HOLLY ENERGY PARTNERS LP (Form: 10-Q, Received: 08/01/2012 15:21:16)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________________________________________________________

FORM 10-Q

______________________________________________________________________________________



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to _____________

Commission File Number: 1-32225

______________________________________________________________________________________

HOLLY ENERGY PARTNERS, L.P.

(Exact name of registrant as specified in its charter)

______________________________________________________________________________________



Delaware		20-0833098
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2828 N. Harwood, Suite 1300

Dallas, Texas 75201

(Address of principal executive offices), (Zip code)

(214) 871-3555

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	ý	Accelerated filer	¨	Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ¨ No ý

The number of the registrant’s outstanding common units at July 27, 2012 was 28,391,024.

HOLLY ENERGY PARTNERS, L.P.

INDEX





	FORWARD-LOOKING STATEMENTS		2

PART I. FINANCIAL INFORMATION			3

	Item 1.	Financial Statements (Unaudited, except December 31, 2011 Balance Sheet)	3

		Consolidated Balance Sheets	3

		Consolidated Statements of Income	4

		Consolidated Statements of Comprehensive Income	5

		Consolidated Statements of Cash Flows	6

		Consolidated Statement of Partners’ Equity	7

		Notes to Consolidated Financial Statements	8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35

	Item 4.	Controls and Procedures	35

PART II. OTHER INFORMATION			36

	Item 1.	Legal Proceedings	36

	Item 1A.	Risk Factors	36

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36

	Item 6.	Exhibits	36

		SIGNATURES	37

		Index to Exhibits	38

Table of Contents ril 19,

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain “forward-looking statements” within the meaning of the federal securities laws. All statements, other than statements of historical fact included in this Form 10-Q, including, but not limited to, those under “Results of Operations” and “Liquidity and Capital Resources” in Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I are forward-looking statements. Forward looking statements use words such as “anticipate,” “project,” “expect,” “plan,” “goal,” “forecast,” “intend,” “could,” “believe,” “may,” and similar expressions and statements regarding our plans and objectives for future operations. These statements are based on our beliefs and assumptions and those of our general partner using currently available information and expectations as of the date hereof, are not guarantees of future performance and involve certain risks and uncertainties. Although we and our general partner believe that such expectations reflected in such forward-looking statements are reasonable, neither we nor our general partner can give assurance that our expectations will prove to be correct. Such statements are subject to a variety of risks, uncertainties and assumptions. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results may vary materially from those anticipated, estimated, projected or expected. Certain factors could cause actual results to differ materially from results anticipated in the forward-looking statements. These factors include, but are not limited to:


•	risks and uncertainties with respect to the actual quantities of petroleum products and crude oil shipped on our pipelines and/or terminalled, stored or throughput in our terminals;


•	the economic viability of HollyFrontier Corporation, Alon USA, Inc. and our other customers;


•	the demand for refined petroleum products in markets we serve;


•	our ability to successfully purchase and integrate additional operations in the future;


•	our ability to complete previously announced or contemplated acquisitions;


•	the availability and cost of additional debt and equity financing;


•	the possibility of reductions in production or shutdowns at refineries utilizing our pipeline and terminal facilities;


•	the effects of current and future government regulations and policies;


•	our operational efficiency in carrying out routine operations and capital construction projects;


•	the possibility of terrorist attacks and the consequences of any such attacks;


•	general economic conditions;


•	our ability to integrate the operations of the UNEV Pipeline successfully and to realize the anticipated benefits associated with our ownership interest of this business; and


•	other financial, operational and legal risks and uncertainties detailed from time to time in our Securities and Exchange Commission filings.

Cautionary statements identifying important factors that could cause actual results to differ materially from our expectations are set forth in this Form 10-Q, including without limitation, the forward-looking statements that are referred to above. When considering forward-looking statements, you should keep in mind the known material risk factors and other cautionary statements set forth in our Annual Report on Form 10-K for the year ended December 31, 2011 in “Risk Factors” and in this Form 10-Q in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” All forward-looking statements included in this Form 10-Q and all subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. The forward-looking statements speak only as of the date made and, other than as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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Table of Contents ril 19,

PART I. FINANCIAL INFORMATION


Item 1.	Financial Statements

HOLLY ENERGY PARTNERS, L.P.

CONSOLIDATED BALANCE SHEETS



	June 30, 2012 (Unaudited)			December 31, 2011
	(In thousands, except unit data)
ASSETS
Current assets:
Cash and cash equivalents	$	4,216		$	3,269
Accounts receivable:
Trade	3,836			3,055
Affiliates	26,333			31,016
	30,169			34,071
Prepaid and other current assets	3,410			2,644
Total current assets	37,795			39,984

Properties and equipment, net	532,548			536,425
Transportation agreements, net	98,070			101,543
Goodwill	256,498			256,498
Investment in SLC Pipeline	25,427			25,302
Other assets	9,360			7,204
Total assets	$	959,698		$	966,956

LIABILITIES AND PARTNERS’ EQUITY
Current liabilities:
Accounts payable:
Trade	$	4,983		$	6,107
Affiliates	4,712			5,299
	9,695			11,406

Accrued interest	9,655			8,280
Deferred revenue	3,603			4,032
Accrued property taxes	1,910			2,196
Other current liabilities	2,581			1,777
Total current liabilities	27,444			27,691

Long-term debt	613,195			605,888
Other long-term liabilities	6,195			4,000

Partners’ equity:
Common unitholders (27,361,124 units issued and outstanding at June 30, 2012 and December 31, 2011)	465,796			482,509
General partner interest (2% interest)	(147,153		)	(146,668		)
Accumulated other comprehensive loss	(5,779		)	(6,464		)
Total partners’ equity	312,864			329,377
Total liabilities and partners’ equity	$	959,698		$	966,956

See accompanying notes.

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Table of Contents ril 19,

HOLLY ENERGY PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
	(In thousands, except per unit data)
Revenues:
Affiliates	$	54,224		$	37,139		$	107,017		$	71,246
Third parties	9,468			13,801			20,190			24,711
	63,692			50,940			127,207			95,957
Operating costs and expenses:
Operations	17,923			14,366			34,911			27,162
Depreciation and amortization	9,132			7,713			19,396			15,353
General and administrative	2,487			1,573			4,526			2,936
	29,542			23,652			58,833			45,451
Operating income	34,150			27,288			68,374			50,506

Other income (expense):
Equity in earnings of SLC Pipeline	794			467			1,625			1,207
Interest expense	(11,324		)	(8,724		)	(21,729		)	(17,273		)
Loss on early extinguishment of debt	(383		)	—			(2,979		)	—
Other expense	—			—			—			(12		)
	(10,913		)	(8,257		)	(23,083		)	(16,078		)
Income before income taxes	23,237			19,031			45,291			34,428
State income tax expense	(75		)	(18		)	(150		)	(246		)
Net income	23,162			19,013			45,141			34,182
Less general partner interest in net income, including incentive distributions	5,917			3,847			11,425			7,409
Limited partners’ interest in net income	$	17,245		$	15,166		$	33,716		$	26,773
Limited partners’ per unit interest in earnings—basic and diluted	$	0.63		$	0.69		$	1.23		$	1.21
Weighted average limited partners’ units outstanding	27,361			22,079			27,361			22,079

See accompanying notes.

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HOLLY ENERGY PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)



	Three Months Ended June 30,					Six Months Ended June 30,
	2012			2011		2012			2011
	(In thousands)

Net income	$	23,162		$	19,013	$	45,141		$	34,182
Other comprehensive income (loss):
Change in fair value of cash flow hedge	(1,508		)	271		(1,862		)	1,554
Amortization of unrealized loss attributable to discontinued cash flow hedge	1,273			—		2,547			—
Other comprehensive income (loss)	(235		)	271		685			1,554
Comprehensive income	$	22,927		$	19,284	$	45,826		$	35,736

See accompanying notes.

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Table of Contents ril 19,

HOLLY ENERGY PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



	Six Months Ended June 30,
	2012			2011
	(In thousands)
Cash flows from operating activities
Net income	$	45,141		$	34,182
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	19,396			15,353
Equity in earnings of SLC Pipeline, net of distributions	(125		)	(82		)
Amortization of restricted and performance units	1,629			1,080
(Increase) decrease in current assets:
Accounts receivable—trade	(781		)	944
Accounts receivable—affiliates	4,220			2,808
Prepaid and other current assets	(766		)	(263		)
Increase (decrease) in current liabilities:
Accounts payable—trade	(596		)	(2,423		)
Accounts payable—affiliates	(587		)	(700		)
Accrued interest	1,375			4
Deferred revenue	(429		)	(5,118		)
Accrued property taxes	(286		)	321
Other current liabilities	804			(306		)
Other, net	4,505			489
Net cash provided by operating activities	73,500			46,289

Cash flows from investing activities
Additions to properties and equipment	(12,008		)	(22,900		)

Cash flows from financing activities
Borrowings under credit agreement	99,000			64,000
Repayments of credit agreement borrowings	(129,000		)	(37,000		)
Proceeds from issuance of senior notes	294,750			—
Repayments of senior notes	(185,000		)	—
Repayment of promissory notes	(72,900		)	—
Distributions to HEP unitholders	(59,977		)	(44,862		)
Purchase of units for incentive grants	(4,533		)	(1,379		)
Deferred financing costs	(3,162		)	(3,149		)
Other	277			—
Net cash used for financing activities	(60,545		)	(22,390		)

Cash and cash equivalents
Increase for the period	947			999
Beginning of period	3,269			403
End of period	$	4,216		$	1,402

See accompanying notes.

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Table of Contents ril 19,

HOLLY ENERGY PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY

(Unaudited)



	Common Units			General Partner Interest			Accumulated Other Comprehensive Income (Loss)			Total
	(In thousands)

Balance December 31, 2011	$	482,509		$	(146,668	)	$	(6,464	)	$	329,377
Net income	34,360			10,781			—			45,141
Other comprehensive income	—			—			685			685
Distributions to unitholders	(48,697		)	(11,280		)	—			(59,977		)
Purchase of units for incentive grants	(4,005		)	—			—			(4,005		)
Amortization of restricted and performance units	1,629			—			—			1,629
Other	—			14			—			14
Balance June 30, 2012	$	465,796		$	(147,153	)	$	(5,779	)	$	312,864

See accompanying notes.

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Table of Contents ril 19,

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


Note 1:	Description of Business and Presentation of Financial Statements

Holly Energy Partners, L.P. (“HEP”) together with its consolidated subsidiaries, is a publicly held master limited partnership which was 42% owned (including the 2% general partner interest) by HollyFrontier Corporation (“HFC”) and its subsidiaries at June 30, 2012. In these consolidated financial statements, the words “we,” “our,” “ours” and “us” refer to HEP unless the context otherwise indicates.

We operate in one operating segment—the operation of petroleum product and crude oil pipelines and terminals, tankage and loading rack facilities.

We own and operate petroleum product and crude oil pipelines and terminal, tankage and loading rack facilities that support HFC’s refining and marketing operations in the Mid-Continent, Southwest and Rocky Mountain regions of the United States and Alon USA, Inc.’s (“Alon”) refinery in Big Spring, Texas. Additionally, we own a 25% joint venture interest in a 95 -mile intrastate crude oil pipeline system (the "SLC Pipeline") that serves refineries in the Salt Lake City area.

On July 12, 2012, we acquired a 75% interest in UNEV Pipeline, LLC (“UNEV”), which owns a recently constructed 400 -mile, 12 -inch refined products pipeline running from Woods Cross, Utah to Las Vegas, Nevada (the “UNEV Pipeline”), product terminals near Cedar City, Utah and Las Vegas, Nevada and related assets. See Note 2 below for additional information on this acquisition.

We generate revenues by charging tariffs for transporting petroleum products and crude oil through our pipelines, by charging fees for terminalling and storing refined products and other hydrocarbons and providing other services at our storage tanks and terminals. We do not take ownership of products that we transport, terminal or store, and therefore, we are not directly exposed to changes in commodity prices.

The consolidated financial statements included herein have been prepared without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). The interim financial statements reflect all adjustments, which, in the opinion of management, are necessary for a fair presentation of our results for the interim periods. Such adjustments are considered to be of a normal recurring nature. Although certain notes and other information required by U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted, we believe that the disclosures in these consolidated financial statements are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with our Form 10-K for the year ended December 31, 2011 . Results of operations for interim periods are not necessarily indicative of the results of operations that will be realized for the year ending December 31, 2012 .


Note 2:	Acquisitions

UNEV Pipeline Interest Acquisition

On July 12, 2012, we acquired HFC's 75% interest in UNEV. We paid consideration consisting of $260.0 million in cash and 1,029,900 of our common units. As a result, HFC's ownership interest in us increased from 42% to 44% (including the 2% general partner interest). Under the terms of the transaction, we issued to HFC equity interests in our wholly-owned subsidiaries that entitle HFC to an interest in our share of UNEV earnings from July 1, 2016 through June 2032, subject to a cap of approximately $34.0 million and certain limitations. Contemporaneously with this transaction, HFC (our general partner) agreed to forego its right to incentive distributions of $1.25 million per quarter over the next twelve consecutive quarterly periods and up to an additional four quarters in certain circumstances.

We are a consolidated variable interest entity of HFC. Therefore, this transaction will be recorded as a transfer between entities under common control and reflect HFC's carrying basis in UNEV's assets and liabilities. Also, we will retrospectively adjust our financial position and operating results as if UNEV were a consolidated subsidiary for all periods while we were under common control of HFC. Upon the closing of this transaction, we recorded UNEV's assets consisting principally of properties and equipment, liabilities and equity at HFC's carrying basis, which were approximately $426.0 million , $6.0 million and $420.0 million , respectively, at June 30, 2012. This includes equity attributable to the noncontrolling interest holder of approximately $100.0 million . This retrospective adjustment will not have a significant impact on our operating results prior to 2012 since the UNEV Pipeline became operational in the first quarter of 2012. At June 30, 2012, UNEV had transportation agreements with shippers that provide minimum annualized revenues of $23.0 million , of which $15.6 million relates to a transportation agreement with HFC.

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HOLLY ENERGY PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued

Assuming this acquisition was effective as of June 30, 2012, our revenues and net income for the three and six months ended June 30, 2012 would have been retrospectively adjusted to include UNEV's current year operating results as presented below:



	Three Months Ended June 30, 2012		Six Months Ended June 30, 2012
	(In thousands, except per share amounts)
Revenues	$	67,706	$	135,283
Net income	$	20,537	$	40,000

Legacy Frontier Pipeline and Tankage Asset Transaction

On November 9, 2011, we acquired from HFC certain tankage, loading rack and crude receiving assets located at HFC’s El Dorado and Cheyenne refineries. We paid non-cash consideration consisting of promissory notes with an aggregate principal amount of $150.0 million and 3,807,615 of our common units.

We recorded this transfer at HFC's carrying basis and recorded properties and equipment of $88.1 million , goodwill of $207.4 million and a $150.0 million liability representing the promissory notes issued to HFC at the time of the closing of this transaction.

Assuming this acquisition had occurred on January 1, 2011 and our throughput agreements with HFC were in effect at that time, pro forma revenues, net income and earnings per unit for the three and the six months ended June 30, 2011 are presented below:



	Three Months Ended June 30, 2011		Six Months Ended June 30, 2011
	(In thousands, except per share amounts)
Revenues	$	62,653	$	119,560
Net income	$	26,964	$	50,278
Earnings per unit	$	0.86	$	1.60


Note 3:	Financial Instruments

Our financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, debt and an interest rate swap. The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term maturity of these instruments. Debt consists of outstanding principal under our revolving credit agreement (which approximates fair value as interest rates are reset frequently at current interest rates) and our fixed interest rate senior notes.

Fair value measurements are derived using inputs (assumptions that market participants would use in pricing an asset or liability) including assumptions about risk. GAAP categorizes inputs used in fair value measurements into three broad levels as follows:


•	(Level 1) Quoted prices in active markets for identical assets or liabilities.


•	(Level 2) Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, similar assets and liabilities in markets that are not active or can be corroborated by observable market data.


•	(Level 3) Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes valuation techniques that involve significant unobservable inputs.

The carrying amounts and estimated fair values of our senior notes and interest rate swap at June 30, 2012 and December 31, 2011 were as follows:

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HOLLY ENERGY PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued



		June 30, 2012				December 31, 2011
Financial Instrument	Fair Value Input Level	Carrying Value		Fair Value		Carrying Value		Fair Value
		(In thousands)
Liabilities:
Senior notes:
6.25% senior notes	Level 2	$	—	$	—	$	184,895	$	186,850
6.5% senior notes	Level 2	294,949		302,250		—		—
8.25% senior notes	Level 2	148,246		159,375		148,093		157,500
		443,195		461,625		332,988		344,350

Interest rate swap	Level 2	2,382		2,382		520		520
		$	445,577	$	464,007	$	333,508	$	344,870

Level 2 Financial Instruments

Our senior notes and interest rate swap are measured and recorded at fair value using Level 2 inputs. The fair value of the senior notes is based on market values provided by a third-party bank, which were derived using market quotes for similar type debt instruments. With respect to our interest rate swap, the fair value is based on the net present value of expected future cash flows related to both variable and fixed rate legs of the swap agreement. This measurement is computed using the forward London Interbank Offered Rate (“LIBOR”) yield curve, a market-based observable input.

See Note 7 for additional information on these instruments.


Note 4:	Properties and Equipment

The carrying amounts of our properties and equipment are as follows:



	June 30, 2012		December 31, 2011
	(In thousands)
Pipelines and terminals	$	632,736	$	633,095
Land and right of way	27,155		27,149
Other	16,978		16,507
Construction in progress	23,829		14,419
	700,698		691,170
Less accumulated depreciation	168,150		154,745
	$	532,548	$	536,425

We capitalized $0.1 million and $0.5 million in interest related to construction projects during the six months ended June 30, 2012 and 2011 , respectively.


Note 5:	Transportation Agreements

Our transportation agreements represent a portion of the total purchase price of certain assets acquired from Alon in 2005 and from HFC in 2008 . The Alon agreement is being amortized over 30 years ending 2035 (the initial 15 -year term of the agreement plus an expected 15 -year extension period) and the HFC agreement is being amortized over 15 years ending 2023 (the term of the HFC agreement).

The carrying amounts of our transportation agreements are as follows:

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HOLLY ENERGY PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued



	June 30, 2012		December 31, 2011
	(In thousands)
Alon transportation agreement	$	59,933	$	59,933
HFC transportation agreement	74,231		74,231
	134,164		134,164
Less accumulated amortization	36,094		32,621
	$	98,070	$	101,543

We have additional transportation agreements with HFC that relate to assets contributed to us or acquired from HFC consisting of pipeline, terminal and tankage assets. These transactions occurred while we were a consolidated variable interest entity of HFC, therefore, our basis in these agreements is zero and does not reflect a step-up in basis to fair value.


Note 6:	Employees, Retirement and Incentive Plans

Employees who provide direct services to us are employed by Holly Logistic Services, L.L.C., an HFC subsidiary. Their costs, including salaries, bonuses, payroll taxes, benefits and other direct costs, are charged to us monthly in accordance with an omnibus agreement that we have with HFC. These employees participate in the retirement and benefit plans of HFC. Our share of retirement and benefit plan costs was $1.5 million and $0.7 million for the three months ended June 30, 2012 and 2011 , respectively, and $3.0 million and $1.4 million for the six months ended June 30, 2012 and 2011 , respectively.

We have an incentive plan (“Long-Term Incentive Plan”) for employees, consultants and non-employee directors who perform services for us. The Long-Term Incentive Plan consists of four components: restricted units, performance units, unit options and unit appreciation rights.

As of June 30, 2012 , we have two types of incentive-based awards which are described below. The compensation cost charged against income was $0.7 million and $0.4 million for the three months ended June 30, 2012 and 2011 , respectively, and $1.6 million and $1.1 million for the six months ended June 30, 2012 and 2011 , respectively. We currently purchase units in the open market instead of issuing new units for settlement of all unit awards under our Long-Term Incentive Plan. Effective February 2012, the units authorized to be granted under our Long-Term Incentive Plan were increased from 350,000 to 1,250,000 units, of which 923,268 have not yet been granted, assuming no forfeitures of the unvested units and full achievement of goals for the performance units already granted.

Restricted Units

Under our Long-Term Incentive Plan, we grant restricted units to selected employees and directors who perform services for us, with most awards vesting over a period of one to three years. Although full ownership of the units does not transfer to the recipients until the units vest, the recipients have distribution and voting rights on these units from the date of grant. The fair value of each restricted unit award is measured at the market price as of the date of grant and is amortized over the vesting period.

A summary of restricted unit activity and changes during the six months ended June 30, 2012 is presented below:



Restricted Units	Units		Weighted- Average Grant-Date Fair Value		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value ($000)
Outstanding at January 1, 2012 (nonvested)	29,536		$	50.45
Granted	38,508		61.21
Vesting and transfer of full ownership to recipients	(21,240	)	52.25
Forfeited	(1,047	)	57.32
Outstanding at June 30, 2012 (nonvested)	45,757		$	58.51	1.2 years	$	2,590

The fair value of restricted units that were vested and transferred to recipients during the six months ended June 30, 2012 and

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HOLLY ENERGY PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued

2011 were $1.1 million and $1.0 million , respectively. As of June 30, 2012 , there was $1.5 million of total unrecognized compensation expense related to nonvested restricted unit grants which is expected to be recognized over a weighted-average period of 1.2 years.

Performance Units

Under our Long-Term Incentive Plan, we grant performance units to selected executives who perform services for us. Performance units granted are payable based upon the growth in our distributable cash flow per common unit over the performance period, and vest over a period of three years. As of June 30, 2012 , estimated unit payouts for outstanding nonvested performance unit awards were approximately 110% .

We granted 5,718 performance units to certain officers in March 2012 . These units will vest over a three -year performance period ending December 31, 2014 and are payable in HEP common units. The number of units actually earned will be based on the growth of our distributable cash flow per common unit over the performance period, and can range from 50% to 150% of the number of performance units granted. Although common units are not transferred to the recipients until the performance units vest, the recipients have distribution rights with respect to the common units from the date of grant. The fair value of these performance units is based on the grant date closing unit price of $61.21 and will apply to the number of units ultimately awarded.

A summary of performance unit activity and changes during the six months ended June 30, 2012 is presented below:



Performance Units	Units
Outstanding at January 1, 2012 (nonvested)	42,991
Granted	5,718
Vesting and transfer of common units to recipients	(21,460	)
Outstanding at June 30, 2012 (nonvested)	27,249

For the six months ended June 30, 2012 , we issued 23,391 of our common units having a fair value of $0.5 million related to vested performance units having a 109% payout. Based on the weighted average fair value at June 30, 2012 of $52.11 , there was $0.7 million of total unrecognized compensation expense related to nonvested performance units, which is expected to be recognized over a weighted-average period of 1.2 years.

During the six months ended June 30, 2012 , we paid $4.5 million for the purchase of our common units in the open market for the issuance and settlement of all unit awards under our Long-Term Incentive Plan.


Note 7:	Debt

Credit Agreement

In June 2012, we amended our credit agreement increasing the size of the credit facility from $375 million to $550 million . Our $550 million senior secured revolving credit facility expires in June 2017 (the “Credit Agreement”) and is available to fund capital expenditures, investments, acquisitions, distribution payments and working capital and for general partnership purposes. It is available also to fund letters of credit up to a $50 million sub-limit and to fund distributions to unitholders up to a $60 million sub-limit.

During the six months ended June 30, 2012 , we received advances totaling $99.0 million and repaid $129.0 million , resulting in net repayments of $30.0 million under the Credit Agreement and an outstanding balance of $170.0 million at June 30, 2012 .

Our obligations under the Credit Agreement are collateralized by substantially all of our assets. Indebtedness under the Credit Agreement is recourse to HEP Logistics Holdings, L.P. (“HEP Logistics”), our general partner, and guaranteed by our material wholly-owned subsidiaries. Any recourse to HEP Logistics would be limited to the extent of its assets, which other than its investment in us, are not significant. We may prepay all loans at any time without penalty, except for payment of certain breakage and related costs.

- 12 -

HOLLY ENERGY PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued

business, enter a merger or consolidation, or sell assets; and covenants that require maintenance of a specified EBITDA to interest expense ratio, total debt to EBITDA ratio and senior debt to EBITDA ratio. If an event of default exists under the Credit Agreement, the lenders will be able to accelerate the maturity of the debt and exercise other rights and remedies.

Senior Notes

In March 2012, we issued $300 million in aggregate principal amount outstanding of 6.5% senior notes maturing March 1, 2020 (the “6.5% Senior Notes”). Net proceeds of $294.8 million were used to fund $157.8 million aggregate principal amount of 6.25% senior notes maturing March 1, 2015 (the “6.25% Senior Notes”) tendered pursuant to a cash tender offer and consent solicitation, to repay $72.9 million in promissory notes due to HFC as discussed below, to pay related fees, expenses and accrued interest in connection with these transactions and to repay borrowings under the Credit Agreement.

In April 2012, we redeemed $27.2 million aggregate principal amount of 6.25% Senior Notes that remained outstanding following the cash tender offer and consent solicitation.

Also, we have $150 million in aggregate principal amount outstanding of 8.25% senior notes (the “8.25% Senior Notes”) maturing March 15, 2018.

The 6.5% and 8.25% Senior Notes (collectively, the “Senior Notes”) are unsecured and impose certain restrictive covenants, which we are currently in compliance with, including limitations on our ability to incur additional indebtedness, make investments, sell assets, incur certain liens, pay distributions, enter into transactions with affiliates, and enter into mergers. At any time when the Senior Notes are rated investment grade by both Moody’s and Standard & Poor’s and no default or event of default exists, we will not be subject to many of the foregoing covenants. Additionally, we have certain redemption rights under the Senior Notes.

Indebtedness under the Senior Notes is recourse to HEP Logistics, our general partner, and guaranteed by our wholly-owned subsidiaries. However, any recourse to HEP Logistics would be limited to the extent of its assets, which other than its investment in us, are not significant.

Promissory Notes

In November 2011, we issued senior unsecured promissory notes to HFC (the “Promissory Notes”) having an aggregate principal amount of $150 million to finance a portion of our November 9, 2011 acquisition of assets located at HFC's El Dorado and Cheyenne refineries (see Note 2). In December 2011, we repaid $77.1 million of outstanding principal using proceeds received in our December 2011 common unit offering and existing cash. We repaid the remaining $72.9 million balance in March 2012.

Long-term Debt

The carrying amounts of our long-term debt are as follows:



	June 30, 2012			December 31, 2011
	(In thousands)
Credit Agreement	$	170,000		$	200,000
6.5% Senior Notes
Principal	300,000			—
Unamortized discount	(5,051		)	—
	294,949			—
6.25% Senior Notes
Principal	—			185,000
Unamortized net discount	—			(105		)
	—			184,895
8.25% Senior Notes
Principal	150,000			150,000
Unamortized discount	(1,754		)	(1,907		)
	148,246			148,093

Promissory Notes	—			72,900

Total long-term debt	$	613,195		$	605,888

- 13 -

HOLLY ENERGY PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued

Interest Rate Risk Management

We use interest rate swaps (derivative instruments) to manage our exposure to interest rate risk.

As of June 30, 2012 , we have an interest rate swap that hedges our exposure to the cash flow risk caused by the effects of LIBOR changes on a $155.0 million Credit Agreement advance. This interest rate swap effectively converts $ 155.0 million of our LIBOR based debt to fixed rate debt having an interest rate of 0.99% plus an applicable margin of 2.00% as of June 30, 2012 , which equaled an effective interest rate of 2.99% . This swap contract matures in February 2016.

We have designated this interest rate swap as a cash flow hedge. Based on our assessment of effectiveness using the change in variable cash flows method, we have determined that this interest rate swap is effective in offsetting the variability in interest payments on $155.0 million of our variable rate debt resulting from changes in LIBOR. Under hedge accounting, we adjust our cash flow hedge on a quarterly basis to its fair value with the offsetting fair value adjustment to accumulated other comprehensive loss. Also on a quarterly basis, we measure hedge effectiveness by comparing the present value of the cumulative change in the expected future interest to be paid or received on the variable leg of our swap against the expected future interest payments on $155.0 million of our variable rate debt. Any ineffectiveness is reclassified from accumulated other comprehensive loss to interest expense. As of June 30, 2012 , we had no ineffectiveness on our cash flow hedge.

At June 30, 2012 , we have an accumulated other comprehensive loss of $5.8 million that relates to our current and previous cash flow hedging instruments. Of this amount, $3.4 million represents an unrecognized loss attributable to a cash flow hedge terminated in December 2011 and relates to the application of hedge accounting prior to termination. This amount is being amortized as a charge to interest expense through February 2013, the remaining term of the terminated swap contract. The remaining $2.4 million amount will be effectively transferred from accumulated other comprehensive loss into interest expense as interest is paid on the underlying swap agreement over the next twelve-month period, assuming interest rates remain unchanged.

Additional information on our interest rate swap is as follows:

Derivative Instrument

Balance Sheet

Location

Fair Value

Location of Offsetting

Balance

Offsetting

Amount

(In thousands)

June 30, 2012

Interest rate swap designated as cash flow hedging instrument:

Variable-to-fixed interest rate swap contract ($155.0 million of LIBOR based debt interest)

Other long-term

liabilities

2,382

Accumulated other

comprehensive loss

2,382

December 31, 2011

Interest rate swap designated as cash flow hedging instrument:

Variable-to-fixed interest rate swap contract ($155.0 million of LIBOR based debt interest)

Other long-term

liabilities

520

Accumulated other

comprehensive loss

520

Interest Expense and Other Debt Information

Interest expense consists of the following components:

- 14 -

HOLLY ENERGY PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued



	Six Months Ended June 30,
	2012		2011
	(In thousands)
Interest on outstanding debt:
Credit Agreement, net of interest on interest rate swap	$	2,953	$	5,013
6.5% Senior Notes	5,966		—
6.25% Senior Notes	2,422		5,781
8.25% Senior Notes	6,193		6,187
Promissory Notes	543		—
Amortization of discount and deferred debt issuance costs	3,422		595
Commitment fees	362		227
Total interest incurred	21,861		17,803
Less capitalized interest	132		530
Net interest expense	$	21,729	$	17,273
Cash paid for interest	$	17,039	$	17,204

We recognized a charge of $3.0 million upon the early extinguishment of debt for the six months ended June 30, 2012 . This charge represents the premium paid to our 6.25% Senior Note holders upon their tender of an aggregate principal amount of $185.0 million and related net discount.


Note 8:	Significant Customers

All revenues are domestic revenues, of which 97% are currently generated from our two largest customers: HFC and Alon. The vast majority of our revenues are derived from activities conducted in the southwest United States.

The following table presents the percentage of total revenues generated by each of these customers:



	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
HFC	85	%	73	%	84	%	74	%
Alon	12	%	23	%	12	%	22	%


Note 9:	Related Party Transactions

We serve HFC's refineries under long-term pipeline and terminal, tankage and throughput agreements expiring from 2019 to 2026. Under these agreements, HFC agreed to transport, store and throughput volumes of refined product and crude oil on our pipelines and terminal, tankage and loading rack facilities that result in minimum annual payments to us. These minimum annual payments or revenues are subject to annual tariff rate adjustments on July 1, based on the Producer Price Index (“PPI”) or Federal Energy Regulatory Commission (“FERC”) index. Following the July 1, 2012 PPI adjustment HFC's minimum annualized payments to us under these agreements increased by $8.5 million to $200.3 million .

If HFC fails to meet its minimum volume commitments under the agreements in any quarter, it will be required to pay us in cash the amount of any shortfall by the last day of the month following the end of the quarter. Under certain of these agreements, a shortfall payment may be applied as a credit in the following four quarters after its minimum obligations are met.

Under certain provisions of an omnibus agreement we have with HFC (the “Omnibus Agreement”) we pay HFC an annual administrative fee for the provision by HFC or its affiliates of various general and administrative services to us, currently $2.3 million . This fee does not include the salaries of pipeline and terminal personnel or the cost of their employee benefits, which are charged to us separately by HFC. Also, we reimburse HFC and its affiliates for direct expenses they incur on our behalf.

Related party transactions with HFC are as follows:

- 15 -

HOLLY ENERGY PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued


•	Revenues received from HFC were $54.2 million and $37.1 million for the three months ended June 30, 2012 and 2011 , respectively, and $107.0 million and $71.2 million for the six months ended June 30, 2012 and 2011 , respectively.


•	HFC charged us general and administrative services under the Omnibus Agreement of $0.6 million for the three months ended June 30, 2012 and 2011 , and $1.2 million for the six months ended June 30, 2012 and 2011 .


•	We reimbursed HFC for costs of employees supporting our operations of $7.1 million and $4.7 million for the three months ended June 30, 2012 and 2011 , respectively, and $14.8 million and $9.7 million for the six months ended June 30, 2012 and 2011 , respectively.


•	HFC reimbursed us $2.2 million and $1.9 million for the three months ended June 30, 2012 and 2011 , respectively, and $4.7 million and $8.7 million for the six months ended June 30, 2012 and 2011 , respectively for certain costs paid on their behalf.


•	We distributed $15.7 million and $10.0 million for the three months ended June 30, 2012 and 2011 , respectively, to HFC as regular distributions on its common units and general partner interest, including general partner incentive distributions. For the six months ended June 30, 2012 and 2011 , we distributed $31.0 million and $19.7 million , respectively.


•	Accounts receivable from HFC were $26.3 million and $31.0 million at June 30, 2012 and December 31, 2011 , respectively.


•	Accounts payable to HFC were $4.7 million and $5.3 million at June 30, 2012 and December 31, 2011 , respectively.

•

Revenues for the three and six months ended June 30, 2012 include $0.8 million and $2.5 million of shortfall payments billed in 2011, as HFC did not exceed its minimum volume commitment in any of the subsequent four quarters. Deferred revenue in the consolidated balance sheets at June 30, 2012 and December 31, 2011 , includes $3.3 million and $4.0 million , respectively, relating to certain shortfall billings. It is possible that HFC may not exceed its minimum obligations to receive credit for any of the $3.3 million deferred at June 30, 2012 .


•	We acquired from HFC a 75% interest in the UNEV Pipeline in July 2012 and tankage and terminal assets in November 2011. See Note 2 for a description of these transactions.


Note 10:	Partners’ Equity

As of June 30, 2012, HFC held 11,097,615 of our common units and the 2% general partner interest, which together constituted a 42% ownership interest in us. On July 12, 2012, we issued HFC 1,029,900 of our common units as partial consideration for our acquisition of its 75% interest in UNEV, which increased HFC's ownership interest in us to 44% , inclusive of the general partner interest.

Allocations of Net Income

Net income attributable to HEP is allocated between limited partners and the general partner interest in accordance with the provisions of the partnership agreement. HEP net income allocated to the general partner includes incentive distributions that are declared subsequent to quarter end. After the amount of incentive distributions is allocated to the general partner, the remaining net income attributable to HEP is allocated to the partners based on their weighted-average ownership percentage during the period.

The following table presents the allocation of the general partner interest in net income for the periods presented below:



	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
	(In thousands)
General partner interest in net income	$	352	$	310	$	688	$	547
General partner incentive distribution	5,565		3,537		10,737		6,862
Total general partner interest in net income	$	5,917	$	3,847	$	11,425	$	7,409

Cash Distributions

Our general partner, HEP Logistics, is entitled to incentive distributions if the amount we distribute with respect to any quarter exceeds specified target levels.

- 16 -

HOLLY ENERGY PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued

On July 25, 2012 , we announced our cash distribution for the second quarter of 2012 of $0.91 per unit. The distribution is payable on all common and general partner units and will be paid August 14, 2012 to all unitholders of record on August 7, 2012 .

The following table presents the allocation of our regular quarterly cash distributions to the general and limited partners for the periods in which they apply. Our distributions are declared subsequent to quarter end; therefore, the amounts presented do not reflect distributions paid during the periods presented below.



	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
	(In thousands, except per unit data)
General partner interest	$	622	$	462	$	1,227	$	915
General partner incentive distribution	5,565		3,537		10,737		6,862
Total general partner distribution	6,187		3,999		11,964		7,777
Limited partner distribution	24,899		19,098		49,387		37,975
Total regular quarterly cash distribution	$	31,086	$	23,097	$	61,351	$	45,752
Cash distribution per unit applicable to limited partners	$	0.910	$	0.865	$	1.805	$	1.720

As a master limited partnership, we distribute our available cash, which historically has exceeded our net income because depreciation and amortization expense represents a non-cash charge against income. The result is a decline in our partners’ equity since our regular quarterly distributions have exceeded our quarterly net income. Additionally, if the assets contributed and acquired from HFC had occurred while we were not a consolidated variable interest entity of HFC, our acquisition cost in excess of HFC’s historical basis in the transferred assets of $295.6 million , exclusive of depreciation and amortization, (as of June 30, 2012) would have been recorded in our financial statements as increases to our properties and equipment and intangible assets instead of decreases to our partners’ equity.


Note 11:	Supplemental Guarantor/Non-Guarantor Financial Information

Obligations of HEP (“Parent”) under the Senior Notes have been jointly and severally guaranteed by each of its direct and indirect wholly-owned subsidiaries (“Guarantor Subsidiaries”). These guarantees are full and unconditional.

The following financial information presents condensed consolidating balance sheets, statements of comprehensive income, and statements of cash flows of the Parent and the Guarantor Subsidiaries. The information has been presented as if the Parent accounted for its ownership in the Guarantor Subsidiaries using the equity method of accounting.

