Document:

exv10w4

 

Exhibit 10.4

Execution Version

CONSENT, WAIVER AND AMENDMENT NO. 2

     This CONSENT, WAIVER AND AMENDMENT NO. 2 (this “Agreement”) dated as of February 28,
2005 is among Holly Energy Partners — Operating, L.P., successor to HEP Operating Company, L.P.
(the “Borrower”), the Existing Guarantors (as defined below), the Banks (as defined in the
Credit Agreement (as defined below)), and Union Bank of California, N.A., as administrative agent
for such Banks (in such capacity, the “Administrative Agent”).

RECITALS

     A. The Borrower, the Banks, and the Administrative Agent are parties to the Credit Agreement
dated as of July 7, 2004, as amended by the Consent and Omnibus Amendment dated as of July 30, 2004
(as so amended, the “Credit Agreement”).

     B. In connection with such Credit Agreement, the undersigned Subsidiaries of the Borrower (the
“Existing Guarantors”) executed and delivered a Guaranty Agreement dated as of July 13,
2004 (the “Guaranty”) in favor of the Administrative Agent for the benefit of the
Beneficiaries (as defined therein).

     C. The Borrower and Holly Energy Partners, L.P. (the “Limited Partner”) have entered
into a Contribution Agreement dated as of January 25, 2005 (the “Acquisition Agreement”)
with T & R Assets, Inc., Fin-Tex Pipe Line Company, and Alon USA Refining, Inc., as transferors,
and Alon Pipeline Assets, LLC, Alon Pipeline Logistics, LLC, Alon USA, Inc., and Alon USA, LP,
pursuant to which the Limited Partner and/or certain of its Subsidiaries will acquire (the
“Acquisition”) certain pipelines and related assets (the “Acquired Assets”), which
Acquired Assets will be contributed to and owned by HEP Fin-Tex/Trust-River, L.P., a Texas limited
partnership and successor by conversion from Alon Pipeline Assets, LLC (“HEP Pipeline”),
immediately after the Acquisition and the transactions contemplated in the Acquisition Agreement
occur.

     D. Concurrently with the closing of, and to partially finance, the Acquisition, the Limited
Partner and Holly Energy Finance Corp. (“Finance Corp”) plan to issue up to $150,000,000 of
unsecured 6.25% Senior Notes due 2015 (“High-Yield Notes”) that will be guaranteed by all
wholly owned domestic subsidiaries of the Limited Partner and Finance Corp, the proceeds of which,
prior to the consummation of the Acquisition, may be deposited and held in a securities escrow
account of the Limited Partner (the “Escrow Account”) held by U.S. Bank National
Association in its capacity as escrow agent and trustee (in such capacities, the “Escrow
Agent” and the “Trustee”, respectively), for the sole benefit of the Limited Partner
and the holders of the High-Yield Notes on the terms set forth in an Escrow and Security Agreement
to be executed by the Limited Partner and the Escrow Agent and Trustee in connection with the
issuance of the High-Yield Notes (the “Escrow Agreement”).

     E. The Borrower has requested that the Banks (i) expressly consent to the Acquisition, (ii)
waive the requirement for the delivery of an Approved Consultants Report in

 

 

connection with the Acquisition, and (iii) amend the Credit Agreement to (a) permit a junior
security interest in the Acquired Assets in favor of the sellers of the Acquired Assets, (b) permit
the Borrower and the other Subsidiaries of the Limited Partner other than Finance Corp to guarantee
the High-Yield Notes referenced above, and (c) make certain other changes to the Credit Agreement.

     F. Subject to the terms and conditions set forth herein, the Banks are willing to make the
consent, waiver, and amendments set forth herein.

     THEREFORE, the Borrower, the Existing Guarantors, the Banks, and the Administrative Agent
hereby agree as follows:

ARTICLE I.

DEFINITIONS

     Section 1.01 Terms Defined Above. As used in this Agreement, each of the terms
defined in the opening paragraph and the Recitals above shall have the meanings assigned to such
terms therein.

     Section 1.02 Terms Defined in the Credit Agreement. Each term defined in the Credit
Agreement and used herein without definition shall have the meaning assigned to such term in the
Credit Agreement, unless expressly provided to the contrary.

     Section 1.03 Other Definitional Provisions. The words “hereby”, “herein”,
“hereinafter”, “hereof”, “hereto” and “hereunder” when used in this Agreement shall refer to this
Agreement as a whole and not to any particular Article, Section, subsection or provision of this
Agreement. Section, subsection and Exhibit references herein are to such Sections, subsections and
Exhibits to this Agreement unless otherwise specified. All titles or headings to Articles,
Sections, subsections or other divisions of this Agreement or the exhibits hereto, if any, are only
for the convenience of the parties and shall not be construed to have any effect or meaning with
respect to the other content of such Articles, Sections, subsections, other divisions or exhibits,
such other content being controlling as the agreement among the parties hereto. Whenever the
context requires, reference herein made to the single number shall be understood to include the
plural; and likewise, the plural shall be understood to include the singular. Words denoting sex
shall be construed to include the masculine, feminine and neuter, when such construction is
appropriate; and specific enumeration shall not exclude the general but shall be construed as
cumulative. Definitions of terms defined in the singular or plural shall be equally applicable to
the plural or singular, as the case may be, unless otherwise indicated.

ARTICLE II.

CONSENT, WAIVER AND AMENDMENTS

     Section 2.01 Consent. To the extent necessary and provided that (a) the Acquisition
is in compliance with the terms of the Credit Agreement and (b) the conditions set forth in Article
IV below are met, the Banks hereby consent to the Acquisition and the transactions contemplated by
the Acquisition Agreement.

