Document:

<PAGE>

                                                                    EXHIBIT 10.3

                              CONSENT AND AGREEMENT

      THIS CONSENT AND AGREEMENT (this "Consent") is entered into as of this
13th day of July 2004, by and among HOLLY CORPORATION, a Delaware corporation
("HOC"), HOLLY LOGISTIC SERVICES, L.L.C., a Delaware limited liability company
("Logistic"), HEP LOGISTICS HOLDINGS, L.P., a Delaware limited partnership
("Holdings"), NAVAJO PIPELINE CO., L.P., a Delaware limited partnership
("Navajo"), NAVAJO REFINING COMPANY, L.P., a Delaware limited partnership
("Navajo Refining"), HOLLY REFINING & MARKETING COMPANY, a Delaware corporation
("Holly Refining"), HOLLY ENERGY PARTNERS, L.P., a Delaware limited partnership
("HEP"), HEP LOGISTICS GP, L.L.C., a Delaware limited liability company (the
"General Partner"), HEP OPERATING COMPANY, L.P., a Delaware limited partnership
("Borrower"), certain other subsidiaries of Borrower who have executed this
Consent (the "Borrower Subsidiaries"), and UNION BANK OF CALIFORNIA, N.A., as
administrative agent for itself and certain other Banks ( as defined below), as
more fully set forth in the Credit Agreement (as defined below) ("Administrative
Agent").

                                    RECITALS:

      A. Certain Persons in the HOC Group (as defined below) are entering into
that certain Omnibus Agreement dated as of July 13, 2004 (as amended or
otherwise modified from time to time, the "Omnibus Agreement"), and certain
Persons in the HOC Group are entering into that certain Pipelines and Terminals
Agreement to be dated as of July 13, 2004 (as amended or otherwise modified from
time to time, the "Pipelines Agreement").

      B. Reference is made to that certain Credit Agreement dated as of July 7,
2004 (as amended or otherwise modified from time to time, the "Credit
Agreement"), among Borrower, the banks party thereto from time to time (the
"Banks"), the Banks issuing letters of credit thereunder from time to time (the
"Issuing Banks") and the Administrative Agent.

      C. The Security Documents (as defined in the Credit Agreement) require
HEP, Borrower, and each of the Borrower Subsidiaries (collectively, the
"Assigning Parties") to assign to Administrative Agent, as security for the
payment and performance of the Obligations, for the benefit of the holders of
the Obligations (collectively, the "Secured Parties") all of the right, title,
and interest of such Persons in, under, and to the Affected Agreements (as
defined below) (collectively, the "Assigned Rights").

      D. The Administrative Agent, the Issuing Banks, and the Banks, as a
condition to making the extensions of credit under the Credit Documents, have
required that each Person in the HOC Group agree to the undertakings set forth
in this Consent.

                                   AGREEMENT:

      NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged and confessed, the parties hereto agree as follows:

      1. DEFINITIONS. Certain capitalized terms used in this Consent are
specifically defined herein. Unless otherwise indicated, capitalized terms not
specifically defined in this

                                       1
<PAGE>

Consent shall have the meanings assigned to such terms in the Credit Agreement.
As used herein, the following terms have the meanings specified below:

            (a) The term "Affected Agreements" means (A) the Omnibus Agreement,
      (B) the Pipelines Agreement, and (C) each New Agreement.

            (b) The term "Bankruptcy Code" means the United States Bankruptcy
      Code, 11 U.S.C. Sections 101, et. seq.

            (c) The term "HOC Group" means, collectively, HOC, Logistic,
      Holdings, Navajo, Navajo Refining, Holly Refining, the General Partner,
      and the Assigning Parties.

            (d) The term "transfer" means any mode, direct or indirect, absolute
      or conditional, voluntary or involuntary, of disposing of or parting with
      property or with an interest in property.

      2. CONSENT. Each Person in the HOC Group hereby irrevocably consents:

            (a) To the assignment of the Assigned Rights by the Assigning
      Parties to the Administrative Agent for the benefit of the Administrative
      Agent and each of the Secured Parties as set forth and subject to the
      terms and provisions of the Security Documents;

            (b) To the assignment of the Assigned Rights by the Administrative
      Agent to any Person that may become a successor Administrative Agent under
      the Credit Agreement; and

            (c) To any assignment, in whole or in part, of any Assigned Rights
      (including the right to become a party under the Affected Agreements in
      the place and stead of the Assigning Parties) to any Person (a "Permitted
      Transferee") in connection with the exercise by Administrative Agent of
      its rights and remedies under, and as set forth in and subject to the
      terms and provisions of, any Credit Document following the occurrence and
      during the continuance of an Event of Default if, prior to or simultaneous
      with any such assignment, the applicable Permitted Transferee shall have
      assumed in writing all duties and obligations of the applicable Assigning
      Parties under the applicable Affected Agreements and/or such Assigned
      Rights, as applicable, in effect as of, and/or arising on and/or after the
      date of such assumption but not before.

      3. REPRESENTATIONS AND WARRANTIES. Each Person in the HOC Group hereby
represents and warrants to Administrative Agent as follows:

            (a) Each of this Consent and the other Affected Agreements (to the
      extent a party thereto) have been duly executed and delivered by it, and
      each such instrument is its legal, valid, and binding obligation,
      enforceable against it in accordance with its terms, except as such
      enforceability may be limited by any applicable bankruptcy, insolvency,
      reorganization, or similar law affecting creditors' rights generally and
      general equitable principles.

                                       2
<PAGE>

            (b) It is not in default under any of its material obligations under
      any Affected Agreement. To its knowledge, no other party to any Affected
      Agreement is in default under any of such party's material obligations
      thereunder.