- 17 -

HOLLY ENERGY PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued

Condensed Consolidating Balance Sheet



June 30, 2012	Parent		Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	2	$	4,214		$	—		$	4,216
Accounts receivable	—		30,169			—			30,169
Intercompany accounts receivable (payable)	47,371		(47,371		)	—			—
Prepaid and other current assets	42		3,368			—			3,410
Total current assets	47,415		(9,620		)	—			37,795
Properties and equipment, net	—		532,548			—			532,548
Investment in subsidiaries	716,967		—			(716,967		)	—
Transportation agreements, net	—		98,070			—			98,070
Goodwill	—		256,498			—			256,498
Investment in SLC Pipeline	—		25,427			—			25,427
Other assets	1,757		7,603			—			9,360
Total assets	$	766,139	$	910,526		$	(716,967	)	$	959,698

LIABILITIES AND PARTNERS’ EQUITY
Current liabilities:
Accounts payable	$	—	$	9,695		$	—		$	9,695
Accrued interest	9,602		53			—			9,655
Deferred revenue	—		3,603			—			3,603
Accrued property taxes	—		1,910			—			1,910
Other current liabilities	478		2,103			—			2,581
Total current liabilities	10,080		17,364			—			27,444
Long-term debt	443,195		170,000			—			613,195
Other long-term liabilities	—		6,195			—			6,195
Partners’ equity	312,864		716,967			(716,967		)	312,864
Total liabilities and partners’ equity	$	766,139	$	910,526		$	(716,967	)	$	959,698

- 18 -

HOLLY ENERGY PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued

Condensed Consolidating Balance Sheet



December 31, 2011	Parent		Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	2	$	3,267		$	—		$	3,269
Accounts receivable	—		34,071			—			34,071
Intercompany accounts receivable (payable)	17,745		(17,745		)	—			—
Prepaid and other current assets	266		2,378			—			2,644
Total current assets	18,013		21,971			—			39,984
Properties and equipment, net	—		536,425			—			536,425
Investment in subsidiaries	651,217		—			(651,217		)	—
Transportation agreements, net	—		101,543			—			101,543
Goodwill	—		256,498			—			256,498
Investment in SLC Pipeline	—		25,302			—			25,302
Other assets	1,322		5,882			—			7,204
Total assets	$	670,552	$	947,621		$	(651,217	)	$	966,956

LIABILITIES AND PARTNERS’ EQUITY
Current liabilities:
Accounts payable	$	—	$	11,406		$	—		$	11,406
Accrued interest	7,498		782			—			8,280
Deferred revenue	—		4,032			—			4,032
Accrued property taxes	—		2,196			—			2,196
Other current liabilities	689		1,088			—			1,777
Total current liabilities	8,187		19,504			—			27,691
Long-term debt	332,988		272,900			—			605,888
Other long-term liabilities	—		4,000			—			4,000
Partners’ equity	329,377		651,217			(651,217		)	329,377
Total liabilities and partners’ equity	$	670,552	$	947,621		$	(651,217	)	$	966,956

- 19 -

HOLLY ENERGY PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued

Condensed Consolidating Statement of Comprehensive Income



Three Months Ended June 30, 2012	Parent			Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenues:
Affiliates	$	—		$	54,224		$	—		$	54,224
Third parties	—			9,468			—			9,468
	—			63,692			—			63,692
Operating costs and expenses:
Operations	—			17,923			—			17,923
Depreciation and amortization	—			9,132			—			9,132
General and administrative	484			2,003			—			2,487
	484			29,058			—			29,542
Operating income (loss)	(484		)	34,634			—			34,150
Equity in earnings of subsidiaries	32,339			—			(32,339		)	—
Equity in earnings of SLC Pipeline	—			794			—			794
Interest expense	(8,310		)	(3,014		)	—			(11,324		)
Loss on early extinguishment of debt	(383		)	—			—			(383		)
	23,646			(2,220		)	(32,339		)	(10,913		)
Income before income taxes	23,162			32,414			(32,339		)	23,237
State income tax expense	—			(75		)	—			(75		)
Net income	23,162			32,339			(32,339		)	23,162
Other comprehensive (loss)	(235		)	—			—			(235		)
Comprehensive income	$	22,927		$	32,339		$	(32,339	)	$	22,927

Condensed Consolidating Statement of Comprehensive Income



Three Months Ended June 30, 2011	Parent			Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenues:
Affiliates	$	—		$	37,139		$	—		$	37,139
Third parties	—			13,801			—			13,801
	—			50,940			—			50,940
Operating costs and expenses:
Operations	—			14,366			—			14,366
Depreciation and amortization	—			7,713			—			7,713
General and administrative	952			621			—			1,573
	952			22,700			—			23,652
Operating income (loss)	(952		)	28,240			—			27,288
Equity in earnings of subsidiaries	26,086			—			(26,086		)	—
Equity in earnings of SLC Pipeline	—			467			—			467
Interest expense	(6,121		)	(2,603		)	—			(8,724		)
	19,965			(2,136		)	(26,086		)	(8,257		)
Income before income taxes	19,013			26,104			(26,086		)	19,031
State income tax expense	—			(18		)	—			(18		)
Net income	19,013			26,086			(26,086		)	19,013
Other comprehensive income	271			—			—			271
Comprehensive income	$	19,284		$	26,086		$	(26,086	)	$	19,284

- 20 -

HOLLY ENERGY PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued

Condensed Consolidating Statement of Comprehensive Income



Six Months Ended June 30, 2012	Parent			Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenues:
Affiliates	$	—		$	107,017		$	—		$	107,017
Third parties	—			20,190			—			20,190
	—			127,207			—			127,207
Operating costs and expenses:
Operations	—			34,911			—			34,911
Depreciation and amortization	—			19,396			—			19,396
General and administrative	1,926			2,600			—			4,526
	1,926			56,907			—			58,833
Operating income (loss)	(1,926		)	70,300			—			68,374
Equity in earnings of subsidiaries	65,064			—			(65,064		)	—
Equity in earnings of SLC Pipeline	—			1,625			—			1,625
Interest expense	(15,018		)	(6,711		)	—			(21,729		)
Loss on early extinguishment of debt	(2,979		)	—			—			(2,979		)
	47,067			(5,086		)	(65,064		)	(23,083		)
Income before income taxes	45,141			65,214			(65,064		)	45,291
State income tax expense	—			(150		)	—			(150		)
Net income	45,141			65,064			(65,064		)	45,141
Other comprehensive income	685			—			—			685
Comprehensive income	$	45,826		$	65,064		$	(65,064	)	$	45,826

Condensed Consolidating Statement of Comprehensive Income



Six Months Ended June 30, 2011	Parent			Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenues:
Affiliates	$	—		$	71,246		$	—		$	71,246
Third parties	—			24,711			—			24,711
	—			95,957			—			95,957
Operating costs and expenses:
Operations	—			27,162			—			27,162
Depreciation and amortization	—			15,353			—			15,353
General and administrative	1,703			1,233			—			2,936
	1,703			43,748			—			45,451
Operating income (loss)	(1,703		)	52,209			—			50,506
Equity in earnings of subsidiaries	48,128			—			(48,128		)	—
Equity in earnings of SLC Pipeline	—			1,207			—			1,207
Interest expense	(12,243		)	(5,030		)	—			(17,273		)
Other	—			(12		)	—			(12		)
	35,885			(3,835		)	(48,128		)	(16,078		)
Income before income taxes	34,182			48,374			(48,128		)	34,428
State income tax expense	—			(246		)	—			(246		)
Net income	34,182			48,128			(48,128		)	34,182
Other comprehensive income	1,554			—			—			1,554
Comprehensive income	$	35,736		$	48,128		$	(48,128	)	$	35,736

- 21 -

HOLLY ENERGY PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued

Condensed Consolidating Statement of Cash Flows



Six Months Ended June 30, 2012	Parent			Guarantor Subsidiaries				Eliminations		Consolidated
	(In thousands)
Cash flows from operating activities	$	(45,135	)	$	118,635			$	—	$	73,500

Cash flows from investing activities
Additions to properties and equipment	—			(12,008		)		—		(12,008		)

Cash flows from financing activities
Net repayments under credit agreement	—			(30,000		)		—		(30,000		)
Proceeds from issuance of senior notes	294,750			—				—		294,750
Repayments of senior notes	(185,000		)	—				—		(185,000		)
Repayment of promissory notes	—			(72,900		)		—		(72,900		)
Distributions to HEP unitholders	(59,977		)	—				—		(59,977		)
Purchase of units for incentive grants	(4,533		)	—				—		(4,533		)
Deferred financing costs	(567		)	(2,595		)		—		(3,162		)
Other	462			(185		)	—	—		277
	45,135			(105,680		)		—		(60,545		)
Cash and cash equivalents
Increase for the period	—			947				—		947
Beginning of period	2			3,267				—		3,269
End of period	$	2		$	4,214			$	—	$	4,216

Condensed Consolidating Statement of Cash Flows



Six Months Ended June 30, 2011	Parent			Guarantor Subsidiaries			Eliminations		Consolidated
	(In thousands)
Cash flows from operating activities	$	46,241		$	48		$	—	$	46,289

Cash flows from investing activities
Additions to properties and equipment	—			(22,900		)	—		(22,900		)

Cash flows from financing activities
Net borrowings under credit agreement	—			27,000			—		27,000
Distributions to HEP unitholders	(44,862		)	—			—		(44,862		)
Purchase of units for incentive grants	(1,379		)	—			—		(1,379		)
Deferred financing costs	—			(3,149		)	—		(3,149		)
	(46,241		)	23,851			—		(22,390		)
Cash and cash equivalents
Increase for the period	—			999			—		999
Beginning of period	2			401			—		403
End of period	$	2		$	1,400		$	—	$	1,402

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HOLLY ENERGY PARTNERS, L.P.


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Item 2, including but not limited to the sections on “Results of Operations” and “Liquidity and Capital Resources,” contains forward-looking statements. See “Forward-Looking Statements” at the beginning of Part I of this Quarterly Report on Form 10-Q. In this document, the words “we,” “our,” “ours” and “us” refer to Holly Energy Partners, L.P. (“HEP”) and its consolidated subsidiaries or to HEP or an individual subsidiary and not to any other person.

OVERVIEW

HEP is a Delaware limited partnership. We own and operate petroleum product and crude oil pipelines and terminal, tankage and loading rack facilities that support the refining and marketing operations of HollyFrontier Corporation (“HFC”) in the Mid-Continent, Southwest and Rocky Mountain regions of the United States. At June 30, 2012, HFC owned a 42% interest in us including the 2% general partnership interest. We also own and operate refined product pipelines and terminals, located primarily in Texas, that service Alon USA, Inc’s (“Alon”) refinery in Big Spring, Texas. Additionally, we own a 25% joint venture interest in the SLC Pipeline (the “SLC Pipeline”), a 95-mile intrastate crude oil pipeline system that serves refineries in the Salt Lake City area.

We generate revenues by charging tariffs for transporting petroleum products and crude oil through our pipelines, by charging fees for terminalling and storing refined products and other hydrocarbons and providing other services at our storage tanks and terminals. We do not take ownership of products that we transport, terminal or store, and therefore we are not directly exposed to changes in commodity prices.

UNEV Pipeline Interest Acquisition

On July 12, 2012, we acquired HFC's 75% interest in UNEV Pipeline, LLC (“UNEV”), which owns a recently constructed 400-mile, 12-inch refined products pipeline running from Woods Cross, Utah to Las Vegas, Nevada (the “UNEV Pipeline”), product terminals near Cedar City, Utah and Las Vegas, Nevada and related assets. We paid consideration consisting of $260.0 million in cash and 1,029,900 of our common units, which as a result, increased HFC's ownership interest in us from 42% to 44% (including the 2% general partner interest).

Legacy Frontier Pipeline and Tankage Asset Transaction

On November 9, 2011, we acquired from HFC certain tankage, loading rack and crude receiving assets located at HFC’s El Dorado and Cheyenne refineries.

See Note 2 “Acquisitions” in the consolidated financial statements for additional information on these acquisitions.

Agreements with HFC and Alon

We serve HFC’s refineries under long-term pipeline and terminal, tankage and throughput agreements expiring from 2019 to 2026. Under these agreements, HFC agreed to transport, store and throughput volumes of refined product and crude oil on our pipelines and terminal, tankage and loading rack facilities that result in minimum annual payments to us. These minimum annual payments or revenues are subject to annual tariff rate adjustments on July 1, based on the Producer Price Index (“PPI”) or Federal Energy Regulatory Commission (“FERC”) index. Following the July 1, 2012 PPI adjustment, HFC's minimum annualized payments under these agreements increased by $8.5 million to $200.3 million .

If HFC fails to meet its minimum volume commitments under the agreements in any quarter, it will be required to pay us in cash the amount of any shortfall by the last day of the month following the end of the quarter. Under certain of the agreements, a shortfall payment may be applied as a credit in the following four quarters after minimum obligations are met.

We also have a pipelines and terminals agreement with Alon expiring in 2020 under which Alon has agreed to transport on our pipelines and throughput through our terminals volumes of refined products that result in a minimum level of annual revenue that also is subject to annual tariff rate adjustments. The terms under this agreement expire beginning in 2018 through 2022. We also have a capacity lease agreement under which we lease Alon space on our Orla to El Paso pipeline for the shipment of refined product. As of July 1, 2012 , these agreements with Alon will result in minimum annualized payments to us of $30.9 million .

A significant reduction in revenues under these agreements could have a material adverse effect on our results of operations.

Under certain provisions of the Omnibus Agreement (“Omnibus Agreement”) that we have with HFC, we pay HFC an annual administrative fee, currently $2.3 million, for the provision by HFC or its affiliates of various general and administrative services to us. This fee does not include the salaries of pipeline and terminal personnel or the cost of their employee benefits, which are separately charged to us by HFC. We also reimburse HFC and its affiliates for direct expenses they incur on our behalf.

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RESULTS OF OPERATIONS (Unaudited)

Income, Distributable Cash Flow and Volumes

The following tables present income, distributable cash flow and volume information for the three and the six months ended June 30, 2012 and 2011 .



	Three Months Ended June 30,						Change from
	2012			2011			2011
	(In thousands, except per unit data)
Revenues
Pipelines:
Affiliates—refined product pipelines	$	13,271		$	11,689		$	1,582
Affiliates—intermediate pipelines	6,712			5,069			1,643
Affiliates—crude pipelines	10,993			9,624			1,369
	30,976			26,382			4,594
Third parties—refined product pipelines	7,452			11,906			(4,454		)
	38,428			38,288			140
Terminals, tanks and loading racks:
Affiliates	23,248			10,757			12,491
Third parties	2,016			1,895			121
	25,264			12,652			12,612
Total revenues	63,692			50,940			12,752
Operating costs and expenses
Operations	17,923			14,366			3,557
Depreciation and amortization	9,132			7,713			1,419
General and administrative	2,487			1,573			914
	29,542			23,652			5,890
Operating income	34,150			27,288			6,862
Equity in earnings of SLC Pipeline	794			467			327
Interest expense, including amortization	(11,324		)	(8,724		)	(2,600		)
Loss on early extinguishment of debt	(383		)	—			(383		)
	(10,913		)	(8,257		)	(2,656		)
Income before income taxes	23,237			19,031			4,206
State income tax	(75		)	(18		)	(57		)
Net income	23,162			19,013			4,149
Less general partner interest in net income, including incentive distributions ⁽¹⁾	5,917			3,847			2,070
Limited partners’ interest in net income	$	17,245		$	15,166		$	2,079
Limited partners’ earnings per unit—basic and diluted ⁽¹⁾	$	0.63		$	0.69		$	(0.06	)
Weighted average limited partners’ units outstanding	27,361			22,079			5,282
EBITDA ⁽²⁾	$	44,076		$	35,468		$	8,608
Distributable cash flow ⁽³⁾	$	34,520		$	21,421		$	13,099

Volumes (bpd)
Pipelines:
Affiliates—refined product pipelines	101,886			90,984			10,902
Affiliates—intermediate pipelines	137,115			84,201			52,914
Affiliates—crude pipelines	168,047			160,648			7,399
	407,048			335,833			71,215
Third parties—refined product pipelines	56,297			51,627			4,670
	463,345			387,460			75,885
Terminals and loading racks:
Affiliates	267,988			182,394			85,594
Third parties	48,825			42,694			6,131
	316,813			225,088			91,725
Total for pipelines and terminal assets (bpd)	780,158			612,548			167,610

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	Six Months Ended June 30,						Change from
	2012			2011			2011
	(In thousands, except per unit data)
Revenues
Pipelines:
Affiliates—refined product pipelines	$	25,628		$	21,547		$	4,081
Affiliates—intermediate pipelines	13,757			9,702			4,055
Affiliates—crude pipelines	21,538			18,945			2,593
	60,923			50,194			10,729
Third parties—refined product pipelines	15,780			21,061			(5,281		)
	76,703			71,255			5,448
Terminals, tanks and loading racks:
Affiliates	46,094			21,052			25,042
Third parties	4,410			3,650			760
	50,504			24,702			25,802
Total revenues	127,207			95,957			31,250
Operating costs and expenses
Operations	34,911			27,162			7,749
Depreciation and amortization	19,396			15,353			4,043
General and administrative	4,526			2,936			1,590
	58,833			45,451			13,382
Operating income	68,374			50,506			17,868
Equity in earnings of SLC Pipeline	1,625			1,207			418
Interest expense, including amortization	(21,729		)	(17,273		)	(4,456		)
Loss on early extinguishment of debt	(2,979		)	—			(2,979		)
Other expense	—			(12		)	12
	(23,083		)	(16,078		)	(7,005		)
Income before income taxes	45,291			34,428			10,863
State income tax	(150		)	(246		)	96
Net income	45,141			34,182			10,959
Less general partner interest in net income, including incentive distributions ⁽¹⁾	11,425			7,409			4,016
Limited partners’ interest in net income	$	33,716		$	26,773		$	6,943
Limited partners’ earnings per unit—basic and diluted ⁽¹⁾	$	1.23		$	1.21		$	0.02
Weighted average limited partners’ units outstanding	27,361			22,079			5,282
EBITDA ⁽²⁾	$	89,395		$	67,054		$	22,341
Distributable cash flow ⁽³⁾	$	71,075		$	42,193		$	28,882

Volumes (bpd)
Pipelines:
Affiliates—refined product pipelines	99,556			84,139			15,417
Affiliates—intermediate pipelines	130,341			76,452			53,889
Affiliates—crude pipelines	160,855			148,520			12,335
	390,752			309,111			81,641
Third parties—refined product pipelines	60,292			50,086			10,206
	451,044			359,197			91,847
Terminals and loading racks:
Affiliates	265,109			170,230			94,879
Third parties	50,604			41,532			9,072
	315,713			211,762			103,951
Total for pipelines and terminal assets (bpd)	766,757			570,959			195,798

(1)

Net income is allocated between limited partners and the general partner interest in accordance with the provisions of the partnership agreement. Net income allocated to the general partner includes incentive distributions declared subsequent to quarter end. Net income attributable to the limited partners is divided by the weighted average limited partner units outstanding in computing the limited partners’ per unit interest in net income.


(2)	EBITDA is calculated as net income plus (i) interest expense, net of interest income, (ii) state income tax and (iii) depreciation and amortization. EBITDA is not a calculation based upon U.S. generally accepted accounting principles

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(“GAAP”). However, the amounts included in the EBITDA calculation are derived from amounts included in our consolidated financial statements. EBITDA should not be considered as an alternative to net income or operating income as an indication of our operating performance or as an alternative to operating cash flow as a measure of liquidity. EBITDA is not necessarily comparable to similarly titled measures of other companies. EBITDA is presented here because it is a widely used financial indicator used by investors and analysts to measure performance. EBITDA also is used by our management for internal analysis and as a basis for compliance with financial covenants. Set forth below is our calculation of EBITDA.



	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
	(In thousands)
Net income	$	23,162	$	19,013	$	45,141	$	34,182
Add:
Interest expense	9,547		8,419		18,307		16,678
Amortization of discount and deferred debt charges	1,777		305		3,422		595
Loss on early extinguishment of debt	383		—		2,979		—
State income tax	75		18		150		246
Depreciation and amortization	9,132		7,713		19,396		15,353
EBITDA	$	44,076	$	35,468	$	89,395	$	67,054

(3)

Distributable cash flow is not a calculation based upon GAAP. However, the amounts included in the calculation are derived from amounts separately presented in our consolidated financial statements, with the exception of billed crude revenue settlement and maintenance capital expenditures. Distributable cash flow should not be considered in isolation or as an alternative to net income or operating income as an indication of our operating performance or as an alternative to operating cash flow as a measure of liquidity. Distributable cash flow is not necessarily comparable to similarly titled measures of other companies. Distributable cash flow is presented here because it is a widely accepted financial indicator used by investors to compare partnership performance. It is also used by management for internal analysis and for our performance units. We believe that this measure provides investors an enhanced perspective of the operating performance of our assets and the cash our business is generating. Set forth below is our calculation of distributable cash flow.



	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
	(In thousands)
Net income	$	23,162		$	19,013		$	45,141		$	34,182
Add (subtract):
Depreciation and amortization	9,132			7,713			19,396			15,353
Amortization of discount and deferred debt charges	1,777			305			3,422			595
Loss on early extinguishment of debt	383			—			2,979			—
Billed crude revenue settlement	917			—			1,835			—
Increase (decrease) in deferred revenue	163			(4,014		)	(429		)	(5,118		)
Maintenance capital expenditures ⁽⁴⁾	(1,292		)	(1,904		)	(1,599		)	(3,133		)
Other non-cash adjustments	278			308			330			314
Distributable cash flow	$	34,520		$	21,421		$	71,075		$	42,193


(4)	Maintenance capital expenditures are capital expenditures made to replace partially or fully depreciated assets in order to maintain the existing operating capacity of our assets and to extend their useful lives. Maintenance capital expenditures include expenditures required to maintain equipment reliability, tankage and pipeline integrity and safety and to address environmental regulations.

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	June 30, 2012		December 31, 2011
	(In thousands)
Balance Sheet Data
Cash and cash equivalents	$	4,216	$	3,269
Working capital	$	10,351	$	12,293
Total assets	$	959,698	$	966,956
Long-term debt	$	613,195	$	605,888
Partners’ equity ⁽⁵⁾	$	312,864	$	329,377

(5)

As a master limited partnership, we distribute our available cash, which historically has exceeded our net income because depreciation and amortization expense represents a non-cash charge against income. The result is a decline in partners’ equity since our regular quarterly distributions have exceeded our quarterly net income. Additionally, if the assets contributed and acquired from HFC while under common control of HFC had been acquired from third parties, our acquisition cost in excess of HFC’s basis in the transferred assets of $295.6 million , exclusive of depreciation and amortization, (as of June 30, 2012) would have been recorded in our financial statements as increases to our properties and equipment and intangible assets instead of decreases to partners’ equity.

Results of Operations—Three Months Ended June 30, 2012 Compared with Three Months Ended June 30, 2011

Summary

Net income for the three months ended June 30, 2012 was $23.2 million , a $4.1 million increase compared to the three months ended June 30, 2011 . This increase in earnings is principally due to increased pipeline shipments, earnings attributable to our November 2011 acquisition and annual tariff increases. These factors were offset partially by a decrease in previously deferred revenue realized, increased operating costs and expenses and higher interest expense.

Revenues for the three months ended June 30, 2012 include the recognition of $0.8 million of prior shortfalls billed to shippers in 2011. Deficiency payments of $1.0 million associated with certain guaranteed shipping contracts were deferred during the three months ended June 30, 2012 . Such deferred revenue will be recognized in earnings either as payment for shipments in excess of guaranteed levels, or when shipping rights expire unused.

Revenues

Total revenues for the three months ended June 30, 2012 were $63.7 million , a $12.8 million increase compared to the three months ended June 30, 2011 . This is principally due to increased pipeline shipments, revenues attributable to our November 2011 asset acquisition and the effect of annual tariff increases, partially offset by a $4.7 million decrease in previously deferred revenue realized.

Overall pipeline volumes were up 20% compared to the three months ended June 30, 2011 .

Revenues from our refined product pipelines were $20.7 million , a decrease of $2.9 million compared to the three months ended June 30, 2011 . This includes the effects of a $4.8 million decrease in previously deferred revenue realized. Volumes shipped on our refined product pipelines averaged 158.2 thousand barrels per day ("mbpd") compared to 142.6 mbpd for the same period last year.

Revenues from our intermediate pipelines were $6.7 million , an increase of $1.6 million compared to the three months ended June 30, 2011 . This includes $1.2 million in revenues attributable to the Tulsa interconnect pipelines which were placed in service in September 2011 and a $0.1 million increase in previously deferred revenue realized. Volumes shipped on our intermediate pipelines averaged 137.1 mbpd compared to 84.2 mbpd for the same period last year.

Revenues from our crude pipelines were $11.0 million , an increase of $1.4 million compared to the three months ended June 30, 2011 . Volumes shipped on our crude pipelines increased to an average of 168.0 mbpd compared to 160.6 mbpd for the same period last year.

Revenues from terminal, tankage and loading rack fees were $25.3 million , an increase of $12.6 million compared to the three months ended June 30, 2011 . This increase is principally due to $11.9 million in revenues attributable to our terminal, tankage and loading racks serving HFC's El Dorado and Cheyenne refineries. Refined products terminalled in our facilities increased to

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an average of 316.8 mbpd compared to 225.1 mbpd for the same period last year.

Operations Expense

Operations expense for the three months ended June 30, 2012 increased by $3.6 million compared to the three months ended June 30, 2011 . This increase is principally due to incremental operating costs of $1.4 million attributable to our recently acquired assets serving HFC's El Dorado and Cheyenne refineries, higher throughput levels as well as year-over-year increases in second quarter maintenance service and payroll costs.

Depreciation and Amortization

Depreciation and amortization for the three months ended June 30, 2012 increased by $1.4 million compared to the three months ended June 30, 2011 . This increase is principally due to depreciation attributable to our recent asset acquisition from HFC and capital projects.

General and Administrative

General and administrative costs for the three months ended June 30, 2012 increased by $0.9 million compared to the three months ended June 30, 2011 due to higher professional fees related to our recent acquisition of HFC's 75% interest in UNEV.

Equity in Earnings of SLC Pipeline

Our equity in earnings of the SLC Pipeline was $0.8 million for the three months ended June 30, 2012 compared to $0.5 million for the three months ended June 30, 2011 .

Interest Expense

Interest expense for the three months ended June 30, 2012 totaled $11.3 million , an increase of $2.6 million compared to the three months ended June 30, 2011 . This increase reflects interest on a year-over-year increase in debt levels. Our aggregate effective interest rate was 7.3% for the three months ended June 30, 2012 compared to 6.7% for the same period of 2011 .

Loss on Early Extinguishment of Debt

We recognized a charge of $0.4 million upon the early extinguishment of our 6.25% senior notes for the three months ended June 30, 2012 . This charge relates to the premium paid to noteholders in April 2012 upon their tender of the remaining $27.2 million aggregate principal amount and related financing costs previously deferred.

State Income Tax

We recorded state income taxes of $75,000 and $18,000 for the three months ended June 30, 2012 and 2011, respectively, which are solely attributable to the Texas margin tax.

Results of Operations—Six Months Ended June 30, 2012 Compared with Six Months Ended June 30, 2011

Summary

Net income for the six months ended June 30, 2012 was $45.1 million , an $11.0 million increase compared to the six months ended June 30, 2011 . This increase in earnings is principally due to increased pipeline shipments, earnings attributable to our November 2011 asset acquisition and annual tariff increases. These factors were offset partially by a decrease in previously deferred revenue realized, increased operating costs and expenses, higher interest expense and a loss incurred on the early extinguishment of debt.

Revenues for the six months ended June 30, 2012 include the recognition of $2.5 million of prior shortfalls billed to shippers in 2011. Deficiency payments of $2.1 million associated with certain guaranteed shipping contracts were deferred during the six months ended June 30, 2012 . Such deferred revenue will be recognized in earnings either as payment for shipments in excess of guaranteed levels, or when shipping rights expire unused.

Revenues

Total revenues for the six months ended June 30, 2012 were $127.2 million , a $31.3 million increase compared to the six months ended June 30, 2011 . This is principally due to increased pipeline shipments, revenues attributable to our November 2011 asset acquisition and the effect of annual tariff increases, partially offset by a $6.6 million decrease in previously deferred revenue realized.

Overall pipeline volumes were up 26% compared to the six months ended June 30, 2011 . During the first six months of 2011, related-party throughput volumes were below target levels due to production downtime at HFC's Navajo refinery following a plant-wide power outage in January 2011.

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Revenues from our refined product pipelines were $41.4 million , a decrease of $1.2 million compared to the six months ended June 30, 2011 . This includes the effects of a $7.2 million decrease in previously deferred revenue realized. Volumes shipped on our refined product pipelines averaged 159.8 mbpd compared to 134.2 mbpd for the same period last year.

Revenues from our intermediate pipelines were $13.8 million , an increase of $4.1 million compared to the six months ended June 30, 2011 . This includes $2.5 million in revenues attributable to the Tulsa interconnect pipelines, and a $0.6 million increase in previously deferred revenue realized. Volumes shipped on our intermediate pipelines averaged 130.3 mbpd compared to 76.5 mbpd for the same period last year.

Revenues from our crude pipelines were $21.5 million , an increase of $2.6 million compared to the six months ended June 30, 2011 . Volumes shipped on our crude pipelines increased to an average of 160.9 mbpd compared to 148.5 mbpd for the same period last year.

Revenues from terminal, tankage and loading rack fees were $50.5 million , an increase of $25.8 million compared to the six months ended June 30, 2011 . This increase is principally due to $23.6 million in revenues attributable to our terminal, tankage and loading racks serving HFC's El Dorado and Cheyenne refineries. Refined products terminalled in our facilities increased to an average of 315.7 mbpd compared to 211.8 mbpd for the same period last year.

Operations Expense

Operations expense for the six months ended June 30, 2012 increased by $7.7 million compared to the six months ended June 30, 2011 . This increase is principally due to incremental operating costs of $2.8 million that are attributable to our recently acquired assets serving HFC's El Dorado and Cheyenne refineries, higher throughput levels as well as year-over-year increases in maintenance service and payroll costs.

Depreciation and Amortization

Depreciation and amortization for the six months ended June 30, 2012 increased by $4.0 million compared to the six months ended June 30, 2011 . This increase is principally due to depreciation attributable to our recent asset acquisition from HFC and capital projects.

General and Administrative

General and administrative costs for the six months ended June 30, 2012 increased by $1.6 million compared to the six months ended June 30, 2011 due to higher professional fees including fees related to our recent acquisition of HFC's 75% interest in UNEV.

Equity in Earnings of SLC Pipeline

Our equity in earnings of the SLC Pipeline was $1.6 million for the six months ended June 30, 2012 compared to $1.2 million for the six months ended June 30, 2011 .

Interest Expense

Interest expense for the six months ended June 30, 2012 totaled $21.7 million , an increase of $4.5 million compared to the six months ended June 30, 2011 . This increase reflects interest on a year-over-year increase in debt levels. Our aggregate effective interest rate was 7.4% for the six months ended June 30, 2012 compared to 6.7% for the same period of 2011 .

Loss on Early Extinguishment of Debt

We recognized a charge of $3.0 million upon the early extinguishment of our 6.25% senior notes for the six months ended June 30, 2012 . This charge relates to the premium paid to noteholders upon their tender of an aggregate principal amount of $185.0 million and related financing costs that were previously deferred.

State Income Tax

We recorded state income taxes of $150,000 and $246,000 for the six months ended June 30, 2012 and 2011, respectively, which are solely attributable to the Texas margin tax.

LIQUIDITY AND CAPITAL RESOURCES

Overview

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available to fund letters of credit up to a $50 million sub-limit and to fund distributions to unitholders up to a $60 million sub-limit.

Under our registration statement filed with the SEC using a “shelf” registration process, we currently have the ability to raise up to $2.0 billion by offering securities, through one or more prospectus supplements that would describe, among other things, the specific amounts, prices and terms of any securities offered and how the proceeds would be used. Any proceeds from the sale of securities would be used for general business purposes, which may include, among other things, funding acquisitions of assets or businesses, working capital, capital expenditures, investments in subsidiaries, the retirement of existing debt and/or the repurchase of common units or other securities.

We believe our current cash balances, future internally generated funds and funds available under the Credit Agreement will provide sufficient resources to meet our working capital liquidity needs for the foreseeable future. Additionally, we funded the $260.0 million cash portion of our UNEV Pipeline interest acquisition from HFC on July 12, 2012 with advances under the Credit Agreement.

In February and May 2012, we paid regular quarterly cash distributions of $0.885 and $0.895 on all units in an aggregate amount of $60.0 million . Included in these distributions were $10.1 million of incentive distribution payments to the general partner.

Contemporaneously with our UNEV Pipeline interest acquisition on July 12, 2012, HFC (our general partner) agreed to forego its right to incentive distributions of $1.25 million per quarter over the next twelve consecutive quarterly periods and up to an additional four quarters in certain circumstances.

Cash and cash equivalents increased by $0.9 million during the six months ended June 30, 2012 . The cash flows provided by operating activities of $73.5 million exceeded the combined cash flows used for investing and financing activities of $12.0 million and $60.5 million , respectively. Working capital decreased by $1.9 million to $10.4 million at June 30, 2012 from $12.3 million at December 31, 2011 .

Cash Flows—Operating Activities

Cash flows from operating activities increased by $27.2 million from $46.3 million for the six months ended June 30, 2011 to $73.5 million for the six months ended June 30, 2012 . This increase is due principally to $33.4 million in additional cash collections from our customers, partially offset by payments attributable to increased operating expenses.

Our major shippers are obligated to make deficiency payments to us if they do not meet their minimum volume shipping obligations. Under certain agreements with these shippers, they have the right to recapture these amounts if future volumes exceed minimum levels. We billed $2.5 million during the six months ended June 30, 2011 related to shortfalls that subsequently expired without recapture and were recognized as revenue during the six months ended June 30, 2012 . Another $1.0 million is included in our accounts receivable at June 30, 2012 related to shortfalls that occurred during the three months ended June 30, 2012 .

Cash Flows—Investing Activities

Cash flows used for investing activities decreased by $10.9 million from $22.9 million for the six months ended June 30, 2011 to $12.0 million for the six months ended June 30, 2012 . During the six months ended June 30, 2012 and 2011 , we invested $12.0 million and $22.9 million in additions to properties and equipment, respectively.

Cash Flows—Financing Activities

Cash flows used for financing activities were $60.5 million for the six months ended June 30, 2012 compared to $22.4 million for the six months ended June 30, 2011 , an increase of $38.2 million . During the six months ended June 30, 2012 , we received $99.0 million and repaid $129.0 million in advances under the Credit Agreement, received net proceeds of $294.8 million from the issuance of our 6.5% senior notes, and repaid $185.0 million of our 6.25% senior notes and $72.9 million of our promissory notes. Additionally, we paid $60.0 million in regular quarterly cash distributions to our general and limited partners, paid $3.2 million in financing costs to amend our Credit Agreement and paid $4.5 million for the purchase of common units for recipients of our incentive grants. During the six months ended June 30, 2011 , we received $64.0 million and repaid $37.0 million in advances under the Credit Agreement. Additionally, we paid $44.9 million in regular quarterly cash distributions to our general and limited partners, incurred $3.1 million in financing costs upon the issuance of the 8.25% senior notes, and paid $1.4 million for the purchase of common units for recipients of our incentive grants.

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Capital Requirements

Our pipeline and terminalling operations are capital intensive, requiring investments to maintain, expand, upgrade or enhance existing operations and to meet environmental and operational regulations. Our capital requirements consist of maintenance capital expenditures and expansion capital expenditures. Repair and maintenance expenses associated with existing assets that do not extend their useful life are charged to operating expenses as incurred.

Each year the Holly Logistic Services, L.L.C. (“HLS”) board approves our annual capital budget, which specifies capital projects that our management is authorized to undertake. Additionally, at times when conditions warrant or as new opportunities arise, special projects may be approved. The funds allocated for a particular capital project may be expended over a period in excess of a year, depending on the time required to complete the project. Therefore, our planned capital expenditures for a given year consist of expenditures approved for capital projects included in the current year’s capital budget as well as, in certain cases, expenditures approved for capital projects in capital budgets for prior years. The 2012 capital budget is comprised of $8.9 million for maintenance capital expenditures and $25.8 million for expansion capital expenditures.

We recently have made certain modifications to our crude oil gathering and trunk line system that effectively have increased our ability to gather and transport an additional 10,000 bpd of Delaware Basin crude oil in response to increased drilling activity in southeast New Mexico. Furthermore, we have developed a project to replace a 5-mile section of this pipeline system that will allow for an additional 15,000 bpd of capacity that will be executed as needed if Delaware Basin crude volumes continue to increase. This project is estimated to cost approximately $2.0 million. We have a second project that consists of the reactivation and conversion to crude oil service of a 70-mile, 8-inch petroleum products pipeline owned by us. Once in service, this pipeline will initially be capable of transporting up to 35,000 bpd of crude oil from southeast New Mexico to third-party common carrier pipelines in west Texas for further transport to major crude oil markets. The scope of this project is being finalized. Subject to receipt of acceptable shipper support and board approval, this project could be operational in early 2013.

On July 12, 2012, we acquired HFC's 75% interest in UNEV which owns the recently constructed UNEV Pipeline, a 400-mile, 12-inch refined products pipeline running from Woods Cross, Utah to Las Vegas, Nevada, product terminals near Cedar City, Utah and Las Vegas, Nevada and related assets. We paid consideration consisting of $260.0 million in cash and 1,029,900 of our common units, which as a result, increased HFC's ownership interest in us from 42% to 44% (including the 2% general partner interest).

We expect that our currently planned sustaining and maintenance capital expenditures, as well as expenditures for acquisitions and capital development projects will be funded with existing cash generated by operations, the sale of additional limited partner common units, the issuance of debt securities and advances under our Credit Agreement, or a combination thereof. With volatility and uncertainty at times in the credit and equity markets, there may be limits on our ability to issue new debt or equity financing. Additionally, due to pricing movements in the debt and equity markets, we may not be able to issue new debt and equity securities at acceptable pricing. Without additional capital beyond amounts available under the Credit Agreement, our ability to fund some of these capital projects may be limited.

Credit Agreement

Our obligations under the Credit Agreement are collateralized by substantially all of our assets. Indebtedness under the Credit Agreement is recourse to HEP Logistics Holdings, L.P. ("HEP Logistics"), our general partner, and guaranteed by our material wholly-owned subsidiaries. Any recourse to HEP Logistics would be limited to the extent of its assets, which other than its investment in us, are not significant. We may prepay all loans at any time without penalty, except for payment of certain breakage and related costs.

The Credit Agreement imposes certain requirements on us which we are currently in compliance with, including: a prohibition against distribution to unitholders if, before or after the distribution, a potential default or an event of default as defined in the agreement would occur; limitations on our ability to incur debt, make loans, acquire other companies, change the nature of our business, enter a merger or consolidation, or sell assets; and covenants that require maintenance of a specified EBITDA to interest expense ratio, total debt to EBITDA ratio and senior debt to EBITDA ratio. If an event of default exists under the Credit Agreement, the lenders will be able to accelerate the maturity of the debt and exercise other rights and remedies.

Senior Notes

In March 2012, we issued $300 million in aggregate principal amount outstanding of 6.5% senior notes maturing March 1, 2020 (the "6.5% Senior Notes"). Net Proceeds of $294.8 million were used to fund $157.8 million aggregate principal amount of 6.25% senior notes maturing March 1, 2015 (the "6.25 Senior Notes") tendered pursuant to a cash tender offer and consent solicitation, to repay $72.9 million in promissory notes due to HFC as discussed below, to pay related fees, expenses and accrued interest in connection with these transactions and to repay borrowings under the Credit Agreement.

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In April 2012, we redeemed $27.2 million aggregate principal amount of 6.25% senior notes that remained outstanding following the cash tender offer and consent solicitation.

Also, we have $150 million in aggregate principal amount outstanding of 8.25% senior notes maturing March 15, 2018.

Our 6.5% senior notes and 8.25% senior notes (collectively, the “Senior Notes”) are unsecured and impose certain restrictive covenants which we are currently in compliance with, including limitations on our ability to incur additional indebtedness, make investments, sell assets, incur certain liens, pay distributions, enter into transactions with affiliates, and enter into mergers. At any time when the Senior Notes are rated investment grade by both Moody’s and Standard & Poor’s and no default or event of default exists, we will not be subject to many of the foregoing covenants. Additionally, we have certain redemption rights under the Senior Notes.

Indebtedness under the Senior Notes is recourse to HEP Logistics, and guaranteed by our wholly-owned subsidiaries. However, any recourse to HEP Logistics would be limited to the extent of its assets, which other than its investment in us, are not significant.

Promissory Notes

In November 2011, we issued senior unsecured promissory notes to HFC (the “Promissory Notes”) having an aggregate principal amount of $150.0 million to finance a portion of our November 9, 2011 acquisition of assets located at HFC's El Dorado and Cheyenne refineries. In December 2011, we repaid $77.1 million of outstanding principal using proceeds received in our December 2011 common unit offering and existing cash. We repaid the remaining $72.9 million balance in March 2012.

