Document:

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                                                                    EXHIBIT 10.5

                        PIPELINES AND TERMINALS AGREEMENT

         This Pipelines and Terminals Agreement (this "Agreement") is dated as
of ___________, 2004, by and among Holly Corporation, a Delaware corporation
("Holly"), Navajo Refining Company, L.P., a Delaware limited partnership
("Navajo Refining"), Holly Refining and Marketing Company, a Delaware
corporation, ("Holly Refining" and, together with Holly and Navajo Refining, the
"Holly Entities"), Holly Energy Partners, L.P., a Delaware limited partnership
(the "Partnership"), HEP Operating Company, L.P., a Delaware limited partnership
(the "Operating Partnership"), HEP Logistics Holdings, L.P., a Delaware limited
partnership (the "General Partner"), Holly Logistic Services, L.L.C., a Delaware
limited liability company ("Holly GP"), and HEP Logistics GP, L.L.C., a Delaware
limited liability company ("Holly GP LLC" and, together with the Partnership,
the Operating Partnership, the General Partner and Holly GP, the "Partnership
Entities").

                                    RECITALS:

         WHEREAS, as of the date hereof, by virtue of its indirect ownership
interests in the Partnership Group (as defined below), the Holly Entities have
an economic interest in the financial and commercial success of the Partnership
Group;

         WHEREAS, the Partnership Group is substantially dependent upon the
Holly Entities for the volumes of Refined Products (as defined below)
transported through the Partnership Group's pipelines and handled at the
Partnership Group's terminals such that a significant reduction in the Holly
Entities' use of the Partnership Group's services to transport and handle the
Refined Products would likely result in a correspondingly significant reduction
in the financial and commercial success of the Partnership Group; and

         WHEREAS, the Holly Entities and the Partnership Entities desire to
enter into this Agreement.

         NOW, THEREFORE, in consideration of the covenants and obligations
contained herein, the parties to this Agreement hereby agree as follows:

         SECTION 1. DEFINITIONS

         Capitalized terms used throughout this Agreement and not otherwise
defined herein shall have the meanings set forth below.

         "Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, the Person in question,
excluding, in the case of Holly, the Partnership Group Members.

         "Applicable Law" means any applicable statute, law, regulation,
ordinance, rule, judgment, rule of law, order, decree, permit, approval,
concession, grant, franchise, license, agreement, requirement, or other
governmental restriction or any similar form of decision of, or any provision or
condition of any permit, license or other operating authorization issued under
any of the foregoing by, or any determination by any Governmental Authority
having or asserting jurisdiction over the matter or matters in question, whether
now or hereafter in effect

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and in each case as amended (including, without limitation, all of the terms and
provisions of the common law of such Governmental Authority), as interpreted and
enforced at the time in question.

         "Arbitrable Dispute" means any and all disputes, Claims, counterclaims,
demands, causes of action, controversies and other matters in question between
any of the Partnership Entities, on the one hand, and any of the Holly Entities,
on the other hand, arising out of or relating to this Agreement or the alleged
breach hereof, or in any way relating to the subject matter of this Agreement
regardless of whether (a) allegedly extra-contractual in nature, (b) sounding in
contract, tort or otherwise, (c) provided for by Applicable Law or otherwise or
(d) seeking damages or any other relief, whether at law, in equity or otherwise.

         "bpd" means barrels per day.

         "Claim" means any existing or threatened future claim, demand, suit,
action, investigation, proceeding, governmental action or cause of action of any
kind or character (in each case, whether civil, criminal, investigative or
administrative), known or unknown, under any theory, including those based on
theories of contract, tort, statutory liability, strict liability, employer
liability, premises liability, products liability, breach of warranty or
malpractice.

         "Closing Date" means the date of the closing of the Partnership's
initial public offering of Common Units.

         "Common Units" has the meaning set forth in the Partnership Agreement.

         "Contract Quarter" means a three-month period that commences on July 1,
October 1, January 1, or April 1, and ends on September 30, December 31, March
31 or June 30, respectively.

         "Contract Year" means a year that commences on [July 1] and ends on the
last day of [June].

         "Control" (including with correlative meaning, the term "controlled
by") means, as used with respect to any Person, the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.

         "Controlled Affiliates" means with respect to any Person, any other
Person that directly or indirectly through one or more intermediaries is
controlled by such Person, excluding, in the case of Holly, the Partnership
Group Members.

         "Deficiency Notice" has the meaning set forth in Section 9(a).

         "Deficiency Payment" has the meaning set forth in Section 9(a).

         "FERC" means the United States Federal Energy Regulatory Commission.

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         "Force Majeure" means acts of God, strikes, lockouts or other
industrial disturbances, acts of the public enemy, wars, blockades,
insurrections, riots, storms, floods, washouts, arrests, the order of any court
or Governmental Authority having jurisdiction while the same is in force and
effect, civil disturbances, explosions, breakage, accident to machinery, storage
tanks or lines of pipe, inability to obtain or unavoidable delay in obtaining
material or equipment, and any other causes whether of the kind herein
enumerated or otherwise not reasonably within the control of the party claiming
suspension and which by the exercise of due diligence such party is unable to
prevent or overcome.

         "Governmental Authority" means any federal, state, local or foreign
government or any provincial, departmental or other political subdivision
thereof, or any entity, body or authority exercising executive, legislative,
judicial, regulatory, administrative or other governmental functions or any
court, department, commission, board, bureau, agency, instrumentality or
administrative body of any of the foregoing.

         "Holly Group" means Holly, Navajo Refining and Holly Refining and any
Subsidiary of such Person, treated as a single consolidated entity, excluding
the Partnership Entities.

         "Limited Partner" has the meaning set forth in the Partnership
Agreement.

         "Minimum Revenue Commitment" has the meaning set forth in Section 2(a).

         "Navajo Refinery" means the refining facilities owned by the Holly
Group in Artesia and Lovington, New Mexico.

         "PPI" has the meaning set forth in Section 2(a).

