exv10w1






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






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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:







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          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.







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          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.







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          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






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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.







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          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



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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



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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






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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