENTS OR OTHER OBLIGATIONS UNDER THIS AGREEMENT OR (ii) BY
REASON OF OR ARISING OUT OF ANY OF THE CONDITIONS OR OTHER MATTERS LISTED IN
SECTION 7.3 OR SECTION 7.4 WHICH THE PARTIES HAVE AGREED TO INDEMNIFY THE OTHER
PARTY AGAINST, SHALL BE LIMITED TO ACTUAL DAMAGES AND SHALL NOT INCLUDE OR APPLY
TO, NOR SHALL ANY PARTY BE ENTITLED TO RECOVER, ANY INDIRECT, CONSEQUENTIAL,
EXEMPLARY OR PUNITIVE DAMAGES (INCLUDING, WITHOUT LIMITATION, ANY DAMAGES ON
ACCOUNT OF LOST PROFITS OR OPPORTUNITIES OR BUSINESS INTERRUPTION OR DIMINUTION
IN VALUE) SUFFERED OR INCURRED BY ANY PARTY; PROVIDED, HOWEVER, THAT SUCH
RESTRICTION AND LIMITATION SHALL NOT APPLY TO A PARTY’S OBLIGATION TO INDEMNIFY
THE OTHER PARTY UNDER SECTION 7.3 OR SECTION 7.4 HEREOF, AS APPLICABLE, (x) AS A
RESULT OF A THIRD PARTY CLAIM FOR SUCH INDIRECT, CONSEQUENTIAL, EXEMPLARY OR
PUNITIVE DAMAGES OR (y) FOR INDIRECT, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE
DAMAGES (INCLUDING, WITHOUT LIMITATION, ANY DAMAGES ON ACCOUNT OF LOST PROFITS
OR OPPORTUNITIES OR BUSINESS INTERRUPTION OR DIMINUTION IN VALUE) THAT ARE A
RESULT OF SUCH INDEMNIFYING PARTY’S OR ITS AFFILIATES GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT.
          12.2 Notwithstanding anything in this Agreement to the contrary and
solely for the purpose of determining which of the Holly Entities shall be
liable in a particular circumstance, no Holly Entity shall be liable to another
Party for any loss, damage, injury, judgment, claim, cost, expense or other
liability suffered or incurred by such Party (the “Damaged Party”) except to the
extent that the Holly Entity causes such loss, damage, injury, judgment, claim,
cost, expense or other liability suffered or incurred by the Damaged Party or
owns or operates the Systems or other property in question responsible for
causing such loss, damage, injury, judgment, claim, cost, expense or other
liability suffered or incurred by the Damaged Party.
     13. GENERAL CONDITIONS; MISCELLANEOUS PROVISIONS
          13.1 Notice. Any notice or other communication given under this
Agreement shall be in writing and shall be (i) delivered personally, (ii) sent
by documented overnight delivery service, (iii) sent by email transmission, or
(iv) sent by first class mail, postage prepaid (certified or registered mail,
return receipt requested). Such notice shall be deemed to have been duly given
(x) if received, on the date of the delivery, with a receipt for delivery,
(y) if refused, on the date of the refused delivery, with a receipt for refusal,
or (z) with respect to email transmissions, on the date the recipient confirms
receipt. Notices or other communications shall be directed to the following
addresses

16

--------------------------------------------------------------------------------

 