         "Partnership Agreement" means the First Amended and Restated Agreement
of Limited Partnership of Holly Energy Partners, L.P., as it may be amended from
time to time.

         "Partnership Group" means the Partnership, the Operating Partnership
and any Subsidiary of any such Person, treated as a single consolidated entity.

         "Partnership Group Member" means any member of the Partnership Group.

         "Person" means an individual or a corporation, limited liability
company, partnership, joint venture, trust, unincorporated organization,
association, government agency or political subdivision thereof or other entity.

         "Prime Rate" means the prime rate per annum announced by
______________, or if _______________ no longer announces a prime rate for any
reason, the prime rate per annum announced by the largest U.S. bank measured by
deposits from time to time as its base rate on corporate loans, automatically
fluctuating upward or downward with each announcement of such prime rate.

         "Refined Products" means gasolines, diesel fuel, jet fuel, kerosene,
heating oil, distillates, transmix, liquefied petroleum gas, natural gas liquids
and blend stocks.

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         "Refined Product Pipelines" means the pipelines described on Exhibit A
attached hereto.

         "Refined Product Terminals" means the terminals described on Exhibit B
attached hereto.

         "Refineries" means, collectively, the Navajo Refinery and the Woods
Cross Refinery.

         "Refund" has the meaning set forth in Section 9(c).

         "Subsidiary" means with respect to any Person, (a) a corporation of
which more than 50% of the voting power of shares entitled (without regard to
the occurrence of any contingency) to vote in the election of directors or other
governing body of such corporation is owned, directly or indirectly, at the date
of determination, by such Person, by one or more Subsidiaries of such Person or
a combination thereof, (b) a partnership (whether general or limited) in which
such Person or a Subsidiary of such Person is, at the date of determination, a
general or limited partner of such partnership, but only if more than 50% of the
partnership interests of such partnership (considering all of the partnership
interests of the partnership as a single class) is owned, directly or
indirectly, at the date of determination, by such Person, by one or more
Subsidiaries of such Person, or a combination thereof, or (c) any other Person
(other than a corporation or a partnership) in which such Person, one or more
Subsidiaries of such Person, or a combination thereof, directly or indirectly,
at the date of determination, has (i) at least a majority ownership interest or
(ii) the power to elect or direct the election of a majority of the directors or
other governing body of such Person.

         "Woods Cross Refinery" means the refinery owned by the Holly Group in
Woods Cross, Utah.

         SECTION 2. AGREEMENT TO USE SERVICES RELATING TO PIPELINES AND
TERMINALS.

         The parties are entering into this Agreement that sets forth a
commercial arrangement consistent with historical operational practices between
the Holly Group and the predecessor to the Partnership Group as well as the
objectives of the parties. The parties intend to be strictly bound by the
commercial terms set forth in this Agreement, which set forth the Minimum
Revenue Commitment on the part of the Holly Group and require the Partnership
Group to provide certain services to the Holly Group. The principal objective of
the Partnership Group is for the Holly Group to meet or exceed the Minimum
Revenue Commitment. The principal objective of the Holly Group is for the
Partnership Group to provide services to the Holly Group in a manner that
enables the Holly Group to operate its assets in a manner at least as favorably
as the historical course of dealing between the parties in which the Holly Group
has been the principal user of the Refined Product Pipelines and the Refined
Product Terminals.

         (a)      Minimum Revenue Commitment. During the term of this Agreement
and subject to the terms and conditions of this Agreement, the Holly Group
agrees as follows:

                  (i)      Subject to Section 3, for a term of 15 Contract Years
         commencing on [July 1, 2004], the Holly Group will transport on the
         Refined Product Pipelines and terminal in the Refined Product Terminals
         an amount of Refined Products in the aggregate that will produce
         revenue to the Partnership Group in an amount at least equal to $8.85
         million per Contract Quarter (the "Minimum Revenue Commitment").

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                  (ii)     The Minimum Revenue Commitment shall be adjusted each
         Contract Year by an amount equal to the percentage increase, if any,
         between the two preceding calendar years, in the Producer Price Index
         for Finished Goods, seasonally adjusted, as published by the Department
         of Labor ("PPI"); provided, however, that the Minimum Revenue
         Commitment will not decrease as a result of any decrease in the PPI. If
         that index is no longer published, the Holly Group and the Partnership
         Group shall negotiate in good faith to agree on a new index that gives
         comparable protection against inflation or deflation. If the Holly
         Group and the Partnership Group are unable to agree, a new index will
         be determined by binding arbitration in accordance with Section 10(f)
         of this Agreement.

                  (iii)    If the Holly Group is unable for a period of time to
         transport on the Refined Product Pipelines or terminal in the Refined
         Product Terminals the volumes of Refined Products required to meet the
         Minimum Revenue Commitment as a result of the Partnership Group's
         operational difficulties, prorationing or difficulties with pipeline
         connections, then upon written notice by Holly to the Partnership
         Group, the Minimum Revenue Commitment will be reduced for such period
         of time by an amount equal to: (1) the volume of Refined Products that
         the Holly Group is unable to transport on the Refined Product Pipelines
         or terminal in the Refined Product Terminals as a result of the
         Partnership Group's operational difficulties, prorationing or
         difficulties with pipeline connections multiplied by (2) the applicable
         tariffs and terminal service fees.

         (b)      Tariffs and Terminal Service Fees. The initial service fees
for terminalling the Refined Products under this Section 2 are set forth on the
fee schedule attached hereto as Exhibit C. The rules and regulations applicable
to interstate and intrastate service on the Refined Product Pipelines shall be
as set forth in the pro forma rules and regulations tariffs attached as Exhibit
D and Exhibit E respectively. The initial tariff rates for interstate and
intrastate service on the Refined Product Pipelines shall be as set forth in the
pro forma tariffs attached as Exhibit F and Exhibit G respectively. The initial
tariff rates shall be adjusted each Contract Year by an amount equal to the
percentage change, if any, between the two preceding calendar years, in the
PPI. If that index is no longer published, the Holly Group and the Partnership
Group shall negotiate in good faith to agree on a new index that gives
comparable protection against inflation or deflation. If the Holly Group and the
Partnership Group are unable to agree, a new index will be determined by binding
arbitration in accordance with Section 10(f) of this Agreement. Notwithstanding
that the Minimum Revenue Commitment will be determined on a Contract Year basis,
the applicable fees, tariff rates and other charges provided for in this
Agreement will become effective as of the date of this Agreement, or in the case
of the pipeline tariff rates, as soon thereafter as those rates become
effective. The Partnership Group will use commercially reasonable efforts to
obtain the necessary regulatory approvals for the Refined Product Pipeline
tariff rates set forth in Exhibit F and Exhibit G to become effective on the
date of this Agreement or as soon as possible thereafter.