Long-term Debt

The carrying amounts of our long-term debt are as follows:



	June 30, 2012			December 31, 2011
	(In thousands)
Credit Agreement	$	170,000		$	200,000

6.5% Senior Notes
Principal	300,000			—
Unamortized discount	(5,051		)	—
	294,949			—
6.25% Senior Notes
Principal	—			185,000
Unamortized net discount	—			(105		)
	—			184,895
8.25% Senior Notes
Principal	150,000			150,000
Unamortized discount	(1,754		)	(1,907		)
	148,246			148,093

Promissory Notes	—			72,900

Total long-term debt	$	613,195		$	605,888

See “Risk Management” for a discussion of our interest rate swap.

Contractual Obligations

In June 2012, we amended our credit agreement increasing the size of the credit facility from $375 million to $550 million . During the six months ended June 30, 2012 , we repaid net advances of $30.0 million resulting in $170.0 million of outstanding borrowings under the Credit Agreement at June 30, 2012 .

In March 2012, we issued $300 million in aggregate principal amount of 6.5% senior notes maturing March 2020.

There were no other significant changes to our long-term contractual obligations during this period.

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Impact of Inflation

Inflation in the United States has been relatively moderate in recent years and did not have a material impact on our results of operations for the six months ended June 30, 2012 and 2011 . Historically, the PPI has increased an average of 3.6% annually over the past 5 calendar years.

The substantial majority of our revenues are generated under long-term contracts that provide for increases in our rates and minimum revenue guarantees annually for increases in the PPI. Certain of these contracts have provisions that limit the level of annual PPI percentage rate increases. Although the recent PPI increase may not be indicative of additional increases to be realized in the future, a significant and prolonged period of inflation could adversely affect our cash flows and results of operations if costs increase at a rate greater than the fees we charge our shippers.

Environmental Matters

Our operation of pipelines, terminals, and associated facilities in connection with the transportation and storage of refined products and crude oil is subject to stringent and complex federal, state, and local laws and regulations governing the discharge of materials into the environment, or otherwise relating to the protection of the environment. As with the industry generally, compliance with existing and anticipated laws and regulations increases our overall cost of business, including our capital costs to construct, maintain, and upgrade equipment and facilities. While these laws and regulations affect our maintenance capital expenditures and net income, we believe that they do not affect our competitive position given that the operations of our competitors are similarly affected. We believe that our operations are in substantial compliance with applicable environmental laws and regulations. However, these laws and regulations, and the interpretation or enforcement thereof, are subject to frequent change by regulatory authorities, and we are unable to predict the ongoing cost to us of complying with these laws and regulations or the future impact of these laws and regulations on our operations. Violation of environmental laws, regulations, and permits can result in the imposition of significant administrative, civil and criminal penalties, injunctions, and construction bans or delays. A discharge of hydrocarbons or hazardous substances into the environment could, to the extent the event is not insured, subject us to substantial expense, including both the cost to comply with applicable laws and regulations and claims made by employees, neighboring landowners and other third parties for personal injury and property damage.

Under the Omnibus Agreement and certain transportation and purchase agreements with HFC, HFC has agreed to indemnify us, subject to certain limitations, for environmental noncompliance and remediation liabilities associated with assets transferred to us from HFC and occurring or existing prior to the date of such transfers. The Omnibus Agreement provides environmental indemnification with respect to certain transferred assets of up to $15.0 million through 2021, plus additional indemnification of $2.5 million through 2015 for certain of these assets and up to $7.5 million through 2023 for certain other assets. HFC’s indemnification obligations under the Omnibus Agreement do not apply to (i) the Tulsa west loading racks acquired in August 2009, (ii) the 16-inch intermediate pipeline acquired in June 2009, (iii) the Roadrunner Pipeline, (iv) the Beeson Pipeline, (v) the logistics and storage assets acquired from Sinclair in December 2009, (vi) the Tulsa east storage tanks and loading racks acquired in March 2010 or (vii) the UNEV Pipeline (following our acquisition of HFC's 74% interest in July 2012). For the Tulsa loading racks acquired from HFC in August 2009 and the Tulsa logistics and storage assets acquired from Sinclair in December 2009, HFC agreed to indemnify us for environmental liabilities arising from our pre-ownership operations of these assets. Additionally, HFC agreed to indemnify us for any liabilities arising from its operation of our loading racks located at HFC's Tulsa refinery west facility.

We have an environmental agreement with Alon with respect to pre-closing environmental costs and liabilities relating to the pipelines and terminals acquired from Alon in 2005, under which Alon will indemnify us through 2015, subject to a $100,000 deductible and a $20.0 million maximum liability cap.

There are environmental remediation projects that are currently in progress that relate to certain assets acquired from HFC. Certain of these projects were underway prior to our purchase and represent liabilities of HFC as the obligation for future remediation activities was retained by HFC. At June 30, 2012 , we have an accrual of $1.3 million that relates to environmental clean-up projects for which we have assumed liability. The remaining projects, including assessment and monitoring activities, are covered under the HFC environmental indemnification discussed above and represent liabilities of HFC.

CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities as of the date of the financial statements. Actual

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results may differ from these estimates under different assumptions or conditions. Our significant accounting policies are described in “Item 7. Management’s Discussion and Analysis of Financial Condition and Operations—Critical Accounting Policies” in our Annual Report on Form 10-K for the year ended December 31, 2011 . Certain critical accounting policies that materially affect the amounts recorded in our consolidated financial statements include revenue recognition, assessing the possible impairment of certain long-lived assets and goodwill, and assessing contingent liabilities for probable losses. There have been no changes to these policies in 2012 . We consider these policies to be the most critical to understanding the judgments that are involved and the uncertainties that could impact our results of operations, financial condition and cash flows.

RISK MANAGEMENT

We use interest rate swaps (derivative instruments) to manage our exposure to interest rate risk.

As of June 30, 2012 , we have an interest rate swap, designated as a cash flow hedge, that hedges our exposure to the cash flow risk caused by the effects of LIBOR changes on a $155.0 million Credit Agreement advance. This interest rate swap effectively converts $155.0 million of our LIBOR based debt to fixed rate debt having an interest rate of 0.99% plus an applicable margin of 2.0% as of June 30, 2012 , which equaled an effective interest rate of 2.99% . This swap contract matures in February 2016.

We review publicly available information on our counterparty in order to review and monitor its financial stability and assess its ongoing ability to honor its commitments under the interest rate swap contract. This counterparty is a large financial institution. Furthermore, we have not experienced, nor do we expect to experience, any difficulty in the counterparty honoring its respective commitment.

The market risk inherent in our debt positions is the potential change arising from increases or decreases in interest rates as discussed below.

At June 30, 2012 , we had an outstanding principal balance on our 6.5% and 8.25% Senior Notes of $300 million and $150 million , respectively. A change in interest rates would generally affect the fair value of the Senior Notes, but not our earnings or cash flows. At June 30, 2012 , the fair values of our 6.5% and 8.25% Senior Notes were $302.3 million and $159.4 million , respectively. We estimate a hypothetical 10% change in the yield-to-maturity applicable to the 6.5% and 8.25% Senior Notes at June 30, 2012 would result in a change of approximately $11.6 million and $5.0 million , respectively, in the fair value of the underlying notes.

For the variable rate Credit Agreement, changes in interest rates would affect cash flows, but not the fair value. At June 30, 2012 , borrowings outstanding under the Credit Agreement were $170.0 million . By means of our cash flow hedge, we have effectively converted the variable rate on $155.0 million of outstanding borrowings to a fixed rate of 2.99% .

At June 30, 2012 , our cash and cash equivalents included highly liquid investments with a maturity of three months or less at the time of purchase. Due to the short-term nature of our cash and cash equivalents, a hypothetical 10% increase in interest rates would not have a material effect on the fair market value of our portfolio. Since we have the ability to liquidate this portfolio, we do not expect our operating results or cash flows to be materially affected by the effect of a sudden change in market interest rates on our investment portfolio.

Our operations are subject to normal hazards of operations, including fire, explosion and weather-related perils. We maintain various insurance coverages, including business interruption insurance, subject to certain deductibles. We are not fully insured against certain risks because such risks are not fully insurable, coverage is unavailable, or premium costs, in our judgment, do not justify such expenditures.

We have a risk management oversight committee that is made up of members from our senior management. This committee monitors our risk environment and provides direction for activities to mitigate, to an acceptable level, identified risks that may adversely affect the achievement of our goals.

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Item 3.	Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices. See “Risk Management” under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of market risk exposures that we have with respect to our cash and cash equivalents and long-term debt, which disclosure should be read in conjunction with the quantitative and qualitative disclosures about market risk contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011. We utilize derivative instruments to hedge our interest rate exposure, as discussed under “Risk Management.”

Since we do not own products shipped on our pipelines or terminalled at our terminal facilities, we do not have market risks associated with commodity prices.


Item 4.	Controls and Procedures

(a) Evaluation of disclosure controls and procedures

Our principal executive officer and principal financial officer have evaluated, as required by Rule 13a-15(b) under the Securities Exchange Act of 1934 (the “Exchange Act”), our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report on Form 10-Q. Our disclosure controls and procedures are designed to provide reasonable assurance that the information we are required to disclose in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Based upon the evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of June 30, 2012 at the reasonable assurance level.

(b) Changes in internal control over financial reporting

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during our last fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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PART II. OTHER INFORMATION


Item 1.	Legal Proceedings

We are a party to various legal and regulatory proceedings, none of which we believe will have a material adverse impact on our financial condition, results of operations or cash flows.

Item 1A. Risk Factors

There have been no material changes in our risk factors as previously disclosed in Part 1, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2011. In addition to the other information set forth in this quarterly report, you should carefully consider the factors discussed in our 2011 Form 10-K, which could materially affect our business, financial condition or future results. The risks described in this quarterly report and in our 2011 Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In the second quarter of 2012, we paid $1.7 million for the purchase of 26,619 of our common units in the open market for the recipients of our 2012 restricted grants. The following table shows these purchases.



Period	Total Number of Units Purchased	Average Price Paid Per Unit		Total Number of Units Purchased as Part of Publicly Announced Plan or Program	Maximum Number of Units that May Yet be Purchased Under a Publicly Announced Plan or Program
April 2012	26,619	$	62.26	—	$	—
May 2012	—	$	—	—	$	—
June 2012	—	$	—	—	$	—
Total for April to June 2012	26,619			—


Item 6.	Exhibits

The Exhibit Index on page 39 of this Quarterly Report on Form 10-Q lists the exhibits that are filed or furnished, as applicable, as part of the Quarterly Report on Form 10-Q.

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HOLLY ENERGY PARTNERS, L.P.

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		HOLLY ENERGY PARTNERS, L.P.
		(Registrant)

		By: HEP LOGISTICS HOLDINGS, L.P. its General Partner

		By: HOLLY LOGISTIC SERVICES, L.L.C. its General Partner

Date: August 1, 2012		/s/ Bruce R. Shaw
		Bruce R. Shaw
		Senior Vice President and Chief Financial Officer (Principal Financial Officer)

		/s/ Scott C. Surplus
		Scott C. Surplus
		Vice President and Controller (Principal Accounting Officer)

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Exhibit Index



Exhibit Number		Description

3.1		First Amended and Restated Agreement of Limited Partnership of Holly Energy Partners, L.P. (incorporated by reference to Exhibit 3.1 of Registrant's Quarterly Report on Form 10-Q for its quarterly period ended June 30, 2004, File No. 1-32225).
3.2		Amendment No. 1 to the First Amended and Restated Agreement of Limited Partnership of Holly Energy Partners, L.P., dated February 28, 2005 (incorporated by reference to Exhibit 3.1 of Registrant's Form 8-K Current Report dated February 28, 2005, File No. 1-32225).
3.3		Amendment No. 2 to the First Amended and Restated Agreement of Limited Partnership of Holly Energy Partners, L.P., as amended, dated July 6, 2005 (incorporated by reference to Exhibit 3.1 of Registrant's Form 8-K Current Report dated July 6, 2005, File No. 1-32225).
3.4		Amendment No. 3 to First Amended and Restated Agreement of Limited Partnership of Holly Energy Partners, L.P., dated April 11, 2008 (incorporated by reference to Exhibit 4.1 of Registrant's Current Report on Form 8-K dated April 15, 2008, File No. 1-32225).
3.5		Limited Partial Waiver of Incentive Distribution Rights under the First Amended and Restated Agreement of Limited Partnership of Holly Energy Partners, L.P., dated as of July 12, 2012 (incorporated by reference to Exhibit 3.1 of Registrant's Current Report on Form 8-K dated July 12, 2012, File No. 1-32225).
3.6		First Amended and Restated Agreement of Limited Partnership of Holly Energy Partners - Operating Company, L.P. (incorporated by reference to Exhibit 3.2 of Registrant's Quarterly Report on Form 10-Q for its quarterly period ended June 30, 2004, File No. 1-32225).
3.7		First Amended and Restated Agreement of Limited Partnership of HEP Logistics Holdings, L.P. (incorporated by reference to Exhibit 3.4 of Registrant's Quarterly Report on Form 10-Q for its quarterly period ended June 30, 2004, File No. 1-32225).
3.8		First Amended and Restated Limited Liability Company Agreement of Holly Logistic Services, L.L.C. (incorporated by reference to Exhibit 3.5 of Registrant's Quarterly Report on Form 10-Q for its quarterly period ended June 30, 2004, File No. 1-32225).
3.9		Amendment No. 1 to the First Amended and Restated Limited Liability Company Agreement of Holly Logistic Services, L.L.C., dated April 27, 2011 (incorporated by reference to Exhibit 3.1 of Registrant's Form 8-K Current Report dated May 3, 2011, File No. 1-32225).
3.1		First Amended and Restated Limited Liability Company Agreement of HEP Logistics GP, L.L.C. (incorporated by reference to Exhibit 3.6 of Registrant's Quarterly Report on Form 10-Q for its quarterly period ended June 30, 2004, File No. 1-32225).
10.1		Holly Energy Partners, L.P. Long-Term Incentive Plan (As Amended and Restated Effective February 10, 2012) (incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K dated April 30, 2012, File No. 1-32225).
10.2		Second Amended and Restated Credit Agreement dated February 14, 2011, among Holly Energy Partners - Operating, L.P., Wells Fargo Bank, N.A., as administrative agent and an issuing bank, Union Bank, N.A., as syndication agent, BBVA Compass Bank and U.S. Bank N.A., as co-documentation agents, and certain other lenders (incorporated by reference to Exhibit 10.1 of Registrant's Form 8-K Current Report dated February 18, 2011, File No. 1-32225).
10.3		Agreement and Amendment No.1 to Second Amended and Restated Credit Agreement dated February 3, 2012, among Holly Energy Partners - Operating, L.P., certain of its subsidiaries acting as guarantors, Wells Fargo Bank, N.A., as administrative agent, an issuing bank and a lender, and certain other lenders party thereto (incorporated by reference to Exhibit 10.1 of Registrant's Current Report on Form 8-K dated February 9, 2012, File No. 1-32225).
10.4		Agreement and Amendment No. 2 to Second Amended and Restated Credit Agreement dated June 29, 2012, by and among Holly Energy Partners - Operating, L.P., certain of its subsidiaries acting as guarantors, Wells Fargo Bank, N.A., as administrative agent, an issuing bank and a lender, and certain other lenders party thereto (incorporated by reference to Exhibit 10.1 of Registrant's Current Report on form 8-K dated June 29, 2012, File No. 1-32225).
10.5+		LLC Interest Purchase Agreement, dated July 12, 2012, by and among HollyFrontier Corporation, Holly Energy Partners, L.P. and HEP UNEV Holdings LLC.
10.6+		Seventh Amended and Restated Omnibus Agreement, dated July 12, 2012, by and among HollyFrontier Corporation, Holly Energy Partners, L.P. and certain of their respective subsidiaries.
10.7+		Amended and Restated Limited Liability Company Agreement of HEP UNEV Holdings LLC, dated July 12, 2012, by and among HEP UNEV Holdings LLC, Holly Energy Partners, L.P. and HollyFrontier Holdings LLC.
10.8+		Termination of Option Agreement, dated July 12, 2012, by and among HollyFrontier Corporation, Holly Energy Partners, L.P., Holly Energy Partners - Operating, L.P. and certain of their respective subsidiaries.

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12.1+		Computation of Ratio of Earnings to Fixed Charges.
31.1+		Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
31.2+		Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
32.1++		Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002.
32.2++		Certification of Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.
101**		The following financial information from Holly Energy Partners, L.P.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Cash Flows, (v) Consolidated Statement of Partners’ Equity, and (vi) Notes to Consolidated Financial Statements.



+	Filed herewith.



++	Furnished herewith.



**	Furnished electronically herewith.

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LLC INTEREST PURCHASE AGREEMENT

by and among

HOLLYFRONTIER CORPORATION,

as Seller,

HEP UNEV HOLDINGS LLC,

as Buyer

and

HOLLY ENERGY PARTNERS, L.P.

Dated as of July 12, 2012

/10908439

US 1472034v.2


ARTICLE I	DEFINED TERMS 2


1.1	Defined Terms 2


ARTICLE II	PURCHASE OF LLC INTERESTS 9


2.1	Transfer of LLC Interests 9


2.2	Consideration 9


2.3	Purchase Price Adjustment 9


ARTICLE III	CLOSING 11


3.1	Closing 11


3.2	Deliveries by Seller 11


3.3	Deliveries by Buyer 12


3.4	Closing Costs; Transfer Taxes and Fees 13


ARTICLE IV	REPRESENTATIONS AND WARRANTIES OF SELLER 13


4.1	Organization 13


4.2	Authorization 13


4.3	Status of Company and UNEV Pipeline 14


4.4	No Conflicts or Violations; No Consents or Approvals Required 15


4.5	Absence of Litigation 15


4.6	Title to LLC Interests; Capitalization 15


4.7	No Undisclosed Liabilities 16


4.8	No Employees 17


4.9	Taxes 17


4.10	Brokers and Finders 17

#PageNum#


4.11	Condition of Pipeline 17


4.12	Title to Assets 17


4.13	Permits 17


4.14	Banking Relationships 18


4.15	Representations Relating to the Unit Consideration 18


4.16	Compliance with Law 18


4.17	Material Contracts 18


4.18	Seller Security 18


4.19	Insurance 18


4.20	Legends 19


4.21	WAIVERS AND DISCLAIMERS 19


ARTICLE V	REPRESENTATIONS AND WARRANTIES OF THE BUYER 20


5.1	Organization 20


5.2	Authorization 20


5.3	No Conflicts or Violations; No Consents or Approvals Required 21


5.4	Absence of Litigation 21


5.5	Brokers and Finders 21


5.6	Validity of Profits Interest 21


ARTICLE VI	REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP 21


6.1	Organization 21


6.2	Authorization 21


6.3	No Conflicts or Violations; No Consents or Approvals Required 22


6.4	Absence of Litigation

#PageNum#


6.5	Brokers and Finders 22


6.6	Validity of Aggregate Units 22


6.7	No Knowledge of Breach 22


ARTICLE VII	COVENANTS 23


7.1	Cooperation 23


7.2	Additional Agreements 23


7.3	Listing of Unit Consideration on New York Stock Exchange 23


ARTICLE VIII	ADDITIONAL AGREEMENTS 23


8.1	Further Assurances 23


8.2	Tariff Increases 23


8.3	Future Capacity Expansion 24


ARTICLE IX	INDEMNIFICATION 24


9.1	Indemnification of Buyer and Seller 24


9.2	Defense of Third-Party Claims 24


9.3	Direct Claims 26


9.4	Limitations 26


9.5	Tax Related Adjustments 27


ARTICLE X	MISCELLANEOUS 27


10.1	Expenses 27


10.2	Notices 27


10.3	Severability 28


10.4	Governing Law; Jurisdiction; Waiver of Jury Trial

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10.5	Arbitration Provision 29


10.6	Parties in Interest 30


10.7	Assignment of Agreement 30


10.8	Captions 30


10.9	Counterparts 30


10.10	Director and Officer Liability 30


10.11	Integration 30


10.12	Effect of Agreement 30


10.13	Amendment; Waiver 30


ARTICLE XI	INTERPRETATION 31


11.1	Interpretation 31


11.2	References, Gender, Number 32

Exhibits:

Exhibit A - Form of Assignment

Exhibit B - Form of Amended and Restated Omnibus Agreement

Exhibit C - Form of Waiver

Exhibit D - Form of LLC Agreement of HEP UNEV Holdings LLC

Exhibit E - Form of Amendment to UNEV Pipeline LLC Agreement

Schedules :

Schedule 1.1 - Certain Specified Buyer Indemnified Costs

Schedule 4.3(a) - Company Foreign Qualifications

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Schedule 4.3(b) - UNEV Pipeline Foreign Qualifications

Schedule 4.4 - Seller Consents

Schedule 4.5 - Pending Litigation and Claims

Schedule 4.6(d) - Ownership in UNEV Pipeline

Schedule 4.7 - Liabilities

Schedule 4.11 - Condition of Pipeline

Schedule 4.12 - Title to Assets

Schedule 4.13 - Permits

Schedule 4.14 - Banking Relationships

Schedule 4.17 - Material Contracts

Schedule 4.18 - Seller Security

Schedule 5.3 - Buyer Consents

Schedule 6.3 - Partnership Consents

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LLC INTEREST PURCHASE AGREEMENT

THIS LLC INTEREST PURCHASE AGREEMENT (this “ Agreement ”) dated as of July 12, 2012, is made and entered into by and among HollyFrontier Corporation, a Delaware corporation (“ Seller ”), HEP UNEV Holdings LLC, a Delaware limited liability company (“ Buyer ”), and Holly Energy Partners, L.P., a Delaware limited partnership (the “ Partnership ”). The above-named entities are sometimes referred to in this Agreement each as a “ Party ” and collectively as the “ Parties .”

WHEREAS , Seller is the sole member of HEP UNEV Pipeline LLC (f/k/a Holly UNEV Pipeline Company), a Delaware limited liability company (the “ Company ”);

WHEREAS , the Company is the owner of 75% of all of the issued and outstanding membership interests (the “ UNEV Membership Interests ”) in UNEV Pipeline, LLC, a Delaware limited liability company (“ UNEV Pipeline ”);

WHEREAS , UNEV Pipeline is the owner of an approximately 400 mile, 12-inch refined products pipeline currently running from Woods Cross, Utah to Las Vegas, Nevada, related products terminals in or near Cedar City, Utah and Las Vegas, Nevada, and other related assets (collectively, the “ Pipeline ”);

WHEREAS , Buyer, which is wholly owned by the Partnership, wishes to purchase from Seller, and Seller wishes to sell to Buyer, all of the issued and outstanding limited liability company interests of the Company (the “ LLC Interests ”) in exchange for the consideration set forth herein;

WHEREAS , it is the intention of the Parties that the Purchase Price (as defined below) be adjusted as set forth herein to reduce the Cash Consideration (as defined below) by the aggregate amount of the distributions by the Partnership to be received by Seller and its Affiliates and the Partnership’s general partner as a result of the issuance of the Unit Consideration (as defined below) for the second quarter of 2012 and the portion of the third quarter of 2012 during which such entities did not hold the Units (as defined below);

WHEREAS , in connection with the acquisition of the LLC Interests, the Parties wish to (i) amend certain provisions of the Omnibus Agreement (as defined below), (ii) waive certain provisions of the Partnership Agreement (as defined below) of the Partnership, and (iii) amend and restate the LLC Agreement (as defined below) to, among other things, provide for the issuance of the Profits Interest (as defined below) to Seller (or its designee).

NOW, THEREFORE , in consideration of the foregoing and the mutual covenants set forth herein and in the Omnibus Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

Article I
DEFINED TERMS

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1.1 Defined Terms . Unless the context expressly requires otherwise, the respective terms defined in this Section 1.1 shall, when used in this Agreement, have the respective meanings herein specified, with each such definition to be equally applicable both to the singular and the plural forms of the term so defined.

“ Action ” shall mean any claim, action, suit, investigation, inquiry, proceeding, condemnation or audit by or before any court or other Governmental Entity or any arbitration proceeding.

“ Affiliate ” means, with respect to a specified person, any other person controlling, controlled by or under common control with that first person. As used in this definition, the term “control” includes (i) with respect to any person having voting securities or the equivalent and elected directors, managers or persons performing similar functions, the ownership of or power to vote, directly or indirectly, voting securities or the equivalent representing 50% or more of the power to vote in the election of directors, managers or persons performing similar functions, (ii) ownership of 50% or more of the equity or equivalent interest in any person and (iii) the ability to direct the business and affairs of any person by acting as a general partner, manager or otherwise. Notwithstanding the foregoing, no HollyFrontier Entity will be considered an Affiliate of an HEP Entity, and no HEP Entity will be considered an Affiliate of a HollyFrontier Entity.

“ Agreement ” shall have the meaning set forth in the preamble.

“ Ancillary Documents ” means, collectively, the Buyer Ancillary Documents and the Seller Ancillary Documents.

“ 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 Entity having or asserting jurisdiction over the matter or matters in question, whether now or hereafter in effect and in each case as amended (including, without limitation, all of the terms and provisions of the common law of such Governmental Entity), as interpreted and enforced at the time in question.

“ Arbitrable Dispute ” means any and all disputes, Claims, controversies and other matters in question between Seller, on the one hand, and Buyer, 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.

“ Assignment ” shall have the meaning set forth in Section 3.2(a) .

“ business day ” means any day on which banks are open for business in Texas, other than Saturday or Sunday.

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“ Buyer ” shall have the meaning set forth in the preamble.

“ Buyer Ancillary Documents ” means each agreement, document, instrument or certificate to be delivered by Buyer, the Partnership, or their Affiliates, at the Closing pursuant to Section 3.3 hereof and each other document or Contract entered into by Buyer, the Partnership, or their Affiliates, in connection with this Agreement or the Closing.

“ Buyer Indemnified Costs ” means, subject to Article IX , any and all damages, losses, Claims, assessments, judgments, liabilities, demands, charges, suits, penalties, costs, and expenses (including court costs and reasonable attorneys’ fees and expenses incurred in investigating and preparing for any litigation or proceeding) that any of the Buyer Indemnified Parties incurs and that arise out of or relate to:

(i) any breach of a representation, warranty or covenant of Seller under this Agreement,

(ii) any obligations or duties of the Company or UNEV Pipeline under any Construction Contract (including, without limitation, the Company’s payment obligations under such Construction Contracts and the cost to complete construction of the Pipeline as set forth in such Construction Contracts), and

(iii) the matters described on Seller Disclosure Schedule 1.1 .

Notwithstanding anything in the foregoing to the contrary, Buyer Indemnified Costs shall exclude (A) any and all indirect, consequential, punitive, or exemplary damages (other than those that are a result of (x) a third-party action for such indirect, consequential, punitive or exemplary damages or (y) the gross negligence or willful misconduct of Seller or, to the extent occurring before the Closing Date, the Company or UNEV Pipeline) and (B) any and all damages, losses, Claims, assessments, judgments, liabilities, demands, charges, suits, penalties, costs, and expenses (including court costs and reasonable attorneys’ fees and expenses incurred in investigating and preparing for any litigation or proceeding) that any of the Buyer Indemnified Parties incurs and that arise out of or relate to any defect in the construction of the Pipeline, including without limitation, any matter that is covered by a warranty under a Construction Contract, unless such matter is listed on Seller Disclosure Schedule 1.1 or constitutes a breach of Section 4.11 (Condition of Pipeline). Notwithstanding anything herein to the contrary, Buyer Indemnified Costs shall only include amounts not taken into account in determining Effective Time Working Capital.

“ Buyer Indemnified Parties ” means Buyer and the Partnership and each officer, director, partner, manager, employee, consultant, stockholder, and Affiliate of Buyer and the Partnership, including, without limitation, the Company and UNEV Pipeline (and their respective heirs and successors, as applicable); provided , however , that for the avoidance of doubt none of Sinclair Transportation Company, its Affiliates or the managers of UNEV Pipeline appointed by Sinclair Transportation Company pursuant to the UNEV Pipeline LLC Agreement shall be Buyer Indemnified Parties.

“ Cap ” shall have the meaning set forth in Section 9.4(b) .

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“ Cash Consideration ” shall have the meaning set forth in Section 2.2(a)(i) .

“ Certificates ” has the meaning set forth in Section 2.2(c) .

“ 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.

“ Claimant ” shall have the meaning set forth in Section 10.5 .

“ Closing ” shall have the meaning set forth in Section 3.1 .

“ Closing Date ” shall have the meaning set forth in Section 3.1 .

“ Code ” means the Internal Revenue Code of 1986, as amended.

“ Common Units ” means common units of limited partnership of the Partnership.

“ Company ” shall have the meaning set forth in the recitals.

“ Consents ” means all notices to, authorizations, consents, Orders or approvals of, or registrations, declarations or filings with, or expiration of waiting periods imposed by, any Governmental Entity, and any notices to, consents or approvals of any other third party, in each case that are required by Applicable Law or by Contract in order to consummate the transactions contemplated by this Agreement and the Ancillary Documents.

“ Construction Contract ” means any Contract relating to the original planned construction of the Pipeline, as such Contract is in effect as of the date hereof (including any change orders agreed to by the parties to such Contracts prior to the date hereof, whether or not such change order has properly been documented as of the date hereof).

“ Contract ” means any written or oral contract, agreement, indenture, instrument, note, bond, loan, lease, mortgage, franchise, license agreement, purchase order, binding bid or offer, binding term sheet or letter of intent or memorandum, commitment, letter of credit or any other legally binding arrangement, including any amendments or modifications thereof and waivers relating thereto.

“ Conversion ” shall have the meaning set forth in Section 4.3(e) .

“ Current Assets ” means cash and cash equivalents and accounts receivable of UNEV Pipeline determined in accordance with GAAP.

“ Current Liabilities ” means accounts payable, accrued expenses and accrued short term liabilities of UNEV Pipeline determined in accordance with GAAP.

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“ Deductible ” shall have the meaning set forth in Section 9.4(b) .

“ DLLCA ” means the Delaware Limited Liability Company Act, as in effect from time to time.

“Effective Time” shall have the meaning set forth in Section 3.1 .

“ Effective Time Working Capital ” means, without duplication of any adjustment otherwise expressly provided for in this Agreement, (a) the Current Assets, less (b) the Current Liabilities determined as of the Effective Time.

“ Encumbrance ” means any mortgage, pledge, charge, hypothecation, Claim, easement, right of purchase, security interest, deed of trust, conditional sales agreement, encumbrance, interest, option, lien, right of first refusal, right of way, defect in title, encroachments or other restriction, whether or not imposed by operation of law, and any voting trust or voting agreement, stockholder agreement or proxy.

“ FERC ” means Federal Energy Regulatory Commission.

“ Fundamental Representations ” shall have the meaning set forth in Section 9.4(a) .

“ GAAP ” means United States generally accepted accounting principles in effect from time to time.

“ Governmental Entity ” means any Federal, state, local or foreign court or governmental agency, authority or instrumentality or regulatory body.

“ HEP Common Unit 10-Day VWAP ” shall have the meaning set forth in Section 2.2(a)(ii) .

“ HEP Entities ” means Holly Logistic Services, L.L.C., HEP Logistics Holdings, L.P. and the Partnership and its direct and indirect subsidiaries.

“ HollyFrontier Entities ” means Seller and its direct and indirect subsidiaries other than the HEP Entities. For the avoidance of doubt, Holly Logistics Limited LLC will be considered a HollyFrontier Entity and not an HEP Entity.

“ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

“ Indemnified Costs ” means Buyer Indemnified Costs and Seller Indemnified Costs, as applicable.

“ Indemnified Party ” means any Buyer Indemnified Party or any Seller Indemnified Party, as applicable.

“ Indemnifying Party ” has the meaning set forth in Section 9.2 .

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“ Instruction Letter ” has the meaning set forth in Section 2.2(c) .

“ knowledge ” and any variations thereof or words to the same effect shall mean (i) with respect to Seller, actual knowledge after reasonable inquiry of the following person: James E. Resinger; and (ii) with respect to Buyer or the Partnership, actual knowledge after reasonable inquiry of the following persons: Bruce R. Shaw and Mark T. Cunningham.

“ LLC Agreement ” shall have the meaning set forth in Section 3.2(e) .

“ LLC Interests ” shall have the meaning set forth in the recitals.

“ Material Adverse Effect ” means any adverse change, circumstance, effect or condition in or relating to the assets, financial condition, results of operations, or business of any person that materially affects the business of such person or that materially impedes the ability of any person to consummate the transactions contemplated hereby, other than any change, circumstance, effect or condition in the refining or pipelines industries generally (including any change in the prices of crude oil, natural gas, natural gas liquids, feedstocks or refined products or other hydrocarbon products, industry margins or any regulatory changes or changes in Applicable Law) or in United States or global economic conditions or financial markets in general. Any determination as to whether any change, circumstance, effect or condition has a Material Adverse Effect shall be made only after taking into account all effective insurance coverages and effective third-party indemnifications with respect to such change, circumstance, effect or condition.

“ Material Contracts ” shall have the meaning set forth in Section 4.17 .

“ Omnibus Agreement ” means that certain Sixth Amended and Restated Omnibus Agreement effective as of November 1, 2011, by and among Seller, Holly Logistic Services, L.L.C., a Delaware limited liability company, the Partnership, Holly Energy Partners – Operating, L.P., HEP Logistics GP, L.L.C., a Delaware limited liability company, HEP Logistics Holdings, L.P., a Delaware limited partnership, and the other HollyFrontier Entities and HEP Entities signatory thereto, and as amended and restated as of the date hereof.

“ Operator ” means Holly Energy Partners – Operating, L.P., a Delaware limited partnership.

“ Option Agreement ” means that certain Option Agreement entered into as of January 31, 2008, by and among Seller, the Company, the Partnership and the other HollyFrontier Entities and HEP Entities signatory thereto, as amended.

“ Order ” means any order, writ, injunction, decree, compliance or consent order or decree, settlement agreement, schedule and similar binding legal agreement issued by or entered into with a Governmental Entity.

“ Partnership ” shall have the meaning set forth in the preamble.

“ Partnership Agreement ” shall have the meaning set forth in Section 3.2(d) .

“ Party ” and “ Parties ” shall have the meanings set forth in the preamble.

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“ Permits ” means all permits, consents, authorizations, licenses, variances, exemptions, Orders, franchises and approvals of all Governmental Entities necessary for the lawful ownership and operation of the Pipeline.

“ Permitted Encumbrances ” means (i) statutory liens for current taxes or assessments not yet due or delinquent or the validity of which are being contested in good faith by appropriate proceedings; (ii) mechanics’, carriers’, workers’, repairmen’s, landlord’s and other similar liens imposed by law arising or incurred in the ordinary course of business with respect to charges not yet due and payable; and (iii) such other encumbrances, if any, which were not incurred in connection with the borrowing of money or the advance of credit and which do not materially detract from the value of or interfere with the present use, or any use presently anticipated by the Company or UNEV Pipeline, of the property subject thereto or affected thereby, and including without limitation capital leases. With respect to the UNEV Membership Interests, Permitted Encumbrances include any Encumbrances on the UNEV Membership Interests arising under the provisions of the UNEV Pipeline LLC Agreement. With respect to the Pipeline, Permitted Encumbrances include any Encumbrances on the Pipeline described on Seller Disclosure Schedule 4.5 .

“ person ” means any individual, firm, corporation, partnership, limited liability company, trust, joint venture, Governmental Entity or other entity.

“ Pipeline ” shall have the meaning set forth in the recitals.

“ Profits Interest ” means that membership interest in Buyer issued to Seller (or its designee) in connection with the execution and delivery of the LLC Agreement as provided in Section 3.2(e) .

“ Purchase Price ” shall have the meaning set forth in Section 2.2(a) .

“ Respondent ” shall have the meaning set forth in Section 10.5 .

“ Restated Omnibus Agreement ” shall have the meaning set forth in Section 3.2(c) .

“ Second Quarter Purchase Price Adjustment ” shall have the meaning set forth in Section 2.3(b)(i) .

“ Securities Act ” shall have the meaning set forth in Section 4.15 .

“ Seller ” shall have the meaning set forth in the preamble.

“ Seller Ancillary Documents ” shall mean each agreement, document, instrument or certificate to be delivered by Seller, or its Affiliates, at the Closing pursuant to Section 3.2 hereof and each other document or Contract entered into by Seller, or its Affiliates, in connection with this Agreement or the Closing.

“ Seller Indemnified Costs ” means (a) any and all damages, losses, Claims, liabilities, charges, penalties, costs, and expenses (including court costs and reasonable attorneys’ fees and expenses incurred in investigating and preparing for any litigation or proceeding) that any Seller Indemnified Party incurs and that arise out of or relate to any breach of a representation, warranty

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or covenant of Buyer or the Partnership under this Agreement, and (b) any and all Claims, assessments, judgments, costs, and expenses, including reasonable legal fees and expenses, incident to any of the foregoing. Notwithstanding anything in the foregoing to the contrary, Seller Indemnified Costs shall exclude any and all indirect, consequential, punitive or exemplary damages (other than those that are a result of (x) a third-party action for such indirect, consequential, punitive or exemplary damages or (y) the gross negligence or willful misconduct of Buyer or the Partnership or, to the extent occurring from and after the Closing Date, the Company or UNEV Pipeline).

“ Seller Indemnified Parties ” means Seller and each officer, director, partner, manager, employee, consultant, stockholder, and Affiliate of Seller (and their respective heirs and successors, as applicable).

“ third-party action ” has the meaning set forth in Section 9.2 .

“ Third Quarter Purchase Price Adjustment ” shall have the meaning set forth in Section 2.3(b)(ii) .

“ Transportation Agreements ” means the Amended and Restated Transportation Services Agreement, effective as of January 1, 2012, between HollyFrontier Refining & Marketing LLC and UNEV Pipeline and the Amended and Restated Transportation Services Agreement, effective as of January 1, 2012, between Sinclair Oil Corporation and UNEV Pipeline.

“ UNEV Membership Interests ” has the meaning set forth in the recitals.

“ UNEV Pipeline ” shall have the meaning set forth in the recitals.

“ UNEV Pipeline LLC Agreement ” shall mean the Amended and Restated Limited Liability Company Agreement of UNEV Pipeline dated as of December 21, 2007, as amended as of the date hereof.

“ Unit Consideration ” has the meaning set forth in Section 2.2(a)(ii) .

“ Units ” shall have the meaning set forth in Section 2.2(a)(ii) .

“ Waiver ” shall have the meaning set forth in Section 3.2(d) .

“ Woods Cross Expansion Completion Date ” means the first date on which both: (a) mechanical completion of the installation of new equipment at Seller’s Woods Cross facility is completed according to its design and permitted basis, as described by Seller’s management as the Woods Cross Phase I expansion, and (b) achievement by the Seller’s Woods Cross refinery of an average actual crude charge rate over a period of 15 consecutive days of at least 40,000 barrels per day, shall have occurred.

“ Working Capital Adjustment ” shall have the meaning set forth in Section 2.3(a)(iii) .