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     Section 2.02 Waiver. Subject to the conditions set forth in Article IV below, the
Banks hereby waive the requirement, contained in the definition of “EBITDA” in the Credit
Agreement, for the preparation and delivery of an Approved Consultant’s Report in connection with
the Acquisition.

     Section 2.03 Amendments to Credit Agreement. Effective as of the Effective Date, the
Credit Agreement shall hereby be amended as follows:

          (a) The following definitions shall be inserted in alphabetical order in Section 1.01
of the Credit Agreement:

     “Alon Acquisition Closing Date” means the date upon which the
“Acquisition” as defined in Amendment No. 2 is consummated.

     “Alon Mortgage” means the Mortgage and Deed of Trust (with Security
Agreement and Financing Statement) dated as of the Alon Acquisition Closing Date
made by HEP Pipeline, to Harlin R. Dean, as Trustee for the benefit of Alon USA, LP.

     “Alon Pipelines and Terminals Agreement” means the Pipelines and
Terminals Agreement dated as of the Alon Acquisition Closing Date between the
Limited Partner and Alon USA, LP.

     “Amendment No. 2” means the Consent, Waiver and Amendment No. 2 to this
Agreement dated as of February 28, 2005.

     “Finance Corp” means Holly Energy Finance Corp., a Delaware
corporation.

     “HEP Pipeline” means HEP Fin-Tex/Trust-River, L.P., a Texas limited
partnership and successor by conversion from Alon Pipeline Assets, LLC.

     “Permitted Note Debt” means Debt in connection with unsecured senior
notes issued by the Limited Partner and Finance Corp or any of their wholly owned
Subsidiaries; provided that (a) after giving effect to the issuance of such
notes, there would be no Default under this Agreement, (b) such notes’ scheduled
maturity is no earlier than July 7, 2010, (c) such notes are rated no lower than B+
by S&P and Ba3 by Moody’s at the time of their issuance, and (d) no indenture or
other agreement governing such notes contains (i) maintenance financial covenants or
(ii) covenants or events of default that are more restrictive on the Limited Partner
or any of its Subsidiaries than those contained in this Agreement are on the
Borrower and its Subsidiaries.

          (b) The definition of “Consolidated” in Section 1.01 of the Credit Agreement is
amended to replace the reference therein to “the Borrower” with a reference to “a Person”.

          (c) The definition of “EBITDA” in Section 1.01 of the Credit Agreement is amended (i)
to delete the words “twenty percent (20%)” and replace them with the words “thirty

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percent (30%)” and (ii) to replace each reference therein to the “Borrower” with a reference
to the “Limited Partner”.

          (d) The definition of “Guarantor” in Section 1.01 of the Credit Agreement is amended
and restated to read in its entirety as follows:

     “Guarantor” means, as of the Effective Date (as defined in Amendment
No. 2), each of the Persons listed on Schedule 1.01(d), and thereafter, (a)
each of the present and future direct and indirect Subsidiaries of the Limited
Partner other than the Borrower and the Restricted Subsidiary, and (b) each direct
obligor or guarantor of Permitted Note Debt. “Guarantors” means all such guarantors
collectively.

          (e) The definition of “Interest Coverage Ratio” in Section 1.01 of the Credit
Agreement is amended to replace the reference therein to the “Borrower” with a reference to the
“Limited Partner”.

          (f) The definition of “Interest Expense” in Section 1.01 of the Credit Agreement is
amended to replace the reference therein to “the Borrower” with a reference to “a Person”.

          (g) The definition of “Leverage Ratio” in Section 1.01 of the Credit Agreement is
amended to replace each reference to the “Borrower” therein with a reference to the “Limited
Partner”.

          (h) The definition of “Material Contracts” in Section 1.01 of the Credit Agreement is
amended and restated to read in its entirety as follows:

     “Material Contracts” means, collectively, (a) the Borrower Partnership
Agreement, the Intercompany Pipelines and Terminals Agreement, the Omnibus
Agreement, the Contribution Agreement, the Alon Mortgage, and the Alon Pipelines and
Terminals Agreement and (b) any other material documents, agreements or instruments
related to any of the foregoing (i) to which the Borrower or any of its Subsidiaries
is a party, and (ii) which, if terminated or cancelled, could reasonably be expected
to have a Material Adverse Effect.

          (i) The definition of “Net Income” in Section 1.01 of the Credit Agreement is amended
to replace the reference therein to “the Borrower” with a reference to “a Person”.

          (j) The definition of “Pipeline Lease Agreement” is deleted from Section 1.01 of the
Credit Agreement.

          (k) The definition of “Pipeline Systems” in Section 1.01 of the Credit Agreement is
amended and restated to read in its entirety as follows:

     “Pipeline Systems” means (a) the approximately 780 miles of Refined
Products pipelines located in New Mexico, Texas and Utah that are owned or leased by
Borrower or any of its Subsidiaries and that are used by Borrower and its
Subsidiaries in the Business, (b) the 249-mile Refined Products pipeline owned

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by the Restricted Subsidiary which is used in the Business to transport liquid
petroleum gases from the western part of the state of Texas to the border between
the state of Texas and Mexico near El Paso, (c) the Refined Product Pipelines (as
defined and described in the Alon Pipelines and Terminals Agreement) that are owned
by HEP Pipeline and that are used in the Business, and (d) any other pipelines owned
or leased by the Borrower or any Subsidiary of the Borrower that are used in the
Business.

          (l) The defined term “Pipelines and Terminals Agreement” in Section 1.01 of the Credit
Agreement is amended to be the defined term “Intercompany Pipelines and Terminals Agreement”, and
such defined term shall be realphabetized. The rest of such definition shall remain unchanged.