         (c)      Obligations of the Partnership Group. During the term of this
Agreement and subject to the terms and conditions of this Agreement, including
Section 10(c), the Partnership Group agrees to own, operate and maintain the
assets necessary to accept the deliveries from the Holly Group and to provide
the services required under this Agreement. At the request of the Holly Group,
the Partnership Group agrees to use commercially reasonable efforts to transport

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by pipeline for the Holly Group each month during the term of this Agreement (i)
up to 40,000 bpd of Refined Products from Artesia to El Paso on the
Partnership's Artesia to Orla to El Paso Refined Product Pipeline or its Artesia
to El Paso Refined Product Pipeline and (ii) up to 40,000 bpd of Refined
Products from Artesia to Moriarty or Artesia to Bloomfield on the Partnership's
Artesia to Moriarty and Artesia to Bloomfield Refined Product Pipeline, subject
in each case to any applicable common carrier proration duties. The Partnership
Group agrees to provide terminalling services for all Holly Group volumes of
Refined Products transported to the Refined Product Terminals. To the extent
that the Holly Group is entitled to an exception under Section 3 of this
Agreement to its obligations under Section 2(a) of this Agreement, the
corresponding obligations of the Partnership Group under this Section 2(c) will
be proportionately reduced.

         (d)      Ancillary Services. The Partnership Group will provide
ancillary services as have been provided historically, such as truck rack
blending, tank sampling and tank-to-tank transfers, to the Holly Group. The fees
for such ancillary services are included in the fees established under this
Agreement for services provided under Section 2(b). All fuel additives, dyes,
de-icers and other additives requested to be added to the Holly Group's Refined
Products will be provided by the Holly Group at no cost to the Partnership
Group. If any ancillary services are requested by the Holly Group that are
different in kind, scope or frequency from the ancillary services that have been
historically provided, then the parties shall negotiate in good faith to
determine the appropriate rates to be charged for such services. The Holly Group
shall be responsible for maintaining the integrity of its operations and the
quality of its products so as to not cause additional operating costs related to
ancillary services to be incurred by the Partnership Group.

         (e)      Pipeline Direction. Without Holly's prior written consent,
which shall not be unreasonably withheld, the Partnership Group will not reverse
the direction of any Refined Product Pipeline or connect any other pipeline to
the Refined Product Pipelines or Refined Product Terminals.

         (f)      Product Losses. With respect to the Refined Product Terminals,
the Partnership Group will be responsible for all product losses, as determined
on a quarterly basis on a terminal by terminal basis, that are greater than
0.25% of the product terminalled in accordance with this Section 2. All product
losses with respect to the Refined Product Terminals will be offset by product
gains, if any, as determined on a quarterly basis on a terminal by terminal
basis. Product gains at the Refined Product Terminals, after any offsetting
losses, will be the property of the Partnership Group.

         (g)      Taxes. The Holly Group will pay all taxes, import duties,
license fees and other charges by any Governmental Authority levied on the
Refined Products delivered by the Holly Group for transportation or storage by
the Partnership Group in the Refined Product Pipelines and Refined Product
Terminals.

         (h)      Timing of Payments. The Holly Group will make payments to the
Partnership Group on a monthly basis during the term of this Agreement with
respect to services rendered by the Partnership Group under this Agreement in
the prior month. Payments not received by the

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Partnership Group on or prior to the applicable payment date will accrue
interest at the Prime Rate from the applicable payment date until paid.

         (i)      Notification of Utilization. When requested by the Partnership
Group, Holly will provide to the Partnership Group written notification of the
Holly Group's reasonable good faith estimate of its anticipated future
utilization of the assets of the Partnership Group.

         (j)      Scheduling of Product Movements. The Partnership Group will
use its reasonable commercial efforts to schedule Refined Product movements and
accept deliveries of Refined Products hereunder in a manner that is consistent
with the historical dealings between the parties, as such dealings may change
from time to time.

         (k)      Monthly Surcharge. If new laws or regulations are enacted that
require the Partnership Group to make substantial and unanticipated capital
expenditures with respect to the Refined Products Terminals, the Partnership
Group may impose a monthly surcharge to cover the Holly Group's pro rata share
of the cost of complying with these laws or regulations. The Holly Group and the
Partnership Group shall use their reasonable commercial efforts to comply with
these laws and regulations, and shall negotiate in good faith to mitigate the
impact of these laws and regulations and to determine the level of the monthly
surcharge. If the Holly Group and the Partnership Group are unable to agree on
the level of the monthly surcharge, such surcharge will be determined by binding
arbitration in accordance with Section 10(f) of this Agreement.

         (l)      Increases in Pipeline Tariff Rates. If new laws or regulations
are enacted that require the Partnership Group to make substantial and
unanticipated capital expenditures with respect to the Refined Product
Pipelines, the Partnership Group may file new tariff rates in order to recover
the cost of complying with these laws or regulations (including a reasonable
return). The Holly Group and the Partnership Group shall use their reasonable
commercial efforts to comply with these laws and regulations, and shall
negotiate in good faith to mitigate the impact of these laws and regulations and
to determine the amount of the new tariff rates. If the Holly Group and the
Partnership Group are unable to agree on the amount of the new tariff rates that
the Partnership Group will file, such tariff rates will be determined by binding
arbitration in accordance with Section 10(f) of this Agreement.