Article II
PURCHASE OF LLC INTERESTS

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2.1 Transfer of LLC Interests . Subject to all of the terms and conditions of this Agreement, at the Closing Seller shall sell, transfer and convey to Buyer, and Buyer shall purchase and acquire from Seller the LLC Interests, free and clear of all Encumbrances.

2.2 Consideration .

(a) The aggregate consideration to be paid by or on behalf of Buyer for the LLC Interests and the Waiver shall be (x) the issuance of the Profits Interest to Seller (or its designee) and (y) $315,000,000 (clause (x) and (y) collectively, the “ Purchase Price ”), subject to adjustment pursuant to Section 2.3, to be paid as follows:

(i) $260,000,000 in immediately available funds (the “ Cash Consideration ”); and

(ii) $55,000,000 in 1,029,900 Common Units (the “ Units ”) issued to Seller (or an Affiliate of Seller designated by Seller) (the “ Unit Consideration ”), which valuation is based upon the volume-weighted average price of the Partnership’s Common Units, as quoted on the New York Stock Exchange, for the 10 trading days immediately preceding the announcement date of the transactions contemplated by this Agreement (the “ HEP Common Unit 10-Day VWAP ”).

(b) The Cash Consideration, subject to adjustment pursuant to Section 2.3, shall be delivered by Buyer to Seller (or its designee) at the Closing by wire transfer of immediately available funds to the account specified by Seller (or its designee); provided , however that the Cash Consideration allocated to the Waiver pursuant to Section 2.2(d) below shall be delivered to HEP Logistics Holdings, L.P. (or its designee).

(c) The Unit Consideration shall be paid by the Partnership, on behalf of Buyer, at the Closing by delivery of a letter to the Partnership’s transfer agent (the “ Instruction Letter ”) irrevocably instructing such transfer agent to deliver certificates representing the Unit Consideration issued in the name of Seller or its designee (the “ Certificates ”), which Instruction Letter shall be in a form and substance reasonably acceptable to both Buyer and Seller.

(d) A portion of the Cash Consideration in the amount of $15,400,000 shall be allocated to the Waiver and treated as a cash distribution by the Partnership to HEP Logistics Holdings, L.P. Notwithstanding anything to the contrary in the Partnership Agreement, the Partnership will not allocate any income to Seller with respect to the incentive distribution rights waived in connection with the Waiver.

(e) The portion of the Cash Consideration that qualifies for treatment as a reimbursement for capital expenditures incurred with respect to Seller’s interest in UNEV Pipeline pursuant to Treasury Regulations Section 1.707-4(d)(2)(ii) shall be determined by Seller and reported consistently by the Parties.

2.3 Purchase Price Adjustments .

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(a) Effective Time Working Capital Adjustment .

(i) Within 60 days after the Closing Date, Buyer shall prepare and deliver to Seller a statement setting forth its calculation of Effective Time Working Capital.

(ii) Within 30 days after Buyer delivers its calculation of Effective Time Working Capital, Seller and its accountants and representatives shall complete its review of the calculation of Effective Time Working Capital. If during such review period Seller objects to Buyer’s calculation of Effective Time Working Capital, Seller and Buyer shall cooperate in good faith to promptly (x) resolve any such objection, dispute or disagreement relating to the calculation of the Effective Time Working Capital and (y) finally determine the Effective Time Working Capital. If Seller does not object to Buyer’s calculation of Effective Time Working Capital by the end of such 30 day period, the Effective Time Working Capital as calculated by Buyer shall be deemed finally determined.

(iii) If the Effective Time Working Capital as finally determined is a positive number, Buyer shall pay to Seller an amount equal to the product of the amount of the Effective Time Working Capital as finally determined multiplied by 0.75. If the Effective Time Working Capital as finally determined is a negative number, Seller shall pay to Buyer an amount equal to the product of the amount of the Effective Time Working Capital as finally determined multiplied by 0.75 (any payment pursuant to this clause (iii), the “ Working Capital Adjustment ”).

(iv) Any Working Capital Adjustment shall be payable on or prior to five (5) business days after the calculation of the Effective Time Working Capital becomes finally determined in accordance with this Section 2.3(a) .

(b) Distribution Purchase Price Adjustments .

(i) Second Quarter Purchase Price Adjustment. The Purchase Price shall be reduced by an amount equal to the aggregate increased distributions to Seller and its Affiliates and the Partnership’s general partner (including with respect to the incentive distribution rights) with respect to the second quarter of 2012 due to the issuance of the Units (the “ Second Quarter Purchase Price Adjustment ”).

(ii) Third Quarter Purchase Price Adjustment. The Purchase Price shall be further reduced by an amount equal to the product of (A) the aggregate distributions made to Seller and its Affiliates and the Partnership’s general partner (including with respect to the incentive distribution rights) with respect to the third quarter of 2012 due to the issuance of the Units, multiplied by (B) the quotient of the number of calendar days between July 1, 2012 and the Closing Date, divided by 92 days (the “ Third Quarter Purchase Price Adjustment ”).

(iii) If there is any Second Quarter Purchase Price Adjustment to be made

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under Section 2.3(b)(i) and the amount of the distributions to the holders of the Common Units for the second quarter of 2012 has been declared on or prior to the Closing Date, then the Cash Consideration shall be reduced by the Second Quarter Purchase Price Adjustment. If the amount of the distributions to the holders of the Common Units for the second quarter of 2012 has not been declared on or prior to the Closing Date, then Seller shall promptly (and in any event within three (3) business days) following its receipt of such distributions pay an amount equal to the Second Quarter Purchase Price Adjustment to Buyer (or its designee) in immediately available funds.

(iv) If there is any Third Quarter Purchase Price Adjustment to be made under Section 2.3(b)(ii) , then Seller shall promptly (and in any event within three (3) business days) following its receipt of such distributions pay an amount equal to the Third Quarter Purchase Price Adjustment to Buyer (or its designee) in immediately available funds.

(c) Adjustments for Tax Purposes . Any payments made pursuant to Section 2.3 shall be treated as an adjustment to the Purchase Price by the Parties for tax purposes, unless otherwise required by law.

Article III
CLOSING

3.1 Closing . The closing of the transactions contemplated hereby (the “ Closing ”) shall take place simultaneously with the execution of this Agreement. The date on which the Closing takes place is referred to herein as the “ Closing Date. ” If the Closing occurs, the Closing shall be deemed to be effective as of 12:01 a.m., Dallas, Texas time, on the Closing Date (the “ Effective Time ”); provided , however , that the issuance of the Unit Consideration and the Profits Interest shall be effective at the time such Units and Profits Interest are actually issued on the Closing Date and such Units and Profits Interest shall not be considered outstanding until such issuance.

3.2 Deliveries by Seller . At the Closing, Seller shall deliver, or cause to be delivered, to Buyer the following:

(a) A counterpart to the assignment of limited liability company interests conveying the LLC Interests to Buyer, substantially in the form of Exhibit A attached hereto (the “ Assignment ”), duly executed by Seller.

(b) The original minute books, company books and membership registers for the Company and UNEV Pipeline.

(c) A counterpart of the Seventh Amended and Restated Omnibus Agreement substantially in the form of Exhibit B attached hereto (the “ Restated Omnibus Agreement ”), duly executed by Seller and each applicable subsidiary of Seller (excluding the HEP Entities).

(d) The Limited Partial Waiver of Incentive Distribution Rights under the First

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Amended and Restated Agreement of Limited Partnership (the “ Partnership Agreement ”) of the Partnership substantially in the form of Exhibit C attached hereto (the “ Waiver ”), duly executed by the general partner of the Partnership.

(e) A counterpart of the First Amended and Restated Limited Liability Company Agreement of Buyer substantially in the form of Exhibit D attached hereto (the “ LLC Agreement ”), duly executed by Seller.

(f) Evidence in form and substance reasonably satisfactory to Buyer of the release and termination of all Encumbrances (other than Permitted Encumbrances) on the LLC Interests, the UNEV Membership Interests and the Pipeline.

(g) To the extent applicable, assignment documents, duly executed by Seller, assigning each of the Permits held by Seller, if any, which are assignable by Seller to Buyer or Operator (or their designees), as applicable, in accordance with Applicable Law.

(h) A properly executed certificate, in the form prescribed by Treasury regulations under Section 1445 of the Code, stating that Seller is not a “foreign person” within the meaning of Section 1445 of the Code.

(i) An amendment to the UNEV Pipeline LLC Agreement substantially in the form of Exhibit E attached hereto.

(j) A counterpart to the termination agreement with respect to the Option Agreement in form and substance reasonably satisfactory to the Parties, duly executed by Seller and each HollyFrontier Entity party thereto.

(k) A written resignation letter executed by each of Michael C. Jennings and Doug S. Aron in his capacity as a manager of each of UNEV Pipeline and the Company, effective as of the Closing.

(l) A written resignation letter executed by each of Michael C. Jennings, Doug S. Aron, James Resinger, Gerald B. Faudel and David J. Jelmini, in his capacity as an officer of each of UNEV Pipeline and the Company, effective as of the Closing.

3.3 Deliveries by Buyer . At the Closing (or such later date as may be set forth below), Buyer shall deliver, or cause to be delivered, to Seller the following:

(a) The Cash Consideration as provided in Section 2.2(a) .

(b) The irrevocable Instruction Letter as provided in Section 2.2(c) .

(c) Evidence in form and substance reasonably satisfactory to Seller that the Unit Consideration has been approved for listing by the New York Stock Exchange subject to official notice of issuance.

(d) A counterpart to the Assignment duly executed by Buyer.

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(e) A counterpart of the Restated Omnibus Agreement, duly executed by the Partnership and each applicable subsidiary of the Partnership.

(f) A counterpart of the LLC Agreement, duly executed by Buyer and the Partnership.

(g) A counterpart to the termination agreement with respect to the Option Agreement in form and substance reasonably satisfactory to the Parties, duly executed by the Partnership and each HEP Entity party thereto.

3.4 Closing Costs; Transfer Taxes and Fees .

(a) Allocation of Costs . Buyer shall pay the cost of all sales, transfer and use taxes arising out of the transfer of the LLC Interests.

(b) Reimbursement. If Buyer, on the one hand, or Seller, on the other hand, pays any tax agreed to be borne by the other Party under this Agreement, such other Party shall promptly reimburse the paying Party for the amounts so paid. If any Party receives any tax refund or credit applicable to a tax paid by another Party hereunder, the receiving Party shall promptly pay such amounts to the Party entitled thereto.

(c) Texas Franchise Tax Sharing Arrangement . The Company and UNEV Pipeline will be included in the Texas franchise tax combined group report filed by (i) Seller or an Affiliate of Seller for the period up to the Effective Time and (ii) Buyer or an Affiliate of Buyer for the period beginning with the Effective Time. The Parties agree that the Company shall promptly reimburse the Seller and the Buyer, or an Affiliate of the Seller or the Buyer, for the franchise tax paid on behalf of the Company and UNEV Pipeline as combined group members. For purposes of the preceding sentence, the franchise tax paid on behalf of the Company and UNEV Pipeline shall be equal to the franchise tax that the Company and UNEV Pipeline would have paid if they had computed their franchise tax liability for the report period as members of a combined group that included only the Company and UNEV Pipeline rather than as members of the Seller’s, Buyer’s or an Affiliate’s combined group.

Article IV
REPRESENTATIONS AND WARRANTIES OF SELLER

Seller hereby represents and warrants to Buyer that as of the date of this Agreement:

4.1 Organization . Seller is an entity duly organized, validly existing and in good standing under the Applicable Laws of the State of Delaware.

4.2 Authorization . Seller has full corporate power and authority to execute, deliver, and perform this Agreement and any Seller Ancillary Documents to which it is a party. The execution, delivery, and performance by Seller of this Agreement and the Seller Ancillary Documents to which it is a party and the consummation by Seller of the transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate action of Seller. This Agreement has been

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duly executed and delivered by Seller and constitutes, and each Seller Ancillary Document executed or to be executed by Seller has been, or when executed will be, duly executed and delivered by Seller and constitutes, or when executed and delivered will constitute, a valid and legally binding obligation of Seller, enforceable against it in accordance with their terms, except to the extent that such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Applicable Laws affecting creditors’ rights and remedies generally and (ii) equitable principles which may limit the availability of certain equitable remedies (such as specific performance) in certain instances.

4.3 Status of Company and UNEV Pipeline .

(a) The Company is duly organized, validly existing and in good standing under the Applicable Laws of the State of Delaware and (i) has all requisite limited liability company power and authority to own, operate, use or lease its properties and assets and to carry on its business as it is now being conducted, and (ii) is duly qualified to do business and is in good standing in each of the jurisdictions in which the ownership, operation or leasing of its properties and assets and the conduct of its business requires it to be so qualified, licensed or authorized, except, in the case of clause (ii), where the failure to have such power and authority or to be so qualified, licensed or authorized would not, individually or in the aggregate, be reasonably likely to cause a Material Adverse Effect. Seller Disclosure Schedule 4.3(a) lists all jurisdictions in which the Company is qualified to do business.

(b) UNEV Pipeline is duly organized, validly existing and in good standing under the laws of the State of Delaware and (i) has all requisite limited liability company power and authority to own, operate, use or lease its properties and assets and to carry on its business as it is now being conducted, and (ii) is duly qualified to do business and is in good standing in each of the jurisdictions in which the ownership, operation or leasing of its properties and assets and the conduct of its business requires it to be so qualified, licensed or authorized, except, in the case of clause (ii), where the failure to have such power and authority or to be so qualified, licensed or authorized would not, individually or in the aggregate, be reasonably likely to cause a Material Adverse Effect. Seller Disclosure Schedule 4.3(b) lists all jurisdictions in which UNEV Pipeline is qualified to do business.

(c) Other than the UNEV Membership Interests and the Pipeline, the Company does not, directly or indirectly, own any assets or any interest in any corporation, partnership, limited liability company, limited partnership, joint venture or other business association or entity, foreign or domestic.

(d) UNEV Pipeline has not engaged in any business other than the construction, ownership and operation of the Pipeline. UNEV Pipeline has no assets except the Pipeline and the associated rights and obligations under the Construction Contracts.

(e) The Company was converted from a Delaware corporation to a Delaware limited liability company on June 27, 2012 (the “ Conversion ”), in compliance with all Applicable Laws and the articles of incorporation, by-laws and all other governing documents of Holly UNEV Pipeline Company and there are no liabilities related to the Conversion.

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(f) Seller has made available to Buyer a copy of the certificate of formation and limited liability company agreement of the Company and UNEV Pipeline, each copy being complete and correct and in full force and effect on the date hereof, and no amendment or modification of any such document has been filed, recorded or is pending or contemplated except as provided for in this Agreement. Neither the Company nor UNEV Pipeline is in violation of any provision of its certificate of formation or limited liability company agreement.

4.4 No Conflicts or Violations; No Consents or Approvals Required .

(a) The execution, delivery and performance by Seller of this Agreement and the other Seller Ancillary Documents to which it is a party does not, and the consummation of the transactions contemplated hereby and thereby will not, (i) violate, conflict with, or result in any breach of any provision of Seller’s organizational documents or (ii) subject to obtaining the Consents or making the registrations, declarations or filings set forth in the next sentence, violate in any material respect any Applicable Law or material Contract binding upon Seller. Except as set forth on Seller Disclosure Schedule 4.4 , no Consent of any Governmental Entity or any other person is required for Seller in connection with the execution, delivery and performance of this Agreement and the other Seller Ancillary Documents or the consummation of the transactions contemplated hereby or thereby.

(b) The consummation of the transactions contemplated by this Agreement and the other Seller Ancillary Documents will not, (i) violate, conflict with, or result in any breach of any provision of the Company’s or UNEV Pipeline’s organizational documents or (ii) subject to obtaining the Consents or making the registrations, declarations or filings set forth in the next sentence, violate in any material respect any Applicable Law or material Contract binding upon the Company, UNEV Pipeline or the Pipeline. Except as set forth on Seller Disclosure Schedule 4.4 , no Consent of any Governmental Entity or any other person is required for the Company or UNEV Pipeline in connection with the performance of this Agreement and the Seller Ancillary Documents or the consummation of the transactions contemplated hereby or thereby.

4.5 Absence of Litigation . Except as set forth on Seller Disclosure Schedule 4.5 , there is no Action pending or, to the knowledge of Seller, threatened against (i) the Company, the LLC Interests, the UNEV Membership Interests, UNEV Pipeline or the Pipeline or (ii) Seller or any of its Affiliates relating to the transactions contemplated by this Agreement or the Ancillary Documents or which, if adversely determined, would reasonably be expected to materially impair the ability of Seller to perform its obligations and agreements under this Agreement or the Seller Ancillary Documents and to consummate the transactions contemplated hereby and thereby.

4.6 Title to LLC Interests; Capitalization .

(a) Seller is the record owner of and has good and valid title to the LLC Interests, free and clear of all Encumbrances, and sole and unrestricted voting power and power of disposition with respect to all of the LLC Interests. The Company is the record owner of and has good and valid title to the UNEV Membership Interests, free and clear of all Encumbrances (other than Permitted Encumbrances), and sole and unrestricted voting power and power of disposition with respect to the UNEV Membership Interests (except as restricted under the UNEV Pipeline LLC

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Agreement). Except for any claims arising under this Agreement, the Transportation Agreement to which any HollyFrontier Entity is a party and any other agreement entered into by Seller in accordance with this Agreement, Seller and its Affiliates have no claims of any kind against the Company, UNEV Pipeline or any of their respective officers, managers, directors or employees. The LLC Interests have been duly authorized and validly issued in accordance with Applicable Laws and the limited liability company agreement of the Company and are fully paid (to the extent required by the limited liability company agreement of the Company) and nonassessable (except to the extent such nonassessability may be affected by Sections 18-607 and 18-804 of DLLCA). The UNEV Membership Interests have been duly authorized and validly issued in accordance with Applicable Laws and the UNEV Pipeline LLC Agreement and are fully paid (to the extent required by the UNEV Pipeline LLC Agreement) and nonassessable (except to the extent such nonassessability may be affected by Sections 18-607 and 18-804 of DLLCA).

(b) There are no options or rights to purchase or acquire, or agreements, arrangements, commitments or understandings relating to, any of the LLC Interests, the UNEV Membership Interests or the Pipeline except pursuant to this Agreement, the Omnibus Agreement, the UNEV Pipeline LLC Agreement and the Option Agreement (which is being terminated simultaneously herewith). There are no (i) authorized or outstanding securities of or equity interests in the Company of any kind other than the LLC Interests, (ii) except pursuant to the Option Agreement (which is being terminated simultaneously herewith), there are no outstanding options, warrants, subscriptions, puts, calls or other rights, agreements, arrangements or commitments (preemptive, contingent or otherwise) obligating Seller or the Company to offer, issue, sell, redeem, repurchase, otherwise acquire or transfer, pledge or encumber any securities of or equity interest in the Company, and (iii) there are no outstanding securities or obligations of any kind of any of the Company that are convertible into or exercisable or exchangeable for any equity interest in the Company.

(c) At the Closing, upon payment of the Purchase Price, Buyer will have the entire record and beneficial ownership of the LLC Interests, free and clear of all Encumbrances.

(d) The limited liability company interests of UNEV Pipeline are held between the Company and Sinclair Transportation Company as set forth on Seller Disclosure Schedule 4.6(d) , and the Company and Sinclair Transportation Company are the sole members of UNEV Pipeline. There are no outstanding options, warrants, subscriptions, puts, calls or other rights, agreements, arrangements or commitments (preemptive, contingent or otherwise) obligating the Company, UNEV Pipeline or, to the knowledge of Seller, Sinclair Transportation Company to offer, issue, sell, redeem, repurchase, otherwise acquire or transfer, pledge or encumber any securities of or equity interest in UNEV Pipeline other than as provided under the UNEV Pipeline LLC Agreement. There are no outstanding securities or obligations of any kind of UNEV Pipeline that are convertible into or exercisable or exchangeable for any equity interest in UNEV Pipeline.

4.7 No Undisclosed Liabilities. Except as set forth on Seller Disclosure Schedules 1.1 , 4.5 , 4.7 and 4.13 , neither the Company nor UNEV Pipeline now has any indebtedness or liability (whether absolute, accrued, contingent or otherwise) of any nature, other than its obligations under the Construction Contracts, Permits and the Transportation Agreements, and neither the Company

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nor UNEV Pipeline, nor to Seller’s knowledge, any counterparty thereto, is currently in material breach of its obligations under the Construction Contracts and the Transportation Agreements.

4.8 No Employees. Neither the Company nor UNEV Pipeline now has nor ever has had any employees.

4.9 Taxes. Each of the Company and UNEV Pipeline has filed, on or before the applicable due date (including any extensions thereof), all material tax returns that it was required to file, and all such tax returns were accurate, correct, and complete in all material respects. All taxes due and owing by each of the Company and UNEV Pipeline have been paid in full or are being properly contested. The Company is, and at all times since the Conversion, has been, disregarded as an entity separate from Seller for U.S. federal income tax purposes, and no election has been filed on or before the Closing Date that would change such classification on or after the Closing Date. Prior to the Conversion, the Company was classified as a corporation for U.S. federal income tax purposes. UNEV Pipeline is, and at all times since its formation has been, classified as a partnership for U.S. federal income tax purposes, and no election has been filed on or before the Closing Date that would change such classification on or after the Closing Date.

4.10 Brokers and Finders . No investment banker, broker, finder, financial advisor or other intermediary has been retained by or is authorized to act on behalf of Seller who is entitled to receive from Buyer any fee or commission in connection with the transactions contemplated by this Agreement.

4.11 Condition of Pipeline . Except as set forth on Seller Disclosure Schedule 4.11 , to Seller’s knowledge, the Pipeline is in good operating condition and repair (normal wear and tear excepted), is free from material defects (patent and latent), is suitable for the purposes for which it is currently used and is not in need of material maintenance or repairs except for ordinary routine maintenance and repairs.

4.12 Title to Assets . Except as disclosed in Seller Disclosure Schedule 4.12 , UNEV Pipeline owns, leases or has the legal right to use all the properties and assets used by UNEV Pipeline in the operation of its business, in each case subject to no Encumbrances, except Permitted Encumbrances. UNEV Pipeline’s assets consist of the Pipeline and the associated rights and obligations under the Construction Contracts relating to the construction of the Pipeline and the Transportation Agreements. Except as set forth in Seller Disclosure Schedule 4.12 , UNEV Pipeline owns the Pipeline free and clear of all Encumbrances other than Permitted Encumbrances.

4.13 Permits . Except as set forth in Seller Disclosure Schedule 4.13 , to Seller’s knowledge, UNEV Pipeline or the Operator own or hold all Permits. Except as set forth in Seller Disclosure Schedule 4.13, each Permit is in full force and effect, and UNEV Pipeline is in compliance with all of its obligations with respect thereto. Except as set forth in Seller Disclosure Schedule 4.13, to the knowledge of Seller, no event has occurred that causes, or upon the giving of notice or the lapse of time or otherwise would cause, revocation or termination of any Permit. All Permits shall be, subject to Permitted Encumbrances, owned or held by UNEV Pipeline or the Operator at Closing.

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4.14 Banking Relationships . Seller Disclosure Schedule 4.14 sets forth a complete and accurate list of all accounts, including checking accounts, cash contribution accounts, safe deposit boxes, borrowing arrangements and certificates of deposit that each of the Company and UNEV Pipeline has with any banks, savings and loan associations or other financial institutions, indicating in each case account numbers, if applicable, and the person or persons authorized to act or sign on behalf of the Company or UNEV Pipeline in respect of the foregoing. No person holds any power of attorney or similar authority from the Company or UNEV Pipeline with respect to such accounts.

4.15 Representations Relating to the Unit Consideration . Seller is acquiring the Unit Consideration for its own account for investment, and not with a view to any distribution or resale thereof in violation of the Securities Act of 1933, as amended, (including the rules and regulations promulgated thereunder, the “ Securities Act ”), or any other applicable domestic or foreign securities law. Seller understands that the Units have not been registered under the Securities Act by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of Seller’s representations as expressed herein. Seller understands that the Units are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, Seller must hold such securities indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available.

4.16 Compliance with Law. The activities currently conducted by Seller, the Company and UNEV Pipeline with respect to the Pipeline are in compliance in all material respects with all Applicable Laws.

4.17 Material Contracts . Except as set forth on Seller Disclosure Schedule 4.17 , and other than the Construction Contracts and Transportation Agreements, there are no material Contracts relating to the activities currently conducted by UNEV Pipeline with respect to the Pipeline, or by which the Company, UNEV Pipeline or the Pipeline are bound. “ Material Contracts ” means the Construction Contracts, Transportation Agreements and the Contracts set forth on Seller Disclosure Schedule 4.17 . The Transportation Agreements have not been amended, modified or terminated.

4.18 Seller Security. Seller Disclosure Schedule 4.18 contains a true and complete listing of the cash collateral, letters of credit, and guaranties in effect as of the date of this Agreement securing the performance of UNEV Pipeline under the Material Contracts and other obligations of UNEV Pipeline with respect to the activities currently conducted by UNEV Pipeline with respect to the Pipeline.

4.19 Insurance. All insurance policies covering UNEV Pipeline or its operations and assets provided by Seller (which, for the avoidance of doubt, excludes insurance policies covering UNEV Pipeline or its operations and assets provided by the Partnership and its Affiliates) are in full force and effect, all premiums with respect thereto covering all periods up to and including the Closing Date have been paid, and no written notice of cancellation or termination has been received with respect to any such policy. Such policies, including without limitation products liability insurance, (a) are sufficient for compliance in all material respects with all requirements of

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Applicable Law and of all Material Contracts for matters covered by such policies, and (b) are, to the knowledge of Seller, valid policies, enforceable against UNEV Pipeline and the other parties thereto, in accordance with their respective terms, except to the extent that such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Applicable Laws affecting creditors’ rights and remedies generally and (ii) equitable principles which may limit the availability of certain equitable remedies (such as specific performance) in certain instances.

4.20 Legends . Seller understands that the certificates or other instruments representing the Unit Consideration shall bear any legend as required by the “blue sky” laws of any state and a restrictive legend in substantially the following form:

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “SECURITIES ACT”) AND MAY NOT BE OFFERED OR SOLD, UNLESS IT HAS BEEN REGISTERED UNDER THE SECURITIES ACT OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE (AND, IN SUCH CASE, AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE PARTNERSHIP SHALL HAVE BEEN DELIVERED TO THE PARTNERSHIP TO THE EFFECT THAT SUCH OFFER OR SALE IS NOT REQUIRED TO BE REGISTERED UNDER THE SECURITIES ACT). THIS SECURITY IS SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER SET FORTH IN THE FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF THE PARTNERSHIP DATED AS OF JULY 13, 2004, AS AMENDED, A COPY OF WHICH MAY BE OBTAINED FROM THE PARTNERSHIP AT ITS PRINCIPAL EXECUTIVE OFFICES.

4.21 WAIVERS AND DISCLAIMERS . NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES AND OTHER COVENANTS AND AGREEMENTS MADE BY THE PARTIES IN THIS AGREEMENT, THE ANCILLARY DOCUMENTS AND THE OMNIBUS AGREEMENT, THE PARTIES ACKNOWLEDGE AND AGREE THAT NONE OF THE PARTIES HAS MADE, DOES NOT MAKE, AND EACH SUCH PARTY SPECIFICALLY NEGATES AND DISCLAIMS, ANY REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS, IMPLIED OR STATUTORY, ORAL OR WRITTEN, PAST OR PRESENT, REGARDING (I) THE VALUE, NATURE, QUALITY OR CONDITION OF THE PIPELINE INCLUDING, WITHOUT LIMITATION, THE WATER, SOIL, GEOLOGY OR ENVIRONMENTAL CONDITION OF THE PIPELINE GENERALLY, INCLUDING THE PRESENCE OR LACK OF HAZARDOUS SUBSTANCES OR OTHER MATTERS ON THE PIPELINE AND RELATED RIGHTS-OF-WAY INCLUDED IN THE PIPELINE, (II) THE INCOME TO BE DERIVED FROM THE PIPELINE, (III) THE SUITABILITY OF THE PIPELINE FOR ANY AND ALL ACTIVITIES AND USES THAT MAY BE CONDUCTED THEREON, (IV) THE COMPLIANCE OF OR BY THE PIPELINE OR ITS OPERATION WITH ANY APPLICABLE LAWS (INCLUDING WITHOUT LIMITATION ANY

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ZONING, ENVIRONMENTAL PROTECTION, POLLUTION OR LAND USE LAWS, RULES, REGULATIONS, ORDERS OR REQUIREMENTS), OR (V) THE HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE PIPELINE. EXCEPT TO THE EXTENT PROVIDED IN THIS AGREEMENT, THE ANCILLARY DOCUMENTS OR THE OMNIBUS AGREEMENT, NONE OF THE PARTIES IS LIABLE OR BOUND IN ANY MANNER BY ANY VERBAL OR WRITTEN STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE LLC INTERESTS, THE COMPANY, THE UNEV MEMBERSHIP INTERESTS OR THE PIPELINE FURNISHED BY ANY AGENT, EMPLOYEE, SERVANT OR THIRD PARTY. EXCEPT TO THE EXTENT PROVIDED IN THIS AGREEMENT, THE ANCILLARY DOCUMENTS OR THE OMNIBUS AGREEMENT, EACH OF THE PARTIES ACKNOWLEDGES THAT TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE INDIRECT TRANSFER AND CONVEYANCE OF THE PIPELINE SHALL BE MADE IN AN “AS IS,” “WHERE IS” CONDITION WITH ALL FAULTS, AND THE PIPELINE IS INDIRECTLY TRANSFERRED AND CONVEYED SUBJECT TO ALL OF THE MATTERS CONTAINED IN THIS SECTION. THIS SECTION SHALL SURVIVE THE TRANSFER AND CONVEYANCE OF THE LLC INTERESTS OR THE TERMINATION OF THIS AGREEMENT. THE PROVISIONS OF THIS SECTION HAVE BEEN NEGOTIATED BY THE PARTIES AFTER DUE CONSIDERATION AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY REPRESENTATIONS OR WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO THE LLC INTERESTS, THE COMPANY, THE UNEV MEMBERSHIP INTERESTS OR THE PIPELINE THAT MAY ARISE PURSUANT TO ANY LAW NOW OR HEREAFTER IN EFFECT, OR OTHERWISE, EXCEPT AS SET FORTH IN THIS AGREEMENT, THE ANCILLARY DOCUMENTS OR THE OMNIBUS AGREEMENT.

Article V
REPRESENTATIONS AND WARRANTIES OF THE BUYER

Buyer hereby represents and warrants to Seller that as of the date of this Agreement:

5.1 Organization . Buyer is an entity duly organized, validly existing and in good standing under the Applicable Laws of the State of Delaware.

5.2 Authorization . Buyer has full limited liability company power and authority to execute, deliver, and perform this Agreement and any Buyer Ancillary Documents to which it is a party. The execution, delivery, and performance by Buyer of this Agreement and the Buyer Ancillary Documents and the consummation by Buyer of the transactions contemplated hereby and thereby, have been duly authorized by all necessary limited liability company action of Buyer. This Agreement has been duly executed and delivered by Buyer and constitutes, and each such Buyer Ancillary Document executed or to be executed Buyer has been, or when executed will be, duly executed and delivered by Buyer and constitutes, or when executed and delivered will constitute, a valid and legally binding obligation of Buyer, enforceable against it in accordance with their terms, except to the extent that such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Applicable Laws affecting creditors’ rights and remedies generally and (ii) equitable principles which may limit the availability

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of certain equitable remedies (such as specific performance) in certain instances.

5.3 No Conflicts or Violations; No Consents or Approvals Required . The execution, delivery and performance by Buyer of this Agreement and the Buyer Ancillary Documents to which it is a party does not, and consummation of the transactions contemplated hereby and thereby will not, (i) violate, conflict with, or result in any breach of any provisions of Buyer’s organizational documents or (ii) subject to obtaining the Consents or making the registrations, declarations or filings set forth in the next sentence, violate any Applicable Law or material contract binding upon Buyer. Except as set forth on Buyer Disclosure Schedule 5.3 , no Consent of any Governmental Entity or any other person is required for Buyer in connection with the execution, delivery and performance of this Agreement and the other Buyer Ancillary Documents to which Buyer is a party or the consummation of the transactions contemplated hereby and thereby.

5.4 Absence of Litigation . There is no Action pending or, to the knowledge of Buyer, threatened against Buyer or any of its Affiliates relating to the transactions contemplated by this Agreement or the Buyer Ancillary Documents or which, if adversely determined, would reasonably be expected to materially impair the ability of Buyer to perform its obligations and agreements under this Agreement or the Buyer Ancillary Documents and to consummate the transactions contemplated hereby and thereby.

5.5 Brokers and Finders . No investment banker, broker, finder, financial advisor or other intermediary has been retained by or is authorized to act on behalf of Buyer who is entitled to receive from Seller any fee or commission in connection with the transactions contemplated by this Agreement.

5.6 Validity of Profits Interest . The Profits Interest have been duly and validly authorized in accordance with Applicable Laws and Buyer’s organizational documents and, when issued and delivered in accordance with the terms of this Agreement and the LLC Agreement, will be validly issued, fully paid (to the extent required under Buyer’s organizational documents) and nonassessable (except as such nonassessability may be affected by Sections 18-607 and 18-804 of the DLLCA).

Article VI
REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP

The Partnership hereby represents and warrants to Seller that as of the date of this Agreement:

6.1 Organization . The Partnership is an entity duly organized, validly existing and in good standing under the Applicable Laws of the State of Delaware.

6.2 Authorization . The Partnership has full limited partnership power and authority to execute, deliver, and perform this Agreement and any Ancillary Documents to which it is a party. The execution, delivery, and performance by the Partnership of this Agreement and the Ancillary Documents and the consummation by the Partnership of the transactions contemplated hereby and thereby, have been duly authorized by all necessary limited partnership action of the Partnership. This Agreement has been duly executed and delivered by the Partnership and constitutes, and each

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such Ancillary Document executed or to be executed by the Partnership has been, or when executed will be, duly executed and delivered by the Partnership and constitutes, or when executed and delivered will constitute, a valid and legally binding obligation of the Partnership, enforceable against it in accordance with their terms, except to the extent that such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Applicable Laws affecting creditors’ rights and remedies generally and (ii) equitable principles which may limit the availability of certain equitable remedies (such as specific performance) in certain instances.

6.3 No Conflicts or Violations; No Consents or Approvals Required . The execution, delivery and performance by the Partnership of this Agreement and the Ancillary Documents to which it is a party does not, and consummation of the transactions contemplated hereby and thereby will not, (i) violate, conflict with, or result in any breach of any provisions of the Partnership’s organizational documents or (ii) subject to obtaining the Consents or making the registrations, declarations or filings set forth in the next sentence, violate any Applicable Law or material contract binding upon the Partnership. Except as set forth on Partnership Disclosure Schedule 6.3 , no Consent of any Governmental Entity or any other person is required for the Partnership in connection with the execution, delivery and performance of this Agreement and the other Ancillary Documents to which the Partnership is a party or the consummation of the transactions contemplated hereby and thereby.

6.4 Absence of Litigation . There is no Action pending or, to the knowledge of the Partnership, threatened against the Partnership or any of its Affiliates relating to the transactions contemplated by this Agreement or which, if adversely determined, would reasonably be expected to materially impair the ability of the Partnership to perform its obligations and agreements under this Agreement or the Ancillary Documents to which it is a party and to consummate the transactions contemplated hereby and thereby.

6.5 Brokers and Finders . No investment banker, broker, finder, financial advisor or other intermediary has been retained by or is authorized to act on behalf of the Partnership who is entitled to receive from Seller any fee or commission in connection with the transactions contemplated by this Agreement.

6.6 Validity of Aggregate Units . The Common Units comprising the Unit Consideration and the limited partner interests represented thereby have been duly and validly authorized by the Partnership’s organizational documents and, when issued and delivered in accordance with the terms of this Agreement, will be validly issued, fully paid (to the extent required under the Partnership’s organizational documents) and nonassessable (except as such nonassessability may be affected by Section 17 607 of the Delaware Revised Uniform Limited Partnership Act).

6.7 No Knowledge of Breach . The Partnership has no knowledge that any of the representations and warranties of Seller in Sections 4.4(a)(ii) , 4.4(b)(ii) , 4.5 , 4.7 , 4.8 , 4.11 , 4.12 , 4.13 , 4.14 , 4.16 and 4.17 as modified by the information set forth in the corresponding Seller Disclosure Schedules attached hereto are not true and correct in all material respects.

Article VII

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COVENANTS

7.1 Cooperation . Seller shall cooperate with Buyer and assist Buyer in identifying all licenses, authorizations, permissions or Permits necessary for the Company’s and UNEV Pipeline’s operations from and after the Closing Date and where permissible, transfer existing Permits, if any, to Buyer or Operator, as applicable, or, where not permissible or applicable, assist UNEV Pipeline, Buyer or Operator, as applicable, in obtaining new Permits at no cost, fee or liability to Seller.

7.2 Additional Agreements . Subject to the terms and conditions of this Agreement, the Ancillary Documents and the Omnibus Agreement, each of the Parties shall use its commercially reasonable efforts to do, or cause to be taken all action and to do, or cause to be done, all things necessary, proper, or advisable under Applicable Laws to consummate and make effective the transactions contemplated by this Agreement. If at any time after the Closing Date any further action is necessary or desirable to carry out the purposes of this Agreement, the Parties and their duly authorized representatives shall use commercially reasonable efforts to take all such action.

7.3 Listing of Unit Consideration on New York Stock Exchange . The Partnership shall provide notice of issuance of the Unit Consideration to the New York Stock Exchange promptly upon such issuance.

Article VIII
ADDITIONAL AGREEMENTS

8.1 Further Assurances . After the Closing, each Party shall take such further actions, including obtaining Consents to assignment from third parties, and execute such further documents as may be necessary or reasonably requested by the other Parties in order to effectuate the intent of this Agreement and the Ancillary Documents and to provide such other Parties with the intended benefits of this Agreement and the Ancillary Documents.

8.2 Tariff Increase . For a period of two years following the Closing, Seller shall not, and shall cause its Affiliates not to, object to any increase by UNEV Pipeline of, and Buyer may cause UNEV Pipeline to increase, the incentive tariff to ship on the Pipeline, subject to FERC rules, regulations and guidelines, in order to cover costs of defects, construction or environmental matters incurred by any of the Buyer Indemnified Parties related to the Pipeline that are discovered after the Closing but that arise out of events that occurred prior to the Closing; provided, however, that the foregoing shall not apply until the aggregate amount of such costs total $8,000,000, in which event the foregoing shall only apply to such costs in excess of $8,000,000; provided, further, that the foregoing shall not apply to such costs that arise out of or relate to any matter to the extent covered by an indemnity under ARTICLE IX of this Agreement, by an indemnity under the Omnibus Agreement, by effective insurance coverage or by a third party (whether by warranty, indemnity, insurance or otherwise). For the avoidance of doubt, this Section 8.2 does not prohibit tariff increases on the Pipeline in the ordinary course of business, such as for increases in the FERC index each year.