            (c) As of the date of this Consent, this Consent, the Transfer
      Documents, the Omnibus Agreement, and the Pipelines Agreement constitute
      and include all Material Contracts entered into by it (to the extent a
      party thereto) with respect to and/or in connection with the transactions
      described in the Omnibus Agreement and the Pipelines Agreement.

            (d) As of the date of this Consent, HOC has procured policies of
      insurance providing insurance coverage for the benefit of the Borrower and
      Borrower Subsidiaries in the forms and amounts required pursuant to
      Section 5.02(a) of the Credit Agreement; HOC is the "named insured" under
      such insurance policies (other than the business interruption insurance
      policies of the Borrower for which the Borrower is the named insured); As
      such "named insured", HOC is the sole party entitled to (i) submit or make
      a proof of loss, settle, and adjust any claims under such insurance
      policies, and (ii) receive notices of cancellation of such policies.
      Administrative Agent is named as "loss payee" and "additional insured", as
      applicable, on each of such policies as well as the Borrower's business
      interruption insurance policies.

      4. REGARDING THE AFFECTED AGREEMENTS. Each Person in the HOC Group and the
Administrative Agent hereby agree as follows:

            (a) Upon any transfer described in Section 2 of this Consent, and
      subject to the terms thereof, the applicable Permitted Transferee shall
      succeed to all Assigned Rights of the applicable Assigning Parties so
      transferred to the same extent as if such Permitted Transferee were named
      in place of such Assigning Parties in the applicable Affected Agreements.

            (b) Upon prior written notice to any applicable Assigning Party,
      Administrative Agent and its assignee or designee, including any Permitted
      Transferee, shall have the right, but not the obligation, to pay all sums
      due from any Assigning Party and to perform any other act, duty, or
      obligation of the Assigning Parties pursuant to any Affected Agreement at
      any time. Nothing in this Consent shall require or obligate Administrative
      Agent or such assignee or designee to cure any default of any Assigning
      Party under any Affected Agreement or to make any such payment or perform
      any such act, duty, or obligation of the Assigning Parties thereunder.

            (c) Nothing in this Consent shall be construed to relieve any
      Assigning Party of any duty or obligation under any Affected Agreement.

            (d) If any Person in the HOC Group (other than an Assigning Party)
      delivers any written notice of default or breach (each, a "Breach") to any
      Assigning Party pursuant to any Affected Agreement, such Person shall
      promptly give a Notice to Administrative Agent, together with a true,
      correct, and complete copy of such notice of a Breach which notice shall
      identify with reasonable specificity the event, occurrence, or omission
      that such Person believes constitutes such Breach. In addition, prior to
      any exercise by any

                                       3
<PAGE>

      Person in the HOC Group of any remedies it may have under such Affected
      Agreement, such Person shall afford the Administrative Agent a period of
      twenty (20) days (after prior written notice to Borrower) to cure any such
      Breaches, such period to begin simultaneously with the expiration of any
      applicable cure period under the applicable Affected Agreement.

            (e) In the event that either (i) any Affected Agreement is rejected,
      in whole or in part, by a trustee or debtor-in-possession in any
      bankruptcy or insolvency proceeding regarding any Assigning Party or (ii)
      any Affected Agreement is deemed, in whole or in part, to be a contract to
      extend "financial accommodations" within the meaning of Section 365 of the
      Bankruptcy Code (each a "bankruptcy event"), and any order regarding such
      bankruptcy event has not been stayed, then within sixty (60) days after
      the occurrence of such bankruptcy event, the Administrative Agent or its
      assignee or designee, including any Permitted Transferee, may give a
      Notice to HOC stating that it is legally authorized to perform all of the
      obligations of the applicable Assigning Party pursuant to this Consent and
      that, upon execution and delivery of a New Agreement, it will assume and
      perform in full all such obligations under such Affected Agreement. Within
      twenty (20) Business Days of its receipt of such a Notice, HOC shall, and
      shall cause each Person in the HOC Group not affected by such bankruptcy
      event to, and the Administrative Agent and/or its assignee or designee
      shall (unless it shall have withdrawn such Notice), execute and deliver to
      the Administrative Agent or to such assignee or designee, a new agreement
      (a "New Agreement") that shall replace, as nearly as possible, that
      portion of the Affected Agreement as is affected by the applicable
      bankruptcy event. Such New Agreement shall be for the then-remaining term
      of such Affected Agreement and shall contain substantially the same terms
      and conditions as such instrument, taking into account any performance by
      the affected Assigning Party prior to such bankruptcy event.

            (f) No Person in the HOC Group will, without the prior written
      consent of the Majority Banks, amend, modify, or supplement any Affected
      Agreement, provided, however, that such amendments, modifications, or
      supplements may be made without the consent of the Majority Banks if such
      amendments, modifications, or supplements (i) individually or in the
      aggregate, are not materially adverse to the rights of the Administrative
      Agent or the Banks and (ii) individually or in the aggregate, do not
      materially decrease the economic benefit that the Assigning Parties would
      have otherwise received pursuant such Affected Agreement.

            (g) Each Person in the HOC Group hereby expressly agrees,
      acknowledges, and affirms that the right of first refusal in favor of HOC
      granted by the Assigning Parties pursuant to Article VI of the Omnibus
      Agreement shall not apply in any respect to any transfer described in
      Section 2 of this Agreement.

            (h) At any time and from time to time, subject to the terms and
      conditions of the Credit Documents, Administrative Agent may give a Notice
      to HOC directing HOC to pay (or cause the payment of within fifteen (15)
      days of receipt) any and all amounts payable by any Person in the HOC
      Group to any Assigning Party pursuant to any Affected Agreement directly
      to Administrative Agent or to such other Person as may be specified by
      Administrative Agent, in each case in accordance with written instructions

                                       4
<PAGE>

      contained in a Notice given to HOC by Administrative Agent. Delivery of
      such Notice to HOC shall constitute delivery of such Notice to all other
      Persons in the HOC Group, and all such other Persons shall be bound by
      such Notice.