         (m)      Business Interruption Insurance. The Holly Group will maintain
commercially reasonable business interruption insurance for the benefit of the
Refineries and the Refined Product Pipelines and the Refined Product Terminals
for so long as the Partnership is a consolidated subsidiary of Holly. To the
extent the Holly Group receives benefits under the insurance policy, the Holly
Group will apply a portion of such benefits to the extent necessary to satisfy
the Minimum Revenue Commitment. Allocation of such benefits will be
proportionate to the loss in revenues sustained by the Holly Group and the
Partnership Group as a result of the interruption.

         SECTION 3. EXCEPTIONS TO THE HOLLY GROUP'S OBLIGATIONS

         (a)      Shut Down or Reconfiguration of Refineries. The Holly Group
must deliver to the Partnership Group at least twelve months advance written
notice of any planned shut down or

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reconfiguration (excluding planned maintenance turnarounds) of any Refinery or
any portion of a Refinery that would reduce such Refinery's output. The Holly
Group will use its commercially reasonable efforts to mitigate any reduction in
the Minimum Revenue Commitment that would result from such a shut down or
reconfiguration. If the Holly Group shuts down or reconfigures any Refinery or
any portion of a Refinery (excluding planned maintenance turnarounds) and
reasonably believes in good faith that such shut down or reconfiguration will
jeopardize its ability to satisfy the Minimum Revenue Commitment, then the Holly
Group will utilize the Refined Product Pipelines for 100% of the available
production from the Refineries to the extent necessary to satisfy the Minimum
Revenue Commitment. In the event that such production is insufficient to satisfy
the Minimum Revenue Commitment, then within 90 days of the delivery of the
written notice of the planned shut down or reconfiguration, the Holly Group
shall (i) propose a new Minimum Revenue Commitment, such that the ratio of the
new Minimum Revenue Commitment under this Agreement over the anticipated
production level following the shut down or reconfiguration will be
approximately equal to the ratio of the original Minimum Revenue Commitment
under this Agreement over the original production level and (ii) propose the
date on which the new Minimum Revenue Commitment shall take effect. Unless
objected to by the Partnership Entities within 60 days of receipt by the
Partnership Group of such proposal, such new Minimum Revenue Commitment shall
become effective as of the date proposed by the Holly Group. To the extent that
the Partnership Entities do not agree with the Holly Group's proposal, any
changes in the Holly Group's obligations under this Agreement, or the date on
which such changes will take effect, will be determined by binding arbitration
in accordance with Section 10(f) of this Agreement.

         (b)      Force Majeure. In the event that any party is rendered unable,
wholly or in part, by a Force Majeure event from performing its obligations
under this Agreement for a period of more than 30 days, the parties agree that
upon the delivery of notice and full particulars of the Force Majeure event in
writing within a reasonable time after the occurrence of the Force Majeure event
relied on, the obligations of the parties, so far as they are affected by the
Force Majeure event, shall be suspended during the continuance of any inability
so caused. Any suspension of the obligations of the parties as a result of this
Section 3(b) shall extend the term of this Agreement. The Holly Group will be
required to pay any amounts accrued and due under this Agreement at the time of
the Force Majeure event. The cause of the Force Majeure event shall so far as
possible be remedied with all reasonable dispatch, except that no party shall be
compelled to resolve any strikes, lockouts or other industrial disputes other
than as it shall determine to be in its best interests. In the event a Force
Majeure event prevents the Partnership Group or the Holly Group from performing
its obligations under this Agreement for a period of more than one year, this
Agreement may be terminated by the Partnership Group or the Holly Group. Nothing
in this Section 3(b) shall alter the liability of the Partnership Group as set
forth in the rules and regulations tariffs for the Refined Product Pipelines
attached as Exhibit D and Exhibit E.

         SECTION 4. AGREEMENT TO REMAIN SHIPPER

         With respect to any Refined Products that are produced at a Refinery
and transported in any Refined Product Pipeline or handled at any Refined
Product Terminal, the Holly Group agrees that it will continue its historical
commercial practice of owning such Refined Products from such point as such
Refined Products leave the Refinery until at least such point as they will

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not be further transported in a Refined Product Pipeline or handled at a Refined
Product Terminal and to continue acting in the capacity of the shipper of any
such Refined Products for their own account at all times that such Refined
Products are in a Refined Product Pipeline or being handled at the Refined
Product Terminals.

         SECTION 5. AGREEMENT NOT TO CHALLENGE TARIFFS OR TERMINAL CHARGES

         The Holly Entities agree to any tariff rate changes for the Refined
Product Pipelines determined in accordance with this Agreement. The Holly
Entities agree (a) not to challenge, nor to cause its Controlled Affiliates to
challenge, nor to encourage or recommend to any other Person that it challenge,
or voluntarily assist in any way any other Person in challenging, in any forum,
interstate or intrastate tariffs (including joint tariffs) of the Partnership
Group that the Partnership Group has filed or may file containing rates, rules
or regulations that are in effect at any time during the term of this Agreement
and regulate the transportation of Refined Products, (b) not to protest or file
a complaint, nor cause their Controlled Affiliates to protest or file a
complaint, nor encourage or recommend to any other Person that it protest or
file a complaint, or voluntarily assist in any way any other Person in
protesting or filing a complaint, with respect to regulatory filings that the
Partnership Group has made or may make at any time during the term of this
Agreement to change interstate or intrastate tariffs (including joint tariffs)
for transportation of Refined Products and (c) not to seek, nor cause their
Controlled Affiliates to seek, nor encourage or recommend to any other Person
that it seek, or voluntarily assist in any way any other Person in seeking,
regulatory review of, or regulatory jurisdiction over, the contractual rates
charged at any time during the term of this Agreement by the Partnership Group
for terminalling services or to challenge, in any forum, such rates or changes
to such rates, in each case so long as such tariffs, regulatory filings or rates
changed do not conflict with the terms of this Agreement.