          Notices to the Holly Entities:
c/o Holly Corporation
100 Crescent Court, Suite 1600
Dallas, Texas 75201-6927
Attention: David L. Lamp
Email address: president@hollycorp.com
with a copy, which shall not constitute notice, but is required in order to
give proper notice, to:
c/o Holly Corporation
100 Crescent Court, Suite 1600
Dallas, Texas 75201
Attn: General Counsel
Email address: generalcounsel@hollycorp.com
          Notices to the Operator:
Holly Energy Partners—Operating, L.P.
100 Crescent Court, Suite 1600
Dallas, Texas 75201-6927
Attention: David G. Blair
Email address: SVP-HEP@hollyenergy.com
with a copy, which shall not constitute notice but is required in order to
give proper notice, to:
Holly Energy Partners—Operating, L.P.
100 Crescent Court, Suite 1600
Dallas, Texas 75201
Attn: General Counsel
Email address: generalcounsel@hollyenergy.com
Any Party may at any time change its address for service from time to time by
giving notice to the other Parties in accordance with this Section 13.1.
          13.2 Captions. The captions of this Agreement are for convenience
only, shall not be deemed part of this Agreement and in no way define, limit,
augment, extend or describe the scope, content or intent of any part or parts of
this Agreement.
          13.3 Pronouns and Plurals. Whenever the context may require, any
pronoun used herein shall include the corresponding masculine, feminine or
neuter forms and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa. Each of the foregoing genders and plurals is
understood to refer to a corporation, partnership or other legal entity when the
context so requires.

17

--------------------------------------------------------------------------------

 

          13.4 Further Action. The Parties shall execute and deliver all
documents, provide all information and take or forebear from all such action as
may be necessary or appropriate to achieve the purposes of this Agreement.
Whenever this Agreement gives a Party the right to consent or approve any
action, unless expressly provided herein, such consent or approval shall not be
unreasonably withheld.
          13.5 Applicable Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of Delaware, excluding any
conflicts-of-law rule or principle that might refer the construction or
interpretation of this Agreement to the laws of another state.
          13.6 Relationship of Parties. In the performance of this Agreement and
the work hereunder, Operator’s status shall be that of an independent
contractor, and this Agreement does not create any partnership or joint venture
between Operator and any of the Holly Entities.
          13.7 Integration. This Agreement constitutes the entire agreement
among the Parties pertaining to the subject matter hereof and supersedes all
prior agreements and understandings pertaining thereto. No covenant,
representation or condition not expressed in this Agreement shall affect or be
deemed to interpret, change or restrict the express provisions hereof. The
failure of either Party to inspect the documents referred to herein constitutes
a waiver of any objection, contention or claim that may be based upon such an
inspection.
          13.8 Severability. In the event that any condition, covenant or other
provision herein contained is held to be invalid or void by any court of
competent jurisdiction, the same shall be deemed severable from the remainder of
this Agreement and shall in no way affect any other covenant or condition herein
contained. If such condition, covenant or other provision shall be deemed
invalid due to its scope or breadth, such provision shall be deemed valid to the
extent of the scope or breadth permitted by law.
          13.9 Force Majeure. Performance under this Agreement, other than to
make payments due, shall be excused in the event any Party is rendered unable,
wholly or in part, by force majeure to carry out its obligations under this
Agreement, and, in this regard, it is agreed that, on such Party giving notice
in reasonably full particulars of such force majeure, in writing or by
electronic means, to the other Party, within a reasonable time after the
occurrence of the cause relied on, then the obligations of the Party giving such
notice, so far as they are affected by such force majeure, shall be suspended
during the continuance of any inability so caused, but for no longer period, and
such cause shall, so far as possible, be remedied with all reasonable dispatch.
The term “force majeure” as used herein means: acts of God; strikes, lockouts or
other industrial disturbances; acts of the public enemy, terrorist acts, wars,
blockades, insurrections, civil disturbances, riots; epidemics, landslides,
lightning, earthquakes, fires, storms, floods and washouts; arrests, the
emergency, disaster or crisis order, directive, requisition or action of any
government and governmental agencies and instrumentalities, either federal or
state, civil or military; application of governmental curtailment rules and
regulations; explosions, breakage or accident to machinery or lines of pipe;
and, other causes, whether of the kind herein enumerated or otherwise, not
reasonably within the control of the Party claiming suspension. It is understood
and agreed that the settlement of strikes or lockouts is entirely within the
discretion of the Party having the difficulty and that the above requirement
that any force majeure be remedied with all reasonable dispatch does not require
the settlement of labor disputes, strikes or lockouts by