          (m) The definition of “Reserve Amount” is deleted from Section 1.01 of the Credit
Agreement.

          (n) The definition of “Terminals” in Section 1.01 of the Credit Agreement is amended
and restated to read in its entirety as follows.

     “Terminals” means, collectively, (a) the five Refined Products
terminals owned in whole or in part by the Borrower that are used in the Business
that are integrated with the Pipeline Systems and are located in and between (i) El
Paso, Texas; (ii) Moriarty, New Mexico; (iii) Bloomfield, New Mexico; (iv)
Albuquerque, New Mexico; and (v) Tucson, Arizona, (b) the three Refined Products
terminals owned in whole or in part by the Borrower that are used in the Business
that serve third-party common carrier pipelines and are located in Boise and Burley,
Idaho and Spokane, Washington, (c) the Refined Products terminal that is owned by
the Borrower and that serves a United States Air Force Base that is located near
Mountain Home, Idaho, (d) the two Refined Products truck loading racks owned by the
Borrower that are used in the Business, one of which is located within the Navajo
Refinery and one of which is located within the Woods Cross Refinery, (e) the
Refined Product Terminals (as defined and described in the Alon Pipelines and
Terminals Agreement) that are owned by HEP Pipeline and that are used in the
Business, and (f) any other terminals and loading racks owned or leased by the
Borrower or any Subsidiary of the Borrower that are used in the Business.

          (o) The definition of “Trigger Event” is deleted from Section 1.01 of the Credit
Agreement.

          (p) The following phrase is deleted from Section 2.01(a) of the Credit Agreement:
“plus, if a Trigger Event shall have occurred and be continuing, the Reserve Amount”.

          (q) The following phrase is deleted from Section 2.04(b)(i) of the Credit Agreement:
“plus, if a Trigger Event shall have occurred and be continuing, the Reserve Amount”.

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          (r) Clause (i) of Section 2.14(b) of the Credit Agreement is deleted, and clauses
(ii), (iii), (iv), and (v) of Section 2.14(b) of the Credit Agreement shall become clauses (i),
(ii), (iii), and (iv) thereof.

          (s) Section 2.14(c) of the Credit Agreement is amended to replace each reference to
“clause (iii) of Section 2.14(b)” or “subsection (iii) of clause (b) of this Section 2.14” with a
reference to “Section 2.14(b)(ii)”.

          (t) Section 5.15 is deleted from Article V of the Credit Agreement.

          (u) The following clause (j) is added to the end of Section 6.01 of the Credit
Agreement:

     (j) In favor of Alon USA, LP (or any assignee or successor thereto) securing
certain obligations under the Alon Pipelines and Terminals Agreement, pursuant to
the Alon Mortgage, so long as such Liens are subordinated to the Liens on the same
assets securing the Obligations on terms not less advantageous to the Administrative
Agent and the Banks than those contained in the Subordination, Non-Disturbance and
Attornment Agreement executed by the Administrative Agent and Alon USA, LP as of the
date of the consummation of the Acquisition (as defined in Amendment No. 2).

          (v) The following clause (j) is added to Section 6.02 of the Credit Agreement after
clause (i), and the existing clause (j) shall become clause (k):

     (j) Permitted Note Debt, including, without limitation, any guaranty
thereof; and

          (w) Section 6.10 of the Credit Agreement is amended and restated to read in its
entirety as follows:

     Section 6.10. Leverage Ratio. As of the end of any fiscal quarter of
the Borrower and the Limited Partner (commencing with the fiscal quarter ended
December 31, 2004), the Leverage Ratio shall not be greater than (a) 3.50 to 1.00
for the fiscal quarter ended December 31, 2004 and (b) 4.00 to 1.00 for fiscal
quarters ending thereafter.

          (x) Section 6.11 of the Credit Agreement is amended and restated to read in its
entirety as follows:

     Section 6.11. Interest Coverage Ratio. As of the end of any fiscal
quarter of the Borrower and the Limited Partner (commencing with the fiscal quarter
ended December 31, 2004), the Interest Coverage Ratio shall not be less than (a)
3.50 to 1.00 for the fiscal quarter ended December 31, 2004 and (b) 3.00 to 1.00 for
fiscal quarters ending thereafter.

          (y) Each reference to the “Borrower” in Sections 7.01(d)(i) and 7.01(d)(ii) of
the Credit Agreement is deleted and replaced with a reference to the “Limited Partner”.

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          (z) Section 7.01(d)(iv) of the Credit Agreement is amended and restated to read in its
entirety as follows:

     (iv) (A) Any default or event of default shall have occurred under any of the
Material Contracts which has not been cured within any applicable grace period and
which default or event of default could reasonably be expected to have a Material
Adverse Effect, (B) any of the Material Contracts (other than the Alon Mortgage)
shall have terminated, or (C) any Person other than the Limited Partner or any of
its Subsidiaries takes (or notifies the Limited Partner or any of its Subsidiaries
that it intends to take) remedial action under the Alon Mortgage or the Alon
Pipelines and Terminals Agreement (or any successor or replacement agreement to the
foregoing) that constitutes or could reasonably be expected to take the form of the
purchase, occupation, or operation of any of the applicable Pipeline Systems or
Terminals by a Person other than the Borrower or its wholly owned Subsidiaries.

          (aa) Schedule 1.01(d) to the Credit Agreement is deleted and replaced with
Schedule 1.01(d) attached hereto.

ARTICLE III.