8.3 Future Capacity Expansion . The Partnership and Buyer agree that during the term of the Transportation Agreement between HollyFrontier Refining & Marketing LLC and UNEV

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Pipeline, as amended from time to time, if the Pipeline is unable to transport Seller’s (or any of its wholly-owned subsidiaries’) desired volume or is reasonably expected to be unable to transport such party’s desired volume following the Woods Cross Expansion Completion Date, the Partnership will cause UNEV Pipeline to expand the Pipeline (for example, by installing one or more additional pump stations of a size and in one or more locations), in the most expedited economically reasonable manner, that would add sufficient pipeline capacity to meet the additional transportation requirements, subject to:

(a) execution by Seller (or any of its applicable subsidiaries) of an agreement for long-term, committed transportation services for the additional volumes on the Pipeline;

(b) compliance with the requirements of the LLC Agreement (as amended, supplemented or modified after the date hereof) and Applicable Law; and

provided, that, notwithstanding the foregoing, the Partnership shall not be required to pursue the expansion if such expansion would result in UNEV Pipeline receiving less than a 15% unlevered rate of return on the actual capital cost incurred by UNEV Pipeline with respect to such expansion.

Article IX
INDEMNIFICATION

9.1 Indemnification of Buyer and Seller. From and after the Closing and subject to the provisions of this ARTICLE IX , (i) Seller agrees to indemnify and hold harmless the Buyer Indemnified Parties from and against any and all Buyer Indemnified Costs and (ii) Buyer and the Partnership agree, jointly and severally, to indemnify and hold harmless the Seller Indemnified Parties from and against any and all Seller Indemnified Costs. Notwithstanding any provision in this Agreement to the contrary, to the extent any Buyer Indemnified Costs are incurred by or attributable to UNEV Pipeline (a) the amount of Buyer Indemnified Costs that the Buyer Indemnified Parties are entitled to recover under this Article IX shall be limited to an amount that is the product of (x) the amount of the Buyer Indemnified Costs, multiplied by (y) the Company’s percentage ownership interest in UNEV Pipeline at the time such Buyer Indemnified Costs were incurred by UNEV Pipeline and (b) payment with respect to such Buyer Indemnified Costs shall be directed to, for the benefit of and recoverable solely by, the Company or its designee (and not UNEV Pipeline).

9.2 Defense of Third-Party Claims . An Indemnified Party shall give prompt written notice to Seller or Buyer, as applicable (the “ Indemnifying Party ”), of the commencement or assertion of any action, proceeding, demand, or claim by a third party (collectively, a “ third-party action ”) in respect of which such Indemnified Party seeks indemnification hereunder. Any failure so to notify the Indemnifying Party shall not relieve the Indemnifying Party from any liability that it, he, or she may have to such Indemnified Party under this ARTICLE IX unless the failure to give such notice materially and adversely prejudices the Indemnifying Party. The Indemnifying Party shall have the right to assume control of the defense of, settle, or otherwise dispose of such third-party action on such terms as it deems appropriate; provided , however , that:

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(a) The Indemnified Party shall be entitled, at its own expense, to participate in the defense of such third-party action ( provided , however , that the Indemnifying Party shall pay the attorneys’ fees of the Indemnified Party if (i) the employment of separate counsel shall have been authorized in writing by the Indemnifying Party in connection with the defense of such third-party action, (ii) the Indemnifying Party shall not have employed counsel reasonably satisfactory to the Indemnified Party to have charge of such third-party action, (iii) the Indemnified Party shall have reasonably concluded that there may be defenses available to such Indemnified Party that are different from or additional to those available to the Indemnifying Party, or (iv) the Indemnified Party’s counsel shall have advised the Indemnified Party in writing, with a copy delivered to the Indemnifying Party, that there is a material conflict of interest that could violate applicable standards of professional conduct to have common counsel);

(b) The Indemnifying Party shall obtain the prior written approval of the Indemnified Party before entering into or making any settlement, compromise, admission, or acknowledgment of the validity of such third-party action or any liability in respect thereof if, pursuant to or as a result of such settlement, compromise, admission, or acknowledgment, injunctive or other equitable relief would be imposed against the Indemnified Party or if, in the opinion of the Indemnified Party, such settlement, compromise, admission, or acknowledgment could have a material adverse effect on its business;

(c) The Indemnifying Party shall not consent to the entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by each claimant or plaintiff to each Indemnified Party of a release from all liability in respect of such third-party action; and

(d) The Indemnifying Party shall not be entitled to control (but shall be entitled to participate at its own expense in the defense of), and the Indemnified Party shall be entitled to have sole control over, the defense or settlement, compromise, admission, or acknowledgment of any third-party action (i) as to which the Indemnifying Party fails to assume the defense within a reasonable length of time or (ii) to the extent the third-party action seeks an order, injunction, or other equitable relief against the Indemnified Party which, if successful, would materially adversely affect the business, operations, assets, or financial condition of the Indemnified Party; provided , however , that the Indemnified Party shall make no settlement, compromise, admission, or acknowledgment that would give rise to liability on the part of any Indemnifying Party without the prior written consent of such Indemnifying Party.

The Parties shall extend reasonable cooperation in connection with the defense of any third-party action pursuant to this ARTICLE IX and, in connection therewith, shall furnish such records, information, and testimony and attend such conferences, discovery proceedings, hearings, trials, and appeals as may be reasonably requested.

9.3 Direct Claims . In any case in which an Indemnified Party seeks indemnification hereunder which is not subject to Section 9.2 because no third-party action is involved, the Indemnified Party shall notify the Indemnifying Party in writing of any Indemnified Costs which such Indemnified Party claims are subject to indemnification under the terms hereof. Subject to the limitations set forth in Section 9.4(a) , the failure of the Indemnified Party to exercise promptness

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in such notification shall not amount to a waiver of such claim unless the resulting delay materially prejudices the position of the Indemnifying Party with respect to such claim.

9.4 Limitations . The following provisions of this Section 9.4 shall limit the indemnification obligations hereunder:

(a) Limitation as to Time . The Indemnifying Party shall not be liable for any Indemnified Costs pursuant to this ARTICLE IX with respect to claims for breaches of the representations and warranties under this Agreement unless a written claim for indemnification in accordance with Section 9.2 or Section 9.3 is given by the Indemnified Party to the Indemnifying Party with respect thereto on or before 5:00 p.m., Dallas, Texas time, on the first anniversary of the Closing Date; provided , however , that the Indemnifying Party shall be liable for Indemnified Costs with respect to claims for indemnification for breach of the representations and warranties contained in Sections 4.1 (Organization), 4.2 (Authorization), 4.6 (Title to LLC Interests; Capitalization), 4.9 (Taxes), 4.21 (Waivers and Disclaimers), 5.1 (Organization), 5.2 (Authorization), 5.6 (Validity of Profits Interest), 6.1 (Organization), 6.2 (Authorization), 6.6 (Validity of Aggregate Units) and 6.7 (No Knowledge of Breach) (collectively, the “ Fundamental Representations ”) if a written claim for indemnification in accordance with Section 9.2 or Section 9.3 is given by the Indemnified Party to the Indemnifying Party at any time prior to the expiration of the applicable statute of limitations; provided further , however , that any representation and warranty that is the subject of a claim for indemnification hereunder which claim was timely made pursuant to Section 9.4(a) shall survive with respect to such claim until such claim is finally paid or adjudicated. For the avoidance of doubt, the limitations set forth in this Section 9.4(a) shall not apply to claims for Buyer Indemnified Costs relating to matters set forth on Seller Disclosure Schedule 1.1.

(b) Limitation as to Amount of Indemnification for Breaches of Representations and Warranties . Solely with respect to Buyer Indemnified Costs arising out of breaches of the representations and warranties of Seller under this Agreement, (1) Seller shall not be liable to the Buyer Indemnified Parties for indemnification under Section 9.1 , until the aggregate amount of all Buyer Indemnified Costs arising out of breaches of the representations and warranties of Seller under this Agreement exceeds $2,000,000 (the “ Deductible ”), in which event the Indemnifying Party shall only be required to pay or be liable for the Buyer Indemnified Costs arising out of breaches of such representations and warranties in excess of the Deductible; and (2) the aggregate amount of all Buyer Indemnified Costs arising out of breaches of the representations and warranties of Seller under this Agreement for which Seller shall be liable pursuant to Section 9.1 , shall not exceed $15,000,000 (the “ Cap ”); provided , however , that the Deductible and the Cap shall not apply to claims for Buyer Indemnified Costs relating to breaches of the Fundamental Representations; provided , further , that the Deductible shall be counted towards the satisfaction of the Cap such that the aggregate amount of Buyer Indemnified Costs for which Seller may be liable under Section 9.1 relating to claims for which the Deductible and Cap apply shall in no event exceed $13,000,000. For the avoidance of doubt, the limitations set forth in this Section 9.4(b) shall not apply to claims for Buyer Indemnified Costs relating to matters set forth on Seller Disclosure Schedule 1.1 .

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Indemnified Costs with respect to any claims for breaches of the representation by Buyer set forth in Section 6.7 (No Knowledge of Breach) shall be deemed to be equal to the amount of Buyer Indemnified Costs, if any, for which the Buyer Indemnified Parties are seeking or have sought indemnification under this ARTICLE IX with respect to the breach of a representation or warranty of Seller of which the Partnership had knowledge that resulted in the breach of Section 6.7 .

(d) Limitation as to Amount of Indemnification for Matters Set Forth on Seller Disclosure Schedule 1.1 . Solely with respect to Buyer Indemnified Costs relating to matters set forth on Seller Disclosure Schedule 1.1 , Seller shall only be required to pay or be liable for, and Buyer Indemnified Parties shall only be entitled to recover, 75% of the Buyer Indemnified Costs for which Seller would otherwise be liable under Section 9.1 (after giving effect to the last sentence of Section 9.1 ) with respect to such matters.

(e) Sole and Exclusive Remedy . Each Party acknowledges and agrees that, after the Closing Date, notwithstanding any other provision of this Agreement to the contrary, Buyer’s and the other Buyer Indemnified Parties’ and Seller’s and the other Seller Indemnified Parties’ sole and exclusive remedy with respect to the Indemnified Costs shall be in accordance with, and limited by, the provisions set forth in this ARTICLE IX . The Parties further acknowledge and agree that the foregoing is not the remedy for and does not limit the Parties’ remedies for matters covered by the indemnification provisions contained in the Omnibus Agreement.

9.5 Tax Related Adjustments . Seller and Buyer agree that any payment of Indemnified Costs made hereunder will be treated by the Parties on their tax returns as an adjustment to the Cash Consideration component of the Purchase Price.

Article X
MISCELLANEOUS

10.1 Expenses . Except as provided in Section 3.4 of this Agreement, or as provided in the Ancillary Documents or the Omnibus Agreement, all costs and expenses incurred by the Parties in connection with the consummation of the transactions contemplated hereby shall be borne solely and entirely by the Party which has incurred such expense.

10.2 Notices .

(a) Any notice or other communication given under this Agreement or the Omnibus Agreement shall be in writing and shall be (i) delivered personally, (ii) sent by documented overnight delivery service, (iii) sent by email transmission, or (iv) sent by first class mail, postage prepaid (certified or registered mail, return receipt requested). Such notice shall be deemed to have been duly given (x) if received, on the date of the delivery, with a receipt for delivery, (y) if refused, on the date of the refused delivery, with a receipt for refusal, or (z) with respect to email transmissions, on the date the recipient confirms receipt. Notices or other communications shall be directed to the following addresses:

Notices to Seller:

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HollyFrontier Corporation

2828 N. Harwood, Suite 1300

Dallas, Texas 75201

Attention: President

Email address: president@hollyfrontier.com

with a copy, which shall not constitute notice, but is required in order to give proper notice, to:

HollyFrontier Corporation

2828 N. Harwood, Suite 1300

Dallas, Texas 75201

Attention: General Counsel

Email address: generalcounsel@hollyfrontier.com

Notices to Buyer:

HEP UNEV Holdings LLC

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2828 N. Harwood, Suite 1300

Dallas, Texas 75201

Attention: President

Email address: president@hollyenergy.com

with a copy, which shall not constitute notice, but is required in order to give proper notice, to:

Holly Energy Partners, L.P.

2828 N. Harwood, Suite 1300

Dallas, Texas 75201

Attention: General Counsel

Email address: generalcounsel@hollyenergy.com

(b) Any Party may at any time change its address for service from time to time by giving notice to the other Parties in accordance with this Section 10.2 .

10.3 Severability . If any term or other provision of this Agreement is invalid, illegal, or incapable of being enforced under Applicable Law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated herein are not affected in any manner adverse to any Party. Upon such determination that any term or other provision of this Agreement is invalid, illegal, or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated herein are consummated as originally contemplated to the fullest extent possible.

10.4 Governing Law; Jurisdiction; Waiver of Jury Trial . This Agreement shall be subject to and governed by the laws of the State of Delaware, excluding any conflicts-of-law rule

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or principle that might refer the construction or interpretation of this Agreement to the laws of another state. Each Party hereby submits to the jurisdiction of the state and federal courts in the State of Texas and to venue in Dallas, Texas. EACH OF THE PARTIES IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

10.5 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 10.5 and the Commercial Arbitration Rules or the Federal Arbitration Act, the terms of this Section 10.5 will control the rights and obligations of the Parties. Arbitration must be initiated within the time limits set forth in this Agreement, or if no such limits apply, then within a reasonable time or the time period allowed by the applicable statute of limitations. Arbitration may be initiated by a Party (“ Claimant ”) serving written notice on the other Party (“ Respondent ”) that the Claimant elects to refer the Arbitrable Dispute to binding arbitration. Claimant’s notice initiating binding arbitration must identify the arbitrator Claimant has appointed. The Respondent shall respond to Claimant within thirty (30) days after receipt of Claimant’s notice, identifying the arbitrator Respondent has appointed. If the Respondent fails for any reason to name an arbitrator within the 30-day period, Claimant shall petition the American Arbitration Association for appointment of an arbitrator for Respondent’s account. The two arbitrators so chosen shall select a third arbitrator within thirty (30) days after the second arbitrator has been appointed. The Claimant will pay the compensation and expenses of the arbitrator named by it, and the Respondent will pay the compensation and expenses of the arbitrator named by or for it. The costs of petitioning for the appointment of an arbitrator, if any, shall be paid by Respondent. The Claimant and Respondent will each pay one-half of the compensation and expenses of the third arbitrator. All arbitrators must (i) be neutral parties who have never been officers, directors or employees of any of Seller, Buyer or any of their Affiliates and (ii) have not less than seven (7) years experience in the petroleum transportation industry. The hearing will be conducted in Dallas, Texas and commence within thirty (30) days after the selection of the third arbitrator. Seller, Buyer and the arbitrators shall proceed diligently and in good faith in order that the award may be made as promptly as possible. Except as provided in the Federal Arbitration Act, the decision of the arbitrators will be binding on and non-appealable by the Parties hereto. The arbitrators shall have no right to grant or award indirect, consequential, punitive or exemplary damages of any kind. The Arbitrable Disputes may be arbitrated in a common proceeding along with disputes under other agreements between Seller, Buyer or their Affiliates to the extent that the issues raised in such disputes are related. Without the written consent of the Parties, no unrelated disputes or third party disputes may be joined to an arbitration pursuant to this Agreement.

10.6 Parties in Interest . This Agreement shall be binding upon and inure solely to the benefit of each Party and their successors and permitted assigns, and nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement.

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10.7 Assignment of Agreement . At any time, the Parties may make a collateral assignment of their rights under this Agreement to any of their bona fide lenders or debt holders, or a trustee or a representative for any of them, and the non-assigning Parties shall execute an acknowledgment of such collateral assignment in such form as may from time to time be reasonably requested; provided , however , that unless written notice is given to the non-assigning Parties that any such collateral assignment has been foreclosed upon, such non-assigning Parties shall be entitled to deal exclusively with Seller, Buyer or the Partnership, as the case may be, as to any matters arising under this Agreement, the Ancillary Documents or the Omnibus Agreement (other than for delivery of notices required by any such collateral assignment). Except as otherwise provided in this Section 10.7 , neither this Agreement nor any of the rights, interests, or obligations hereunder may be assigned by any Party without the prior written consent of the other Parties.

10.8 Captions . The captions in this Agreement are for purposes of reference only and shall not limit or otherwise affect the interpretation hereof.

10.9 Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

10.10 Director and Officer Liability . The directors, managers, officers, partners and stockholders of the Partnership, Seller, Buyer, and their respective Affiliates shall not have any personal liability or obligation arising under this Agreement (including any claims that another party may assert) other than, if applicable, as a direct party to or an assignee of this Agreement or pursuant to a written guarantee.

10.11 Integration . This Agreement, the Ancillary Documents and the Omnibus Agreement supersede any previous understandings or agreements among the Parties, whether oral or written, with respect to their subject matter. This Agreement, the Ancillary Documents and the Omnibus Agreement contain the entire understanding of the Parties with respect to the subject matter hereof and thereof. No understanding, representation, promise or agreement, whether oral or written, is intended to be or shall be included in or form part of this Agreement, the Ancillary Documents or the Omnibus Agreement unless it is contained in a written amendment hereto or thereto and executed by the Parties hereto or thereto after the date of this Agreement, the Ancillary Documents or the Omnibus Agreement.

10.12 Effect of Agreement . The Parties ratify and confirm that except as otherwise expressly provided herein, in the event this Agreement conflicts in any way with the Omnibus Agreement, the terms and provisions of the Omnibus Agreement shall control.

10.13 Amendment; Waiver . This Agreement may be amended only in a writing signed by all Parties. Any waiver of rights hereunder must be set forth in writing. A waiver of any breach or failure to enforce any of the terms or conditions of this Agreement shall not in any way affect, limit or waive any party’s rights at any time to enforce strict compliance thereafter with every term or condition of this Agreement.

Article XI

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INTERPRETATION

11.1 Interpretation . It is expressly agreed that this Agreement shall not be construed against any Party, and no consideration shall be given or presumption made, on the basis of who drafted this Agreement or any particular provision hereof or who supplied the form of Agreement. Each Party agrees that this Agreement has been purposefully drawn and correctly reflects its understanding of the transaction that this Agreement contemplates. In construing this Agreement:

(a) examples shall not be construed to limit, expressly or by implication, the matter they illustrate;

(b) the word “includes” and its derivatives means “includes, but is not limited to” and corresponding derivative expressions;

(c) a defined term has its defined meaning throughout this Agreement and each Exhibit, Annex or Schedule to this Agreement, regardless of whether it appears before or after the place where it is defined;

(d) each Exhibit, Annex and Schedule to this Agreement is a part of this Agreement, but if there is any conflict or inconsistency between the main body of this Agreement and any Exhibit, Annex or Schedule, the provisions of the main body of this Agreement shall prevail;

(e) the term “cost” includes expense and the term “expense” includes cost;

(f) the headings and titles herein are for convenience only and shall have no significance in the interpretation hereof;

(g) the inclusion of a matter on a Schedule in relation to a representation or warranty shall not be deemed an indication that such matter necessarily would, or may, breach such representation or warranty absent its inclusion on such Schedule;

(h) any reference to a statute, regulation or Applicable Law shall include any amendment thereof or any successor thereto and any rules and regulations promulgated thereunder;

(i) currency amounts referenced herein, unless otherwise specified, are in U.S. Dollars;

(j) unless the context otherwise requires, all references to time shall mean time in Dallas, Texas;

(k) whenever this Agreement refers to a number of days, such number shall refer to calendar days unless business days are specified; and

(l) if a term is defined as one part of speech (such as a noun), it shall have a corresponding meaning when used as another part of speech (such as a verb).

11.2 References, Gender, Number . All references in this Agreement to an “Article,”

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“Section,” “subsection,” “Exhibit” or “Schedule” shall be to an Article, Section, subsection, Exhibit or Schedule of this Agreement, unless the context requires otherwise. Unless the context clearly requires otherwise, the words “this Agreement,” “hereof,” “hereunder,” “herein,” “hereby,” or words of similar import shall refer to this Agreement as a whole and not to a particular Article, Section, subsection, clause or other subdivision hereof. Cross references in this Agreement to a subsection or a clause within a Section may be made by reference to the number or other subdivision reference of such subsection or clause preceded by the word “Section.” Whenever the context requires, the words used herein shall include the masculine, feminine and neuter gender, and the singular and the plural.

[The Remainder of this Page is Intentionally Left Blank]

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IN WITNESS WHEREOF , the parties have executed this Agreement to be effective as of the date first set forth above.

SELLER:

HOLLYFRONTIER CORPORATION

By: /s/ Michael C. Jennings

Name: Michael C. Jennings


Title:	Chief Executive Officer and President

BUYER:

HEP UNEV HOLDINGS LLC

By: /s/ Matthew P. Clifton

Name: Matthew P. Clifton

Title: Chief Executive Officer and President

PARTNERSHIP:

HOLLY ENERGY PARTNERS, L.P.

By: HEP Logistics Holdings, L.P.

its General Partner

By: Holly Logistic Services, L.L.C.

its General Partner

By: /s/ Matthew P. Clifton

Name: Matthew P. Clifton

Title: Chief Executive Officer and President

SEVENTH AMENDED AND RESTATED OMNIBUS AGREEMENT

among

HOLLYFRONTIER CORPORATION

HOLLY ENERGY PARTNERS, L.P.

and

CERTAIN OF THEIR RESPECTIVE SUBSIDIARIES

TABLE OF CONTENTS

Page


Article I	Definitions 3


1.1	Definitions 3


Article II	Business Opportunities 10


2.1	Restricted Businesses 10


2.2	Permitted Exceptions 10


2.3	Procedures 11


2.4	Scope of Prohibition 13


2.5	Enforcement 13


2.6	Limitation on Acquisitions of Subject Assets by Partnership Group Members 13


Article III	Indemnification 13


3.1	Environmental Indemnification 13


3.2	Limitations Regarding Environmental Indemnification 15


3.3	Right of Way Indemnification 15


3.4	Additional Indemnification 16


3.5	Indemnification Procedures 17


3.6	Limitation on Indemnification Obligations 18


3.7	Exclusion from Indemnification 18


Article IV	General and Administrative Expenses 19


4.1	General 19


Article V	Right of First Refusal 19


5.1	Holly Right of First Refusal: Prohibition on Transfer of Refinery Related Assets 19


5.2	Procedures 20


Article VI	Holly Purchase Option 22


6.1	Option to Purchase Tulsa Transferred Assets 22


Article VII	Miscellaneous 22


7.1	Choice of Law 22


7.2	Arbitration Provision 22


7.3	Notice 23


7.4	Entire Agreement 24


7.5	Termination of Article II 24


7.6	Amendment or Modification 24


7.7	Assignment 25


7.8	Additional Partnership Entities 25


7.9	Counterparts 25


7.10	Severability 25


7.11	Further Assurances 25


7.12	Rights of Limited Partners 25


7.13	Headings 25


7.14	[Intentionally omitted] 26


7.15	Limitation of Damages 26

SEVENTH AMENDED AND RESTATED

OMNIBUS AGREEMENT

THIS SEVENTH AMENDED AND RESTATED OMNIBUS AGREEMENT (the “ Agreement ”) is being entered into on July 12, 2012, by and among HollyFrontier Corporation, a Delaware corporation (“ Holly ”), the other Holly Entities (as defined herein) listed on the signature pages hereto, Holly Energy Partners, L.P., a Delaware limited partnership (the “ Partnership ”), and the other Partnership Entities (as defined herein) listed on the signature pages hereto, and amends and restates in its entirety the Sixth Amended and Restated Omnibus Agreement entered into on November 9, 2011 and effective as of November 1, 2011 (as amended, the “ Sixth Amended Omnibus Agreement ”) among Holly, Navajo Pipeline Co., L.P., a Delaware limited partnership (“ Navajo Pipeline ”), Holly Logistic Services, L.L.C., a Delaware limited liability company (“ Holly GP ”), HEP Logistics Holdings, L.P., a Delaware limited partnership (the “ General Partner ”), the Partnership, HEP Logistics GP, L.L.C., a Delaware limited liability company (the “ OLP GP ”), and Holly Energy Partners – Operating, L.P., a Delaware limited partnership (the “ Operating Partnership ”) and the other Holly Entities and Partnership Entities signatory thereto.

R E C I T A L S:

WHEREAS, the Parties entered into an Omnibus Agreement on July 13, 2004 (as amended, the “ Original Omnibus Agreement ”) to evidence their agreement, as more fully set forth in Article II , with respect to those business opportunities that the Holly Entities and Holly GP would not engage in, directly or indirectly, during the term of the Original Omnibus Agreement unless the Partnership declined to engage in any such business opportunity for its own account;

WHEREAS, the Parties entered into the Original Omnibus Agreement to evidence their agreement, as more fully set forth in Article III , with respect to certain indemnification obligations of the Parties to each other;

WHEREAS, the Parties entered into the Original Omnibus Agreement to evidence their agreement, as more fully set forth in Article IV , with respect to the amount to be paid by the Partnership for the general and administrative services to be performed by Holly and its Affiliates (as defined herein) for and on behalf of the Partnership Entities and their Subsidiaries;

WHEREAS, the Parties entered into the Original Omnibus Agreement to evidence their agreement, as more fully set forth in Article V , with respect to Holly’s right of first refusal relating to the Assets (as defined herein);

WHEREAS, in connection with that certain LLC Interest Purchase Agreement dated as of June 1, 2009, by and among Holly, Navajo Pipeline and the Operating Partnership, pursuant to which Navajo Pipeline transferred and conveyed to the Operating Partnership, and the Operating Partnership has acquired, all of the limited liability company interests of Lovington-Artesia, L.L.C., the entity that owns the 16” Lovington/Artesia Intermediate Pipeline (as defined herein), the Parties amended and restated the Original Omnibus Agreement and entered into the First Amended and Restated Omnibus Agreement (the “ First Amended Omnibus Agreement ”);

WHEREAS, in connection with that certain Asset Purchase Agreement dated as of August 1, 2009, by and between Holly Refining & Marketing – Tulsa LLC (“ Holly Tulsa ”) and HEP Tulsa LLC (“ HEP Tulsa ”), pursuant to which Holly Tulsa transferred and conveyed to HEP Tulsa, and HEP Tulsa acquired, the Tulsa Transferred Assets (as defined herein), the Parties amended and restated the First Amended Omnibus Agreement and entered into the Second Amended and Restated Omnibus Agreement (the “ Second Amended Omnibus Agreement ”);

WHEREAS, in connection with (i) that certain Asset Sale and Purchase Agreement dated as of October 19, 2009, by and among Holly Tulsa, HEP Tulsa and Sinclair Tulsa Refining Company (“ Sinclair ”), pursuant to which HEP Tulsa acquired the Sinclair Transferred Assets (as defined herein), (ii) that certain Asset Purchase Agreement dated as of December 1, 2009, by and among Holly, Navajo Pipeline and HEP Pipeline L.L.C., pursuant to which Navajo Pipeline agreed to transfer and convey to HEP Pipeline L.L.C., and HEP Pipeline L.L.C. agreed to acquire, the Beeson Pipeline (as defined herein), and (iii) that certain LLC Interest Purchase Agreement by and among Holly, Navajo Pipeline and the Operating Partnership, pursuant to which Navajo Pipeline agreed to transfer and convey to the Operating Partnership, and the Operating Partnership agreed to acquire, all of the limited liability company interests of Roadrunner Pipeline, L.L.C., the entity that owns the Roadrunner Pipeline (as defined herein), the Parties amended and restated the Second Amended Omnibus Agreement and entered into the Third Amended and Restated Omnibus Agreement (the “ Third Amended Omnibus Agreement ”);

WHEREAS, in connection with that certain LLC Interest Purchase Agreement dated as of March 31, 2010, by and among Holly, Lea Refining Company, Holly Tulsa, HEP Refining, L.L.C. (“ HEP Refining ”) and HEP Tulsa (the “ March 2010 Drop Down LLC Interest Purchase Agreement ”), pursuant to which Holly, Lea Refining Company and Holly Tulsa agreed to transfer and convey to HEP Refining and HEP Tulsa the Additional Tulsa East Assets (as defined herein) and the Additional Lovington Assets (as defined herein), the Parties amended and restated the Third Amended Omnibus Agreement and entered into the Fourth Amended and Restated Omnibus Agreement (the “ Fourth Amended Omnibus Agreement ”);

WHEREAS, in connection with the construction of the Tulsa Interconnecting Pipelines (as defined herein), Holly Tulsa, HEP Tulsa and Holly Energy Storage – Tulsa LLC entered into that certain Second Amended and Restated Pipelines, Tankage and Loading Rack Throughput Agreement (Tulsa East), dated as of August 31, 2011, pursuant to which HEP Tulsa agreed to provide transportation services to Holly Tulsa with respect to the Tulsa Interconnecting Pipelines (the “ Tulsa Throughput Agreement ”), the Parties amended and restated the Fourth Amended Omnibus Agreement and entered into the Fifth Amended and Restated Omnibus Agreement (the “ Fifth Amended Omnibus Agreement ”);

WHEREAS, in connection with that certain LLC Interest Purchase Agreement effective as of November 1, 2011, by and among Holly, Frontier Refining LLC (“ Frontier Cheyenne ”), Frontier El Dorado Refining LLC (“ Frontier El Dorado ”), the Operating Partnership and the Partnership, (the “ November 2011 Frontier Drop Down LLC Interest Purchase Agreement ”), pursuant to which Frontier Cheyenne and Frontier El Dorado agreed sell to the Operating Partnership the entities that own the Cheyenne Assets (as defined herein) and the El Dorado Assets (as defined herein), the Parties amended and restated the Fifth Amended Omnibus Agreement and entered into the Sixth Amended Omnibus Agreement; and

WHEREAS, in connection with that certain LLC Interest Purchase Agreement dated as of July 12, 2012, by and among Holly, HEP UNEV Holdings LLC (“ HEP UNEV ”) and the Partnership (the “ UNEV LLC Interest Purchase Agreement ”), pursuant to which Holly agreed to sell to HEP UNEV the entity that owns 75% of all of the issued and outstanding membership interests of UNEV Pipeline, LLC, the entity that owns the UNEV Pipeline (as defined herein), the Parties desire to amend and restate the Sixth Amended Omnibus Agreement as provided herein.

In consideration of the premises and the covenants, conditions, and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto hereby agree as follows:

Article I
Definitions

1.1 Definitions .

As used in this Agreement, the following terms shall have the respective meanings set forth below:

“ 8” and 10” Lovington/Artesia Intermediate Pipelines ” means the 8-inch pipeline running from Lovington, New Mexico to Artesia, New Mexico and the 10-inch pipeline running from Lovington, New Mexico to Artesia, New Mexico, each owned by Navajo Pipeline.

“ 16” Lovington/Artesia Intermediate Pipeline ” means the 16-inch pipeline running from Lovington, New Mexico to Artesia, New Mexico, owned by Lovington-Artesia, L.L.C.

“ 2004 Product Pipelines, Terminal and Related Assets ” means the assets transferred under the July 13, 2004 Contribution, Conveyance and Assumption Agreement at the time of the Partnership’s initial public offering.

“ 2008 Crude Pipelines, Tanks and Related Assets ” means the Drop-Down Assets as defined in the Purchase and Sale Agreement, dated February 25, 2008, by and among Holly, Navajo Pipeline, Woods Cross Refining Company, L.L.C., a Delaware limited liability company, and Navajo Refining Company, L.L.C., as the seller parties, and the Partnership, the Operating Partnership, HEP Woods Cross, L.L.C., a Delaware limited liability company, and HEP Pipeline, L.L.C., a Delaware limited liability company, as the buyer parties.

“ Acquisition Proposal ” is defined in Section 5.2(a) .

“ Additional Tulsa East Assets ” means the Transferred Tulsa East Assets as defined in the March 2010 Drop Down LLC Interest Purchase Agreement.

“ Additional Lovington Assets ” means the Transferred Lovington Assets as defined in the March 2010 Drop Down LLC Interest Purchase Agreement.

“ Administrative Fee ” is defined in Section 4.1(a) .

“ Affiliate ” is defined in the Partnership Agreement.

“ Agreement ” is defined in the introduction to this Agreement.

“ Applicable Law ” means any applicable statute, law, regulation, ordinance, rule, judgment, rule of law, order, decree, permit, approval, concession, grant, franchise, license, agreement, requirement, or other governmental restriction or any similar form of decision of, or any provision or condition of any permit, license or other operating authorization issued under any of the foregoing by, or any determination by any Governmental Authority having or asserting jurisdiction over the matter or matters in question, whether now or hereafter in effect and in each case as amended (including, without limitation, all of the terms and provisions of the common law of such Governmental Authority), as interpreted and enforced at the time in question.

“ Arbitrable Dispute ” means any and all disputes, Claims, 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.

“ Assets ” means all of the following assets conveyed, contributed, or otherwise transferred, directly or indirectly (including by transfer or sale of the entity that owns such assets or the entity that owns the interests in the entity that owns such assets), by the Holly Entities to the Partnership Entities: (i) the 2004 Product Pipelines, Terminal and Related Assets, (ii) the 8” and 10” Lovington/Artesia Intermediate Pipelines, (iii) the 2008 Crude Pipelines, Tanks and Related Assets, (iv) the 16” Lovington/Artesia Intermediate Pipeline, (v) the Tulsa Transferred Assets, (vi) the Beeson Pipeline, (vii) the Roadrunner Pipeline, (viii) the Additional Lovington Assets, (ix) the Additional Tulsa East Assets, (x) the Sinclair Assets, (xi) the Tulsa Interconnecting Pipelines, (xii) the Cheyenne Assets, (xiii) the El Dorado Assets, and (xiv) the UNEV Pipeline.

“ Beeson Pipeline ” means the 8” crude oil pipeline extending from Beeson station to Lovington, New Mexico, owned by HEP Pipeline, L.L.C.

“ Change of Control ” means, with respect to any Person (the “ Applicable Person ”), any of the following events: (a) any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all of the Applicable Person’s assets to any other Person unless immediately following such sale, lease, exchange, or other transfer such assets are owned, directly or indirectly, by the Applicable Person; (b) the consolidation or merger of the Applicable Person with or into another Person pursuant to a transaction in which the outstanding Voting Securities of the Applicable Person are changed into or exchanged for cash, securities, or other property, other than any such transaction where (i) the outstanding Voting Securities of the Applicable Person are changed into or exchanged for Voting Securities of the surviving Person or its parent and (ii) the holders of the Voting Securities of the Applicable Person immediately prior to such transaction own, directly or indirectly, not less than a majority of the Voting Securities of the surviving Person or its parent immediately after such transaction; and (c) a “person” or “group” (within the meaning of Sections 13(d) or 14(d)(2) of the Exchange Act) (in the case of Holly, other than a group consisting of some of all of the current control persons of Holly), being or becoming the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) of more than 50% of all of the then outstanding Voting Securities of the Applicable Person, except in a merger or consolidation that would not constitute a Change of Control under clause (b) above.

“ Cheyenne Assets ” is defined in the November 2011 Frontier Drop Down LLC Interest Purchase Agreement.

“ Claimant ” is defined in Section 7.2 .

“ Closing Date ” means the date of the closing of the Partnership’s initial public offering of Common Units. For purposes of Article III , Closing Date shall mean, with respect to a group of Assets (e.g. the 8” and 10” Lovington/Artesia Intermediate Pipelines), the effective date of the purchase of such Assets or the stock, partnership interests or membership interests of the entity that directly or indirectly owned such Assets, by a Partnership Entity.

“ Common Units ” is defined in the Partnership Agreement.

“ Contribution Agreement ” means that certain Contribution, Conveyance and Assumption Agreement, dated as of July 13, 2004, among Holly, Navajo Pipeline, Holly GP, the General Partner, the Partnership, the OLP GP, the Operating Partnership and certain other parties, together with the additional conveyance documents and instruments contemplated or referenced thereunder.

“ control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract, or otherwise.

“ Covered Environmental Losses ” is defined in Section 3.1 .

“ Disposition Notice ” is defined in Section 5.2(a) .

“ El Dorado Assets ” is defined in the November 2011 Frontier Drop Down LLC Interest Purchase Agreement.

“ Environmental Laws ” means all federal, state, and local laws, statutes, rules, regulations, orders, and ordinances, now or hereafter in effect, relating to protection of the environment including, without limitation, the federal Comprehensive Environmental Response, Compensation, and Liability Act, the Superfund Amendments Reauthorization Act, the Resource Conservation and Recovery Act, the Clean Air Act, the Federal Water Pollution Control Act, the Toxic Substances Control Act, the Oil Pollution Act, the Safe Drinking Water Act, the Hazardous Materials Transportation Act, and other environmental conservation and protection laws, each as amended from time to time.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ Fifth Amended Omnibus Agreement ” is defined in the recitals to this Agreement.

“ First Amended Omnibus Agreement ” is defined in the recitals to this Agreement.

“ First ROFR Acceptance Deadline ” is defined in Section 5.2(a) .

“ Fourth Amended Omnibus Agreement ” is defined in the recitals to this Agreement.

“ General Partner ” is defined in the introduction to this Agreement.

“ 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.

“ Hazardous Substance ” means (a) any substance that is designated, defined, or classified as a hazardous waste, hazardous material, pollutant, contaminant, or toxic or hazardous substance, or that is otherwise regulated under any Environmental Law, including, without limitation, any hazardous substance as defined under the Comprehensive Environmental Response, Compensation, and Liability Act, and (b) petroleum, crude oil, gasoline, natural gas, fuel oil, motor oil, waste oil, diesel fuel, jet fuel, and other refined petroleum hydrocarbons.

“ Holly ” is defined in the introduction to this Agreement.

“ Holly Entities ” means Holly and each other entity listed on the signature pages hereto as Holly Entity.

“ Holly Entity ” means any of the Holly Entities.

“ Holly Group ” means the Holly Entities and any Person controlled, directly or indirectly, by Holly other than the Partnership Entities.

“ Holly Group Member ” means any member of the Holly Group.

“ Indemnified Party ” means the Partnership Entities or the Holly Entities, as the case may be, in their capacity as the parties entitled to indemnification in accordance with Article III .

“ Indemnifying Party ” means either the Partnership Entities or the Holly Entities, as the case may be, in their capacity as the parties from whom indemnification may be required in accordance with Article III , including Section 3.6 .

“ Initial Tank Inspection ” is defined in Section 3.1(c) .

“ Initial Tank Inspection Period ” is defined in Section 3.1(c) .

“ Limited Partner ” is defined in the Partnership Agreement.

“ March 2010 Drop Down LLC Interest Purchase Agreement ” is defined in the recitals to this Agreement.

“ Navajo Pipeline ” is defined in the introduction to this Agreement.

“ November 2011 Frontier Drop Down LLC Interest Purchase Agreement ” is defined in the recitals to this Agreement.

“ Offer ” is defined in Section 2.3(b)(i) .

“ Offer Price ” is defined in Section 5.2(a) .

“ OLP GP ” is defined in the introduction to this Agreement.

“ Operating Partnership ” is defined in the introduction to this Agreement.

“ Original Omnibus Agreement ” is defined in the recitals to this Agreement.

“ Partnership ” is defined in the introduction to this Agreement.

“ Partnership Agreement ” means the First Amended and Restated Agreement of Limited Partnership of Holly Energy Partners, L.P., dated July 13, 2004, as amended by Amendment No. 1 to the First Amended and Restated Agreement of Limited Partnership of Holly Energy Partners, L.P., dated February 28, 2005, as amended by Amendment No. 2 to the First Amended and Restated Agreement of Limited Partnership of Holly Energy Partners, L.P., dated July 6, 2005, as amended by Amendment No. 3 to the First Amended and Restated Agreement of Limited Partnership of Holly Energy Partners, L.P., dated April 11, 2008, and as amended pursuant to that certain Limited Partial Waiver of Incentive Distribution Rights, dated July 12, 2012, as such agreement is in effect on the date of this Agreement. No amendment or modification to the Partnership Agreement subsequent to the date of this Agreement shall be given effect for the purposes of this Agreement unless consented to by each of the Parties.