18

--------------------------------------------------------------------------------

 

acceding to the demands of an opposing Party when such course is inadvisable in
the discretion of the Party having the difficulty.
          13.10 Attorney’s Fees. In the event there is a default under this
Agreement and it becomes reasonably necessary for a Party to employ the services
of outside counsel in connection therewith, either with or without arbitration,
the defaulting Party shall pay to the non-defaulting Party reasonable outside
counsel’s fees and, in addition, such costs and expenses as are incurred in
interpreting, enforcing or terminating this Agreement.
          13.11 Limitation. Notwithstanding that all of the covenants and
obligations of the Parties hereunder are in form expressed in language creating
personal covenants on the part of such Parties, none of the Parties’ respective
officers, managers, members, partners, directors, employees, agents, successors
or assigns shall in any event have personal liability under this Agreement.
          13.12 Exhibits. All Exhibits annexed to this Agreement are expressly
made a part of this Agreement as fully as though completely set forth in it. All
references to this Agreement, either in the Agreement itself or in any of such
writings, shall be deemed to refer to and include this Agreement and all such
Exhibits.
          13.13 Amendments and Waivers. No amendment or modification of this
Agreement shall be valid unless it is in writing and signed by the Parties. No
waiver of any provision of this Agreement shall be valid unless it is in writing
and signed by the Party against whom the waiver is sought to be enforced. Any of
the exhibits to this Agreement may be amended, modified, revised or updated by
the Parties hereto if each of the Parties executes an amended, modified, revised
or updated exhibit and attaches it to this Agreement. Such amended, modified,
revised or updated exhibits shall be sequentially numbered (e.g., Exhibit A-1,
Exhibit A-2, etc.), dated and appended as an additional exhibit to this
Agreement and shall replace the prior exhibit in its entirety, except as
specified therein. No failure or delay in exercising any right hereunder, and no
course of conduct, shall operate as a waiver of any provision of this Agreement.
No single or partial exercise of a right hereunder shall preclude further or
complete exercise of that right or any other right hereunder.
          13.14 Rights and Remedies. Except as may be provided in Section 10,
the rights and remedies of any of the Parties hereto shall not be mutually
exclusive, and the exercise of one or more of the provisions of this Agreement
shall not preclude the exercise of any other provisions.
          13.15 Successors and Assigns. This Agreement shall inure to the
benefit of, and shall be binding upon, the Holly Entities, Operator and their
respective successors and permitted assigns. Neither this Agreement nor any of
the rights or obligations hereunder shall be assigned without the prior written
consent of the Holly Entities (in the case of any assignment by Operator) or
Operator (in the case of any assignment by the Holly Entities), in each case,
such consent is not to be unreasonably withheld or delayed; provided, however,
that (i) Operator may make such an assignment (including a partial pro rata
assignment) to an Affiliate of Operator without the Holly Entities’ consent,
(ii) the Holly Entities may make such an assignment (including a partial pro
rata assignment) to an Affiliate of the Holly Entities without Operator’s
consent, and (iii) the Holly Entities may make such an assignment to any Person
to which the Holly Entities have sold any of

19

--------------------------------------------------------------------------------

 