REPRESENTATIONS, WARRANTIES AND COVENANTS

     Section 3.01 Borrower Representations and Warranties. The Borrower represents and
warrants that: (a) the representations and warranties contained in the Credit Agreement and the
representations and warranties contained in the other Credit Documents are true and correct in all
material respects on and as of the Effective Date as if made on as and as of such date, except to
the extent that such representations and warranties specifically refer to an earlier date, in which
case they shall be true and correct as of such earlier date; (b) no Default has occurred which is
continuing; (c) the execution, delivery and performance of this Agreement are within the
partnership power and authority of the Borrower and have been duly authorized by appropriate
partnership action and proceedings; (d) this Agreement constitutes the legal, valid, and binding
obligation of the Borrower enforceable in accordance with its terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the rights
of creditors generally and general principles of equity; (e) there are no governmental or other
third party consents, licenses and approvals required to be obtained by the Borrower in connection
with the execution, delivery, performance of this Agreement by the Borrower or the validity and
enforceability of this Agreement against the Borrower; and (f) the Liens under the Security
Documents are valid and subsisting and secure Borrower’s obligations under the Credit Documents.

     Section 3.02 Existing Guarantors’ Representations and Warranties. Each Existing
Guarantor represents and warrants that: (a) the representations and warranties of such Guarantor
contained in the Guaranty and the representations and warranties contained in the other Credit
Documents to which such Existing Guarantor is a party are true and correct in all material respects
on and as of the Effective Date as if made on as and as of such date, except to the extent that
such representations and warranties specifically refer to an earlier date, in which case they shall
be true and correct as of such earlier date; (b) no Default has occurred which is continuing;

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(c) the execution, delivery and performance of this Agreement are within the corporate or
other organizational power and authority of such Existing Guarantor and have been duly authorized
by appropriate action and proceedings; (d) this Agreement constitutes the legal, valid, and binding
obligation of such Existing Guarantor enforceable in accordance with its terms, except as limited
by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the
rights of creditors generally and general principles of equity; (e) there are no governmental or
other third party consents, licenses and approvals required to be obtained by such Existing
Guarantor in connection with the execution, delivery or performance of this Agreement by such
Existing Guarantor or the validity and enforceability of this Agreement against such Existing
Guarantor; (f) it has no defenses to the enforcement of its Guaranty; and (g) the Liens under the
Security Documents to which such Existing Guarantor is a party are valid and subsisting and secure
such Existing Guarantor’s obligations under the Credit Documents.

     Section 3.03 Covenants. The Borrower at its expense will, and will cause each
Existing Guarantor to, promptly execute and deliver to the Administrative Agent upon reasonable
request all such documents, agreements and instruments to state more fully the security obligations
set out in any of the Security Documents, or to perfect, protect or preserve any Liens created
pursuant to any of the Security Documents, or to make any recordings, to file any notices or obtain
any consents, all as may be necessary or appropriate to grant or perfect a first lien in each
Existing Guarantor’s assets. The Borrower hereby authorizes the Administrative Agent to file any
amendments to financing statements without the signature of the Borrower to the extent permitted by
applicable law in order to perfect or maintain the perfection of any security interest granted
under any of the Credit Documents. Without limiting the foregoing:

          (a) promptly upon the issuance of the High-Yield Notes, the Limited Partner will at its
expense deliver or cause to be delivered to the Administrative Agent a fully executed copy,
certified by the Limited Partner, of the indenture dated as of February 28, 2005 among the Limited
Partner, Finance Corp, certain subsidiary guarantors party thereto, and U.S. Bank National
Association as trustee, pursuant to which the High-Yield Notes are issued, together with all
exhibits and schedules thereto;

          (b) promptly after the closing of the Acquisition but in any event not more than five days
after the closing date of the Acquisition, the Borrower will at its expense deliver or cause to be
delivered to the Administrative Agent (i) a Supplement to the Guaranty Agreement in favor of the
Administrative Agent for the benefit of the Beneficiaries (as defined therein), duly executed and
delivered by HEP Pipeline, pursuant to which HEP Pipeline shall become a “Guarantor” under and as
defined in the Guaranty, (ii) two Supplements to the Pledge Agreement in favor of the
Administrative Agent for the benefit of the Beneficiaries (as defined therein), duly executed and
delivered by the Borrower and HEP Pipeline GP, L.L.C., respectively, pursuant to which the Borrower
and HEP Pipeline GP, L.L.C. shall pledge their interests in HEP Pipeline under the Pledge
Agreement, (iii) a Supplement to the Security Agreement in favor of the Administrative Agent for
the benefit of the Beneficiaries (as defined therein), duly executed and delivered by HEP Pipeline,
pursuant to which HEP Pipeline shall become a “Grantor” under and as defined in the Security
Agreement, (iv) a UCC-1 financing statement to be filed against HEP Pipeline, in such entity’s
jurisdiction of organization, (v) a secretary’s certificate of HEP Pipeline, certifying (A) the
organizational documents of such entity, (B) the resolutions or other documents evidencing such
entity’s authority to enter into the transactions contemplated herein,

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and (C) the incumbency and sample signatures of the authorized officers of such entity, (vi)
Mortgages duly executed and delivered by HEP Pipeline in favor of the Administrative Agent for the
benefit of the Secured Parties (as defined therein) covering all real property assets included in
the Acquired Assets, including, without limitation, those certain Acquired Assets consisting of
real property located in Cotton, Jefferson, and Stephens Counties, Oklahoma, and Archer, Baylor,
Clay, Culberson, Ector, Haskell, Howard, Jones, Loving, Midland, Mitchell, Nolan, Reeves,
Shackelford, Taylor, Throckmorton, Wichita, and Winkler Counties, Texas, (vii) a legal opinion of
Vinson & Elkins L.L.P. in form and substance, as applicable, substantially similar to the opinion
delivered in connection with the closing of the Credit Agreement, with respect to the documents
described in the preceding clauses (i), (ii), (iii) and (iv) and the Mortgages that are to be filed
in Texas, and (viii) complete and correct copies of any amendments to the Acquisition Agreement not
previously delivered to the Administrative Agent; and

          (c) promptly after the closing of the Acquisition, the Borrower will at its expense deliver or
cause to be delivered to the Administrative Agent complete and correct copies of any material bills
of sale, material assignments, and other material documents or agreements executed in connection
with the Acquisition and not previously delivered to the Administrative Agent.