         SECTION 6. EFFECTIVENESS AND TERM

         This Agreement shall be effective as of [July 1, 2004] and shall
terminate at 12:01 a.m. Dallas, Texas, time on [July 1, 2019], unless extended
by written mutual agreement of the parties hereto as set forth in Section 7;
provided, however, that Section 5 shall survive the termination of this
Agreement.

         SECTION 7. RIGHT TO ENTER INTO A NEW AGREEMENT

         Upon termination of this Agreement as set forth in Section 6, the Holly
Entities will have the right to enter into a new pipelines and terminals
agreement with the Partnership Entities on commercial terms that are
substantially similar to the terms which the Partnership Group proposes to enter
into an agreement with a third party for similar services. The Partnership Group
shall give the Holly Group 90 days prior written notice of any proposed new
pipelines and terminals agreement with a third party, including details of all
of the material terms and conditions thereof.

         SECTION 8. NOTICES

         All notices or requests or consents provided for by, or permitted to be
given pursuant to, this Agreement must be in writing and must be given by
depositing same in the United States

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mail, addressed to the Person to be notified, postpaid, and registered or
certified with return receipt requested or by delivering such notice in person
or by telecopier or telegram to such party. Notice given by personal delivery or
mail shall be effective upon actual receipt. Notice given by telegram or
telecopier shall be effective upon actual receipt if received during the
recipient's normal business hours or at the beginning of the recipient's next
business day after receipt if not received during the recipient's normal
business hours. All notices to be sent to a party pursuant to this Agreement
shall be sent to or made at the address set forth below or at such other address
as such party may stipulate to the other parties in the manner provided in this
Section 8:

                               if to the Holly Entities:

                               Holly Corporation
                               100 Crescent Court
                               Suite 1600
                               Dallas, Texas 75201
                               Attn: _________________
                               Telecopy: _____________

                               with a copy to:

                               _______________________
                               _______________________
                               _______________________
                               _______________________

                               if to the Partnership Entities:

                               Holly Energy Partners, L.P.
                               c/o Holly Logistic Services, L.L.C.
                               100 Crescent Court
                               Suite 1600
                               Dallas, Texas 75201
                               Attn: ________________
                               Telecopy: _____________

                               with a copy to:

                               _______________________
                               _______________________
                               _______________________
                               _______________________

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         SECTION 9. DEFICIENCY PAYMENTS

         (a)      As soon as practicable following the end of each Contract
Quarter under this Agreement, the Partnership Group shall deliver to the Holly
Group a written notice (the "Deficiency Notice") detailing any failure of the
Holly Group to meet any of its obligations under Section 2(a) of this Agreement.
The Deficiency Notice shall (i) specify in reasonable detail the nature of any
deficiency and (ii) specify the approximate dollar amount that the Partnership
Group believes would have been paid by the Holly Group to the Partnership Group
if the Holly Group had complied with Section 2(a) of this Agreement (the
"Deficiency Payment"). The Holly Group shall pay the Deficiency Payment to the
Partnership Group upon the later of: (1) 10 days after its receipt of the
Deficiency Notice and (2) 30 days following the end of the related Contract
Quarter.

         (b)      If the Holly Group disagrees with the Deficiency Notice, then
following the payment of the Deficiency Payment to the Partnership Group, the
chief financial officers of Holly (on behalf of the Holly Group) and Holly GP
(on behalf of the Partnership Group) shall meet or communicate by telephone at a
mutually acceptable time and place, and thereafter as often as they reasonably
deem necessary and shall negotiate in good faith to attempt to resolve any
differences that they may have with respect to matters specified in the
Deficiency Notice. During the 30-day period following the payment of the
Deficiency Payment, the Holly Group shall have access to the working papers of
the Partnership Group relating to the Deficiency Notice. If such differences are
not resolved within 30 days following the payment of the Deficiency Payment, the
Holly Group and the Partnership Group shall, within 45 days following the
payment of the Deficiency Payment, submit any and all matters which remain in
dispute and which were properly included in the Deficiency Notice to arbitration
in accordance with Section 10(f).

         (c)      If it is finally determined pursuant to this Section 9 that
the Holly Group is not required to make any or all of the Deficiency Payment
(the "Refund"), the Partnership Group shall promptly pay to the Holly Group the
Refund, together with interest thereon at the Prime Rate, in immediately
available funds.

         (d)      Deficiency Payments will be credited against any payments owed
by the Holly Group in the following four Contract Quarters in excess of the
Minimum Revenue Commitments established by this Agreement for such Calendar
Quarters; provided, however, that the Holly Group will not receive credit for
any Deficiency Payment in any of the following four Contract Quarters until it
has met the Minimum Revenue Commitment in the succeeding Contract Quarter.

         SECTION 10. MISCELLANEOUS

         (a)      Intention as to Refineries. The Holly Entities represent to
the Partnership Entities that, as of the date of this Agreement, they are not
considering a shut down of any of the Refineries or any changes to any of the
Refineries that would have a material adverse effect on the operation of any of
the Refineries.

                                       11
<PAGE>

         (b)      Amendments and Waivers. No amendment or modification of this
Agreement shall be valid unless it is in writing and signed by the parties
hereto and, in the case of any amendment or modification adverse to the
Partnership Group, approved by the Conflicts Committee of Holly GP. No waiver of
any provision of this Agreement shall be valid unless it is in writing and
signed by the party against whom the waiver is sought to be enforced, and, in
the case of any waiver by the Partnership Entities, approved by the Conflicts
Committee of Holly GP. No failure or delay in exercising any right hereunder,
and no course of conduct, shall operate as a waiver of any provision of this
Agreement. No single or partial exercise of a right hereunder shall preclude
further or complete exercise of that right or any other right hereunder.