“ Partnership Entities ” means the Partnership and each other entity listed on the signature pages hereto as a Partnership Entity.

“ Partnership Entity ” means any of the Partnership Entities.

“ Partnership Group ” means the Partnership Entities and any Subsidiary of any such Person, treated as a single consolidated entity.

“ Partnership Group Member ” means any member of the Partnership Group.

“ Party ” means each of the entities listed on the signature page to this Agreement, collectively the “ Parties ”.

“ 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.

“ Proposed Transferee ” is defined in Section 5.2(a) .

“ Prudent Industry Practice ” means such practices, methods, acts, techniques, and standards as are in effect at the time in question that are consistent with (a) the standards generally followed by the United States pipeline and terminalling industries or (b) such higher standards as may be applied or followed by the Holly Entities in the performance of similar tasks or projects, or by the Partnership Entities in the performance of similar tasks or projects.

“ Purchase Option Agreement ” has the meaning set forth in the Asset Purchase Agreement, dated August 1, 2009, between Holly Refining & Marketing – Tulsa LLC, a Delaware limited liability company, as the seller, and HEP Tulsa LLC, a Delaware limited liability company, as the buyer.

“ Respondent ” is defined in Section 7.2 .

“ Restricted Businesses ” is defined in Section 2.1 .

“ Retained Assets ” means the pipelines, terminals and other assets and investments owned by any of the Holly Group Members on the date of the Contribution Agreement that were not conveyed, contributed or otherwise transferred to the Partnership Entities pursuant to the Contribution Agreement or otherwise.

“ Roadrunner Pipeline ” means 16” crude oil pipeline extending from Slaughter station in Texas to Lovington, New Mexico owned by Roadrunner Pipeline, L.L.C.

“ ROFR Acceptance Deadline ” means the First ROFR Acceptance Deadline or the Second ROFR Acceptance Deadline, as applicable.

“ Sale Assets ” is defined in Section 5.2(a) .

“ Second Amended Omnibus Agreement ” is defined in the recitals to this Agreement.

“ Second ROFR Acceptance Deadline ” is defined in Section 5.2(a) .

“ Sinclair Transferred Assets ” means the HEP Tulsa Assets as defined in the Asset Sale and Purchase Agreement dated October 19, 2009 by and among Holly Tulsa, HEP Tulsa and Sinclair.

“ Sixth Amended Omnibus Agreement ” is defined in the introduction to this Agreement.

“ Subject Assets ” is defined in Section 2.2(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.

“ Third Amended Omnibus Agreement ” is defined in the recitals to this Agreement.

“ Toxic Tort ” means a claim or cause of action arising from personal injury or property damage incurred by the plaintiff that is alleged to have been caused by exposure to, or contamination by, Hazardous Substances that have been released into the environment by or as a result of the actions or omissions of the defendant.

“ Tulsa Interconnecting Pipelines ” means the Interconnecting Pipelines as defined in the Tulsa Throughput Agreement.

“ Tulsa Throughput Agreement ” is defined in the recitals to this Agreement.

“ Tulsa Transferred Assets ” means the Transferred Assets as defined in the Asset Purchase Agreement, dated August 1, 2009, between Holly Refining & Marketing – Tulsa LLC, a Delaware limited liability company, as the seller, and HEP Tulsa LLC, a Delaware limited liability company, as the buyer.

“ Transfer ” including the correlative terms “ Transferring ” or “ Transferred ” means any direct or indirect transfer, assignment, sale, gift, pledge, hypothecation or other encumbrance, or any other disposition (whether voluntary, involuntary or by operation of law) of the Assets.

“ Transferred Tanks ” is defined in Section 3.1(a)(iii) .

“ UNEV LLC Interest Purchase Agreement ” is defined in the recitals to this Agreement.

“ UNEV Pipeline ” means, collectively, an approximately 400 mile, 12-inch refined products pipeline currently running from Woods Cross, Utah to Las Vegas, Nevada, related products terminals in or near Cedar City, Utah to Las Vegas, Nevada and other related assets owned by UNEV Pipeline, LLC.

“ UNEV Profits Interest ” means the membership interest in HEP UNEV held directly or indirectly by Holly.

“ Units ” is defined in the Partnership Agreement.

“ Voting Securities ” means securities of any class of a Person entitling the holders thereof to vote on a regular basis in the election of members of the board of directors or other governing body of such Person.

Article II
Business Opportunities

2.1 Restricted Businesses . For so long as a Holly Group Member controls the Partnership, and except as permitted by Section 2.2 , Holly GP and each of the Holly Group Members shall be prohibited from engaging in or acquiring or investing in any business having assets engaged in the following businesses (the “ Restricted Businesses ”): the ownership and/or operation of crude oil pipelines or terminals, intermediate product pipelines or terminals, refined products pipelines or terminals, truck racks or crude oil gathering systems in the continental United States.

2.2 Permitted Exceptions . Notwithstanding any provision of Section 2.1 to the contrary, Holly GP and the Holly Group Members may engage in the following activities under the following circumstances:

(a) the ownership and/or operation of any of the Retained Assets (including replacements of the Retained Assets);

(b) any Restricted Business conducted by a Holly Group Member or Holly GP with the approval of the General Partner;

(c) the ownership and/or operation of any asset or group of related assets used in the activities described in Section 2.1 that are acquired or constructed by a Holly Group Member or Holly GP after the Closing Date (the “ Subject Assets ”) if, in the case of an acquisition, the fair market value of the Subject Assets (as determined in good faith by the Board of Directors of Holly), or, in the case of construction, the estimated construction cost of the Subject Assets (as determined in good faith by the Board of Directors of Holly), is less than $5 million at the time of such acquisition or completion of construction, as the case may be;

(d) the ownership and/or operation of any Subject Assets acquired by a Holly Group Member or Holly GP after the Closing Date with a fair market value (as determined in good faith by the Board of Directors of Holly) equal to or greater than $5 million at the time of the acquisition; provided , the Partnership has been offered the opportunity to purchase the Subject Assets in accordance with Section 2.3 and the Partnership has elected not to purchase the Subject Assets;

(e) the ownership and/or operation of any Subject Assets constructed by a Holly Group Member or Holly GP after the Closing Date with a construction cost (as determined in good faith by the Board of Directors of Holly) equal to or greater than $5 million at the time of completion of construction that the Partnership has been offered the opportunity to purchase in accordance with Section 2.3 and the Partnership has elected not to purchase; and

(f) the ownership of the UNEV Profits Interest.

2.3 Procedures .

(a) In the event that Holly GP or a Holly Group Member becomes aware of an opportunity to acquire Subject Assets with a fair market value (as determined in good faith by the Board of Directors of Holly) equal to or greater than $5 million, then subject to Section 2.3(b) , then as soon as practicable, Holly GP or such Holly Group Member shall notify the General Partner of such opportunity and deliver to the General Partner, or provide the General Partner access to, all information prepared by or on behalf of, or material information submitted or delivered to, Holly GP or such Holly Group Member relating to such potential transaction. As soon as practicable, but in any event within 30 days after receipt of such notification and information, the General Partner, on behalf of the Partnership, shall notify Holly GP or the Holly Group Member that either (1) the General Partner, on behalf of the Partnership, has elected not to cause a Partnership Group Member to pursue the opportunity to purchase the Subject Assets, or (2) the General Partner, on behalf of the Partnership, has elected to cause a Partnership Group Member to pursue the opportunity to purchase the Subject Assets. If, at any time, the General Partner abandons such opportunity (as evidenced in writing by the General Partner following the request of Holly GP or the Holly Group Member), Holly GP or the Holly Group Member under this Section 2.3(a) may pursue such opportunity. Any Subject Assets which are permitted to be acquired by Holly GP or a Holly Group Member must be so acquired (i) within 12 months of the later to occur of (a) the date that Holly GP or the Holly Group Member becomes able to pursue such acquisition in accordance with the provisions of this Section 2.3(a) , and (b) the date upon which all required governmental approvals to consummate such acquisition have been obtained, and (ii) on terms not materially more favorable to Holly GP or the Holly Group Member than were offered to the Partnership. If either of these conditions are not satisfied, the opportunity must be reoffered to the Partnership in accordance with this Section 2.3(a) .

(b) Notwithstanding Section 2.3(a) , in the event that (i) Holly GP or a Holly Group Member becomes aware of an opportunity to make an acquisition that includes both Subject Assets and assets that are not Subject Assets and the Subject Assets have a fair market value (as determined in good faith by the Board of Directors of Holly) equal to or greater than $5 million but comprise less than half of the fair market value (as determined in good faith by the Board of Directors of Holly) of the total assets being considered for acquisition or (ii) Holly GP or a Holly Group Member desires to construct Subject Assets with an estimated construction cost (as determined in good faith by the Board of Directors of Holly) equal to or greater than $5 million, then Holly GP or the Holly Group Member may make such acquisition without first offering the opportunity to the Partnership or may construct such Subject Assets as long as it complies with the following procedures:

(i) Within 90 days after the consummation of the acquisition or the completion of construction by Holly GP or a Holly Group Member of the Subject Assets, as the case may be, Holly GP or the Holly Group Member shall notify the General Partner in writing of such acquisition or construction and offer the Partnership Group the opportunity to purchase such Subject Assets in accordance with this Section 2.3(b) (the “ Offer ”). The Offer shall set forth the terms relating to the purchase of the Subject Assets and, if Holly GP or any Holly Group Member desires to utilize the Subject Assets, the Offer will also include the commercially reasonable terms on which the Partnership Group will provide services to Holly GP or the Holly Group Member to enable Holly GP or the Holly Group Member to utilize the Subject Assets. As soon as practicable, but in any event within 30 days after receipt of such written notification, the General Partner shall notify Holly GP or the Holly Group Member in writing that either (x) the General Partner has elected not to cause a Partnership Group Member to purchase the Subject Assets, in which event Holly GP or the Holly Group Member shall be forever free to continue to own or operate such Subject Assets, or (y) the General Partner has elected to cause a Partnership Group Member to purchase the Subject Assets, in which event the following procedures shall apply.

(ii) If Holly GP or the Holly Group Member and the General Partner within 60 days after receipt by the General Partner of the Offer are able to agree on the fair market value of the Subject Assets that are subject to the Offer and the other terms of the Offer including, without limitation, the terms, if any, on which the Partnership Group will provide services to Holly GP or the Holly Group Member to enable it to utilize the Subject Assets, a Partnership Group Member shall purchase the Subject Assets for the agreed upon fair market value as soon as commercially practicable after such agreement has been reached and, if applicable, enter into an agreement with Holly GP or the Holly Group Member to provide services in a manner consistent with the Offer.

(iii) If Holly GP or the Holly Group Member and the General Partner are unable to agree within 60 days after receipt by the General Partner of the Offer on the fair market value of the Subject Assets that are subject to the Offer or the other terms of the Offer including, if applicable, the terms on which the Partnership Group will provide services to Holly GP or the Holly Group Member to enable it to utilize the Subject Assets, Holly GP or the Holly Entity and the General Partner will engage a mutually agreed upon investment banking firm to determine the fair market value of the Subject Assets and/or the other terms on which the Partnership Group and Holly GP or the Holly Group Member are unable to agree. Such investment banking firm will determine the fair market value of the Subject Assets and/or the other terms on which the Partnership Group and Holly GP or the Holly Group Member are unable to agree within 30 days of its engagement and furnish Holly GP or the Holly Group Member and the General Partner its determination. The fees of the investment banking firm will be split equally between Holly GP or the Holly Group Member and the Partnership Group. Once the investment banking firm has submitted its determination of the fair market value of the Subject Assets and/or the other terms on which the Partnership Group and Holly GP or the Holly Group Member are unable to agree, the General Partner will have the right, but not the obligation, to cause a Partnership Group Member to purchase the Subject Assets pursuant to the Offer as modified by the determination of the investment banking firm. The Partnership Group will provide written notice of its decision to Holly GP or the Holly Group Member within 30 days after the investment banking firm has submitted its determination. Failure to provide such notice within such 30-day period shall be deemed to constitute a decision not to purchase the Subject Assets. If the General Partner elects to cause a Partnership Group Member to purchase the Subject Assets, then the Partnership Group Member shall purchase the Subject Assets pursuant to the Offer as modified by the determination of the investment banking firm as soon as commercially practicable after such determination and, if applicable, enter into an agreement with Holly GP or the Holly Group Member to provide services in a manner consistent with the Offer, as modified by the determination of the investment banking firm, if applicable.

2.4 Scope of Prohibition . Except as provided in this Article II and the Partnership Agreement, Holly GP and each Holly Group Member shall be free to engage in any business activity, including those that may be in direct competition with any Partnership Group Member.

2.5 Enforcement . Holly GP and the Holly Group Members agree and acknowledge that the Partnership Group does not have an adequate remedy at law for the breach by Holly GP and the Holly Group of the covenants and agreements set forth in this Article II , and that any breach by Holly GP or the Holly Group of the covenants and agreements set forth in this Article II would result in irreparable injury to the Partnership Group. Holly GP and the Holly Group Members further agree and acknowledge that any Partnership Group Member may, in addition to the other remedies which may be available to the Partnership Group, file a suit in equity to enjoin Holly GP and the Holly Group from such breach, and consent to the issuance of injunctive relief under this Agreement.

2.6 Limitation on Acquisitions of Subject Assets by Partnership Group Members . Notwithstanding anything in this Agreement to the contrary, a Partnership Group Member who is not a party to this Agreement is prohibited from acquiring Subject Assets. In the event the General Partner desires a Partnership Group Member who is not a party to this Agreement to acquire any Subject Assets, then the General Partner shall first cause such Partnership Group Member to become a party to this Agreement.

Article III
Indemnification

3.1 Environmental Indemnification .

(a) Subject to Section 3.2 , the Holly Entities shall indemnify, defend and hold harmless the Partnership Entities for a period of 10 years after the Closing Date or, solely with respect to the 2008 Crude Pipelines, Tanks and Related Assets, 15 years after the Closing Date, as applicable, from and against environmental and Toxic Tort losses (including, without limitation, economic losses, diminution in value suffered by third parties, and lost profits), damages, injuries (including, without limitation, personal injury and death), liabilities, claims, demands, causes of action, judgments, settlements, fines, penalties, costs, and expenses (including, without limitation, court costs and reasonable attorney’s and expert’s fees) of any and every kind or character, known or unknown, fixed or contingent, suffered or incurred by the Partnership Entities or any third party to the extent arising out of:

(i) any violation or correction of violation of Environmental Laws associated with the ownership or operation of the Assets, or

(ii) any event or condition associated with ownership or operation of the Assets (including, without limitation, the presence of Hazardous Substances on, under, about or migrating to or from the Assets or the disposal or release of Hazardous Substances generated by operation of the Assets at non-Asset locations), including, without limitation, (c) the cost and expense of any investigation, assessment, evaluation, monitoring, containment, cleanup, repair, restoration, remediation, or other corrective action required or necessary under Environmental Laws, (d) the cost or expense of the preparation and implementation of any closure, remedial, corrective action, or other plans required or necessary under Environmental Laws, and (e) the cost and expense for any environmental or Toxic Tort pre-trial, trial, or appellate legal or litigation support work;

but only to the extent that such violation complained of under Section 3.1(a)(i) or such events or conditions included under Section 3.1(a)(ii) occurred before the Closing Date (collectively, “ Covered Environmental Losses ”); or

(iii) the operation or ownership by Holly and its Affiliates of any assets not constituting part of the Assets, including but not limited to underground pipelines retained by the Seller Parties which serve the refineries in Lovington, New Mexico, Artesia, New Mexico and Woods Cross, Utah or the tanks that are part of the 2008 Crude Pipelines, Tanks and Related Assets to the extent not transferred to the Partnership Entities (the “ Transferred Tanks ”), except to the extent arising out of the negligent acts or omissions or willful misconduct of a member of the Partnership Entities.

(b) To the extent that a good faith claim by the Partnership Entities for indemnification under Section 3.1(a)(i) or Section 3.1(a)(ii) arises from events or conditions at the Transferred Tanks or the soil immediately underneath the Transferred Tanks or the Transferred Tanks’ secondary containment, and the Holly Entities refuse to provide such indemnification, then the burden of proof shall be on the Holly Entities to demonstrate that the events or conditions giving rise to the claim arose after the Closing Date.

(c) The Holly Entities shall, during the period that commences on the Closing Date and ends five (5) years thereafter (the “ Initial Tank Inspection Period ”), reimburse the Partnership Entities for the actual costs associated with the first regularly scheduled API 653 inspection (the “ Initial Tank Inspections ”) and the costs associated with the replacement of the tank mixers on each of the Transferred Tanks after the Closing Date and any repairs required to be made to the Transferred Tanks as a result of any discovery made during the Initial Tank Inspections; provided , however , that (f) the Holly Entities shall not reimburse the Partnership Entities with respect to the relocated crude oil Tank 437 in the Artesia refinery complex and the new crude oil tank to replace crude oil Tank 439 in the Artesia refinery complex more particularly described in the definition of 2008 Crude Pipelines, Tanks and Related Assets, and (g) upon expiration of the Initial Tank Inspection Period, all of the obligations of the Holly Entities pursuant to this Section 3.1(c) shall terminate, except that the Initial Tank Inspection Period shall be extended if, and only to the extent that (h) inaccessibility of the Transferred Tanks during the Initial Tank Inspection Period caused the delay of an Initial Tank Inspection originally scheduled to be performed during the Initial Tank Inspection Period, and (i) the Holly Entities received notice from the Partnership Entities regarding such delay at the time it occurred.

(d) The Partnership Entities shall indemnify, defend and hold harmless the Holly Entities from and against environmental and Toxic Tort losses (including, without limitation, economic losses, diminution in value and lost profits suffered by third parties), damages, injuries (including, without limitation, personal injury and death), liabilities, claims, demands, causes of action, judgments, settlements, fines, penalties, costs, and expenses (including, without limitation, court costs and reasonable attorney’s and expert’s fees) of any and every kind or character, known or unknown, fixed or contingent, suffered or incurred by the Holly Entities or any third party to the extent arising out of:

(i) any violation or correction of violation of Environmental Laws associated with the operation of the Assets by a Person other than a Holly Entity or ownership and operation of the Assets by a Person other than a Holly Entity, or

(ii) any event or condition associated with the operation of the Assets by a Person other than a Holly Entity or ownership and operation of the Assets by a Person other than a Holly Entity (including, but not limited to, the presence of Hazardous Substances on, under, about or migrating to or from the Assets or the disposal or release of Hazardous Substances generated by operation of the Assets at non-Asset locations) except, where a Holly Entity is operating an Asset, to the extent resulting from the negligent acts or omissions or willful misconduct of such Holly Entity including, without limitation, (j) the cost and expense of any investigation, assessment, evaluation, monitoring, containment, cleanup, repair, restoration, remediation, or other corrective action required or necessary under Environmental Laws, (k) the cost or expense of the preparation and implementation of any closure, remedial, corrective action, or other plans required or necessary under Environmental Laws, and (l) the cost and expense for any environmental or Toxic Tort pre-trial, trial, or appellate legal or litigation support work;

but only to the extent such violation complained of under Section 3.1(d)(i) or such events or conditions included under Section 3.1(d)(ii) occurred after the Closing Date; provided , however , that nothing stated above shall make the Partnership Entities responsible for any post-Closing Date negligent actions or omissions or willful misconduct by the Holly Entities.

(e) Notwithstanding anything in this Agreement to the contrary, as used in Section 3.1(a) the definition of Assets shall not include the 16” Lovington/Artesia Intermediate Pipeline, the Beeson Pipeline, the Roadrunner Pipeline, the Tulsa Interconnecting Pipelines or the UNEV Pipeline.

3.2 Limitations Regarding Environmental Indemnification . The aggregate liability of the Holly Entities in respect of all Covered Environmental Losses under Section 3.1(a) shall not exceed (1) with respect to Assets other than the 2008 Crude Pipelines, Tanks and Related Assets, $15.0 million plus an additional $2.5 million in the case of Covered Environmental Losses related to the 8” and 10” Lovington/Artesia Intermediate Pipelines (for clarity, the first $15,000,000 million limit would apply to Covered Environmental Losses associated with the 8” and 10” Lovington/Artesia Intermediate Pipelines and the 2004 Product Pipelines, Terminal and Related Assets, while the limit between $15,000,000 and $17,500,000 would apply only to Covered Environmental Losses associated with the 8” and 10” Lovington/Artesia Intermediate Pipelines) and (2) $7.5 million in the case of Covered Environmental Losses related to the 2008 Crude Pipelines, Tanks and Related Assets. The Holly Entities will not have any obligation under Section 3.1 with respect to any Assets until the Covered Environmental Losses of the Partnership Entities exceed $200,000.

3.3 Right of Way Indemnification . The Holly Entities shall indemnify, defend and hold harmless the Partnership Entities from and against any losses, damages, liabilities, claims, demands, causes of action, judgments, settlements, fines, penalties, costs, and expenses (including, without limitation, court costs and reasonable attorney's and expert's fees) of any and every kind or character, known or unknown, fixed or contingent, suffered or incurred by the Partnership Entities to the extent arising out of (m) the failure of the applicable Partnership Entity to be the owner of such valid and indefeasible easement rights or fee ownership interests in and to the lands on which any pipeline or related pump station, tank farm or equipment conveyed or contributed or otherwise Transferred (including by way of a Transfer of the ownership interest of a Person or by operation of law) to the applicable Partnership Entity on the Closing Date is located as of the Closing Date; (n) the failure of the applicable Partnership Entity to have the consents, licenses and permits necessary to allow any such pipeline referred to in clause (a) of this Section 3.3 to cross the roads, waterways, railroads and other areas upon which any such pipeline is located as of the Closing Date; and (o) the cost of curing any condition set forth in clause (a) or (b) above that does not allow any Asset to be operated in accordance with Prudent Industry Practice, to the extent that the Holly Entities are notified in writing of any of the foregoing within 10 years after the Closing Date or, solely with respect to the 2008 Crude Pipelines, Tanks and Related Assets, 15 years after the Closing Date, as applicable.

3.4 Additional Indemnification .

(a) In addition to and not in limitation of the indemnification provided under Section 3.1(a) and Section 3.3 , the Holly Entities shall indemnify, defend, and hold harmless the Partnership Entities from and against any losses, damages, liabilities, claims, demands, causes of action, judgments, settlements, fines, penalties, costs, and expenses (including, without limitation, court costs and reasonable attorney’s and expert’s fees) of any and every kind or character, known or unknown, fixed or contingent, suffered or incurred by the Partnership Entities to the extent arising out of (p) events and conditions associated with the operation of the Assets occurring before the Closing Date (other than Covered Environmental Losses which are provided for under Section 3.1 and Section 3.2 ) to the extent that the Holly Entities are notified in writing of any of the foregoing within five years after the Closing Date, (q) all legal actions pending against the Holly Entities on July 13, 2004, (r) the completion of remediation projects at the Partnership’s El Paso, Albuquerque and Mountain Home terminals that were ongoing or scheduled as of July 13, 2004, (s) events and conditions associated with the Retained Assets and whether occurring before or after the Closing Date, and (t) all federal, state and local tax liabilities attributable to the operation or ownership of the Assets prior to the Closing Date, including any such tax liabilities of the Holly Entities that may result from the consummation of the formation transactions for the Partnership Entities and the General Partner.

(b) In addition to and not in limitation of the indemnification provided under Section 3.1(b) or the Partnership Agreement, the Partnership Entities shall indemnify, defend, and hold harmless the Holly Entities from and against any losses, damages, liabilities, claims, demands, causes of action, judgments, settlements, fines, penalties, costs, and expenses (including, without limitation, court costs and reasonable attorney’s and expert’s fees) of any and every kind or character, known or unknown, fixed or contingent, suffered or incurred by the Holly Entities to the extent arising out of events and conditions associated with the operation of the Assets occurring on or after the Closing Date (other than Covered Environmental Losses which are provided for under Section 3.1 except, where a Holly Entity is operating an Asset, to the extent resulting from the negligent acts or omissions or willful misconduct of such Holly Entity), unless such indemnification would not be permitted under the Partnership Agreement by reason of one of the provisos contained in Section 7.7(a) of the Partnership Agreement.

3.5 Indemnification Procedures .

(a) The Indemnified Party agrees that promptly after it becomes aware of facts giving rise to a claim for indemnification under this Article III , it will provide notice thereof in writing to the Indemnifying Party, specifying the nature of and specific basis for such claim.

(b) The Indemnifying Party shall have the right to control all aspects of the defense of (and any counterclaims with respect to) any claims brought against the Indemnified Party that are covered by the indemnification under this Article III , including, without limitation, the selection of counsel, determination of whether to appeal any decision of any court and the settling of any such matter or any issues relating thereto; provided , however , that no such settlement shall be entered into without the consent of the Indemnified Party unless it includes a full release of the Indemnified Party from such matter or issues, as the case may be.

(c) The Indemnified Party agrees to cooperate fully with the Indemnifying Party, with respect to all aspects of the defense of any claims covered by the indemnification under this Article III , including, without limitation, the prompt furnishing to the Indemnifying Party of any correspondence or other notice relating thereto that the Indemnified Party may receive, permitting the name of the Indemnified Party to be utilized in connection with such defense, the making available to the Indemnifying Party of any files, records or other information of the Indemnified Party that the Indemnifying Party considers relevant to such defense and the making available to the Indemnifying Party of any employees of the Indemnified Party; provided , however , that in connection therewith the Indemnifying Party agrees to use reasonable efforts to minimize the impact thereof on the operations of the Indemnified Party and further agrees to maintain the confidentiality of all files, records, and other information furnished by the Indemnified Party pursuant to this Section 3.5 . In no event shall the obligation of the Indemnified Party to cooperate with the Indemnifying Party as set forth in the immediately preceding sentence be construed as imposing upon the Indemnified Party an obligation to hire and pay for counsel in connection with the defense of any claims covered by the indemnification set forth in this Article III ; provided , however , that the Indemnified Party may, at its own option, cost and expense, hire and pay for counsel in connection with any such defense. The Indemnifying Party agrees to keep any such counsel hired by the Indemnified Party informed as to the status of any such defense, but the Indemnifying Party shall have the right to retain sole control over such defense.

(d) In determining the amount of any loss, cost, damage or expense for which the Indemnified Party is entitled to indemnification under this Agreement, the gross amount of the indemnification will be reduced by all amounts recovered by the Indemnified Party under contractual indemnities (other than insurance policies) from third Persons. An Indemnified Party shall be obligated to pursue all contractual indemnities that such Indemnified Party has with third Persons outside of this Agreement, provided , however , if the Indemnified Party’s right to such indemnification is assignable, the Indemnified Party may, in its sole discretion and in lieu of pursuing such claim, elect to assign such indemnification claim to the Indemnifying Party to pursue and shall reasonably cooperate with the Indemnifying Party (including, without limitation, making its relevant books, records, officers, information and testimony reasonably available to the Indemnifying Party) in the Indemnifying Party’s pursuit of such claim. In the event the Indemnified Party recovers under a contractual indemnity from a third Person outside of this Agreement, the amount recovered, less the reasonable out-of-pocket fees and expenses incurred by the Indemnified Party in recovering such amounts, shall reduce the amount such Indemnified Party may recover under this Article III and if the Indemnified Party receives any such amounts subsequent to an indemnification payment by the Indemnifying Party in respect of such losses, then such Indemnified Party shall promptly reimburse the Indemnifying Party for any payment made or expense incurred by such Indemnifying Party in connection with providing such indemnification payment up to the amount so received by the Indemnified Party.

(e) The date on which notification of a claim for indemnification is received by the Indemnifying Party shall determine whether such claim is timely made.

3.6 Limitation on Indemnification Obligations .

(a) Notwithstanding anything in this Agreement to the contrary, when referring to the indemnification obligations of the Holly Entities in Article III , the definition of Holly Entities shall be deemed to mean solely (u) the Holly Entity or Holly Entities that own or operate, or owned or operated immediately prior to the transfer to the Partnership Entities, the Retained Asset, Asset or other property in question with respect to which indemnification is sought by reason of such Holly Entity’s or Holly Entities’ ownership or operation of the Retained Asset, Asset or other property in question or that is responsible for causing such loss, damage, injury, judgment, claim, cost, expense or other liability suffered or incurred by the Partnership Entities for which it is entitled to indemnification under Article III and (v) Holly.

(b) Notwithstanding anything in this Agreement to the contrary, when referring to the indemnification obligations of the Partnership Entities in Article III , the definition of Partnership Entities shall be deemed to mean solely (w) the Partnership Entity or Partnership Entities that own or operate, or owned or operated, the Asset or other property in Partnership Entity’s or Partnership Group Entities’ ownership or operation of the Asset or other property in question or that is responsible for causing such loss, damage, injury, judgment, claim, cost, expense or other liability suffered or incurred by the Holly Entities for which they are entitled to indemnification under Article III , (x) the Partnership and (y) the Operating Partnership.

(c) For the avoidance of doubt, any indemnification obligations of the Holly Entities in Article III with respect to any indemnifiable losses incurred by or attributable to the UNEV Pipeline shall be (i) limited to an amount that is the product of (x) the amount of such losses, multiplied by (y) HEP UNEV’s direct or indirect percentage ownership interest in the UNEV Pipeline at the time such losses were incurred and (ii) payable to, for the benefit of and recoverable solely by HEP UNEV or any Partnership Entity designated by HEP UNEV (and not by UNEV Pipeline, LLC).

3.7 Exclusion from Indemnification . Notwithstanding anything in this Agreement to the contrary, as used in Article III the definition of Assets shall not include the Tulsa Transferred Assets, the Sinclair Transferred Assets or the Additional Tulsa East Assets, though the parties hereto acknowledge the environmental indemnity provided among certain of the Holly Entities and HEP Entities with respect to the Sinclair Transferred Assets and the Additional Tulsa East Assets contained in the Tulsa Throughput Agreement.

Article IV
General and Administrative Expenses

4.1 General

(a) The Partnership will pay Holly an administrative fee (the “ Administrative Fee ”) in the amount set forth on Schedule I to this Agreement, payable in equal quarterly installments, for the provision by Holly and its Affiliates for the Partnership Group’s benefit of all the general and administrative services that Holly and its Affiliates have traditionally provided in connection with the Assets including, without limitation, the general and administrative services listed on Schedule I to this Agreement. The General Partner may agree on behalf of the Partnership to increases in the Administrative Fee in connection with expansions of the operations of the Partnership Group through the acquisition or construction of new assets or businesses.

(b) At the end of each year, the Partnership will have the right to submit to Holly a proposal to reduce the amount of the Administrative Fee for that year if the Partnership believes, in good faith, that the general and administrative services performed by Holly and its Affiliates for the benefit of the Partnership Group for the year in question do not justify payment of the full Administrative Fee for that year. If the Partnership submits such a proposal to Holly, Holly agrees that it will negotiate in good faith with the Partnership to determine if the Administrative Fee for that year should be reduced and, if so, by how much.

(i) salaries of employees of Holly GP, to the extent, but only to the extent, such employees perform services for the Partnership Group;

(ii) the cost of employee benefits relating to employees of Holly GP, such as 401(k), pension, and health insurance benefits, to the extent, but only to the extent, such employees perform services for the Partnership Group; and

(iii) all sales, use, excise, value added or similar taxes, if any, that may be applicable from time to time in respect of the services provided by the Holly and its Affiliates to the Partnership pursuant to Section 4.1(a) .

(d) Either Holly, on the one hand, or the Partnership, on the other hand, may terminate this Article IV , by providing the other with written notice of its election to do so at least six months prior to the proposed date of termination.

Article V
Right of First Refusal

5.1 Holly Right of First Refusal: Prohibition on Transfer of Refinery Related Assets .

(a) The Partnership Entities hereby grant to Holly a right of first refusal on any proposed Transfer (other than a grant of a security interest to a bona fide third-party lender or a Transfer to another Partnership Group Member) of the Assets that serve the Holly Entities’ refineries.

(b) The Partnership Entities are prohibited from Transferring any of the Assets that serve the Holly Entities’ refineries to a Partnership Group Member that is not a party to this Agreement. In the event the Partnership Entities wish to Transfer any of the Assets that serve the Holly Entities’ refineries to a Partnership Group Member that is not a party to this Agreement, they shall first cause the proposed transferee Partnership Group Member to become a party to this Agreement.

(c) The Parties acknowledge that all potential Transfers of Sale Assets pursuant to this Article V are subject to obtaining any and all required written consents of governmental authorities and other third parties and to the terms of all existing agreements in respect of the Sale Assets.

(d) Notwithstanding anything in this Agreement to the contrary, as used in Article V the definition of Assets shall not include the Tulsa Transferred Assets or the UNEV Pipeline, but shall expressly include the equity interests of UNEV Pipeline, LLC then owned directly or indirectly by the Partnership Entities.

5.2 Procedures .

(a) If a Partnership Entity proposes to Transfer any of the Assets that serve the Holly Entities’ refineries to any Person pursuant to a bona fide third-party offer (an “ Acquisition Proposal ”), then the Partnership shall promptly give written notice (a “ Disposition Notice ”) thereof to Holly. The Disposition Notice shall set forth the following information in respect of the proposed Transfer: the name and address of the prospective acquiror (the “ Proposed Transferee ”), the Assets subject to the Acquisition Proposal (the “ Sale Assets ”), the purchase price offered by such Proposed Transferee (the “ Offer Price ”), reasonable detail concerning any non-cash portion of the proposed consideration, if any, to allow Holly to reasonably determine the fair market value of such non-cash consideration, the Partnership Entities’ estimate of the fair market value of any non-cash consideration and all other material terms and conditions of the Acquisition Proposal that are then known to the Partnership Entities. To the extent the Proposed Transferee’s offer consists of consideration other than cash (or in addition to cash) the Offer Price shall be deemed equal to the amount of any such cash plus the fair market value of such non-cash consideration. In the event Holly and the Partnership Entities agree as to the fair market value of any non-cash consideration, Holly will provide written notice of its decision regarding the exercise of its right of first refusal to purchase the Sale Assets within 30 days of its receipt of the Disposition Notice (the “ First ROFR Acceptance Deadline ”). Failure to provide such notice within such 30-day period shall be deemed to constitute a decision not to purchase the Sale Assets. In the event (z) Holly’s determination of the fair market value of any non-cash consideration described in the Disposition Notice (to be determined by Holly within 30 days of receipt of such Disposition Notice) is less than the fair market value of such consideration as determined by the Partnership Entities in the Disposition Notice and (aa) Holly and the Partnership Entities are unable to mutually agree upon the fair market value of such non-cash consideration within 30 days after Holly notifies the Partnership Entities of its determination thereof, the Partnership Entities and Holly shall engage a mutually-agreed-upon investment banking firm to determine the fair market value of the non-cash consideration. Such investment banking firm shall be instructed to return its decision within 30 days after all material information is submitted thereto, which decision shall be final. The fees of the investment banking firm will be split equally between Holly and the Partnership Entities. Holly will provide written notice of its decision regarding the exercise of its right of first refusal to purchase the Sale Assets to the Partnership Entities within 30 days after the investment banking firm has submitted its determination (the “ Second ROFR Acceptance Deadline ”). Failure to provide such notice within such 30-day period shall be deemed to constitute a decision by Holly not to purchase the Sale Assets. If Holly fails to exercise a right during any applicable period set forth in this Section 5.2(a) , Holly shall be deemed to have waived its rights with respect to such proposed disposition of the Sale Assets, but not with respect to any future offer of Assets.

(b) If Holly chooses to exercise its right of first refusal to purchase the Sale Assets under Section 5.2(a) , Holly and the Partnership Entities shall enter into a purchase and sale agreement for the Sale Assets which shall include the following terms:

(i) Holly will agree to deliver cash for the Offer Price (or any other consideration agreed to by Holly and the Partnership Entities (each in their sole discretion));

(ii) the Partnership Entities will represent that they have good and indefeasible title to the Sale Assets, subject to all recorded and unrecorded matters and all physical conditions and other matters in existence on the closing date for the purchase of the Sale Assets, plus any other such matters as Holly may approve, which approval will not be unreasonably withheld. If Holly desires to obtain any title insurance with respect to the Sale Assets, the full cost and expense of obtaining the same (including but not limited to the cost of title examination, document duplication and policy premium) shall be borne by Holly;

(iii) the Partnership Entities will grant to Holly the right, exercisable at Holly’s risk and expense, to make such surveys, tests and inspections of the Sale Assets as Holly may deem desirable, so long as such surveys, tests or inspections do not damage the Sale Assets or interfere with the activities of the Partnership Entities thereon and so long as Holly has furnished the Partnership Entities with evidence that adequate liability insurance is in full force and effect;

(iv) Holly will have the right to terminate its obligation to purchase the Sale Assets under this Article V if the results of any searches, surveys, tests or inspections conducted pursuant to Section 5.2(b)(ii) or Section 5.2(b)(iii) above are, in the reasonable opinion of Holly, unsatisfactory;

(v) the closing date for the purchase of the Sale Assets shall, unless otherwise agreed to by Holly and the Partnership Entities, occur no later than 90 days following receipt by the Partnership Entities of written notice by Holly of its intention to exercise its option to purchase the Sale Assets pursuant to Section 5.2(a) ;

(vi) the Partnership Entities shall execute, have acknowledged and deliver to Holly a special warranty deed, assignment of easement, or comparable document, as appropriate, in the applicable jurisdiction, on the closing date for the purchase of the Sale Assets constituting real property interests conveying the Sale Assets unto Holly free and clear of all encumbrances created by the Partnership Entities other than those set forth in Section 5.2(b)(ii) above;

(vii) the sale of any Sale Assets shall be made on an “as is,” “where is” and “with all faults” basis, and the instruments conveying such Sale Assets shall contain appropriate disclaimers; and

(viii) neither the Partnership Entities nor Holly shall have any obligation to sell or buy the Sale Assets if any of the material consents referred to in Section 5.1(c) have not been obtained or such sale or purchase is prohibited by Applicable Law.

(c) Holly and the Partnership Entities shall cooperate in good faith in obtaining all necessary governmental and other third Person approvals, waivers and consents required for the closing. Any such closing shall be delayed, to the extent required, until the third Business Day following the expiration of any required waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; provided , however , that such delay shall not exceed 120 days and, if governmental approvals and waiting periods shall not have been obtained or expired, as the case may be, by such 120th day, then Holly shall be deemed to have waived its right of first refusal with respect to the Sale Assets described in the Disposition Notice and thereafter neither Holly nor the Partnership shall have any further obligation under this Article V with respect to such Sale Assets unless such Sale Assets again become subject to this Article V pursuant to Section 5.2(d) .

(d) If the Transfer to the Proposed Transferee is not consummated in accordance with the terms of the Acquisition Proposal within the later of (bb) 180 days after the later of the applicable ROFR Acceptance Deadline, and (cc) 10 days after the satisfaction of all governmental approval or filing requirements, if any, the Acquisition Proposal shall be deemed to lapse, and the Partnership or Partnership Entity may not Transfer any of the Sale Assets described in the Disposition Notice without complying again with the provisions of this Article V if and to the extent then applicable.