ARTICLE IV.

CONDITIONS

     The consent and the waiver provided herein shall become effective and enforceable against the
parties hereto, and the Credit Agreement shall be amended as provided herein, upon the date all of
the following conditions precedent have been met (the “Effective Date”):

     Section 4.01 Documents. The Administrative Agent shall have received each of the
following:

          (a) this Agreement duly and validly executed and delivered by duly authorized officers of the
Borrower, the Existing Guarantors, the Administrative Agent, and the Banks;

          (b) three Supplements to the Guaranty Agreement dated as of the Effective Date, in favor of
the Administrative Agent for the benefit of the Beneficiaries (as defined therein), duly executed
and delivered by the Limited Partner, the General Partner, and Finance Corp, respectively
(collectively, the “New Guarantors”), pursuant to which the New Guarantors shall become
“Guarantors” under and as defined in the Guaranty;

          (c) two Supplements to the Pledge Agreement dated as of the Effective Date, in favor of the
Administrative Agent for the benefit of the Beneficiaries (as defined therein), duly executed and
delivered by the Limited Partner and the General Partner, respectively, pursuant to which the
Limited Partner and the General Partner shall become “Pledgors” under and as defined in the Pledge
Agreement;

          (d) three Supplements to the Security Agreement, dated as of the Effective Date, in favor of
the Administrative Agent for the benefit of the Beneficiaries (as defined therein), duly executed
and delivered by each of the New Guarantors, respectively, pursuant to which the New

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Guarantors shall become “Grantors” under and as defined in the Security Agreement;
provided that the Supplement executed by the Limited Partner will expressly exclude any
grant of a security interest in the Escrow Agreement, the Escrow Account, or any assets of the
Limited Partner held in the Escrow Account, including, without limitation, the cash proceeds of the
issuance of the High-Yield Notes;

          (e) the original stock certificate representing all of the stock of Finance Corp, along with a
stock power in blank relating to such certificate;

          (f) UCC-1 financing statements to be filed against each of the Limited Partner, the General
Partner, and Finance Corp, in each such entity’s jurisdiction of organization;

          (g) a fully executed copy, certified by the Limited Partner, of the Acquisition Agreement,
together with all exhibits, schedules, and amendments thereto;

          (h) a secretary’s certificate of the Limited Partner, the General Partner, and Finance Corp,
certifying (A) the organizational documents of each such entity, (B) the resolutions or other
documents evidencing each such entity’s authority to enter into the transactions contemplated
herein, and (C) the incumbency and sample signatures of the authorized officers of each such
entity; and

          (i) a legal opinion of Vinson & Elkins L.L.P. dated as of the Effective Date in form and
substance, as applicable, substantially similar to the opinion delivered in connection with the
closing of the Credit Agreement.

     Section 4.02 No Default. No Default shall have occurred which is continuing as of the
Effective Date.

     Section 4.03 Representations. The representations and warranties in this Agreement
shall be true and correct in all material respects as of the Effective Date.

     Section 4.04 Fees. The Borrower shall have paid all reasonable fees and expenses of
the Administrative Agent’s outside legal counsel pursuant to all invoices presented to the Borrower
for payment not less than one Business Day prior to the Effective Date.

ARTICLE V.

MISCELLANEOUS

     Section 5.01 Effect on Credit Documents; Acknowledgments.

          (a) The Borrower acknowledges that on the date hereof all Obligations are payable without
defense, offset, counterclaim or recoupment.

          (b) The Administrative Agent, the Issuing Banks, and the Banks hereby expressly reserve all of
their rights, remedies, and claims under the Credit Documents. Other than as expressly provided in
Section 2.02 above, nothing in this Agreement shall constitute a waiver or relinquishment of (i)
any Default or Event of Default under any of the Credit Documents, (ii) any of the agreements,
terms or conditions contained in any of the Credit

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Documents, (iii) any rights or remedies of the Administrative Agent, the Issuing Bank or any
Bank with respect to the Credit Documents, or (iv) the rights of the Administrative Agent, any
Issuing Bank or any Bank to collect the full amounts owing to them under the Credit Documents.

          (c) Each of the Borrower, the Existing Guarantors, Administrative Agent, Issuing Banks, and
Banks does hereby adopt, ratify, and confirm the Credit Agreement and each other Credit Document,
as amended hereby, and acknowledges and agrees that the Credit Agreement and each other Credit
Document, as amended hereby, is and remains in full force and effect, and the Borrower and the
Existing Guarantors acknowledge and agree that their respective liabilities under the Credit
Agreement and the other Credit Documents are not impaired in any respect by this Agreement or the
waiver granted hereunder.

          (d) From and after the Effective Date, all references to the Credit Agreement and the Credit
Documents shall mean such Credit Agreement and such Credit Documents as amended by this Agreement.

          (e) This Agreement is a Credit Document for the purposes of the provisions of the other Credit
Documents. Without limiting the foregoing, any breach of representations, warranties, and
covenants under this Agreement shall be a Default or Event of Default, as applicable, under the
Credit Agreement.