the Systems if such Person (1) is reasonably capable of performing the Holly
Entities’ obligations (or its pro rata portion of such obligations) under this
Agreement assigned to such Person, which determination shall be made by the
Holly Entities in their reasonable judgment and (2) has agreed in writing to
assume the obligations of the Holly Entities assigned to such Person, without
Operator’s consent. Any attempt to make an assignment otherwise than as
permitted by the foregoing shall be null and void. The Parties agree to require
their respective successors, if any, to expressly assume, in a form of agreement
reasonably acceptable to the other Parties, their obligations under this
Agreement. As used in this Section 13.15, (x) “Affiliate” means, with respect to
any Person, any other Person that directly or indirectly through one or more
intermediaries controls, is controlled by or is under common control with, the
Person in question and (y) “Person” means an individual or a corporation,
limited liability company, partnership, joint venture, trust, unincorporated
organization, association, government agency or political subdivision thereof or
other entity.
          13.16 No Third-Party Beneficiaries. Nothing contained in this
Agreement shall create a contractual relationship with or a cause of action in
favor of a third Party against any of the Holly Entities or Operator. None of
the provisions of this Agreement shall be for the benefit of or enforceable by
any creditors of any Party hereto.
          13.17 Delegation by Operator. Notwithstanding anything in this
Agreement to the contrary, Operator shall be permitted to delegate any of its
obligations or responsibilities under this Agreement to any of its subsidiaries;
provided, however, that no such delegation shall relieve Operator of any of its
obligations or responsibilities under this Agreement.
     14. GUARANTEE BY HOLLY
          14.1 Payment and Performance Guaranty. Holly unconditionally,
absolutely, continually and irrevocably guarantees, as principal and not as
surety, to the Operator the punctual and complete payment in full when due of
all amounts due from the Holly Entities under the Agreement (collectively, the
“Holly Payment Obligations”). Holly agrees that the Operator shall be entitled
to enforce directly against Holly any of the Holly Payment Obligations.
          14.2 Guaranty Absolute. Holly hereby guarantees that the Holly Payment
Obligations will be paid strictly in accordance with the terms of the Agreement.
The obligations of Holly under this Agreement constitute a present and
continuing guaranty of payment, and not of collection or collectability. The
liability of Holly under this Agreement shall be absolute, unconditional,
present, continuing and irrevocable irrespective of:
               (i) any assignment or other transfer of the Agreement or any of
the rights thereunder of the Operator;
               (ii) amendment, waiver, renewal, extension or release of or any
consent to or departure from or other action or inaction related to the
Agreement;
               (iii) acceptance by the Operator of partial payment or
performance from the Holly Entities;

20

--------------------------------------------------------------------------------

 

               (iv) any bankruptcy, insolvency, reorganization, arrangement,
composition, adjustment, dissolution, liquidation or other like proceeding
relating to the Holly Entities or any action taken with respect to the Agreement
by any trustee or receiver, or by any court, in any such proceeding;
               (v) any absence of any notice to, or knowledge of, Holly, of the
existence or occurrence of any of the matters or events set forth in the
foregoing subsections (i) through (iv); or
               (vi) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, a guarantor.
     The obligations of Holly hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason, including any claim of
waiver, release, surrender, alteration or compromise, and shall not be subject
to any defense or setoff, counterclaim, recoupment or termination whatsoever by
reason of the invalidity, illegality or unenforceability of the Holly Payment
Obligations or otherwise.
          14.3 Waiver. Holly hereby waives promptness, diligence, all setoffs,
presentments, protests and notice of acceptance and any other notice relating to
any of the Holly Payment Obligations and any requirement for the Operator to
protect, secure, perfect or insure any security interest or lien or any property
subject thereto or exhaust any right or take any action against the Holly
Entities, any other entity or any collateral.
          14.4 Subrogation Waiver. Holly agrees that for so long as there is a
current or ongoing default or breach of this Agreement by any of the Holly
Entities, Holly shall not have any rights (direct or indirect) of subrogation,
contribution, reimbursement, indemnification or other rights of payment or
recovery from the Holly Entities for any payments made by Holly under this
Section 14, and Holly hereby irrevocably waives and releases, absolutely and
unconditionally, any such rights of subrogation, contribution, reimbursement,
indemnification and other rights of payment or recovery it may now have or
hereafter acquire against the Holly Entities during any period of default or
breach of this Agreement by any of the Holly Entities until such time as there
is no current or ongoing default or breach of this Agreement by the Holly
Entities.
          14.5 Reinstatement. The obligations of Holly under this Section 14
shall continue to be effective or shall be reinstated, as the case may be, if at
any time any payment of any of the Holly Payment Obligations is rescinded or
must otherwise be returned to the Holly Entities or any other entity, upon the
insolvency, bankruptcy, arrangement, adjustment, composition, liquidation or
reorganization of the Holly Entities or such other entity, or for any other
reason, all as though such payment had not been made.
          14.6 Continuing Guaranty. This Section 14 is a continuing guaranty and
shall (i) remain in full force and effect until the first to occur of the
indefeasible payment in full of all of the Holly Payment Obligations, (ii) be
binding upon Holly, its successors and assigns and (iii) inure to the benefit of
and be enforceable by the Operator and its successors, transferees and assigns.
          14.7 No Duty to Pursue Others. It shall not be necessary for the
Operator (and Holly hereby waives any rights which Holly may have to require the
Operator), in order to enforce