Article VI
Holly Purchase Option

6.1 Option to Purchase Tulsa Transferred Assets . The Parties acknowledge the purchase options and right of first refusal granted to an Affiliate of Holly with respect to the Tulsa Transferred Assets in the Purchase Option Agreement.

Article VII
Miscellaneous

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

7.2 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 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 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 (3) be neutral parties who have never been officers, directors or employees of any of the Holly Entities, the Partnership Entities or any of their affiliates and (4) have not less than seven years experience in the petroleum transportation 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. The Arbitrable Disputes may be arbitrated in a common proceeding along with disputes under other agreements between the Holly Entities, the Partnership Entities or their Affiliates to the extent that the issues raised in such disputes are related. Without the written consent of Holly, on behalf of the Holly Entities, and the Partnership, on behalf of the Partnership Entities, no unrelated disputes or third party disputes may be joined to an arbitration pursuant to this Agreement.

7.3 Notice .

(a) Any notice or other communication given under this Agreement shall be in writing and shall be (5) delivered personally, (6) sent by documented overnight delivery service, (7) sent by email transmission, or (8) sent by first class mail, postage prepaid (certified or registered mail, return receipt requested). Such notice shall be deemed to have been duly given (x) if received, on the date of the delivery, with a receipt for delivery, (y) if refused, on the date of the refused delivery, with a receipt for refusal, or (z) with respect to email transmissions, on the date the recipient confirms receipt. Notices or other communications shall be directed to the following addresses.

Notices to the Holly Entities:

HollyFrontier Corporation

2828 N. Harwood, Suite 1300

Dallas, Texas 75201

Attention: President

Email address: president@hollyfrontier.com

with a copy, which shall not constitute notice, but is required in order to give proper notice, to:

HollyFrontier Corporation

2828 N. Harwood, Suite 1300

Dallas, Texas 75201

Attention: General Counsel

Email address: generalcounsel@hollyfrontier.com

Notices to the Partnership Entities:

Holly Energy Partners, L.P.

c/o Holly Logistic Services, L.L.C.

2828 N. Harwood, Suite 1300

Dallas, Texas 75201

Attention: President

Email address: president@hollyenergy.com

with a copy, which shall not constitute notice, but is required in order to give proper notice, to:

Holly Energy Partners, L.P.

c/o Holly Logistic Services, L.L.C.

2828 N. Harwood, Suite 1300

Dallas, Texas 75201

Attention: General Counsel

Email address: generalcounsel@hollyenergy.com

(b) Either Party may at any time change its address for service from time to time by giving notice to the other Party in accordance with this Section 7.3 .

7.4 Entire Agreement . This Agreement, together with the other agreements and instruments referred to herein, constitutes the entire agreement of the Parties relating to the matters contained herein, superseding all prior contracts or agreements, whether oral or written, relating to the matters contained herein.

7.5 Termination of Article II . The provisions of Article II of this Agreement may be terminated by Holly upon a Change of Control of Holly.

7.6 Amendment or Modification . No amendment or modification of this Agreement shall be valid unless it is in writing and signed by the parties hereto . No waiver of any provision of this Agreement shall be valid unless it is in writing and signed by the party against whom the waiver is sought to be enforced. Any of the exhibits or schedules to this Agreement may be amended, modified, revised or updated by the parties hereto if each of Holly (on behalf of the Holly Entities) and the Partnership (on behalf of the Partnership Entities) execute an amended, modified, revised or updated exhibit or schedule, as applicable, and attach it to this Agreement. Such amended, modified, revised or updated exhibits or schedules shall be sequentially numbered (e.g. Exhibit A‑1, Exhibit A‑2, etc.), dated and appended as an additional exhibit or schedule to this Agreement and shall replace the prior exhibit or schedule, as applicable, in its entirety, except as specified therein. No failure or delay in exercising any right hereunder, and no course of conduct, shall operate as a waiver of any provision of this Agreement. No single or partial exercise of a right hereunder shall preclude further or complete exercise of that right or any other right hereunder.

7.7 Assignment . No Party shall have the right to assign any of its rights or obligations under this Agreement without the consent of the other Parties hereto.

7.8 Additional Partnership Entities . In the event the General Partner desires a Partnership Group Member who is not a party to this Agreement to acquire Subject Assets or a Partnership Entity wishes to Transfer any of the Assets that serve the Holly Entities’ refineries to a Partnership Group Member who is not a party to this Agreement, then the Partnership Group Member that is the proposed acquiror of the Subject Assets or transferee of the Assets that serve the Holly Entities’ refineries may become a party to this Agreement by executing a joinder in a form reasonably satisfactory to Holly (on behalf of the Holly Entities) and the Partnership (on behalf of the Partnership Entities).

7.9 Counterparts . This Agreement may be executed in any number of counterparts with the same effect as if all signatory parties had signed the same document. All counterparts shall be construed together and shall constitute one and the same instrument.

7.10 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.

7.11 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.

7.12 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.

7.13 Headings . Headings of the Sections of this Agreement are for convenience of the parties only and shall be given no substantive or interpretative effect whatsoever. All references in this Agreement to Sections are to Sections of this Agreement unless otherwise stated.

7.14 [Intentionally omitted]

7.15 Limitation of Damages . NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN ANY OTHER PROVISION OF THIS AGREEMENT AND EXCEPT FOR CLAIMS MADE BY THIRD PARTIES WHICH SHALL NOT BE LIMITED BY THIS SECTION, THE PARTIES AGREE THAT THE RECOVERY BY ANY PARTY, INCLUDING PURSUANT TO ARTICLE III , OF ANY LIABILITIES, DAMAGES, COSTS OR OTHER EXPENSES SUFFERED OR INCURRED BY IT (9) AS A RESULT OF ANY BREACH OR NONFULFILLMENT BY A PARTY OF ANY OF ITS COVENANTS, AGREEMENTS OR OTHER OBLIGATIONS UNDER THIS AGREEMENT OR (10) BY REASON OF OR ARISING OUT OF ANY OF THE EVENTS, CONDITIONS OR OTHER MATTERS LISTED IN SECTIONS 3.1 , 3.3 OR 3.4 WHICH THE PARTIES HAVE AGREED TO INDEMNIFY THE OTHER PARTY AGAINST, SHALL BE LIMITED TO ACTUAL DAMAGES AND SHALL NOT INCLUDE OR APPLY TO, NOR SHALL ANY PARTY BE ENTITLED TO RECOVER, ANY INDIRECT, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES (INCLUDING, WITHOUT LIMITATION, ANY DAMAGES ON ACCOUNT OF LOST PROFITS OR OPPORTUNITIES OR BUSINESS INTERRUPTION OR DIMINUTION IN VALUE) SUFFERED OR INCURRED BY ANY PARTY; PROVIDED , HOWEVER , THAT SUCH RESTRICTION AND LIMITATION SHALL NOT APPLY TO A PARTY’S OBLIGATION TO INDEMNIFY THE OTHER PARTY UNDER SECTIONS 3.1 , 3.3 OR 3.4 HEREOF, AS APPLICABLE, (y) AS A RESULT OF A THIRD PARTY CLAIM FOR SUCH INDIRECT, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES AGAINST SUCH INDEMNIFIED PARTY OR (z) INDIRECT, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES THAT ARE A RESULT OF SUCH INDEMNIFYING PARTY’S OR ITS AFFILIATES’ GROSS NEGLIGENCE OR WILLFUL MISCONDUCT (INCLUDING, WITHOUT LIMITATION, ANY DAMAGES ON ACCOUNT OF LOST PROFITS OR OPPORTUNITIES OR BUSINESS INTERRUPTION OR DIMINUTION IN VALUE). FOR PURPOSES OF THIS SECTION 7.15, “AFFILIATES” OF THE INDEMNIFYING PARTY SHALL NOT INCLUDE THE PARTNERSHIP GROUP MEMBERS WHEN A HOLLY ENTITY IS THE INDEMNIFYING PARTY AND SHALL NOT INCLUDE THE HOLLY GROUP MEMBERS WHEN THE INDEMNIFYING PARTY IS A PARTNERSHIP ENTITY.

[Remainder of Page Intentionally Left Blank.]

IN WITNESS WHEREOF, the Parties have executed this Agreement to be effective as of July 12, 2012.

HOLLY ENTITIES:

HOLLYFRONTIER CORPORATION

By: /s/ Michael C. Jennings

Name: Michael C. Jennings


Title:	Chief Executive Officer and President

HOLLY REFINING & MARKETING COMPANY – WOODS CROSS LLC (formerly Holly Refining & Marketing Company – Woods Cross)

By: /s/ Michael C. Jennings

Name: Michael C. Jennings

Title: Chief Executive Officer and President

NAVAJO REFINING COMPANY, L.L.C.

(formerly Navajo Refining Company, L.P.)

By: /s/ Michael C. Jennings

Name: Michael C. Jennings

Title: Chief Executive Officer and President

NAVAJO PIPELINE CO., L.P.

By: /s/ Michael C. Jennings

Name: Michael C. Jennings


Title:	Chief Executive Officer and President

HOLLY REFINING & MARKETING

– TULSA LLC

By: /s/ Michael C. Jennings

Name: Michael C. Jennings

Title: Chief Executive Officer and President

FRONTIER REFINING LLC

By: /s/ Michael C. Jennings

Name: Michael C. Jennings

Title: Chief Executive Officer and President

FRONTIER EL DORADO REFINING LLC

By: /s/ Michael C. Jennings

Name: Michael C. Jennings

Title: Chief Executive Officer and President

PARTNERSHIP ENTITIES:

HOLLY ENERGY PARTNERS, L.P.

By: HEP Logistics Holdings, L.P.

Its General Partner

By: Holly Logistic Services, L.L.C.

Its General Partner

By: /s/ Matthew P. Clifton

Name: Matthew P. Clifton

Title: Chief Executive Officer and President

HOLLY ENERGY PARTNERS – OPERATING, L.P.

By: /s/ Matthew P. Clifton

Name: Matthew P. Clifton

Title: Chief Executive Officer and President

HOLLY LOGISTIC SERVICES, L.L.C.

By: /s/ Matthew P. Clifton

Name: Matthew P. Clifton

Title: Chief Executive Officer and President

HEP LOGISTICS HOLDINGS, L.P.

By: Holly Logistic Services, L.L.C,

Its General Partner

By: /s/ Matthew P. Clifton

Name: Matthew P. Clifton

Title: Chief Executive Officer and President

HEP LOGISTICS GP, L.L.C.

By: /s/ Matthew P. Clifton

Name: Matthew P. Clifton

Title: Chief Executive Officer and President

HEP MOUNTAIN HOME, L.L.C.

HEP PIPELINE GP, L.L.C.

HEP PIPELINE, L.L.C.

HEP REFINING GP, L.L.C.

HEP REFINING, L.L.C.

HEP WOODS CROSS, L.L.C.

LOVINGTON-ARTESIA, L.L.C.

By: HOLLY ENERGY PARTNERS –

OPERATING, L.P.

Sole Member

By: /s/ Matthew P. Clifton

Name: Matthew P. Clifton

Title: Chief Executive Officer and President

HEP NAVAJO SOUTHERN, L.P.

By: HEP Pipeline GP, L.L.C.

Its General Partner

By: /s/ Matthew P. Clifton

Name: Matthew P. Clifton

Title: Chief Executive Officer and President

HEP REFINING ASSETS, L.P.

By: HEP Refining GP, L.L.C.

Its General Partner

By: /s/ Matthew P. Clifton

Name: Matthew P. Clifton

Title: Chief Executive Officer and President

HEP PIPELINE ASSETS, LIMITED PARTNERSHIP

By: HEP Pipeline GP, L.L.C.

Its General Partner

By: /s/ Matthew P. Clifton

Name: Matthew P. Clifton

Title: Chief Executive Officer and President

HEP TULSA LLC

By: /s/ Matthew P. Clifton

Name: Matthew P. Clifton

Title: Chief Executive Officer and President

ROADRUNNER PIPELINE, L.L.C.

By: /s/ Matthew P. Clifton

Name: Matthew P. Clifton

Title: Chief Executive Officer and President

HOLLY ENERGY STORAGE – TULSA LLC

By: /s/ Matthew P. Clifton

Name: Matthew P. Clifton

Title: Chief Executive Officer and President

HOLLY ENERGY STORAGE – LOVINGTON LLC

By: /s/ Matthew P. Clifton

Name: Matthew P. Clifton

Title: Chief Executive Officer and President

CHEYENNE LOGISTICS LLC

By: /s/ Matthew P. Clifton

Name: Matthew P. Clifton

Title: Chief Executive Officer and President

EL DORADO LOGISTICS LLC

By: /s/ Matthew P. Clifton

Name: Matthew P. Clifton

Title: Chief Executive Officer and President

HEP UNEV HOLDINGS LLC

By: /s/ Matthew P. Clifton

Name: Matthew P. Clifton

Title: Chief Executive Officer and President

HEP UNEV PIPELINE LLC

By: /s/ Matthew P. Clifton

Name: Matthew P. Clifton

Title: Chief Executive Officer and President

SCHEDULE I

Administrative Fee



	Amount of Annual Administrative Fee
Years beginning July 13, 2004 through June 30, 2007	$2,000,000
Years beginning July 1, 2007 through February 29, 2008	$2,100,000
Years beginning March 1, 2008	$2,300,000

General and Administrative Services

(1) executive services

(2) finance, including treasury, and administration services

(3) information technology services

(4) legal services

(5) health, safety and environmental services

(6) human resources services

#PageNum#

AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT

HEP UNEV HOLDINGS LLC

THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this “ Agreement ”) of HEP UNEV HOLDINGS LLC, a Delaware limited liability company (the “ Company ”), is being entered into on July 12, 2012, by and among the Company, Holly Energy Partners, L.P., a Delaware limited partnership (“ HEP ”) and HollyFrontier Holdings LLC, a Delaware limited liability company (“ HFC Holdings ” and, together with HEP, collectively, the “ Members ”).

W I T N E S S E T H :

WHEREAS, this Agreement amends and restates the Limited Liability Company Agreement of the Company dated as of June 27, 2012;

WHEREAS, the Members desire to enter into this Agreement to set forth the Members’ rights and obligations and other matters with respect to the Company;

WHEREAS, this Agreement shall become effective only upon the consummation of the transactions contemplated by that certain LLC Interest Purchase Agreement, dated as of July 12, 2012, pursuant to which the Company will purchase and acquire all of the issued and outstanding membership interests in HEP UNEV Pipeline LLC (f/k/a Holly UNEV Pipeline Company) (“ HEP UNEV ”) held by HollyFrontier Corporation (“ HFC ”); and

WHEREAS, HEP UNEV is the owner of 75% of all of the issued and outstanding membership interests in UNEV Pipeline (as defined below).

NOW, THEREFORE, in consideration of the promises and the covenants and provisions hereinafter contained, the Members hereby adopt the following:

ARTICLE I
DEFINITIONS

Section 1.1 Definitions . Capitalized terms used herein and not otherwise defined shall have the meanings set forth in this Section 1.1.

“ Affiliate ” means, with respect to any specified person, any other person controlling, controlled by or under common control with such specified person.

“ Applicable Credit Documents ” means, collectively, the Credit Agreement, the Indentures and any other indentures, credit agreements, loan agreements, promissory notes, or similar instruments or agreements (including all security agreements, pledge agreements, mortgages and other documents and instruments entered into or issued in connection with the foregoing) to which HEP or any of its subsidiaries is a party or pursuant to which any of their respective assets is pledged or encumbered, as the same may be amended or restated from time to time.

“ Capital Contribution ” means, for any Member, the total amount of cash and cash equivalents and the fair market value of any property contributed to the Company by such Member; provided , however , that in the case of HEP Common Units distributed to the Class B Member pursuant to Section 7.3(a), such HEP Common Units shall be deemed contributed to the Company by the Class A Members, and the fair market value of such HEP Common Units shall be as determined pursuant to Section 7.3(a).

“ Class A Appraiser ” has the meaning set forth in Section 12.3(c).

“ Class A Common Units ” means the Units having the privileges, preference, duties, liabilities, obligations and rights specified with respect to “Class A Common Units” in this Agreement.

“ Class A Member ” means a holder of Class A Common Units.

“ Class B Appraiser ” has the meaning set forth in Section 12.3(c).

“ Class B Common Units ” means the Units having the privileges, preference, duties, liabilities, obligations and rights specified with respect to “Class B Common Units” in this Agreement.

“ Class B Member ” means the holder of Class B Common Units.

“ Company Minimum Gain ” means “partnership minimum gain” as defined in Section 1.704-2(b)(2) of the Treasury Regulations, substituting the term “Company” for the term “partnership” as the context requires.

“ Contract Year ” means a 12 consecutive calendar month period beginning on July 1 ^st and ending on the next succeeding June 30 ^th .

“ Corresponding Percentage ” means (i) in the case of a UNEV Sell-Down involving a sale by HEP UNEV of membership interests of UNEV Pipeline, a percentage equal to the portion of such seller’s total membership interest in UNEV Pipeline represented by the membership interest being sold (e.g. – For a sale of a 7.5% membership interest in UNEV Pipeline when the seller owned a 75% membership interest in UNEV Pipeline, the Corresponding Percentage would be 10% (7.5%/75% = 10%)); and (ii) in the case of a sale of membership interests in HEP UNEV by the Company or a sale of Class A Common Units by an HEP Entity, a percentage equal to the portion of such seller’s total membership interest in such entity represented by the membership interest being sold, multiplied by the ownership percentage of each entity in each other entity through which such entity indirectly holds an interest in UNEV Pipeline (e.g. – For a sale of 25% of the Class A Common Units where the Company owned 100% of HEP UNEV and HEP UNEV owned 75% of UNEV Pipeline, the Corresponding Percentage would be 18.75% (25% x 100% x 75% = 18.75%)).

“ Credit Agreement ” means that certain Second Amended and Restated Credit Agreement, dated as of February 14, 2011, by and among Holly Energy Partners – Operating, L.P., Wells Fargo Bank, N.A., as administrative agent, Union Bank, N.A., as syndication agent, BBVA Compass Bank and U.S. Bank N.A., as co-documentation agents, Wells Fargo Securities, LLC and Union Bank, N.A., as joint lead arrangers and joint bookrunners, and the financial institutions party thereto, providing for revolving credit borrowings and letters of credit, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time.

“ Distribution ” means a distribution made by the Company to a Member, whether in cash, property or securities of the Company and whether by liquidating distribution or otherwise; provided , however , that none of the following shall be a Distribution: (a) any recapitalization or exchange of securities of the Company; or (b) any subdivision (by a split of Units or otherwise) or any combination (by a reverse split of Units or otherwise) of any outstanding Units. “ Distribute ” when used in other grammatical variations shall have a correlative meaning.

“ DLLCA ” means the Delaware Limited Liability Company Act, Title 6, Chapter 18, §§ 18-101, et seq , and any successor statute, as it may be amended from time to time.

“ EBITDA Threshold Amount ” means the amount in dollars equal to (A) the HEP Ownership Percentage, multiplied by (B) $30 million, divided by (C) 75%.

“ General Partner ” means HEP Logistics Holdings, L.P., a Delaware limited partnership and general partner of HEP.

“ Giveback Amount ” means an amount equal to the sum of: (A) the aggregate Quarterly Reductions for the fourth fiscal quarter of the Contract Year beginning on July 1, 2015; plus (B) the product of (i) the aggregate Quarterly Reductions for the third fiscal quarter of the Contract Year beginning on July 1, 2015, multiplied by (ii) 1.0175; plus (C) the product of (i) the aggregate Quarterly Reductions for the second fiscal quarter of the Contract Year beginning on July 1, 2015, multiplied by (ii) 1.0353; plus (D) the product of (i) the aggregate Quarterly Reductions for the first fiscal quarter of the Contract Year beginning on July 1, 2015, multiplied by (ii) 1.0534.

“ HEP ” has the meaning set forth in the preamble.

“ HEP Common Unit ” means a “Common Unit” as such term is defined in the Partnership Agreement.

“ HEP Entities ” means HEP and its wholly-owned subsidiaries.

“ HEP Ownership Percentage ” means a percentage equal to the product of (at the time of calculation) (A) the lesser of (x) the aggregate percentage ownership interest in UNEV Pipeline directly owned by HEP UNEV and/or any other HEP Entity or (y) 75%, multiplied by (B) the aggregate percentage ownership interest in HEP UNEV directly owned by the Company and/or any other HEP Entity, multiplied by (C) the aggregate percentage of the Company’s Class A Common Units directly held by HEP and/or any other HEP Entity.

“ HEP UNEV ” shall have the meaning as set forth in the Recitals.

“ Incentive Distribution Rights ” means the “Incentive Distribution Rights” as such term is defined in the Partnership Agreement.

“ Indentures ” means (i) that certain Indenture, dated as of March 10, 2010 among HEP and Holly Energy Finance Corp., the guarantors party thereto, and U.S. Bank National Association, as trustee and (ii) that certain Indenture, dated as of March 12, 2012 among HEP and Holly Energy Finance Corp., the guarantors party thereto, and U.S. Bank National Association, as trustee, in each case, as amended, restated, modified, or renewed, in whole or in part from time to time.

“ Independent Appraiser ” has the meaning set forth in Section 12.3(c).

“ Mandatory Buy-Out Date ” has the meaning set forth in Section 12.3.

“ Mandatory Buy-Out Price ” has the meaning set forth in Section 12.3.

“ Member Nonrecourse Debt Minimum Gain ” means “partner nonrecourse debt minimum gain” as defined in Section 1.704-2(i) of the Treasury Regulations, substituting the term “member” for the term “partner” as the context requires.

“ Membership Interest ” means an interest in the Company owned by a Member, including such Member's right (based on the type and class of Unit or Units held by such Member), as applicable, (a) to a Distributive share of net income, net losses and other items of income, gain, loss and deduction of the Company; (b) to a Distributive share of the assets of the Company; (c) to vote on, consent to or otherwise participate in any decision of the Members as provided in this Agreement; and (d) to any and all other benefits to which such Member may be entitled as provided in this Agreement or the DLLCA.

“ Optional Buy-Down Date ” has the meaning set forth in Section 12.2.

“ Optional Buy-Out Date ” has the meaning set forth in Section 12.1.

“ Optional Buy-Out Price ” has the meaning set forth in Section 12.1.

“ Partnership Agreement ” means the First Amended and Restated Agreement of Limited Partnership of HEP, dated as of July 13, 2004 and as amended from time to time.

“ Permitted Transfers ” means transfers to an Affiliate.

“ Preferred Return ” shall have the meaning set forth in Section 7.3(a).

“ Profits Interest Accrual Start Date ” means July 1, 2015.

“ Profits Interest Accrual Termination Date ” means the earlier of (i) the final day of the Contract Year with respect to which there shall have accrued a Profits Interest Amount equal to the Profits Interest Balance Amount applicable for the next Contract Year or (ii) June 30, 2032.

“ Profits Interest Amount ” means, with respect to each Profits Interest Annual Period, an amount equal to 50% multiplied by the excess of the incremental UNEV EBITDA for such Profits Interest Annual Period attributable to HEP’s indirect aggregate percentage ownership interest in UNEV Pipeline (not counting, as of the time of calculation, any ownership interest in UNEV Pipeline held by the HEP Entities that was previously held by Sinclair Transportation Corporation as of the date of this Agreement), over the EBITDA Threshold Amount. For the avoidance of doubt, the Profits Interest Amount with respect to a Profits Interest Annual Period shall equal the product of (at the time of such calculation) (A) 50% multiplied by (B) the excess (if any) of (x) the product of (i) the UNEV EBITDA for such Profits Interest Annual Period, multiplied by (ii) the HEP Ownership Percentage, over (y) the EBITDA Threshold Amount. For the further avoidance of doubt, (i) no Profits Interest Amount will accrue with respect to any Contract Year or any other period that follows the Profits Interest Accrual Termination Date, and (ii) in no event will the Profits Interest Amount with respect to any Profits Interest Annual Period include any amounts in excess of the Profits Interest Balance Amount that will be applicable for the next Contract Year.

“ Profits Interest Annual Period ” means each Contract Year beginning on the Profits Interest Accrual Start Date or an anniversary of the Profits Interest Accrual Start Date, but not including any Contract Year beginning after the Profits Interest Accrual Termination Date.

“ Profits Interest Balance Amount ” means an amount calculated in the following manner:

(a) For the Contract Year beginning on July 1, 2016, the Profits Interest Balance Amount is $33,820,000 (as such may be adjusted from time to time pursuant to Article XII ); provided , however , that if the Woods Cross Expansion Completion Date has not occurred by July 1, 2015, then the Profits Interest Balance Amount for the Contract year beginning on July 1, 2016 shall equal the sum of (x) $33,820,000 (as such may be adjusted from time to time pursuant to Article XII ) plus (y) the Giveback Amount.

(b) For each succeeding Contract Year, the Profits Interest Balance Amount applicable to such Contract Year will be equal to the product of (i) the difference between (A) the prior Contract Year’s Profits Interest Balance Amount and (B) the Profits Interest Amounts paid during such prior Contract Year, multiplied by (ii) 1.07. A table containing examples of the calculation of the Profits Interest Balance Amount is attached hereto as Exhibit 1 .

(c) Solely for the purposes of calculating the Profits Interest Balance Amount, amounts that were due to be paid on a Profits Interest Payment Date but which were not paid and became part of the Unpaid Profits Interest Amount (and with respect to which Preferred Return is accruing) shall be deemed “paid” under (b)(i)(B) of this definition.

(d) Amounts paid to the Class B Member by the Company in HEP Common Units pursuant to Section 7.3, shall be valued as determined on the date of payment in accordance with such Section 7.3, rather than by reference to the value of such HEP Common Units on any subsequent date.

(e) Preferred Return paid to the Class B Member by the Company with respect to the Unpaid Profits Interest Amount shall not be considered in determining whether or not the Profits Interest Balance Amount has been met.

“ Profits Interest Payment Date ” means the date in each Contract Year following the end of a Profits Interest Annual Period that is the earlier of (i) the 30 ^th day following the receipt by the Company of all financial statements of UNEV Pipeline with respect to such Profits Interest Annual Period, and (ii) the 60 ^th day following the end of such Profits Interest Annual Period.

“ Profits Interest Payment Restriction ” has the meaning set forth in Section 7.3(a).

“ Quarterly Reductions ” means, for a given fiscal quarter, the aggregate amount of the reductions, pursuant to the Waiver, in the quarterly distributions to the General Partner in its capacity as a holder of Incentive Distribution Rights paid during such fiscal quarter.

“ Restricted Profits Interest Account ” has the meaning set forth in Section 7.3(b).

“ Treasury Regulations ” means the final or temporary regulations issued by the United States Department of Treasury pursuant to its authority under the Code, and any successor regulations.

“ UNEV EBITDA ” means earnings before interest, taxes, depreciation and amortization of UNEV Pipeline.

“ UNEV Pipeline ” means UNEV Pipeline, LLC a Delaware limited liability company of which HEP UNEV, a wholly owned subsidiary of the Company, owns 75% of all of the issued and outstanding membership interests and Sinclair Transportation Corporation owns 25% of all of the issued and outstanding membership interests. UNEV Pipeline is the owner of an approximately 400 mile, 12-inch refined products pipeline currently running from Woods Cross, Utah to Las Vegas, Nevada, related products terminals in or near Cedar City, Utah and Las Vegas, Nevada, and other related assets.

“ UNEV Sale Event ” means (A) any direct or indirect transfer, assignment, sale, gift, exchange, change of record holder, pledge, hypothecation or other encumbrance, or any other disposition (whether voluntary, involuntary or by operation of law, or by way of merger or consolidation that is not part of an internal restructuring involving, or transfer between, only HEP Entities) of: (i) all or any part of any membership interests of UNEV Pipeline by an HEP Entity; (ii) all or any part of any membership interests of HEP UNEV; or (iii) any material assets of UNEV Pipeline, or (B) any transfer, conveyance, assignment, sale or pledge of any Class A Common Units to any person other than a wholly-owned subsidiary of such Class A Member; provided , however , that no pledge, hypothecation or other encumbrance shall constitute a UNEV Sale Event to the extent made pursuant to the Credit Agreement or made to another bona fide third-party lender of borrowed money to UNEV Pipeline.

“ UNEV Sell-Down ” means a sale, transfer, assignment or conveyance (other than to an HEP Entity) of any (i) membership interests of UNEV Pipeline by HEP UNEV following which the HEP Entities collectively own more than 50% of the aggregate outstanding membership interests of UNEV Pipeline, (ii) membership interests of HEP UNEV by the Company following which the HEP Entities collectively own more than 50% of the aggregate outstanding membership interests of HEP UNEV, or (iii) Class A Common Units of the Company following which the HEP Entities collectively own more than 50% of the aggregate outstanding Class A Common Units of the Company.

“ Unit ” means a unit representing a fractional part of the Membership Interests of the Members and shall include all types and classes of Units, including the Class A Common Units and the Class B Common Units; provided , however , that any type or class of Unit shall have the privileges, preference, duties, liabilities, obligations and rights set forth in this Agreement and the Membership Interests represented by such type or class or series of Unit shall be determined in accordance with such privileges, preference, duties, liabilities, obligations and rights.

“ Unpaid Profits Interest Amount ” means, at any given time on or following the first Profits Interest Payment Date, an amount equal to the aggregate accrued and unpaid Profits Interest Amount at such time, including all Preferred Return accrued on any unpaid amounts in accordance with Section 7.3. For the sake of clarity, the Unpaid Profits Interest Amount shall (i) increase on each Profits Interest Payment Date by the amount of any Profits Interest Amount due on such date with respect to the most recently expired Profits Interest Annual Period, (ii) increase over time with the amount of any Preferred Return that accrues under Section 7.3, and (iii) be reduced at the time of payment by the amount of any Distributions or payments made to the Class B Member with respect to the Class B Common Units.

“ Waiver ” means the Limited Partial Waiver of Incentive Distribution Rights Under the Partnership Agreement, effective as of July 12, 2012, by HEP Logistics Holdings, L.P.

“ Woods Cross Expansion Completion Date ” means the “Woods Cross Expansion Completion Date” as such term is defined in the Waiver.

ARTICLE II

ORGANIZATIONAL AND OTHER MATTERS

Section 2.1 Organization; Admission . The Company was formed as a limited liability company pursuant to the DLLCA by filing a Certificate of Formation (the “ Certificate ”) with the Secretary of State of the State of Delaware on June 27, 2012.

Section 2.2 Name . The name of the Company is HEP UNEV Holdings LLC, and the business of the Company is conducted under such name. The Board may, in its sole discretion, change the name of the Company from time to time. In any such event, the Secretary shall promptly file or cause to be filed in the office of the Secretary of State of the State of Delaware an amendment to the Certificate reflecting such change of name. The Company may also conduct business under one or more fictitious names if the Board determines that such is in the best interests of the Company.

Section 2.3 Limited Liability . Except as otherwise provided by the DLLCA, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be the debts, obligations and liabilities solely of the Company, and the Members shall not be obligated personally for any of such debts, obligations or liabilities solely by reason of being a member.

Section 2.4 Registered Office and Agent . The address of the Company’s registered office (required by Section 18-104 of the DLLCA to be maintained in the State of Delaware) shall be Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801 and the name of the Company’s registered agent at such address is The Corporation Trust Company. The Company’s principal place of business shall be 2828 N. Harwood, Suite 1300, Dallas, Texas 75201. The Board may change such registered office, registered agent or principal place of business from time to time. The Company may from time to time have such other place or places of business within or without the State of Delaware as may be determined by the Board.

Section 2.5 Fiscal Year . The fiscal year of the Company shall end on December 31 of each calendar year unless, for United States federal income tax purposes, another fiscal year is required. The Company shall have the same fiscal year for United States federal income tax purposes and for accounting purposes.

Section 2.6 No State-Law Partnership . The Company shall not be a partnership or a joint venture for any reason other than for United States federal income and state tax purposes, and no provision of this Agreement shall be construed otherwise. The Company shall be operated in a manner consistent with its classification as a disregarded entity for United States federal and state tax purposes.

Section 2.7 Seal . The Company may maintain a seal containing the name of the Company. Any officer of the Company shall have the authority to affix the seal of the Company in the name of the Company to any document duly authorized pursuant to this Agreement or resolutions of the Board and to attest the affixation of the seal of the Company thereto, as such affixation may be required for the conduct of the Company’s business.

ARTICLE III

PURPOSE AND POWERS

Section 3.1 Purpose of the Company . The purpose of the Company shall be to engage or participate in any lawful business activities in which a limited liability company formed in the State of Delaware may engage or participate.

Section 3.2 Powers of the Company . The Company shall have the power to do any and all acts reasonably necessary, appropriate, proper, advisable, incidental or convenient to or for the furtherance of the purpose and business described herein and for the protection and benefit of the Company.

ARTICLE IV

UNITS

Section 4.1 Units Generally . The Membership Interests of the Members shall be represented by issued and outstanding Units, which may be divided into one or more types, classes or series. Each type, class or series of Units shall have the privileges, preference, duties, liabilities, obligations and rights, including voting rights, if any, set forth in this Agreement with respect to such type, class or series. Subject to the rights of the Class B Member under the final sentence in Section 4.3, the Company may, in the sole discretion of the Board, create, authorize and issue additional Membership Interests (which may or may not be denominated in Units and which may include additional Class A Common Units) with such rights and privileges as are determined by the Board, in its sole discretion.

Section 4.2 Class A Common Units . Other than the Class B Member’s right to the Profits Interest Amount (and any Preferred Return), holders of Class A Common Units shall have the rights to all Distributions of the Company. Each Class A Member shall be entitled to one vote per Class A Common Unit on all matters upon which the Class A Members have the right to vote under this Agreement, or otherwise submitted to a vote of the Class A Members.

Section 4.3 Class B Common Units . The Class B Member shall have the right to the Profits Interest Amount (and any Preferred Return) as provided in Article VII . Following the payment in full of all Profits Interest Amounts accruing (or to accrue) prior to the Profits Interest Accrual Termination Date (as well as any Preferred Return), the Class B Common Units shall automatically cease to be outstanding and the Class B Member shall no longer have any rights or privileges under this Agreement. Unless specifically set forth in this Agreement, the Class B Common Member shall have no other rights of the Members under this Agreement. Unless specifically set forth in this Agreement, the Class B Common Units shall not entitle the holder thereof to vote on any matters required or permitted to be voted on by the Members. Notwithstanding the foregoing, following the date of this Agreement and prior to the payment in full of all Profits Interest Amounts accruing (or to accrue) prior to the Profits Interest Accrual Termination Date (as well as any Preferred Return), the Company may not issue any Membership Interest that would entitle the holder thereof to receive Distributions prior to, in preference to, or pari passu with, the Class B Common Units.

Section 4.4 Members Schedule . The Company shall maintain a schedule of all Members, their respective mailing addresses and the amount and series of Units held by them (the “ Members Schedule ”), and shall update the Members Schedule upon the issuance or transfer of any Units to any new or existing Member. A copy of the Members Schedule as of the execution of this Agreement is attached hereto as Schedule A .

ARTICLE V

CONTRIBUTIONS AND ALLOCATIONS

Section 5.1 Contributions .

(a) Contemporaneously with the execution of this Agreement, each Member owning Class A Common Units and Class B Common Units has made the Capital Contribution giving rise to such Member’s initial Capital Account and is deemed to own the number, type, series and class of Units, in each case, in the amounts set forth opposite such Member’s name on the Members Schedule as in effect on the date hereof.

(b) If, at any time, the revenues and other funds available to the Company are not adequate to meet its obligations, the Members may, in their sole and absolute discretion, make additional capital contributions in such amounts as they deem necessary. The Members will not at any time have any liability to the Company for any negative balance in their capital accounts except to the extent that such negative balance arose as the result of distributions in violation of this Agreement or applicable law. No Member shall be required to make any additional Capital Contributions to the Company. Any future Capital Contributions made by any Member may only be made with the consent of the Board. No Member shall be required to lend any funds to the Company and no Member shall have any personal liability for the payment or repayment of any Capital Contribution by or to any other Member.

Section 5.2 Capital Accounts . The Company shall establish and maintain for each Member a separate capital account (a “ Capital Account ”) on its books and records in accordance with this Section 5.2. Each Capital Account shall be established and maintained in accordance with the following provisions:

(a) Each Member’s Capital Account shall be increased by the amount of:

(i) such Member’s Capital Contributions, including such Member’s initial Capital Contribution and any HEP Common Units deemed contributed to the Company by the Class A Members pursuant to Section 7.3(a);

(ii) any net income or other item of income or gain allocated to such Member pursuant to Sections 6.1(a) and (b); and

(iii) any liabilities of the Company that are assumed by such Member or secured by any property Distributed to such Member.

(b) Each Member’s Capital Account shall be decreased by:

(i) the cash amount or fair market value of any property Distributed to such Member pursuant to Article VII, including any HEP Common Units distributed to the Class B Member pursuant to Section 7.3(a), the fair market value of which shall be determined in accordance with Section 7.3(a);

(ii) the amount of any net loss or other item of loss or deduction allocated to such Member pursuant to Sections 6.1(a) and (b); and

(iii) the amount of any liabilities of such Member assumed by the Company or which are secured by any property contributed by such Member to the Company.

ARTICLE VI

ALLOCATIONS

Section 6.1 Allocations .

(a) For each fiscal year (or portion thereof), except as otherwise provided in this Agreement, net income and net loss (and, to the extent necessary, individual items of income, gain, loss or deduction) of the Company shall be allocated among the Members in a manner such that, the Capital Account balance of each Member, immediately after making such allocations, is, as nearly as possible, equal to (i) the Distributions that would be made to such Member pursuant to Article XII if the Company were dissolved, its affairs wound up and its assets sold for cash equal to their fair market value, all Company liabilities were satisfied, and the net assets of the Company were Distributed, in accordance with Article XII, to the Members immediately after making such allocations, minus (ii) such Member's share of Company Minimum Gain and Member Nonrecourse Debt Minimum Gain, computed immediately prior to the hypothetical sale of assets.

(b) Notwithstanding any other provision of this Agreement, “partner nonrecourse deductions” (as defined in Treasury Regulation Section 1.704-2(i)), if any, of the Company shall be allocated for each period to the Member that bears the economic risk of loss within the meaning of Treasury Regulation Section 1.704-2(i), and “nonrecourse deductions” (as defined in Treasury Regulation Section 1.704-2(b)) and “excess nonrecourse liabilities” (as defined in Treasury Regulations Section 1.752-3(a), if any, of the Company shall be allocated to the Members as reasonably determined by the tax matters members in accordance with applicable Treasury Regulations. This Agreement shall be deemed to include “qualified income offset,” minimum gain chargeback” and “partner nonrecourse debt minimum gain chargeback” provisions within the meaning of the Treasury Regulations under Section 704(b) of the Code.

(c) Except as otherwise required by Section 704(c) of the Code, for federal income tax purposes, each item of income, gain, loss and deduction of the Company for each taxable period shall be allocated in the manner as such items are allocated under Sections 6.1(a) and (b).