         (c)      Successors and Assigns. This Agreement shall inure to the
benefit of, and shall be binding upon, the Holly Entities, the Partnership
Entities and their respective successors and permitted assigns. Neither this
Agreement nor any of the rights or obligations hereunder shall be assigned
without the prior written consent of Holly (in the case of any assignment by the
Partnership Entities) or the Conflicts Committee of Holly GP (in the case of any
assignment by the Holly Entities); provided, however, that (i) the Partnership
Entities may make such an assignment (including a partial pro rata assignment)
to an Affiliate of the Partnership Entities and (ii) the Holly Group may make
such an assignment to any Person to which the Holly Group has sold any of its
assets that relies on the services provided by the Partnership Group under this
Agreement if such Person (A) is reasonably capable of performing the Holly
Group's obligations (or its pro rata portion of such obligations) under this
Agreement assigned to such Person, which determination shall be made by the
Holly Group in its reasonable judgment and (B) has agreed in writing with the
Partnership Group to assume the obligations of the Holly Group assigned to such
Person. Any attempt to make an assignment otherwise than as permitted by the
foregoing shall be null and void. The parties hereto agree to require their
respective successors, if any, to expressly assume, in a form of agreement
acceptable to the other parties, their obligations under this Agreement.

         (d)      Severability. If any provision of this Agreement shall be held
invalid or unenforceable by a court or regulatory body of competent
jurisdiction, the remainder of this Agreement shall remain in full force and
effect.

         (e)      Choice of Law. This Agreement shall be subject to and governed
by the laws of the State of Texas, excluding any conflicts-of-law rule or
principle that might refer the construction or interpretation of this Agreement
to the laws of another state.

         (f)      Arbitration Provision. Any and all Arbitrable Disputes must be
resolved through the use of binding arbitration using three arbitrators, in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, as supplemented to the extent necessary to determine any procedural
appeal questions by the Federal Arbitration Act (Title 9 of the United States
Code). If there is any inconsistency between this Section and the Commercial
Arbitration Rules or the Federal Arbitration Act, the terms of this Section will
control the rights and obligations of the parties. Arbitration must be initiated
within the time limits set forth in this Agreement, or if no such limits apply,
then within a reasonable time or the time period allowed by the applicable
statute of limitations. Arbitration may be initiated by a party ("Claimant")
serving written notice on the other party ("Respondent") that the Claimant
elects to refer the Arbitrable Dispute to binding arbitration. Claimant's notice
initiating binding arbitration must

                                       12
<PAGE>

identify the arbitrator Claimant has appointed. The Respondent shall respond to
Claimant within 30 days after receipt of Claimant's notice, identifying the
arbitrator Respondent has appointed. If the Respondent fails for any reason to
name an arbitrator within the 30-day period, Claimant shall petition the
American Arbitration Association for appointment of an arbitrator for
Respondent's account. The two arbitrators so chosen shall select a third
arbitrator within 30 days after the second arbitrator has been appointed. The
Claimant will pay the compensation and expenses of the arbitrator named by or
for it, and the Respondent will pay the compensation and expenses of the
arbitrator named by or for it. The costs of petitioning for the appointment of
an arbitrator, if any, shall be paid by Respondent. The Claimant and Respondent
will each pay one-half of the compensation and expenses of the third arbitrator.
All arbitrators must (a) be neutral parties who have never been officers,
directors or employees of the Holly Entities, the Partnership Entities or any of
their affiliates and (b) have not less than seven years experience in the energy
industry. The hearing will be conducted in Dallas, Texas and commence within 30
days after the selection of the third arbitrator. The Holly Entities, the
Partnership Entities and the arbitrators shall proceed diligently and in good
faith in order that the award may be made as promptly as possible. Except as
provided in the Federal Arbitration Act, the decision of the arbitrators will be
binding on and non-appealable by the parties hereto. The arbitrators shall have
no right to grant or award indirect, consequential, punitive or exemplary
damages of any kind.

         (g)      Rights of Limited Partners. The provisions of this Agreement
are enforceable solely by the parties to this Agreement, and no Limited Partner
of the Partnership shall have the right, separate and apart from the
Partnership, to enforce any provision of this Agreement or to compel any party
to this Agreement to comply with the terms of this Agreement.

         (h)      Further Assurances. In connection with this Agreement and all
transactions contemplated by this Agreement, each signatory party hereto agrees
to execute and deliver such additional documents and instruments and to perform
such additional acts as may be necessary or appropriate to effectuate, carry out
and perform all of the terms, provisions and conditions of this Agreement and
all such transactions.

                                       13
<PAGE>

         IN WITNESS WHEREOF, the undersigned parties have executed this
Agreement as of the date first written above.

                                   HOLLY CORPORATION

                                   By: ________________________________________
                                   Name: ______________________________________
                                   Title: _____________________________________

                                   NAVAJO REFINING COMPANY, L.P.

                                   By: HOLLY CORPORATION,
                                       its general partner

                                       By: _____________________________________
                                       Name: ___________________________________
                                       Title: __________________________________

                                   HOLLY REFINING AND MARKETING COMPANY

                                   By: ________________________________________
                                   Name: ______________________________________
                                   Title: _____________________________________

                                   HOLLY ENERGY PARTNERS, L.P.

                                   By: HEP LOGISTICS HOLDINGS, L.P.,
                                       its general partner

                                   By: HOLLY LOGISTIC SERVICES, L.L.C.,
                                       its general partner

                                       By: _____________________________________
                                       Name: ___________________________________
                                       Title: __________________________________

         Signature Page 1 of 2 to the Pipelines and Terminals Agreement
<PAGE>

                                   HEP OPERATING COMPANY, L.P.

                                   By: HEP LOGISTICS GP, L.L.C.,
                                       its general partner

                                       By: ____________________________________
                                       Name: __________________________________
                                       Title: _________________________________

                                   HEP LOGISTICS HOLDINGS, L.P.

                                   By: HOLLY LOGISTIC SERVICES, L.L.C.,
                                       its general partner

                                       By: ____________________________________
                                       Name: __________________________________
                                       Title: _________________________________

                                   HOLLY LOGISTIC SERVICES, L.L.C.

                                   By: ________________________________________
                                   Name: ______________________________________
                                   Title: _____________________________________

                                   HEP LOGISTICS GP, L.L.C.