     Section 5.02 Reaffirmation of the Guaranty. Each Existing Guarantor hereby ratifies,
confirms, acknowledges and agrees that its obligations under the Guaranty are in full force and
effect and that such Existing Guarantor continues to unconditionally and irrevocably guarantee the
full and punctual payment, when due, whether at stated maturity or earlier by acceleration or
otherwise, all of the Guaranteed Obligations (as defined in the Guaranty), as such Guaranteed
Obligations may have been amended by this Agreement, and its execution and delivery of this
Agreement does not indicate or establish an approval or consent requirement by such Existing
Guarantor under the Guaranty in connection with the execution and delivery of amendments to the
Credit Agreement, the Notes or any of the other Credit Documents (other than the Guaranty or any
other Credit Document to which such Existing Guarantor is a party).

     Section 5.03 Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original and all of which, taken together, constitute a
single instrument. This Agreement may be executed by facsimile signature and all such signatures
shall be effective as originals.

     Section 5.04 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns permitted pursuant
to the Credit Agreement.

     Section 5.05 Invalidity. In the event that any one or more of the provisions
contained in this Agreement shall for any reason be held invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any other provision of
this Agreement.

     Section 5.06 Governing Law. This Agreement shall be deemed to be a contract made
under and shall be governed by and construed in accordance with the laws of the State of Texas.

-11-

 

     Section 5.07 Entire Agreement. THIS AGREEMENT, THE CREDIT AGREEMENT AS AMENDED BY THIS
AGREEMENT, THE NOTES, AND THE OTHER CREDIT DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE
PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS,
WRITTEN OR ORAL, WITH RESPECT THERETO.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

[SIGNATURES BEGIN ON NEXT PAGE]

-12-

 

     EXECUTED effective as of the date first above written.

	 	 	 
	 	 	BORROWER:

	 
	 	 
	 	 	HOLLY ENERGY PARTNERS — OPERATING, L.P.,

a Delaware limited partnership

	 
	 	 
	 	 	By: HEP Logistics GP, L.L.C., a Delaware limited
liability company, its General Partner

	 
	 	 
	 	 	By: Holly Energy Partners, L.P., a Delaware limited
partnership, its Managing Member

	 
	 	 
	 	 	By: HEP Logistics Holdings, L.P., a Delaware
limited partnership, its General Partner

	 
	 	 
	 	 	By: Holly Logistic Services, L.L.C., a
Delaware limited liability company, its
General Partner

	 	 	 	 	 
	 	 	 
	 	By:  	/s/ Stephen J. McDonnell
 	 
	 	Name:  	Stephen J. McDonnell 	 
	 	Title:  	Vice President and Chief Financial Officer 	 

Signature page to Consent, Waiver and Amendment No. 2

 

 

EXISTING GUARANTORS:

	 	 	 	 	 
	 	 	HEP PIPELINE GP, L.L.C., a Delaware
	

	 	 	 	limited liability company
	 	 	HEP REFINING GP, L.L.C., a Delaware
	

	 	 	 	limited liability company
	 	 	HEP MOUNTAIN HOME, L.L.C., a Delaware
	

	 	 	 	limited liability company
	 	 	HEP PIPELINE, L.L.C., a Delaware
	

	 	 	 	limited liability company
	 	 	HEP REFINING, L.L.C., a Delaware
	

	 	 	 	limited liability company
	 	 	HEP WOODS CROSS, L.L.C., a Delaware
	

	 	 	 	limited liability company
	 
	 	 	 	 
	

	 	Each by:
	 	HEP Operating Company, L.P., a Delaware
	

	 	 	 	limited partnership and its Sole Member

	 	 	 
	 	 	By: HEP Logistics GP, L.L.C., a Delaware limited
liability company, its General Partner

	 
	 	 
	 	 	By: Holly Energy Partners, L.P., a Delaware
limited partnership, its Managing Member

	 
	 	 
	 	 	By: HEP Logistics Holdings, L.P., a Delaware
limited partnership, its General Partner

	 
	 	 
	 	 	By: Holly Logistic Services, L.L.C., a
Delaware limited liability company, its
General Partner

	 	 	 	 	 
	 	 	 
	 	By:  	/s/ Stephen J. McDonnell
 	 
	 	Name:  	Stephen J. McDonnell 	 
	 	Title:  	Vice President and Chief Financial Officer 	 

Signature page to Consent, Waiver and Amendment No. 2

 

 

	 	 	 	 	 
	 	 	HEP NAVAJO SOUTHERN, L.P., a Delaware limited
	

	 	 	 	partnership
	 	 	HEP PIPELINE ASSETS, LIMITED PARTNERSHIP,
	

	 	 	 	a Delaware limited partnership
	 
	 	 	 	 
	

	 	Each by:
	 	HEP Pipeline GP, L.L.C., a Delaware limited
	

	 	 	 	liability company and its General Partner

	 	 	 
	 	 	By: HEP Operating Company, L.P., a Delaware limited
partnership and its Sole Member

	 
	 	 
	 	 	By: HEP Logistics GP, L.L.C., a Delaware limited
liability company, its General Partner

	 
	 	 
	 	 	By: Holly Energy Partners, L.P., a Delaware
limited partnership, its Managing Member

	 
	 	 
	 	 	By: HEP Logistics Holdings, L.P., a Delaware
limited partnership, its General Partner

	 
	 	 
	 	 	By: Holly Logistic Services, L.L.C., a
Delaware limited liability company, its
General Partner

	 	 	 	 	 
	 	 	 
	 	By:  	/s/ Stephen J. McDonnell
 	 
	 	Name:  	Stephen J. McDonnell 	 
	 	Title:  	Vice President and Chief Financial Officer 	 