      5. INSURANCE PROVISIONS.

            (a) Within ten (10) Business Days of a material loss, damage,
      destruction, or other casualty affecting any Assigning Party or its
      property (collectively, a "claim"), HOC shall give a Notice to
      Administrative Agent describing the claim (a "Claim Notice"). As soon as
      reasonably practicable after the date the Claim Notice is deemed received
      pursuant to the terms hereof, HOC shall give a Notice to Administrative
      Agent which shall contain a copy of a proof of loss with respect to such
      claim that is addressed to the applicable insurance company, references
      the applicable insurance policy, requests that any proceeds paid by such
      insurance company be delivered by a check made jointly payable to HOC and
      Administrative Agent, and contain such other information as is required
      for such proof of loss to be properly submitted (a "Proof of Loss
      Notice"). Within ten (10) Business Days from the date the Proof of Loss
      Notice is deemed received by the Administrative Agent pursuant to the
      terms hereof , HOC shall submit such proof of loss to the applicable
      insurance company.

            (b) Within ten (10) Business Days after HOC's receipt of any
      insurance proceeds paid in connection with any claim, HOC shall give a
      Notice to Administrative Agent stating that HOC has received such
      insurance proceeds, specifying the amount of such insurance proceeds, and
      identifying the proof of loss to which such insurance proceeds relate and
      requesting Administrative Agent to endorse such check (the "Receipt of
      Proceeds Notice"). As soon as reasonably practicable after receiving such
      check, the Administrative Agent shall, in accordance with the terms of the
      Credit Agreement, endorse such check and either return it to the Borrower
      or apply such proceeds to the Obligations.

            (c) In the event that any insurance proceeds are paid to any Person
      in the HOC Group in violation of the foregoing or in the event any Person
      in the HOC Group takes any action with respect to such insurance proceeds
      inconsistent with the foregoing, all Persons in the HOC Group holding such
      proceeds shall hold such proceeds in trust for Administrative Agent,
      segregate such proceeds from all other funds of such Person or Persons,
      and deliver such proceeds to the Administrative Agent for further
      disbursement in accordance with the requirements of the Credit Agreement.

      6. NOTICES.

            (a) Each party giving or making any notice, request, demand, or
      other communication (each, a "Notice") pursuant to this Consent shall give
      such Notice in writing and shall use one of the following methods of
      delivery, each of which, for purposes of this Consent, constitutes a
      writing: personal delivery, Registered or Certified Mail (in each case,
      return receipt requested and postage prepaid), nationally recognized
      overnight courier (with all fees prepaid), or facsimile.

                                       5
<PAGE>

            (b) Any party giving a Notice shall address such Notice to the
      receiving party (the "Addressee") at the address and to the individual
      listed on Schedule I attached to this Consent or at such other address
      and/or to such other individual as previously designated by the Addressee
      in a Notice.

            (c) Except as specifically provided elsewhere in this Consent, a
      Notice is effective only if the party giving or making such Notice has
      complied with Sections 6(a) and 6(b) and if the Addressee has received the
      Notice. A Notice is deemed to have been received as follows:

                  (i) If a Notice is delivered (A) in person, upon receipt as
            indicated by the date on the signed receipt; (B) by Registered or
            Certified Mail, upon the earlier of (1) receipt as indicated by the
            date on the signed receipt or (2) five (5) days after such Notice is
            deposited in the mail; (C) by nationally recognized overnight
            courier, upon receipt as indicated by the date on the signed
            receipt; and (D) by facsimile, upon receipt by the party giving or
            making such Notice of an acknowledgment or transmission report
            generated by the machine from which the facsimile was sent
            indicating that the facsimile was sent in its entirety to the
            Addressee's facsimile number.

                  (ii) If the Addressee rejects or otherwise refuses to accept a
            Notice, or if the Notice cannot be delivered because of a change in
            address for which no Notice was given to the party attempting to
            give or make such Notice, then upon the rejection, refusal, or
            inability to deliver.

                  (iii) Notwithstanding the foregoing, any Notice received after
            5:00 P.M. (est) on a Business Day, or on a day that is not a
            Business Day, is deemed received at 9:00 A.M. (est) on the next
            Business Day.

      7. COUNTERPARTS. The parties hereto may execute this Consent in any number
of duplicate originals, each of which constitutes an original, and all of which,
collectively, constitute only one agreement. The parties may execute this
Consent in counterparts, each of which constitutes an original, and all of
which, collectively, constitute only one agreement. Delivery of an executed
counterpart signature page by facsimile is as effective as executing and
delivering this Consent in the presence of the other parties to this Consent.

      8. SUCCESSORS AND ASSIGNS. This Consent shall be binding upon each Person
in the HOC Group, and each of their respective successors, transferees, and
assigns and shall inure, together with the rights of Administrative Agent
hereunder, to the benefit of and be binding upon, Administrative Agent and its
successors, transferees, and assigns.

      9. ASSIGNMENT AND DELEGATION. Except as expressly permitted herein and
except for assignments and participations by the Administrative Agent and the
Banks permitted by the terms of the Credit Agreement, no party may assign any of
its rights under this Consent, whether any such assignment is voluntary,
involuntary, by merger, consolidation, dissolution, operation of law, or any
other manner except with the prior written consent of the other parties which
consent shall not be unreasonably withheld. All assignments of rights are
expressly prohibited

                                       6
<PAGE>

under this Section 9. Any purported assignment of rights or delegation of
performance in violation of this Section 9 is void.

      10. FURTHER ASSURANCES. At any time and from time to time, the parties
hereto shall take any and all further actions as may be reasonably required to
carry out the intent of the parties under this Consent or as Administrative
Agent may reasonably request to provide Administrative Agent the full benefits
of this Consent.