21

--------------------------------------------------------------------------------

 

such payment by Holly, first to (i) institute suit or exhaust its remedies
against the Holly Entities or others liable on the Holly Payment Obligations or
any other person, (ii) enforce the Operator’s rights against any other
guarantors of the Holly Payment Obligations, (iii) join the Holly Entities or
any others liable on the Holly Payment Obligations in any action seeking to
enforce this Section 14, (iv) exhaust any remedies available to the Operator
against any security which shall ever have been given to secure the Holly
Payment Obligations, or (v) resort to any other means of obtaining payment of
the Holly Payment Obligations.
     15. GUARANTEE BY HOLLY ENERGY PARTNERS, L.P.
          15.1 Payment and Performance Guaranty. Holly Energy Partners, L.P., a
Delaware limited partnership (the “Partnership”), unconditionally, absolutely,
continually and irrevocably guarantees, as principal and not as surety, to the
Holly Entities the punctual and complete payment in full when due of all amounts
due from the Operator under the Agreement (collectively, the “HEP Payment
Obligations”). The Partnership agrees that the Holly Entities shall be entitled
to enforce directly against the Partnership any of the HEP Payment Obligations.
          15.2 Guaranty Absolute. The Partnership hereby guarantees that the HEP
Payment Obligations will be paid strictly in accordance with the terms of the
Agreement. The obligations of the Partnership under this Agreement constitute a
present and continuing guaranty of payment, and not of collection or
collectability. The liability of the Partnership under this Agreement shall be
absolute, unconditional, present, continuing and irrevocable irrespective of:
               (i) any assignment or other transfer of the Agreement or any of
the rights thereunder of the Holly Entities;
               (ii) any amendment, waiver, renewal, extension or release of or
any consent to or departure from or other action or inaction related to the
Agreement;
               (iii) any acceptance by the Holly Entities of partial payment or
performance from the Operator;
               (iv) any bankruptcy, insolvency, reorganization, arrangement,
composition, adjustment, dissolution, liquidation or other like proceeding
relating to the Operator or any action taken with respect to the Agreement by
any trustee or receiver, or by any court, in any such proceeding;
               (v) any absence of any notice to, or knowledge of, the
Partnership, of the existence or occurrence of any of the matters or events set
forth in the foregoing subsections (i) through (iv); or
               (vi) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, a guarantor.
     The obligations of the Partnership hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason, including any
claim of waiver, release, surrender, alteration or compromise, and shall not be
subject to any defense or setoff,

22

--------------------------------------------------------------------------------

 