                                   By: ________________________________________
                                   Name: ______________________________________
                                   Title: _____________________________________

         Signature Page 2 of 2 to the Pipelines and Terminals Agreement

<PAGE>

                                                                       EXHIBIT A

                            REFINED PRODUCT PIPELINES

<TABLE>
<CAPTION>
                                                         MILES OF
   ORIGIN AND DESTINATION                                PIPELINE        DIAMETER     CAPACITY
   ----------------------                                --------        --------     --------
                                                                         (inches)       (bpd)
<S>                                                      <C>             <C>          <C>
Artesia, NM to El Paso, TX..........................        156                6       24,000
Artesia, NM to Orla, TX
      to El Paso, TX................................        215           8/12/8       60,000(1)
Artesia, NM to Moriarty, NM(2)......................        215             12/8       45,000
Artesia, NM to Bloomfield, NM(2)....................        406             12/8             (3)
</TABLE>

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

(1)      Includes 20,000 bpd of capacity on the Orla to El Paso segment of this
         pipeline that is leased to Alon.

(2)      The White Lakes Junction to Moriarty segment of the Artesia to Moriarty
         pipeline and the Moriarty to Bloomfield pipeline is leased from
         Enterprise Products Partners, L.P. under a long-term lease agreement.

(3)      Capacity for this pipeline is reflected in the information for the
         Artesia to Moriarty pipeline.

                                      A-1
<PAGE>

                                                                       EXHIBIT B

                           REFINED PRODUCTS TERMINALS

<TABLE>
<CAPTION>
                                                                                       STORAGE CAPACITY
       LOCATION                                                                            (BARRELS)         NUMBER OF TANKS
       --------                                                                        ----------------      ---------------
<S>                                                                                    <C>                   <C>
El Paso, TX...................................................................              507,000                  16
Moriarty, NM..................................................................              189,000                   9
Bloomfield, NM................................................................              193,000                   7
Albuquerque, NM(1)............................................................               64,000                   9
Tucson, AZ(2).................................................................              176,000                   9
Mountain Home, ID(3)..........................................................              120,000                   3
Boise, ID(1)..................................................................              111,000                   9
Burley, ID(1).................................................................               70,000                   7
Spokane, WA...................................................................              333,000                  32
Artesia facility truck rack...................................................                  N/A                 N/A
Woods Cross facility truck rack...............................................                  N/A                 N/A
</TABLE>

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

(1)      The Partnership Group has a 50% ownership interest in these terminals.
         The capacity information represents the proportionate share of capacity
         attributable to this ownership interest.

(2)      The Partnership Group has a 50% ownership interest in this terminal.
         The Partnership Group leases the remaining 50% of the terminal from
         Kaneb Pipeline Co., the other owner.

(3)      Handles only jet fuel.

                                      B-1
<PAGE>

                                                                       EXHIBIT C

                                  FEE SCHEDULE

1.       The Holly Group will pay a terminal service fee of $0.30 per barrel for
         truck rack deliveries and $0.10 per barrel for pipeline deliveries at
         each of the Refined Product Terminals.

2.       The Holly Group will pay a service fee of $0.25 per barrel for truck
         rack deliveries for facilities located within Refineries.

3.       Each of the service fees listed on this Exhibit C will adjust at the
         beginning of each Contract Year by an amount equal to the percentage
         change between the two preceding Contract Years in the index comprised
         of comparable fees posted by Kinder Morgan at its Phoenix, Tucson and
         Las Vegas terminals.

                                       C-1
<PAGE>

                                                                       EXHIBIT D

                                       D-1
<PAGE>

                                                                       EXHIBIT E

                                       E-1
<PAGE>

                                                                       EXHIBIT F

                                       F-1
<PAGE>

                                                                       EXHIBIT G

                                       G-1<PAGE>
                                                                    EXHIBIT 10.6

                         HOLLY LOGISTIC SERVICES, L.L.C.
                              ANNUAL INCENTIVE PLAN

1.       INTENT.

         The purpose of this Annual Incentive Plan (the "Plan") is to motivate
management and the employees of Holly Logistic Services, L.L.C. (the "Company")
and its affiliates who perform services for the Company and for Holly Energy
Partners, L.P., a Delaware limited partnership, and its subsidiaries (the
"Partnership") to collectively produce outstanding results, encourage superior
performance, increase productivity, and aid in attracting and retaining key
employees.

2.       PLAN GUIDELINES.

         The administration of the Plan and any potential awards granted
pursuant to the Plan is subject to the determination by the Compensation
Committee of the Company's Board of Directors (the "Compensation Committee")
that the performance goals for the applicable periods have been achieved. The
Plan is an additional compensation program designed to encourage Plan
participants (designated by the Compensation Committee) to exceed specified
objective performance targets for the designated period. The Compensation
Committee will review performance results for the designated performance period,
and thereafter will determine whether or not to approve awards under the Plan.

3.       PERFORMANCE TARGETS.

         3.1 DESIGNATION OF PERFORMANCE TARGETS. The Company's Chief Executive
Officer shall recommend, subject to the Compensation Committee's approval, the
performance measures and performance targets to be used for each calendar year
(a "Plan Year") in determining the bonus amounts to be paid as a result of the
Plan. Performance targets may be based on Partnership, business unit and/or
individual achievements, or any combination of these, or on such other factors
as the Company's Chief Executive Officer, subject to the approval of the
Compensation Committee, may determine. Different performance targets may be
established for different participants for any Plan Year. Satisfactory results,
as determined by the Compensation Committee in its sole discretion, must be
achieved in order for an award to be made pursuant to the Plan.

         3.2 EQUITABLE ADJUSTMENT TO PERFORMANCE TARGETS. At its discretion, the
Compensation Committee may adjust performance measure results for extraordinary
events or accounting adjustments resulting from significant asset purchases or
dispositions or other events not contemplated or otherwise considered by the
Compensation Committee when the performance measures and targets were set.