      11. CHOICE OF LAW. The laws of the state of Texas (without giving effect
to its conflict of laws principles) govern all matters arising out of or
relating to this Consent, including its validity, interpretation, construction,
and enforcement.

      12. EQUITABLE ENFORCEMENT. Each party hereto acknowledges and agrees that
its obligations under this Consent may be equitably enforced and that it may be
compelled to specifically perform its obligations under this Consent.

                            [SIGNATURE PAGES FOLLOW]

                                       7
<PAGE>

            [SIGNATURE PAGE TO CONSENT AND AGREEMENT - PAGE 1 OF 13]

      IN WITNESS WHEREOF, pursuant to due authorization, each party hereto has
caused this Consent to be duly executed and delivered as of the date hereto.

                                 HOC:

                                 HOLLY CORPORATION,
                                 a Delaware corporation

                                 By: /s/  Stephen J. McDonnell
                                     ------------------------------------------
                                     Stephen J. McDonnell,
                                     Vice President and Chief Financial Officer

<PAGE>

            [SIGNATURE PAGE TO CONSENT AND AGREEMENT - PAGE 2 OF 13]

                                 LOGISTIC:

                                 HOLLY LOGISTIC SERVICES, L.L.C.,
                                 a Delaware limited liability company

                                 By: /s/ M. Neale Hickerson
                                     -----------------------------------------
                                       M. Neale Hickerson
                                       Vice President - Treasury and
                                       Investor Relations

<PAGE>

            [SIGNATURE PAGE TO CONSENT AND AGREEMENT - PAGE 3 OF 13]

                                 HOLDINGS:

                                 HEP LOGISTICS HOLDINGS, L.P.,
                                 a Delaware limited partnership

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

                                      By: /s/ M. Neale Hickerson
                                          -------------------------------------
                                              M. Neale Hickerson
                                              Vice President - Treasury and
                                              Investor Relations

<PAGE>

            [SIGNATURE PAGE TO CONSENT AND AGREEMENT - PAGE 4 OF 13]

                                 NAVAJO:

                                 NAVAJO PIPELINE CO., L.P.,
                                 a Delaware limited partnership

                                 By: Navajo Pipeline GP, L.L.C., a Delaware
                                     limited liability company, its General
                                     Partner

                                     By: /s/  Stephen J. McDonnell
                                         -------------------------------------
                                              Stephen J. McDonnell,
                                              Vice President and Chief Financial
                                              Officer

<PAGE>

            [SIGNATURE PAGE TO CONSENT AND AGREEMENT - PAGE 5 OF 13]

                                 NAVAJO REFINING:

                                 NAVAJO REFINING COMPANY., L.P.,
                                 a Delaware limited partnership

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

                                     By: /s/  Stephen J. McDonnell
                                         --------------------------------------
                                         Stephen J. McDonnell,
                                         Vice President and Chief Financial
                                         Officer

<PAGE>

            [SIGNATURE PAGE TO CONSENT AND AGREEMENT - PAGE 6 OF 13]

                                 HOLLY REFINING:

                                 HOLLY REFINING & MARKETING COMPANY,
                                 a Delaware corporation

                                 By: /s/ Stephen J. McDonnell
                                     -------------------------------------------
                                     Stephen J. McDonnell,
                                     Vice President and Chief Financial Officer

<PAGE>

            [SIGNATURE PAGE TO CONSENT AND AGREEMENT - PAGE 7 OF 13]

                                 HEP:

                                 HOLLY ENERGY PARTNERS, L.P.,
                                 a Delaware limited partnership

                                 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/ M. Neale Hickerson
                                             ----------------------------------
                                               M. Neale Hickerson
                                               Vice President - Treasury and
                                               Investor Relations

<PAGE>

            [SIGNATURE PAGE TO CONSENT AND AGREEMENT - PAGE 8 OF 13]

                                 GENERAL PARTNER:

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

                                 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/ M. Neale Hickerson
                                                 ------------------------------
                                                 M. Neale Hickerson
                                                 Vice President - Treasury and
                                                 Investor Relations

<PAGE>

            [SIGNATURE PAGE TO CONSENT AND AGREEMENT - PAGE 9 OF 13]

                                 BORROWER:

                                 HEP OPERATING COMPANY, 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/  M. Neale Hickerson
                                                     ---------------------------
                                                     M. Neale Hickerson
                                                     Vice President - Treasury
                                                     and Investor Relations

<PAGE>

            [SIGNATURE PAGE TO CONSENT AND AGREEMENT - PAGE 10 OF 13]

                         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/ M. Neale Hickerson
                                                      --------------------------
                                                      M. Neale Hickerson
                                                      Vice President - Treasury
                                                      and Investor Relations

<PAGE>

            [SIGNATURE PAGE TO CONSENT AND AGREEMENT - PAGE 11 OF 13]

                    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/  M. Neale Hickerson
                                                   -----------------------------
                                                   M. Neale Hickerson
                                                   Vice President - Treasury and
                                                   Investor Relations

<PAGE>

            [SIGNATURE PAGE TO CONSENT AND AGREEMENT - PAGE 12 OF 13]

                         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/  M. Neale Hickerson
                                          -------------------------------------
                                          M. Neale Hickerson
                                          Vice President - Treasury and
                                          Investor Relations

<PAGE>

            [SIGNATURE PAGE TO CONSENT AND AGREEMENT - PAGE 13 OF 13]

                                ADMINISTRATIVE AGENT:

                                UNION BANK OF CALIFORNIA, N.A.,
                                a national association, as Administrative Agent

                                By: /s/  Sean Murphy
                                    ------------------------------------------
                                       Sean Murphy, Vice President<PAGE>
                                                                    EXHIBIT 10.4

                               GUARANTY AGREEMENT

      This Guaranty Agreement dated as of July 13, 2004 (this "Guaranty") is
executed by each of the undersigned (individually a "Guarantor" and
collectively, the "Guarantors"), in favor of Union Bank of California, N.A, as
Administrative Agent for the ratable benefit of itself, the Banks (as defined
below), the Issuing Banks (as defined below), and the Swap Counterparties (as
defined below) (together with the Administrative Agent, the Issuing Banks, the
Banks, individually a "Beneficiary", and collectively, the "Beneficiaries").