counterclaim, recoupment or termination whatsoever by reason of the invalidity,
illegality or unenforceability of the HEP Payment Obligations or otherwise.
          15.3 Waiver. The Partnership hereby waives promptness, diligence, all
setoffs, presentments, protests and notice of acceptance and any other notice
relating to any of the HEP Payment Obligations and any requirement for the Holly
Entities to protect, secure, perfect or insure any security interest or lien or
any property subject thereto or exhaust any right or take any action against the
Operator, any other entity or any collateral.
          15.4 Subrogation Waiver. The Partnership agrees that for so long as
there is a current or ongoing default or breach of this Agreement by Operator,
the Partnership shall not have any rights (direct or indirect) of subrogation,
contribution, reimbursement, indemnification or other rights of payment or
recovery from the Operator for any payments made by the Partnership under this
Section 15, and the Partnership hereby irrevocably waives and releases,
absolutely and unconditionally, any such rights of subrogation, contribution,
reimbursement, indemnification and other rights of payment or recovery it may
now have or hereafter acquire against the Operator during any period of default
or breach of this Agreement by Operator until such time as there is no current
or ongoing default or breach of this Agreement by Operator.
          15.5 Reinstatement. The obligations of the Partnership under this
Section 15 shall continue to be effective or shall be reinstated, as the case
may be, if at any time any payment of any of the HEP Payment Obligations is
rescinded or must otherwise be returned to the Operator or any other entity,
upon the insolvency, bankruptcy, arrangement, adjustment, composition,
liquidation or reorganization of the Operator or such other entity, or for any
other reason, all as though such payment had not been made.
          15.6 Continuing Guaranty. This Section 15 is a continuing guaranty and
shall (i) remain in full force and effect until the first to occur of the
indefeasible payment in full of all of the HEP Payment Obligations, (ii) be
binding upon the Partnership, its successors and assigns and (iii) inure to the
benefit of and be enforceable by the Holly Entities and their respective
successors, transferees and assigns.
          15.7 No Duty to Pursue Others. It shall not be necessary for the Holly
Entities (and the Partnership hereby waives any rights which the Partnership may
have to require the Holly Entities), in order to enforce such payment by the
Partnership, first to (i) institute suit or exhaust its remedies against the
Operator or others liable on the HEP Payment Obligations or any other person,
(ii) enforce the Holly Entities’ rights against any other guarantors of the HEP
Payment Obligations, (iii) join the Operator or any others liable on the HEP
Payment Obligations in any action seeking to enforce this Section 15,
(iv) exhaust any remedies available to the Holly Entities against any security
which shall ever have been given to secure the HEP Payment Obligations, or
(v) resort to any other means of obtaining payment of the HEP Payment
Obligations.
[Signature Pages Follow]

23

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, the Parties have executed this Agreement on the date
first written above.

            OPERATOR:

HOLLY ENERGY PARTNERS-OPERATING, L.P.
      By:   HEP Logistics GP, L.L.C.,
its general partner             /s/ David G. Blair       David G. Blair     
President        HOLLY ENTITIES:

NAVAJO REFINING COMPANY, L.L.C.
      /s/ David L. Lamp       David L. Lamp      President        LEA REFINING
COMPANY
      /s/ David L. Lamp       David L. Lamp      Vice President        WOODS
CROSS REFINING COMPANY,
L.L.C.
      /s/ David L. Lamp       David L. Lamp      President     

(Signature Page 1 of 2 pages to Pipeline Systems Operating Agreement)

--------------------------------------------------------------------------------

 

            HOLLY REFINING & MARKETING — TULSA
LLC

By:         Holly Refining & Marketing Company,
               its sole member
        /s/ David L. Lamp       David L. Lamp      President     

ACKNOWLEDGED AND AGREED
FOR PURPOSES OF SECTION 14:
HOLLY CORPORATION

                  By:   /s/ David L. Lamp         David L. Lamp       
President     

ACKNOWLEDGED AND AGREED
FOR PURPOSES OF SECTION 15:
HOLLY ENERGY PARTNERS, L.P.

            By:      HEP Logistics Holdings, L.P.,
            its General Partner
      By:       Holly Logistic Services, L.L.C.,
            its General Partner
   

            By:   /s/ David G. Blair         David G. Blair        President   
 

(Signature Page 2 of 2 pages to Pipeline Systems Operating Agreement)

--------------------------------------------------------------------------------

 

EXHIBIT A
Basic Description of Systems and Management Fee
Management Fee
The Management Fee for 2009 will be the “Total Management Fee” as set forth in
the table below and will be allocated among the Systems as set forth in the
table below.
Systems

                      Amount of Management     Owner of Asset   Fee Allocated to
the Asset
General Systems Management
           