Signature page to Consent, Waiver and Amendment No. 2

 

 

	 	 	 	 	 
	 	 	HEP REFINING ASSETS, L.P., a Delaware limited
	

	 	 	 	partnership

	 	 	 
	 	 	By: HEP Refining GP, L.L.C., a Delaware limited liability
company and its General Partner

	 
	 	 
	 	 	By: HEP Operating Company, L.P., a Delaware limited
partnership and its Sole Member

	 
	 	 
	 	 	By: HEP Logistics GP, L.L.C., a Delaware limited
liability company, its General Partner

	 
	 	 
	 	 	By: Holly Energy Partners, L.P., a Delaware
limited partnership, its Managing Member

	 
	 	 
	 	 	By: HEP Logistics Holdings, L.P., a Delaware
limited partnership, its General Partner

	 
	 	 
	 	 	By: Holly Logistic Services, L.L.C., a
Delaware limited liability company, its
General Partner

	 	 	 	 	 
	 	 	 
	 	By:  	/s/ Stephen J. McDonnell
 	 
	 	Name:  	Stephen J. McDonnell 	 
	 	Title:  	Vice President and Chief Financial Officer 	 

Signature page to Consent, Waiver and Amendment No. 2

 

 

	 	 	 	 	 
	 	ADMINISTRATIVE AGENT:

UNION BANK OF CALIFORNIA, N.A.

 	 
	 	By:  	/s/ Sean Murphy
 	 
	 	 	Sean Murphy, Vice President 	 
	 	 	 	 
	 

	 	 	 	 	 
	 	BANKS:

UNION BANK OF CALIFORNIA, N.A.

 	 
	 	By:  	/s/ Sean Murphy
 	 
	 	 	Sean Murphy, Vice President 	 
	 	 	 	 
	 

Signature page to Consent, Waiver and Amendment No. 2

 

 

	 	 	 	 	 
	 	BANK OF AMERICA, NATIONAL ASSOCIATION

 	 
	 	By:  	/s/ Claire Liu
 	 
	 	Name:  	Claire Lui 	 
	 	Title:  	Senior Vice President 	 

Signature page to Consent, Waiver and Amendment No. 2

 

 

	 	 	 	 	 
	 	GUARANTY BANK

 	 
	 	By:  	/s/ Jim R. Hamilton
 	 
	 	Name:  	Jim R. Hamilton 	 
	 	Title:  	Senior Vice President 	 

Signature page to Consent, Waiver and Amendment No. 2

 

 

	 	 	 	 	 
	 	FORTIS CAPITAL CORP.

 	 
	 	By:  	/s/ Darrell Holley
 	 
	 	Name:  	Darrell Holley 	 
	 	Title:  	Managing Director 	 

	 	 	 	 	 
	 	By:  	                                              /s/ Casey Lowary
 	 
	 	Name:  	Casey Lowary 	 
	 	Title:  	Senior Vice President 	 

Signature page to Consent, Waiver and Amendment No. 2

 

 

	 	 	 	 	 
	 	WELLS FARGO BANK, NATIONAL ASSOCIATION

 	 
	 	By:  	/s/ M. Jarrod Bourgeois
 	 
	 	Name:  	M. Jarrod Bourgeois 	 
	 	Title:  	Assistant Vice President 	 

Signature page to Consent, Waiver and Amendment No. 2

 

 

	 	 	 	 	 
	 	U.S. BANK NATIONAL ASSOCIATION

 	 
	 	By:  	/s/ Mark E. Thompson
 	 
	 	Name:  	Mark E. Thompson 	 
	 	Title:  	Vice President 	 

Signature page to Consent, Waiver and Amendment No. 2

 

 

SCHEDULE 1.01(d)

GUARANTORS

	 	 	 	 	 	 
	 
	 	Guarantor	 	 	Ownership	 
	 	Holly Energy Partners, L.P.

	 	 	HEP Logistics Holdings, L.P. – 100%	 
	 	Holly Energy Finance Corp.

	 	 	Holly Energy Partners, L.P. – 100%	 
	 	HEP Logistics GP, L.L.C.

	 	 	Holly Energy Partners, L.P. – 100%	 
	 	HEP Pipeline GP, L.L.C.

	 	 	Borrower – 100%	 
	 	HEP Refining GP, L.L.C.

	 	 	Borrower – 100%	 
	 	HEP Mountain Home, L.L.C.

	 	 	Borrower – 100%	 
	 	HEP Pipeline, L.L.C.

	 	 	Borrower – 100%	 
	 	HEP Refining, L.L.C.

	 	 	Borrower – 100%	 
	 	HEP Woods Cross, L.L.C.

	 	 	Borrower – 100%	 
	 	HEP Fin-Tex/Trust-River, L.P. (as of
the Alon Acquisition Closing Date)

	 	 	99.999% – Borrower

0.001% – HEP Pipeline GP, L.L.C.	 
	 	HEP Navajo Southern, L.P.

	 	 	99.999% – Borrower

0.001% – HEP Pipeline GP, L.L.C.	 
	 	HEP Pipeline Assets, Limited Partnership

	 	 	99.999% – Borrower

0.001% – HEP Pipeline GP, L.L.C.	 
	 	HEP Refining Assets, L.P.

	 	 	99.999% – Borrower

0.001% – HEP Refining GP, L.L.C.exv10w1

 

Exhibit 10.1

ENGAGEMENT LETTER

January 12, 2005

Mr. Mack Traynor

President & CEO

HEI Inc.