                                  INTRODUCTION

      A. This Guaranty is given in connection with that certain Credit Agreement
dated as of July 7, 2004 (as it has been or may be amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among HEP
Operating Company, L.P., a Delaware limited partnership (the "Borrower"), the
Banks party thereto from time to time (individually, a "Bank", and collectively
the "Banks"), the Banks issuing letters of credit thereunder from time to time
(individually, an "Issuing Bank", and collectively, the "Issuing Banks") and
Union Bank of California, N.A. as an administrative agent (the "Administrative
Agent") for such Banks and Issuing Banks.

      B. Each Guarantor is a Subsidiary of the Borrower and will derive
substantial direct and indirect benefit from (i) the transactions contemplated
by the Credit Agreement and the other Credit Documents and (ii) the Interest
Rate Contracts entered into by the Borrower or any of its Subsidiaries with a
Bank or an Affiliate of a Bank (each such counterparty being referred to as a
"Swap Counterparty").

      C. Each Guarantor is executing and delivering this Guaranty (i) to induce
the Banks to provide Advances under the Credit Agreement, (ii) to induce the
Issuing Banks to provide Letters of Credit under the Credit Agreement, and (iii)
intending it to be a legal, valid, binding, enforceable and continuing
obligation of such Guarantor, whether or not such Guarantor derives any benefit
from the Credit Agreement or from any other Credit Document.

      NOW, THEREFORE, in consideration of the premises, each Guarantor hereby
agrees as follows:

      Section 1. Definitions. All capitalized terms not otherwise defined in
this Guaranty that are defined in the Credit Agreement shall have the meanings
assigned to such terms by the Credit Agreement.

      Section 2. Guaranty.

(a) Each Guarantor hereby absolutely, unconditionally and irrevocably guarantees
the punctual payment and performance, when due, whether at stated maturity, by
acceleration or otherwise, of all Obligations, whether absolute or contingent
and whether for principal, interest (including, without limitation, interest
that but for the existence of a bankruptcy, reorganization or similar proceeding
would accrue), fees, amounts owing in respect of Letter of Credit Obligations,
amounts required to be provided as collateral, indemnities, expenses or
otherwise (collectively, the "Guaranteed Obligations"). Without limiting the
generality of the foregoing,

<PAGE>

each Guarantor's liability shall extend to all amounts that constitute part of
the Guaranteed Obligations and would be owed by the Borrower to the
Administrative Agent, any Issuing Bank or any Bank under the Credit Documents
and by the Borrower to any Swap Counterparty but for the fact that they are
unenforceable or not allowable due to insolvency or the existence of a
bankruptcy, reorganization or similar proceeding involving the Borrower.

(b) It is the intention of the Guarantors and each Beneficiary that the amount
of the Guaranteed Obligations guaranteed by each Guarantor shall be in, but not
in excess of, the maximum amount permitted by fraudulent conveyance, fraudulent
transfer or similar Legal Requirements applicable to such Guarantor.
Accordingly, notwithstanding anything to the contrary contained in this Guaranty
or in any other agreement or instrument executed in connection with the payment
of any of the Guaranteed Obligations, the amount of the Guaranteed Obligations
guaranteed by a Guarantor under this Guaranty shall be limited to an aggregate
amount equal to the largest amount that would not render such Guarantor's
obligations hereunder subject to avoidance under Section 548 of the United
States Bankruptcy Code or any comparable provision of any other applicable law.

      Section 3. Guaranty Absolute. Each Guarantor guarantees that the
Guaranteed Obligations will be paid strictly in accordance with the terms of the
Credit Documents, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the
Administrative Agent, any Issuing Bank, any Bank or any Swap Counterparty with
respect thereto but subject to Section 2(b) above. The obligations of each
Guarantor under this Guaranty are independent of the Guaranteed Obligations or
any other obligations of any other Person under the Credit Documents or in
connection with any Interest Rate Contract, and a separate action or actions may
be brought and prosecuted against any Guarantor to enforce this Guaranty,
irrespective of whether any action is brought against the Borrower, any other
Guarantor or any other Person or whether the Borrower, any other Guarantor or
any other Person is joined in any such action or actions. The liability of each
Guarantor under this Guaranty shall be irrevocable, absolute and unconditional
irrespective of, and each Guarantor hereby irrevocably waives any defenses it
may now or hereafter have in any way relating to, any or all of the following:

(a) any lack of validity or enforceability of any Credit Document or any
agreement or instrument relating thereto or any part of the Guaranteed
Obligations being irrecoverable;

(b) any change in the time, manner or place of payment of, or in any other term
of, all or any of the Guaranteed Obligations or any other obligations of any
Person under the Credit Documents or any agreement or instrument relating to
Interest Rate Contract with a Swap Counterparty, or any other amendment or
waiver of or any consent to departure from any Credit Document or any agreement
or instrument relating to Interest Rate Contract with a Swap Counterparty,
including, without limitation, any increase in the Guaranteed Obligations
resulting from the extension of additional credit to the Borrower or otherwise;

(c) any taking, exchange, release or non-perfection of any collateral, or any
taking, release or amendment or waiver of or consent to departure from any other
guaranty, for all or any of the Guaranteed Obligations;

                                       2
<PAGE>

(d) any manner of application of collateral, or proceeds thereof, to all or any
of the Guaranteed Obligations, or any manner of sale or other disposition of any
collateral for all or any of the Guaranteed Obligations or any other obligations
of any other Person under the Credit Documents or any other assets of the
Borrower or any of its Subsidiaries;

(e) any change, restructuring or termination of the corporate structure or
existence of the Borrower or any of its Subsidiaries;

(f) any failure of any Bank, the Administrative Agent, any Issuing Bank or any
other Beneficiary to disclose to the Borrower or any Guarantor any information
relating to the business, condition (financial or otherwise), operations,
properties or prospects of any Person now or in the future known to the
Administrative Agent, any Issuing Bank, any Bank or any other Beneficiary (and
each Guarantor hereby irrevocably waives any duty on the part of any Beneficiary
to disclose such information);

(g) any signature of any officer of the Borrower being mechanically reproduced
in facsimile or otherwise; or

(h) any other circumstance or any existence of or reliance on any representation
by any Beneficiary that might otherwise constitute a defense available to, or a
discharge of, the Borrower, any Guarantor or any other guarantor, surety or
other Person.