 
  N/A   $ 150,000.00  
Insurance Reimbursement
           
 
  N/A   $ 15,000.00  
Artesia System
           
(None)
  N/A     N/A  
Lovington System
           
Lovington Terminal Building
  Navajo Refining Company, L.L.C.
Lea Refining Company   $
$ 0.00
0.00  
Lovington Asphalt Rack
  Navajo Refining Company, L.L.C.
Lea Refining Company   $
$ 170,000.00
0.00  
Lovington Weigh Scales
  Navajo Refining Company, L.L.C.
Lea Refining Company   $
$ 0.00
0.00  
Ponderosa Junction to Lovington — LPG/Natural Gasoline Pipeline having a
diameter of 8” and extending approximately 11 1/2 miles and a diameter of 6”
extending approximately 8 miles
  Navajo Refining Company, L.L.C.   $ 0.00  
Woods Cross System
           
Woods Cross 12” Plains Crude Oil Delivery Pipeline extending approximately 700
feet
  Woods Cross Refining Company, L.L.C.   $ 25,000.00  
Woods Cross 6” Hydrogen Pipeline extending approximately 4 miles
  Woods Cross Refining Company, L.L.C.   $ 25,000.00  

A-1

--------------------------------------------------------------------------------

 

                      Amount of Management     Owner of Asset   Fee Allocated to
the Asset
Tulsa System
           
Tulsa East System - Asphalt / Diesel Fuel Rail Loading Rack, Crude Oil/Feedstock
Truck Unloading Site, Tanks Numbered: 1-4, 6-9, 13-18, , 31, 34, 36, 40, 41,
107, 108, 109, 112, 114, 118, 119, 122-126, 131, 442, 444-447, 457, 460, 461,
471, 400, and 401
  Holly Refining & Marketing — Tulsa L.L.C.   $ 800,000.00  
Tulsa Systems Management
      $ 150,000.00  
 
  Total Management Fee:   $ 1,335,000.00  

A-2

--------------------------------------------------------------------------------

 

EXHIBIT B
Services included in Management Fee

PART I –   Management services and costs included in the Management Fee, as
contemplated by Section 8.2 of the foregoing Agreement are the following:

  •   Operator’s central office costs     •   General administration of Pipeline
operations by Operator’s senior management personnel     •   General
administration of Pipeline operations by Operator’s operations management
personnel     •   Supervision of the Pipeline Control Center     •  
Environmental, health and safety management     •   Administrative services
relating to DOT compliance     •   Preparation and submission of FERC Reports  
  •   Pipeline Scheduling     •   Purchasing     •   Right of Way services after
the In-Service Date (excluding new projects)     •   Travel and meeting expenses
for necessary meetings     •   Crisis Communications     •   Ordinary course
administration of contracts between the Holly Entities and customers of the
Holly Entities (excluding outside counsel services deemed necessary by Operator)
    •   Services of two employees at the terminal and asphalt loading rack
located at the Facilities in Lovington, New Mexico (and such fee shall cover the
wages, salaries and other expenses of such employees)     •   Normal operating
activities of the Facilities     •   Services of employees in the operation of
the Tulsa East System (and such fee shall cover the wages, salaries and other
expenses of such employees)

PART II –   For avoidance of doubt, the following work and services are
specifically excluded from the Management Fee and shall be paid to Operator by
the Holly Entities, along with other costs, under Section 8.3 of the foregoing
Agreement:

  •   Operations personnel to the extent performing services in connection with
activities outside the normal operation of the Systems     •   All direct
operating costs incurred outside the normal operation of the Systems     •  
Services obtained from third-parties     •   Travel and meal expenses for
Operator’s personnel while performing work on the assets set forth on Exhibit A
    •   Pipeline measurement including contract proving     •   Insurance     •
  All project management, engineering and other services related to any
expansion project     •   Compliance and other costs or expenses incurred in
connection with any regulatory program to the extent directly applicable to the
Systems, including, but not limited to, compliance with governmental
requirements and guidelines for public awareness, contractor awareness,
one-call, operator qualification, facility response plans, drug and

B-1

--------------------------------------------------------------------------------

 

      alcohol testing and other requirements and guidelines of any governmental
authority with jurisdiction     •   Annual DOT fees     •   Procurement,
maintenance and replacement of safety equipment and materials     •  
Preparation and filing of required reports and permit applications with
governmental entities with jurisdiction (other than FERC and DOT), including,
but not limited to environmental permit reporting and permit renewals (third
party contract costs only)