1495 Steiger Lake Lane

Victoria, MN 55386

Dear Mack:

     Thank you for the opportunity to work with HEI, Inc. (“HEI” or “the Company”).
I believe that I understand your needs and that I can help you achieve your
goals. This letter agreement (“Agreement”) sets forth the proposed terms of
our engagement.

SCOPE OF SERVICES

     Timothy Clayton, a principal of Emerging Capital, will provide consulting
services generally consistent with the duties and responsibilities of the Chief
Financial Officer. This would include assisting the Company with the financial
reporting process, financial forecasting, budgeting, performance measurement,
strategic planning, internal controls, investor relations, administration
assistance and assistance in other areas as desired by the Chief Executive
Officer of the Company. He will work closely with the senior management team
and report to the Chief Executive Officer and Board of Directors.

     While it is anticipated that the services to be performed by Mr. Clayton as
contemplated in this Agreement will be provided over a longer-term period, this
initial engagement letter has been structured to cover the period from January
15, 2005 through April 30, 2005. It is expected that the fulfillment of the
services outlined above will require a substantial amount of effort during this
period which has been estimated to be approximately 120 hours per month. At the
end of this initial term, the parties will discuss the ongoing needs of HEI and
consider revisions to the terms of this Agreement, if necessary. Either party
may terminate this Agreement upon 5 days’ advance written notice; provided,
however, that in the event of termination, the Company is obligated to make
full payment to Emerging Capital for the month in which the written notice is
received. Upon termination of this Agreement, Emerging Capital shall deliver to
the Company all work products, tangible manifestations of Confidential
Information and Company property in its possession or under its control.

 

 

INDEPENDENT CONTRACTOR/WORKS FOR HIRE

     The parties agree that Emerging Capital is an independent contractor and, as
such, neither Emerging Capital nor any employee of Emerging Capital is an
employee of HEI. As a consequence, HEI is not responsible for withholding or
deducting from its payments to Emerging Capital any sums for federal or state
income taxes; social security; medical, dental, worker’s compensation or
disability insurance coverage; pension or retirement plans; or the like.
Emerging Capital specifically agrees to pay for any and all federal and state
taxes and other payments lawfully due in connection with the compensation
received pursuant to this Agreement.

     All documentation, training materials, and other works developed by Emerging
Capital under this Agreement, as well as all papers, records and the like
prepared or produced by Emerging Capital in the performance of services under
this Agreement, shall hereinafter be referred to as “Works.” All Works shall be
the sole and exclusive property of the Company and the Company shall have the
right to examine Works at any time.

PROFESSIONAL FEES

     The
fees for the services outlined in this Agreement will be a $15,000
monthly, non- refundable retainer payable at the beginning of each month. This
arrangement will begin on or about January 15, 2005 and the retainer payment
for January, 2005 will be $7,500. This agreement is based on an estimation of
the time required to perform the services described above. As noted above, if
the time incurred or expected to be incurred is inconsistent with this fee
level, the parties agree to discuss a modification of these terms for the next
engagement period.

     The fees outlined above are exclusive of normal and customary expenses that
would be incurred in this process such as travel, meals, lodging, and delivery
services.

     I will bill the Company at the beginning of each month and expect payment
promptly upon receipt. The first billing will be in January, 2005 for the month
of January.

     You have also agreed, subject to approval by the Company’s Board of Directors,
to issue to the undersigned, an option to purchase 20,000 shares of HEI common
stock pursuant to the terms of your Stock Option Plan. These options shall have
a term of 7 years. In view of the fact that the parties anticipate that this
relationship will continue into the future, we have agreed that 50% of the
options will vest six months following the date of grant and the remainder will
vest one year after the date of grant. The exercise price of the stock options
shall be equal to the fair market value of a share of HEI common stock on the
date of grant, which is deemed to be January 14, 2005. The shares of HEI common
stock underlying the option shall be registered at the time of exercise on Form
S-8 under the Securities Act of 1933, as amended. In the event that the Company
terminates or decides not to renew this Agreement, the options will be retained
by Mr. Clayton. If Mr. Clayton terminates this agreement prior to the end of
the initial term, he agrees to forfeit the options.

     HEI agrees to indemnify and hold Emerging Capital and its principals and
affiliates harmless from and against any and all damage, loss, cost, expense,
obligation, claim or liability, joint or several, to which Emerging Capital and
its principals and affiliates may

 

 

become subject in connection with the performance of its obligations hereunder,
including, without limitation any claim arising under federal or state
securities laws, under any other statute, at common law or investigation, and
to reimburse Emerging Capital for any reasonable legal or other expenses
(including the cost of any investigation and preparation) incurred by Emerging
Capital and its principals and affiliates arising out of or in connection with
any action or claim in connection therewith, whether or not resulting in
liability; provided however that HEI shall not be liable in any such case to
the extent that any such loss, claim, damage or liability is found in a final
judgment by a court to have resulted from Emerging Capital’s gross negligence
or intentional misconduct in performing the services provided for under this
agreement. HEI agrees to not hold Emerging Capital and its principals and
affiliates liable for any and all actions of other parties. This
indemnification shall survive any termination of this agreement.

     We are very excited about the possibility of working with you and look forward
to getting underway.

     In order to proceed please sign the letter in the space provided evidencing
your understanding of our services and related fees.

	 	 	 	 	 
	 	Sincerely,

	 
	 	/S/ Timothy Clayton
          
2/28/05
	 	Timothy C. Clayton

Emerging Capital

 

     We understand the scope of the services to be provided and agree to the
compensation as described above.

	 	 	 	 	 
	 	HEI, Inc.

	 
	 	/S/ Mack Traynor
              
2/28/05
	 	Name: Mr. Mack Traynor

Title: President & CEO

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