4.       PARTICIPANTS.

         The Compensation Committee, in consultation with the Company's Chief
Executive Officer, will designate members of management and employees of the
Company and its affiliates as eligible to participate in the Plan.
Employees so designated shall be referred to as "Participants."

                                       1
<PAGE>

5.       PARTICIPATION LEVELS.

         A Participant's designated level of participation in the Plan, or
target bonus, will be determined under criteria established or approved by the
Compensation Committee for that Plan Year or designated performance period.
Levels of participation in the Plan may vary according to a Participant's
position and the relative impact such Participant can have on the Company's
and/or affiliates' operations. Care will be used in communicating to any
participant his performance targets and potential performance amount for a Plan
Year. The amount of target bonus a participant may receive for any Plan Year, if
any, will depend upon the performance level achieved (unless waived) for that
Plan Year, as determined by the Compensation Committee. No Participant shall
have any claim to be granted any award under the Plan, and there is no
obligation for uniformity of treatment of Participants. The terms and conditions
of awards need not be the same respecting each Participant.

6.       AWARD PAYOUT.

         Awards typically will be determined after the end of the Plan Year or
designated performance period. Awards will be paid in cash annually, unless
otherwise determined by the Compensation Committee. The Compensation Committee
will have the discretion, by Participant and by grant, to reduce (but not to
increase) some or all of the amount of any award that otherwise would be payable
by reason of the satisfaction of the applicable performance targets. In making
any such determination, the Compensation Committee is authorized to take into
account any such factor or factors it determines are appropriate, including but
not limited to Company, business unit and individual performance; provided,
however, that the exercise of such negative discretion with respect to one
Participant may not be used to increase the amount of any award otherwise
payable to another Participant.

7.       TERMINATION OF EMPLOYMENT.

         Termination of a Participant's employment for any reason prior to
payout of an award under the Plan will result in the Participant's forfeiture of
any right, title or interest in any such award, unless and to the extent waived
by the Compensation Committee in its sole discretion.

8.       AMENDMENT AND TERMINATION.

         The Compensation Committee, at its sole discretion, may amend the Plan
or terminate the Plan at any time.

9.       ADMINISTRATION.

         The Compensation Committee may delegate the responsibility for the
administration and operation of the Plan to the Chief Executive Officer (or
designee) of the Company or any participating affiliate. The Compensation
Committee (or the person(s) to which administrative authority has been
delegated) shall have the authority to interpret and construe any and all
provisions of the Plan, including all performance targets and whether and to
what extent achieved. Any determination made by the Compensation Committee (or
the person(s) to which administrative authority has been delegated) shall be
final and conclusive and binding on all persons.

                                       2
<PAGE>

10.      INDEMNIFICATION.

         Neither the Company, nor any participating affiliate, nor the Board of
Directors of the Company or any participating affiliate, nor any member of any
committee of the Board of Directors or any participating affiliate, nor any
employee of the Company or any participating affiliate shall be liable for any
act, omission, interpretation, construction or determination made in connection
with the Plan in good faith; and the members of the Company's Board of
Directors, the Compensation Committee and/or the employees of the Company or any
participating affiliate shall be entitled to indemnification and reimbursement
by the Company to the maximum extent permitted by law in respect of any claim,
loss, damage or expense (including counsel's fees) arising from their acts,
omission and conduct in their official capacity with respect to the Plan.

11.      GENERAL PROVISIONS.

         11.1 NON-GUARANTEE OF EMPLOYMENT. Nothing contained in this Plan shall
be construed as a contract of employment between the Company and/or a
participating affiliate and a Participant, and nothing in this Plan shall confer
upon any Participant any right to continued employment with the Company or a
participating affiliate, or to interfere with the right of the Company or a
participating affiliate to terminate a Participant's employment, with or without
cause.

         11.2 INTERESTS NOT TRANSFERABLE. No benefits under the Plan shall be
subject in any manner to alienation, sale, transfer, assignment, pledge,
attachment or other legal process, or encumbrance of any kind, and any attempt
to do so shall be void.

         11.3 FACILITY PAYMENT. Any amounts payable hereunder to any person
under legal disability or who, in the judgment of the Compensation Committee or
its designee, is unable to properly manage his or her financial affairs, may be
paid to the legal representative of such person, or may be applied for the
benefit of such person in any manner which the Compensation Committee or its
designee may select, and each participating affiliate shall be relieved of any
further liability for payment of such amounts.

         11.4 CONTROLLING LAW. To the extent not superseded by federal law, the
law of the State of [DELAWARE], without regard to its choice of law principles,
shall be controlling in all matters relating to the Plan.

         11.5 NO RIGHTS TO AWARD. No person shall have any claim to be granted
any award under the Plan, and there is no obligation for uniformity of treatment
of Participants. The terms and conditions of awards need not be the same with
respect to each recipient.

         11.6 SEVERABILITY. If any Plan provision or any award is or becomes or
is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to
any person or award, or would disqualify the Plan or any award under the law
deemed applicable by the Compensation Committee, such provision shall be
construed or deemed amended to conform to the applicable laws, or if it cannot
be construed or deemed amended without, in the determination of the Compensation
Committee, materially altering the intent of the Plan or the award, such
provision

                                       3
<PAGE>

shall be stricken as to such jurisdiction, person or award and the remainder of
the Plan and any such award shall remain in full force and effect.

         11.7 NO TRUST OR FUND CREATED. Neither the Plan nor any award shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any participating affiliate and a
Participant or any other person. To the extent that any person acquires a right
to receive payments from the Company or any participating affiliate pursuant to
an award, such right shall be no greater than the right of any general unsecured
creditor of the Company or any participating affiliate.

         11.8 HEADINGS. Headings are given to the sections of the Plan solely as
a convenience to facilitate reference. Such headings shall not be deemed in any
way material or relevant to the construction or interpretation of the Plan or
any provision of it.

         11.9 TAX WITHHOLDING. The Company and/or any participating affiliate
may deduct from any payment otherwise due under this Plan to a Participant (or
beneficiary) amounts required by law to be withheld for purposes of federal,
state or local taxes.

                                       4

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