B-2

--------------------------------------------------------------------------------

 

EXHIBIT C
Direct Charge Items

1.   Land and Right-of-Way Expense. Amounts expended for acquisition of
rights-of-way, easements, fee property, lease and easement rentals,
condemnations, contract right-of-way services, permits, etc., and all outside
survey, legal, engineering and other costs incidental to acquisition, recording
and assignment;   2.   Personnel Expense. Amounts expended for wages, salaries,
benefits and payroll taxes for all personnel outside the ordinary course of
business who are directly engaged on a full-time or part time-basis in the
acquisition, construction, operation and/or maintenance of the Systems, other
than those included in the Management Fee as set forth in Section 8.2. This
includes amounts contributed by Operator to employee benefit plans for
Operator’s own employees. Charges for wages and salaries, benefits, and payroll
taxes shall be based on time records. Travel and personal expenses, and supplies
associated with direct field operating and/or maintenance work performed by
Operator’s area level staff shall be directly charged to the Holly Entities.
“Employee benefit plans” means and includes written publicized plans for
vacation pay, holiday pay, disability benefit, medical, dental, hospitalization,
group life, retirement, savings, actual or imputed unemployment compensation, or
other such established employee benefit plans.   3.   Contractual Obligations.
Amounts expended for contractual obligations, including outside services for
services other than those covered by Section 8.2.   4.   Utility Costs. Amounts
expended for power, fuel, and other utilities and communication services used
directly by the Systems.   5.   Purchases. Amounts expended for materials,
equipment, and supplies for services (other than those covered by Section 8.2)
shall be charged in accordance with the following:

  •   Outside Purchases. Amounts expended for materials, equipment, and supplies
purchased from sources other than affiliates shall be charged at actual
delivered cost, after deducting cash discounts taken by Operator.     •   Used
Material and Equipment Furnished by Affiliates. Whenever good used material or
equipment in a condition acceptable to Operator is furnished by an affiliate, it
shall be priced at the lesser of market value or the affiliate’s depreciated
book value for such, f.o.b. destination. In no event shall the material or
equipment be priced at greater than replacement cost (new) of the same kind of
material or equipment f.o.b. destination.     •   New Materials and Equipment
Furnished by Affiliates. Whenever new material or equipment is furnished by an
affiliate, then all such items shall be priced at current market (new) cost for
the same kind of material or equipment f.o.b. destination.

C-1

--------------------------------------------------------------------------------

 

6.   Use of Equipment. Charges for use of equipment owned exclusively by
Operator and used by the Holly Entities shall be made as mutually agreed by the
Holly Entities and Operator.   7.   Taxes. Amounts paid by Operator for ad
valorem, excise, sales and use and other taxes relating to the Systems or the
Holly Entities.   8.   Insurance Deductibles. Insurance deductibles and
self-insured retention limits paid by Operator on claims arising out of, in
connection with or as an incident to, any act or omission, including negligence,
of Operator or its employees, agents, affiliates, Delegates or contractors in
maintaining and operating the Systems, except for claims arising from the gross
negligence or willful misconduct Operator or its employees, agents, affiliates,
Delegates or contractors.   9.   Uninsured Losses. Since insurance covering loss
or damage to any System by fire, windstorm, tornado, flood, explosion,
vandalism, malicious mischief, other physical damage to property, or theft of
property will not be carried by Operator to protect the interests of the Holly
Entities, the Holly Entities shall be responsible for the repair or replacement
of the properties damaged as a result of such occurrences or other casualties.
Operator shall promptly notify the Holly Entities of any and all losses of this
description.   10.   ROW Maintenance. Payments made by Operator under any ROW
Document and all costs Operator incurs in connection with taking all actions
required to maintain and protect the Holly Entities’ beneficial rights under any
ROW Document pursuant to Section 3.8.   11.   Maintenance. Tank Dike
Maintenance, Mowing, and Road Maintenance will be managed by operator and
reimbursed or direct billed to Holly Entities.

C-2