      Section 4. Continuation and Reinstatement, Etc. Each Guarantor agrees
that, to the extent that payments of any of the Guaranteed Obligations are made,
or any Bank, the Administrative Agent, any Issuing Bank or any Swap Counterparty
receives any proceeds of collateral, and such payments or proceeds or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside, or otherwise required to be repaid, then to the extent of such
repayment the Guaranteed Obligations shall be reinstated and continued in full
force and effect as of the date such initial payment or collection of proceeds
occurred. EACH GUARANTOR SHALL DEFEND AND INDEMNIFY EACH BENEFICIARY FROM AND
AGAINST ANY CLAIM, DAMAGE, LOSS, LIABILITY, COST OR EXPENSE UNDER THIS SECTION 4
(INCLUDING REASONABLE ATTORNEYS' FEES AND EXPENSES) IN THE DEFENSE OF ANY SUCH
ACTION OR SUIT INCLUDING SUCH CLAIM, DAMAGE, LOSS, LIABILITY, COST, OR EXPENSE
ARISING AS A RESULT OF THE INDEMNIFIED BENEFICIARY'S OWN NEGLIGENCE BUT
EXCLUDING SUCH CLAIM, DAMAGE, LOSS, LIABILITY, COST, OR EXPENSE THAT IS FOUND IN
A FINAL, NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE
RESULTED FROM SUCH INDEMNIFIED BENEFICIARY'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.

      Section 5. Waivers and Acknowledgments.

(a) Each Guarantor hereby waives promptness, diligence, presentment, notice of
acceptance and any other notice with respect to any of the Guaranteed
Obligations and this Guaranty and any requirement that any Beneficiary protect,
secure, perfect or insure any Lien or any property or exhaust any right or take
any action against the Borrower or any other Person or any collateral.

                                       3
<PAGE>

(b) Each Guarantor hereby irrevocably waives any right to revoke this Guaranty,
and acknowledges that this Guaranty is continuing in nature and applies to all
Guaranteed Obligations, whether existing now or in the future.

(c) Each Guarantor acknowledges that it will receive substantial direct and
indirect benefits from the financing arrangements involving the Borrower
contemplated by the Credit Documents and the Interest Rate Contracts with the
Swap Counterparties and that the waivers set forth in this Guaranty are
knowingly made in contemplation of such benefits.

      Section 6. Subrogation. No Guarantor will exercise any rights that it may
now have or hereafter acquire against the Borrower or any other Person to the
extent that such rights arise from the existence, payment, performance or
enforcement of such Guarantor's obligations under this Guaranty or any other
Credit Document, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution or indemnification and any right to
participate in any claim or remedy of any Beneficiary against the Borrower or
any other Person, whether or not such claim, remedy or right arises in equity or
under contract, statute or common law, including, without limitation, the right
to take or receive from the Borrower or any other Person, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim, remedy or right, unless and until
all of the Guaranteed Obligations and any and all other amounts payable by the
Guarantors under this Guaranty shall have been paid in full in cash, all Letters
of Credit have terminated or expired and no Letter of Credit Obligations shall
remain outstanding, and all Commitments shall have expired or terminated. If any
amount shall be paid to a Guarantor in violation of the preceding sentence at
any time prior to (a) the payment in full in cash of the Guaranteed Obligations
and any and all other amounts payable by the Guarantors under this Guaranty, (b)
the satisfaction of all Letter of Credit Obligations and the termination of all
obligations of the Issuing Banks and the Banks in respect of Letters of Credit,
and (c) the termination of the Commitments, such amount shall be held in trust
for the benefit of the Beneficiaries and shall forthwith be paid to the
Administrative Agent to be credited and applied to the Guaranteed Obligations
and any and all other amounts payable by the Guarantors under this Guaranty,
whether matured or unmatured, in accordance with the terms of the Credit
Documents.

      Section 7. Representations and Warranties. Each Guarantor hereby
represents and warrants as follows:

(a) There are no conditions precedent to the effectiveness of this Guaranty.
Such Guarantor benefits from executing this Guaranty.

(b) Such Guarantor has, independently and without reliance upon the
Administrative Agent, the Issuing Bank or any Bank and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Guaranty, and such Guarantor has established
adequate means of obtaining from the Borrower and each other relevant Person on
a continuing basis information pertaining to, and is now and on a continuing
basis will be reasonably familiar with, the business, condition (financial and
otherwise), operations, properties and prospects of the Borrower and each other
relevant Person.

                                       4
<PAGE>

(c) The obligations of such Guarantor under this Guaranty are the valid, binding
and legally enforceable obligations of such Guarantor, and the execution and
delivery of this Guaranty by such Guarantor has been duly and validly authorized
in all respects by such Guarantor, and the Person who is executing and
delivering this Guaranty on behalf of such Guarantor has full power, authority
and legal right to so do, and to observe and perform all of the terms and
conditions of this Guaranty on such Guarantor's part to be observed or
performed.