ARTICLE VII

DISTRIBUTIONS

Section 7.1 Distributions Prior to the First Profits Interest Payment Date and After Payment of All Profits Interest Amounts and Unpaid Profits Interest Amounts . Subject to Section 7.3, prior to the first Profits Interest Payment Date and after payment in full of all Profits Interest Amounts accrued (or to accrue) and all Unpaid Profits Interest Amounts:

(a) the Board, in its sole discretion, shall decide whether, when and in what amounts Distributions shall be made to the Members; and

(b) any amounts so Distributed shall be distributed to the Class A Members pro rata in proportion to their holdings of Class A Common Units.

Section 7.2 Distributions On and After the First Profits Interest Payment Date Until Payment of All Profits Interest Amounts and Unpaid Profits Interest Amounts . Subject to Section 7.3, from and after the first Profits Interest Payment Date until payment in full of all Profits Interest Amounts accrued (or to accrue) and all Unpaid Profits Interest Amounts, Distributions shall be made as follows:

(a) first, 100% to the Class B Member until the Unpaid Profits Interest Amount is reduced to zero; and

(b) thereafter, 100% to the Class A Members pro rata in proportion to their holdings of Class A Common Units.

Section 7.3 Restrictions on Dividends; Interest and Class B Member’s Election .

(a) Notwithstanding Section 7.1 or Section 7.2, no Distribution shall be made to any Member if, at the time of such Distribution, payment of such Distribution would (i) violate, breach or result in a default (or give any party thereto the right to declare any event of default) under any Applicable Credit Document then in effect, or (ii) violate or breach any law, regulation or court order applicable to the Class A Members, any of their direct and indirect subsidiaries, or the Company, including §18-607 of the DLLCA (a “ Profits Interest Payment Restriction ”). In the event the Company is unable to make any payment to the Class B Member of any Profits Interest Amount due on any Profits Interest Payment Date as a result of a Profits Interest Payment Restriction, then, at the election of the Class B Member, either (1) such Unpaid Profits Interest Amount will accrue a preferred return at a rate of 10% per annum (the “ Preferred Return ”), or (2) the Class B Member may receive payment of such Profits Interest Amount in the form of HEP Common Units, rather than cash, which HEP Common Units shall be valued at market prices without discount, calculated using the volume weighted average price of HEP’s Common Units, as quoted on the New York Stock Exchange for the 10 trading days immediately preceding such Profits Interest Payment Date. If the Class B Member elects to receive payment of any Profits Interest Amount in the form of HEP Common Units, such payment shall only be made if such issuance is permitted pursuant to applicable laws, regulations, court orders and the Partnership Agreement.

(b) Notwithstanding the provisions of Section 7.3(a) or the priority of Distributions provided for in Section 7.2, in the event the Company is unable to make payment of any Profits Interest Amount as a result of a Profits Interest Payment Restriction and such payment is not made in HEP Common Units as provided in Section 7.3(a), then the Company may, nevertheless, make Distributions to the Class A Members in accordance with Section 7.2(b) so long as (i) the Company deposits the Unpaid Profits Interest Amount in a segregated account (the “ Restricted Profits Interest Account ”) (including, at least quarterly, amounts for Preferred Return accrued under Section 7.3(a)), and (ii) promptly distributes to the Class B Member the amounts in the Restricted Profits Interest Account as soon as and to the extent payment of such amounts is no longer subject to such Profits Interest Payment Restrictions.

(c) Following the receipt of annual financial statements of UNEV Pipeline for any fiscal year that contains any portion of a completed Profits Interest Annual Period, the Company shall recalculate the UNEV EBITDA for such completed Profits Interest Annual Period based upon such annual financial statements for all purposes hereunder. If such recalculation results in an increase in the Profits Interest Amount for a completed Profits Interest Annual Period, then the Company shall Distribute such increased amount to the Class B Member. If such recalculation results in a decrease in the Profits Interest Amount for a completed Profits Interest Annual Period, then the Class B Member shall repay the amount of such Decrease to the Company.

ARTICLE VIII

MANAGEMENT OF THE COMPANY

Section 8.1 Board of Managers; Power and Authority . The business and affairs of the Company shall be managed by or under the direction of a Board of one or more Managers (the “ Board ”; individual members of the Board shall be referred to as “ Managers ”), which shall have the power to do any and all acts necessary, convenient or incidental to or for the furtherance of the purposes of the Company described in this Agreement, including all powers, statutory or otherwise, possessed by managers of a limited liability company under the DLLCA and the power and authority to amend the Certificate, adopt an agreement of merger or consolidation, approve a conversion of the Company and approve any dissolution or winding up of the Company or a revocation of a dissolution of the Company. Each Manager is hereby designated a “manager” of the Company within the meaning of the DLLCA. Except as otherwise required by law, approval of any action by the Board in accordance with this Agreement shall constitute approval of such action by the Company.

(a) Number of Managers . The number of Managers constituting the entire Board shall be three individuals or such other number as may be fixed from time to time by the Class A Members or by the vote of a majority of the entire Board.

(b) Appointment and Removal of Managers . All Managers shall be appointed by the Class A Members. Any Manager so appointed by the Members shall serve in the capacity so appointed until (i) removed with or without cause by the Class A Members, (ii) such Manager’s successor shall be duly elected and appointed by the Class A Members or (iii) such Manager’s death, disability or resignation. The Class A Member hereby appoints Matthew P. Clifton, Bruce R. Shaw and Denise C. McWatters as the Managers.

(c) Vacancies; Increases in the Number of Managers . Vacancies and newly created Board positions resulting from any increase in the authorized number of Managers constituting the entire Board may be filled by the Class A Members.

(d) Quorum . A majority of the total number of Managers shall constitute a quorum for the transaction of business of the Board. Any meeting may be adjourned from time to time by a majority of the Managers present at the meeting, whether or not a quorum is present, and the meeting may be adjourned without further notice.

(e) Action by Vote . Except as may otherwise be provided by law or this Agreement, when a quorum is present at any meeting, the vote of a majority of the Managers present shall be the act of the Board.

(f) Offices; Location of Books and Records; Place of Meetings; Order of Business . The Company’s office shall be at, and the books and records of the Company will be kept at, the Company’s principal place of business. The Board may have offices and keep the books and records of the Company, except as otherwise provided by law, in such other place or places, within or without the State of Delaware, as the Board may from time to time determine by resolution. The Board may hold meetings at the Company’s principal place of business or at any place determined by a majority of the Managers. At all meetings of the Board business shall be transacted in such order as shall from time to time be determined by the Chairman of the Board (if any), or in his absence by the President, or by resolution of the Board.

(g) Meetings . Meetings of the Board may be called by any Manager, the President or any Vice President.

(h) Notice . Meetings of the Board may be held upon at least twenty-four hours oral or written notice to the Managers or upon such shorter notice as may be approved by the Managers. All written notices and other communications to be given to Managers shall be sufficiently given for all purposes hereunder if in writing and delivered by hand, courier or overnight delivery service or three days after being mailed by certified or registered mail, return receipt requested, with appropriate postage prepaid, or when received in the form of a telegram, facsimile or other electronic transmission (including electronic mail), and shall be directed to the address, facsimile number or electronic mail address as such Manager shall designate by notice to the Company. Neither the business to be transacted at, nor the purpose of, any meeting of the Board need be specified in the notice of such meeting. Any Manager may waive the requirement of such notice as to such Manager. Attendance by a Manager at any meeting shall constitute waiver by such Manager of the requirement of notice of such meeting unless such Manager specifically objects at such meeting on the basis of improper notice.

(i) Participation in Meetings by Conference Telephone . Managers may participate in a meeting of the Board by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other or by any other means permitted by law. Such participation shall constitute presence in person at such meeting.

(j) Action without a Meeting . Any action required or permitted to be taken at any meeting of the Board may be taken without a meeting if a majority of the Managers consent thereto in writing; provided , however , that if such action is taken by less than unanimous written consent, notice of the taking of such action must be given to those Managers who have not consented in writing within two days of the taking of such action. Such consent shall be treated for all purposes as the act of the Board.

(k) Compensation . The Managers shall not receive any compensation except as may be fixed from time to time in writing by the Board.

(l) Manager Standard of Care; Liability . A Manager shall perform his duties in good faith and in a manner such Manager reasonably believes to be in the best interests of the Company. A Manager shall not have any liability by reason of being or having been a Manager.

(m) Interested Managers . No contract or transaction between the Company and one or more of its Managers or the Members, or between the Company and any other corporation, partnership, association, or other organization in which one or more of the Company’s Managers or the Members are managers or members or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the Manager or Member is present at or participates in the meeting of the Board which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if:

(i) the material facts as to the relationship or interest and as to the contract or transaction are disclosed or are known to the Board, and the Board in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested Managers, even though the disinterested Managers be less than a quorum;

(ii) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the Members entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the Members; or

(iii) the contract or transaction is fair as to the Company as of the time it is authorized, approved or ratified, by the Board or the Members.

Section 8.2 Officers .

(a) Authority to Appoint . The Board may appoint, and remove with or without cause, such officers of the Company as the Board from time to time may determine, in its sole and absolute discretion to manage and control the business and affairs of the Company. Such officers need not be a Member or Manager, and shall have such duties, powers, responsibilities and authority as set forth below and as otherwise may be authorized by the Board from time to time.

(b) Term . Subject to any express term of any written agreement between the Company and any officer approved by the Board in writing, any officer so appointed by the Board shall serve in the capacity so appointed until (i) removed with or without cause by the Board, (ii) such officer’s successor shall be duly elected and appointed by the Board or (iii) such officer’s death, disability or resignation.

(c) Titles . To the extent appointed by the Board, the officers of the Company may be a Chairman of the Board, a Chief Executive Officer, President, a Secretary, one or more Vice Presidents (any one or more of whom may be designated Executive Vice President or Senior Vice President), a Treasurer and such other officers as the Board may from time to time elect or appoint by resolution. Any number of offices may be held by the same person.

(d) Salaries . The officers and agents of the Company shall not receive any salaries or other compensation except as may be fixed from time to time in writing by the Board.

(e) Vacancies . Any vacancy occurring in any office of the Company may be filled by the Board.

(f) Powers and Duties of the Chairman of the Board . The Chairman of the Board shall be an existing Manager and shall preside at all meetings of the Board.

(g) Powers and Duties of the Chief Executive Officer . The President shall be the Chief Executive Officer of the Company unless the Board designates the Chairman of the Board as Chief Executive Officer. The Chief Executive Officer shall have, subject to the control of the Board, general executive charge, management and control of the properties, business and operations of the Company with all such powers as may be reasonably incident to such responsibilities; he may agree upon and execute leases, contracts, evidences of indebtedness and other obligations in the name of the Company; and he may sign certificates for membership interests of the Company.

(h) Powers and Duties of the President . The President shall have the authority to agree upon and execute all leases, contracts, evidences of indebtedness and other obligations in the name of the Company; and, unless the Board otherwise determines, he shall, in the absence of the Chairman of the Board or if there be no Chairman of the Board, preside at all meetings of the Board.

(i) Vice Presidents . In the absence of the President, or in the event of his inability or refusal to act, a Vice President designated by the Board shall perform the duties of the President, and when so acting shall have all the powers of and be subject to all the restrictions upon the President. In the absence of a designation by the Board of a Vice President to perform the duties of the President, or in the event of his absence or inability or refusal to act, the Vice President who is present and who is senior in terms of time as a Vice President of the Company shall so act.

(j) Powers and Duties of the Chief Financial Officer . The Chief Financial Officer, if any, shall have responsibility for the general executive charge, management and control of the financial affairs and business of the Company and, jointly with the Treasurer (if one shall be appointed), shall have custody and control of all the funds and securities of the Company. He shall perform all acts incident to the position of Chief Financial Officer, subject to the control of the Chief Executive Officer.

(k) Treasurer . The Treasurer, if any, jointly with the Chief Financial Officer (if one shall be appointed), shall have responsibility for the custody and control of all the funds and securities of the Company. He shall perform all acts incident to the position of Treasurer, subject to the control of the Chief Executive Officer.

(l) Secretary . The Secretary shall keep the minutes of all actions or consents by the Board and the Member, in books provided for that purpose; he shall attend to the giving and serving of all notices; he may sign with the other appointed officers all certificates for membership interests of the Company; he shall have charge of the certificate books, transfer books and membership interest ledgers, and such other books and records as the Board may direct, all of which shall at all reasonable times be open to inspection of any Manager or the Member upon application at the office of the Company during reasonable hours; and he shall in general perform all acts incident to the office of Secretary, subject to the control of the Chief Executive Officer.

(m) Assistant Secretaries . Each Assistant Secretary, if any, shall have the usual powers and duties pertaining to his office, together with such other powers and duties as from time to time may be designated in this Agreement or assigned to him by the Chief Executive Officer or the Board. The Assistant Secretaries shall exercise the powers of the Secretary under the Secretary’s direction or during that officer’s absence or inability or refusal to act.

(n) Action with Respect to Securities and membership interests of Other Entities . Unless otherwise directed by the Board, the Chief Executive Officer, the President and each Vice President shall have power to vote and otherwise act on behalf of the Company, in person or by proxy, at any meeting of holders of voting securities or interests held by the Company of or with respect to any action of holders of voting securities or interests of any other corporation or other entity in which the Company may hold securities and otherwise to exercise any and all rights and powers which this Company may possess by reason of its ownership of or voting securities or interest in such other corporation or other entity.

Section 8.3 Other Activities . Neither this Agreement nor any principle of law or equity shall preclude or limit, in any respect, the right of the Members to engage in or derive profit or compensation from any other activities or investments.

ARTICLE IX

INDEMNIFICATION

Section 9.1 Indemnification by the Company . The Company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (each a “ Proceeding ”), by reason of the fact that he (i) is or was a member, manager, officer, employee or agent of the Company or an officer, director, manager, stockholder, member or partner of the Members or, (ii) is or was serving at the request of the Company as a director, officer, employee or agent of another foreign or domestic limited liability company, corporation, partnership, joint venture, trust or other enterprise (a “ Subject Enterprise ”) (each person that may be indemnified under clause (i) or (ii), an “ Indemnified Person ”), in accordance with and to the fullest extent permitted under the laws of the State of Delaware as the same may be amended from time to time, including the advancement of expenses incurred by the Indemnified Person in defending any such threatened, pending or completed Proceeding. To the extent the present or former spouse(s) of any Indemnified Person is made a party or is threatened to be made a party to any Proceeding solely by virtue of his or her marital relationship to such Indemnified Person, such spouse shall be indemnified hereunder to the fullest extent permitted by the laws of the State of Delaware as the same may be amended from time to time. Except as the Board in its discretion (but subject to applicable law) may otherwise determine, such indemnification shall be afforded only if such person within 5 business days after his becoming aware of the institution of such Proceeding, shall have notified in writing by registered or certified mail, the Chief Executive Officer, President or Secretary of the Company of the institution of such Proceeding, and shall have furnished such Chief Executive Officer, President or Secretary with true copies of all papers served upon or otherwise received by such person relating to such Proceeding, and shall make available to officers or counsel of the Company all information necessary to keep the Company currently advised as to the status of such Proceeding, and permit the Company, at its option and expense, at any time during the course of such Proceeding, through counsel of the Company’s choosing, to participate in or direct the defense thereof in good faith, and in case of any proposed settlement of any Proceeding the defense of which is not directed by the Company, to submit the proposed terms and conditions thereof to the Board for its approval, failing which no indemnification hereunder shall be afforded for any such settlement. Such indemnification shall be a contract right and as such shall run to the benefit of any Indemnified Person while this Article VI is in effect. Any repeal or amendment of this Article VI shall be prospective only and shall not limit the rights of any such Indemnified Person, or the obligations of the Company with respect to any claim arising from or related to the services of such person in any of the foregoing capacities prior to any such repeal or amendment to this Article VI . The rights of indemnification under the foregoing provisions shall inure to the benefit of the successors, assigns, heirs, executors, administrators and personal representatives of any Indemnified Person. Such indemnification as hereinabove provided shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any statute, agreement, resolution of the Member, the Board or officers, or otherwise.

Section 9.2 Subrogation . In the event the Company shall be obligated to indemnify any Indemnified Person pursuant to clause (ii) of the first sentence of Section 6.1 , the Company shall be subrogated to all rights of such Indemnified Person against, or otherwise to receive indemnification from, each Subject Enterprise with respect to or on account of the Proceeding giving rise to the Company’s obligation to indemnify such Indemnified Person pursuant to clause (ii) of the first sentence of Section 6.1 , including without limitation any and all rights of such Indemnified Person to indemnification from such Subject Enterprise under the articles or certificate of incorporation, bylaws, regulations, limited liability company agreement, partnership agreement or other organizational documents of such Subject Enterprise or any agreement between such Indemnified Person and such Subject Enterprise.

ARTICLE X

ASSIGNMENT OF MEMBERSHIP INTERESTS

The Class A Members may transfer, convey, assign or pledge all or any portion of such Class A Member’s Membership Interest in the Company at any time, subject to Section 12.3. No portion of the Membership Interest of the Class B Member may be transferred, conveyed, assigned or pledged at any time without the prior approval of Class A Members holding at least a majority of the then outstanding Class A Common Units, except for Permitted Transfers. Upon any assignment, conveyance or transfer permitted hereunder, the assignee shall succeed to the rights and obligations of the assigning Member in respect of its interests in the Company so transferred and such assignee shall become a member in the Company; provided , however , that such assignee must agree to be bound by the terms of this Agreement, and evidence such agreement by executing a copy of this Agreement or a joinder thereto simultaneously with receiving such assignment of Membership Interests and as a condition to being admitted as a Member in the Company. Notwithstanding anything to the contrary contained herein, no such transfer of a Member’s interest in the Company shall operate to dissolve the Company.

ARTICLE XI

RESIGNATION

No Member may resign from the Company except upon an assignment by such Member of 100% of such Member’s interests in the Company in accordance with Article X , in which case such Member may resign at any time upon or after the effectiveness of such assignment.

ARTICLE XII

BUY-OUT AND BUY-DOWN OF THE PROFITS INTEREST

Section 12.1 Optional Buy-Out of the Profits Interest in Full . At any time, the Class A Members or the Company may elect to purchase all of the Class B Common Units from the Class B Member by (i) providing written notice of such election to the Class B Member specifying a date for such purchase (the “ Optional Buy-Out Date ”), which date may not be more than 20 nor less than 10 days from the date of such notice, and (ii) paying to the Class B Member on the Optional Buy-Out Date an amount equal to the sum of (A) the Profits Interest Balance Amount, and (B) the Unpaid Profits Interest Amount, each as of such Optional Buy-Out Date (the “ Optional Buy-Out Price ”).

Section 12.2 Optional Buy-Down of the Profits Interest . At any time, and from time-to-time, the Class A Members or the Company may elect to buy-down the Profits Interest Balance Amount by providing written notice of such election to the Class B Member specifying the amount it intends to pay toward such buy-down and specifying a date for such buy-down (the “ Optional Buy-Down Date ”), which date may not be more than 20 nor less than 10 days from the date of such notice. Payment of such amount will be made on the Optional Buy-Down Date, and the Profits Interest Balance Amount will be reduced on such date by the amount of such payment.

Section 12.3 Mandatory Buy-Out of the Profits Interest upon a UNEV Sale Event .

(a) Upon a UNEV Sale Event, the Class A Members or the Company will (i) promptly (and in any event within 10 business days) notify the Class B Member in writing of such UNEV Sale Event, specifying in reasonable detail the nature of such UNEV Sale Event and the proceeds received by it or any of its Affiliates in connection with such UNEV Sale Event, and (ii) within 30 days of such UNEV Sale Event (or, if the fair market value of the Class B Common Units is being determined under Section 12.3(c), within 30 days after such determination becomes final as provided in such Section 12.3(c)) (the “ Mandatory Buy-Out Date ”), purchase all, but not less than all, of the Class B Member’s Class B Common Units for a price equal to the Mandatory Buy-Out Price; provided, however , that if the UNEV Sale Event relates to a transaction by the Class A Member within the meaning of clause (B) of the definition of UNEV Sale Event, then such transaction may not occur prior to the payment of the Mandatory Buy-Out Price; provided further , however , that if the UNEV Sale Event is a UNEV Sell-Down, then, instead of purchasing all of the Class B Common Units, the Class A Member or the Company will buy-down the Profits Interest Balance Amount by an amount equal to the Corresponding Percentage of the Profits Interest Balance Amount (a “ Mandatory Buy-Down ”). Payment for a Mandatory Buy-Down will be made within 30 days of the UNEV Sell-Down (except as provided in the first proviso above), and on such date the Profits Interest Balance Amount will be reduced by the amount of such payment.

(b) The term “ Mandatory Buy-Out Price ” means:

(i) if the UNEV Sale Event occurs before July 1, 2016, an amount equal to the Profits Interest Balance Amount as of such Mandatory Buy-Out Date (as indicated for such date in the table attached as Exhibit 2, using the table labeled “3-year Giveback Scenario” if the Wood Cross Expansion Completion Date has occurred by July 1, 2015, and the table labeled “4-year Giveback Scenario” if the Woods Cross Expansion Completion Date has not occurred by July 1, 2015);

(ii) if the UNEV Sale Event occurs on or after July 1, 2016, at the option of the Class A Member or the Company (as applicable), either:

(A) the sum of (1) the Profits Interest Balance Amount, and (2) the Unpaid Profits Interest Amount, each as of such Mandatory Buy-Out Date; or

(B) the fair market value of the Class B Common Units as of such Mandatory Buy-Out Date, as determined in accordance with Section 12.3(c).

(c) The fair market value of the Class B Common Units shall initially be determined by an independent appraiser or investment banker of national prominence selected by the Class A Members or the Company (as applicable) (the “ Class A Appraiser ”). The Class A Members or Company (as applicable) shall provide the Class B Member with written notice and a copy of the determination of the Class A Appraiser promptly following its receipt thereof. If the Class B Member does not object to such valuation within 30 days following its receipt of such notice and determination, such determination shall be final and binding on the parties. If the Class B Member does object to such valuation within such 30 day period, then the Class B Member shall promptly retain a different, independent appraiser or investment banker of national prominence (the “ Class B Appraiser ”), which shall make its own determination of the fair market value of the Class B Common Units. The Class B Member shall provide the Class A Members or the Company (as applicable) with a copy of the determination of the Class B Appraiser promptly following its receipt thereof. If the Class A Members or the Company (as applicable) do not object to such valuation within 30 days following its receipt of such determination, such determination shall be final and binding on the parties. If the Class A Members or Company (as applicable) do object to such valuation within such 30 day period, then the Class A Appraiser and the Class B Appraiser shall select a third appraiser or investment banker of national prominence (the “ Independent Appraiser ”), which shall make its own determination of the fair market value of the Class B Common Units, which determination shall be final and binding on the parties. The fees and expenses of the Class A Appraiser will be borne entirely by the Class A Members or the Company (as applicable). The fees and expenses of the Class B Appraiser will be borne by entirely by the Class B Member. The fees and expenses of the Independent Appraiser will be paid proportionately by the Class A Members (or the Company, as applicable) and the Class B Member based upon the proximity of the determination made by the appraiser’s selected by them to the Independent Appraiser’s determination. For example, if the Class A Appraiser’s determination was $100, the Class B Appraiser’s determination was $200, and the Independent Appraiser’s determination was $120, then the Class A Members (or the Company, as applicable) would pay 20% of the Independent Appraiser’s fees and expenses, and the Class B Member would pay 80% of such fees and expenses.

Section 12.4 Further Assurances; Documents . On any Optional Buy-Out Date or Mandatory Buyout Date, the Company, the Class A Members and the Class B Member shall (x) execute and deliver such documents, agreements, assignments and instruments, and take such further actions, as are necessary or reasonably requested by the Class A Members (or the Company, as applicable) to transfer and assign such Class B Common Units to the Class A Members (or the Company, as applicable), and (y) if, as of such date, the General Partner has not yet forgone all of the Incentive Distribution Rights that it is required to forego pursuant to the Waiver, take such action as is necessary to cause the General Partner to terminate the Waiver effective as of such date.

ARTICLE XIII

DISSOLUTION AND LIQUIDATION

Section 13.1 Dissolution . The Company shall be dissolved upon the occurrence of any dissolution event specified in the DLLCA; provided , however , that notwithstanding the foregoing, the Company shall not dissolve upon the occurrence of any of the events described in Section 18‑801(a)(4) of the DLLCA (including, without limitation, the death or bankruptcy of the Members).

Section 13.2 Effect of Dissolution . Upon dissolution, the Company shall cease carrying on its business but shall not terminate until the winding up of the affairs of the Company is completed, the assets of the Company shall have been distributed as provided below and a Certificate of Cancellation of the Company under the DLLCA has been filed in the office of the Secretary of State of the State of Delaware.

Section 13.3 Liquidation Upon Dissolution . Upon the dissolution of the Company, sole and plenary authority to effectuate the liquidation of the assets of the Company shall be vested in the Board, which shall have full power and authority to sell, assign and encumber any and all of the Company’s assets and to wind up and liquidate the affairs of the Company in an orderly and business-like manner. The proceeds of liquidation of the assets of the Company distributable upon a dissolution and winding up of the Company shall be applied in the following order of priority:

(a) first, to the creditors of the Company, including creditors who are members, in the order of priority provided by law, in satisfaction of all liabilities and obligations of the Company (of any nature whatsoever, including, without limitation, fixed or contingent, matured or unmatured, legal or equitable, secured or unsecured), whether by payment or the making of reasonable provision for payment thereof; and

(b) thereafter, to the Members in accordance with the amounts such Members would receive if the remaining proceeds of liquidation were Distributed in accordance with Section 12.3, in which case the Class B Member shall receive only the Mandatory Buy-Out Price as determined in accordance with Section 12.3, and the Class A Members shall receive all remaining amounts.

Section 13.4 Winding Up and Certificate of Cancellation . The winding up of the Company shall be completed when all of its debts, liabilities and obligations have been paid and discharged or reasonably adequate provision therefor has been made, and all of the remaining property and assets of the Company have been distributed to the Members. Upon the completion of the winding up of the Company, a Certificate of Cancellation of the Company shall be filed in the office of the Secretary of State of the State of Delaware.

ARTICLE XIV

AMENDMENT

This Agreement may be amended or modified only by a written instrument executed by the Class A Members; provided , however , that, while any Class B Common Units remain outstanding, the Class B Member must consent to any amendment that would adversely affect the rights and privileges of the holder of Class B Common Units, increase the liability or duties of the holder of Class B Common Units or require additional contributions by the holder of Class B Common Units. In addition, the terms or conditions hereof may be waived by a written instrument executed by the party waiving compliance.

[Signatures appear on the following page.]

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

COMPANY :

HEP UNEV HOLDINGS LLC

By: /s/ Matthew P. Clifton

Name: Matthew P. Clifton

Title: Chief Executive Officer and President

MEMBERS :

HOLLY ENERGY PARTNERS, L.P.

By: HEP Logistics Holdings, L.P.

its General Partner

By: Holly Logistic Services, L.L.C.

its General Partner

By: /s/ Matthew P. Clifton

Name: Matthew P. Clifton

Title: Chief Executive Officer and President

HOLLYFRONTIER HOLDINGS LLC

By: /s/ Michael C. Jennings

Name: Michael C. Jennings

Title: Chief Executive Officer and President

EXHIBIT 1

EXAMPLE PROFITS INTEREST BALANCE AMOUNT CALCULATION

[See Attached.]



Exhibit 1
Example Profits Interest Balance Amount Calculations

Example Profits Interest Balance Amount Calculations (all amounts are in millions; assumes WX expansion completed by end of year 3; assumes 1x annual payment in subsequent year)

Contract Year	Profits Interest Balance Amount applciable for this Contract Year*		Hypothetical Profits Interest payment made in this Contract Year (with respect to prior Contract Year EBITDA)*		Total of all Profits Interest payments (after payment in this Contract Year)		Profits Interest Balance Amount after payment in this Contract Year (and before accrual of 7% applicable rate)		Profits Interest Balance Amount for next Contract Year (including accrual of 7% applicable rate)
4*	N/A*		$	—	$	—	N/A		$	33.82
5	$	33.82	$	5	$	5	$	28.82	$	30.84
6	$	30.84	$	5	$	10	$	25.84	$	27.65
7	$	27.65	$	5	$	15	$	22.65	$	24.23
8	$	24.23	$	5	$	20	$	19.23	$	20.58
9	$	20.58	$	5	$	25	$	15.58	$	16.67
10	$	16.67	$	5	$	30	$	11.67	$	12.48
11	$	12.48	$	5	$	35	$	7.48	$	8.01
12	$	8.01	$	5	$	40	$	3.01	$	3.22
13	$	3.22	$	3.22	$	43.22	$	—	$	—
14	$	—	$	—	$	43.22	$	—	$	—
15	$	—	$	—	$	43.22	$	—	$	—
16	$	—	$	—	$	43.22	$	—	$	—
17	$	—	$	—	$	43.22	$	—	$	—
18	$	—	$	—	$	43.22	$	—	$	—
19	$	—	$	—	$	43.22	$	—	$	—
20	$	—	$	—	$	43.22	$	—	$	—

	* * * Profits Interest Amount fully paid in Year 13.

Formula for Determining Profits Interest Balance Amount for Contract Year n+1:

Variables:
PI(n)	>> Profits Interest payments made in Contract Year n (with respect to
	prior Contract Year EBITDA)
BA(n)	>> Profits Interest Balance Amount applciable for Contract Year n

Formula:
BA(n+1) =	[ BA(n) - PI(n) ] + ( [ BA(n) - PI(n) ] * .07 )

BA(n+1) =	[ BA(n) - PI(n) ] * 1 .07				>>> Column G in above spreadsheet uses
					this reduced formula.

Notes and Data Inputs:
* Profits Interest amounts begin to accrue during Contract Year 4; Payment of
Profits Interest amount for Contract Year 4 occurs in Contract Year 5.

Assumed hypothetical Profits Interest payment amount:									$5
Initial Profits Interest Balance Amount (for Contract Year 5):									$33.82

EXHIBIT 2

UNEV PROFITS INTEREST BALANCE AMOUNT CALCULATION (DURING WAIVER PERIOD)

$millions

3-year GP Giveback Scenario

Interest Rate 7.0%



			GP giveback	Purchase price gap	Profits Interest Balance Amount
		6/30/2012		12.2	12.2
Year 1	Q1	9/30/2012	1.25		13.66
	Q2	12/31/2012	1.25		15.15
	Q3	3/31/2013	1.25		16.67
	Q4	6/30/2013	1.25		18.21
Year 2	Q1	9/30/2013	1.25		19.78
	Q2	12/31/2013	1.25		21.37
	Q3	3/31/2014	1.25		23
	Q4	6/30/2014	1.25		24.65
Year 3	Q1	9/30/2014	1.25		26.33
	Q2	12/31/2014	1.25		28.04
	Q3	3/31/2015	1.25		29.78
	Q4	6/30/2015	1.25		31.55
Year 4	Q1	9/30/2015	-		32.11
	Q2	12/31/2015	-		32.67
	Q3	3/31/2016	-		33.24
	Q4	6/30/2016	-		33.82

4-year GP Giveback Scenario

Interest Rate 7.0%



			GP giveback	Purchase price gap	Profits Interest Balance Amount
		6/30/2012		12.2	12.2
Year 1	Q1	9/30/2012	1.25		13.66
	Q2	12/31/2012	1.25		15.15
	Q3	3/31/2013	1.25		16.67
	Q4	6/30/2013	1.25		18.21
Year 2	Q1	9/30/2013	1.25		19.78
	Q2	12/31/2013	1.25		21.37
	Q3	3/31/2014	1.25		23
	Q4	6/30/2014	1.25		24.65
Year 3	Q1	9/30/2014	1.25		26.33
	Q2	12/31/2014	1.25		28.04
	Q3	3/31/2015	1.25		29.78
	Q4	6/30/2015	1.25		31.55
Year 4	Q1	9/30/2015	1.25		33.36
	Q2	12/31/2015	1.25		35.19
	Q3	3/31/2016	1.25		37.06
	Q4	6/30/2016	1.25		38.96

AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT

HEP UNEV HOLDINGS LLC

JULY 12, 2012

#PageNum#

TERMINATION OF OPTION AGREEMENT

This TERMINATION OF OPTION AGREEMENT (this “ Termination ”), dated as of July 12, 2012, is entered into by and between HollyFrontier Corporation (as successor-in-interest to Holly Corporation), a Delaware corporation (“ HFC ”), HEP UNEV Pipeline LLC (f/k/a Holly UNEV Pipeline Company), a Delaware limited liability company (“ HEP UNEV ”), Holly Energy Partners – Operating, L.P., a Delaware limited partnership (“ HEP-Operating ”), Navajo Pipeline Co., L.P., a Delaware limited partnership, Holly Logistic Services, L.L.C., a Delaware limited liability company, HEP Logistics Holdings, L.P., a Delaware limited partnership, Holly Energy Partners, L.P., a Delaware limited partnership (“ HEP ”) and HEP Logistics GP, L.L.C., a Delaware limited liability company. The above-named entities are sometimes referred to in this Termination collectively as the “ Parties .”

R E C I T A L S

A. The Parties previously entered into that certain Option Agreement, dated as of January 31, 2008, as amended by that certain First Amendment to Option Agreement, dated as of February 11, 2010 (collectively, the “ Option Agreement ”), pursuant to which HEP UNEV granted to HEP-Operating an irrevocable option to purchase all the equity interests owned by HEP UNEV in UNEV Pipeline, LLC, a Delaware limited liability company, upon the terms and conditions set forth in the Option Agreement.

B. HFC and HEP desire to enter into that certain LLC Interest Purchase Agreement, by and among HFC, HEP and HEP UNEV Holdings LLC, a Delaware limited liability company and a wholly-owned subsidiary of HEP (“ Holdings ”), pursuant to which Holdings would acquire from HFC all the issued and outstanding membership interests held by HFC in HEP UNEV (the “ Purchase Agreement ”).

C. The termination of the Option Agreement is a condition precedent to the closing of the transactions contemplated by the Purchase Agreement and the Parties desire to terminate the Option Agreement.

A G R E E M E N T

For and in consideration of the mutual understandings contained herein and other good and valuable consideration, receipt of which is hereby acknowledged, the Parties hereby covenant and agree as follows:

1. Termination . The Parties agree that, effective immediately as of the execution of this Termination, the Option Agreement shall terminate in its entirety and be of no further force or effect and there shall be no liability or obligations on the part of any party thereto of any nature whatsoever with respect to, in connection with or otherwise arising under the Option Agreement.

2. Release . The Parties hereby release and forever discharge one another for any and all past, present and future claims, demands, rights, judgments, executions, damages, liabilities, costs or expenses (including attorney’s fees and court costs), and causes of action of any and every character (whether heretofore or now known, unknown or unforeseen, or hereafter discovered) that in any way arise out of, relate to or result from the Option Agreement.

3. Governing Law . This Termination shall be subject to and governed by the laws of the State of Delaware, excluding any conflicts-of-law rule or principle that might refer the construction or interpretation of this Termination to the laws of another state.

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

5. Counterparts . This Termination may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

[Signature Page Follows]

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

HOLLYFRONTIER CORPORATION

By: /s/ Michael C. Jennings

Name: Michael C. Jennings

Title: Chief Executive Officer and President

HEP UNEV PIPELINE LLC

By: /s/ Michael C. Jennings

Name: Michael C. Jennings

Title: Chief Executive Officer and President

HOLLY ENERGY PARTNERS – OPERATING, L.P.

By: /s/ Matthew P. Clifton

Name: Matthew P. Clifton

Title: Chief Executive Officer and President

HEP LOGISTICS HOLDINGS, L.P.

By: Holly Logistic Services, L.L.C.

its general partner

By: /s/ Matthew P. Clifton

Name: Matthew P. Clifton

Title: Chief Executive Officer and President

HOLLY LOGISTIC SERVICES, L.L.C.

By: /s/ Matthew P. Clifton

Name: Matthew P. Clifton

Title: Chief Executive Officer and President

NAVAJO PIPELINE CO., L.P.

By: /s/ Michael C. Jennings

Name: Michael C. Jennings

Title: Chief Executive Officer and President

HOLLY ENERGY PARTNERS, L.P.

By: HEP Logistics Holdings, L.P.

its general partner

By: Holly Logistic Services, L.L.C.,

its general partner

By: /s/ Matthew P. Clifton

Name: Matthew P. Clifton

Title: Chief Executive Officer and President

HEP LOGISTICS GP, L.L.C.

By: /s/ Matthew P. Clifton

Name: Matthew P. Clifton

Title: Chief Executive Officer and President

Exhibit 12.1

Holly Energy Partners, L.P.

Computation of Ratio of Earnings

To Fixed Charges

(in thousands)



	Six Months Ended		Years Ended December 31,
	June 30, 2012		2011		2010		2009		2008		2007
Earnings:
Income from continuing operations	$	45,141	$	77,997	$	58,869	$	46,234	$	20,696	$	35,152
Add total fixed charges (per below)	23,007		39,075		36,598		24,638		24,751		15,125
Total Earnings	$	68,148	$	117,072	$	95,467	$	70,872	$	45,447	$	50,277

Fixed Charges:
Interest expense	$	21,729	$	35,959	$	34,001	$	21,501	$	21,763	$	13,289
Capitalized interest	132		891		455		1,008		1,007
Estimate of interest within rental expense ⁽¹⁾	1,146		2,225		2,142		2,129		1,981		1,836
Total Fixed Charges	$	23,007	$	39,075	$	36,598	$	24,638	$	24,751	$	15,125

Ratio of Earnings to Fixed Charges	2.96		3.00		2.61		2.88		1.84		3.32

(1) Represents 30% of the total operating lease rental expense, which is that portion deemed to be interest.

Exhibit 31.1

CERTIFICATION

I, Matthew P. Clifton, certify that:


1.	I have reviewed this quarterly report on Form 10-Q of Holly Energy Partners, L.P;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a.	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b.	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c.	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d.	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):


a.	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: August 1, 2012		/s/ Matthew P. Clifton
		Matthew P. Clifton
		Chairman of the Board, Chief Executive Officer and President

Exhibit 31.2

CERTIFICATION

I, Bruce R. Shaw, certify that:


1.	I have reviewed this quarterly report on Form 10-Q of Holly Energy Partners, L.P;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a.	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b.	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c.	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d.	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):


a.	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: August 1, 2012		/s/ Bruce R. Shaw
		Bruce R. Shaw
		Senior Vice President and Chief Financial Officer

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE

OFFICER OF HOLLY ENERGY PARTNERS, L.P.

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the accompanying report on Form 10-Q for the quarterly period ended June 30, 2012 and filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Matthew P. Clifton, Chief Executive Officer of Holly Logistic Services, L.L.C., the general partner of HEP Logistics Holdings, L.P., the general partner of Holly Energy Partners, L.P (the “Company”), hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date: August 1, 2012		/s/ Matthew P. Clifton
		Matthew P. Clifton
		Chairman of the Board, Chief Executive Officer and President

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL

OFFICER OF HOLLYFRONTIER CORPORATION

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the accompanying report on Form 10-Q for the quarterly period ended June 30, 2012 and filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Bruce R. Shaw, Chief Financial Officer of Holly Logistic Services, L.L.C., the general partner of HEP Logistics Holdings, L.P., the general partner of Holly Energy Partners, L.P (the “Company”), hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:


1.	The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and


2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date: August 1, 2012		/s/ Bruce R. Shaw
		Bruce R. Shaw
		Senior Vice President and Chief Financial Officer