      Section 8. Right of Set-Off. Upon the occurrence and during the
continuance of any Event of Default, any Bank or the Administrative Agent, the
Issuing Bank and any other Beneficiary is hereby authorized at any time, to the
fullest extent permitted by law, to set off and apply any deposits (general or
special, time or demand, provisional or final) and other indebtedness owing by
such Beneficiary to the account of each Guarantor against any and all of the
obligations of the Guarantors under this Guaranty, irrespective of whether or
not such Beneficiary shall have made any demand under this Guaranty and although
such obligations may be contingent and unmatured. Such Beneficiary shall
promptly notify the affected Guarantor after any such set-off and application is
made, provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of the Beneficiaries under
this Section 8 are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which any Beneficiary may have.

      Section 9. Amendments, Etc. No amendment or waiver of any provision of
this Guaranty and no consent to any departure by any Guarantor therefrom shall
in any event be effective unless the same shall be in writing and signed by the
affected Guarantor, the Administrative Agent and the Majority Banks, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given; provided that no amendment, waiver or
consent shall, unless in writing and signed by all of the Banks, (a) other than
to the extent expressly provided in such amendment, waiver or consent, limit the
liability of any Guarantor hereunder (it being understood that waivers and
amendments permitted to be made under the Credit Agreement by the Majority Banks
with respect to any of the underlying obligations guaranteed hereunder shall not
be deemed to limit the liability of any Guarantor within the meaning of this
clause (a)), (b) postpone any date fixed for payment hereunder in respect of any
of the Guaranteed Obligations that is principal of, or interest on, the Notes or
any fees, or Letter of Credit Obligations, or (c) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the Notes required to
take any action hereunder.

      Section 10. Notices, Etc. All notices and other communications provided
for hereunder shall be sent in the manner provided for in Section 9.02 of the
Credit Agreement and if to a Guarantor, at its address specified on the
signature page hereto and if to the Administrative Agent, any Issuing Bank or
any Bank, at its address specified in or pursuant to the Credit Agreement, and
if to a Swap Counterparty, at its address specified in the applicable Interest
Rate Contract. All such notices and communications shall be effective when
delivered, except that notices and communications to the Administrative Agent
shall not be effective until received by the Administrative Agent.

      Section 11. No Waiver: Remedies. No failure on the part of the
Administrative Agent or any other Beneficiary to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any

                                       5
<PAGE>

other or further exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.

      Section 12. Continuing Guaranty: Assignments under the Credit Agreement.
This Guaranty is a continuing guaranty and shall (a) remain in full force and
effect until the payment in full of all Guaranteed Obligations and all other
amounts payable under the Credit Documents, the termination of all Letter of
Credit Obligations, and the termination of all the Commitments, (b) be binding
upon each Guarantor and its successors and assigns, (c) inure to the benefit of
and be enforceable by the Administrative Agent, each Bank, and each Issuing
Bank, and their respective successors, and, in the case of transfers and
assignments made in accordance with the Credit Agreement, transferees and
assigns, and (d) inure to the benefit of and be enforceable by a Swap
Counterparty and each of its successors, transferees and assigns to the extent
such successor, transferee or assign is a Bank or an Affiliate of a Bank.
Without limiting the generality of the foregoing clause (c), subject to Section
9.06 of the Credit Agreement, any Bank may assign or otherwise transfer all or
any portion of its rights and obligations under the Credit Agreement (including,
without limitation, all or any portion of its Commitment, the Advances owing to
it and the Note or Notes held by it) to any other Person, and such other Person
shall thereupon become vested with all the benefits in respect thereof granted
to such Bank herein or otherwise, subject, however, in all respects to the
provisions of the Credit Agreement. Each Guarantor acknowledges that upon any
Person becoming a Bank, the Administrative Agent, or an Issuing Bank in
accordance with the Credit Agreement, such Person shall be entitled to the
benefits hereof.

      Section 13. Governing Law. This Guaranty shall be governed by, and
construed and enforced in accordance with, the laws of the State of Texas. Each
Guarantor hereby irrevocably submits to the jurisdiction of any Texas state or
federal court sitting in Dallas, Texas in any action or proceeding arising out
of or relating to this Guaranty and the other Credit Documents, and each
Guarantor hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such court. Each Guarantor hereby
irrevocably waives, to the fullest extent it may effectively do so, any right it
may have to the defense of an inconvenient forum to the maintenance of such
action or proceeding. Each Guarantor hereby agrees that service of copies of the
summons and complaint and any other process which may be served in any such
action or proceeding may be made by mailing or delivering a copy of such process
to such Guarantor at its address set forth in the Credit Agreement or set forth
on the signature page of this Guaranty. Each Guarantor agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Section shall affect the rights of any
Beneficiary to serve legal process in any other manner permitted by the law or
affect the right of any Beneficiary to bring any action or proceeding against
any Guarantor or its Property in the courts of any other jurisdiction.

      Section 14. INDEMNIFICATION. EACH GUARANTOR SHALL INDEMNIFY EACH OF THE
BENEFICIARIES, AND THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
FROM, AND DISCHARGE, RELEASE, AND HOLD EACH OF THEM HARMLESS AGAINST, ANY AND
ALL LIABILITIES, OBLIGATIONS, LOSSES, CLAIMS, EXPENSES, OR DAMAGES OF ANY KIND
OR NATURE WHATSOEVER TO WHICH ANY OF THEM MAY BECOME SUBJECT

                                       6
<PAGE>

RELATING TO OR ARISING OUT OF THIS GUARANTY, INCLUDING ANY LIABILITIES,
OBLIGATIONS, LOSSES, CLAIMS, EXPENSES, OR DAMAGES WHICH ARISE OUT OF OR RESULT
FROM (A) ANY ACTUAL OR PROPOSED USE BY THE BORROWER, ANY GUARANTOR OR ANY
AFFILIATE OF THE BORROWER OR ANY GUARANTOR OF THE PROCEEDS OF THE ADVANCES, (B)
ANY BREACH BY THE BORROWER OR ANY GUARANTOR OF ANY PROVISION OF THE CREDIT
AGREEMENT OR ANY OTHER CREDIT DOCUMENT, (C) ANY INVESTIGATION, LITIGATION OR
OTHER PROCEEDING (INCLUDING ANY THREATENED INVESTIGATION OR PROCEEDING) RELATING
TO THE FOREGOING, (D) ANY ENVIRONMENTAL CLAIM OR REQUIREMENT OF ENVIRONMENTAL
LAWS CONCERNING OR RELATING TO THE PRESENT OR PREVIOUSLY-OWNED OR OPERATED
PROPERTIES OF THE BORROWER, ANY GUARANTOR OR THE OPERATIONS OR BUSINESS, OF THE
BORROWER OR ANY GUARANTOR, OR (E) ANY ENVIRONMENTAL CLAIM OR REQUIREMENT OF
ENVIRONMENTAL LAWS CONCERNING OR RELATED TO THE BORROWER'S OR ANY GUARANTOR'S
PROPERTIES AND EACH GUARANTOR SHALL REIMBURSE THE BENEFICIARIES AND THEIR
RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS, UPON DEMAND FOR ANY
REASONABLE OUT-OF-POCKET EXPENSES (INCLUDING REASONABLE OUTSIDE LEGAL FEES)
INCURRED IN CONNECTION WITH ANY SUCH INVESTIGATION, LITIGATION OR OTHER
PROCEEDING; AND EXPRESSLY INCLUDING ANY SUCH LOSSES, LIABILITIES, CLAIMS,
DAMAGES, OR EXPENSE INCURRED BY REASON OF THE PERSON BEING INDEMNIFIED'S OWN
NEGLIGENCE, BUT EXCLUDING ANY SUCH LOSSES, LIABILITIES, CLAIMS, DAMAGES OR
EXPENSES THAT IS FOUND IN A FINAL, NON-APPEALABLE JUDGMENT BY A COURT OF
COMPETENT JURISDICTION TO HAVE RESULTED FROM SUCH INDEMNIFIED PERSON'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT.

      Section 15. WAIVER OF JURY TRIAL. EACH GUARANTOR HEREBY ACKNOWLEDGES THAT
IT HAS BEEN REPRESENTED BY AND HAS CONSULTED WITH COUNSEL OF ITS CHOICE, AND
HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN RESPECT OF ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS GUARANTY, ANY OTHER CREDIT DOCUMENT, OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.

      Section 16. Additional Guarantors. Pursuant to Section 5.10 of the Credit
Agreement, each Subsidiary of the Borrower (other than a Restricted Subsidiary)
that was not in existence on the date of the Credit Agreement is required to
enter into this Guaranty as a Guarantor upon becoming a Subsidiary. Upon
execution and delivery after the date hereof by the Administrative Agent and
such Subsidiary of an instrument in the form of Annex 1, such Subsidiary shall
become a Guarantor hereunder with the same force and effect as if originally
named as a Guarantor herein. The execution and delivery of any instrument adding
an additional Guarantor as a party to this Guaranty shall not require the
consent of any other Guarantor hereunder. The rights and obligations of each
Guarantor hereunder shall remain in full force and effect notwithstanding the
addition of any new Guarantor as a party to this Guaranty.

                                       7
<PAGE>

      Section 17. ORAL AGREEMENTS. PURSUANT TO SECTION 26.02 OF THE TEXAS
BUSINESS AND COMMERCE CODE, AN AGREEMENT IN WHICH THE AMOUNT INVOLVED IN
AGREEMENT EXCEEDS $50,000 IN VALUE IS NOT ENFORCEABLE UNLESS THE AGREEMENT IS IN
WRITING AND SIGNED BY THE PARTY TO BE BOUND OR THAT PARTY'S AUTHORIZED
REPRESENTATIVE.

      THE RIGHTS AND OBLIGATIONS OF THE PARTIES TO AN AGREEMENT SUBJECT TO THE
PRECEDING PARAGRAPH SHALL BE DETERMINED SOLELY FROM THE WRITTEN AGREEMENT, AND
ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO
THIS GUARANTY. THIS GUARANTY AND THE CREDIT DOCUMENTS REPRESENT THE FINAL
AGREEMENT AMONG THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.

      THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

               [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]

                                       8
<PAGE>

      Each Guarantor has caused this Guaranty to be duly executed as of the date
first above written.

                         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/ M. Neale Hickerson
                                      ----------------------------------------
                                           M. Neale Hickerson
                                           Vice President - Treasury and
                                           Investor Relations

                               Address of Guarantors:
                               100 Crescent Court, Suite 1600
                               Dallas, Texas  75201-6927
                               Facsimile: (214) 871-3850
                               Attention: Steve McDonnell

                           [Signature pages continue.]

                      Signature page to Guaranty Agreement

<PAGE>

                         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/ M. Neale Hickerson
                                           -----------------------------------
                                            M. Neale Hickerson
                                            Vice President - Treasury and
                                            Investor Relations

                              Address of Guarantors:
                              100 Crescent Court, Suite 1600
                              Dallas, Texas  75201-6927
                              Facsimile: (214) 871-3850
                              Attention: Steve McDonnell

                           [Signature pages continue.]

                      Signature page to Guaranty Agreement

<PAGE>

                         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/ M. Neale Hickerson
                                      ----------------------------------------
                                       M. Neale Hickerson
                                       Vice President - Treasury and
                                       Investor Relations

                               Address of Guarantor:
                               100 Crescent Court, Suite 1600
                               Dallas, Texas  75201-6927
                               Facsimile: (214) 871-3850
                               Attention: Steve McDonnell

                      Signature page to Guaranty Agreement

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